Tuesday 10 February 2015
[Mr Philip Hollobone in the Chair]
Allied Steel and Wire (Pensions)
Motion made, and Question proposed, That the sitting be now adjourned.—(Damian Hinds.)
Thank you, Mr Hollobone—it is a real delight to see such a cheery face in the Chair for a debate so early in the morning.
I want to raise an issue that has been of concern to a group of my constituents for the past 13 years. That group comprises ex-ASW workers who lost their pensions when the company went into receivership in July 2002 and was declared insolvent the following year. Of course, it was not just ASW workers in Cardiff and Sheerness who faced the loss of their pensions in that era, when a large number of final salary pension schemes were wound up. Indeed, 40,000 people were affected at the time, and many more have been affected since. However, I would like to concentrate most of my remarks on members of the ASW pension plan or the ASW Sheerness Steel Group pension fund, which were defined-benefit payment schemes based on final salary and length of service.
Many of those workers lived in my constituency, and they were treated disgracefully. Their story really starts following the raid on the Mirror pension scheme by Robert Maxwell, which led to the introduction of legislation in 1997 with the intention of ensuring that all company pension schemes were correctly funded and protected. The benchmark used was the minimum funding requirement. Pension schemes had to be funded to a level that met the MFR. Therefore, a scheme funded to 100% of the MFR would be properly funded and safe—or so most people believed. However, nothing was further from the truth. In fact, should a scheme funded at 100% of the MFR have been wound up, it would have bought only about 60% of the expected benefits.
The problem was that there was nothing in the legislation to force the higher levels of funding needed to deliver the expected pensions. The MFR was heavily criticised by the parliamentary ombudsman in the report “Trusting in the pensions promise”. The reality was that companies were penalised through increased taxation if their pension schemes were funded at more than 10% above the MFR. Pension funds considered able to finance full pensions were deemed to be overfunded. That led many companies to introduce pensions holidays during the 1990s. That included ASW, whose pension scheme was very healthy, standing at about 130% of the MFR. To avoid taxation, the company introduced a pensions holiday for several years, during which it made no contributions to its pension fund. It eventually reduced the scheme to just over 100% of the MFR.
When the ASW pension plan and the Sheerness Steel Group pension fund were terminated in 2002 and started to be wound up, it was found that there were insufficient assets to meet the schemes’ liabilities. Under the legislation in place at the time, if there were insufficient assets when a scheme was wound up, the employer was required to make up the difference, but an insolvent company such as ASW might not be able to do that. In such cases, those assets that were available had to be distributed in accordance with a statutory priority order—a provision introduced in 1997 under the Pensions Act 1995. Normally, that ensured that existing pensioners got all their due pension, but active and deferred scheme members might get only a small proportion of their entitlement. The proportion of their promised pension to which ASW workers were entitled was about 40%.
As hon. Members can imagine, that was a huge shock to the ASW workers in my constituency, particularly because, before the Sheerness Steel Group pension fund was wound up, the Government had assured them and many other workers that their pensions were safe. One Government booklet on occupational pensions posed the following question:
“How do I know my money is safe?”
It obligingly gave the following answer:
“Occupational pension schemes in the private sector are set up under trust law. The trustees must run the scheme in the interests of the members and in line with…trust law…the trust deed (a legal document) and rules; and…specific laws about pensions.”
It went on to explain:
“Although your employer pays into the scheme and may be a trustee, the assets of the pension scheme belong to the scheme, not to your employer. As a scheme member, you are protected by a number of laws designed to make sure schemes are run properly and to make sure funds are used properly.”
Like workers in many other companies, ASW pensioners believed what they were told. If they had not been given those assurances, they might have transferred to a different scheme, although it is worth noting that independent financial advisers were told by the pension regulator at the time not to transfer people out of “safe” final salary schemes.
Helped by my predecessor in Sittingbourne and Sheppey, Derek Wyatt, and by my right hon. Friend the Member for Thornbury and Yate (Steve Webb), who is now the Pensions Minister, ASW made a complaint to the parliamentary ombudsman, whose subsequent report stated that the general public had every reason to believe that their occupational pensions were safe, because of statements repeatedly made by the Department for Work and Pensions and because of other Government actions.
The then Government rejected that report and took no action. The Pensions Action Group initiated a judicial review of that rejection, and the High Court found in its favour. The Government appealed the ruling, but the Appeal Court upheld the High Court judgment. In 2003, the Government sought to improve protection for members of pension schemes by proposing to introduce the Pension Protection Fund, a levy-based scheme that eventually came into being in April 2005. However, the PPF did not provide protection for workers who had lost pension rights before the legislation came into force.
Following considerable pressure from right hon. and hon. Members on both sides of the House and determined campaigning from the Pensions Action Group, the Government eventually introduced the financial assistance scheme in 2004. The FAS promised 90% of earned pension to workers who had lost their pensions before the introduction of the PPF. However, 90% of an earned pension was not the same as 90% of an expected pension based on any particular scheme, such as that in which ASW workers had invested. Compensation payments were much lower, so for the Government continually to quote a 90% figure was, at best, disingenuous. The FAS also provided little inflation protection. In addition, a £26,000 payments cap was introduced, badly affecting people with good salaries, such as steel workers, and particularly those with long service.
When the PPF was eventually introduced in 2005, it acted like an insurance scheme funded by pension funds and without the input of any Government money.
I congratulate the hon. Gentleman on bringing this important issue to the House. What he has described thus far is almost a mirror image of a number of cases in my constituency, where adequate funding was not in place to deal with pensions and insolvency. After 15 years, families in my area are still suffering the aftermath. The attitude is that the funding of pensions was not regulated properly. Does he agree?
Yes, I certainly do, and I will come to the problems relating to that.
Like the FAS, the PPF gives 90% of earned pension, and it gives protection against inflation for employment post-1997. That indexation ensures that protection under the PPF is much better than protection under the FAS, because it improves over time. Under the FAS there is very little post-1997 inflation protection, and the pre-1997 pensionable service has no inflation protection at all, even though most of the ASW workers in my constituency had paid for indexation with enhanced contributions to the Sheerness Steel Group pension fund. For most ASW FAS members, the pre-1997 element of their pension represents the majority, if not all, of their pensionable service.
I want to give an example of what that means in practice to a typical employee at the steelworks—and, I am sure, to constituents of the hon. Member for Upper Bann (David Simpson)who have been affected. Someone who joined the pension scheme in 1980, with an anticipated retirement date in 2010 at the age of 62—the Sheerness steelworkers’ retirement age—and a salary of £30,000 a year in 2002, would have expected when he retired in 2010, after 30 years of service, to receive a pension equal to 30 sixtieths of at least a £30,000 salary, which would equate to £15,000 a year. However, by the time the steelworks went into liquidation in 2002, that worker had only 22 years of service, so his pension entitlement would have been 22 sixtieths of £30,000, or about £11,000 per annum. However, the FAS paid only 90% of that amount, which is £9,900 per annum.
The FAS then applied limited inflation protection, at 2.5%, but only for service post-1997 until the steelworks went into liquidation—about 4.5 years in total. The employee would therefore have inflation protection on just 4.5 twenty-seconds of £9,900, which equates to £2,025—that sounds a bit complicated, and I have the figures before me which makes it easier for me, but trust me, they are right. However, there would be no inflation protection on the remaining 17.5 twenty-seconds, which would have been £7,875. The maximum indexation that the employee would get was therefore 2.5% of £2,025, which is £50 per year. That is equivalent to a total indexation of about 0.5% maximum over the full amount of the pension.
My hon. Friend may recall that a couple of years ago I obtained an Adjournment debate on this very issue, which affected constituents of mine who were ASW workers. What they tell me endlessly is that when the very arrangements he describes were outlined before the last election, all politicians made it clear to them that it was an injustice, which would be corrected. The fact that it has still not been corrected undermines the Government’s record on pensions generally, in my constituents’ view.
I fully accept that, and I want to talk about the reasons why the Government have been unable to pursue the matter.
In the example I have been outlining, that typical worker, having expected a pension of £15,000 but with an actual FAS pension of £9,900 and a maximum of 0.5% indexation compared with an average inflation rate over the relevant years of more than 2%, lost an awful lot of money.
An ASW pensioner told me recently that he received his first FAS payment in 2006 and reckons that today it is worth only about 80% of its initial value—which was, of course, only 90% of his actual entitlement. That person calculates that he is actually getting about 75% of his entitlement, a figure that reduces year by year. That is why the DWP-quoted figure of 90% is misleading. The brutal truth for ASW pensioners is that the longer their service, the more negative the effect on their income the lack of proper indexation is. The PPF uses very similar rules, but as the number of years since 1997 is increasing, the multiplier becomes more favourable. There have been 18 years since 1997, so someone with 20 years’ service going into the PPF now will have inflation protection on 18 twentieths, or 90%, of his pension; and only two twentieths, or 10%, will be without protection. Those proportions will become more favourable as time progresses. Under the FAS, indexation is very limited, whereas under the PPF, as each year goes by, the amount of post-1997 service increases and, through Pensions Act disclosure requirements, PPF members are kept fully informed about funding levels and about what would happen if their employer became insolvent.
There is another problem under the FAS, in connection with the period between members reaching retirement and the May 2004 date, when the FAS was introduced. Anyone affected by that gets nothing from the FAS for that period; yet that is not the case under the PPF scheme. Ministers in the previous Government insisted consistently that the country could not afford to provide pre-1997 indexation to ASW pensioners under the financial assistance scheme. However, the very same Government bailed out Northern Rock and fully protected the pensions of the employees and well as investors’ funds. The Government also offered a 100% bail-out to UK investors in Icelandic banks, despite the fact that those investors were fully aware of the risk in such investments. Subsequently, the Government bailed out other British banks to prevent their bankruptcy and fully protected the final salary schemes of the employees. That smacks of double standards.
Furthermore, on the question of the affordability of pre-1997 indexation, £2 billion is being transferred to the Treasury from residual pension scheme assets from failed companies. The total FAS costs are estimated at the same figure of £2 billion, albeit spread over a number of years, and there should be more than enough to fund indexation for ASW pensioners pre-1997. It is likely also that the final costs of the scheme will be well below the original estimate, because more than 10,000 people who were eligible for FAS payments have died since its introduction.
I want to raise one other matter: overpayment of FAS payments. Some ASW FAS members have been overpaid because of errors by either the scheme’s trustees or FAS staff. Almost none of those members knows how the calculations that led to the overpayments were done, and they are unable to check whether the FAS payments were right or not. When the FAS discovers an overpayment, it imposes an inequitable repayment plan; it is harsh and unfair. In some cases the repayment plan results in the total loss of pension payments, as happened to one of my constituents, who raised the matter with me at a recent advice surgery. He alleges that the FAS never even contacted him to negotiate a suitable repayment plan. Instead it simply stopped his pension entirely and without warning. That simply cannot be right.
Another problem with those repayment plans, which, let us remember, are to recover overpayments resulting from mistakes by the FAS, not the pensioners involved, is that because the way they are calculated—a bit like an annuity—members can actually repay significantly more than the overpayment itself. That, too, cannot be right.
I must admit that, unlike my right hon. Friend the Member for Thornbury and Yate, I am no expert on pensions. When writing this speech, I relied heavily on the help of my friend and constituent, Andrew Parr, who is himself an ASW pensioner who has been badly let down by the financial assistance scheme. However, although I am no pensions expert, I recognise injustice when I see it. I genuinely believe that ASW pensioners in my constituency have been hard done by, and I urge the Government to take the following action to improve the situation for ASW pensioners: first, reconsider the decision not to provide pre-1997 indexation to ensure that ASW pensioners receive the inflation-proof pensions for which they paid; secondly, increase the FAS payments cap to help long-service pensioners; and thirdly, look again at the way that overpayments are calculated and recovered.
ASW pensioners have never given up their fight for justice. Working with the Pensioners Action Group, they have campaigned tirelessly, lobbying MPs, demonstrating at party conferences and staging protest marches. In March 2006, I was honoured to join ASW workers from my constituency on a march in Cardiff, and in November of the same year, I marched down Whitehall with the very same workers. My speech today is a reminder to the Government that the protests will continue until ASW pensioners get the justice they deserve.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Sittingbourne and Sheppey (Gordon Henderson) on bringing the issue of FAS pensions to the attention of the House once again.
As the hon. Gentleman set out eloquently, this has been a burning issue for some time. He made it clear that the Pensions Action Group will continue to campaign to see the full value of their pensions restored. No one who walks the pensions road or takes the pensions brief can be unaware of the strength of feeling about the issue. Over the past few years, as shadow Pensions Minister, I have met representatives of the Pensions Action Group and of trade unions—including Community, which I met last week, and Unite, a significant number of whose members were affected by the collapse of the steel workers’ pension scheme.
Let me say a little about where I think the issue has come from and where it stands. The previous Government took action and put in place a system to ensure that those who lost their pensions received 90% back, with a cap at just under £30,000. I have the sense that, particularly in the past 18 months or so, there has been growing anger among campaigners about promises that they think were made before the previous election by parties who came to power but did not meet those promises.
Members of the Government parties have been outspoken about the failure to meet the promises that were made. The hon. Member for Cardiff North (Jonathan Evans) was clear that the indications given to pensioners—that the missing element would be restored to them on a change of Government—have not materialised. He said that in a polite and decorous way, but that was his point.
One of the campaigners in the Pensions Action Group, John Benson, went as far as to say that the group had been betrayed by the coalition. I do not know whether that is true, as I entered this House in 2010, but it speaks to the difficulties that the issue raises.
I pay tribute to the hon. Member for Sittingbourne and Sheppey (Gordon Henderson) for securing this debate. I must declare an interest, as I am a member of the Community trade union and I was a former regional industrial officer for it, although I did not work in the areas where Allied Steel and Wire were based. We were part of a large campaign, and the previous Government were challenged in the European Court of Justice. Perhaps my hon. Friend wishes to comment on the fact that the Government have not applied article 8 of the European insolvency directive, which the European Court of Justice said would entitle the steel workers to full compensation.
No one can doubt the attention that Community has paid to making that case for its members, who suffered great detriment as a result of the collapse of these pension schemes.
I know from the discussions that I have had that there was a strong sense that there would be further action, given the promises made by the parties that are now in government. Actually, given the current situation, the previous Government’s substantial intervention stands as the signal contribution from the state to alleviating the detriment suffered by members of those schemes. Since 2010, there has been no advance on the agreement reached under the previous Government. Of course, that agreement has virtues—up to 90% is a lot more than nothing. It is a big difference.
Community and Unite have acknowledged to me that the previous Government’s intervention made a substantial difference. Of course it did. Those who lost their pensions now receive up to 90% and a cap at approximately £29,300—I cannot remember the precise number; I think it is £29,348. That is a significant advance, but those people had a strong feeling that they would get more if there was a change of Government; perhaps that speaks to the differences between opposition and government. None the less, promises were made, and those who made them should account for why they have not been fulfilled.
I am listening carefully to the hon. Gentleman. He may be getting to this, so he will have to forgive me if I am jumping the gun. Given the tone of what he is saying, is he making a commitment on behalf of the Opposition to make a significant financial improvement to what is on the table?
The Minister says it is just words, but the words that those campaigning for the parties that are now in government used have not materialised into any action. The difference between the Government parties and Labour is not only that the previous Government actually acted, but that we are a responsible Opposition and we will not promise things that we do not intend to deliver.
The perfect example of that, to which the Minister must pay attention, is the difference between the Conservative party’s pre-election promises about Equitable Life and what was delivered. We need to bear that in mind because it is an ongoing case, much like this one. We are talking about the lives of individual workers who laid down their deferred income on the understanding that they would receive it.
Yes. We are dealing with individual workers’ lives, and it is incumbent on political parties not to promise things in their search for votes that they do not intend to deliver. That is the big difference between the Government and the Opposition.
I have met a number of times with the pensioners affected by this issue, and the impact on people’s lives is enormous. The previous Government acted—it was not just words. Understandably, that action has not met all the expectations of those whose pensions disappeared. A significant part of their pensions has been restored, but not all. Understandably, those affected feel an enormous sense of injustice, but it is incumbent on us all to use words carefully, to make sure that actions speak louder than words and to take on board the points made today.
The hon. Member for Sittingbourne and Sheppey, who rightly brought this issue before the House, mentioned the Pension Protection Fund, comparing it with the FAS. The PPF is another welcome development: it ensures that if someone is saving into a company pension, they can have confidence that that pension promise will be met, whatever circumstances the company finds itself in. He was right to draw a distinction between the financial assistance scheme approach and the PPF.
The issue of overpayments has repeatedly been brought to my attention and adds to the agony, if I may use that word—I think it appropriate—of the situation. Not only is one’s full pension not restored, but that individual then finds through no fault of their own that they are asked to repay money because of mistakes made in calculations. Any sensible Government would look at that.
I find it curious that the Minister for Pensions is not responding to today’s debate—I do not know why he is not. We were in a Committee together earlier; perhaps he is not here because of the potential for that Committee to overrun, but it would have been nice to have him stand up and explain the Government’s approach. I looked at what he has said on this issue. He has referred to the fact that the Government are paying out £2 billion, I think, but of course that system was put in place by the previous Government. There has been no advance under the coalition.
Let me finish by making a broader point. When individuals save into a company pension scheme, it is understood that that pension will be paid out in full when individual savers retire. That is understood to be part of the compact between employers and employees. What emerged in the 1980s and 1990s really brought home the necessity of putting in place a system that protects against the non-fulfilment of that pension promise.
Although it is easier for us, as politicians, to step back a little and make this point, the system now is clearly much better than the situation in the ’90s. That, however, is cold comfort to those who have not received their full pension. Having regularly met the representatives of the Allied Steel workers, let me say that Labour understands both the necessity of continuing the campaign and the injustice felt at not receiving the full pension that is due. We will continue to listen closely to the campaigners, but we will not promise something that we are not sure we can deliver. We have learned that lesson from watching the parties who are now in government.
I just want to add a point to my hon. Friend’s good summing up. Without industrial vigilance, this campaign would not even have started in the first place. The lion’s share of the funding for taking the legal case to the ECJ back in 2006 came from the trade union movement. Without collective bargaining in workplaces, there is no ability to be vigilant about any employer who tries to perform any sort of industrial acrobatics to get out of the payments that they owe their employees.
Yes, and I want to finish by paying tribute to the campaigns run by the Pensions Action Group and the trade unions. Through those campaigns, this issue has remained near the top of the pensions agenda. I repeatedly receive submissions on it and that repeatedly results in conversations and dialogue with the various parts of the campaign.
In my understanding, and from meetings with the campaigners and those affected, that search will continue until the full payment of the pension due is realised. Although I am not going to stand here in opposition and promise something that I am not sure I can deliver, I will say that it was the last Government who put in place the system that does exist. That surely stands for something next to the honeyed words of the Government.
It is a great pleasure to serve under your chairmanship, Mr Hollobone. I pay tribute to my hon. Friend the Member for Sittingbourne and Sheppey (Gordon Henderson) for securing the debate.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont)referred to my right hon. Friend the Minister for Pensions. I should be clear that my right hon. Friend, like the shadow Minister, was scheduled to be in a Committee considering regulations for an hour and a half, so he prudently ensured that a Minister was available from the Department to answer this debate. Due to the fact that the regulations were clearly excellent and that the Opposition had very few questions and did not challenge them, the Committee unexpectedly finished early. However, the Pensions Minister had secured my cover for this debate, which is why I am here and he is not. I am sorry that that is so disappointing to the shadow Minister.
I thank those Members who have contributed to the debate, as well as other Members and those outside the House who worked to establish the financial assistance scheme in the first place. The scheme ensures that people who were members of schemes that went into wind-up prior to the introduction of the Pension Protection Fund will get some financial help, which they otherwise would not.
It is also worth saying—the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East acknowledged this point—that I understand the views of all the pensioners who have been affected, but the fact is that the pension schemes that were wound up without sufficient funds in them to pay those pensions mean that those pensions effectively do not exist and have been lost. Without the financial assistance scheme, there would not be the funds to pay those pensioners either in part or at all, so they would be in a far worse situation. What we are discussing is the amount of help people can expect from the Government, and of course, there is no Government money; what we are talking about is the amount of money that taxpayers more generally are prepared to make available.
My hon. Friend the Member for Sittingbourne and Sheppey made the point about what people could expect. My understanding is that the financial assistance scheme has always promised that people would get 90% of their expected pension accrued at the point of winding-up, subject to a cap. That is obviously not the same as the amount that someone who had continued their working life would have expected had the scheme been fully funded. My understanding is that that is not what the Government ever promised. When the previous Government set up the financial assistance scheme, they promised 90% of what would have been accrued at the point of wind-up, and I think that is what has been delivered.
My hon. Friend referred to the cap, whereby when someone was entitled to a higher pension, the FAS caps the amount of assistance paid. That cap was put in place to target the payments on the lowest-paid pensioners. The cap was £26,000 for anyone who began to be paid before April 2007. It is increased annually and is now £33,454, and the amount paid depends on the level of cap in place when the payments begin. For example, a person whose payments began in 2012-13 would have a cap of £31,873, which is more than twice the average occupational pension in the UK in the same period.
When the changes to the PPF cap legislation were made, the Minister for Pensions said that he was considering whether a similar change could be made to the financial assistance scheme. He continues to keep the matter under review and is having discussions with his Treasury colleagues about whether that is doable and affordable. No doubt he will keep the House fully informed on the progress of those discussions.
One point made by my hon. Friend the Member for Sittingbourne and Sheppey and others was about indexing what was accrued before 1997. The FAS reflects the statutory requirement on all schemes, which is to index post-April 1997 accruals in line with the consumer prices index, capped at 2.5%. My hon. Friend did not think that was in line with the PPF, but in fact it is. The PPF has the same indexation post-April 1997, which is CPI, capped at 2.5%. The PPF also pays 90% of the expected pension, so the FAS is in line with the PPF. It would be difficult to argue that the FAS, largely funded by the taxpayer, should be more generous by paying to index pre-1997 accruals than the PPF, which is partly funded from a levy on pension schemes.
If we did index the pre-1997 accruals, that would not be inexpensive. It was estimated in 2010 that providing indexation on all assistance to all FAS recipients in line with the retail prices index, as it was then done, capped at 2.5%, would cost an extra £845 million of taxpayers’ money. That would be the net present value. If we accept that the money available is limited, a choice has to be made. We could provide more generous indexation, which would benefit those pensioners who live longer, but the cost of doing that is that we would pay a smaller percentage of pensions at the beginning. I think the scheme has made the right judgment.
I want to cover one point on the cost. I listened carefully to my hon. Friend and I have heard the point before about the value of the assets of schemes transferred into the FAS being broadly similar to the cost of the scheme. That is not right. In December 2007, the Government announced a significant extension to the FAS. That was funded by a combination of the money transferred in from schemes that were not wound up, which was an estimated £1.7 billion, and an increase in the taxpayer contribution, taking the total taxpayer contribution to the FAS to £12.5 billion. The net sum from the taxpayer to stand behind this pension promise was nearly £11 billion. I think that is very significant.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East is right to say that the promise was made by the previous Government, but of course this is an ongoing commitment, which is being met and stood behind by the present Government. It is an ongoing commitment for taxpayers today and it is a very significant cost. It clearly is not covered by all the assets being transferred in, because if all the assets being transferred in matched the cost of delivering the promise, there would of course be no need for a financial assistance scheme in the first place. The whole point is that the assets in the pension schemes do not, for all sorts of reasons, fund the promises that were made.
On the issue of funding, I listened very carefully to the hon. Gentleman, who seemed to be giving the impression that the Opposition were going to do something significant. I simply wanted to probe him on that and be clear that he was not making any financial commitments. I am not aware that my party made any financial commitments that we have gone back on. Indeed, the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), who is no longer in his place, referred to Equitable Life. I will be brief on this, Mr Hollobone, because I am getting slightly off the subject of the debate, but as the point was made, let me say that my party did make some commitments on Equitable Life—I followed that very closely, because I have constituents who were affected—and we have delivered on what we promised to do for Equitable Life annuity holders. I have had lots of correspondence with Ministers and with my constituents, and we absolutely have delivered on that, so I do not quite know what point the hon. Gentleman was making.
I was not sure, either, where the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East was going with the promises that my party makes. I was listening carefully and I did not hear any specific promise that we were alleged to have gone back on. We have stood behind the very significant commitment that the previous Government made, which is an ongoing commitment, and we have done that in the context of inheriting a very difficult financial situation—in the words of the former Chief Secretary to the Treasury, there was no money left.
This is a significant commitment. It was the right commitment for the previous Government to make, and this Government have honoured the commitment even in the very difficult financial circumstances that we inherited. We are right to have done so, but it does mean—this is where I agree with the hon. Gentleman —it is difficult to justify putting even more taxpayers’ money into a scheme to do the things that my hon. Friend the Member for Sittingbourne and Sheppey and his constituents want. I completely understand that, but we have to recognise that other taxpayers would have to foot the bill.
I accept everything that my hon. Friend the Minister has said, but does he not accept that there is a principle involved? The principle is very clear: the Government of the day misled people into believing that their occupational pension would be safe and was safe to invest in. That is what the parliamentary ombudsman, the High Court and the Court of Appeal decided—that those pensioners had been misled—and therefore it is morally wrong for any Government, of whatever complexion, to use finance as a reason for not giving those people justice.
Following on from that point, I think, having read through the detail of the case, that what my hon. Friend says is exactly why a financial assistance scheme was set up in the first place, and very significant amounts of taxpayers’ money were put into it. As I said, the total commitment from the taxpayer is now about £12.5 billion and about £1.7 billion has come in from the schemes that were not wound up. That is a very significant commitment from the taxpayer in order to provide protection for pensioners who are not getting support from pension schemes because those schemes were not adequately funded to meet the promises that had been made.
My hon. Friend said that a number of pensioners in the schemes covered by the FAS have died over time and that in some way reduces the cost. It does not, because the calculation of the total cost will have taken into account the age profile of the pensioners and the expected number of deaths—that is the rather brutal science in which actuaries are involved. That factor will have been taken into account in the costings, so no extra money arises from the fact that some pensioners in schemes covered by the FAS are, sadly, no longer with us.
My hon. Friend made a point about workers who became pensioners before the FAS was first announced, in May 2004. As is normal with all Government schemes, assistance payments are not backdated to before the announcement date, so anyone who became a pensioner before May 2004 gets assistance from that date only. The same applies to the PPF: it does not pay compensation for any period before it was introduced.
I listened carefully to my hon. Friend’s point about overpayments. Because a scheme does not know at the beginning of the winding-up process the exact value of the assets it has and what each member is entitled to, it pays interim pensions—its best guess of what the member will get when the scheme does wind up. At the end of the winding-up, the scheme balances its payments, paying less in the future if a person has been overpaid during the winding-up period. Where possible, the FAS balances overpayments and underpayments once it has the full data, which is the same as the approach taken by schemes. During the winding-up period, the FAS tops up any interim pension to 90% of the expected pension, based on data provided by the scheme. I understand that it used to be 80%, but in response to representations from the various groups, the then Government raised the limit to 90%. That narrows the margin for error, so if there is an error in the data provided by the scheme, that increases the chances of having to recover an overpayment.
The reason why the overpayments are not simply written off is because the FAS is largely funded by the taxpayer. The Department uses the guidance “Managing public money”, which is issued by the Treasury. That is the same guidance used when, for example, the Government overpay benefits and have to recover them. The FAS does what the schemes would do to recover overpayments: it turns the amount that has been overpaid into a notional annuity and deducts it from the assistance due, so that over the individual’s lifetime, they will receive the correct amount.
I listened carefully to my hon. Friend, and I think he said that one of his constituents did not receive good communication from the FAS about the fact that they had been overpaid and that the overpayment would be recovered. I am sure that my hon. Friend will correct me if I am wrong. If that is the case, there is no excuse for poor communication. If I have correctly understood that that came as a surprise, it would be helpful if he wrote to the Minister for Pensions, if he has not done so already, so that we can look into that breakdown of communication.
May I clarify that point? My constituent’s complaint was that he is aware of other people in similar situations whom the PPF contacted to negotiate a repayment plan to ensure that it recovered the money over time, but he was not given that opportunity. I have already written to the PPF to ask why it did not negotiate, and why it immediately stopped his pension entirely. That was his point; he was not given an opportunity to negotiate and say, “Right, I will pay off x amount per month.”
I am grateful to my hon. Friend for that clarification. He has already written to the scheme, so I will draw his comments to the attention of the Minister for Pensions. It may be helpful for the Minister to look at the case and perhaps write to my hon. Friend about it, because it is difficult to go into the specifics of an individual case in an Adjournment debate.
My hon. Friend rightly raised the subject in his role as Member of Parliament for his constituents. He acknowledged in his speech the assistance he has received from those in his constituency who have campaigned on the matter. I recognise that he and those whom he represents are probably disappointed by what I have had to say. However, I hope he understands that, given the very significant contribution that taxpayers rightly continue to make to the financial assistance scheme, there is a limit to the amount of support that taxpayers can give. I fear that it will not, therefore, be possible to deliver the things that he has requested, given the circumstances that we still face in the public finances because we are dealing with the legacy that we inherited from the previous Government.
I thank all hon. Members who took part in that important debate for covering all the issues pithily and succinctly. The next debate is not due to start until 11 o’clock, so I will suspend the sitting until that time. However, if the participants arrive a few minutes early, we will start when they arrive. The sitting is, therefore, suspended until about 11 o’clock.
Contaminated Land (Householder Responsibility)
It is a pleasure to serve under your chairmanship, Mr Hollobone. I am particularly pleased to have secured this brief debate on an issue that affects perhaps only a limited number of people, but in a substantial way: the liabilities of householders when contamination is found on their land, whether that is their home or business. I will deal in particular with domestic householders and their property, which is governed by part 2 of the Environmental Protection Act 1990, as amended by the Environment Act 1995. I look back on the 1990 Act with some fondness, as I was at that time employed as a consultant by the World Wildlife Fund to help it with the passage of that Bill and therefore had a lot of dealings with it. It contained a very important principle: where land is polluted, it is right that the polluter pays to clean up what he or she caused.
The 1990 Act provides for what is termed a class A person: the polluter, or someone who knowingly allows land under their control to be polluted, and provides that, in the first instance, they should pay for any remedial action. It also introduces a separate, class B person—the so-called “appropriate person”—if the class A person cannot be identified or is no longer in existence. They are the current owner or occupier of the land.
That causes a potential difficulty, which was drawn to my attention in the first instance by Dr Jeff Downing, who was the contaminated land officer for South Somerset district council. He came to see me in a personal capacity as a constituent because he was so worried about the consequences of his work for a particular couple who lived in my constituency. He saw a problem with the system and he wanted me to find whether there was any way to alleviate that. I am particularly grateful to Dr Downing, who no longer works for South Somerset and has moved to another council, for his help in spelling out the situation and how the arrangements were working against the principles of natural justice and perversely in public policy terms.
Dr Downing drew my attention to the situation of a retired couple in Langport—I will not mention their names because I have not got their explicit agreement to do so and I do not want to embarrass them in any way—who, following an inspection from South Somerset district council, found that their house and garden had contaminated land from former gasworks. They were completely unaware of that and they could not have not been aware—there had been no failure of appropriate searches when they bought the property some time ago—so it came as a complete bolt out of the blue that they were the proud owners of contaminated land.
The difficulty arose that the cost of removing that contamination was substantial: the estimates on the first assessment were about £260,000 to £270,000. That sum was well beyond their means; in fact, I suspect it was well beyond the value of their house, so there was no question of using a charge on the house or some other mechanism even if that were fair.
Dr Downing pointed out that the arrangements contain certain inflexibilities. First, the council has a statutory obligation to search and identify contaminated land. It has no discretion on that and certainly if a suspicion of contaminated land is reported, it has to investigate and add that to its records. Secondly, once it has identified such land, it has a statutory duty with a small professional discretion about the nature of the contamination to register that land as contaminated land. Thirdly, it has a statutory obligation to ensure that remedial action, normally removal of the contaminated soil, takes place if, in its opinion—this is the only area where I think it has significant discretion—there is a significant possibility of significant harm: the so-called SPOSH, an inelegant acronym on which it applies its professional judgment. However, such discretion is purely professional; it has to make a judgment on potential significant harm and if it thinks that there is potential significant harm, it must take action.
If all those tests, in which the council has little discretion, are passed, costs—they are significant in this case—must fall on someone and, in the absence of a class A polluter, they fall on the householder. In this case, despite the best efforts put into finding the successors connected to the original industrial activity, the couple were found to be liable.
In each of those steps along the way, the council cannot take into account the circumstances of the person on whom the liability falls, save for the very last step, which is whether they waive any part of the cost of remedial action. That has happened on occasions in the past few years by use of the contaminated land grant, provided by the Government through the Department for Environment, Food and Rural Affairs. The difficulty lies in the fact that that grant has been shrunk and will disappear completely by April 2017.
There will be two consequences. First, if no funding is available for the removal of contaminated land––a public good––to help people who had no direct involvement in the polluting but find themselves victims of circumstances beyond their control, that will be a manifest injustice. That is simply not right. Secondly, councils could subvent the costs of remedial work from their own funds. However, that is difficult—I would say impossible. Dr Downing told me, “There are probably still hundreds of properties that are affected by pollution where this may apply in one small district council area alone.” That is a massive capital sum, well beyond what the local authority can reasonably bear. That is difficult in itself, but it also provides a massive disincentive to the authorities to carry out the statutory duty we want them to perform, which is to look assiduously for pollution and deal with that effectively for the safety of the environment and the local population. The system has a built-in disincentive.
I suspect that when the decision was made—the Minister knows that I know only too well the Department’s budgeting difficulties, both currently and over the past few years—there was perhaps a thought that the contaminated land grant had served its purpose. It is, after all, 15 years since the regulations and statutory guidance came into effect. The Department perhaps thought that most of the contaminated land had been identified and dealt with, but in reality, as I am told by someone who deals with the matter face to face and day by day, that is not the case. A lot of unidentified contaminated land still needs to be dealt with. If that was the Department’s assumption, it was incorrect. It might have been thought that the £500,000 available in the current year was sufficient, but it clearly is not. Spread across the whole country, that money is nowhere near enough. I quoted a figure for one single garden in one single property, and 10 such properties have been identified already in the area that I am describing.
We have a significant problem of public policy. I wrote a little while ago to the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall (Dan Rogerson). I received a response from Lord de Mauley. I am grateful for his letter, which was sympathetic and clearly recognised the difficulties that my constituents found themselves in, but at the end of the day it provided scant support. One thing may have happened in the interim, but Lord de Mauley said that my constituents are having the cost met by the district council. I am not convinced that that is the case, and I am trying to establish whether it is, but let us not rest the case on their circumstances. I hope that it is the case, but the last I heard from the council, it was looking at a loan or other means of spreading the cost, rather than removing the cost from the couple. The more important point is that nothing is available this year.
Lord de Mauley’s letter states that the property
“meets the criteria for a priority category 3 site…but does not meet the criteria for a priority category 1 site requiring urgent remediation. We are therefore unable to offer funding for remediation this year as the contingency fund has been fully allocated to higher priority sites.”
I understand the idea of priority, but it does not help under the circumstances. Lord de Mauley continues:
“the Environment Agency has approved in principle the provisional sum of £50,000 contribution to the remediation.”
That is certainly welcome, but goes nowhere near meeting the total cost. I accept that the cost might be driven down further, were there a competitive tendering process. We are not quite at that stage yet, but there appears to be a substantial gap between the cost as originally estimated and the support that may or may not be available.
To return to where I started, I am not yet convinced that I have a solution for people who are extraordinarily and quite reasonably worried about whether they will lose their entire life savings, the value of their house and more to meet a circumstance that is of no direct benefit to them other than the fact it would make their house saleable again. This is the Catch-22, of course: if contaminated land is not removed once it has been identified, there is still a problem because the land is unsaleable, so its owner has lost the value anyway. It is a conundrum. The couple are worried that they still face a substantial bill that they are not sure they can meet. That is a huge worry for a couple on a fixed income with no obvious means of finding alternative borrowings.
There is also the wider question, because the case demonstrates a clear failing in the architecture of the system. The system was always based on the idea that those who caused the pollution dealt with the pollution. It was never intended to penalise those who unknowingly occupy that land much later on and find themselves saddled with an enormous bill. Where those circumstances applied, it was always assumed that the local council would have the support of public funding to make good the land in question in the public interest. Remove the contaminated land grant and a massive loophole in the system is created that threatens to make the whole thing not function properly and, in the process, cause many who find themselves in such circumstances sleepless nights and a great deal of concern, and that is entirely unjustified.
I ask the Minister to look again at the situation—I appreciate that it is not his direct responsibility, so he will need to talk to colleagues in the Department—and potentially go back to the Treasury and say, “This is a capital grant. It is not a revenue grant, although it is paid out of departmental revenue.” We as a country need to identify the problem so that those who in all innocence find themselves facing it are not put in the same position as my constituents. Most of all—laying aside that equity issue for those individuals—if we want public policy to work properly and if we want councils to look for this land, identify it and deal with it, we cannot give them a massive disincentive to doing so, because frankly it will not work. I look forward to the Minister’s response.
I congratulate the hon. Member for Somerton and Frome (Mr Heath) on securing the debate. I assure him that representing as I do a seat with towns built on the sites of 18th and 19th-century tin mining, I am well aware that contaminated land is still an issue in many parts of the country and that it has in no way gone away. The idea that it has is not the driver behind some of the changes we have made.
Contaminated land is a complex area and can cause hardship and anxiety for people, particularly where their homes are involved. The case that the hon. Gentleman mentioned, where he suggested the cost could be £270,000, very much demonstrates that point. An estimated 90% of the remediation of contaminated sites is market-driven and occurs under the planning regime, but there will continue to be sites that are not suitable for further development, but require remediation.
I was interested to hear about the hon. Gentleman’s involvement in the passage of the Environmental Protection Act 1990. As he knows, the contaminated land regime, as set out in part 2A of that Act, provides a risk-based approach to the identification and remediation of land where contamination poses an unacceptable risk to human health, property or the environment. Responsibility for identifying that contaminated land rests with the local authority, as set out under part 2A. Changes made to the part 2A statutory guidance in April 2012 have resulted in a more risk-based approach to identifying and remediating contaminated land, meaning that more resource can be directed to those sites most in need. From our discussions with local authorities, we know that the new statutory guidance is proving helpful to them and has helped to simplify a complex area.
Part 2A, as the hon. Gentleman pointed out, is based on the principle of polluter pays. Therefore, liability will always be apportioned in the first instance to the company or person that caused the pollution or knowingly permitted it to be caused. However, it is not always possible to identify the polluter. In some cases, the pollution was caused long ago, and the company responsible may since have folded. When that happens, the costs of remediation can fall to the site owner or the occupier of the land. That might be the local authority itself, but it can also be individual private householders. Crucially, however, local authorities are required to take into account the hardship that may be caused if all costs, or partial costs, are to be apportioned. When local authorities are reaching decisions over cost apportionment, hardship must be considered on a case-by-case basis, with regard given to the principles set out in the statutory guidance.
Turning to the hon. Gentleman’s constituency matter relating to the Whatley gasworks in Somerset, I understand that in the case of the home owner on that site, no liable polluter could be identified. Although the Department for Environment, Food and Rural Affairs was unable to offer further funding this year, as the contingency fund was allocated to higher-priority sites, I can confirm that in previous years, capital grants totalling almost £90,000 have been issued for the same site to cover the costs of investigation. The hon. Gentleman was unclear about this, but my understanding is that, in the end, the local council agreed to bear the costs of remediation because it determined that hardship would be caused to the householders who owned the affected property had they been made to pay. I know that he questions whether that is the case, and I am more than willing to clarify that point after the debate, but my understanding is that the costs will be borne in this instance.
A related point about part 2A is that it is clear that where a class B person owns and occupies a dwelling on contaminated land, the council should consider waiving or reducing the costs of recovery if the person did not know and could not reasonably have been expected to know that the land was contaminated when they brought it. My understanding is that the people in the case raised by the hon. Gentleman did have a survey carried out when they purchased the property many years ago, which is also a mitigating circumstance.
The local authority has been as helpful as possible in this case and did identify both of those factors as arguments for waiving the fees. Nevertheless, it expressed concern that a number of other properties around the district council area will end up in similar circumstances. That would mean a substantial capital sum mounting up very quickly, which would be difficult for a small district council to support.
I understand the hon. Gentleman’s point and hope to reassure him in a moment when I discuss some of the other things that we are doing to move from looking only at the hazard of contaminated land to a more risk-based approach. From 2012 onwards, we have taken a number of steps to ensure that councils do not unnecessarily identify sites that may well have some contamination but are not a priority. I am pleased that the case he has raised appears to have been resolved satisfactorily; however, he has put his finger on an important point, because other sites might be affected.
As I said at the start of my speech, it is important to recognise that an estimated 90% of the cleaning up of contaminated land in England and Wales is carried out through the planning system under the national planning policy framework. The Government encourage the focus on a market-based approach to dealing with contaminated land. One of the financial incentives provided by Government to encourage the re-development of contaminated land is land remediation relief, which allows companies to claim back corporation tax on 150% of the costs of dealing with contaminated land and is intended to influence developers’ decisions positively by increasing the profitability of redevelopment projects. We should also note that the existing environmental permitting regime for the current activities with the greatest potential to cause contamination is designed to ensure that no new part 2A contaminated sites are created.
As the hon. Gentleman pointed out, the capital grant scheme is being phased out. I know that local authorities were disappointed when DEFRA announced in December 2013 that the contaminated land capital grants scheme would be closed. The phasing out of the grants scheme is regrettable, but it reflected a necessary shift to a more sustainable approach in the face of pressures on the public finances, of which the hon. Gentleman will be well aware, having been a DEFRA Minister himself. The cornerstone of our new approach was the revised guidance that we issued in 2012 that has saved local authorities and businesses money by giving much more clarity over how to decide whether affected sites need to be remediated.
In March 2014, we published DEFRA-funded research to develop new screening levels that will help public authorities and developers to screen out low-risk land from the need for further investigation and so prevent unnecessary remediation works. The crucial thing is to ensure that there is no obligation on local authorities to search for sites that might not be of particularly high risk and should not be a priority, thereby creating a potential liability for householders. By adopting a more risk-based, less hazard-based approach to these issues, we have helped to address some concerns.
The screening values that we published sit alongside DEFRA research that was published in 2012 on the normal background concentrations of contaminants. That forms part of a toolkit for use by the contaminated land sector that will help to ensure that pragmatic, evidence-based decisions can be taken, thereby reducing costs while ensuring a high level of protection to human health and the environment. DEFRA continues to support the national experts panel on contaminated land, the remit of which is to advise local authorities on difficult decisions under part 2A at more complex contaminated sites. The panel is available as a free resource for local authorities to access, and is intended to help where it is unclear whether a site should be determined as contaminated under part 2A. Case studies on the output of the panel’s work will be published so that all local authorities can benefit from the lessons learned.
In conclusion, we remain committed to ensuring that the appropriate policy tools are available to support local authorities in carrying out their duties under part 2A. Local authorities that require help and advice about how best to manage affected sites should obtain advice from industry experts where necessary. Authorities should also try to work with the owner of the land to see what benefits could be gained via the land remediation relief scheme. Although there will always be difficult cases that require more detailed consideration, the changes that we have introduced to the contaminated land management regime since 2012 have stimulated growth, enabled previously abandoned sites to be developed and returned to productive use, and delivered significant benefits for the economy, while maintaining a high degree of protection for human health and the environment.
I congratulate the hon. Gentleman again on bringing this debate before the House. I hope I have been able to allay some of his concerns, both on the individual case that he raised, which I understand has now been resolved, and more widely.
I am most grateful to the Minister for giving way at this point. In the course of the debate, I have been advised that the matter has not yet been resolved. It might be a matter of loan or of grant, but the household concerned is still not absolutely clear about where the funding will come from.
In which case that is a disappointment, because I thought that we had found a solution. After the debate, I will discuss the case with my noble Friend Lord de Mauley, with whom I know the hon. Gentleman has previously corresponded. As I said, the local authority could show forbearance on a couple of grounds and waive the costs: first, on the grounds of hardship, for which there would seem to be a good case, given the high costs; and secondly, on the grounds that there was no reason why the householders should have known or had reason to know about the contamination, given that they had a survey conducted when they purchased the property. We will look further at the case and see whether a resolution can be found.
I hope that, owing to the efforts of the hon. Gentleman and the good intentions of the Minister, this matter can be cleaned up for the hon. Gentleman’s constituents as soon as possible. I thank both participants for their contributions.
Introduction of a Maximum Wage
[Mr Gary Streeter in the Chair]
It is a pleasure to serve under your chairmanship again, Mr Streeter. I am pleased to have secured this debate, because in these continuing and challenging times financially, when austerity is still biting from the deepest recession we have known, it is fitting that we should look at fairness of wage. In these difficult times, we see many struggling, including hard-working families, with the cost of living crisis across the UK today. That is why I want to focus on one of the obstacles to fairness: the pay gap between the bosses of Britain’s biggest companies and their average employees, which has become even greater over the past couple of years.
I cite analysis by the High Pay Centre think-tank, which revealed that in 2013 the average FTSE 100 chief executive officer received remuneration worth 143 times that of the average employee in their firm. Previously, the average ratio was 47 times. That analysis provides examples of excessive pay gaps. At Associated British Foods, which owns Primark, the gap between the pay of the chief executive and the average worker’s salary was 361 times. In the hospitality conglomerate Whitbread, the gap was 415 times. The Next boss was awarded pay worth 459 times that of the average employee—although I should add that, to his credit, he distributed his bonus to the staff. Worst of all was the pay gap at the media company WPP, where the chief executive officer took home a pay package nearly 800 times bigger than his employees’.
That is why people say we need a maximum wage to complement the minimum wage. What people are now identifying with is the need for maximum pay ratios within companies and across sectors to put an end to chief executive officers getting paid many hundred times what their average-earning staff are paid. The reason people are so upset at these figures is that rising wage disparities are one of the key drivers of inequality. We need to tame extremely high levels of pay among executives, because it is one of the factors that has encouraged risk-taking behaviour, leading to crisis, and it has often been found to hinder, not aid, the overall productivity of a company.
Capping excessive pay is not anti-business. There is nothing pro-business about letting a small group of chief executive officers take far larger rewards than their shareholders or staff. If anything, it is the executive pay racket that is anti-business. Some may choose to argue for the enforced pay ratio on practical or economic grounds. Mine is unashamedly a moral position: it is fundamentally unfair for the pay gap to be so wide. History has taught us that our society fares worst when there is such a gap between our rich and poor. Today, that gap has never been wider. We know that rising income inequality is shaped by the increasing concentration of income at the top end of the income distribution, and a likely cause in the UK is simply that leading executives and those who are head-hunted demand bigger and bigger salary packages.
Salary packages are listed in the “Name and shame” list for Fat Cat Tuesday, which is the name that the High Pay Centre has given to the first Tuesday in January, which this year was 6 January. Believe it or not, by 6 January this year, bosses of Britain’s biggest companies had already made more money in 2015 than most workers in the country will earn in the entire year. Surely that, more than anything, highlights the problem of unfair pay ratios in the UK.
The High Pay Centre calculated that the average FTSE 100 chief executive was paid the equivalent of nearly £1,200 an hour, based on earnings calculated in the previous year, meaning that the average CEO can earn more in two days than the average employee earns in a whole year. The huge hourly rate even assumes that FTSE bosses work three out of four weekends, work 12-hour days, and take fewer than 10 days’ holiday a year. For top bosses to rake in more in two days than their staff earn in a year is clearly unfair at any time, but in these difficult times it is a downright insult and a financial racket if ever we saw one.
Has my hon. Friend noticed that there seems to be a trend in this country, particularly at executive level, for rewarding failure? We have seen a number of cases in the past. More importantly, although the Prime Minister is now calling for pay increases, saying that inflation is at about 0.5%, the reality is that the purchasing power of wages has dropped by about 6%, so there is a long way to go to catch up. I notice too that what the Prime Minister is talking about is voluntary, and he is talking about the private sector, not the public sector. We have poverty wages and employers being subsidised by the benefits system. What does my hon. Friend think about that?
My hon. Friend makes some very good and poignant points. We have seen several chief executives walk away from failure—abject failure—with handsome salaries and even handsome bonuses. It is difficult in these times, with the cost of living crisis, for hard-working people to stretch their budgets. We are seeing a decrease in real spend for them, and their income is being supplemented by the benefits system. That is probably why the cost of welfare is rising year on year.
What we have seen over the past couple of years is that, although chief executive officers’ pay went up by 73%, the FTSE hardly moved. It is still no higher than it was a decade ago and it is impossible to argue that FTSE companies are twice as well run as they were a decade ago or that bosses are twice as important as the workers. In fact, executive pay has become, as I said, a kind of racket, with a small club of non-executives voting themselves huge pay rises and ignoring their shareholders.
So what does this unfairness look like? The average UK salary was £27,000 in 2013. It rose to £27,200 in 2014, an increase of only £200. At the same time, the average pay for a CEO rose by almost £500,000, and the average CEO was taking home £4.72 million. All this is happening against a backdrop of austerity, zero-hours contracts and increasing visits to food banks throughout the country. Alarmingly, more than a third of UK workers on the minimum wage cannot even afford to shop where they work. Estimates of the number of people employed on zero-hours contracts are said to be in the region of 622,000 up and down the country.
Is the wage gap just our problem? No, because last November, 66% of Swiss voters rejected an initiative that would have capped the compensation of a company’s top executives at 12 times the wage of its lowest-paid workers. I accept, and I could envisage, that a cap that low might equally be rejected across the United Kingdom; but that does not mean that something less severe and more thoughtfully crafted could not work. Limiting a chief executive officer’s pay to, say, 100 times the minimum wage would still allow top executives to be handsomely rewarded.
However—here is the best part—if the chief executive officers wanted a pay increase, they may be more willing to throw their weight behind a campaign to boost the minimum wage. As was pointed out by the Swiss politicians who debated this in 2013, this level of unfairness can damage the social fabric and indeed democracy itself. Put quite simply, any economic model that does not properly address inequality will eventually face a crisis, harming long-term economic growth and welfare. Concern about the gap between the super-rich and everyone else has reached its highest ever level, contributing to a wider anger and the perception of a self-serving elite.
We have had a recent example of this issue with Citylink. At least 1,000 drivers were contracted to that company and could not work for anyone else. They are still waiting to be paid. More importantly, they do not qualify for redundancy pay. That is the level to which employment legislation has taken people. My hon. Friend mentions democracy and fairness; does he agree that things are becoming more and more unfair for people in the workplace?
I wholeheartedly agree with my hon. Friend. I will go on to indicate some ideas that could be added to that of a maximum wage to assist people in the workplace.
As I said, 80% of the public are said to support Government action to reduce the gap between the high and the low and middle-income earners. Growing differences in pay are neither fair nor proportionate, producing widening income discrepancies in Britain. When bosses make hundreds of times as much money as the rest of the work force, it creates a deep sense of unfairness. Income inequality is a threat to the economy. I predict dire consequences if the worsening gap remains unchecked. Britain’s executives have not got that much better over the past couple of years. The Government need to take more radical action on top pay to deliver a fair economy that ordinary people can have faith in.
What can be done? The minimum wage was recently voted the most successful Government policy of the past 30 years by members of the Political Studies Association. Could a maximum wage prove equally popular? I believe the time has come for the idea to be seriously debated. It is worth noting that a maximum wage can be set one of two ways. There could be a straightforward maximum, so that no one can earn more than a set sum—for example, £1 million—either set in legislation or enforced through a 100% tax rate kicking in at the chosen point, to make sure that it is the top income. Alternatively, there could be a maximum pay ratio, so an employee in an organisation cannot earn more than x times what the lowest or the average paid employee earns.
The average pay of a FTSE 100 chief executive officer has rocketed from around £1 million a year in the late 1990s, which was about 60 times the pay for the average UK worker, to closer to £5 million today, which is more than 170 times the average worker’s pay. The idea of a maximum wage in difficult times is not new. During the second world war, President Roosevelt issued an executive order limiting corporate salaries to no more than $25,000 per year. FDR believed that if men were putting their lives on the line for just $60 per month, the rich should be required to make some sacrifice, too.
Perhaps we should not employ such a rigid cap to tackle corporate excess, but instead raise the idea of a maximum pay ratio, so that the highest paid employee of an organisation would not be allowed to earn more than a fixed multiple of the amount earned by lowest paid. That would undoubtedly be a radical step, but would a democratically enacted maximum pay ratio of, for example, 75:1 really be that extreme in a society that uses zero-hours contracts and relies on food banks?
Around 80% of the public support a requirement for executive pay to be tied to the pay of the average-paid employee. Some forward-looking organisations already operate such a policy unilaterally; for example, John Lewis has capped the ratio at 75:1 and the TSB at 65:1. Pay for top executives increased from £4.1 million to £4.7 million between 2012 and 2013, and inequality is predicted to rise in the coming years. The Government’s tinkering with shareholder scrutiny has had little effect, so it is time to contemplate bigger reforms, and pay ratios could be part of those. Worker representation on company boards should also have a role to play, and taxation and profit sharing are further important mechanisms.
What of the Government’s actions so far? The Business Secretary has imposed new accounting regulations requiring quoted companies to produce a “single figure” for the remuneration of directors in annual reports. That figure includes base salary, bonuses and share-based awards in any long-term incentive plan. That is a start. In stark contrast, however, the Chancellor challenged the EU cap on bankers’ bonuses in the courts.
Apologists for the pay gap often argue that high pay is needed for high performance, yet we do not seem to expect generals, admirals, senior civil servants or indeed Prime Ministers—let alone nurses or teachers—to require millions of pounds a year to perform well. If we believe the performance-related argument, it would seem to suggest that businessmen are, almost uniquely among high fliers, incapable of being motivated by anything but money. Research shows that growth in executive pay, bonuses and incentive payments has vastly outpaced performance as measured by every indicator in common use.
Another argument in defence of high salaries is that the money trickles down to the rest of us. Trickle-down is a fundamental building block of supply-side economic theory, which has been the tool of choice in the past few decades. Yet it is generally accepted that it did not work in Thatcher’s Britain, and in fact had negative effects. In a recent report, the OECD rejects trickle-down economics, noting the
“sizeable and statistically significant negative impact”
of income inequality.
Small businesses are hit by taxes and business rates, while big business turns around and says to the state, “This is how much tax I fancy paying this year—take it or leave it.” If we take zero-hours contracts as an example, it is clear that the more unequal we become as a society, the faster the earnings of those at the top race away from those of the people at the bottom. Wealth inequality in the USA was at its highest levels historically in 1928 and 2007, one year before each of its two biggest financial crises. The International Monetary Fund has observed—and this is its view—that countries with more income inequality see their economies more frequently plunged into deeper recessions, and that economic growth lasts much longer in more equal societies.
Let us look at the so-called shareholder spring of 2012. A series of big revolts were recorded against ludicrous packages, which seem to have had some effect, for a while. But what more can shareholders do? They need to keep on making their voices heard at annual general meetings, to question and press for more substantial cuts in CEO pay. Companies such as Shell have cut CEO pay; if a company of the complexity of Shell can cut it, it is hard to understand why others cannot do the same.
The widening gap between rich and poor in this country can only be detrimental to our society. What is called for is fairness in remuneration between the top earners and CEOs and those on average salaries in organisations. A capped ratio should be considered in these difficult times. I warn everyone, most especially the Government, to mind the gap.
I apologise to the hon. Member for Inverclyde (Mr McKenzie) for not being here at the start of the debate—I was at a Bill Committee that I am serving on. I am conscious that that Committee will have several votes. I apologise to the shadow Minister and Minister because I will have to leave early, if they do not mind.
I am privileged to contribute to this debate on a maximum wage. I will try to strike a balance between the need to bring up the wages of those on poor pay and the need for those on very high pay to consider those further down the ladder, so to speak. The issue is very sensitive. At a time when many people are struggling to make ends meet, find employment or put food on the table, sections of society are earning disproportionately large and astounding sums of money. We have seen the rise of the slogan “We are the 99%” and much theorising about how much the 1% earns, but we must be careful about how we handle this issue. We should proceed with empathy and tact.
The Prime Minister said on TV and in the papers today that we must encourage businesses to give their workers more money. It is good that we are having this debate, because it enables us to focus on the important things. We need to consider what benefit a national maximum wage would have for our social capital. It will make more people feel that they live in an economically just society and help to create a more equal society. However, there is no point in narrowing the gap between the highest and lowest earners if the wages of the lowest earners do not increase. That is what we have to do, and that is the thrust of what the hon. Gentleman said.
Nobody in this Chamber would argue that the gap between our highest and lowest earners is not vast and that it does not have to be addressed. However, we must balance fairness and competitiveness, and take into account the potential spill-over effects of moving towards a maximum wage. We need to minimise economic harm, while healing our social fabric.
The highest earners in our society are often those in charge of large corporations. They are the CEOs of companies that create jobs and contribute to growth, and we commend them for that. When we decide on a cap, it should not penalise those individuals. However, we cannot put on the back burner the fact that the disparity in earnings is UK-wide, and that its prevalence across the globe makes the global wage gap positively monumental.
Income inequalities have been increasing in the short term and the long term, and have been aggravated at both ends of the pay scale. I do not mean that the rich have become poorer in correlation with the decrease in pay of the poorest; rather, the poorest have fallen further behind the average, while the richest have moved further ahead. That is not a criticism of those who earn lots of money, but that gap has to be addressed and I hope that this debate will be a way of doing that.
When we think about introducing a maximum wage, we must consider many issues. First, we need to take into account the regional differences in the cost of living in the United Kingdom of Great Britain and Northern Ireland. Secondly, we must address the critical issue of how to deal with pensions in the private sector. The biggest issue is that we must show that we are not against innovators, strivers and those who create jobs. Job creation helps the economy to grow, provides wages to individuals and helps their local areas to thrive. There is a wider social issue to be addressed, which is eating away at the social fabric of our society. We should not shy away from the challenges of opening such a debate. Undoubtedly, it will be difficult to harmonise everything at stake, but that does not mean that we should not make an effort to do so.
It is of great concern that the public perception of corporate executive wages has become so intense that they have been labelled “institutionalised robbery”. It is hard to argue that there is not something unsettling about the disparity between executive pay packages and average wages. Regardless of the hard work of executives in running companies or corporations, it is difficult to justify the fact that some chief executives receive more than £6 million while their employees live hand to mouth in minimum wage jobs.
There is also the issue of performance-based bonuses, which affects the banks in particular. We have seen the general public in a frenzy about the fact that those they see as most visibly to blame for the economic crisis are being rewarded, while their own wages are either being pushed down further or do not exist due to redundancy. The fact that more directors are choosing not to accept their bonuses signals that there is a sense among the highest paid that the gap has become too big. I congratulate those at the higher levels of companies who have refused to accept their bonuses.
To reiterate, the proposal is to put a cap on the maximum wage that can be paid to a person in any one year, as the hon. Gentleman said. It is important that we address this issue. There are various means by which we could do that—perhaps through proportionality. It does not have to be arbitrarily about fundamental equality; it can be about increasing fairness and narrowing the gap.
Does the hon. Gentleman agree that it is abhorrent that millionaires, if not billionaires, are running large enterprises on the back of zero-hours contracts for their staff? In these days of austerity and food banks, they are running empires on zero-hours contracts.
The hon. Gentleman is right. Everybody in this Chamber is concerned about zero-hours contracts and the many other disparities that need to be addressed. I thank the hon. Gentleman for his intervention, for securing this debate and for giving us the chance to make our comments.
Although I support the principle of a maximum wage, I have concerns about how we would introduce one without its having a detrimental effect on our competitiveness. We must ensure that we raise wages in a way that enables companies to progress. I believe that that can happen. We have seen some small changes in the past few weeks and months. It is important that we enable people to achieve as much as they can. We cannot allow a maximum wage to result in complacency about raising bottom-level wages.
The United Kingdom, and Northern Ireland in particular, must compete internationally. We need big businesses to draw in investment as well as the best and the brightest. We must create jobs by attracting people willing to set up corporations. The last thing we want is to deter those people on the basis of a superficial narrowing of inequality, so any reform must bring about substantive social and economic effects. It must increase the lowest wages in a company, or at least make earnings proportionate to the lowest earner in the corporation.
The hon. Gentleman said that the average FTSE 100 chief executive officer is now paid 143 times as much as their average employee. In 1998—that does not seem so long ago for those of us of a certain vintage—the average was only 47:1. The increase from 47:1 to 143:1 in 17 years has resulted in a massive disparity. Average wages are not increasing, even in companies run by CEOs earning 143 times their employees’ wages. Those companies evidently have money in excess, but still there has been little or no change in average wages, and there is only a marginal chance that they will increase.
Last October, the Business Secretary granted powers that were supposed to require a firm’s remuneration to its executives to have the support of 50% of its shareholders. However, they failed to cap the maximum salaries going to executives, and they did not prevent the pay of the average FTSE 100 chief executive from increasing by £600,000 between 2012 and 2014. In contrast, figures from the Office for National Statistics show that the average pay in the UK is £26,500. A worker in a full-time job earning the hourly minimum wage of £6.31 would get an annual salary of just £13,124. I believe, as the Prime Minister said today, that we need change. We need business to pay more to those at the lower wage levels.
I am curious about why, in the space of less than two decades, such a monumental rise has occurred. It is not surprising that the everyday worker is discontented and looking for us to take action. That is why this debate is being held. The High Pay Centre has called for a debate on more radical measures to address the widening income discrepancy in the United Kingdom.
The hon. Gentleman asked why the difference has increased so much in the past decade or so. Could it be that there is a bidding war for chief executives, with each company bidding more to attract a chief executive to stay for a minimum number of years before they move on?
It is always hard to speculate on the reasons, but chief executive officers are much sought after—and yes, there does seem to be a bidding war. Unfortunately, in that bidding war those in the company who do the hard work and get their hands dirty are being left behind, and that greatly concerns me. At the very least, we need to acknowledge what is going on in order to open a discourse on solutions, whether they be the national maximum wage or an alternative.
In conclusion, I urge the Minister to consider the fact of inequality, shown by all the figures that we have heard and will hear in today’s debate. On top of that, when we consider a maximum wage to decrease the gap between the highest and lowest earners, we should also think about the prospect of decreasing the gap through bringing the bottom range up. I believe we have a duty to be compassionate and a responsibility to ensure that those in the bottom levels have their wages increased. Again, we must tread carefully. We have to address this social grievance and take it seriously, but we must also be ambitious in doing that in such a way that the United Kingdom of Great Britain and Northern Ireland is still seen as a place for fruitful investment and business prospects.
I thank the hon. Member for Inverclyde for bringing the matter forward for consideration. I apologise to you, Mr Streeter, to the shadow Minister and the Minister —my phone has been going like nothing ordinary; I am being summoned to vote in the Bill Committee. With your agreement, Mr Streeter, and that of the shadow Minister and Minister, I beg leave to retire.
May I begin by saying how good it is to see you in the Chair, Mr Streeter? I am very pleased to have you presiding over our proceedings this afternoon. I particularly want to thank my hon. Friend the Member for Inverclyde (Mr McKenzie) for securing the debate, and also my hon. Friend the Member for Coventry South (Mr Cunningham) and the hon. Member for Strangford (Jim Shannon) for their contributions. I also thank the hon. Gentleman for his usual courtesy in telling us about his commitments elsewhere on the parliamentary estate.
I pay my commiserations to the Minister for having to deal with this debate at the last possible moment, having had it transferred at the 23rd hour from Treasury Ministers. Presumably Ministers at the Treasury are recovering today from their £15,000-a-table black-and-white fundraising ball—nothing to do with Newcastle United, I understand—where lucky recipients had the chance to bid to go shoe shopping with the Home Secretary or for a meal at the Carlton club with the Culture Secretary. Personally, I would rather go for a pint with the Culture Minister who is in the Chamber today. Alternatively, perhaps Treasury Ministers are engaged with tackling the issues of HSBC and the collusion with its clients over tax evasion.
I deliberately make those two points, not for cheap party political point scoring, but because they touch on an important theme in today’s debate, namely a growing inequality in society. As my hon. Friend the Member for Inverclyde said, how can it be either morally fair or economically efficient that there is a widening gulf between working people in Inverclyde, Strangford or Hartlepool, who have seen their pay cut and living standards fall, and people at the top of business—often financial backers to the Conservative party—who have seen their rewards grow exponentially and disproportionately and their tax bill fall over the lifetime of this Parliament?
Since this debate started 33 minutes ago, the average FTSE 100 chief executive has earned £297. That seems an astonishing amount of money in such a short time. In 1980, the median pay of directors in FTSE 100 companies was £63,000. At that time, the median pay across the country was £5,400. The ratio of executive pay to the average wage some 35 years ago was 11:1. In 2013, that ratio had moved to 130:1. Despite the Government’s reforms—to which I will refer later, as will the Minister, no doubt, in his response—the annual Manifest/MM&K directors’ total remuneration report estimated that pay received by the average FTSE 100 chief executive increased from £4.1 million to £4.7 million in the year following the reforms.
In contrast, as was touched on very well by my hon. Friend, one in five workers—that is, more than five million people—earn less than a living wage, up from 4.8 million in 2012 and 3.4 million in 2009. Almost a quarter of north-east workers—I speak as a proud north-eastern MP—and nearly half of all part-time staff are not being paid a living wage. Regrettably, my constituency has the largest proportion of jobs paying less than the living wage in the north-east, at 34.7%. More than 5 million people do not earn a decent wage. People are trapped in low-paid, insecure jobs; of employees earning the minimum wage for five years, one in four—the highest proportion since records began—have been unable to move out of that low pay for all of that period.
It is striking that the people most likely to be in poverty in Britain in the 21st century are those in work. No one can honestly suggest that the economy is working well or as productively as it could be when that is the case. This country will not achieve our vision of a highly skilled, well paid and innovative work force, ensuring that the benefits of economic growth are enjoyed by all in work, if we continue down the present path. My hon. Friend hit the nail on the head when he said that trickle-down economics is a fallacy. The taxpayer is having to subsidise, through tax credits and other parts of the welfare state, the failure of many firms to pay a decent wage. It is estimated that the cost to the Exchequer, in terms of spending on in-work benefits and lost tax revenue, is almost £3.25 billion a year. The loss of the real value of the minimum wage over the lifetime of this Parliament has cost taxpayers an additional £270 million in extra public spending. That cannot be right. The state should not be paying for the failures of the corporate world.
The Government introduced new regulations for executive pay in 2013, and no doubt the Minister will want to talk about those. Shareholders now have a binding veto over company executive pay policy. The regulations require companies to provide greater transparency—for example, by reporting the ratio of average percentage change in employee pay compared with the percentage change in the chief executive’s pay. However, I would question whether the Government’s reforms are having the intended effect.
It is true that several companies, such as Burberry, Kentz and BG Group, have had to revise executive remuneration in the face of shareholders’ votes, but will the Minister confirm that less than 1% of all relevant companies have seen shareholders reject pay proposals? No doubt the Minister might respond to that point by saying that that proves the system is working, because it encourages companies to talk in advance about their remuneration packages to their shareholders, thereby promoting greater dialogue. However, I would question that argument. Professor Peter Wright—no relation of mine—of the university of Sheffield, in a report, “CEO pay and voting dissent before and after the crisis”, concludes:
“The government has promoted shareholder activism as a key mechanism for restraining corporate excess and securing the long- term health of the UK’s biggest firms. But our results suggest that any expectations that the recent changes to give shareholders a binding vote on directors’ pay will have a big impact may be sorely disappointed.”
The Minister must be concerned that, as the economy improves, the practices and trends of the past 30 years will be entrenched once more, so that executive pay continues to runs out of kilter, at odds with the performance of the company and far in excess of the remuneration of the rest of the work force. As my hon. Friend rightly said, I do not think anybody is suggesting that talent is not required to run a big company, and if the chief executive, along with the board and all the rest of the work force, produces good results, those benefits should be shared. However, the pay of chief executives is now out of kilter with the performance and share prices of big companies. It cannot be right that pay and performance is so misaligned.
On that basis, given this important debate, will the Minister pledge to go further, not only on the narrow issue of executive pay, but on the fundamental matter of corporate governance? How will he ensure that the rules of the market and companies are aligned to ensure that we see companies creating value for the long term, not extracting value for an immediate boost at the expense of long-term productivity gains? Will he pledge to ensure that employees have much more of a say in the strategic direction and corporate governance of a company by, for example, ensuring that workers sit on remuneration committees to scrutinise and hold to account the pay packages of top bosses?
Will the Minister also ensure that low pay is tackled? I fully agree with the hon. Member for Strangford—who has now gone to fulfil his Bill Committee responsibilities—that we need to tackle wage inequality, but ensure that we do not bring executive pay down at the expense of low pay. We need to make sure that lower pay is boosted, so that the situation for low-paid workers is enhanced. Will the Minister agree to our proposal of a “make work pay” contract, so that firms that sign up to become living wage employers in the first year of the next Parliament will benefit from a 12-month tax rebate of up to £1,000 for every low-paid worker who gets a pay increase? Will the Minister agree with Labour’s proposals to bring the minimum wage closer to average earnings, setting the Low Pay Commission the target of boosting it to 58% of median earnings? That would mean that it was £8 by the end of the next Parliament, ensuring that workers on low pay got a £60 per week boost, or £3,000 more a year.
This important debate relates to what companies do, how they act in society and what makes them successful. Britain is great, and we have some of the most creative and hard-working people anywhere in the world, but it cannot be right, in a moral society or a productive economy, that the rewards for the few at the top are distorted at the expense of the majority, while far too many workers cannot have a secure, dignified job that pays the bills.
I respect the Minister, who often has to respond to debates that are not part of his brief, but he must accept that the Government’s response in this Parliament to wage inequality has come far too late and been far too lacklustre. In their remaining days in office, I hope he will address that, set out where his Administration have gone wrong and acknowledge that we will need a Labour Government in 85 days’ time if we are to tackle wage inequality.
It is a great honour to appear under your chairmanship, Mr Streeter. I thank the hon. Member for Inverclyde (Mr McKenzie) for calling this important debate. I am grateful for the contributions from the hon. Member for Strangford (Jim Shannon), who explained why he could not remain in his place, and the hon. Member for Coventry South (Mr Cunningham).
I congratulate the hon. Member for Hartlepool (Mr Wright) on his reasoned response on behalf of the Opposition. Of course, I cannot resist echoing the comments of his predecessor, Lord Mandelson, who said, while in government, that the Labour party was
“intensely relaxed about people becoming filthy rich”,
which perhaps provides some of the context for the debate. Indeed, those comments were echoed by the Labour party’s education spokesman, the hon. Member for Stoke-on-Trent Central (Tristram Hunt), who went on television on Sunday to talk about how the party was “aggressively pro-business”, because it may unwittingly have given the impression over the last few weeks that it is opposed to businesses and keen to burden them with regulations.
When Lord Mandelson was in government, the ratio of top pay to average employee pay increased from just 47:1 in 1998 to a peak of 151:1 in 2007. I am pleased to say that it had fallen back to 121:1 by 2013. That reflects the fact that the average total remuneration awarded to FTSE 100 CEOs fell by 5% in 2012 and by a further 7% in 2013.
Those cheap party political points aside, may I say that I have a lot of sympathy with the framework of this argument? We live in a civic society, and it is important people feel that they are part of a community, that they will be rewarded for the work they do and, just as importantly, that people are not remunerated for work in a way they perhaps do not deserve.
Philosophically, it is important to reflect on how public opinion views very high pay. For example, the football fans among us might not baulk too much at the pay of a top striker, defender or even manager in the premier league; indeed, some fans might say that any pay is possible, as long as the team gets the best person. However, that view is balanced by the fact that, to a certain extent, a footballer or other sportsperson has nowhere to hide; they are paid according to their performance on the pitch, and we can all assess that, so they are as vulnerable as anyone else to being dumped unceremoniously when their performance falls short. However, when we see some top executives being paid significant sums—or, even worse, leaving a job with a significant golden farewell—that sometimes impinges on our sense of fair play.
I say that because I am conscious of the fact that the Government have made efforts to reflect some of the public’s concerns. Indeed, the debate takes place against the background of significant allegations against HSBC about running a tax evasion operation. It also takes place on the day the Prime Minister has rightly sent out a message to chief executives that they should share the proceeds of growth and reflect in the wage packets of the people who work with them the fact that the economy is now growing.
I know only what I have read in the papers, so I hesitate to extrapolate too much from that case. However, if those allegations are proved correct, I hope the appropriate consequences do follow. It sometimes astonishes me that the behaviour of some companies—happily, they tend to be the exception rather than the rule—does not reflect their place in civic society.
Where and how should the Government intervene? The Government do not believe in blanket regulation of high pay through, say, a maximum wage. Companies and their shareholders need the flexibility to negotiate outcomes that work for them. However, we can force greater transparency on companies in terms of how they remunerate their top executives, and we can also give those who invest in such companies the power to demand simpler, more long-term pay structures—the long term has been mentioned in a number of contributions.
We have acknowledged that directors’ pay has gone up in recent years, while the link to companies’ performance and the wages of those who work in those companies has grown weak. I repeat that that damages the long-term interests of business, and it is right that we see that as a market failure and address it.
The Government’s reforms have been alluded to. The tone suggested that they were good first steps, but that they perhaps did not go far enough. Let me set out exactly what we have done. The new regulations came into force in October 2013. They create a more robust framework for the setting and reporting of directors’ pay. They have boosted transparency so that what people are paid is clearer and easily understood. They have also given shareholders the power to hold companies to account by calling for binding votes. We want to restore a stronger, clearer link between pay and performance and to address the culture of reward for failure.
Our reforms require companies to report the ratio of the average percentage change in employee pay to the percentage change in the chief executive’s pay. That should allow shareholders to understand whether pay increases apply proportionately to all employees or only to those at the top. Our reforms also mean that companies must report on how the pay and conditions of employees inform directors’ pay, whether companies have sought the views of their work force and, if so, how those views were sought.
We are monitoring the impact of our reforms. Most fair-minded people would agree that it is early days. Our focus is on understanding how companies have applied the regulations in the last couple of years. What trends can we see in remuneration packages? How have shareholders responded in terms of voting and engagement? We will publish the findings from that analysis shortly, and we will look to see whether we can draw any policy conclusions. When we implemented these policies, we always made it clear that we would keep them under review. What we know from the evidence available at the moment is that companies are responding to shareholder expectations. There are positive signs of restraint on the level of directors’ pay, and many companies have simplified their remuneration policy and linked it more closely to measurable performance over—crucially—a longer period of time.
Of course, the media will report rising pay. Sometimes that reflects previously agreed pay awards. What matters to the Government is the pay now being awarded under the new regime. As I mentioned earlier, the pay of the FTSE 100 CEOs has fallen significantly in the past two years. I gather also that statistics show that about a third of FTSE 100 CEOs and executive directors received no salary increase last year. It is our view that the reforms have begun to bring about a step change in transparency and that companies set out their future pay policies in much more detail than before.
I think that the Minister is being deliberately precise in his language when he talks about chief executives’ salaries not going up. Has he considered their total remuneration? Is he concerned that, although basic salary may be falling, executive pay is going up disproportionately through share options and vesting rights?
The reason why we focus on salary is that often the bonus is linked to salary as a percentage; if shareholders have a say in the salary of the CEO, they in effect have a say in the bonus. Clearly, shareholders will also have views on the level of the bonus that is linked to the salary. The crucial point is that we want more transparency.
As I said earlier, I believe that shareholders are engaged more proactively in the remuneration package of CEOs. For example, Aberdeen Asset Management clarified the extent of arrangements to limit payments in lieu of notice to departing directors because shareholders were concerned about the potential for rewarding failure. Furthermore, Imperial Tobacco was forced to clarify the fact that it would not give a golden hello to a newly recruited director and capped the level of the package for that director, with reference to previous salaries and policies. [Interruption.]
I think we have had a good debate. There are other important issues, such as remuneration committees, the Labour party’s “make work pay” policy and the minimum wage, but I hope I have been able in the few minutes I have been on my feet to show that the Government take the issue seriously. We believe we are making progress. There will always be the opportunity for the Opposition to tell us to go further, but—ironically, given the title of the debate—we are perhaps finding more common ground than people might have anticipated.
Town Centre Regeneration (England)
I do not want to be too alarmist, but town centres in this great country of ours are in danger. They are threatened by all sorts of forces: not exactly evil forces, but forces of change. If we do not adapt to that change, the nature and vibrancy of our communities in towns and cities—I am talking particularly about towns in this debate—will be in great danger.
I will go through the dangers first, because the situation is not entirely bleak. The fact is that people today are changing their habits, as they have over the generations. They are changing now to a pattern of retail shopping online. Everybody I meet says, “Of course, I only do it in extremis,” but when they are under the stress of Christmas shopping or a late birthday or anniversary, they go for the online option. Online shopping is with us; it is growing; and it will become more dominant as time goes on. It is no good wishing it away; it is happening. That is one danger. Many shops may find that they are not viable because they are competing with the online option.
Another danger that has been with us for some time is the big supermarkets. The mega supermarkets want to sell everything: wine, food, clothing, white goods. When I was a lot younger, one went to a supermarket for food shopping. Now, supermarkets want to sell everything. In pursuit of market dominance, they take away custom from the small and medium-sized businesses, which are at the heart of communities and make town centres vibrant and enjoyable to visit.
There are other problems. Many small shops have been driven out—I know that as the Member of Parliament for Huddersfield, which is the heart of the woollen and textile area in Yorkshire. We know about the retail market in clothing; we know that many low-cost traders have come into the market, usually selling clothes manufactured in low-cost economies thousands of miles away from this country. Low-cost shops, certainly in women’s fashion but also in men’s, are making life difficult for smaller retailers. Wherever we look, we see threats to a vibrant town centre.
I do not want to give the impression that all vibrant town centres are about is shopping. They are about arts and culture as well as convenient health facilities, so that people do not always have to go to an outlying hospital but can go to a clinic. They are also about good libraries, theatres and having the option to have a lovely coffee in a variety of shops.
There are some problems with that vibrancy. A couple of years ago, I looked at all the little town centres in my area. Huddersfield is the main town centre, but we have a number of smaller locations. When we did a bit of research, we found—the hon. Member for Colne Valley (Jason McCartney), my next-door neighbour, will agree—that if a smaller town centre can retain a certain number of crucial shops, it will often survive and thrive. When we did our analysis of 15 little town centres around Huddersfield, we found that the crucial difference was retaining a baker and a butcher. If a town retained those, it had an anchor for other little shops around it.
What makes a vibrant town centre is almost indefinable, but it can be analysed using quite scientific methods. You must remember, Mr Streeter, that a long time ago I trained as a social scientist, first as an economist and then as a sociologist. We can study how human beings interact and where they enjoy meeting socially and culturally. There is a mix. I know I am in a nice town centre when there is a range of interesting shops and places to eat or have coffee or a glass of wine, or when I can wander into a nice library or art gallery or pop into the local theatre. I am in a nice town centre if I can do all those things in an aesthetically pleasing environment rather than a great 1960s cement innovation—although there are some, such the Barbican, where I used to live, that I am quite fond of.
In Huddersfield, we have 1,001 listed buildings; in Greater Huddersfield, we have about 3,000. We have wonderful architecture—what an asset that is—but it is much nicer if that architecture has flowers and ornaments in summer, and nice lighting in the winter. We know what makes a beautiful town centre: aesthetic factors, as well as retail and cultural ones.
Huddersfield is still a town. Some people argue that it is the largest town. That is not true, although it is a very large town; if Kirklees had been called Huddersfield, we would have been a city. I inform hon. Members that we now have a Bishop of Huddersfield, so we are becoming even more significant as a town. We are also a university town. Any town or city in this country that does not have an institution of higher education is not in the top league of towns and cities. I am sorry for places, even in Yorkshire, that do not have a university, such as Doncaster, Wakefield and Harrogate. If a town does not have a higher education institution, usually a university, it is likely not to have the vibrancy that it needs.
The hon. Gentleman is making some excellent points. He mentioned aesthetics, culture and all the things that can make our town centres great. I have a university in my constituency in Worcester that has been one of the fastest-growing in the UK and has contributed to the city’s getting a fantastic new library shared between the city and university. It has also contributed—this is an issue that he has not yet mentioned—to an improvement in our sports facilities, including a fantastic wheelchair basketball arena in Worcester city centre. Does he agree that universities have much to offer the life of our cities and town centres?
I take that point very positively; it is exactly what I am driving at, if a town has a university that is willing to share facilities, which is an important proviso. Also, a lot of universities are slightly out of town, but those that have wisdom involve themselves more and more in the life of the city centre. I will not make a party political speech in this debate, but we know that large cuts have been made to local government up and down the land. That is a fact of life. In Kirklees and Huddersfield, we are paring back almost to the statutory minimum even on education and schools, but also in cultural affairs such as libraries, theatres and art galleries. I am not saying that all of those in Huddersfield are in danger, but they are certainly being considered at present.
Without those things, a town centre becomes impoverished. On the one hand, there are real commercial factors—a change in retail patterns—that are affecting town centres. On the other hand, there is no doubt that there are real changes in what local government delivers, and in the balance between what local and central Government deliver, and what other bodies deliver. That area is an important challenge for the future.
In my constituency, we have recently had a real problem in evaluating the free bus that operates in the centre of Huddersfield. It is an amazing bus—for some parts of the day it is for students, and for others it is for older people, including “Twirlies”. I hope that you have Twirlies in your patch, Mr Streeter. They are the people who have a bus pass that does not start until 9.30 am but they come at 9.15 am and the driver says to them, “You’re too early”. I did not know that until I went on the Huddersfield free bus myself.
The free bus is vital for people who need transport, including young people with children and buggies. It is an essential part of the life of our community. However, there was a possibility that local government funding for it would end. What local government has done, with a whole group of local businesses, including retailers, is to go out and see whether we can fund it in a different way—turning it into a social enterprise, for example, so that we can give ownership of it to people and it becomes “our bus”, rather than the bus that somebody else is providing. Indeed, we can improve the service by adding a park and ride scheme and other things. We are well on our way with that process in Huddersfield.
Alternatives are what we need for the future. As some Members know, I am passionate about crowdfunding and crowdsourcing; I chair the Westminster crowdfunding forum. In a sense, we have been liberated in respect of how we can expand the social sector of our vibrant towns and cities: we can use crowdfunding to raise money and increase involvement. That involvement is important, because it is not only the money that matters; it is the ownership and involvement of people that social ownership can bring. We have seen some very good and innovative processes coming through.
I thank my hon. Friend—I will call him that—for giving way and congratulate him on securing this important debate. As we may hear from the Minister, Mary Portas reported on our high streets and emphasised the need for local businesses to provide specialism, service and quality. As my hon. Friend knows, in my patch we have Hinchliffe’s farm shop and restaurant in Netherton, and Bolster Moor Farm Shop. Both are heaving, because they offer that specialism, quality service and free parking, which is so important if people are to access shops. Will he join me in saying “Good luck” to the newly rejuvenated Milnsbridge Business Association, which is meeting next Thursday for the first time? It realises the importance of good parking and access in the centre of Milnsbridge.
I am very grateful to my hon. Friend—I will call him that as well—for that intervention; you can see, Mr Streeter, that we work very well together, across boundaries, in the Huddersfield and Colne Valley area.
My hon. Friend is right to mention parking; any analysis of a lively town centre must include analysis of parking, including park and ride schemes. Parking must be identifiable; so much about parking is pretty mysterious. We found that good signposting—including about who is in charge of car parks, what the rates were and what the likelihood of being towed away or fined was—helps. Good parking access is very important and he makes a good point by mentioning it.
Business rates are also important. The Business, Innovation and Skills Committee produced a very good report on high streets, which it said were severely hampered by an unfavourable business rate system. It recommended that the Government review that system, including considering whether taxes for retail businesses should be based on sales and not property; whether retail businesses should have their own forms of taxation; and whether business rate revaluation charges should be made at a different time.
In so many town centres now, so many shops are empty; they are vacant and boarded up. It is dismal when a row of shops in a street are closed. Personally, I like charity shops although not too many of them in one place; we need a balance in the number of charity shops. Like many Members, I have worked in a charity shop to give the charity some publicity.
I am afraid that I am coming out with some pet hates, but I hate takeaway shops. If they are allowed without proper planning permission, there can be a whole row of them. One thing about takeaways is that they are dead during the day; they have horrible aluminium covering or security blinds. At night, they open up for those out socially or near nightclubs. If there are too many of them in a town centre, they become a very unpleasant feature. I have a big Poundstretcher warehouse in my constituency, but I have to say that too many pound shops—low-cost, pound-style shops—in one area also blight a town centre. Furthermore, if they are like Poundstretcher, what and how they pay their employees bears some scrutiny.
Having too many takeaways or too many pound shops is a problem, as is having too many bookies. We all know the campaigns against fixed-odds betting, through which people can lose their savings in an afternoon. I have joined the throng in calling for regulation of such betting.
Having said what I dislike about some aspects of town centres, I know that the balance has got to be right. Good amenities have to be included. In my constituency at the moment, we have a campaign to save our libraries and our theatre. Again, we are looking at new options, including encouraging social enterprise.
I am going to say something nice about the Government; I know that the Minister will be very alert when I say it. Something that came through in the autumn statement, which we had lobbied very hard for, was an improvement in the inducements for social investment tax relief. The Chancellor of the Exchequer was very positive in reacting to our lobbying and the social investment tax relief has been raised to a much higher level, so there is more opportunity for people to invest in social enterprise. On the one hand, people on the higher tax rate can invest in social enterprises in their town centres; on the other, crowdfunding can be used. All this activity becomes more possible.
Of course, under any Government, we will have to redesign our town centres and reconsider what they are. They are the heart of our community and the mark of a civilised society, and we must support our small retailers and other small businesses. Let us make sure that the town centres of the future are dominated not by the large, but by the small, the various and the exciting.
Thank you, Mr Streeter, for allowing me to speak. I also thank my hon. Friend the Member for Huddersfield (Mr Sheerman); what he says is always inspirational. I will keep my remarks brief, so that the Minister and any other Members who wish to speak have time to contribute.
The point has already been made that town centres are exceptionally important; they are the heart of our communities. I will briefly use Rochdale as an example. The first co-operative shop in Rochdale is still there on Toad lane. There is a fantastic town hall and other fantastic architecture in the centre of Rochdale. There are two shopping centres: the Exchange, which does very well, and the Wheatsheaf, which is less well managed and needs a lot of attention. We also have colleges and leisure centres, which have already been referred to. My hon. Friend made the point that town centres are now very much about a leisure pursuit; there has been a real change. However, there are challenges, as he said, particularly in relation to online shopping. Having said that, Rochdale Online department store—which is an internet news hub that works with independent retailers so that they can offer their goods online in Rochdale—is a fantastic innovation.
The night-time economy is another challenge. It now starts very late into the night, if not in the early morning. I went round a couple of pubs on Saturday evening in Rochdale—I went to the Roebuck, the Reed hotel, the Spread Eagle and the Regal Moon—and really understood what the night-time economy is about, but there is a lot more to be done.
The hon. Gentleman mentioned the night-time economy and he is making a good point. Does he agree that one of the things we can do to strengthen our town and city centres is to ensure that the gap between the daytime and night-time economy is broken down? One of the things that shops and shopping centres can do to help is look at their opening hours, to try to ensure that the time that people are socialising and shopping in the early evening runs into the night-time economy more effectively.
That is an excellent point. The early evening economy is just as important, because it connects everything together and makes for a safer place to be.
Councils have a critical role to play, and I am pleased to say that recently Rochdale has been much more innovative: free parking for three hours is being introduced and there is a new business rates scheme to help to fill empty shops. However, central Government have to play their part. I have concerns about the national planning policy framework, which I do not think puts the town centre first. The Association of Convenience Stores found that 76% of new retail floor space created since the NPPF came in has been out of town. Business rates revaluation has been a failure for northern towns in particular and the Government have failed fully to act on the Mary Portas recommendations.
Whoever is in Government next time needs to have a better strategy. We must listen less to the bigger players, such as the supermarkets, and we need to get local government doing more.
I congratulate the hon. Member for Huddersfield (Mr Sheerman) on securing the debate and I thank all hon. Members who contributed to it. They are right: if high streets are to remain at the heart of our communities, they need to be vibrant and viable places where people can live, shop, use services and spend their leisure time both during the day and in the evening.
Successful towns and high streets are adapting to the changing needs of their customers. A recent report by the university of Southampton found that a growing convenience culture and the night-time economy have been important for the resilience of the high street. The review also suggested that the long-term shift to more leisure, health and beauty services will continue.
Successful high streets are also making use of online retail. Britain leads the way in click and collect, with 35% of online shoppers using self-collect, and that figure is set to double in the next three years. According to John Lewis, 56% of its online shoppers opted for in-store collection during last year’s Christmas period. All that helps drive footfall.
The Government are committed to helping our high streets, but the vision, plans and ideas for town centres must come from the local areas themselves. We have taken forward a range of measures that will help. We announced in the Chancellor’s autumn statement a further £650 million of support for business rates bills in England. We have also given local councils wide-ranging powers to grant business rates discounts. With business rates retention, councils now have a strong incentive to invest in the future of their town centres. Central Government will meet 50% of any costs of any local discount granted. We have also announced that we will review the future structure of business rates by 2016.
To help small businesses, we have extended the doubling of small business rate relief for another year. To help tackle vacant properties, we have introduced a new reoccupation relief, halving business rates for 18 months for businesses taking over a long-term empty retail property. We have lifted planning restrictions to help high streets be more flexible and encourage reuse of redundant office and retail space. We have also recently consulted on further changes, which include controlling the spread of betting shops and payday loan shops.
We all know how important parking is, as my hon. Friend the Member for Colne Valley (Jason McCartney) mentioned in his intervention, and we are introducing a range of reforms, including stopping the use of CCTV for parking enforcement except in limited circumstances.
Corporation tax was reduced to 21% in April last year and will fall to 20% in April this year. We are also easing the tax burden on small shops. Every business and charity is now entitled to an allowance against its national insurance contributions bill each year. More than 90% of the benefit of that allowance goes to small businesses with fewer than 50 employees, including small shops.
Retail is one of the major employers of young people and we have made such employment cheaper by cutting employer contributions for those under 21.We will continue to take the opportunities where we can to help at a national level, but everyone needs to play their part. Businesses large and small, local government and, as the hon. Member for Huddersfield rightly pointed out, the community and the third sector all have a role to play. We have funded more than 360 town teams, including the Portas pilots, and put their ideas into practice. They have delivered many significant successes and the focus now is on building on that and helping other areas to learn about what works.
Business improvement districts are a successful model of how local businesses can work together to lever greater funding for their town centres. We have set up a loan fund to help with start-up costs and legislated to create property owners BIDs. We are also taking forward new measures to strengthen the role of BIDs and give them more powers locally.
Every council should be able to deliver sensible savings, while protecting front-line services for local taxpayers. We urge all councils to work with their local town teams and BIDs to identify where they can make the most difference. Many councils are already playing a leading role in their town teams, providing financial and management support. Councils can also look at more targeted support. I point the hon. Member for Huddersfield to the examples of Peterborough council and Cannock Chase council, which have done a tremendous amount of work in this area.
I was pleased to hear the hon. Gentleman focus on social enterprises and community organisations, which have a key role to play. I know that they do much in his constituency, including looking at taking over the free town bus service. Community groups can organise to take control of key community assets or deliver projects that benefit their area.
We understand that it can be difficult to access the finance needed to start or sustain such projects over the long term, so we welcome initiatives such as the forthcoming power to change programme, which no doubt the hon. Gentleman will have heard of, which will use a £150 million endowment from the Big Lottery Fund to provide funding and support to existing and new community businesses. Power to change has already met with the future high streets forum to look at how they can support high streets, town centres and libraries.
Does the Minister agree that whoever is in charge—councils take much less of a lead role in many towns—we need good design, long-term thinking and to appeal to the older age group, who need cover in all weathers when they go shopping or out to the town centre? Design is at the heart of so many of these challenges.
The hon. Gentleman is absolutely right. As well as consolidating the work that we have done with the Great British High Street in exchanging good ideas and buddying one area with another to help people to get out of the blocks faster, we have also been concentrating on areas that have been in the “too tough” in-tray for too long. He might like to talk to the hon. Member for Nottingham North (Mr Allen), who is one of a number of colleagues for whom we have put together a bespoke package, including an event that will help design the plan for his local high street. I would be happy to replicate that support in his area if that would be helpful.
The hon. Gentleman is right that everyone has a role to play and social enterprise is a key part of that. In other parts of my portfolio, and in working with local enterprise partnerships in particular, we have really been pushing that agenda by ensuring that such enterprises have representation on the board and that they are focused on all the opportunities in their sector. He is right that crowdfunding is a fantastic way to access finance. The Government now fund the community shares unit and a pilot site that helps communities issue community share offers. The site also provides advice on good practice and it is supporting the roll-out of a sector-led quality assurance mark.
More support will be available and work that the future high street forum has been undertaking will be published before the end of the Parliament. I point the hon. Gentleman to the Great British High Street portal, which contains a huge amount of support and advice for traders and all who have a role to play in making our town centres and high streets vibrant. My Department stands ready to provide whatever support he needs.
I thank the hon. Gentleman not just for the positive tone that he took to some of the initiatives that the Government have been pushing, but for his recognition that tremendously creative people are looking after our high streets. They have achieved an enormous amount in the past few years. The public value our high streets. He is right that they are more than just places to shop: they provide a social network, support and so much more that enhances our quality of life. I thank him for securing the debate and for enabling us to air those issues this afternoon.
Trading Standards and the Green Deal
I recently received an e-mail from a constituent, that stated the following—[Interruption.] I will let the Minister take his place, because there is a word in this e-mail that will shock him to his core, as it shocked me. My constituent said:
“At 12.55 I dashed to the telephone to hear a cheerful voice announcing that he was speaking from the ‘Energy Awareness Centre’ to advise me of the government’s free energy schemes.
I informed him that I was fed up with these unwanted calls, that I was on Telephone Preference Service, and that I had written to my MP…to complain about the matter. He replied ‘And what do you think she is going to do about that, you T-W-A-T.’
I put the phone down and thought that I would address his question to you.
These are supposedly government schemes which are being promoted at considerable cost and nuisance the public. Could you please ask the Prime Minister, or appropriate government minister, what he is going to do to mitigate this nuisance?”
I was as shocked as you are, Mr Streeter, to hear the language reported, and asked myself what I should do. As an elected Member of Parliament, with the right and responsibility to speak on behalf of my constituents—unlike that anonymous and pathetic coward at the end of the telephone—I said to myself, “I shall attempt to repeat that e-mail in Parliament. This will ensure that the Minister is able to take action on a scam-type activity and will also shame the company and its kind.” I want to raise two issues: nuisance calling purporting to relate to Government energy schemes and the actions of one particular company in purporting to sell green deal products to my constituent.
I support the green deal. It is a good scheme that can help households to lower their bills and keep their homes warmer. I have directed many constituents to the services of Norwich city council and Broadland district council for good advice and information on reputable providers, but I will not stand by while rogue traders fraudulently claim to be registered providers of these products and services or while they intimidate residents, who are often elderly and particularly vulnerable to losing precious savings. I would like an assurance that consumers are properly protected from such disgraceful scams, and I hope that the Minister will explain what procedures are in place and what can be improved to protect consumers from such scams.
First, to add a little more detail on nuisance calls, you have heard, Mr Streeter, the worst of what my constituents are having to put up with, although I have not outlined the quantity of calls that that constituent and others receive. Other constituents tell me that they are also being bothered, despite being on the Telephone Preference Service. The TPS website, I noted this morning, has an entire section entitled “Still Getting Calls”, which states:
“On the whole the TPS is very effective. Any reputable company that values its customers and its brand image takes the TPS very seriously.”
However, it goes on to state:
“We are aware that in recent months there has been a rise in the number of unsolicited calls being received by people registered on the TPS.”
The Trading Standards Institute adds:
“GD accredited suppliers must respect ‘no cold calling’ stickers and respect properly established ‘no cold calling zones’.”
I would be grateful if the Minister explained to me—and to my deeply offended constituent, who has borne the brunt of these idiotic calls—what further the Government might be doing about nuisance calling, whether by phone or in person and whether green deal-related or otherwise.
Let me turn to the actions of a company that has taken hundreds of pounds from my constituents. The company is called Tivium Ltd. It is based in Gateshead and has recently touted for trade extensively in Norwich, including by phone. I understand it has also been active elsewhere in the country. Tivium has charged £299 to at least three of my constituents to assess homes for improvements, including new boilers, purporting to be part of the Government’s green deal, but my constituents have been left out of pocket and with no new boiler.
One constituent told me that Tivium advised him after he had paid for the survey and report that he would be eligible for a replacement boiler under the scheme only if he purchased another installation product from the company. His long, disgraceful story includes misinformation, products he did not ask for, misleading assertions and an utterly false cashback promise. He feels ashamed that he let Tivium pass his judgment and
“can imagine this plausible salesperson intimidating others with such assertions”.
He would like to know the actions available to him to reclaim money extracted from him on false premises, so I would be grateful if the Minister provided such advice or directed my constituent to where to find it.
Another constituent, aged 82, paid for an assessment by Tivium that never came to pass, and all she is left with is an A4 sheet full of numbers. A third constituent—she has recently lost her job, making the situation all the more difficult for her—paid for two assessments on two properties, putting her out of pocket by £598. She has had “constant excuses”, followed by silence from Tivium. I wrote to Tivium’s managing director on 7 January on behalf of that constituent, and I have received no reply. That is not only discourteous, but the collection of stories is despicable and the situations are tantamount to theft.
To give some context, Broadland district council, via its very capable portfolio holder for environmental excellence, Councillor John Fisher, has given me comparable prices for a green deal assessment. He said:
“We have negotiated with our Providers to charge £65 for the same product/service via the ‘Warm Up Broadland & South Norfolk’ Green Deal Communities scheme. Our main provider charges £95 for a full Green Deal Assessment Report to anyone across the county.”
That puts the prices that Tivium charges in context, but the point is this: a consumer needs their product. If they do not get their product, they have been defrauded or stolen from. I have, of course, reported the firm to trading standards and contacted Stroma, which administers the green deal, for further investigation. Norfolk county council trading standards service has told me that it is monitoring Tivium and that Gateshead trading standards service is investigating the company, which has 84 county court judgements against it. Trading standards advises my constituents to contact the Citizens Advice consumer helpline, which has information available for victims of Tivium. It is also asking some of them to provide witness statements.
The Trading Standards Institute is concerned that
“there are other businesses using similar tactics”
to Tivium, and I know that it has acted in concert with the Minister’s colleague, the Under-Secretary of State for Energy and Climate Change, my hon. Friend the Member for Hastings and Rye (Amber Rudd), to try to make the issue clear. Tivium would be an example of the Trading Standards Institute’s concern about lead generators having inserted themselves into the supply chain in a way that could encourage mis-selling or over-selling, where consumers have to place heavy reliance on the information given by sales representatives. The TSI and the ombudsman services also express another concern that I am sure the Minister is aware of, which is the gap in protection where those who have an assessment done and take out no further package have no redress via the green deal ombudsman.
As should come as no surprise to any Member of Parliament who seeks to assist their constituents and take up their concerns, I think this behaviour is despicable. It is unacceptable, illicit behaviour that requires the strongest possible response, whether from trading standards or, if sufficient evidence can be gathered, through the justice system. It is not acceptable for elderly and vulnerable people in particular—they may well be considering putting hard-earned savings into good products and a good scheme that should help them to better insulate their home and go greener, which also helps broader society—to be defrauded of their savings and left out of pocket, feeling ashamed and worried that the same could happen again and again if the problem is not corrected.
To sum up, I am asking the Minister for three things: first, to explain what procedures are currently in place to protect consumers from both nuisance calls and rogue trading; secondly, to advise me of what action is available to my constituents to reclaim money that has been taken on false premises; and thirdly, to explain his thoughts on what needs to be improved to protect the public better from such traders, given that the Trading Standards Institute estimates that similar consumer complaints have gone up by 10% in the past 12 months. I do not want to see more Norwich people insulted, defrauded or ripped off, and nor, I think, does the Minister. I would be grateful for his advice on the three questions that I have posed, and I am confident that he will join me in utterly condemning the behaviour that I have described for my constituents, which I imagine is repeated elsewhere in the country.
It is a pleasure to serve under your chairmanship, Mr Streeter. I am grateful to my hon. Friend the Member for Norwich North (Chloe Smith) for securing this debate on such an important issue. It shows that she is a powerful voice for her constituency, working with her constituents to stand up to those who engage in disreputable and unacceptable behaviour, and that the people of the northern part of Norwich who are treated badly on the phone should expect that their MP will come to their aid and ensure that the company in question is brought to account. It also raises an important issue that, as my hon. Friend says, is a problem not only in Norwich but across the nation.
Whenever we deliver a Government scheme, we think about how it can support consumer interests and how to protect consumers from people who would misuse such a scheme. I will come to the wider issues relating to the Telephone Preference Service, but first I want to discuss the green deal, which is a positive programme. We have had almost half a million assessments, around three quarters of which lead to people either making improvements or planning to make improvements to their properties to bring about energy efficiency savings that can be paid for through the reduced cost of energy bills. It is a successful programme—alongside the energy companies obligation—that is funded through bill payers, and it is rolling forward with a great, regular momentum throughout the country. I am glad that my hon. Friend supports it.
People must be able to use the green deal with confidence and trust, so we have a robust authorisation process for all green deal participants, with a comprehensive monitoring and compliance structure that sets out clearly the roles and responsibilities for all involved. Authorised participants must abide by a code of practice and comply with the green deal quality mark, which must be used on the marketing material of all green deal assessors, providers, installers and certification bodies. Organisations that are not authorised to trade as a green deal participant and work outside the framework and code of practice must be dealt with in exactly the same way as any other commercial rogue trader, and the company referred to by my hon. Friend is a rogue trader.
The green deal code and attached conditions state that cold calling telephone numbers that are registered with the TPS because those households do not want to be cold called is not permitted. The TPS is an important part of having a telephone directory and the phone system, because it ensures that people who do not want nuisance calls do not get them. I will come later to the wider issue of nuisance calls.
Where legislation has been breached, it is for trading standards to be the enforcement agency for the relevant consumer protection law and its related regulations. In the past month, the Under-Secretary of State for Energy and Climate Change, my hon. Friend the Member for Hastings and Rye (Amber Rudd), has written to the chairman of the Association of Chief Trading Standards Officers to ensure that appropriate resources have been made available so that cases against rogue traders, particularly those who associate themselves with the green deal, are investigated thoroughly in a timely fashion. We have also sent out a joint communication with the chairman of the Association of Chief Trading Standards Officers to remind green deal market participants that it is their responsibility to uphold the green deal framework and ensure that there is protection for all parties. I am happy to share that information with my hon. Friend the Member for Norwich North and others.
The central point of this debate is that we must deal with companies that purport to be green deal participants but do not abide by the code. My hon. Friend mentioned a number of complaints about Tivium that she has received from her constituents—we have received a great deal of ministerial correspondence, including hundreds of cases throughout the country. It is totally unacceptable. Gateshead trading standards is currently leading an investigation into Tivium’s purported green deal activities. Along with the Financial Conduct Authority, we in the Department of Energy and Climate Change are supporting trading standards. I am sure that my hon. Friend understands that I cannot go into that ongoing investigation, but she should be in no doubt that where unacceptable behaviour has occurred, we will do everything we can to stamp it out. We want to protect the green deal’s integrity and reputation from rogue traders who have nothing to do with it and are simply behaving unacceptably.
It is worth mentioning that there have been a number of different cases, including one that concluded last month at Cardiff Crown court. The defendants were sentenced under consumer protection and unfair trading regulations for mis-selling the green deal scheme, failure to provide the correct cancellation rights and the unauthorised use of trade body logos. That shows that where organisations behave in such a manner, they will face prosecution. I hope that acts as a strong deterrent going forward and demonstrates that such behaviour is unacceptable.
I mentioned earlier that Norfolk county council trading standards told me that Tivium has 84 county court judgments against it, but I did not mention the second part of the sentence, which states that only three have been satisfied. While the Minister is talking about gaining redress through the courts, will he say how redress can be gained once a judgment has been issued and procedures need to be fulfilled?
There is provision in the legislation to ensure that enforcement occurs. I would also add that the Information Commissioner’s Office has successfully prosecuted Tivium Ltd, and we are now in discussions about tackling the wider problem. The message from the Government for companies that are engaged in this sort of activity is absolutely crystal clear: “We will come after you, and you will not benefit from ripping off people across the country and purporting to be that which you are not.” As my hon. Friend said, it is tantamount to theft to require payment but not deliver anything in return. I can see her argument; she put the case powerfully. The appropriate place for prosecutions is within the structure that has already been set up. My hon. Friend asked what her constituents should do in these sorts of circumstances. Trading standards bodies are the best first port of call. They are co-ordinating nationally to ensure that Gateshead trading standards has all the necessary information.
On the wider issue of the Telephone Preference Service, we are working hard with the Information Commissioner’s Office—including meeting this week—to ensure that phone users’ rights in relation to the TPS are protected. That is part of a much wider cross-Government action. Last year, we put in place the action plan for nuisance calls. We consulted on various options from across Government to tackle the problem of nuisance calls, and we reported in December 2014 on the actions that need to be taken by Government, by regulators, by civil society and by companies. The nuisance calls action plan simplified how Ofcom can share information with the Information Commissioner’s Office and the Insolvency Service on rogue companies.
Which? did a review of how consumers agree to receive calls from specific firms: they do not want general cold calls, but do want calls from specific firms. The Ministry of Justice has strengthened regulations regarding companies that breach the rules on nuisance calls, so there is a cross-Government action plan to ensure we are putting in place a robust framework to tackle nuisance calls. I will be happy to talk in more detail about that comprehensive plan, but it is vital that it is taken forward across Government and regulators, and also more broadly, to ensure that the problem is tackled at root.
I am aware of the action plan and pleased to hear the seriousness with which the Government take it. Will the Minister reflect on the problem of the ability of unscrupulous firms to call with a name that sounds plausible—for instance, the Energy Awareness Centre, Solar Panels Ltd or some other phrase constructed using familiar words? The name sounds about right, but is absolutely untraceable. The TPS has noted this on its website, where it has advice about how to tackle unwanted calls. Perhaps the Minister will reflect on the traceability question.
I will certainly reflect on it. As with other behaviour that is without the rules, people can be ingenious in attempting to find new ways to break the rules. It is difficult to solve this problem once and for all, but I have no doubt that more action, as set out in the action plan, will help to tackle it. I am sure my hon. Friend will agree that we must keep up the pressure on the nuisance call action plan.
I want to assure my hon. Friend and all Members that we are doing all that we can to make sure rogue traders do not get away with mis-selling on the green deal, and, crucially, do not rip off consumers. There is always more that can be done, but we need to tackle the nuisance calls and such activity in a way that also allows us to promote and enhance the offer to the law-abiding, the responsible, and the companies that provide the green deal. They do so with a social conscience, in the best possible way, to help people reduce carbon emissions and their energy bills. Ultimately, this is an important area of policy to get right, and the public need to have confidence.
Finally, on the point about the names sounding plausible, there is a public list of authorised green deal participants for this specific area, which is searchable online, so consumers can verify and identify companies. The Department is working on making sure that more people know they can verify a green deal provider and check that the people they are doing business with have got a good track record. The internet is a very helpful tool for people to be able to do this in an unobtrusive and straightforward way. I hope that my hon. Friend will also continue to engage in the whole process, which is very important, of making sure that more and more people know who the good traders are. We must promote the good traders as well as tackling the rogue traders, and I look forward to working with her on that.
Question put and agreed to.