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When the town started to grow, as part of the expansion of new towns in the ’60s and ’70s, people came from London and Liverpool because they wanted work, homes
and a better life for their families. That has remained the overwhelming ethic of the town and of my constituency. Reflecting the economic mood, Northampton chamber of commerce recently cited improvements in the manufacturing industry and increased optimism in the sector, with four in 10 manufacturers reporting improved cash flows for their businesses, which, ironically, is reported by only 20 per cent. of service companies. Manufacturers have reported higher UK sales, with 44 per cent. seeing an increase, against 41 per cent. of service companies. The outlook is generally positive, and I am particularly pleased that the optimism is coming from the manufacturing sector this time, not just from the service sector.
The question for us now is how the Government can best support a working and aspirational community. The measures in the Queen’s Speech are particularly important in that respect. To a certain extent the economic measures are important, but many of the other measures will contribute to the economic success and well-being of my constituents too, such as the measures to improve the work-life balance. There is enormous participation in the economy by women in my constituency, with 83 per cent. of women in Northampton working, which is well above the national average. There has tended to be a pattern of partners staggering their working hours, so that they can share their family commitments. I remember receiving an extraordinary letter from a constituent in her 60s who berated the Government for introducing child care, saying that she thought that parents should look after their own children. She said that she and her husband had shared their child care, with her going to work in the evening, only after he had come home.
There are also measures for more social and affordable housing, which will be extremely important for the young families currently diverted into private sector rented housing. Above all, however, the measures that will probably benefit the economy the most are those concerned with education and training. I refer again to the comments that the hon. Member for Peterborough made about the increasing numbers in the new category of NEET. A number of the measures in the Queen’s Speech, particularly the new apprenticeship scheme and the raising of the education leaving age, are about ensuring that those young people have better prospects in life and get into either training or employment.
Julia Goldsworthy: Does the hon. Lady agree that a large number of young people who fall into that category will have complex needs that tie in with demands on other Departments? Does she agree that although multi-agency work has helped to tackle such problems, such work is the first to be cut when there is pressure on local government and budgets are squeezed—that has been the experience in my constituency—thereby undermining the support that those young people need to be offered?
Ms Keeble:
I certainly agree that large numbers in that group often have complex, compound needs, involving combinations of social dysfunction, family dysfunction, drug problems and suchlike, particularly in areas where employment levels are high and the economy is strong. However, some of the work being
undertaken by the agencies has already been able to overcome such problems. Perhaps the hon. Member for Peterborough and others who have particular problems with that group of young people would do well to look at what my local Connexions service has done. It was set targets to reduce the number of young people not in education, employment or training. It has well exceeded those targets and, by working closely across the different agencies, has been able to get young people into work and training and to ensure that they do not fall through the holes in the safety net. The new measures in the Queen’s Speech will be important, but work is already being done.
One of the factors repeatedly cited by local employers in relation to the prospects for improving the performance of the local economy is the skills level among young people. In that regard, the amount of money that the Government have put into rebuilding schools and improving the pay structure and performance of teachers has been extremely important. All the secondary schools and most of the primary schools in my constituency have been rebuilt. I pay tribute to the teachers and head teachers who, during the chaos of the building work, nevertheless helped to achieve improved exam results for the first time in a long time. That is very welcome and will produce a real improvement.
There are still concerns, however. I am sorry that I was not in the Chamber for the whole of the speech by the hon. Member for Eastbourne (Mr. Waterson). I certainly agree with him that one of the biggest concerns among our constituents now is to ensure that they have security in retirement. When people have worked hard throughout their adult working life, they are entitled to expect to be reasonably comfortable when they retire.
Women in employment, in particular, have missed out. That is why I am so pleased that the Government are going to set up new pension schemes that will, I hope, tackle for the first time the disadvantages that women have experienced in retirement. As I said earlier, 83 per cent. of the women in my constituency work. In the past, their earnings have fallen well below those of men. They are starting to catch up, but a typical comparison is still £380 a week for women compared with £495 a week for men.
The Turner report clearly identified that women were poor in retirement and fell behind not only because they did not receive the state pension but because they did not have a pension scheme linked to their employment. Overcoming that problem would provide a real breakthrough for women in retirement. I look forward to the new legislation, which will have to ensure that, for once, women can get pension schemes that are linked to their employment and that will enable them to make the right provision for themselves in retirement. It has been mentioned by several hon. Members that a key factor in these proposals is the extent of consensus that exists, because the extent to which people will participate in the schemes, and their viability, will depend on that.
One of the medium-sized employers in Northampton talked me through his pension scheme very carefully, because he was most concerned about the fact that it was reaching a point at which it was no longer viable. His biggest problem was the fact that many younger people had simply opted out of the scheme. The age
profile of the scheme was therefore changing and it really was not working. He was thinking about having to close it. I could see that that was not just because of the financial aspects of the provision—his scheme looked very good—but because of the perceptions of the young people. Some of them thought that what one should do was to go into another pension scheme, rather than the company scheme, and the system was gradually falling into decay.
Of course, people need good advice and there must not be any mis-selling. People have to look at what is in their best interests, but when the new schemes start off, it is important that they are given support and not undermined by constant rubbishing. I have to say that we have heard rather too much rubbishing of the proposed new scheme from Conservative Members.
Mr. Waterson: I knew that it was too good to be true when the hon. Lady paid tribute to my speech earlier. Which would she rather have? Does she want people to go into the scheme with their eyes closed, ending up no better off or, in some cases, worse off; or should they go in fully informed and aware of how the scheme was created for people on low incomes and on interrupted work patterns, who may have to rent in retirement?
Ms Keeble: The scheme obviously has to be designed to meet the needs of a changing work force, particularly for the growing number of women who may have some interruptions in their careers, but increasingly short ones. It is also important to show confidence in the scheme. People should start with the assumption that it should be looked at positively, rather than thinking, “Oh, this is a rubbish thing, but people say I will be better off; it may be better just to wait”. At the end of the day, that will become a self-fulfilling prophecy. It is a difficult one to juggle, but if the scheme is constantly run down in the way that occupational and other schemes were undermined, we shall find exactly the same problem; schemes will not work properly because they will not have enough people in them.
I should like to take up a further issue with my right hon. Friend the Secretary of State for Work and Pensions, who I am sure will deal with it. What happens to pensioners who are on medium or modest incomes—as many of my constituents will be on retirement—and who own their own homes? There are some difficult issues about the expense of home ownership for pensioners who are asset rich and, if not poor, at least on modest means. The issue is repeatedly brought up with me by constituents, who find that they face real financial difficulties in maintaining their homes. If they sell and try to downsize, the economics of that does not work either. I am thinking particularly of people who bought the Conservative party dream and moved from the inner cities to Northampton, bought their own council homes, but now find themselves well past retirement age and facing real difficulties. They often say that although things such as the Warm Front initiative are important, they are not enough: they need to be able to release some of the equity in their homes to make them habitable, comfortable and secure for their retirement.
Will my right hon. Friend look into this problem and see whether there is any way of providing further support—other than through the warm homes scheme,
which is extremely good, but only goes so far—for pensioners in this situation with financial difficulties? It would help them if some equity could be released and put into home improvements so that they avoid the need to remortgage, which is a problem, or to go into some of the more difficult equity release schemes, which could land them in even worse financial problems. As I said, pensioners have raised this issue with me on a number of occasions—mainly those who have bought their homes, provided for their retirement and done all the right things, as it were, but who find it more difficult to manage their homes, particularly the capital costs of improvement, as they get older.
Overall, however, the Queen’s Speech contains important economic measures such as those on security of deposits and use of dormant accounts, and a large number of measures that will improve the economic performance of my constituency and the well-being of my constituents. Those measures will ensure that this Government meet the aspirations of the people in my constituency and other areas of middle England.
6.15 pm
Mr. Philip Dunne (Ludlow) (Con): I must apologise to you, Madam Deputy Speaker, for not being able to attend the opening speeches this afternoon as a result of my Select Committee duties.
It is a great pleasure to contribute to the debate on the Gracious Speech and to follow the hon. Member for Northampton, North (Ms Keeble), who clearly either read a different Queen’s Speech or made a very different interpretation of the one that I read. I am afraid that I found the speech a great disappointment. It lacked the famous vision about which much has been said in and outside the Chamber. It seemed to lack a recognition of many of the problems that beset our economy, to which I wish to address most of my remarks. Consequently, it lacked any serious attempt to provide solutions to the problems that we face.
We must remember that the economy is currently facing challenges posed by global shifts in economic power from, broadly speaking, the industrialised nations of the 20th century to what will become the technological nations of the 21st century. In part, the way in which our economy reacts to that is causing seismic changes. Currently, this country has the lowest savings ratio that it has ever had, business investment in manufacturing is half the level of 10 years ago and we are rapidly losing our historic manufacturing base. Nothing in the Queen’s Speech attempts to address those fundamental problems. In part, that is the result of a change of leadership at the top of Government. Now that senior members of the Government are four months into their new roles, we have the opportunity to see how they are getting on.
The new Chancellor has, I must admit, an unenviable position to defend. In the third month of his reign as Chancellor, he has presided over the first run on a bank in this country for 141 years. I will return to that in a moment. Last month, the Chancellor also had the opportunity to introduce a pre-Budget report. His disappointing performance in that pre-Budget report and subsequent events have shown him unravelling
before our eyes. There were relatively few innovations in the pre-Budget report of the Chancellor’s own inspiration. He seemed to look elsewhere for inspiration, notably to some of the inheritance tax proposals introduced so spectacularly by my hon. Friend the Member for Tatton (Mr. Osborne) a few days before the pre-Budget report. Miraculously, those proposals appeared in the Chancellor’s speech, and he has found it difficult to admit to the date on which he first started to think about them.
The one idea that the Chancellor had of his own was to simplify capital gains tax on business. He introduced a flat rate instead of the plethora of rates, tapers and reliefs. That can undoubtedly be traced back to the desire to introduce a higher rate of taxation on private equity executives who had been exploiting an apparent loophole—it was not a loophole, but a 10 per cent. rate of capital gains tax introduced by the Prime Minister, when he was Chancellor, back in 1998. Undoubtedly, that was one of the few measures for which the business community would regularly applaud the Prime Minister during his tenure as Chancellor. His successor decided that instead of living with a competitive rate of capital gains tax for entrepreneurs, he would virtually double the rate to 18 per cent. to address a politically inspired assault on a very narrow segment of the business community, namely private equity executives.
That idea was ill thought through. We know that it was ill thought through because the Chancellor confessed in evidence to the Treasury Committee that he had not discussed the proposed changes in capital gains tax with any of the traditional representatives of business, large and small, with whom the Treasury normally has regular dialogues, not about taxation rates but about fundamental changes in the structure of taxation. He was forced to make that admission because the representatives themselves were telling anyone who cared to ask them that there had been no consultation on the changes before their introduction. It is not surprising that this rushed measure introduced to deal with another problem has caused uproar in the business community. Such is the uproar that the Chancellor has had to come crawling back to the House to say that he is thinking of introducing some reliefs.
Let us spend a moment thinking about the consequences of the muddle over this measure for the economic lifeblood of the country, particularly the small business man. By introducing an 80 per cent. increase in capital gains tax, the Chancellor is clobbering the owners of the 4.5 million small and medium-sized businesses that represent the engine of growth in the economy as we move into the new era to which I referred at the beginning of my speech. They have been most vociferous about the effect that the increase will have on the way in which they plan investment in their businesses.
The Chancellor’s action has also had a significant impact on savers in employee share schemes, some of whom were expecting to pay tax at rates as low as 5 per cent. under reliefs and other schemes that will remain in place until the Finance Bill is enacted. According to ProShare, hundreds of thousands of them will have to pay tax at the new 18 per cent. rate.
Paul Farrelly (Newcastle-under-Lyme) (Lab):
Many years ago, when I was advising mostly small businesses on sales, the level of capital gains tax—under a
Conservative Government—was the same as the higher rate of income tax. Even after these changes it will be at half that level, and below the standard rate of income tax. I think that those who realise capital gains are still being given a very good deal. Does the hon. Gentleman not agree?
Mr. Dunne: I believe that since the hon. Gentleman left professional practice, capital gains tax rates have fallen in our main competitor nations. The new 18 per cent. rate is substantially higher than the rate for those seeking to set up businesses in Switzerland, Hong Kong or Ireland, and I think it is higher even than the rate in France. As I said at the outset, we are now in a global environment. People do not decide where to locate their businesses purely from an incorporation point of view or in the light of the current level of income tax—
Mr. Oliver Heald (North-East Hertfordshire) (Con): What about taper relief?
Mr. Dunne: Indeed, the abolition of taper relief has a significant impact on the actual level of tax that people must pay.
Mr. Heald: Is it not particularly dismal that this is a tax on our future as a nation, and that it hits young people? It is all of a piece with the Government’s failure to consider the proposals to remove stamp duty on first-time purchases of houses, and in the same bracket as their failure to include in the Queen's Speech any measure to reduce the number of young people who are still unemployed and not being trained.
Mr. Dunne: I entirely agree. There was very little in the Queen's Speech to stimulate the economy, and quite a lot to restrain entrepreneurial endeavour.
It not only those who will be affected by the tax changes who have been complaining so much; it is Ministers themselves. The Minister for Trade Promotion and Industry has been quoted as saying that this is a terrible proposal, and he is supposed to have been having a quiet word with the Chancellor. A week after the Minister made that statement in Bolton, I asked the Chancellor whether they had had an opportunity to speak and I regret to say that they had not. Either the Chancellor was not listening when the Minister was passing on the views of business men from Bolton, or they do not talk very often.
As a consequence of that measure, there is now a form of paralysis in the small business environment. Investing for capital gain in one's business is a long-term process. It is not undertaken lightly. One does not switch in and out of that. Through abolishing the taper, the Government have removed an encouragement for long-term investment. They are now actively encouraging short-term investment. Because of the muddle over whether any reliefs will be introduced in the Finance Bill, individuals who make investment decisions do not know what to do. They have a six-month window of uncertainty about whether there will be any relief, and whether they should sell their business now if they have been thinking of retiring in the foreseeable future, or hang on. They do not know. It is characteristic of the muddle that is at
the heart of the Government. I urge the Economic Secretary to encourage the Chancellor to publish his proposals on the reliefs as soon as possible—not to wait until the next Budget—so that people have time to understand where the Government's thinking is going and possibly to act on it.
I would like to talk finally about another area of muddle and confusion and its effect on the stability of the economy. Those of us on the Treasury Committee—there are a couple of its members present—had the benefit earlier this week of hearing Professor Buiter, one of the original members of the Monetary Policy Committee, give his views on the causes of the problems in the system that gave rise directly and indirectly to the terrible run on the bank, which the economy should never have suffered. He made it crystal clear that in his view, and in the view of other learned economists who have given evidence to us, the tripartite regulatory system that was established by the present Chancellor when he was Chief Secretary in 1997 is fundamentally flawed. There is no clarity as to who is responsible for taking the ultimate decisions that have to be taken.
Mr. Simon: To be clear, the professor did say that it works but that it did not work well. He mentioned one change: if the Bank were given some oversight of liquidity, it would work very well. It is not quite as bad as the hon. Gentleman is making out.
Mr. Dunne: The hon. Gentleman is being a little kind-hearted in his interpretation of what we heard. A number of criticisms were levelled against the system. Some aspects of the tripartite system did not work well, including the fact that no joint statement was made by the three components of the system. The professor specifically criticised the Chancellor and his predecessor, the Prime Minister, for dithering and not making an announcement to back up the proposals for the lender of last resort, with a deposit guarantee at the same time.
The hon. Gentleman will recall that the three-day interval was the main reason why the run took the time it took. Had a clear statement been made and had deposit protection been put in place at the same time as the lending facility was established, there would not have been a run on the bank. That shows that it is difficult in a tripartite system to have clarity as to who is in charge and who makes the decision. That system was set up by the Chancellor and his predecessor. Effectively, they have been fingered with some element of responsibility for that. It goes back to the issue that I was discussing earlier. When we look at competence in the stewardship of the economy, we have to face the fact that we have a set of senior Ministers in place who are presiding over muddle and confusion. I regret that that is the case, but that is the situation that we find ourselves in. I thank you for calling me, Madam Deputy Speaker.
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