"Banks will no longer be allowed to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit unrelated to serving their customers."
Hedge funds are completely private. There should be no public finance support or tax subsidy for them whatsoever. They can have their deals with the banks, but their owners should have no special ownership privileges, based on the fact that they are too big to fail. If the banks decided to take over Manchester United FC or Liverpool FC because the hedge funds could not meet their debt, then that is what they should do. My early-day motion 1185 of 23 March 2009 spells out that position.
The Chancellor has been wrong to elevate the hedge funds to a privileged position in our economy. In a number of speeches, he has called them "systematically important" but, as I have said, the hedge funds are private and generally unregulated and should not have such status. Basically, hedge funds are the corner shops of the banking and finance industries in this country. Corner shops are important, but we would not dream of saying that they were systematically important to the economy. The Chancellor has got it wrong.
I do not agree that the hedge funds should be considered systematically important, and we are out of step with the US in that regard. We are also out of step with the European Commission, which issued a draft directive on alternative investment fund management in response to the revelation that the alternative investment finance sector managed some £1,900 billion in assets at the end of 2008. The directive is aimed at trying to regulate those hedge funds, but it was blocked by the UK Government. I am disappointed about that.
"I work well with Gordon Brown, but his one-off tax on bankers' bonuses is only half as good an idea as the hedge fund rules we are considering and which Great Britain ought to approve. That is what we must fight for and I am expecting some support."
"The key issue holding up a compromise deal was disagreement over the conditions on which funds and fund managers based outside the EU-including London-based managers running offshore funds-should be allowed to market to professional investors within the 27-country bloc."
Clearly, our Government are trying to protect offshore hedge fund interests, and I do not think that they should. It was right in yesterday's Budget to apply those agreements to Dominica, Grenada, Belize and all the other offshore places, but we need Europe-wide regulation rather than individual agreements. We need to get back in line with Europe on that.
The Government argue that action should be taken through the G20, but that is a weak argument. The G20 should be involved in regulating the hedge funds, but we should establish that regulation with the strength of EU agreement. It feels as though the Government's position is one of delay, deferral and procrastination, in order to defend the hedge fund sector. I do not agree with that.
In mentioning the importance of accountability and transparency for investment funds, I have the opportunity to refer to a Bill that I had proposed to bring to the House; I will not have a chance to do so, because I am standing down at the election. Let me read it into the record, because it is an example of where we should be going on the issue of greater transparency. I call it the investment funds, endowment and pensions funds transparency Bill. It says that
"every Company, Business or Authority responsible for an investment, endowment or pension fund shall publish annually, and have available for any investor or beneficiary of that fund who requests to see it, a full list of investments in that fund over the last year of the Annual Report period, together with a list of changed investments over that year with an explanation of why each was changed. Any investment transferred to, or from, a fund in which any Director, manager or major shareholder in the business has a stake must be separately listed and the Director, manager or major shareholder's interest specifically explained."
That would stop directors, managers and major shareholders ripping off investors in those funds. That is the sort of transparency that we should provide. I am sad that I will not get to introduce that Bill, but I am pleased that I have been able to refer to it and put it on the record.
My second point on transparency is about non-executive directors on boards of banks. I raised the issue of transparency and accountability at a meeting of the parliamentary Labour party, and the Chancellor mentioned that we would look at getting other people on the boards of banks to uphold the public interest. However, the Government have backed away from that. I am sad about that, because if those organisations are systematically important, as the Chancellor says, there should be a person directly on the boards of banks and hedge funds with a mandate to represent the public interest, keep control and whistleblow when dangerous speculation is going on. I hope that a future Government will come back to that idea. I have concentrated on those measures because they are a lot to have left out of the Budget, but they are still vital if we are to run a coherent economy.
The deficit is the pre-eminent issue, and will be in the election, too, so the issue clearly must be addressed. I am proud of my role in tackling the deficit. I was the first in the parliamentary Labour party to call on the Chancellor and the Prime Minister to adopt a Keynesian policy. They listened and did so, and it has saved thousands of jobs. We would be in much greater deficit, and in a much greater crisis, if the Government had not followed that policy, and I pay tribute to the Chancellor and the Prime Minister for doing what they did. Of course, the deficit has to be tackled, but over a period, reasonably, and without putting the economy and recovery at risk.
Here are some of my suggestions. First, we must recover every single penny handed out to the banks, plus interest. I was pleased that the Chancellor included that point in his speech; I pay tribute to him for that. We have not heard the same commitment from the Tory party. I suspect that that is because the Tories want to sell off the state interest in the banks-other financial institutions as well, but banks in particular-as soon as the profits start to flow again. That money would not come back; the taxpayer would be sold short.
Harry Cohen: Absolutely. The only reason why the banking sector is in existence is because of taxpayers' investment; it would have gone completely flat otherwise. If we are to solve the deficit problem, those profits, instead of going into the big bonuses of bankers, should come back to the taxpayer.
"is an important step in the right direction",
"does not match the scale of resources required to tackle the deficit in the UK or provide enough resources to tackle global poverty and climate change."
"A Robin Hood tax, set at an average rate of 0.05 per cent. would raise up to $400 billion annually, resulting in tens of billions of pounds in revenue for the UK. In order to meet the scale of the financial challenges the UK and global economy faces, a financial transaction tax is by far the best option on the table."
I agree also with my hon. Friend the Member for Luton, North (Kelvin Hopkins) about eating severely into tax avoidance, which costs us dear. He gave some amazing figures, and in a recent TUC report, tax consultant Richard Murphy looked at the amount that is lost to the UK taxpayer by the use of tax havens in Jersey, Switzerland, Isle of Man and Guernsey. The report stated that
"the TUC estimates that the total tax loss last year from UK residents (without non-domicile status) holding assets to avoid and evade tax is at least £4 billion,"
"Taxpayers are paying £2.50 for subsidising the pensions of the richest 1 per cent. of the population for every pound spent on paying pensions to retired public servants such as nurses, teachers and civil servants".
Kelvin Hopkins: On that point, another estimate from the figures that I gave is that the top 1 per cent. of earners-just the top 1 per cent.-receive on their savings tax relief that costs the Treasury £9 billion a year.
"Tax relief is heavily skewed towards the better off. Treasury figures reveal that 60 per cent. of tax relief goes to higher rate taxpayers, including nearly £10 billion a year...to the top 1 per cent. of earners, those on more than £150,000 a year."
"raise £10 billion a year by capping the amount of tax relief that can be claimed by those earning more than £100,000 a year at £5,000".
"just 3.1 per cent. of the taxpayer population receive 31 per cent. of all tax relief, averaging £18,750 a year".
It compared that with people earning just below £100,000-between £70,000 and £100,000. They receive on average £4,500 in tax allowances, so it would not be unreasonable to cap tax relief at £5,000 for people earning more than £100,000. As I have said, it could save the taxpayer £10 billion a year. I see no reason why we should not do that well ahead of public service cuts, which would hammer the poorest people in our community.
We can make other savings, too. First, next year we will spend another £5 billion on the war. I do not think that that is worth it; the British people do not want it. I pay tribute to the soldiers, who are tremendously brave-indeed, some have lost their lives, and that is a great tragedy for their relatives and friends-but it is a futile war for all sorts of reasons. We should not be engaged in it; we should have been discussing with the moderate Taliban how they can govern their country with the existing Government. Given our current situation, we cannot afford to spend £5 billion a year on that war. We have to settle it, and any future Government must settle it immediately.
Secondly, there are the costs of nuclear weapons. I agree with the Liberals about Trident, but they are mealy-mouthed, because they keep using the phrase "like for like". They are not really about scrapping nuclear weapons and making those savings. In fact, if they got into government-I suspect that this applies to the Tories as well-they would abandon the Trident replacement and put nuclear weapons on aeroplanes instead. That would be incredibly dangerous for the world situation, and it would not save that much money either.
Then there is the issue of expanding nuclear power. That is an immensely expensive road to go down, and our Government are encouraging it all around the world as well. Only this week, there was a headline in The Daily Telegraph about the risk to this country from a dirty bomb. I do not think that that has been properly taken into account in the argument about nuclear power. In any case, the nuclear industry cannot be expanded without massive public subsidies. That is not appropriate in our financial situation, notwithstanding the fact that we have an energy crisis, which is best dealt with by expanding the renewables sector, as well as making important energy savings.
We also need to look more closely at the oil industry, which has made huge profits and benefited from a deal at the beginning of each Parliament. When oil and petrol prices went up, the industry made huge profits that were not handed back to the British taxpayer.
A future Government will have to return to the issue of privatisation and private finance initiative contracts. We are paying in excess of what they are worth: London Underground is a great example of that. In future-in the health sector, for example- we will increasingly be paying large amounts in exchange for nothing at all. That is wrong, and it needs to be revisited by Government.
Those are some suggestions on cutting the deficit that should come ahead of public spending cuts. My hon. Friend the Member for Luton, North is right: there is still a great need to spend Government money to do things out there. I draw attention to just one of those areas-child poverty. We have made a commitment-indeed, we have passed an Act-that says that we want
to abolish child poverty by 2020, but that will not happen unless the Government back up their commitment with further spending.
This Government have done a great job with Sure Start and the child tax credit. Those things would be at risk under the Conservatives. Indeed, we know that if the Conservatives got into a coalition with the Liberals, the child trust fund would also be at risk, because the hon. Member for North Southwark and Bermondsey (Simon Hughes) made it clear that that is Liberal policy. Those things are vital to help young people to have a future and get out of poverty.
"Increasing JSA by as little as £10 a week would make a real difference to millions of families."
That would help to bring people at that level out of poverty. The other big factor in tackling tackle child poverty is equal pay-that could make a huge difference. We have closed the gap, but far too slowly. A future Labour Government must do more on equal pay. As an employer themselves, they should be driving down the road of equal pay and forcing employers to do so.
Whatever the issues in the election, in future Parliament will have to return to the issue of equality. We do not want a party, such as the Conservative party, to be elected as a Government who would actually laud inequality and enhance it further.
Mr. John Randall (Uxbridge) (Con): It is a pleasure to follow the hon. Member for Leyton and Wanstead (Harry Cohen), who made what I guess was a valedictory speech, like that of my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton). The House will miss them.
I am not quite ready for the concept of the hon. Member for Leyton and Wanstead as one of Parliament's saviours through advising the Prime Minister and the Chancellor, along with President Obama, the Chancellor of Germany and others. However, I am prepared to see him as Robin Hood.
First, I declare my interest as a director of the family retail store in which I am also a shareholder. The details are in the Register of Members' Financial Interests. Normally, I try not to speak in the Budget debate because I know that interests outside this place always attract the attention of the media and Labour Members. However, having been involved in retail since 1979 and even before that, I must speak now because I want to tell the House what it is like out there on the high street.
We have had history lessons from various hon. Members. I shall be brief, but I want to say that my business has existed since 1888. Even in my time, the cycle-the way things come around-is one of the things one learns. Budgets always used to come at Easter time, as they still do, and I remember as a child sitting in a car on a windswept sea front, often in Wales, on our Easter holiday, with my father listening to the Budget on the car radio. My father was a wonderful man, but I knew that after any Budget, particularly a Labour Budget, it would be wise not to go near him for about 12 hours
-possibly 24 hours after a Labour Budget-because Governments never seem to understand businesses. They talk about them, but they never really understand.
We have been talking about history-the hon. Member for Leyton and Wanstead gave a vignette from a past era. I can remember hearing about the selective employment tax and asking my father what it was. He explained it to me. Younger Members may not realise that the Labour Government imposed a tax which meant that every business was taxed on the number of people it employed. We all understand today that that was not an incentive for job creation. I still believe that Governments, particularly Labour Governments, do not understand what is going on.
The Budget will disappoint people in business. Business, not Government, creates jobs. Government can try to devise schemes-as has been said, many schemes involve creating jobs for people who like to be on schemes, not real jobs in real businesses. I am thinking of people I know very well-my employees. Some of them have been with us for many years, and we have members of same family working for us. They are hard-working, loyal people, but they cannot necessarily get the benefits of those on low incomes. They are not well off, and measures in the Budget, such as freezing allowances and the provision on national insurance will make them worse off. They are struggling to keep their families going and enjoy a reasonable quality of life. There are masses of such people around the country, and they are forgotten. Those hard-working people are just above the thresholds for help from the Government or from various schemes. I want to speak about them because I have every sympathy for them, and I wish that economic conditions were better so that I could pay them what they deserve. The hon. Member for Leyton and Wanstead talks about socialism. When I started examining the business, I learned socialism is a great idea which simply does not work in practice. In a previous recession, we decided that we would take a pay cut. Every member of staff and I took a percentage cut. However, that was not actually fair, because someone who worked flipping hard and had a family to bring up took exactly the same cut as someone who might well be described-frankly-as a passenger. That is why I decided that that model does not work. I wish it would, but humanity is not designed for socialism.
Harry Cohen: I appreciate the hon. Gentleman's homily and I do not disagree with some aspects of it, but does he acknowledge that in certain circumstances, such as those we recently experienced, capitalism does not work either? If it had not been for quasi-socialists coming in and saving the capitalist system-to put it kindly for my colleagues on the Front Bench-it would have collapsed by now?
Mr. Randall: Excesses of any ideology are bad and wrong. I am a pragmatist, and I think we should just get on with the way we live our lives, and not adhere strictly to such ideologies, so the hon. Gentleman is right in one way.