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House of Commons

Tuesday 3 November 2009

The House met at half-past Two o'clock


[Mr. Speaker in the Chair]

Business before questions

Beverley Freemen Bill [ Lords]

Lords message (29 October) relating to the Bill considered.


London Local Authorities bill [ Lords]

Lords message (29 October) relating to the Bill considered.


London Local Authorities and Transport for London (No. 2) Bill [ Lords]

Lords message (29 October) relating to the Bill considered.


Transport for London (Supplemental Toll Provisions) Bill [ Lords]

Motion made,

Hon. Members: Object.

To be considered on Tuesday 10 November.

Oral Answers to Questions


The Chancellor of the Exchequer was asked-

VAT Returns

1. Gordon Banks (Ochil and South Perthshire) (Lab): What estimate he has made of the average annual savings to Her Majesty's Revenue and Customs over the next three years arising from the introduction of paperless value added tax returns. [297048]

The Financial Secretary to the Treasury (Mr. Stephen Timms): Businesses turning over more than £100,000 per year, and all newly registering businesses, will be required to file online from 1 April. Savings of about £4 million a year are expected within three years as a result, but the main reason for the change is to make the service work
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better-fewer errors, faster turnarounds and an extra seven days before businesses have to pay the tax due.

Gordon Banks: I thank my right hon. Friend for his answer-and, indeed, my hon. Friend the Member for Vale of Clwyd (Chris Ruane) for lending me his pen earlier. Has my right hon. Friend considered the impact that the changes could have on some small businesses that reach the £100,000 threshold, but for which a paperless VAT return might not bring a saving, but a cost, especially in these hard economic times?

Mr. Timms: Yes, we have been thinking about that. We have consulted and will announce our conclusions shortly. However, we have provided quite substantial financial help to businesses signing up to online filing-£900 million in total before the scheme closed earlier this year. I can reassure my hon. Friend that we will provide a detailed, step-by-step guide to registering for online services in the February letter that will set out the requirement to file online. The change will bring benefits to HMRC and to businesses as well.

Richard Ottaway (Croydon, South) (Con): Given that a survey by the Revenue showed that most businesses were totally unaware of the obligation, how did the Government get on with their target that at least half of businesses would be filing their returns electronically by March 2008?

Mr. Timms: We are making very good progress, and there will be-indeed, there already has been-a substantial campaign to inform businesses of their obligations. Over the next few months more efforts will be made to ensure that everybody is aware of them. Telephone support, for example, will be available to businesses that have queries, and help will also be provided through a programme of presentations and drop-in sessions. Most people will have to make their first online return next July, so we still have a number of months in which to advise businesses, and we are determined to get this right.

Mr. Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD): Will the Minister assure us that he will devote enough management time and resources to this stage of reforms, so that we can avoid the utter chaos experienced by many of my constituents with more recent reforms? As a result of the latter, for many people it is taking months to get thousands of pounds of tax that is their due repaid.

Mr. Timms: Of course, one of the great strengths of filing online is that it speeds up the whole process-for exactly the reason that the hon. Gentleman set out. We have had very good experiences, for example, with online filing of self-assessment returns, and I am confident that those benefits will be repeated when businesses go online for VAT filing and other taxes.


2. Derek Twigg (Halton) (Lab): What steps he is taking to ensure that additional Government funding is provided for areas most affected by rising unemployment. [297049]

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The Chief Secretary to the Treasury (Mr. Liam Byrne): Since the pre-Budget report, more than 3 million people have been moved off unemployment benefits. Across the country, a targeted effort has been made to assist those communities most hit by unemployment, including initiatives such as the working neighbourhoods fund, which is worth more than £1 billion, and the new £1 billion future jobs fund designed to create 150,000 jobs.

Derek Twigg: The campaign to end child poverty today released a report highlighting the impact of unemployment on children and families. What measures is my right hon. Friend taking to prevent unemployment from meaning poverty for children?

Mr. Byrne: As I am sure my hon. Friend would agree, the best route out of poverty remains the prospect of work, which is why we have been so determined over the past year to take combined action on monetary policy and fiscal policy, which together are now supporting about 500,000 jobs. However, in addition, we realise that some communities need targeted help, which is why the future jobs fund will seek to create more than 6,000 jobs in his region. On top of that, of course, is the important role of tax credits, which are now supporting 20 million people and helping the poorest families in this country to the tune of more than £4,500 a year.

Mr. Michael Fallon (Sevenoaks) (Con): Given rising unemployment, and the fact that this country has been in recession for longer than any of its major competitors, how can Ministers still claim that we were better prepared?

Mr. Byrne: The truth is that the recession is hitting different countries differently. If we look at the United States, the unemployment rate is 10 per cent; if we look at France, the unemployment rate is 10 per cent; and if we look at Germany and Japan, the fall in their respective gross domestic product is greater than ours. The fact that we have been able to put in place a fiscal stimulus worth 4 per cent. of GDP, as well as keeping interest rates low-together supporting up to 500,000 jobs-is in part because we went into this recession with the second lowest debt in the G7.

Chris Ruane (Vale of Clwyd) (Lab): I concur with my hon. Friend the Member for Halton (Derek Twigg) that Treasury resources should be targeted at specific areas. They should also be targeted at specific projects, such as the city strategy, the future jobs fund and the fit for work programme, all of which exist in my constituency, all of which are putting people back to work and all of which are under threat from that lot over there on the Tory Benches.

Mr. Byrne: My hon. Friend has put his finger on precisely the point. Over the course of this year, the Opposition have said consistently that we cannot afford a fiscal stimulus. That was repeated month on month, until the shadow Chancellor's recent speech, when he began to nuance their position. The truth is that without the support that we have put in place over the past year, the jobs that we are now supporting, such as the 150,000 jobs supported by the future jobs fund, would be in jeopardy.

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Stewart Hosie (Dundee, East) (SNP): With the Government's fiscal stimulus ending, quantitative easing ceased, the VAT cut being reversed and departmental cuts already in the pipeline, there is deep concern that this removal of assistance from the economy will force unemployment even higher. Is this therefore not the time for the Government to make the earliest possible statement that they will permit a further year's reprofiling of capital expenditure, as the most effective way to protect and preserve jobs?

Mr. Byrne: None of the measures that the hon. Gentleman mentioned has been stopped. In the pre-Budget report and in the Budget, my right hon. Friend the Chancellor was clear when he said that the measures that we have put in place have to be targeted and have to last only as long as the problem exists. That is why it is quite right that as recovery returns to our economy, some measures should be retired. However, those that are still needed, such as measures to support jobs or businesses' cash flow, are set to continue. Also, as the hon. Gentleman knows, the Bank of England is still to reach a decision on quantitative easing.

Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): Is my right hon. Friend aware that in west Yorkshire we are coming out of recession and doing very well, but that we still need some help from better investment in public sector jobs, to move them from the south and London up to Yorkshire?

Mr. Byrne: The Government have actually moved more jobs from London out into the regions than we set targets for, but that process needs to continue, and I am determined to see that it does.

Bingo Industry

3. Philip Davies (Shipley) (Con): If he will bring forward proposals to reduce the level of taxation applied to the bingo industry. [297050]

The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): We have had continued dialogue with the bingo industry, including before and since the Budget, on the impact of the tax regime. I last met the industry just three weeks ago, and that dialogue will continue. However, I am sure that the hon. Gentleman is aware that tax policy decisions are taken and announced in Budgets and pre-Budget reports.

Philip Davies: The Government have increased the taxation on bingo to 22 per cent., whereas tax on other forms of gambling is 15 per cent. Bingo plays an important part in local communities, but many clubs are shutting up and down the country. What have this Government got against bingo?

Sarah McCarthy-Fry: I can assure the hon. Gentleman that we value the bingo industry and recognise the important part that it plays in the community. I remind him that 22 per cent. is the average across the gambling industry, that the effective tax rate in 2003 was 35 per cent. and that, on the information that the bingo industry gave us before the Budget, the effective tax rate was 24 to 25 per cent.

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Kelvin Hopkins (Luton, North) (Lab): I have raised this with my right hon. and hon. Friends on the Front Bench before, but is it not more sensible to tax the more dangerous forms of gambling more than the innocent forms, such as bingo?

Sarah McCarthy-Fry: I do not think that we are in the business of grading types of gambling. As I have said, we recognise the important part that bingo clubs play in the community, and all these things are taken into account when such decisions are made.

Mr. Greg Hands (Hammersmith and Fulham) (Con): When the Finance Bill went through, we were told that the overall tax burden on bingo would not rise. The industry disagreed, and indeed, a report from Ernst and Young that landed with the Minister last month concluded that the tax had actually gone up. When will she finally admit to the House that the Treasury got its sums wrong on bingo?

Sarah McCarthy-Fry: As I told the hon. Member for Shipley (Philip Davies), I met representatives of the Bingo Association just a few weeks ago, and we discussed the report from Ernst and Young. That report is still with officials, and it is being assessed. As I have said, these decisions are taken in the pre-Budget report and in the Budget, and the information on which we based the Budget decisions last year was based on figures that the Bingo Association gave us. If it is now giving us different figures, it makes sense that we should take our time to assess them.

Bank Liabilities

5. Jim Cousins (Newcastle upon Tyne, Central) (Lab): What the liabilities will be of the proposed (a) good and (b) bad banks to be formed from Northern Rock and Bradford & Bingley. [297052]

The Chancellor of the Exchequer (Mr. Alistair Darling): Northern Rock's total liabilities were published in its half-year results. The split between the two banks will be set out once the business plan is finalised. Bradford & Bingley's liabilities are published in its annual report.

Jim Cousins: I thank the Chancellor for that answer, but he will know that many thousands of home owners are likely to be left behind with the £50 billion to £60 billion in the old Northern Rock mortgage book. They are not well off, and they are not rubbish, as Opposition Members are so keen to say. What sort of future, and what sort of mortgage deal, will they have?

Mr. Darling: My hon. Friend raises an important point. The proposal is to split Northern Rock so that there is a new bank that will accept deposits and lend money for new mortgages. The majority of mortgages will remain in the Northern Rock asset management part of the branch. People who have mortgages with Northern Rock will be written to by the institution before this division happens. I am very anxious to ensure that people are treated in a similar way, no matter whether their mortgage is held by the Northern Rock bank or by the Northern Rock mortgage asset-holding company, and I have had discussions with the chief executive of Northern Rock so that we can ensure that that happens.

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I should like to say two other things, if I may. One is that what is now happening demonstrates the wisdom of our intervening in the first place to save Northern Rock, to nationalise it and now to see it through to recovery. My second point is that, although some jobs were unfortunately lost, there are more than 3,500 people employed in Northern Rock. That is good-quality employment in a region that needs that employment.

Dr. Vincent Cable (Twickenham) (LD): Can the Chancellor explain what process is being put in place to ensure that Northern Rock's good assets, of which there are undoubtedly many, are not sold off cheaply to the private sector while its bad, toxic debts-including those that resulted from 125 per cent. mortgages-are left with the taxpayer?

Mr. Darling: Again, it might be helpful if I make the point that the mortgages that will be held by the Northern Rock mortgage asset company are not all what we might characterise as bad assets. There will be some-there is no doubt about that, given what happened at Northern Rock, especially towards the end-from which the company will not get its money back. However, the majority of the assets in that company are performing-that is, the people who have them are meeting their loans. In other words, they are perfectly good loans. The reason that we have divided Northern Rock up is that, otherwise, we would have had to put even more capital into it. What I am proposing means that we can sell off the Northern Rock bank-in the not-too-distant future, I hope, when it is right to do so-and get it back into the private sector. The other assets will need to be managed over a longer period of time. As conditions improve, however, I hope that many of those loans will come good again and we will be able to get our money back.

Dr. Cable: But what is the hurry? As I understand it, the European Commission has set no timeline for this process-unlike with the Royal Bank of Scotland. Our experience of other countries, such as Sweden, is that this problem could take 10 years to sort out, so why are the Government putting forward this proposal now? They run the risk of getting very bad value for money for the taxpayer in a premature sale.

Mr. Darling: I have said on many occasions in this Chamber and elsewhere that we are in no hurry to sell at all. Indeed, we will not sell these assets in relation to Northern Rock until the price that is offered is right and we can get our money back. It is also worth bearing in mind that, of the original £29 billion that was lent to Northern Rock, the amount outstanding is now £14 billion, so we are on the right track. We are in no hurry to sell at all. I recall having said that to the hon. Gentleman on at least two occasions at previous Question Times, and it is not entirely clear why he seems so reluctant to accept that assurance.

John McFall (West Dunbartonshire) (Lab/Co-op): Is it not the case that about 90 per cent. of the mortgages held by the Northern Rock management asset company, while having risky characteristics, could come good in the long term? That being the case, will the Chancellor take on board the issue of competition? We know that the British banking system suffers from too little competition. In the process of disposing of Northern Rock-at the Government's leisure-will he not rule out the possibility of the mutualisation of the company?

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