Alan Simpson: No, I do not, and I think that it is a mistake to presume that earnings in the richest part of society are not a zero sum game. That is one of the great myths that is debunked in the book that I mentioned. It has always been argued that if the superrich are allowed to be superrich, they will somehow engender a dynamic in the economy that will drag everyone else's earnings along with theirs.
Two studies paint a picture of the actual state of affairs. The Institute for Fiscal Studies recently produced a report showing that Britain has one of the lowest rates of innovation compared with our main competitors in the industrial world. We also rank 15th among the 30 richest countries in terms of productivity growth. There is little evidence to suggest that the freeing up of wealth acquisition among the wealthiest is delivering the productivity gains that Members would like to see, or to claim.
Mr. Graham Stuart: Does the hon. Gentleman accept that the countries that are being innovative and have the most dynamic economies have not adopted the Soviet-type policy that almost underlies his comments, but apply lower taxes? Ireland, for instance, wants to reduce corporation tax. Companies setting up there are now contributing in a major way to Irish tax coffers, and hence to schools and hospitals.
Alan Simpson: Other Members would say that what underpins the dynamism of the southern Ireland economy is the number of subsidies that it has received from the European Union. That is what allows such investment and relocation to take place. In many ways, those subsidies are merely relocation bribesthey are not necessarily about productivity gains. The notion that if taxes on the rich are reduced wealth will flow to society as a whole is pure mythology.
The other study that I wanted to mention was conducted by Manchester university and relates to our thinking about economics and productivity in this country. It reveals that the top company heads in the United Kingdom have enjoyed pay increases that bear no relation to any benchmark or cross-section of productivity measures against which they could be justified. The study refers to a culture of "value skimming" among senior management in UK industries. It says that
Nowhere is such a culture more apparent than in the management of the water industry, a critical issue to which I now turn. Today is world water day, which is an interesting benchmark for the House. No mention was made of it in the Budget. It comes at a time when 12 million households in the UK, mainly in southern England, have been told that they are likely to face hosepipe bans and water restrictions during the summer, and when the UK water industriesthe companies responsible for water managementare haemorrhaging 4.7 billion litres into the drains through unrepaired leaks every single day of the year. That is enough water to meet the needs of 14.5 million households. The scale of inefficiency in the management of the water supply is breathtaking and it will certainly be neither welcomed nor understood by any of those who face hosepipe bans and water restrictions.
Despite that crisis, the rate of leakage reduction has fallen in the past five years. However, the rate of self-reward, profits and distributed dividends has risen.
22 Mar 2006 : Column 362
Dividend rates in the UK water industry are now four times higher than those of our European counterparts. Last year, executive pay in the water industry increased by 31 per cent.at a time when leakages were becoming colossal. Now, the industry is asking the country as a whole for some form of restraint in order to manage its way out of the crisis, but such restraint has nothing to do with the rewards that those in the industry pay themselves. We have created a water service delivery culture in which companies are pouring water down the drain, and in which that rate of loss is matched only by the rate at which they pour money into their own pockets.
Richard Younger-Ross: I have a great deal of sympathy with the point that the hon. Gentleman is making. Does he accept that there is an inequality in this regard? In some areas, the price paid by people for so-called improvements to the water supplyimprovements that they are not seeinghas risen exponentially. In areas such as the south-west, the water rates and the council tax combined account for more than 25 per cent. of some pensioners' income. That is unsustainable for the poorest in our societythose on fixed incomes and pensionsparticularly given that, as the hon. Gentleman says, there are those who are making large profits out of the water industry.
Alan Simpson: The hon. Gentleman makes an important point, and Members in all parts of the House who have long campaigned for recognition of the concept of fuel poverty are beginning to understand that water poverty could be no less a threat to the poorest and most vulnerable in our society.
It is obscene to have such a crisis of affordability and access at a time when the levels of self-reward in these privatised industries have gone through the roof. This is indeed almost a national obscenity, so it is indefensible for us, as a Government, not to intervene. We should say, for instance, that water companies can pay no bonuses until they have met the European average for water losses, which is 5 per cent. At present, we are losing almost 25 per cent. of our water supply. Why should we create a market that allows executives to reward themselves, but which cannot deliver a consistent water supply to the public?
David Taylor: My hon. Friend and regional near neighbour paints an accurate picture of water companies' incompetence in tackling water leaks, and of their directors' greed in filling their pockets. Does he agree that such behaviour sometimes tips over into the fraud and dishonesty exhibited by Severn Trent plc, the privatised utility that serves both of our constituencies, which provided fraudulent figures to justify very significant increases in water supply charges? Is not that an appalling thing to do to people in poorer circumstances?
I think that it is. As an observation, I want to say that the impetus to attempt to cheat the public and the regulator by providing false information is a direct consequence of the fact that responsibility for ensuring that services are of high quality and that accounting is honest has been pushed away from Government. We now express surprise that pushing that
22 Mar 2006 : Column 363
responsibility away to arm's length should have engendered a culture of cheating and dishonesty, but we are reaping the harvest of the mistaken belief that throwing assets out to the private sector would lead to that sector delivering social gain. What has happened, in fact, is that it has delivered social greed.
At the same time, hon. Members are lobbied, in the House and in our constituencies, by people who have been punished not for pursuing policies of greed, but for acting in a responsible manner. I am referring to the 85,000 people who have had their pensions stolen. I spoke earlier about the lack of wisdom of using pensions savings for speculative purposes, but the people who have suffered are the ones who did as successive Governments, of all parties, asked them to do. They put money into pension schemes so that their retirement years would be properly provided for, and we have a moral duty to ensure that that money is paid back. We need people to believe in saving for their pensions, but that has to be underpinned by a cast-iron guarantee that those savings cannot be stolen.
If people choose to cash in their pension savings and subsequently squander the money on speculation, that is their tough luck. However, I believe that it is a criminal offence to cause people to lose out after a lifetime of regular saving into a pension scheme. An offence like that must be redressed in full. How such redress is achieved is, in part, a responsibility for the Chancellor and the Government.
The cost of full repayment is put at £15 billion over 60 years, but the House will soon be asked to make a decision about renewing the Trident nuclear weapons system at a similar cost. I would much prefer the money to be used to redress the difficulties faced by people whose pensions have been nuked rather than to pay for a weapons system that is likely to be used to nuke the lives and prospects of other people.
That choice is the language of priorities. Aneurin Bevan always said that being in government required us to make key decisions of that sort. Restoring the stolen pensions is part of creating the platform of credibility on which we will restore people's belief in the sanctity and security of pensions and pension contributions.
My hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke about the need to restore the value of the state pension and its link with earnings. That is another aspect of the matter, and would cost about £7.3 billion. On the figures that I mentioned in relation to the gap in terms of self-rewards among the corporate rich, if we were to have a windfall tax on executive bonuses and profits, that would bring in £3.75 billion a year. If we were to impose a similar tax on executive share options, that would cover the rest of the gap in relation to what is required to restore pensions and their link with earnings.