7.15 pm
Stella Creasy: The hon. Gentleman appears to be arguing that the money that would be raised by the bank levy should be given to the high-cost credit industry. Far be it from me to suggest that he wants to support those kinds of businesses. I know that some Liberal Democrat Members have been very supportive of these companies—mistakenly, because if they were to talk to the local communities affected by them, they would realise how damaging they are.
Let me be very clear: I am arguing for the ability of the Government to review the bank levy and for a review to consider whether it could be applied in such a way as to discourage lending that is detrimental to consumers. I have firmly in my sights the high-cost
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credit industry and the detriment that it causes to our local communities. I hope that Ministers will accept the amendment and explore whether the bank levy could be used to act as a positive behavioural challenge on these companies, because that would benefit many people in our country. I do not want to see investment in the high-cost credit industry, and I am sure that the hon. Member for Bradford East (Mr Ward) did not mean to suggest that, but I do want to see action on it, and I know that I am not alone in this House in hoping for that.
If the Government will not accept the amendment, I will table more amendments and keep pressing this issue, and I hope that other Members will join me in support. The Minister is shaking his head. I hope that he has spoken to the many Members on his own Benches who do not shake their heads and walk on by as people are preyed on by these companies. I spent yesterday with 900 members of London Citizens Black Clergy Caucus, who will be seeking urgent meetings with the Ministers responsible. Ministers may think they can ignore me or ignore Labour Members, but I hope that they will not ignore the millions of people who are struggling to pay their bills and make ends meet, and for whom these companies are increasingly the only option. Regulation has worked effectively in other countries, and it could be achieved through this Bill. I hope that the Minister will look at the case seriously and not dismiss it out of hand as he appears to be doing.
Barry Gardiner: It seems to me that when it comes to bonuses, the clue is in the word. If one looks at the etymology, the word “bonus” comes from the Latin: it means “good”. In fact, it should be “bonum”, as with “maximum”, “minimum” and “premium”, so that we had “bonum” and “bona”, but let us leave that aside. The bonus culture in the banks is supposed to be for something good—for good performance—and yet, certainly within the banks that are largely owned by the public, these bonuses are being given almost uniformly for bad performances: they are “malum”, not “bonum”. It is really quite ridiculous that these bonuses should be paid and that the Government should be proposing to levy such a low rate against them.
The right hon. Member for Wokingham (Mr Redwood) gave us a bit of the history of how the recession had come about and the context in which these bonuses were being paid. Interestingly, however, his history stopped in 2006 or 2007, when he published a paper about the regulatory regime and the need for tighter regulation. To find out the true history of this, one has to go back to a time before 2006 and 2007, and beyond this country, to look at the sub-prime market in the United States in 2000. At that time, the proportion of mortgages in the United States that were lent to sub-prime borrowers was just 5%. Between 2000 and 2005, that increased to 47%. That meant that by 2005, 45% of mortgages in the US were in arrears by two months, or more than 60 days. That is the origin of the problem.
Much has been said by Government Members to try to set the recession in context. For months, they have said that it was because of the Labour Government’s disastrous economic management. Of course, the context for it is in the United States, where what happened with
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Fannie Mae and Freddie Mac, the two major mortgage-lending institutions, was the beginning of the collapse of what had been a virtuous circle, and what became a vicious one. Those institutions could not lend because they were not getting revenues in, which was because people with mortgages were more than two months in arrears. That meant that there was a drying up of credit in the system in the United States.
One of my hon. Friends—I cannot remember who—mentioned the role played by the rating agencies. The way in which the situation impacted more widely on the economy, first in the United States and subsequently elsewhere, was through the securitisation of mortgages into bundles to create revenue streams for companies and, indeed, for financial institutions.
Andrew Gwynne: My hon. Friend is making a perfectly good point about the historical context of the global downturn. Is it not the case that the bubble burst because financial institutions across the globe were not certain about the packages that they had bought, because of the unpicking of those packages, and because of the percentages of those packages that were made up of bad debt?
Barry Gardiner: My hon. Friend is right, but perhaps he has missed a further element of that toxic mix. That is not the role of the rating agencies, although they played their part in bundling up sub-prime mortgages. In order to securitise them into revenue streams for companies, they had looked at the historical rate of default in the sub-prime sector in 2000, when only 5% of the market was being sold to sub-prime borrowers, not in 2005, when the figure was 47%. The effect was that many companies had security streams that were not very secure. The piece of the toxic mix that we need to introduce is the way in which hedge funds brought to bear their financial might.
The Temporary Chair (Mr James Gray) rose—
Barry Gardiner: I give way to Mr Gray.
The Temporary Chair: Order. The hon. Gentleman is not giving way to the Chair, but resuming his seat. He is giving an interesting explanation of the causes of the banking crisis. He must relate his point to amendment 9, which we are discussing, rather than dilating more generally on the subject.
Barry Gardiner: Of course I wish to abide by your ruling, Mr Gray. I am referring to earlier comments in the debate, which I am sure you heard, from the right hon. Member for Wokingham, who was not ruled out of order. He gave an interesting explanation of the history of what we are discussing.
The Temporary Chair: Order. I was not in the Chair at that time. It seems to me important that we relate the debate to what we are supposed to be debating, namely amendment 9. I am not aware of what happened previously, but I suggest that the hon. Gentleman relates his comments directly to the amendment.
Barry Gardiner: I am very happy to do so, Mr Gray. We are talking about a bank levy, and amendment 9 refers to
“the Government’s analysis behind the rate and threshold chosen for the bank levy”.
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It seems to me that if one is to perform an analysis of the rate and threshold chosen, one has to understand how these things came about and the historical context. More importantly, one has to understand the regulatory context and what went wrong in the regulatory system. Much of the debate has been about that regulatory structure. I am seeking to address subsection (2)(a) proposed in the amendment. That is exactly the import of my remarks.
As the hedge funds brought their pressure to bear, they identified the problem of the companies’ overvaluation in the market. They saw that the structure of the bundled streams of security was not providing the security to the companies that the market believed it was providing. The hedge funds then short sold on those companies. That was an important regulatory failure. There was no uptake rule and no clear limit on the arbitrage window that was allowed for trading on such shares, so the short selling allowed the hedge funds to beat down the value of those financial institutions in such a way that there was a precipitation of the collapse of the credit that could flow through the financial institutions, which infected all the other companies in the stock exchange. That is how the situation became a global crisis.
In addressing the analysis that the amendment asks the Government to engage in, I urge them to take seriously the regulatory failings at that time. [ Interruption. ] The Financial Secretary says from a sedentary position that those were the mistakes of the previous Government. What I am pointing out to him is that they were not simply mistakes made by the previous Government, but mistakes that were made on a global scale. The financial crisis started in the sub-prime market in the US, and that infected the global markets. The reason that it took hold in the UK, to the detriment of this country, was that we had placed an over-reliance on the financial markets and the financial sector as opposed to manufacturing and industry.
Mr Kevan Jones: Does my hon. Friend agree that if we had listened to those on the Conservative Front Bench, including the Chancellor of the Exchequer, who did not want to intervene in Northern Rock and wanted to let banks go bust, the banking crisis in this country would have—[ Interruption. ] The Economic Secretary chunters from a sedentary position, but what I am saying was said by the—[ Interruption. ] She can keep chuntering, but the truth hurts. The fact of the matter is that if we had listened to the Chancellor—
The Economic Secretary to the Treasury (Justine Greening) rose—
Mr Jones: You cannot intervene on an intervention. I am going on because the Economic Secretary has been wittering on for so long.
The Temporary Chair (Mr James Gray): Order. Interventions must be short. The tenor of the debate is moving widely away from the amendment that we are supposed to be discussing. The amendment is about the bank levy, the way in which it is raised and the way in which it affects the wider banking sector. I accept that there is a point about that, but we must return to our consideration of the amendment, rather than having such a wide discussion.
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Barry Gardiner: I am of course always happy to abide by your ruling, Mr Gray, so I will move on to focus on the adequacy of the bank levy in the context of other reforms to the wider banking system. It is clear that those other reforms are necessary. We can debate the history at length, and we may take different lessons from that history about the type of regulatory reform that we wish to see, but I want to focus on the adequacy of the levy.
7.30 pm
My hon. Friend the Member for Nottingham East (Chris Leslie) sought to contrast the payments that bankers would be receiving this year—the million pound-plus bonuses—with the situation of ordinary working families in this country, many of whom are seeing their own financial position severely worsened or are losing their jobs or benefits. He expanded on the modest emoluments that those people would receive this year.
However, the force of our argument is not just the contrast between the difficult situation of those people and the greed at the other end of the scale. It comes from the fact that there is a direct causal relationship between the two—the bankers are the ones who have caused the misery that our constituents will be enduring. More than that, the funds from the bank levy—the funds that are being paid in bonuses, from which we would seek to extract more for the Exchequer—could be better spent in tackling the problem in the other dimension. Instead of considering the matter from the point of view of its inequity, we should consider it in the context of achieving a resolution to the deficit crisis. That resolution can come through growth and through the spending of these resources in ways such as my hon. Friend the Member for Scunthorpe (Nic Dakin) explained clearly. We want the Government to accept the amendment, so that we can consider the adequacy of the bank levy in the context of other reforms to the banking system. We want a policy that is for growth in the economy, not simply one that is for taxes.
Mr Love: Is it not also the case that the taxpayer has given the banking system an unlimited guarantee, and that according to the Bank of England, we are subsidising the banks to the tune of about £100 billion a year? Yet even with all that support, they still demand that they should be able to pay massive bonuses.
Barry Gardiner: Indeed. The support that the country has given the banks is perfectly right, in my view. I disagree with the right hon. Member for Wokingham on the matter. He said that he would not have bailed out the banks at all. His position was very clear—he takes a very hard monetarist line and says that if the banks fail, they fail. Labour Members believe that the consequences of that failure cannot simply be ignored.
Mr Kevan Jones: Is that not exactly the line that the Chancellor took when he was shadow Chancellor? He argued that intervention was not important in the case of Northern Rock, for example. If we had followed what he suggested and had less regulation of the banking system, we would have been in a worse situation than we are now.
Barry Gardiner:
My hon. Friend is absolutely right. To give the right hon. Member for Wokingham his due, he did distinguish his own position on the issue from
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that of his party’s Front Benchers. Both would have failed to support Northern Rock, the consequences of which would have been disastrous for savers, but the right hon. Gentleman would have gone further. He would have stopped any support for the wider banking system, including for Halifax, the Royal Bank of Scotland and Lloyds. There we see the consequences of policies that had their origin in “There’s no such thing as society.” Only if someone does not pay regard to society can they adopt such a hard-line position, because it ignores the consequences of failure and the effect on ordinary human beings—not just savers but, as he said, investors. The structural consequences of the failure would have been economically disastrous for this country.
Andrew Gwynne: Is it not also the case that the banking system is getting the best of both worlds? Over the past few years it has received very substantial support for the taxpayer, but at the same time as paying itself ever-increasing bonuses it is refusing to invest in local companies and valid business propositions in all our constituencies, thus hampering economic growth across the country. Is it not right that the bank levy is introduced for a second year and beyond through the reviews suggested in the amendment, so that we can get that growth back into the economy?
Barry Gardiner: My hon. Friend makes an excellent point in contrasting the lending policies of the banks with the bonuses that they seek to pay, particularly to their higher-end staff. The Government have to be much clearer in the regulatory demands that they impose on the banks, because they are speaking with forked tongue. On one hand, they are insisting that there is tighter regulation and that there is a regime to ensure that there are adequate reserves and far more stringency in the banks’ investment policies. On the other hand, they are on the side of business, urging the banks to lend more money. It is not possible for them to have it both ways, and we must not fall into that trap either. Either the Government have to say, “We want tighter regulation, and to hell with small business”, or they have to say, “No, we want small businesses to thrive, because we want growth in the economy”, in which case the regulatory regime for banks has to allow for that.
That does not affect my hon. Friend’s point, because he is absolutely right to contrast the bonus structure with the banks’ lending policy. The bankers expect the situation to be all good for them, but it is not so good when they are dishing out the money at the other end.
Andrew Gwynne: My hon. Friend is exactly right. Is not the real problem that we are actually getting neither of the things that he mentions? We are getting neither effective regulation of the banks nor money flowing into small and medium-sized enterprises.
Barry Gardiner:
That is the sad fact of our situation. I am sure that all of us, as constituency MPs, have business people coming to us saying that they cannot get credit. Indeed, many successful businesses that have had no change in their circumstances are suddenly being told by their banks that their credit facilities are no longer there. The banks are unilaterally changing the terms of those facilities, and the Government must do
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something about that. They cannot on one hand let the banks off with a £20 billion tax allowance for bonuses and, on the other hand, say that they do not have to ensure that they are lending to small businesses.
The difference between Opposition and Government Members goes right to the heart of whether we believe that the most important thing to do is to get growth back into the economy, get money flowing into small businesses and pay people a decent wage rather than make them redundant—that means that their spending on goods and services does not contract, and they spend money on brown goods and white goods and generate wealth and jobs in the economy, so that we grow our way through the problems—or whether we believe that we have simply to cut, cut, cut the public sector and pay, pay, pay the bankers’ bonuses.
John McDonnell: I would welcome the amendment because I think it is time to stand back and review the future role of levies. The amendment seeks to prise out the Government’s analysis regarding the rate and the threshold of the levy, but it also gives us the opportunity to debate the overall adequacy of a levy and its role in the economic situation that we face.
I echo the right hon. Member for Wokingham (Mr Redwood) in saying that the world has moved on and the role of bank levies is different now. The first early-day motion on this matter, tabled by my hon. Friend the Member for Islington North (Jeremy Corbyn) and I eight years ago, in advance of the crisis, related specifically to the profligacy of the banks in their distribution of bonuses. We gained the support of 40 Members of the House. At that stage, the role of the proposed levy was fairly clear cut and straightforward: it was to act as a disincentive to the payment of such obscene bonuses, as others have described them.
Then, economic crisis hit us. The first sign was Northern Rock. I remember being in the Chamber when we exposed the role of Granite in Northern Rock and the tax fiddles, avoidance and evasion—whatever we want to call it—that were taking place. We called for the Government to use public ownership to nationalise and stabilise the banking system, but we added to that a call for the maintenance of a levy system, because we wanted to prevent a recurrence of the bankers’ bonuses during a period of recession caused by their profligacy.
As the right hon. Member for Wokingham said, the world has moved on, and we now have a bizarre situation. Yes, a levy on privately owned banks that are making profits and paying large bonuses is relevant, but introducing a levy on publicly owned banks is bizarre—it is a circular form of taxation—which is why the review proposed in the amendment is important. Surely if we own banks, we should end such bonuses by diktat and enforce reasonable lending using our management control. I hope that the review will examine the adequacy of future bank levy arrangements.
I compliment a number of my hon. Friends who have spoken in this debate, none more passionately than my hon. Friend the Member for Wansbeck (Ian Lavery), who reflected the climate of anger in which this debate takes place. There is anger about how individuals have been treated by the banks, but also anger about the impact of the banks on the overall economy. The impact has also been felt by families in the loss of jobs and cuts in services. If we are to have a review of the bank levy, I
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would welcome a commitment to absolute openness and transparency about the nature of the banks’ current operations. Many people are bewildered by the banks’ lack of adherence to the exhortations of successive Governments on the role that they should play, particularly in lending and long-term investment.
I welcome the proposed production of a report, but I would prefer it to be published earlier. The amendment proposes a deadline of “before 31 December 2011”, but I would want the report no later than the autumn, because I believe we need a tighter analysis and review regime for the banks.
I am no longer sure that the Government know what the levy is meant to achieve; they are certainly not clear on the appropriate rate, or even to whom and what the levy should apply. The previous Chancellor’s levy was clearly a bonus tax: it was an attempt to influence the behaviour of the banks and to end the remuneration system that encouraged reckless behaviour and the taking of excessive risk. The objective was also to raise income, although that was not the stated primary aim. Bizarrely—this is why I admitted an error earlier—the levy failed to influence behaviour, because the bonuses continued, but at the same time it was extremely successful at raising income. In fact, it was seven times more successful than was originally predicted. As I said, the original prediction was that it would to reap £500 million, but £3.5 billion was gained.
7.45 pm
The review is important because when the current Chancellor was asked what the role of the proposed levy is, he replied that it was a lump-sum tax, or simply an aimed-for sum. However, that sum has changed as the rate has metamorphosed over the past year. On at least six occasions, there have been changes in the rate calculated, and therefore in the estimated amount to be gained. Why is the levy set at the level the Government propose? They have given us no clear understanding of that tonight. All we know, from various media reports, is that the bankers have laughed all the way to their banks. The tax take has been described as “relatively insignificant”. A number of commentators, some of whom appeared before the Treasury Committee, described the levy as generous, and others have described it as an easy ride for the banks. If the levy were set purely to generate a lump-sum tax take, why at that level? Why not double, triple or quadruple that level? I fail to see what analysis of the estimate has been made. In fact, so far, the Government have published no independent analysis that would allow the House to understand the rationale for the estimated take.
Mr Kevan Jones: Does my hon. Friend agree that if the levy was designed to change the behaviour of bankers, it has failed? Barclays, for example, paid more than £110 million to five of its top bankers.
John McDonnell: I agree with my hon. Friend, but I will come to that point later. The way in which the banks have continued their profligate distribution of bonuses looks like them cocking a snook at the Government and the level at which the levy has been set.
When the Chancellor appeared before the Treasury Committee, he advanced two arguments on how the levy was constructed. First, he argued that the levy was
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based on the price of the insurance that the Government and the taxpayer now implicitly offer for the wholesale funding of the banks; the levy is therefore a tax on the wholesale funding of banks’ operations. However, a calculation of the appropriate insurance for that scale of banking insurance, which could surely be done, would show that that sum is significantly more than the current bank levy proposal would raise.
The Chancellor’s second argument was that the levy was in the interests of equity: the banking sector, as well as the rest of us, should make a contribution to resolving the economic crisis. However, the amount that the bankers are being asked to provide to help to tackle the crisis that they created is piffling in comparison with the damage caused to our wider society, and minute in comparison with the burden that is being carried by others in terms of job losses and services cuts. Whole communities now face significant suffering and deprivation.
The Chancellor himself admitted that the targeted revenue sum was “relatively small” because, he argued, it balanced fairness with competitiveness, yet no study has been published and no evidence has been produced on the impact on banking competitiveness of varying the levy. Like my hon. Friend the Member for Nottingham East (Chris Leslie), I want to know what independent assessments have been made of the balance between fairness and competitiveness and how the calculation was arrived at. I agree with my hon. Friend the Member for Edmonton (Mr Love), who said that the measure throws the Government’s commitment to tax simplicity out the window. The taxation system on this issue is now more complex than any other point of taxation in the tax book, so I endorse the questions about how HMRC, with its current staffing cuts, can cope with the implementation of the levy. I would also welcome the Government publishing the consultation on the assessment of the amount of tax take from the proposed levy, because it looks like consultation was either non-existent or fairly minimal.
The amendment would require the report to consider
“the adequacy of the bank levy in the context of other reforms”.
Our understanding is that the levy was set to assist the implementation of the Merlin agreement and to ensure that the banks had a lending strategy to help get the economy moving and out of recession. As others have said, the levy must be set so as to ensure a continued influence on banks’ behaviour in relation to remuneration and bonuses. While promoting the bank levy, the Prime Minister and Chancellor exhorted bankers to show restraint. Is the levy set at the right level to ensure that the other reforms linked to it are completed and adhered to?
Ian Mearns (Gateshead) (Lab): The evidence of our eyes and ears of the relationship in recent months between the Chancellor and the Prime Minister and the bankers is that there has been one word from the Chancellor and another word from the Prime Minister, and the banks have continued to do exactly what they want.
John McDonnell:
That is exactly my point. It might be that the levy is being set in relation to other banking reforms, particularly those on bonuses and remuneration, but not only have we seen the complete disregard of the Chancellor’s and Prime Minister’s exhortations, with bonuses continuing at a very high level, but we have
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seen, as another Member said, a diversion into other forms of remuneration and salary increases. That is almost an abuse of the system as set out in the Government’s proposals.
If the debate is about the adequacy of the levy, and in view of the fact that in spite of the Government having set down a marker in the proposals, bonuses have continued and remuneration has increased, can the Government not support the amendment? If the review reported at least by December—I would prefer the autumn—we could consider increasing the levy to ensure adherence to the wider banking reform proposals the Government want implemented. It is clear from the evidence produced today that the banks need a continuing threat—a sword of Damocles—hanging over their heads, if we are to get any change in the bonuses and remuneration that are so offensive to all our constituents suffering in the recession.
It might be that the levy was set so that the Merlin agreement could become fully operable and lending might start in earnest again. As my hon. Friend the Member for Nottingham East noted, however, so far all the indications are that the revival of lending has not taken place. The Government’s proposals therefore warrant a review at the earliest stage, because even now, while they are still being implemented, they are not working. The evidence for that is all around us. It is clear now—this is why the review is so important—that the levy has become almost irrelevant to the real issues of capitalisation and regulation.
Mr Love: I agree with my hon. Friend about the review’s importance. On the one side, bankers are telling us that they are lending money and that money is available to lend; on the other side, we have small business organisations united in saying not only that money is not available, but that the terms on which it would be made available are so onerous as to make it impossible for them to take out a loan. The review could resolve who is right and who is wrong.
John McDonnell: The review would certainly test the adequacy of the levy as an instrument for influencing banks’ behaviour, which I believe is its purpose. However, the problem is not just the lack of lending; it is the continuing profiteering in the mainstream banking system—let alone the shadow banking system that my hon. Friend the Member for Walthamstow (Stella Creasy) has been so assiduous in exposing. In the main Budget debate, I highlighted some of the interest charges being made. A report by Moneyfacts last August showed that the profit margins enjoyed by the banks on fixed-rate deals are the highest since 1988, and that the average interest rate on personal loans was 12.6%, which at 12.1% over the base rate is an all-time high. So far, the threat of the levy has done absolutely nothing to change banks’ behaviour in any aspect, whether remuneration, bonuses or lending. We are in danger of allowing the banks not merely to return to business as normal, but to get even worse. Even those in public ownership are out of public control. I find that extraordinary.
The review must take place in the context of other attempts, such as the Basel discussions, to restrain or control banks’ behaviour. Basel II seems to let the banks off the hook on a range of issues, from remuneration
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to capital ratios. The levy is meant to come in the context of the reforms the Government are engaging in nationally and internationally, but the
Financial Times
reported today that discussions about global standards on bank lending risks are not moving towards an agreement, so now we are not even moving forward in capital ratio discussions.
We need to consider the levy in the context of the banks’ role overall and the anger in our wider communities. Many believe—rightly—that the banks played the key role in creating the recession, and now, if we are not careful, by not lending or engaging in economic growth, they will play a role if not in tipping the economy into a double-dip recession, at least in leaving the economy to scrape along the bottom of economic activity. I have referred before to the words of Graham Turner, from the Left Economics Advisory Panel. He works in the City and is an expert on what happened in Japan. We face the prospect of a long, low-level, depressed, deflationary spiral if we do not use the levy to stimulate the banks into playing a responsible role within our economy.
We will come out of recession only through an astute mix of fiscal and monetary policy. In the 1930s—this is the whole point about Keynes—it was about not just deficit funding and quantitative easing, but more importantly banking reform. Banking reform is one element of the strategy that any Government must adopt to take us out of recession, and the banking levy is one of the few tools and weapons at our disposal that can force through banking reform. So far, the threat of the banking levy has failed to engage even those banks that are in public ownership in a proper discussion about banking reform and the role that they will have to play in tackling the recession and encouraging economic activity.
8 pm
I urge the Government and all parties to accept the amendment. All it does is seek a review, so that we can come back to this place—the amendment says in December; I would welcome doing it earlier—having reviewed the banking levy’s effectiveness. I do not understand why that is difficult for the Government to accept. At that stage, if we find that the banks are continuing to ignore the Government’s exhortations and to ignore the levy as a means of encouraging them to engage in constructive activity in our economy, we can adjust the policy. We can then use it as a proper lever to encourage new banking practices, increase transparency and accountability in the banking sector and get the regulation for which everybody across all parties is now clamouring, but which in the past has been ignored.
I support the amendment because it could be the start of a valuable process of engaging realistically with banking regulation in this country. I also support it because if the banking levy proves to be ineffective and we do not review it and make it effective, if the bonuses are let rip again next Christmas but lending is not happening and the bankers and the banks are not playing their full role in tackling our recession, the anger among our constituents will be immense, especially if they are on the dole or are facing cuts, or if their communities are facing severe deprivation. That anger will also fall upon our heads for failing to act by simply having a review to ensure that we have the right mechanism to tackle the banks and the recession.
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Mr Kevan Jones: It is a pleasure to follow my hon. Friend the Member for Hayes and Harlington (John McDonnell), who summed up the anger that is still out there among many of our constituents, who do not understand why neither of the parties that now form this push-me, pull-you coalition is following through on their rhetoric in the general election.
I support the amendment, which stands in the name of my right hon. Friend the Member for Delyn (Mr Hanson) and those of my hon. Friends the Members for Bristol East (Kerry McCarthy), for Wallasey (Ms Eagle) and for Nottingham East (Chris Leslie). The amendment addresses clause 72 and schedule 19, which deal with the bank levy. The explanatory notes say:
“Clause 72 and Schedule 19 impose a new tax”—
the point that my hon. Friend the Member for Hayes and Harlington emphasised—
“the bank levy, which applies in relation to periods of account ending on or after 1 January 2011. The Schedule identifies who will be liable to pay the tax and how the tax is to be administered.”
The complexities have been referred to, some of which I will cover later.
I have already referred to the rhetoric that we heard in the lead-up to the general election. My hon. Friend the Member for Ealing North (Stephen Pound) has referred to the hobby of bashing bankers, which was certainly the sport of the day for the future Prime Minister and the Deputy Prime Minister. In every TV studio that we saw them in, they talked about who would be tougher on the bankers, arguing that if they were elected, they would be as tough as possible on the bankers—who, as everyone recognised, got us into the mess whose economic consequences this country and our constituents are now facing.
Mrs Jenny Chapman (Darlington) (Lab): This is not just about banker bashing, as my hon. Friend will know; this is about an opportunity cost, particularly in regions such as ours in the north-east. My constituency did not succeed in securing any grants from the regional growth fund. It is that lack of opportunity, too, that makes people so angry.
Mr Jones: It does, and my hon. Friend makes a good point. The rhetoric from Conservative central office, now joined by the Liberal Democrats, is that we are in this economic mess because of the recklessness of the Labour Government, somehow forgetting both the international economic climate and the effects of the irresponsible lending by banks, on which the levy will now be imposed. My hon. Friend is quite right: I know that her constituency is facing a tough time at the moment, and not just in the public sector. A number of private sector companies are closing in Darlington as a direct result of the fiscal straitjacket that this coalition Government have put on the north-east region. Before the election the Prime Minister said that there would be a “day of reckoning” for bankers, but if this is a “day of reckoning”—[ Interruption. ]
Stephen Pound: Does my hon. Friend agree that we seem to have had an example today of the Sage of Twickenham being seduced by the subtle, perfumed blandishments of the banking industry? Might this not be time for us to say, “We’ve had enough of ‘Double Your Money’ and ‘Who Wants to Be a Millionaire?’ Let’s go for ‘Call My Bluff’”?
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Mr Jones: That is exactly what the electorate will be doing: calling the bluff of this Government and asking whether they will live up to the promises that they made. Indeed, it is interesting that when I mentioned the Prime Minister’s “day of reckoning”, someone on the Government Benches said that it would be a bank holiday. If I was a banker, that is exactly what I would think this weak banking levy and these weak banking regulations were delivering.
The Deputy Prime Minister even joined in on the act, saying on Radio Sheffield that he wanted to
“wring the neck of these wretched people”.
I am not sure whether he was referring to the Conservatives or the bankers—or, after Thursday, some of his Cabinet colleagues, when the AV referendum delivers a no vote, which is how I recommend everyone should vote on Thursday. Despite all the overblown rhetoric, we have seen no action to follow it through. As was said earlier, many of our constituents cannot understand why, if we were going to tax the bankers through this levy—and thereby control their reckless behaviour, as my hon. Friend the Member for Hayes and Harlington said—they seem to have completely ignored it.
We need to consider that when thinking about the appearance of the head of Barclays before the Treasury Committee, when he said,
“there was a period of remorse and apology for banks.”
I am sure that many of our constituents are very grateful for that. However, he continued:
“I think that period needs to be over”.
It might be over for him, but it is not over for many of our constituents, including those running small businesses who are struggling to get loans from banks. He went on:
“we need our banks willing to take risks…so…we can create jobs”.
Well, lending money to those businesses would be a start. Another starting point for doing that might also be Barclay’s five top bankers. They have just received bonuses of £110 million, which does not—
Those bonuses do not reflect the behaviour of bankers who have been responsible in their lending.
Andrew Gwynne: My hon. Friend makes an excellent point. Does he understand the dismay of those from small and medium-sized companies in Denton and Reddish who come to see me? They would not mind their banks being a bit more generous in their lending now and then. They cannot even get a decent proposal through their local banks for funding to expand their businesses. These are not risks; they are sound business proposals that would generate jobs in my constituency. No doubt the same happens in my hon. Friend’s constituency, too.
Mr Jones: My hon. Friend makes a good point. Those examples can be seen up and down the country.
Given the amounts of money that some of the directors of Barclays are being paid, they could lend money to those small businesses themselves. The two highest-paid managers, Jerry del Missier and Rich Ricci—great name!—
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were handed more than £40 million each after share deals awarded over the previous five years. Bob Diamond, the chief executive, took the helm in January this year and, in that period of remorse, has received £27 million, including £6.5 million in bonuses for 2010 and £2.525 million awarded in shares, which could be paid out in the future. The share deal for the past five years paid out £40 million, and the one for 2007 paid out £5 million.
We know about those amounts because of the Government’s great deal under Project Merlin to force banks to expose what their directors are being paid. If that was supposed to act as a threat to them, they seem to be ignoring us and doing it all anyway. They seem to have very tough hides, because rather than being remorseful for the mess that they got us into, they are still taking the money.
Ben Gummer (Ipswich) (Con): The hon. Gentleman is speaking of remorse. He was one of the more eminent members of the previous Government; is he remorseful about the pay-off given to Sir Fred Goodwin, who broke the Royal Bank of Scotland and who was given a knighthood by the previous Government and was a member of the council of “wise men” who advised the previous Chancellor of the Exchequer and Prime Minister?
Mr Jones: I had only a small walk-on part in the previous Government. However, when asked whether we can justify some of the bonuses that were paid, I would say no, we cannot. I agree with the hon. Gentleman about that.
When our constituents vote this Thursday, they should be aware of the lack of Conservative and Liberal Democrat Members present for this debate today. I note, however, that the hon. Member for Bristol West (Stephen Williams), who speaks for the Liberal Democrats on finance, has referred to the Barclays bankers’ pay deal as “obscene”. As part of the coalition, the Liberal Democrats need to speak out loudly to ensure that something is done about the bonuses.
The levy is supposed to curb behaviour, but I agree with the hon. Member for Ipswich (Ben Gummer) that the greatest scandal is the bankers’ bonuses being paid by banks controlled mainly by the Government. For example, the Royal Bank of Scotland is 87% owned by ourselves as taxpayers, yet more than 100 of its bankers were paid a bonus of more than £1 million last year, totalling more than £1 billion. We are talking about the bank levy raising more than £2 billion a year, but the banks are paying out £1 billion in bonuses. That raises the question of whether the levy is high enough. If it is not going to change the behaviour of the banks it clearly is not high enough, and we should look in greater detail at the idea of raising the levy.
We have heard a lot of rhetoric on the regulation of the banks, but we have seen very little action. The bankers’ bonus tax raised £3.5 billion for the taxpayer, but the levy that we are now discussing will raise only just over £2 billion a year. The new levy will add about £800 million to that. The banks have got off pretty lightly. In addition, as my hon. Friend the Member for Nottingham East said earlier, they will gain about £100 million from the reduction in corporation tax from 28% to 24%.
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The danger that was threatened by the banking sector to Labour when we were in power, and is still threatened today, is that if we do not allow these large bonuses to be paid, or if we charge the banks too high a levy, they will move offshore or elsewhere. The example of Sweden has been mentioned as the only example of that, however. I have looked into whether the lack of such bankers’ bonuses elsewhere affects where people live. An interesting survey has been carried out by eFinancialCareers, which looked at 2,511 bankers, 654 of whom were in the UK. It showed that bonuses rose by about 5% in this country, whereas in the United States they decreased by the same amount.
8.15 pm
Another issue of concern to many of us is the fact that banks will increasingly come up with ways of paying bonuses other than in cash. We have already seen arrangements whereby 40% to 60% of bonuses can be paid through share options at a future date. It was pointed out earlier that some of those individuals could defer accepting their bonuses for several years, possibly until tax rates have gone down, or in order to use other mechanisms to avoid payment of tax.
If we are to follow through on the rhetoric, we need to ensure that the proposed levy is justifiable, as my hon. Friend the Member for Nottingham East said earlier. But what is wrong with the amendment? It is simply asking for something quite reasonable—that the Chancellor
“review the bank levy and publish a report”
on that levy. Such an analysis would also examine the thresholds involved. I would also be interested to hear from the Minister why the first £20 billion is exempt. Why was the figure of £20 billion chosen? That measure will take out quite a number of small institutions. It has been argued that it was set at that level to discourage larger banks, but it will also benefit those banks, which will avoid paying anything on the first £20 billion.
Andrew Gwynne: Why does my hon. Friend think that those on the Government Front Bench are so apprehensive about having a review of their own banking levy? Does he suspect, as I do, that the findings could show that it was not working?
Mr Jones: Yes, possibly. The Government are getting used to performing U-turns on a daily basis: and after Thursday, the reinvigorated Liberal Democrats might be able to force a change and get the levy increased.
We need time to see whether the system is working, and whether it is a way of increasing the money that we get from the banks. At the end of the day, the taxpayer has put huge amounts of public money—rightly, in my opinion—into supporting the banking system. I do not agree with the suggestion made by the right hon. Member for Wokingham (Mr Redwood) that we should have let the banks fail three years ago. If that had happened we would certainly have had a real problem, not only with Northern Rock but with a large number of other banks. That would have ruined the UK banking system, and there would have been international implications as well.
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Mr Anderson: It is not only my hon. Friend who disagrees with the right hon. Member for Wokingham (Mr Redwood); the OECD disagreed with him as well, saying that the actions of the previous Government prevented the recession from turning into a depression.
Mr Jones: I agree with my hon. Friend. The Tory spin doctors forget that if we had followed the first reaction to the Northern Rock crisis from the then shadow Chancellor, the right hon. Member for Tatton (Mr Osborne), we would have let Northern Rock go, which would have had a knock-on effect on other banking systems and the recession would have turned into a depression. It is perhaps not fashionable to say it, but we should thank the Chancellor and the Prime Minister of the time for the decisions they took to ensure that that depression did not materialise.
Jim Shannon (Strangford) (DUP): It is a pleasure to see my hon. Friend the Member for South Antrim (Dr McCrea) in the Chair. I understand that this is the first time a Northern Ireland MP has chaired a Committee of the whole House, which is particularly fitting on the 90th birthday of Northern Ireland’s formation as a state.
Does the hon. Member for North Durham (Mr Jones) agree that one thing that annoys people about the banks and their bonuses is that after the Government and taxpayer bailed them out, they went on to make excessive profits? Does he agree that some of those profits should be returned to the taxpayer and the Government to pay off the money spent bailing them out in the first place?
Mr Jones: I agree. I am sorry that I forgot to welcome Reverend McCrea to the Chair; it is a pleasure to serve under his chairmanship. The hon. Gentleman makes a good point. It was taxpayers’ money that rightly bailed out the banks; if they are making excessive profits now, which clearly they are, the banking levy would allow some payback.
If the Government are feeling timid and do not want to upset the banking sector, the amendment provides them with an obvious get-out by making it clear that there is a review at the end of the year that would enable us to see whether the levy was having a detrimental effect. Evidence to date suggests that the £3.5 billion that the bonus tax took out of the banking sector has not damaged the banking system in any way, shape or form. The public expenditure effects, however—they will affect my region and also the area that the hon. Member for Strangford (Jim Shannon) represents—are going to be absolutely devastating.
Ian Mearns: I wonder whether my hon. Friend would reflect on the view of many of my constituents, who feel that the Government’s reticence in tackling the bonus culture or in tackling the banks in any tangible way has much to do with the number of Members sitting on the Government Benches who have an employment history within the banking sector?
Mr Jones:
My hon. Friend brings me on to a new relevant area, because he shows how the banking and financial sector are able to influence the debate. The previous Labour Government as well as this Government might have been somewhat in awe of the threats made by the banking sector—for example, to move offshore, with a consequent effect on jobs, if too much regulation
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is imposed. It might just be coincidental, but since the right hon. Member for Witney (Mr Cameron) became Leader of the Opposition, donations to the Conservative party have increased, and about 50% of them come from the City and the financial sector, including some donations of £500,000 from four or five key individuals, including from Finsbury and Pelham PR, whose job it is to persuade politicians and other decision makers of the importance of, and the need for, the banking sector. As I say, it could be completely coincidental that the Tory party gets large amounts of money from this sector, but one could draw the conclusion that this is one of the reasons this Government have taken such a light-touch approach to regulation of the banking and finance sector.
Hugh Bayley: I wanted to follow up the intervention of my hon. Friend the Member for Blaydon (Mr Anderson). It was not only the OECD that praised the London summit, which got the leaders of the western world to work together through fiscal stimulus to avoid recession. I remember going to the IMF in spring 2009 and what it described as “the Brown plan” was, it said, the only thing that stood between a global financial meltdown and getting the world economy back on a level footing. Does my hon. Friend share my concern and dismay at the Prime Minister saying that he would not support the former Prime Minister if he decided to run for the job of managing director of the IMF? Surely the best way to test the Prime Minister’s thesis about whether the former Prime Minister’s leadership was good or not is to allow him to run and see whether other countries support his candidature.
Mr Jones: I would not want to stray too far down that avenue, but it does say something about the pettiness and smallness of our present Prime Minister, whereas the previous incumbent is not only respected in financial circles but has proven ability to do the job. Pettiness is one aspect of this Government but another part of their mantra is that they must sound tough. They won an election by sounding tough, but they have not followed it through when it comes to banking regulation.
The right hon. Member for Wokingham spoke about banking regulation. He is no longer in his place, but he used a wonderful phrase about his being in favour not of less regulation, but of “better and less regulation”. My hon. Friend the Member for Wansbeck (Ian Lavery) touched on whether the previous Government should have regulated the banking sector more. In hindsight, I think yes, they should. I think we all accept that; it is not an admission of failure to concede that. We also need to remember who else at the time was arguing, along with the right hon. Member for Wokingham, for less regulation and less red tape in all areas, including banking. The answer is, the Conservative Front-Bench team—those same Conservative Front Benchers who were arguing for the same spending levels that we had right up to 2007, although that seems to have been forgotten about in the revisionist history that has developed since they gained power with the Liberal Democrats last May.
The Government’s bank levy is estimated to bring in £2.5 billion a year—less than Labour’s bank bonus measures, which according to the Office for Budget Responsibility brought in £3.5 billion. We should not
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forget that the cut in corporation tax in 2011-12 will give the banks £100 million in tax relief, but that at the same time local government is being asked to make cuts. My own county council, for example, is going to lose 40% of its budget—£125 million—over the next four years as a result of the unnecessary austerity measure proposed by this coalition Government.
Mrs Mary Glindon (North Tyneside) (Lab): On a day when a leading economist has said that affordable income is falling by 2% and that the average family will be worse off by £780, it falls on the Government to support this amendment and show some care for the people who are working so hard out there and suffering while the banks are simply laughing all the way to the bank!
Mr Jones: My hon. Friend makes a very good point. One of this Government’s favourite soundbites is that “We are all in it together”, but it is quite clear that we are not all in it together. When bankers are claiming bonuses such as the ones we know certain individuals have got, it is just mind boggling to think about what could be done with the money.
Mr Ward: It is useful to have on record your opposition to the reduction in corporation tax, which will enable the companies concerned to employ many of the people about whom you have been talking. However, what really interests me is why, when the Government are monitoring every single day the repayment of loans to the banks, the effect of the tax levy and its adequacy, banks’ lending to businesses—which was mentioned by the hon. Member for Denton and Reddish (Andrew Gwynne), who is sitting next to you—and the strengthening of the banks’ balance sheets, you are prepared to wait—
The Temporary Chairman (Dr William McCrea): Order. Let me draw the hon. Gentleman’s attention to the fact that “you” refers to the Chair, and that I am not participating in the debate.
Mr Ward: I apologise, Dr McCrea. I should like to know why the hon. Member for North Durham (Mr Jones) is prepared to wait seven or eight months for a review of something that the Government are doing every single day.
8.30 pm
Mr Jones: Given the hon. Gentleman’s interventions, I am pleased that he will be here for only one term. It is simply not worth responding to some of them. I should have more respect for him if he asked—
Mr Jones: I would answer the question if it were not so stupid. If the hon. Gentleman believes that the review would be delayed for too long, why does he not table an amendment demanding that it be produced immediately? I am happy to give way to him if he wishes to intervene again.
Mr Ward:
If you are interested—if the hon. Gentleman is interested—in any of this, he need only table some written parliamentary questions. He could obtain answers
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to all of them without amending the Bill. This is absolute nonsense. The hon. Gentleman is prepared to wait eight months for answers that he could obtain in response to a written question.
Mr Jones: If the hon. Gentleman believes that it is possible to obtain all the answers that he requires by means of parliamentary questions, that demonstrates his naivety. Having been in the House for nearly 10 years and having, as a Minister, spent many hours trying to avoid answering parliamentary questions, I can only say “Good luck” to him.
Let me quote from the amendment—
Mr Jones: Then let me remind the hon. Gentleman what it says. It refers to
“the Government’s analysis behind the rate and threshold chosen for the bank levy”—
we have not yet been given that analysis, a point made by my hon. Friend the Member for Nottingham East—and to
“the adequacy of the bank levy in the context of other reforms to the wider banking system”.
We have heard a good many statements on bank regulation and on how the bankers can be made to lend more responsibly, but if the hon. Gentleman thinks that he can obtain the information that he requires by means of parliamentary questions, he is a better man than I am.
Stephen Pound: According to the current edition of Private Eye, when the hon. Member for Ipswich (Ben Gummer) enters a room, it lights up. No doubt my hon. Friend agrees with me that when the hon. Member for Bradford East (Mr Ward) enters a room, a tenebrous gloom seems to hang around his shoulders. May I adjure my hon. Friend to resist the temptation presented by the hon. Member for Bradford East, and say quite simply that if the hon. Gentleman thinks that December 2011 is too late, we will happily consider an amendment from him that would introduce the damned thing next week?
Mr Jones: I agree, but I not am sure that it would help much. Given that subsection (c) of the amendment refers to
“the total tax revenues expected from banks across all categories of taxation in each year from 2011-12 to 2016-17”,
I think that that would be very difficult to do. However, I look forward to seeing all the written questions tabled by the hon. Member for Bradford East (Mr Ward). I am sure that his coalition partners in the Treasury are longing to get hold of them. May I suggest that the hon. Gentleman table his questions on a Wednesday on a named-day basis? That usually messes up Ministers’ weekend boxes.
Stephen Pound: He should not table them after 3 pm.
Mr Jones: No, because otherwise some Ministers might not get them in their weekend boxes. Anyway, it is nonsense to say that the information could be obtained in that way.
Mr Ward: Will the hon. Gentleman give way?
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Mr Ward: Is the hon. Gentleman really not aware of the in-depth investigation conducted by the Business, Innovation and Skills Committee of the role of the banks and the contribution that they need to make to the economy?
Mr Jones: I am, but that is part of the scrutiny process, and so is this. If the hon. Gentleman is so interested in the banking levy and the effects of the Bill on his constituents, why does he not speak? At one point he was alone on the Liberal Democrat Benches. The Government Benches have been fairly deserted this evening: the poop deck of the Mary Celeste may have had more life in it. Members who support the proposal in the Bill should at least turn up to argue in favour of it. No doubt we will be receiving “Focus” leaflets from the Liberal Democrats—although after Thursday they may be called something different—describing how tough they have been in regulating the banking system, but it is clear that they have not.
The hon. Gentleman has until late tonight, and tomorrow, in which to contribute to the debate so that he can reproduce his contribution in his “Focus” leaflets ad nauseam, which I know the Liberal Democrats love doing. People will be able to learn about how he stood up for them against the bankers rather than just listening to the hollow words and rhetoric of the Prime Minister and the Deputy Prime Minister in the run-up to the general election. The beauty of being in government is that politicians can actually do things. I know it has come as a big shock to many Liberal Democrats that they are in a position of responsibility whereby they can actually affect the lives of ordinary people. [Interruption.] Yes, responsibility without influence, as my hon. Friend the Member for Gateshead (Ian Mearns) says from a sedentary position. As the Liberal Democrats are in government, they can follow through and make sure that the Bill deals with the people who were responsible for getting us into this mess three years ago. They also have an opportunity to tackle the excessive profits. I do not know what the average salary is in Bradford, but I am sure that £1 million is a lot of money to the people there. I know that in 1914, prior to the first world war, Bradford won the competition for being the place where the most Silver Ghosts were sold, because it was a rich mill town back then; I learned that from the predecessor of the hon. Member for Bradford East when I was working for him in a by-election many years ago. I doubt whether many Rolls-Royces are sold in Bradford nowadays, however, and the hon. Gentleman’s constituents can only dream of some of the bonuses he is supporting this afternoon.
Andrew Gwynne: Will not such a review serve to make it clear that many of the commitments made by the Liberal Democrats in opposition have not been implemented—and, indeed, have not even made it off the drawing board to become Government policy?
Mr Jones:
Yes. I do not particularly like giving opportunities to Liberal Democrats, but it would give them an opportunity to show that they have the teeth that the Liberal Democrat Cabinet Ministers claim they have got in this coalition, because they would be able to say to the Conservative part of the coalition that they want change—that they want, for example, to increase
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the levy or to make sure that the huge bonuses being paid are taxed in a different way, or to bring in regulation. Let us be honest about this, however: most Liberal Democrat Ministers have not got sharp teeth—unless they have been to the dentist in the last few weeks. In the next few days we will see the beginning of the demise of the Liberal Democrats, and, as it were, the extraction of their teeth. It will certainly be interesting to see how sharp their teeth are after Thursday.
The current Government’s bank levy should take the same amount as the Labour Government’s bank bonus measure raised, which was £3.5 billion.
Mr Ward: As repeating the same point time and again is not a problem in this Chamber, I will do what everybody else here does and repeat myself: £3.5 billion is a lot less than £10 billion, which will be the amount generated—£2.5 billion times four years—so to talk about it as a reduction is just silly.
Mr Jones: This is becoming a bit like bashing Bambi to death. The fact of the matter is that the hon. Gentleman is either being very obtuse or something else that I will not say. We are talking about £3.5 billion for each year, which would add up to more than what is being proposed. We are talking about four times £3.5 billion.
Mr Robinson: Which is £14 billion.
Mr Jones: Yes, the hon. Gentleman can intervene again if he does not quite understand.
Mr Ward: The amount levied by the previous Government was stated very clearly to be a one-off that could not be repeated. Everybody knows that, so why cannot the hon. Gentleman admit it?
Mr Jones: That is because I have said that we should do it again. I am sorry if the hon. Gentleman does not get that. He might say that it is a one-off deal, but perhaps it is a bit like one of those once and only, one-off sales that we see on television that furniture companies have every other week. I am proposing that we repeat the levy and raise that £3.5 billion again. Does he get it now?
Mr Ward: Yes, I do get it. I see not only Bambi before me, but the ice that the hon. Gentleman is stood on.
Mr Jones: That was too subtle for me.
The important point was made by my hon. Friend the Member for Nottingham East when he talked about what we would do with this money. As my hon. Friend the Member for Hayes and Harlington said, if the levy is seen as a tax, it is a pretty meagre tax on the banks, as it raises a small amount of money. However, the question is still about what we then do with the money. We could put it into rebuilding the economy by investing in housing and the regional economy, as has been said. The Government have allocated £1.4 billion over the next three years to projects, which is two thirds less than the £1.4 billion that the previous Labour Government invested in regional development agencies per year. In regions such as mine, the north-east, companies and
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individuals have to bid for that money. A banking levy could come in very useful for the investment that is being put forward.
The problem with the Conservatives—the Liberal Democrats have gone along with this—is that they have this notion of “Public sector bad, private sector good.” What they have failed to realise in regions such as the north-east is that large-scale public expenditure cuts have a huge knock-on effect on the private sector. The unemployment level is already 10.2% in the north-east, whereas it was as low as 4% under the previous Labour Government. Durham university has done a study suggesting that if 45,000 to 50,000 public sector jobs in the north-east are cut, 20,000 jobs will actually go from the private sector. Regions such as mine had no responsibility for the mess, but those responsible for it could pay for some of that reinvestment and that could be done through the banking levy.
Ian Mearns: The point that my hon. Friend is making about the north-east economy is appropriate. Clearly the job cuts in the public sector have not yet hit the employment market, yet the statistics for last month showed that although there had been a national decrease in unemployment of 17,000, it had increased by 11,000 in the north-east, which has a population of only 2.5 million. That is happening even before the job cuts hit the market, so the situation up there is very serious indeed.
Mr Jones: It is very serious. What my hon. Friend describes will have an effect on the private sector and on what has already been seen in the banks. The Government have set great store by making sure that banks lend to small businesses. That was one of the things talked about at the general election by both the Conservatives and the Liberal Democrats, but we have seen little evidence of it actually happening. As I said, it will be painful for many small businesses, particularly those in the north-east, when they see the amount of bonuses being paid to bankers and find that when they ask those same banks for investment they are told that either it is not available or that the terms on which it is available involve such horrendous rates of return. As my hon. Friend the Member for Wansbeck (Ian Lavery) has said, the same may also be true of personal finance, whereby certain individuals who would in the past have got access to credit will no longer be able to do so.
Hugh Bayley: It is not just that banks are still not providing finance for small and medium-sized businesses. Under the Labour Government, we had support through the regional development agencies—Yorkshire Forward in Yorkshire—to help businesses with the Government loan guarantee schemes, and in my constituency that secured a very important investment for a packaging factory. The RDAs are now being done away with and so there is not that support from the Government to get the banks lending.
8.45 pm
Mr Jones:
That is right. My hon. Friend might have examples from his constituency—I certainly did—of the RDA underwriting small business loans for small companies when the banks, particularly Barclays and
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others, suddenly withdrew the finance. One company came to me that wanted a £1 million overdraft for six months to get some investment and the RDA helpfully underwrote that to allow the investment to go forward and create in the region of 25 new jobs. That is the important point about the relationship between the banking system and the regions.
Mr Robinson: Before my hon. Friend leaves this point, I would hate for the Government not to realise the impact that their refusal to have this levy or even a review of it is having not only in the north-east and the north but in the west midlands—the area from where the Government are apparently looking for the big revival in the private sector and manufacturing to come. Advantage West Midlands, the RDA, has had its funds cut by no less than 70% and schemes that were going to have the go-ahead, triggered either by a guarantee or seedcorn funding, will simply be stopped. The resurgence in manufacturing and of the economy as a whole will certainly not come from the west midlands, where the level of activity is below the national average and where the level of unemployment is above it.
Mr Jones: My hon. Friend makes a good point. That small seedcorn funding made all the difference for small companies as they established themselves and grew. The problem we have in the north-east—I am not sure whether things are the same in my hon. Friend’s region—is the lack of confidence in the regional economy for the reasons mentioned by my hon. Friend the Member for Gateshead. The uncertainty about what will happen in the next few months as the public sector job cuts work their way through the economy means that there is no appetite to invest in small businesses. A few weeks ago, I was talking to someone from a small building company who relied for part of his turnover on school building contracts with the local council, which had suddenly been stopped, so the money is not available and people will have to be laid off. We have not yet seen the effects of such decisions.
If we add to that the fact that banks are not lending and are going to carry on in their own way, those involved with small businesses end up wondering why decent hard-working people like them who, in many cases, have built up businesses over many years are suddenly through no fault of their own having either to lay people off or to fold the businesses completely. These are family businesses which have been going for many years, and people see individuals getting bonuses that involve amounts of money of which they can only dream and which are equivalent to the turnover for their companies over two or three years, never mind one year.
Stephen Pound: My hon. Friend has teased out a very important element of the amendment. In Northern Ireland, the public sector accounts for approximately 74% of all economic activity and for perfectly sound and understandable reasons the private sector has not been able to generate economic activity. I implore my hon. Friend, following on from his points, to take on board the reality of the situation: a reduction in expenditure could have a disastrous effect, especially in Northern Ireland.
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Mr Jones: I agree. I spoke in the last Budget debate about the effects of the public expenditure cuts on the north-east and our dependence on public sector jobs is very similar to, if not as high as, Northern Ireland’s. This is another example of the nonsense that is being put about that suggests that if those jobs and that money are taken out of the economy we can somehow replace them overnight with private sector jobs. Those jobs are not just there; they are linked directly to public expenditure. If we also have a situation in which banks are not lending and companies are fearful of borrowing because they fear what the economy will bring in future, one can understand how we can get into a downward spiral. As I have said before, I fear that we could have a recovery that bobs along the bottom, as my hon. Friend the Member for Hayes and Harlington has described. We could end up with a two-speed Britain with a boom in the south-east economy—possibly again drunk on the excesses of the financial markets—while regions in the north-east, Northern Ireland and elsewhere struggle and do not get a look in when it comes to the growth that is expected on the back of the huge numbers of jobs that the Government say will be created.
The bank levy is a missed opportunity and I do not think the amendment is at all radical. It is quite modest to ask for a review of the situation; the Government will have to review the levy sooner or later anyway. Political expediency will lead them to do so when it starts to dawn on people that, despite the rhetoric of the election, the Government are not being tough on bankers at all but are letting them off—and many people will ask why. I believe that in the past five years, since the Prime Minister became its leader, the Conservative party has accepted about 50% of its donations from the financial sector; that prompts questions about why it is not taking a tougher and more robust stance against the financial sector.
Let me conclude with a few questions that I think the Minister needs to answer. My hon. Friend the Member for Nottingham East raised the issue of the tax-free allowance of £20 billion. The explanatory notes on clause 72 and schedule 19 state:
“Paragraph 6 sets out the steps to be followed in order to ascertain the amount of the bank levy. The steps show how the allowance of £20 billion is to be applied and how the bank levy charge is calculated for long and short chargeable periods. Part 6 of the Schedule provides details of how to identify the entity responsible for payment of the bank levy.”
I have asked why the figure is £20 billion and not £5 billion, £10 billion or £50 billion? [ Interruption. ] Hon. Members say “Higher!” but we have not heard any explanation why £20 billion was the figure arrived at. If we are not only to maximise the amount of money we get from the banking levy but be able to justify to our constituents how fair the measures are, we must be able to explain how that figure was arrived at.
Mr Robinson:
Does my hon. Friend know why the Government set £2.5 billion as the absolute limit for the amount they wanted to raise from banks and made everything fit with that? Does it not all come down to the fact that the Government have struck an awful deal with the banks? They have limited so much and got Merlin in return—and perhaps some other things to which my hon. Friend has referred but which I shall not go into now. They have tied themselves in knots, complications and contortions to deliver this deal
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and the banks have simply walked away from Merlin saying, “Thank you, very much.” Is not that the problem?
Mr Jones: My hon. Friend makes a clear point. I do not know which wag in the Treasury came up with the nickname Merlin for this project. Having dealt with the Treasury and Treasury Ministers I have never thought of them as having a sense of humour, but whoever came up with that name clearly had one. Again, my hon. Friend makes a good point. There is no explanation for the figure of £20 billion other than the yield that it is intended to produce. The Minister needs to provide the evidential basis for the £2.6 billion yield. If we levy, for example, £2.7 billion, £2.8 billion or £2.93 billion, at what point do the Barclays bankers pack their bags and move to Zurich? Would the entire system of bankers' bonuses fall apart if the figure were more than £2.6 billion?
I have raised the issue already, and I accept that international finance is a global business and can move, but in terms of bonuses, bankers are clearly not bothered about the £2.6 billion figure. May we see the evidential basis on which the figure was arrived at? What would be the effect if it were a little higher or lower than £2.6 billion? It is important that we know that.
Mr Gregory Campbell (East Londonderry) (DUP): The hon. Gentleman makes an interesting point. The Government would be helpful to us if they clarified the figure that they think would be the tipping point. Would it be £3 billion, £4 billion or £5 billion? We want the banks to be profitable and to lend money to our constituents, but at what point would they move overseas? The Government have so far failed to tell us.
Mr Jones: The hon. Gentleman makes a good point. That is the acid test. The Government must explain why they set that figure. I am happy to listen to the evidence—even the evidence that the hon. Member for Bradford East could come up with. I do not think we are anywhere near the tipping point at which the entire banking system crashes, especially as Barclays and others are paying large bonuses. If we had a review and analysis, we could see how the figure was arrived at. Unfortunately, we are in the dark about that.
A further point is the progress that the Chancellor has made on tax activities. If we are to remain competitive internationally, is there an international tipping point across Europe in respect of bank levies and caps on bonuses?
The hon. Member for Bradford East seems to be dreaming if he thinks he will ever find himself in the Front-Bench team of the Liberal party or the coalition, but it is nice to see him sitting on the Government Front Bench.
Is work being done internationally to look at what other countries are doing? We need to study that in detail to see whether £3.5 billion would be too much. We need to achieve agreement across Europe.
The subject of Project Merlin has been raised. What leverage does the Treasury have over lending to SMEs? To what extent will the cost of the levy be passed on to customers of the commercial or private sector—in other words, to all of us who use banks? Will it become more difficult for SMEs to borrow money if bank charges are passed on? To explain Project Merlin, much
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more needs to be put forward. A review would enable us to look in detail not just at the bank levy, because we must remember that the amendment also relates to other areas of banking tax. That would also lead to the public having a lot more confidence in politicians actually following through on their rhetoric about being tough on bankers.
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In conclusion, this is a missed opportunity. If we followed through on the rhetoric and showed that we were not only fair but tough on the banks, we would be able to stand in front of our constituents and say that we had stood up on their behalf to those responsible for the crisis that hit this country, which our constituents are all paying for today through the austerity affecting them, and that the mess we got into as a result of the crisis a few years ago will not be repeated. If they do not do that, the Government will have to review and change, because otherwise the electorate will do it for them. The Government will not be able to stand up and say that somehow they have been tough, that they have followed through on the rhetoric and, more importantly, that they have made sure that such a crisis will never happen again.
Mr David Lammy (Tottenham) (Lab): It is a great pleasure to follow my hon. Friend the Member for North Durham (Mr Jones), whose eye for forensic detail and lucidity in these matters are second to none. He could not be described as brief, and on this occasion I intend to be a bit briefer. The amendment seeks a review of this proposal because, at its heart, this is about equity and fairness. You, Dr McCrea, understand better than anyone what fairness and equity mean.
There has been much talk about small business men. A small business man came to see me a month ago about the lack of finance from Barclays bank. It is true to say that even though we all have stories of small businesses that are unable to get loans, many constituents come and ask Members specifically not to contact their banks, because they are scared, frankly, that they will be cut loose and that the intervention of a Member of Parliament could make things worse. The fact that across the Chamber no party is suggesting that we have got back to a situation in which there is access to loans indicates that industry and small businesses in this country are in a very serious way.
That brings me to the other deceit, or conceit, that lies at the heart of what has been suggested. Much has been made of the manufacturing sector. Yes, it is hugely important, but it employs 4 million people or thereabouts, whereas 23 million are employed by the service sector, which is a depressed sector. That is perhaps why, alongside the public sector cuts we are now seeing, unemployment in Tottenham is the highest in London. The levy, set at the right amount and consistently reviewed, could have done something to ameliorate that.
It is about fairness and equity, and it is also about what the Government’s story on growth really is. Some of what we are hearing on how they see the levy and the box into which they want to put it, with the constraints of £2.5 billion only, can only mitigate the growth that we want to see in our constituencies.
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The single mums who came to see me a few weeks ago because the after-school activity club is being cut for their young children and they are wondering how they are going to get back from work by half-past 3 to pick them up need to feel that bankers, too, are making a contribution. The elderly suffering from Alzheimer’s in one of my local residential homes, against a backdrop of three being closed because the local authority is being squeezed, need to feel and want to believe, because of the age they have reached and the contribution they have made to this country, having paid into the system, that the banking sector is also making a contribution that is fair. The many public sector workers who received their payslip for the last time just a few days ago also want to believe that bankers are making their contribution.
These people cannot understand why, despite the fact that growth in our economy is so sluggish, at barely 2% over the most recent period, City workers are taking home an increase of 7% on average. Why have 231 workers at Barclays bank managed to receive bonuses of £554 million between them? How is that possible, when the dividend for those who have shares in that bank was just over £600 million? That is a bonus culture that has not been checked, that has not been sorted out, and that feels brutally unfair.
When I was canvassing in Slough at the most recent general election, a 90-year-old said to me, “Love, you know what it is? The poorer you are, the more you give in this country.” That is how it feels at this point, when we have to come back to a subject on which really we ought to agree. We know that the banking sector led to this depressed economy, so why should it be let off the hook at this time?
When my hon. Friend the Member for North Durham asked, “Where did we get this £20 billion from?”, I asked the Minister to begin his contribution with the answer. Where did that £20 billion allowance come from? It is a staggering amount of money to slot in at the last minute so that the figure drops beneath the £3.9 billion mark which the industry itself originally predicted. Where did that money come from, and how did we secure the millions in tax relief for that sector? We owe a bigger contribution from the banking sector to the young people of this country, one in five of whom is currently unemployed.
This Government have led us to a situation in which the new arrangements for funding higher education are between the student solely and the university. They have taken the state entirely out of the picture, cutting teaching funding by 80% and abandoning arts and the humanities and any contribution to them. Effectively, with a proper banking levy they could have said that the state could stay involved. Industry, the other sector that benefits, could have made a contribution, too, but the banking sector is certainly somewhere where we could have started. The Government, however, turned their face against that, saying, “No, we’ll land the debt on our young people and let the very people who have led to their unemployment off the hook.”
I want to understand why the Minister has made that decision, and how we will get back to growth, given that young people are to be dealt with in that way.
Mike Gapes: My right hon. Friend asks why. Is it not clear why? This is a Government of millionaires and toffs, and they are in the pocket of the banksters. That is what it is all about.
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Mr Lammy: My hon. Friend is exactly right.
The Government’s rhetoric prior to the general election about what they would do with the bankers, and about recklessness and bankers paying their dues, led some to believe that at least we could agree that bankers were responsible for the situation and that they should make a contribution—and a serious one at that, which we should constantly keep under review for obvious and clear reasons. As my hon. Friend the shadow Minister said, the amendment is incredibly tame: it simply asks for a review and says to the Minister, “Can you look at this again?” It seems reasonable to ask him to do so, given that the state of our economy could change between now and Christmas, but he has said no even to that. As other Members have suggested, that can only be because of the slightly peculiar relationship between the Conservatives and the many friends in the sector who bankrolled them. That is unfair, and it is not right, and the public know it. I suspect that on Thursday we will see that they have sensed this injustice in the balance of how we should deal with the difficulties that we face.
It is not the first time that we have had a debate in this House about how we deal with an economically depressed situation. There are those who believe that we should invest—in fact, reinvest. That is a Keynesian approach to growth from the same party that did not back away after the second world war, when this country was in rubble, but invested in the NHS. Then there is the party that says we should cut, and the cuts fall hardest on the poorest while those who can afford to make a bigger contribution get let off. Yes, there is a balanced argument as to why one would support a reduction in corporation tax: in order to see growth in the economy. However, when people set that tax reduction against this levy, which is minuscule relative to the huge sector that has brought us to this point, and then against the £20 billion tax relief that has come out of nowhere, of course they get suspicious. I hope that the Minister will explain why this proposal is fair to a young person who is one of the one in five who are unemployed, to someone who is experiencing their local authority cutting services that they desperately rely on, or to a public sector worker who has just received their last payslip because they have lost their job. Will he also explain how it gets us back to growth? If he is to let off this sector of all sectors, how are we to develop that growth strategy and generate the funds for the investment that we need to stimulate recovery?
The Chancellor of the Exchequer said that we must move from retribution to recovery. That is an interesting play on words. What most Labour Members want is not retribution but reciprocity—a bit of give and take, and something that is fair and honourable. I have to say to the Minister that this proposal is deeply dishonourable, unfair and wrong, and he should come to the Dispatch Box and explain why the simplest of reviews is not possible on this occasion.
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Mr Love: I congratulate my next-door neighbour and right hon. Friend the Member for Tottenham (Mr Lammy) on a very competent speech.
It will not come as a surprise to those in the Chamber that I support the amendment. I support it primarily because there is so much public interest in and concern
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about bankers’ bonuses and the contribution being made by bankers when we are all supposed to be pulling our weight. I also support it for the reason given by the shadow Minister: a peculiarity of our system is that we cannot amend upwards any proposal in the Finance Bill, and the amendment offers an alternative way to look critically at the levy by proposing a review, which is not unreasonable. By December, we should have some idea of how it is working.
The most important feature of the amendment, as discussed earlier, is that it asks for a report to be published that can be debated by this House. Because of the importance of the issues involved, that is critical. The report will include an account of how the rate and the threshold were decided. As we have watched the measure’s development over the past few months, we have started to have a sneaking suspicion that Ministers decided what amount of tax should be paid by the banks and then worked back to what the threshold and the rate should be. I will come back to that point later.
Much has been said by Opposition Members about the measure’s adequacy. It is right to say that it will not raise as much as the bank bonus tax did and it is felt widely, within the House and outside, that the levy does not reflect the contribution that bankers ought to make. That relates to new subsection (2)(c) in the amendment. I will come back to bankers’ bonuses, because they have an important implication for the contribution that bankers should make.
In what the Government propose, we are being asked to agree to a levy on UK banks and building societies and on the UK operations of foreign banks. It is estimated that it will affect between 30 and 40 institutions, covering all the largest financial services institutions in the City of London and throughout the country. That proposal seems reasonable, but it is important that it is reviewed to see whether it is appropriate.
The tax will be levied on what the Chancellor termed the wholesale funding of banks, which is the liabilities and equity minus a number of items that are considered safe, such as tier 1 capital and insured retail deposits. I think that we are being asked to agree that that will incentivise the use of prudent balance sheets, rather than risky balance sheets. Of course, the wholesale funding that the Chancellor talked about was a major cause of the difficulties in the credit crunch. We all remember the collateralised debt obligations and the exotic funding regimes, although I do not think that any of the major institutions are into any of that now. The proposal, which mirrors the proposal that was discussed internationally, is intended to incentivise our banks to hold safer liabilities than they held before.
Many Opposition Members have commented on the threshold of the tax, which has been set at £20 billion. I hope that the Minister will respond to the concern that that figure is far too high. The rate has been a moveable feast, and there have been many different rates and proposals. As was mentioned earlier, the Chancellor got up one morning—it just happened to be the day of Treasury questions—and announced another change. Changes have also been announced presumably because of corporation tax, and there has been concern that the rate may have been raised as a result of the failures of Project Merlin, which I will talk about later. We have had many different threshold rates, and I ask the Minister to clarify how we reached all those rates, where we are
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now and how much money the levy will raise. It is suggested that it will raise between £2.5 billion and £2.8 billion, which, as other Opposition Members have said, seems a very low figure in the present situation. I hope that he will respond to that concern.
What is the levy meant to achieve? Supposedly, it deals with a number of matters. First, numerous speakers have mentioned the implicit public subsidy that we provide to banks. The Bank of England has done some work and suggests that there is a £100 billion subsidy; others have suggested lower figures, but there is consensus that the figure is very substantial. If the bank levy will raise only one twentieth or one fortieth of that sum, that puts the matter in context.
To pick up on a point that the right hon. Member for Wokingham (Mr Redwood) made, the bank subsidies make life for new entrants to the marketplace—they are called challenger banks—very much more difficult, as they do not have any of those subsidies, reflecting the idea of banks being too important to fail. That notion should be the crux of our discussion about the financial services sector, because it raises the question of moral hazard: will banks that are too important to fail take riskier decisions, as happened in the lead-up to the credit crunch? I would like the Minister to explain how those issues relate to the levy. We understand that it will provide only part of the contribution that has to be made, but what contribution will that be?
I mentioned banks being incentivised to hold less risky liabilities. The reason for that is clear: if things go wrong, it is not just the financial services sector that is affected. Unlike other industries, in which problems affect other companies in the same industry, if the financial services sector hits difficulties, the whole economy is hit, as we found out to our great cost in 2007. It is critical that we reduce the possibility of that contagion happening in future.
We must deal with a number of issues peculiar to our financial services sector. Many believe that too much is concentrated in four or five very large banks and that as a result there is not sufficient competition. I will not go into the details of the Banking Commission’s report or the most recent Treasury Committee report, but those who have read them will know that both have strongly suggested that consumers do not have a great deal of choice in our banking system, that the banks are too concentrated and that it is very difficult for new banking companies to come into being. There is not sufficient competition and, by common consent, the cost is that banks make excessive profits. The levy should tax those profits. I would like the Minister to say whether he believes it will do that sufficiently.
To return to a point that I made a few moments ago, in the light of the subsidy given to the banks—£50 billion is one suggestion, £60 billion is another and the Bank of England says it is £100 billion—a levy of £2.5 billion, which is between a twentieth and a fortieth of that subsidy, does not seem to address the problem that we face. Why does the Minister believe that the measure answers the concern about the financial services sector?
I could be more generous and suggest that the Government are moving in the right direction. After all, all the changes in the rate of the banking levy have been increases—from 0.07%, to 0.075%, and for longer held
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assets, from 0.04% to 0.05%. I think I got those right, but I would be unsurprised if someone stood up and said, “You’re wrong. It’s changed,” or if I woke up tomorrow to find that the Chancellor had re-announced the rate. Those changes have raised the take from the levy by £200 million or £300 million, so that £2.5 billion will be raised in the first year. However, as I said at the start of my speech, given how the £20 billion threshold was constructed and the rate changes, we cannot escape the conclusion that the Government have set the overall amount that they wish to take and then gone back to work out the threshold and the rate. I should like the Minister to explain why that is not the case.
Of course, critically, at £2.5 billion or £2.8 billion, the levy does not raise as much as the bank bonus tax, so the suggestion—I put it no stronger than that—is that the banks are getting off lightly. The corporation tax reduction—corporation tax seems to have been constructed because the banks do not invest a great deal but have high turnover—and other changes could have been ideally designed for the banks. There is therefore a suspicion that banks are doing really rather well out of this year’s Budget. If that is not so, I should like the Minister to tell us why not.
There are many good reasons why the Minister should have been more draconian in introducing the levy. After all, as has been said by many hon. Members, when the coalition parties were in opposition, they told us that negotiations between the Government and the banking industry on proposals such as Project Merlin would produce certain results; on bonuses, however, the Government got absolutely nowhere. Statements were made about constructive negotiations, so it was embarrassing to find bankers telling us that there was no change.
Of course, still more critically, we were told that small businesses are the lifeblood of our economy—that mainly small businesses in the private sector would make a reality of the Government’s so-called strategy of getting the private sector to take up the slack created in the public sector. If they are to achieve that, they need to grow.
Roberta Blackman-Woods (City of Durham) (Lab): May I draw my hon. Friend back to the use of the bank bonus tax to promote growth? We heard last week that the construction industry was struggling to come out of the recession. Of course, applying the bonus tax and giving it to the construction sector to, for example, build affordable homes, which are very much needed in my constituency and many others, would have helped to stimulate the economy.
Mr Love: I agree with my hon. Friend. Clearly, the sector of the economy that has lost out the most is construction. If the Government intend to contribute only the homes bonus and changes to the planning regulations to the construction industry—they are creating uncertainty up and down the country—I foresee a bleak future for the construction sector in the next two to three years. I urge the Government to consider that carefully. They say they have a growth strategy but they do not, and we are now suggesting one. It would repay them to listen to what people are saying and to address the inadequacies of their response, particularly in the construction sector.
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I was speaking about lending to SMEs. The failure of Project Merlin is risible, and it is a sad reflection that all the Government could get from the banking industry was a gross figure of an additional £10 billion of lending. If, as someone said earlier, figures are to be released to show how things are developing and to ensure transparency, I suspect they will show that the banks are not coming up to par. However, I hope I am wrong, so I ask the Minister to reassure me on that.
The cut in corporation tax is another reason why the Government should have been firmer in how they introduced the bank bonus tax. I understand that the cut is worth £100 million a year. If there are now to be two reductions in corporation tax—the Budget includes a further 1% reduction—the cut will be worth £200 million, which seems to me a good reason why the Government should have been tougher. They are giving back in corporation tax, so they should have been tougher on the bank bonus tax.
There is confusion in the Government about what they are suggesting the financial services sector ought to do. On the one hand, we are asking banks to lend more, and on the other, we are asking them to hold more capital and, into the bargain, to pay more tax, as the right hon. Member for Wokingham said. That is not a coherent policy. Banks have to lend to keep the economy going, but they also need to increase their capital. One of the major advantages of the bank bonus tax was that it incentivised the retention of profits, which would have helped to build up banks’ capital base.
The real failure of tonight’s proposal, however, is that it does not live up to the Chancellor’s own expressed reason for its introduction. When pressed on the matter, he said that equity was the reason. He had to prove to the public that he was looking to get from the banks their contribution to the austerity measures that had to be introduced as a result of the banking sector’s failures. In my view and that of other Opposition Members, however, he clearly has not done that. Although we look forward to him agreeing to the review that will tell us whether he has done it, perhaps the Ministers could gives us some reassurance.
That brings me to the bank bonus tax. I would like to refer to an earlier intervention. If, as is likely, we pass the bank levy in its present form, despite the amendment, we simply will not raise enough money to do all the things the economy needs if it is not to bump along the bottom, as someone characterised it earlier. If we are not to bump along the bottom for the next few years, we need to do something. I commend the work done on the bank bonus tax and how it would have been used. That was a tax of 50% only on bonuses over £25,000, so it did not tax the smaller end of the bank bonus market. The particular merit of the bank bonus tax was that the bank paid, not the employee.
I mentioned earlier that the bank bonus tax raised £3.5 billion. Why did we introduce it? First, it should be noted that it had widespread support among the public, who felt that we were directly addressing bonuses and the bonus culture. Taxpayers kept saying, “Why have you guaranteed the banking sector and not any other part of the economy?” We in this House know why that was, but they needed a justification for it. One justification for that implicit guarantee was that we wanted to rescue
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the economy. We did not give that guarantee so that we could enrich bankers a year later. That was not the idea. We were doing everything we could to reflect public concern, as well as ensuring that the system was stable and that bankers paid their fair whack.
However, the bonus tax was described by the bankers—these are direct quotations—as “populist”, “political” and, believe it or not, “penal”. There were also threats to leave the country. We have been looking out for additional electoral registrations in Zurich, Paris and New York, and although there is a flow backwards and forwards, to and from those countries, the reality is that the bankers did not leave. They did not leave because the banking industry recognised that we made the correct and appropriate response, which I would commend to the Minister.
Finally—this comes back to the earlier intervention—let us look at what the Government have brought forward in what they call their growth zones. Enterprise zones? I mean, come on! As for the idea that they are an appropriate growth strategy, we need only look back at the experience of previous enterprise zones to know that creating jobs under such a regime is prohibitively expensive. The national insurance holiday is another centrepiece of what the Government said they wanted to do. However, although they will not release any concrete figures, it was already clear from an article in the Financial Times in January that, far from 400,000 businesses being helped over the four or five years of the policy, at that time only 1,500 had been helped.
Mike Gapes: My hon. Friend mentions the national insurance holiday for new businesses, but it discriminates against London and Londoners. Some of the poorest people in the poorest communities in the poorest boroughs in this country are in London, as are some of the areas with the highest unemployment, yet the national insurance holiday does not cover London, which he, as a London Member, knows as well as I do.
Mr Love: I thank my hon. Friend for that intervention. He is correct. When that legislation was passed, we argued that many parts of London had suffered tremendously from the credit crunch and were as deserving as—if not more deserving than—other parts of the country. However, that argument was not listened to. Perhaps the policy would be a little more successful if the Government had included London, along with all the other parts of the country.
The policy has clearly not been a success. The Government’s growth strategy is not producing growth. I would therefore like to suggest an alternative growth strategy, the merit of which is that it was beginning to bear fruit at the time of the general election.
I will pick out just a few areas at which the Government need to look carefully, while searching their conscience and trying to construct a positive growth strategy and address these concerns. First, youth unemployment is just about topping 1 million. One in five of our young people aged 16 to 24 are unemployed, and to focus on getting young people back into work, as we were trying to do before the general election, would pay dividends. We shall lose a whole generation if we do not address the youth unemployment problem, and that should be a priority for the Government.
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Mr Robinson: The whole House will agree with my hon. Friend that youth unemployment is the single biggest threat on the unemployment front at the moment, at 20% and rising. Was not the cancellation of the future jobs fund a short-sighted, perverse reaction by the Government that could well result in a repeat of what happened in the 1980s—a whole generation being lost to the working population because of the rise in youth unemployment?
Mr Love: Yes, the future jobs fund was the very vehicle to provide a job, training or relevant work experience so that our kids did not have to sit on the sidelines without a future, getting demoralised and not being in a position to take up the job opportunities that will be available when the economy turns round. It is a dereliction of duty on the part of the Government not to address that issue.
Nic Dakin: My hon. Friend is giving a cogent and coherent analysis of the amendment before us. Does he not agree that the review suggested in the amendment represents a real opportunity to find the money needed to invest in young people and their job opportunities? It is not too late for the Government to address this error.
Mr Love: Absolutely. The merit of the amendment is that it would give Parliament, and particularly the Government, the opportunity to review the operation of the levy, as well as providing the banking sector with other opportunities to make a contribution to sorting out some of the deep-seated economic problems in our country. I hope that the Liberal Democrat part of the coalition will be sympathetic to our arguments and speak up where it matters, to try to get the Government to recognise that there is an alternative that would be good for the economy and good for our society.
A second issue is house construction. In my local authority area we have the fourth worst housing stress in the country. Things are difficult, and they are going to get significantly worse. I mentioned earlier the Government’s incoherent construction policy, with its homes bonus that is not a bonus, and its planning system that is so riddled with inconsistency and lack of certainty that major construction is now off the agenda. It is a system that allows local considerations to dominate and outweigh much-needed construction in different parts of the country. I can see only a bleak future for public and private housing construction—but our proposal provides one small, modest way in which the Government could improve the situation.
Mrs Chapman: Does my hon. Friend agree that it is not only the house builders who have a hard time when the construction industry suffers? In Darlington last week, we heard the announcement of the loss of almost 200 manufacturing jobs in a company that builds conservatories. Obviously, that is a difficult business to be in with the construction sector in its present state.
Mr Love: I agree entirely with my hon. Friend, and I hope that someone on the Government Front Bench is listening. These are urgent problems.
Let me mention two other brief points about a growth strategy. We do not have a Sheffield Forgemasters contributing to growth. I remind Government Members
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of that because a viable, well-thought-through and supportable project was put forward, yet it has still not received any funding—
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The Chairman of Ways and Means (Mr Lindsay Hoyle): Order. As we know, we are debating the bank levy. There has been some stretching of the debate already, and we are in danger of stretching it even further. We have had a good debate so far, and I am sure that the hon. Gentleman will want to keep to the amendment.
Mr Love: I bow to your advice, Mr Hoyle. I will conclude my remarks about the lack of a growth strategy by saying that as an optimist, I believe that it is never too late. I hope the Government will think carefully and recognise that the growth strategy they produced on paper simply does not respond to the real needs of the economy.
I finish where I started, by commending the amendment to the Government. It poses no threat to them; it simply seeks to review the bank levy system that they are introducing. They will know, because they have spent a great deal of time on this, just how important the public think the role of the banks in getting our economy sorted out is. After all, it is widely perceived that the banks were the main cause of the problem in the first place, so people are looking to them to help our economy in a meaningful way. For the reasons that I have stated, the amendment will address some of those issues and provide an opportunity to examine how the levy is working in December. I hope that it will provide us with an opportunity to straighten out and ensure that the levy really addresses the needs of our country.
Mr Hoban: Amendment 9 seeks to require a report into the effectiveness of the new bank levy, which is introduced in clause 72. I will come to the components of the amendment shortly, but I think it would help hon. Members if I first explained the role and features of the levy.
The levy is a new tax that will ensure that the banks fairly contribute to the Exchequer, while encouraging them to move to less risky forms of funding. This levy forms part of the Government’s far-reaching plans for banking reform. We have already announced an overhaul of financial regulation, marking a break from the light-touch regime championed by the shadow Chancellor when he was the City Minister. We have created an Independent Commission on Banking, which published its interim report last month and is due to publish its final report in September.
When Labour Members were in government, they refused to debate the structure of the banking sector. They were afraid of banking reform and they were afraid to understand and tackle the lessons from the financial crisis. This debate would have been better if one of them had had the courage to accept the failures of the previous Government on the regulation of the banking sector. Not one of them did so. I think this whole debate is a cover for their bluster. When we proposed in March last year to introduce a bank levy, on a unilateral basis if necessary, Labour Members were against it. The then Chancellor was against it and the present leader of the Labour party, who wrote the Labour manifesto, was against it, too. What we have
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heard today is a whole load of bluster, rhetoric and empty words about how we must tax the banking sector properly when Labour Members lacked the courage to champion these moves when they were in government. We have taken the lead on the issue, when they would have hung back and waited for international consensus and agreement. We have taken the lead, as I say, and France and Germany have joined us in announcing levies. Others have since followed, including Hungary, Austria and Portugal.
The hon. Member for Nottingham East (Chris Leslie) made great play of the various rates that other countries were introducing. Let me point out to him, then, that in France the levy is expected to raise only €500 million. In Germany, the levy is expected to raise €1 billion annually. The hon. Gentleman prayed in aid the US on two occasions, but the US has not yet introduced legislation, so his comments are empty—
Chris Leslie: Will the hon. Gentleman give way?
Mr Hoban: No, I am not going to give way. We have had quite a long debate already, and it is time we made some progress.
Chris Leslie: On a point of order, Mr Hoyle. I understood that this was a Committee stage, and that we were considering the Bill in detail. Is it usual practice for a Minister responding to a debate not at least to give way and allow a dialogue on the clause in question?
The Chairman of Ways and Means (Mr Lindsay Hoyle): That is not a point of order. It is up to the Minister to decide whether to give way, and I am sure that he heard the cries for him to do so.
Mr Hoban: Subsection (2)(a) of the amendment requires a report on
“the Government’s analysis behind the rate and threshold chosen for the bank levy”.
It might help Opposition Members if I explained how we designed the levy, and why we set the rate and threshold as we did. The levy is intended to ensure that the banking sector makes a fair and substantial contribution, reflecting the risks that it poses to the financial system and the wider economy. It is intended to encourage banks to move away from risky funding models, and complements the wider regulatory agenda to improve standards and enhance financial stability. During the crisis, it became clear that some banks had become over-reliant on short-term funding for long-term lending. When financial markets seized up, those banks were exposed.
I must emphasise that the levy is based on the liabilities of a bank, not on its assets. It is based on the bank’s deposits, its share capital and loans made to it, not on loans made by it. It applies to the global balance sheets of UK banks, building societies and banking and building society groups, and to the UK operations of banks from other countries.
In determining the scope of the levy, we concluded that foreign banks operating in the UK also posed potential risks to the UK financial system and the wider economy, whether they operated as branches or as subsidiaries. It therefore follows that they should contribute on the same basis, and branches and subsidiaries of foreign banking groups are included to ensure that they
3 May 2011 : Column 550
cannot avoid the levy by group restructuring. That will ensure the provision of a level playing field for all banks operating in the UK.
The levy will be paid by between 30 and 40 building societies and banking groups, and we have made it clear that we expect it to yield about £2.5 billion of revenues each year in its steady state. That appropriate contribution balances fairness with competitiveness, and the rates of the levy were chosen to allow it. We initially announced that a reduced rate would apply for 2011, recognising the uncertain market conditions prevailing at the time, but we no longer consider that to be necessary.
In December the Bank of England noted that the near-term outlook and resilience of the UK banking sector had improved. Markets also now have greater certainty about the timing and direction of regulatory change, with the Basel III regulatory reforms being introduced in 2013 and transition periods being extended to 2015. We therefore decided that from 1 March this year, the full rate of the levy should be introduced for 2011. The levy will now yield £2.5 billion in that year. The steady state target yield was set out last year, when we also announced our intention to make significant cuts in the main rate of corporation tax.
Mr Hoban: I am going to continue my speech.
We were clear at that time, as we are now, that the bank levy yield far outweighs the benefits that banks receive from the corporation tax change. Other sectors will benefit from the reduction in corporation tax, but the banks will not benefit because of the levy. In the March Budget, the Chancellor went further in helping our economy to grow, and announced an additional 1p reduction in the main rate of corporation tax. At the same time, to offset the benefits to banks from that further cut and maintain the same incentives for them to move to less risky funding, we announced that the rate of the levy would increase from 1 January 2012, to 0.078%.
The threshold has prompted some discussion. The initial announcement on the bank levy last year proposed that it would include a threshold of £20 billion. However, as part of the subsequent consultation exercise, we explicitly sought views on whether it would be preferable to make it an allowance rather than an all-or-nothing threshold. A threshold would provide a cliff edge that banks would avoid by restructuring. Respondents to the consultation made that clear to us, and even suggested that banks, or indeed building societies, might avoid growing their UK operations to avoid the threshold and to avoid paying the levy. We accepted that argument, and have therefore decided that there should be an allowance on the first £20 billion of liabilities liable for the levy. That means that smaller banks, building societies and foreign banks with a small UK presence—that is, those whose liabilities are less than the £20 billion allowance—will not pay the levy.
The allowance will ensure that the levy is proportionate to the risks inherent in banking businesses of different sizes. It balances the probability that the failure of a bank could pose a systemic risk against the relative burden imposed in order to gather additional revenue at the margin. While size is not the sole factor in determining risk to the system, it is an important one. Increasing the
3 May 2011 : Column 551
allowance would risk excluding banks or building societies that are highly likely to pose a systemic risk if they fail. Similarly, setting the allowance at a lower level—which Opposition Members seem very keen on doing—would risk imposing an unnecessarily high burden on institutions that do not pose a systemic risk to the UK economy in the way that larger banking institutions do. These details, along with many others, have already been made public, and I am sure that the Opposition Members who tabled the amendment are aware of the steps the Government have taken to explain the basis of the decisions. All tax measures now have a tax information and impact note, which sets out clear information relating to the measure and its impact, and which has provided a significant amount of analysis on the levy so far. It is clear that there is no need for a report to provide an analysis of the rates and threshold of the bank levy.
Let me turn to the second element of the amendment.
Mr Kevan Jones: Will the Financial Secretary give way?
Mr Hoban: Let me make progress. The hon. Gentleman spoke for over an hour and I am responding to the speeches made in five hours of debate. I therefore think the hon. Gentleman should hear me out, after which I may consider taking interventions.
Let me turn to the second element of the amendment, on the adequacy of the levy in the context of other reforms to the wider banking sector.
Mr Lammy: On a point of order, Mr Hoyle. In Committee, when Ministers have not answered questions from Back Benchers, is it normal for them not even to give way? Surely the Financial Secretary could simply photocopy what he is reading out, and send that to all of us so we can go home?
The Chairman: That is not a point of order. It is up to the Minister to decide how he wishes to reply to the debate.
Mr Hoban: I think that is the best suggestion the right hon. Gentleman has so far made in this debate. I shall send a copy of my speech to all hon. Members who are interested in it, so they can then go home.
The levy is a permanent tax, and is part of our wider package of far-reaching reforms. It is designed to be consistent with global regulatory practices, drawing on proposals from the International Monetary Fund and reflecting emerging proposals from the Basel committee. Excessive risk taking in the financial sector was a significant contributory factor in the recent financial crisis. As I said earlier, the levy is intended to encourage banks to move away from riskier funding.
The levy should not be seen in isolation from other reforms to the banking system. Domestic, European and international banking reforms will change the landscape of banking. For example, Basel III will lead to higher capital levels, and its liquidity reforms will change the funding profiles of banks. There is a vigorous debate within the EU and the G20 about whether the holders of bank debt should be required to contribute to the recovery or resolution of banks, for example through
3 May 2011 : Column 552
the conversion of debt to equity. As I said earlier, we have established an independent commission on banking to consider structural and related non-structural reforms.
The hon. Member for Edmonton (Mr Love) raised issues to do with the implicit guarantee, to make sure the right reforms are in place so banks are not dependent on the guarantee from the taxpayer. We have tackled that issue, whereas when his party was in government, it failed to do so. I wish he would give us some credit for the action we have taken to reform the regulation of the banking system during the year in which this Government have been in office.
The final element of the report calls for information on the total tax revenues expected from banks in each year to 2016-17. We have been clear that we expect the levy to raise about £2.5 billion each year. We have also taken other steps to ensure that banks pay their fair share. The previous Government introduced the code of practice on taxation for banks, but they utterly failed to get banks to sign up to it. They talk tough now, but they failed when in government; only four of our leading 15 banks actually signed up to that code of practice when they were in office. By the end of November, however, all the top banks had signed up to the code, and by March 2011 some 200 banks had adopted it. We therefore need take no lessons from the Labour party about getting the banks to sign up to codes.
We are very clear that banks should make a contribution reflecting the risks they pose to the UK financial system and wider economy. While amendment 9 calls for a report, this Government are delivering action. We have already set out the reason for the rates chosen and the decision to set an allowance at £20 billion. We have been clear on how the bank levy fits with and complements our wider reform package and we have been clear that we expect revenues from banks to grow as the economy recovers. We have also secured agreement from the top banks on the tax revenues they expect to pay over the spending review period. We are raising more in this levy than the previous Government raised through their one-off bank payroll tax. Labour Members refused to introduce a bank levy when they were in government. We backed it where they have failed to act and I ask hon. Members to support the clause.
10 pm
The Parliamentary Secretary to the Treasury (Mr Patrick McLoughlin) claimed to move the closure (Standing Order No. 36 ) .
The Chairman: Order. I think it would be of interest to the House to hear from the hon. Member for Nottingham East (Chris Leslie), and I am sure that he will not take too long.
Chris Leslie: Thank you, Mr Hoyle. The Chief Whip really needs to take a breath and perhaps calm down for a moment. [Interruption.] I did not quite put it in the way that the Prime Minister might.
The Financial Secretary to the Treasury usually does act honourably by trying to respond to the debate, and probably he secretly would have done so today. Our debate was wide ranging and we covered a number of specific points on the detailed design of the bank levy, with which he entirely refused to engage. He refused to
3 May 2011 : Column 553
give way in this Committee stage of the Finance Bill, which shows the Government’s thinly veiled contempt for the parliamentary process. No debate, no scrutiny and no contributions came from those on the Government Benches, other than the speech by the right hon. Member for Wokingham (Mr Redwood). They have accepted absolutely no challenge and no scrutiny. They have put their heads down and ploughed on—the Lansley strategy of policy making in action.
The Financial Secretary gave no explanation of why the Government set the banking levy at this puny £2.6 billion or why they have given a very generous tax-free allowance of £20 billion to the banks. Their original design, as set out in June, could have netted £3.9 billion, but when the banks complained the figure went back down to £2.6 billion. He says that we should not criticise the levy for being set at such a low rate because the French levy will raise less, but of course it will because the French banking sector is smaller. The fact is that our banking levy is being set at a third of the rate that the French are pursuing. He did not answer any questions on the netting of derivatives, the double taxation treaties or what would happen in terms of accounting practice. He certainly did not address the outrage in the country, never mind in the House, about the continuing appalling abuse of bonuses in the banking system. That is an obscene ongoing process and although bonuses might reduce slightly in one year, that is offset by the increase in the salaries that those bankers are enjoying. He did not even address the new loophole he is introducing in the Bill so that those enjoying deferred bonuses will now be able to pay the tax rates in future years, thus perhaps avoiding the 50% income tax rate when eventually the Government scale back from that.
Mr Kevan Jones: Does my hon. Friend agree that we had a wide-ranging debate, including on bankers’ bonuses, and that the Financial Secretary did not even address that issue in his wind-up?
Chris Leslie: Astonishingly, the Financial Secretary, having had his coat tugged by the Government Chief Whip, did not even address many of these points at all. As I say, the right hon. Member for Wokingham made his points about the role of the state-owned banks, how they ought to behave and how perhaps they would change their behaviour in a different market position.
My hon. Friend the Member for Wansbeck (Ian Lavery) made an important point about the comparison between those who enjoy exceptionally high bonuses and ordinary working people who, I think he said, might take 125,000 years on average to earn the bonuses that some bankers earn in one year.
My hon. Friend the Member for Scunthorpe (Nic Dakin) said that the Government have no mandate for their approach, and that is absolutely true.
My hon. Friends the Members for Walthamstow (Stella Creasy), for Brent North (Barry Gardiner) and for Hayes and Harlington (John McDonnell) also made important points about the feeble nature of the design of this element of bank taxation.
My hon. Friend the Member for North Durham (Mr Jones), in his rapid canter across the landscape of banking taxation, made a point about the obscenity of bonuses, which the Government have singularly failed to address through their failures on Project Merlin. My
3 May 2011 : Column 554
right hon. Friend the Member for Tottenham (Mr Lammy) talked about the impact on his constituency of the public services that will be cut because the Government will not pursue the sources of revenue that could be necessary to help ameliorate some of those reductions.
My hon. Friend the Member for Edmonton (Mr Love) made, I think, the most important point of all: our amendment is no threat to the Government. We are simply asking for a review and a report on the levels of bank taxation and the banking levy. The Government are introducing a tax cut for the banks and the bank levy proposal is weak and fails to ensure that banks pay their fair share. This is a simple amendment that is surely unobjectionable and I think we should seek the Committee’s view.
Question put, That the amendment be made.
The Committee divided:
Ayes 153, Noes 296.
[10.5 pm
AYES
Abrahams, Debbie
Ainsworth, rh Mr Bob
Alexander, Heidi
Ali, Rushanara
Allen, Mr Graham
Anderson, Mr David
Bailey, Mr Adrian
Balls, rh Ed
Barron, rh Mr Kevin
Bayley, Hugh
Beckett, rh Margaret
Begg, Dame Anne
Benn, rh Hilary
Berger, Luciana
Blackman-Woods, Roberta
Blears, rh Hazel
Blomfield, Paul
Brown, Lyn
Brown, rh Mr Nicholas
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burnham, rh Andy
Campbell, Mr Alan
Campbell, Mr Gregory
Chapman, Mrs Jenny
Clwyd, rh Ann
Coaker, Vernon
Coffey, Ann
Cooper, Rosie
Corbyn, Jeremy
Creasy, Stella
Cruddas, Jon
Cryer, John
Cunningham, Mr Jim
Cunningham, Tony
Curran, Margaret
Dakin, Nic
Darling, rh Mr Alistair
David, Mr Wayne
Davidson, Mr Ian
De Piero, Gloria
Donohoe, Mr Brian H.
Dowd, Jim
Dromey, Jack
Efford, Clive
Elliott, Julie
Ellman, Mrs Louise
Engel, Natascha
Farrelly, Paul
Field, rh Mr Frank
Fitzpatrick, Jim
Flint, rh Caroline
Flynn, Paul
Fovargue, Yvonne
Gapes, Mike
Gardiner, Barry
Gilmore, Sheila
Glindon, Mrs Mary
Goggins, rh Paul
Goodman, Helen
Green, Kate
Greenwood, Lilian
Gwynne, Andrew
Hain, rh Mr Peter
Hanson, rh Mr David
Healey, rh John
Hepburn, Mr Stephen
Heyes, David
Hillier, Meg
Hodge, rh Margaret
Hodgson, Mrs Sharon
Hoey, Kate
Hopkins, Kelvin
Hosie, Stewart
Howarth, rh Mr George
James, Mrs Siân C.
Johnson, rh Alan
Johnson, Diana
Jones, Mr Kevan
Joyce, Eric
Kaufman, rh Sir Gerald
Keeley, Barbara
Lammy, rh Mr David
Lavery, Ian
Lazarowicz, Mark
Leslie, Chris
Lewis, Mr Ivan
Lloyd, Tony
Love, Mr Andrew
MacNeil, Mr Angus Brendan
Mactaggart, Fiona
Mahmood, Shabana
McCann, Mr Michael
McCarthy, Kerry
McCrea, Dr William
McDonagh, Siobhain
McDonnell, John
McFadden, rh Mr Pat
McGovern, Alison
McKechin, Ann
Meacher, rh Mr Michael
Meale, Mr Alan
Mearns, Ian
Michael, rh Alun
Miliband, rh David
Miller, Andrew
Morris, Grahame M.
(Easington)
Mudie, Mr George
Nandy, Lisa
Pearce, Teresa
Phillipson, Bridget
Pound, Stephen
Raynsford, rh Mr Nick
Reed, Mr Jamie
Reynolds, Emma
Robertson, Angus
Robertson, John
Robinson, Mr Geoffrey
Rotheram, Steve
Ruane, Chris
Ruddock, rh Joan
Seabeck, Alison
Shannon, Jim
Sharma, Mr Virendra
Sheerman, Mr Barry
Skinner, Mr Dennis
Slaughter, Mr Andy
Smith, rh Mr Andrew
Spellar, rh Mr John
Straw, rh Mr Jack
Stringer, Graham
Stuart, Ms Gisela
Timms, rh Stephen
Trickett, Jon
Turner, Karl
Twigg, Derek
Twigg, Stephen
Umunna, Mr Chuka
Vaz, Valerie
Walley, Joan
Watson, Mr Tom
Watts, Mr Dave
Weir, Mr Mike
Whiteford, Dr Eilidh
Whitehead, Dr Alan
Wicks, rh Malcolm
Williamson, Chris
Winnick, Mr David
Winterton, rh Ms Rosie
Wishart, Pete
Wood, Mike
Wright, David
Tellers for the Ayes:
Mark Hendrick and
Phil Wilson
NOES
Adams, Nigel
Afriyie, Adam
Aldous, Peter
Alexander, rh Danny
Amess, Mr David
Andrew, Stuart
Arbuthnot, rh Mr James
Bacon, Mr Richard
Bagshawe, Ms Louise
Baker, Norman
Baker, Steve
Baldry, Tony
Baldwin, Harriett
Barclay, Stephen
Barker, Gregory
Baron, Mr John
Barwell, Gavin
Bebb, Guto
Bellingham, Mr Henry
Benyon, Richard
Beresford, Sir Paul
Bingham, Andrew
Binley, Mr Brian
Blackman, Bob
Blackwood, Nicola
Blunt, Mr Crispin
Boles, Nick
Bone, Mr Peter
Bottomley, Sir Peter
Bradley, Karen
Brady, Mr Graham
Brake, Tom
Bray, Angie
Brazier, Mr Julian
Brine, Mr Steve
Brokenshire, James
Bruce, Fiona
Bruce, rh Malcolm
Buckland, Mr Robert
Burns, rh Mr Simon
Burrowes, Mr David
Burstow, Paul
Burt, Alistair
Burt, Lorely
Byles, Dan
Cable, rh Vince
Cairns, Alun
Campbell, rh Sir Menzies
Carmichael, rh Mr Alistair
Carswell, Mr Douglas
Cash, Mr William
Chishti, Rehman
Chope, Mr Christopher
Clark, rh Greg
Clarke, rh Mr Kenneth
Clifton-Brown, Geoffrey
Coffey, Dr Thérèse
Collins, Damian
Colvile, Oliver
Cox, Mr Geoffrey
Crouch, Tracey
Davey, Mr Edward
Davies, David T. C.
(Monmouth)
Davies, Philip
de Bois, Nick
Dinenage, Caroline
Djanogly, Mr Jonathan
Dorrell, rh Mr Stephen
Dorries, Nadine
Doyle-Price, Jackie
Duncan, rh Mr Alan
Duncan Smith, rh Mr Iain
Dunne, Mr Philip
Ellis, Michael
Ellison, Jane
Elphicke, Charlie
Eustice, George
Evans, Jonathan
Evennett, Mr David
Fabricant, Michael
Fallon, Michael
Featherstone, Lynne
Field, Mr Mark
Foster, rh Mr Don
Francois, rh Mr Mark
Freeman, George
Freer, Mike
Fuller, Richard
Garnier, Mr Edward
Garnier, Mark
Gauke, Mr David
Gibb, Mr Nick
Gilbert, Stephen
Glen, John
Goldsmith, Zac
Goodwill, Mr Robert
Graham, Richard
Grant, Mrs Helen
Gray, Mr James
Grayling, rh Chris
Green, Damian
Greening, Justine
Grieve, rh Mr Dominic
Griffiths, Andrew
Gummer, Ben
Gyimah, Mr Sam
Hague, rh Mr William
Halfon, Robert
Hames, Duncan
Hammond, rh Mr Philip
Hammond, Stephen
Hancock, Matthew
Hancock, Mr Mike
Hands, Greg
Harper, Mr Mark
Harrington, Richard
Harris, Rebecca
Hart, Simon
Harvey, Nick
Haselhurst, rh Sir Alan
Hayes, Mr John
Heald, Oliver
Heath, Mr David
Heaton-Harris, Chris
Hemming, John
Henderson, Gordon
Herbert, rh Nick
Hinds, Damian
Hoban, Mr Mark
Hollingbery, George
Hollobone, Mr Philip
Holloway, Mr Adam
Hopkins, Kris
Horwood, Martin
Howarth, Mr Gerald
Howell, John
Hughes, rh Simon
Huhne, rh Chris
Hunt, rh Mr Jeremy
Huppert, Dr Julian
Hurd, Mr Nick
Jackson, Mr Stewart
James, Margot
Javid, Sajid
Jenkin, Mr Bernard
Johnson, Gareth
Johnson, Joseph
Jones, Andrew
Jones, Mr David
Jones, Mr Marcus
Kawczynski, Daniel
Kelly, Chris
Kirby, Simon
Knight, rh Mr Greg
Kwarteng, Kwasi
Laing, Mrs Eleanor
Lamb, Norman
Lancaster, Mark
Laws, rh Mr David
Leadsom, Andrea
Lee, Jessica
Lee, Dr Phillip
Lefroy, Jeremy
Leigh, Mr Edward
Leslie, Charlotte
Letwin, rh Mr Oliver
Lewis, Brandon
Lewis, Dr Julian
Lidington, rh Mr David
Lilley, rh Mr Peter
Lloyd, Stephen
Lopresti, Jack
Lord, Jonathan
Loughton, Tim
Luff, Peter
Main, Mrs Anne
Maude, rh Mr Francis
May, rh Mrs Theresa
McCartney, Jason
McCartney, Karl
McIntosh, Miss Anne
McLoughlin, rh Mr Patrick
McPartland, Stephen
McVey, Esther
Menzies, Mark
Mercer, Patrick
Metcalfe, Stephen
Miller, Maria
Mills, Nigel
Milton, Anne
Mitchell, rh Mr Andrew
Moore, rh Michael
Mordaunt, Penny
Morris, David
Morris, James
Mosley, Stephen
Mowat, David
Mulholland, Greg
Munt, Tessa
Murray, Sheryll
Murrison, Dr Andrew
Neill, Robert
Newmark, Mr Brooks
Newton, Sarah
Nokes, Caroline
Norman, Jesse
Nuttall, Mr David
O'Brien, Mr Stephen
Offord, Mr Matthew
Ollerenshaw, Eric
Paice, rh Mr James
Parish, Neil
Patel, Priti
Pawsey, Mark
Penrose, John
Percy, Andrew
Perry, Claire
Phillips, Stephen
Pincher, Christopher
Poulter, Dr Daniel
Prisk, Mr Mark
Pritchard, Mark
Pugh, John
Raab, Mr Dominic
Randall, rh Mr John
Reckless, Mark
Redwood, rh Mr John
Rees-Mogg, Jacob
Reevell, Simon
Robathan, rh Mr Andrew
Robertson, Hugh
Rogerson, Dan
Rosindell, Andrew
Rudd, Amber
Russell, Bob
Rutley, David
Sanders, Mr Adrian
Sandys, Laura
Scott, Mr Lee
Selous, Andrew
Sharma, Alok
Shelbrooke, Alec
Simmonds, Mark
Simpson, Mr Keith
Smith, Miss Chloe
Smith, Henry
Smith, Julian
Smith, Sir Robert
Spelman, rh Mrs Caroline
Spencer, Mr Mark
Stanley, rh Sir John
Stephenson, Andrew
Stevenson, John
Stewart, Bob
Stewart, Iain
Stewart, Rory
Streeter, Mr Gary
Stride, Mel
Stuart, Mr Graham
Sturdy, Julian
Swales, Ian
Swayne, Mr Desmond
Swinson, Jo
Syms, Mr Robert
Tapsell, Sir Peter
Teather, Sarah
Thurso, John
Timpson, Mr Edward
Tomlinson, Justin
Tredinnick, David
Truss, Elizabeth
Turner, Mr Andrew
Tyrie, Mr Andrew
Vaizey, Mr Edward
Vara, Mr Shailesh
Vickers, Martin
Villiers, rh Mrs Theresa
Walker, Mr Charles
Walker, Mr Robin
Wallace, Mr Ben
Walter, Mr Robert
Ward, Mr David
Watkinson, Angela
Weatherley, Mike
Webb, Steve
White, Chris
Whittaker, Craig
Whittingdale, Mr John
Wiggin, Bill
Williamson, Gavin
Willott, Jenny
Wilson, Mr Rob
Wollaston, Dr Sarah
Wright, Simon
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Noes:
Stephen Crabb and
Jeremy Wright
Question accordingly negatived
.