PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT GENERAL COMMITTEES

Public Bill Committee

FINANCE BILL

(Except clauses, 1, 3, 16, 183, 184 and 200 to 212, schedules 3 and 41 and certain new clauses and new schedules)

Twelfth Sitting Thursday 6 June 2013 (Afternoon)

CONTENTS

SCHEDULE 21 agreed to. CLAUSES 48 to 50 agreed to. Adjourned till Tuesday 11 June at ten minutes past Nine o’clock.

PUBLISHED BY AUTHORITY OF THE HOUSE OF COMMONS LONDON – THE STATIONERY OFFICE LIMITED £6·00 PBC (Bill 001) 2013 - 2014 Members who wish to have copies of the Official Report of Proceedings in General Committees sent to them are requested to give notice to that effect at the Vote Office.

No proofs can be supplied. Corrigenda slips may be published with Bound Volume editions. Corrigenda that Members suggest should be clearly marked in a copy of the report—not telephoned—and must be received in the Editor’s Room, House of Commons,

not later than

Monday 10 June 2013

STRICT ADHERENCE TO THIS ARRANGEMENT WILL GREATLY FACILITATE THE PROMPT PUBLICATION OF THE BOUND VOLUMES OF PROCEEDINGS IN GENERAL COMMITTEES

© Parliamentary Copyright House of Commons 2013 This publication may be reproduced under the terms of the Open Parliament licence, which is published at www.parliament.uk/site-information/copyright/. 363 Public Bill Committee6 JUNE 2013 Finance Bill 364

The Committee consisted of the following Members:

Chairs: †MR DAVID AMESS,MR DAVID CRAUSBY

† Ashworth, Jonathan (Leicester South) (Lab) † Mearns, Ian (Gateshead) (Lab) † Baker, Steve (Wycombe) (Con) † Menzies, Mark (Fylde) (Con) Cryer, John (Leyton and Wanstead) (Lab) † Mills, Nigel (Amber Valley) (Con) † Doughty, Stephen (Cardiff South and Penarth) †Mowat,David(Warrington South) (Con) (Lab/Co-op) † Murray, Sheryll (South East Cornwall) (Con) † Duddridge, James (Rochford and Southend East) † Nash, Pamela (Airdrie and Shotts) (Lab) (Con) † Newmark, Mr Brooks (Braintree) (Con) Evans, Chris (Islwyn) (Lab/Co-op) O’Donnell, Fiona (East Lothian) (Lab) † Gauke, Mr David (Exchequer Secretary to the † Offord, Dr Matthew (Hendon) (Con) Treasury) Pearce, Teresa (Erith and Thamesmead) (Lab) † Gilmore, Sheila (Edinburgh East) (Lab) † Pugh, John (Southport) (LD) † Gummer, Ben (Ipswich) (Con) Qureshi, Yasmin (Bolton South East) (Lab) Hands, Greg (Chelsea and Fulham) (Con) Shannon, Jim (Strangford) (DUP) † Jamieson, Cathy (Kilmarnock and Loudoun) (Lab/ † Stephenson, Andrew (Pendle) (Con) Co-op) Stewart, Rory (Penrith and The Border) (Con) † Javid, Sajid (Economic Secretary to the Treasury) † Thornton, Mike (Eastleigh) (LD) Jones, Mr Marcus (Nuneaton) (Con) † Uppal, Paul (Wolverhampton South West) (Con) † Kwarteng, Kwasi (Spelthorne) (Con) Williams, Stephen (Bristol West) (LD) † Leslie, Chris (Nottingham East) (Lab/Co-op) McKinnell, Catherine (Newcastle upon Tyne North) Simon Patrick, Committee Clerk (Lab) † McDonald, Andy (Middlesbrough) (Lab) † attended the Committee 365 Public Bill CommitteeHOUSE OF COMMONS Finance Bill 366

adults over the age of 25 have been out of work for two Public Bill Committee years or more, which is a significant rise of going on for 150% in the past two years. Those individuals are Thursday 6 June 2013 struggling to find work and, having a gap in their employment service of 24 months or more, are finding it increasingly difficult to get back into work because (Afternoon) future employers are naturally asking, “Well, are you out of the habit of employment? What are your skill sets? How will you contribute to the organisation that [MR DAVID AMESS in the Chair] you want to work for?” Those individuals are often capable of making contributions to organisations; it is Finance Bill just that they have not been able to find work for a long time. (Except clauses 1, 3, 16, 183, 184 and 200 to 212, We therefore have to do something about that problem, schedules 3 and 41 and certain new clauses and new which is a matter of national significance as well as an schedules) important part of tackling the social security costs Schedule 21 agreed to. facing the country. The welfare bill has risen significantly under this Government, as the costs of economic failure have mounted higher and higher, so it is time that we Clause 48 took a proper rigorous approach towards enabling people to get off benefit and back into work—not by means of ANNUAL ALLOWANCE: NEW ANNUAL ALLOWANCE FOR the ineffective, worse-than-useless Work programme that THE TAX YEAR 2014-15 AND SUBSEQUENT TAX YEARS the Government have put together. That scheme underperforms the norm that might have existed had 2pm there been no job enhancement schemes whatever. Barely more than 2% of those going through the Work programme Chris Leslie (Nottingham East) (Lab/Co-op): I beg to have found sustained employment as a result of their move amendment 14, in clause 48, page 22, line 33, at encounter with it. That is just not good enough. The end add— Government clearly should have retained the future ‘(3) The Treasury shall publish a review within six months of jobs fund: the previous Administration pursued a scheme Royal Assent of the impact of restricting or reducing exemptions that brought £7,000 of net benefit to the Exchequer for from income tax of employee contributions to pension schemes at the additional rate. The review shall assess the impact that every job it created. alternative uses for revenues currently committed to pensions tax reliefs and exemptions for the additional rate of income tax Sheila Gilmore (Edinburgh East) (Lab): The future could have on job creation for the long-term unemployed.’. jobs fund was abolished on the basis of statements that it was not working and therefore should be abolished. The Chair: With this it will be convenient to discuss Was it not disgraceful that that was done before the clause stand part. outcome of the evaluation, which told a different story?

Chris Leslie: I hope that you had a good lunch break, Chris Leslie: It was the Government’s haste on coming Mr Amess. I know that members of the Committee feel to office, without looking at the evidence, that got them that it went quickly, but here we are again—as though into much of the trouble they find themselves in today. we had never left. The amendment focuses on the long-term unemployed The amendment would change the provisions with because £1 billion could be generated by returning to a regard to the Government’s approach to tax relief and 20% basic rate tax relief for those on the additional rate pensions allowances. It focuses in particular on an issue who have high earnings of £150,000 or more. With that with which many hon. Members will be familiar—namely, money, we could provide a jobs guarantee for all those the Government’s bizarre decision to allow a more who have been unemployed for two years or more. If generous relief arrangement for those who earn more that significant achievement was recorded, the net costs than £150,000 a year. Under our amendment, the Treasury could, over time, be reduced considerably. Indeed, there would undertake a review, fairly soon after the legislation may be net benefits to the Exchequer, because individuals received Royal Assent, of the impact of restricting or who are unemployed and in receipt of benefits are a reducing exemptions from income tax of employee great cost to the Exchequer. If those people were in contributions to pension schemes at the additional rate— work, not only would savings be made in welfare costs, now at 45p not 50p, but that is a debate for another time. but revenue would be generated through the income tax We are discussing the additional rate today, and we paid to the Exchequer. Obvious social benefits flow think that a review should assess the impact that alternative from putting an emphasis on employment and uses for revenues that might be generated by reducing employability. I know that my hon. Friends are keenly the tax relief available to the wealthiest 1% in society in favour of that proposal. might have on other vital purposes of social benefit. In I do not understand—the Minister needs to explain particular, that £1 billion of revenue should be used to this—why he chose to show such generosity to the pay for a compulsory jobs guarantee for the long-term top-rate taxpayers who earn more than £150,000. What unemployed, which is the subject of our amendment. a perverse decision and strange choice to look at that The Government have a lamentable record on tax relief and say, “Let’s reverse that and move it back employment and unemployment, especially with respect up from 20p to 45p.” The Government’s decision was to the long-term employed. I gather that about 130,000 not even to move it to 40p, but to go to 45p. 367 Public Bill Committee6 JUNE 2013 Finance Bill 368

The Minister first needs to justify that decision, but The scheme, as we have costed it, could also cover the he also needs to explain why on earth he would not cost of 10 hours of training per week. We would want agree to the amendment. We have not even gone so far to work with the Work programme providers or Jobcentre as to suggest that he go for a particular scheme. We Plus to agree how that training could be most effective would merely like him to review properly what revenues to ensure that the person secured a permanent job at the could be generated and what help provided. end of the six-month temporary-job period. After 12 months of claiming jobseeker’s allowance under the current welfare to work system, most claimants Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co- over the age of 25 are referred by Jobcentre Plus to the op): Will my hon. Friend say something further about Work programme, which lasts two years. In spite of training? One concern that is sometimes expressed is that, there are more than 130,000 people over the age of that temporary jobs are all very well, but they have to 25 still looking for work two years into their JSA claim, lead to something. Training is important, but so is the after a year of Jobcentre Plus and a year on the Work future job search and the support to enable someone to programme. move from a temporary job to a permanent post. Youth unemployment is a big issue and a scar on society more generally, and we should use other sources Chris Leslie: That is why we need a scheme that does of revenue, such as the bankers’ bonus tax, to support a not simply get people back into the virtuous habit of youth jobs programme, but today I want the Committee being in employment and turning up for work, but to focus on this aspect of tax relief. The Government provides training and support and those ancillary activities are choosing to lavish that tax relief on the wealthiest to help to encourage and support individuals into long-term 1%, but our choice would be to use that revenue to focus permanent employment. Ultimately, in the Labour party, support on the long-term unemployed. we believe in labour. We believe in getting people back The numbers speak for themselves. It is time to end into work. That is the only way to support economic the scourge of unemployment and, under our scheme, recovery, which is something Government Members no one would be able to spend a life on the dole, because would not know if it hit them in the face. We are here to after two years of unemployment they would have to educate them and, I hope, convert them to the right way take up a job, which would be provided to them. There forward. We do not have a monopoly on good ideas on would have to be some benefit sanctions if they did not this side of the Committee. do that. Ben Gummer (Ipswich) (Con): Will the hon. Gentleman Andy McDonald (Middlesbrough) (Lab): Does my give way? hon. Friend share my concern? In my constituency, there have been some small improvements from a high rate of 14.3% unemployment, but the 50-plus rates are Chris Leslie: Some hon. Members might have good starting to emerge as the rising trend in unemployment. ideas. Perhaps I have managed to convert the hon. Surely that cohort of workers will need a great deal Gentleman to the right path. more attention in the years ahead, and the programmes we are talking about should come to their aid and Ben Gummer: I know that the hon. Gentleman means benefit them very largely. well, but will he reflect on the fact that every single Labour Government—ever—has left office with Chris Leslie: It should not be the case that the older unemployment higher than when they came in? someone gets, the harder it is to find employment, but many employers look for younger individuals to take Chris Leslie: We have already had a conversation this on, so long-term unemployment in that older age range morning about the mistakes that the hon. Gentleman can present a significant impediment to those individuals may make and I am not convinced about his understanding finding a means to support themselves and their families, of the factoid that he wishes to peddle. However, I am particularly pre-retirement. That is a real problem in happy to look into the matter further. society. We would design a scheme where we could support job creation in the private sector. Anyone left without a James Duddridge (Rochford and Southend East) (Con): job because the private sector did not have the capacity I was curious about whether that factoid was indeed a to take them on could be supported in a voluntary fact, so I checked with the House of Commons Library. sector or public sector role with some of the support The hon. Gentleman might like to do likewise. from that source of revenue. Such a scheme could work successfully. Chris Leslie: I think it is important to focus on Under our scheme, the Government could support getting people back into work. I am more than happy to wages to cover the individual’s employment for at least give way to the hon. Gentleman if he thinks that there is six months. That support could go to the business a better use for the revenues that would be available to directly. It would cover employer’s national insurance the Exchequer from reducing that tax relief for those costs and support 25 hours of work a week at the earning more than £150,000 to the basic rate. If he minimum wage for at least six months. That would be thinks it better to give that money to those earning around £4,000 per job. If an employer were to bid for £150,000 and above, I would like to hear what he has to that money, they would have to create the new job. They say about it. The Opposition think it is time to focus on could not use the subsidy—that support—to sack another getting young people and the long-term unemployed—those worker in that individual’s place or replace them with a who have been out of work for 24 months or more—back person from another scheme. into work. 369 Public Bill CommitteeHOUSE OF COMMONS Finance Bill 370

[Chris Leslie] relief and use the £1 billion revenue to fund a job creation scheme for those most in need. Indeed, many I know that there will be many difficulties with long-term basic rate taxpayers getting the lower level of tax relief unemployment in the hon. Gentleman’s constituency, will be astonished by the Minister’s choice; they will be and I am sure he cares very deeply about the issue. If he wondering why on earth those getting the higher levels does not agree with our scheme, I want to hear his are receiving that benefit. These are very significant proposals for helping the long-term unemployed back matters. into work. Amendment 14 would be a helpful stepping stone on the way to addressing those questions. I would be 2.15 pm grateful if the Committee were to give it a fair hearing James Duddridge rose— and support our proposal.

Chris Leslie: I will give way to the hon. Gentleman if Ian Mearns (Gateshead) (Lab): My hon. Friend is he can tell me whether he believes that it is right for making a compelling case for taking the sort of action people earning £150,000 to be receiving that 45p tax he has outlined. There are significant regional variations relief on their pensions. in how long-term unemployment is impacting on communities. Of course, on coming to office the coalition James Duddridge: In my constituency, Rochford and Government abolished the concept of regions and, in Southend East, employment levels have gone up and doing away with regional development agencies, they unemployment levels have gone down over the year. took away the means by which we could target particular Only a few weeks ago, I visited the Work programme on resources. Victoria avenue, which has really good success rates. I While the regional growth fund is welcome, it has cannot speak for other places, but from talking to been slow to impact on economies such as the north-east. individuals there it seems that both the jobcentre and A stimulus for employers to take on long-term unemployed the private sector are providing a fabulous service; we people is the very sort of thing that would help to should encourage that. There is actually quite good reduce unemployment figures in constituencies such as news—in fact, yesterday, Southend airport announced mine and in regions such as the north-east where the 300 more jobs. overall level—not just long-term unemployment—stands at more than 10%. Chris Leslie: We are debating a particular issue, which is long-term unemployment; my interest is in what has been happening with long-term unemployment in the Chris Leslie: Yes. It is perhaps the Government’s hon. Gentleman’s constituency. I will certainly look at lethargy that is most frustrating of all. We hear plenty the figures from the House of Commons Library—we of talk from Ministers but little by way of action and can trade those statistics another time. From time to the whole country faces dire consequences as a result. time, businesses open and, from time to time, others In a few weeks’ time, the Chancellor will be playing close down, but ultimately we have to focus on the games with his spending review, thinking that he can significant number of individuals—there are about 130,000 make projections about what tax revenues might come spread across the country—whose lives are blighted by in two years subsequently when, of course, two years the scourge of long-term unemployment. It is time we ago they thought that they would have balanced the had some action from the Government on that issue. books by 2015. They thought that the economy would have been motoring ahead by now, yet they still make Sheila Gilmore: Does my hon. Friend share my concern predictions so far ahead with such confidence. I ask that we are in grave danger of replicating the north-south myself, “Will they ever learn from their mistakes?” and divide that blighted the 1930s, or possibly making an the answer I provide to myself is, “Most probably not”. even worse one? The fact that unemployment is lower in some places than in others does not take away from the fact that we have severe long-term unemployment in Ian Mearns: In the way in which the Government some areas and there is little sign that any of the discuss unemployment and the creation of new jobs, I schemes that have been put in place are making any find it frustrating that they constantly trumpet numbers actual difference. of new jobs created, but never flesh out those numbers in terms of full-time equivalents. I would be interested Chris Leslie: It is not just a question of the cost to the to hear from the Government the figures for full-time Exchequer; there is a massive human cost as well. equivalent jobs created in the last three years. Speaking of costs, will the Minister update us on what has been happening with long-term unemployment and, Chris Leslie: That is a good point. There are various in particular, on the cost of long-term unemployment theories about what has happened with employment levels to the Exchequer? What is the welfare bill that results across the country, with part time, short hours, zero-hours from long-term unemployment? How much does he contracts and so forth, and the pressures that people are estimate that the Exchequer has lost in income tax under. There is a deeper story about productivity in the forgone from those currently deemed as long-term economy; the fact that it takes more hours of labour unemployed—in our view, those who have been unemployed and endeavour to produce the same output is slightly for 24 months or longer? We need some information worrying over the longer term. We seem to need to work from the Minister so that we can make a proper judgment much harder and yet we seem to stand still, or sometimes of his choice to say, “Well, those poor individuals even go backwards. As the Minister said, that is not a earning £150,000 or more need the tax relief on their reflection of the Finance Bill, but it is a reflection of pensions to go up to 45p;” the Opposition would cut the their stewardship of the economy as a whole. 371 Public Bill Committee6 JUNE 2013 Finance Bill 372

I have a number of other points to make on the clause. As the annual allowance for defined benefit schemes I see that, in your wisdom, Mr Amess, you have grouped is calculated by valuing the pension at the start and end the amendment with the clause stand part debate, so I of the accounting period, with the differences being will make those points now. The clause amends the annual accrual, I am told that, under the Government’s annual allowance provisions to reduce the annual amount new approach, those earning the most will receive quite payable into a pension from £50,000 to £40,000 from a significant tax break compared with those on average April 2014 onwards. earnings. As we can see here, there are differences The changes that the Government will make by reducing between the 45p and the 20p levels. that annual allowance are said to impact about 140,000 People who are on defined benefit schemes may find individuals. Will the Minister take a moment to explain themselves exceeding the annual allowance without realising the variable impact on defined benefit pension schemes, it and becoming liable for tax. According to some tax versus defined contribution schemes? In another piece advisers, anyone in a defined benefit scheme who accrues of legislation, we had debates on different types of more than £2,500 per annum to their pension may now pension schemes and, as defined benefit schemes are find that they have to pay tax on those savings. I am not eroded and fall back, defined contribution schemes are sure whether that is the case. Will the Minister confirm increasing in their place. There are arguments to be had how many public service workers, for example, will be on whether that is a good or bad thing. affected by that measure? What mechanisms will be put I am anxious that not enough time is spent thinking in place to explain it to those affected? Will there be any through the incomes that individuals will need in their offsetting arrangements in those tax provisions? How retirement. I want clarity on whether the Government many extra people will be pushed into paying tax on have properly thought about the impact of their tax their pension savings as a consequence of the reduction framework arrangements on defined benefit schemes, to the annual allowance? We need some clarity on those which are already under a great deal of pressure. issues. The arrangements for defined benefit schemes are Returning to amendment 14, I reiterate that our accounted differently than those for defined contribution focus today needs to be on the Government’s strange schemes. Some concerns have been voiced about what choice to give the 45p tax relief to the richest 1% of appear to be generous annual allowances, and indeed society—those earning more than £150,000. We believe they are—a payment of £40,000 into a pension is pretty that the £1 billion should be used for job creation considerable for an individual in any given year. The schemes to help the long-term unemployed. This is an way in which defined benefit schemes are calculated opportunity that the Committee should not pass up does not necessarily reflect a particular deduction from lightly. It is a clear choice that could be started by an individual’s pay packet in that year as it would for a adopting the amendment. Let us get that review under defined contribution scheme; there is a separate accounting way and help the 130,000 individuals who have been out arrangement. Various organisations—Towers Watson, of work for two years or more. It is our responsibility to KPMG and others—have calculated that lower annual our constituents. allowances will now catch those who have defined benefit schemes and who earn five-figure salaries; the issue is not just about six-figure salaries. 2.30 pm Now, those five figures could be high—£66,000 or Sheila Gilmore: Thank you, Mr Amess, for giving me above, just to pluck a number from the air—but those the opportunity to speak to amendment 14. Very often with defined benefit schemes might want to think about when the Opposition propose policies that we think are the issue. It would be helpful if the Minister could walk desirable, the call that comes out is, “How would you us through the question, because those individuals may pay for it? Where would you find the money? Until you find themselves unwittingly caught by a tax charge as a tell us where you would find the money, we are going to result of the change. That may be perfectly legitimate—I tell you that that is not good enough.” In this instance, do not say that it is wrong—but we need some clarity on we have accompanied the proposal with a suggestion of who will be affected and at what level of salary, on where the funding could be found. Clearly, we need to average, a defined benefit pension might be drawn into investigate carefully what the yield would be, but that those arrangements. revenue could be put to better use than giving an additional advantage to people who already have substantial James Duddridge: The hon. Gentleman makes a valid pension provision through their employment or asset point. As people move from job to job, there may be wealth by boosting their pensions. That sum of money—the more than one relevant defined benefit scheme, which amendment would let us know exactly what it is—would makes decision making complex. Will he also ask the be of considerable assistance. Minister to look not just at the difference between I will address some of the issues that were raised in defined contribution and defined benefit but at the interventions. This factoid, or fact—whatever we call different tax treatment of state defined benefit and it—is very interesting, but it depends on what point in private sector defined benefit? I do not fully understand the snapshot we go from. In 1979, the big election cry the reasons for the differential, but I understand that was, “Labour isn’t working,” and we were told how the treatment is different. dreadful it was that over 1 million people were unemployed. Chris Leslie: I was not aware of that. I certainly But within a couple of years 3 million people were would be interested in hearing what the Minister has to unemployed. say about that. Obviously, there are more defined benefit In 1951, the UK national average unemployment was schemes in the public sector, given the history of some 1.8%. Perhaps that was higher than in 1945, but that of them, particularly those for teachers, doctors and was because in 1945 most of the adult working-age civil servants—our constituents have such schemes. population were either working in things such as munitions 373 Public Bill CommitteeHOUSE OF COMMONS Finance Bill 374

[Sheila Gilmore] it would be useful to look at the root causes rather than being partisan about the matter. In my constituency, a or other reserved occupations, or were in the armed traditional low-skills environment is a driver of long-term forces. That, of course, included many women who had unemployment. Jaguar Land Rover is bringing private been conscripted. Unemployment lower than 1.8% was sector investment into my constituency for the first actually pretty good, but 1.8% in 1951 must be seen as a time; between 1997 and 2010, the west midlands, uniquely considerable achievement compared with the levels of in the region, experienced a decrease in the number of unemployment in the 1930s. Clearly, somebody has private sector jobs. Whether that was wilful, I do not gone away and dug out those beginning and end figures, know; that is entirely for the Opposition to say. I do not but that is not where the economic cycle actually is. know what their thinking was on the matter. If we are to tackle the problem, rather than being partisan about Andy McDonald: I, too, heard the comments made by it we must tackle the underlying issue, which is the lack members of the party in power about the level of of skills— unemployment. My experience in my town and in my constituency is that every time the Conservative party The Chair: Order. Interventions need to be much has been in power unemployment rates have been colossally briefer. high. We heard about that wonderful rate of 1.8%, but in my constituency today the unemployment rate is Sheila Gilmore: Lack of skills is an issue for some 13.8%. I beg the Committee to think about the people people. I come from a city in which unemployment was in constituencies such as mine, which has the fourth reduced—during, I have to say, a Labour Government— highest rate of unemployment in this country. We must after 1997 to a pretty low level of between 2% and 2.5%. think about where our priorities lie. Should we be giving Much of the residual unemployment had a lot to do benefits to people who are doing very nicely, thank you with low levels of skills, and we put in place important very much? Do the people in my constituency not count job schemes to help people get skills and training. at all? Over the past two years, however, the Government’s answer to the problem has been: “The Work programme, Sheila Gilmore: I thank my hon. Friend for his comments, the Work programme, the Work programme,” but my which amplify my point. Labour’s proposed compulsory concern is that, sadly, the Work programme does not jobs guarantee would kick in when people had been seem to be addressing low skills at all. What my constituents unemployed for two years. It is interesting that this —and the witnesses who gave evidence to the Work and month large numbers of people are going to be coming Pensions Committee, which recently issued a report on out of the back end of the Government’s current scheme, the subject—describe is not skills training at all. Indeed, the Work programme. People who have been through constituents of mine have been told that the Work two years of the Work programme will start returning programme cannot afford to send them on courses to jobcentres. They only get on to the Work programme because it is not funded to do so. It is funded, it appears, if they have been unemployed for years, so those people endlessly to try to improve CVs, when I entirely agree will have been three years unemployed. that what some people need is an opportunity to increase What is the Government’s solution? According to the their skills. press release that the DWP issued earlier this week, Learning and training while working in a real job is people will simply be given more of the same. They will one way of getting such skills, which brings us back to be given more help with their CV and job search, and the jobs guarantee. Our proposal would kick in much they will be matched up to universal jobs match so that earlier, and I hope that in the fullness of time that it will they can use it better. That prompts me to ask what be possible to start it even earlier, because it is important those people have been doing on the Work programme for people to have such opportunities before they become for two years, because as we understood it, the Work long-term unemployed. A great deal of evidence, research programme was supposed to help people to brush up and history demonstrates that if people are out of work their CVs and their interview skills; give them training for a long time, they become increasingly deskilled and and skills that they did not have; and help them learn demotivated, and their health suffers. Even if they started how to use universal jobs match, which is apparently out without health problems, they often end up with the panacea for all ills. them. That is all hugely important. We must be much When I checked universal jobs match in my area only more active and realise that proper jobs must be created. yesterday, however, a search for shop assistant vacancies, which I have been checking carefully, resulted in 78 separate Ian Mearns: My hon. Friend is making a very powerful entries, 55 of which applied, yet again, to catalogue point. Government Members may bandy about statistics sales and opportunities as a self-employed person. To about increases in unemployment, but let us not forget take part in most such schemes, an individual must pay that in the past year, the number of people out of work up front and provide their own transport, which many for 24 months or more has risen by 88%—that is in one people will find difficult. I am not quite old enough to 12-month period. In the past two years, that number recall this, but the situation reminds me of what I have has risen by 146%. Those are real statistics. One statistic seen in films and read in books about many long-term that no one should ever forget is that one of those unemployed men in the 1930s who had to go around unfortunate individuals who has been unemployed for selling brushes. Sadly, not much has changed. 24 months or more is 100% unemployed. That is the real impact on the individual. Paul Uppal (Wolverhampton South West) (Con): In reference to the previous intervention from the hon. Sheila Gilmore: I thank my hon. Friend for his Member for Middlesbrough, if we are going to have a intervention. In an intervention I made earlier, I touched genuine conversation about long-term unemployment, on the serious issue of the imbalance of the country and 375 Public Bill Committee6 JUNE 2013 Finance Bill 376 the economy. The UK was in exactly the same position sanctioned if they do not want to take part in mandatory in the 1930s. Although some revisionist historians try to work experience, the evaluation of which showed that it say that there never was a great depression, I do not had no effect. think that that forms the majority view. There was a huge difference between then and now. In some parts of 2.45 pm the country—the south-east, Essex and other places—new A lot of those people need a lot of help to get back to light industries were developing. We had the beginnings skilled employment. We think the compulsory jobs of the car industry, which has already been mentioned guarantee is one way to do that. If we can find that in this debate. There was a lot of house building going funding, it is more fair and equitable to use that money on, hence the urban sprawl and the ribbon developments not to enable people to have an even more prosperous that came out of it. retirement than they might otherwise have had, but to help some of their fellow citizens get back into employment, That was a very different world from the one that a and then they can begin to save for their retirement and lot of people, certainly in Scotland and the north-east take advantage of auto-enrolment for pensions. That and north-west of England, were experiencing. We do sort of thing is no use if someone has no job to go to. not say because of that, “Well, actually, there isn’t really such a big problem. The jobs are out there if people would Pamela Nash (Airdrie and Shotts) (Lab): My hon. just go out and get them.” Of course, a lot of people did Friend makes a powerful argument for what a Labour move south at that time. They moved to where the jobs Government would do in bringing in a jobs guarantee. I were, hence the large number of Scots who live in places want to highlight that that does not go without proof. such as Corby, where you hear some real Scots accents Labour local government is already putting in place when you talk to people. People had to move south some policies to push that strategy. The Secretary of because they had little choice, but it did create an State for Scotland was in Airdrie not long ago at a imbalance, and we are in grave danger of doing that Teleperformance call centre and saw what North again. Lanarkshire council is doing to get young people back Sometimes I think that we are talking at cross purposes. into work. Those who were not helped by that programme I suspect that the constituencies of some Government but were on the Work programme were crying out for Members are not having that great a problem, and the Government to do something earlier rather than perhaps they genuinely think that we are making mountains later. out of molehills, but we are not. Even in a city such as Edinburgh, where I do not have the unemployment levels Sheila Gilmore: To sum up, we have a clear policy and that some of my colleagues have, we still have considerably want to be responsible about how we fund it, which is higher unemployment than we had for most of the why we suggested it could be done in this way. Although 2000s. We also have issues about people who are sort of the amendment does not necessarily say to implement it in work, but find their work very unsatisfactory. now, though I might like to see that, I hope—

One gentleman I met recently talked about his experience Ian Mearns: My hon. Friend is generous with her on the Work programme. He had been found a job as a time. One thing struck me. On an earlier intervention I security guard. It was 24 hours a week—he had hoped mentioned regional differentiation. Earlier this week we for full-time, but the hours were not available. He went were told that the Government were introducing new to the job for three days and was not called back by the fines for people who were hogging the middle lane of employer. That will count as a job start, although the motorway. I think that exemplifies that there are admittedly not in the final figures that the Department significant regional variations in the economy, because produces. However, when the previous official Work chance would be a fine thing for someone to hog the programme figures were issued, showing that the middle lane of any major road in the north-east given programme was not meeting even its minimum performance that there are about only three miles of crawler lane in standard, the Government were very quick to endorse a County Durham on the A1. Everything else is maximum report from the trade body that there had been a lot of dual carriageway. I look forward to the day, Mr Amess. job starts. The Chair: Order. I think that is getting slightly wide Well, the gentleman I met would be a job start—a job of the amendment we are discussing. I gave the hon. start for three days that did not go any further. That was Gentleman time to see where it was leading. in March. He e-mailed his job adviser at the Work programme provider to tell him what had happened, and when I saw him two weeks ago, he had still not Sheila Gilmore: I thank my hon. Friend for his heard back. His adviser had not called him in to give intervention, although we would probably disagree him any of the personalised help that he was meant to about whether to build road or rail. receive. If he counts as a job start, that is not really what most of us would call a decent job. Ian Mearns: Infrastructure. People need a decent opportunity and they need it Sheila Gilmore: Whatever it is, we need to give people sooner than they are getting it at the moment. Over the a chance to do a proper job. It is extremely galling for us next few months, large numbers of people are going to that the previous programme of the Future Jobs Fund come off the Work programme and back into jobcentres. was so hastily swept out of the way when it was a very They do not need to be told yet again that it is their good scheme for the young people it covered. We want fault, that they have not tried hard enough, that they to build on that and help people get the kind of real have not made the effort over that period, and that now paid work experience that will enable them to get out they are going to be further cajoled and potentially from the shadow of unemployment. 377 Public Bill CommitteeHOUSE OF COMMONS Finance Bill 378

Ben Gummer: Some very important issues have been The Opposition do themselves a disservice at a time raised by Opposition Members. I know that we have when they should be examining what they are about as been joshing, but this is a very serious matter. They are a Labour party, by trying once again to find a little right to bring into the debate the important issue of political hook on which to have a quick row with the long-term unemployment, which we do not discuss Government rather than trying to understand precisely enough generally in this House. why we have the problem of long-term unemployment My experience of this in Ipswich is interesting. Contrary in this country. Were they to propose an amendment to what the hon. Member for Edinburgh East might about a review of long-term debasement of skills, or on think, many of us on the Government Benches represent helping school leavers without decent qualifications, or towns with significant problems of unemployment. My on the impact of immigration, or on the changes in the hon. Friends the Member for Wolverhampton South labour market over the last 30 years, many Government West and for Warrington South and I share representation Members would be happy to support them. for ex-industrial depressed towns that have struggled, not just in the past four or five years but the past 20, Pamela Nash: It is above my pay grade to table such 30 or 50 years since the gradual deindustrialisation of an amendment, but I invite all members of the Committee the country began after the war. The picture is complex to join my new all-party group on youth unemployment and, unless we understand the complexity of the issues, where we hope to consider some of these issues. Does the we are not going to be able to deal with the root causes. hon. Gentleman understand that the abandoning of the In my town, unemployment has been rising since £150,000 cap gives out the wrong message to people who 2004; very gradually by 10 basis points every few months. are really struggling at the moment? We are using this to Then there was a spike during the crisis. In the last six highlight the fact that young, long-term unemployed or seven months it has been coming down again. The people are struggling, but they see the very richest unemployment rate is now roughly where it was when I in our society benefiting yet again from the Government’s inherited representation of the seat in May 2010. Youth policies. unemployment has been going up quite considerably in my town since the middle of the last decade, but in the Ben Gummer: I completely sympathise with what the last few months it has been going down again to the point hon. Lady says, and there is emotional merit in it, but we where it is just beneath the level it was in May 2010. are trying to get people into jobs. Here is where the Both of those figures show what has happened to Government have made a hard and difficult decision to long-term unemployment in that period, because long-term try to stimulate the economy. Many of us represent towns unemployment is considerably higher than it was in and communities that have had a lack of private sector May 2010 but that is as a consequence—the clue is in investment for many decades. That is the fault of several the name—of a general accrual of unemployment and Governments. The way to get private sector investment is youth unemployment over a long period from the middle not to penalise entrepreneurs and people who might want of the last decade. The Opposition were well intentioned to invest, but to try to free them up and free up the in what they tried to do, especially in breaking the back cash that they might wish to invest in my and of long-term unemployment, and they had some success others’ constituencies. in some areas. But we did not see the kind of revolution Before the hon. Member for Nottingham East rises, I we should have seen when the economy was operating want to cite the example of one entrepreneur in my at full capacity, when we had one of the longest booms constituency who runs a company employing several in British history and when they inherited some of the hundred people and who made specific representations best fiscal circumstances that any Government have to me about the 50p rate. It is a wholly owned company. inherited since the 19th century. She is not one of those mega-rich people who can get For the shadow Minister to say that he is giving us a round the 50p rate and the higher rate of taxation. She lesson on how to deal with unemployment is something is one of those people who is hit right in the middle of I object to in a small way. The people in my constituency the 50p rate and therefore has less money at the end of are suffering as a result of the poor policies and the the year to reinvest in her business and to grow it and failure to take those opportunities when the country employ more people. Her argument was: “You can take had more wealth than it has now. 50p from me out of every pound that I make”—of course, the marginal rate is far higher—“but, at the end Mr Marcus Jones (Nuneaton) (Con): My hon. Friend of the day, that means I have less to be able to build up sets out an extremely good point. Does he agree that the business and employ more people.” one of the other things that the Labour party did that contributed to the situation he describes was to allow Chris Leslie: If the hon. Gentleman were advocating immigration to go unchecked and uncontrolled? It reduced a strategy that was working, he would perhaps have the opportunities for people in constituencies like his. a case. However, in his constituency, the number of people who have been unemployed for more than a year The Chair: Order. I have been lax in ensuring that grew by 7% from April 2012 to April 2013. There are hon. Members restrict their remarks to the amendment. now 1,115 people in Ipswich who are in the long-term I hope that the hon. Gentleman will not respond to that unemployed bracket, which, incidentally, is more point. I hope he will keep his remarks more closely to than half of his majority of 2,079. His neck is on the the amendment. line. I would be very sad in some respects to see him Ben Gummer: The Opposition’s amendment states: lost from Parliament, although, obviously, I want a “The review shall assess the impact that alternative uses for Labour MP in Ipswich. We would wish him well, but revenues currently committed to pensions tax reliefs and exemptions he has to realise that more than half of the people for the additional rate of income tax could have on job creation represented in his majority are long-term unemployed for the long-term unemployed.” in Ipswich. 379 Public Bill Committee6 JUNE 2013 Finance Bill 380

Ben Gummer: I began my comments by saying I am 3pm very conscious of that. The clue is in the name: it is We heard about Middlesbrough, which has suffered long-term unemployment, largely as a result—a tale—of for so long from the lack of private sector investment. many years of slowly growing general unemployment That is true, but to get jobs back there, we need to do and a significant increase in youth unemployment, more of what the Government are doing by encouraging which has turned into long-term unemployment. The private sector investment, incentivising prosperity and Labour party is always keen—rightly so—to stress that share ownership. youth unemployment quickly translates into long-term unemployment. I am glad—apart from the fact that he is not a Conservative Member of Parliament—that the Andy McDonald: The hon. Gentleman is making hon. Gentleman represents his seat. I am sure that in some interesting points about skills, as did his colleague, doing so he will be pleased that, whereas youth the hon. Member for Wolverhampton South West. unemployment went up between 2005 and 2010 in his However, to have an honest discussion about how we seat by 76%, under the coalition it has reduced by 8%, can make progress, we need to say that times have so when he asks whether the policies of the coalition changed enormously over several decades. In my Government are working, the answer can be found in constituency, assistance could come from the public his own seat. sector with investment in our infrastructure. We are crying out for investment in our local rail James Duddridge: My hon. Friend is being grossly system. If we had a Tees valley metro, that would unfair on the shadow Minister, because there was a provide greater connectivity across that conurbation of period of time when he was not in Government. He was half a million people. There are skills issues and we are working out there in the private sector as a lobbyist. addressing those, but the process would be assisted enormously by public investment in our infrastructure to serve industry and our communities. Ben Gummer: Perhaps that is one of the reasons why, during the time the hon. Gentleman was not representing his seat, youth unemployment went up by 76% under Ben Gummer: I could not agree more with the hon. the last period of the Labour Government, and now, Gentleman; we need to invest more in infrastructure. It with the magic that has come with his new representation, is a pity that infrastructure spending reduced at a time it has reduced by 8%. when Government coffers were growing after 2002-03 The hon. Gentleman has asked, in all seriousness, and it is to this Government’s credit that that has been whether the policies are working, and there is proof that prioritised. they are. However, it will take a while to stimulate In my maiden speech, and since, I have made the entrepreneurship, to encourage investment, and to get point that we should go even further, cut current expenditure the kind of aspiration economy that we need in this as far as possible and invest that in capital budgets—the country. Chancellor has done that in every single autumn statement since taking office. It is a pity that Labour has consistently Paul Uppal: My hon. Friend is making a powerful voted against the Budgets put forward by my right hon. and pertinent speech. My constituency has a rich industrial Friend the Chancellor, where he has proposed just that. heritage, but many young constituents come to me and We are now in a position where we can put a little say that at so many points in the history of the constituency more into infrastructure, and I hope that we can do far they have been dependent on the public purse and more, but the turnaround in skills and education will whatever quango or mechanism. I think people are take many decades to complete. That must start now. looking forward to some aspect of private sector If we are to get jobs back into Middlesbrough, where entrepreneurship to provide a route out of the poverty we want to see a revival of the kind of brave, pioneering, that exists in so many of these industrial constituencies. industrial spirit that made that town out of a small fishing hamlet into the industrial marvel that it was in Ben Gummer: I, too, share an ex-industrial seat, which the 19th century and after, that will come not from has one of the proudest industrial heritages in the Government coffers, because the money is not there, country. Unfortunately, a large part of the industry was but from entrepreneurs in Middlesbrough and around purchased by the Labour MP, Robert Maxwell, who the world investing in that town and feeling that they quickly asset-stripped it, including the trophy cabinet will get a return out of it. Frankly, they can go anywhere for the football team. We are now in a position where else in the world to get a bang for their buck and they we do not have that, for various reasons—not just his will do so in Middlesbrough only if the incentive is poor management. All the reasons that we can adduce there in terms of pensions, income tax, dividends, capital for the decline of British industry since the second gains and everything else. world war were seen in part in Ipswich. It is through Labour Members may find that talk uncomfortable, private sector investment, however, that we see long-term but, in the end, the money will come only if the incentive sustainable jobs, because, even if we were to wish it is there. That is why I praise the Government for what otherwise, even if the Labour party were to win the next they are doing to help high earners to invest more in this election—I very much hope that it does not—it will not country. When the shadow Minister comes back with have the money to create public sector jobs in the way more amendments to the Bill, I hope that he does not that it did from 2002 onwards. That money will not be see that as an opportunity to do what his boss so often there, so it could not just grow public offices, especially does: to take the quick political turn rather than consider in the seats represented—I am sure very well—by Labour the long-term, detailed, sensible understanding of the Members. problems that face us, whether they be skills, mass 381 Public Bill CommitteeHOUSE OF COMMONS Finance Bill 382

[Ben Gummer] Pamela Nash: Is the Minister in a position to tell the Committee how many people have already benefited immigration or the education base. I hope that, rather from the cap being abolished? What has been the monetary than trying to attack the Government, he understands cost of that to the Exchequer? what we are trying to do. Sajid Javid: Which cap that has been abolished is the hon. Lady referring to? The Economic Secretary to the Treasury (Sajid Javid): I thank all hon. Members for their contributions in Pamela Nash: The tax relief—[Interruption.] Iwas discussing clause 48 and, in particular, the excellent, referring to the restriction on tax relief for those earning incisive speech by my hon. Friend the Member for more than £150,000, not that of £150,000—the previous Ipswich. tax relief that was abandoned in 2010. Clause 48, together with clause 47 and schedule 21, makes changes to ensure that the cost of pension tax Sajid Javid: I am not entirely sure what the hon. Lady relief is fair, affordable and sustainable. Before I turn to means. Perhaps she was referring to the policy that was the amendment tabled by the Opposition, it would suggested by the previous Government and that was perhaps be helpful to provide some background to the why she used the word “cap”. I assume that she was clause. referring to the proposal to cap the tax relief at 20%. For the same reasons discussed under the previous I am pleased that the hon. Lady raises that issue, clause for the lifetime allowance, the Government because I wish to highlight the accusation made by the announced, in the 2012 autumn statement, that we hon. Member for Nottingham East that what the would reduce the annual allowance from £50,000 to Government are proposing is more generous than what £40,000 for 2014-15 and subsequent tax years. the previous Government had proposed, although they did not have the time to implement it. I remind the The restriction to both annual and lifetime allowances Committee that the annual allowance was set by the protects the public finances by limiting the amount of previous Government in 2006 at £255,000. pensions tax relief going to the earners, and that is in line with the Government’s deficit reduction plans. David Mowat (Warrington South) (Con): Was that The changes made by the clause will reduce the £255,000? annual allowance for tax privileged pension savings from £50,000 to £40,000, effective from 2014-15 onwards. The restriction to the annual allowance is expected to Sajid Javid: Yes, £255,000 a year. That figure was set raise about half a billion pounds a year, impacting in 2006. I am sure that the hon. Member for Nottingham those individuals with the largest pension savings. At East is aware that, prior to 2006, there were various present, 99% of pension savers have annual pension caps for allowances that were determined through a savings of less than the reduced annual allowance of complex formula, but it is fair to say that the system £40,000, which still far exceeds average annual pension prior to 2006 was less generous. The introduction of the savings of about £6,000 each year. £255,000 cap in 2006 led to a landscape that was more generous for most pension savers. The impact of introducing Let me turn now to the amendment. The Government the allowance in the first place in 2006 was therefore keep all areas of the tax system, including the annual actually to provide more generous tax relief to the allowance and the associated lifetime allowance, under highest earners in society. That is probably not especially regular review. That is why we have decided to restrict well known; it is probably not very well known among the total amount of tax relief for individuals with the Labour Members. highest pension savings each year. When combined with The outgoing Labour Government’s proposal was a the reduction in the lifetime allowance under clause 47, cap of 20% of relief, but the hon. Gentleman will know the changes introduced under clause 48 are expected to that 20% of £255,000 is £51,000 of relief per individual. raise about £1 billion a year. Under this Government, the relief on £40,000 at the In 2009, the previous Government proposed restricting current top tax rate is £18,000, so Labour would have tax relief on pension contributions to 20% for individuals given away £33,000 more in tax relief to each of the liable to the additional rate. That would have introduced wealthiest individuals in society.I find the hon. Gentleman’s significant complexity into the tax system and damaged proposal completely bizarre. Like most things that come UK business competitiveness. This Government’s approach from the Opposition, it does not add up. of reducing the annual allowance and the lifetime allowance as a means of restricting tax relief on pension contributions Pamela Nash: I thank the Minister for giving way so has been consulted on widely and is recognised by that I can clarify my earlier interventions. My understanding industry as a fairer and simpler tax policy that is better was that those earning more than £150,000 were not for business and better for the UK economy than the eligible for full tax relief, but that the current Government alternative put forward by the previous Government. removed that provision in 2011. If that is the case, how The amendment would provide for a review of the many people have benefited from the change? impact of restricting relief at the additional rate, but I have explained why industry preferred the Government’s Sajid Javid: I think that the hon. Lady is referring to approach of restricting the annual and lifetime allowances. a proposal by a dying Government that was never As we will continue to monitor the policy, as is the case implemented, so it is incorrect to say that we abolished for all other areas of the tax system, I do not believe or changed it. I hope that she will also appreciate that that the proposed review is necessary. this Government are implementing an annual allowance 383 Public Bill Committee6 JUNE 2013 Finance Bill 384 of £40,000 rather than £255,000. Even if the £255,000 Sajid Javid: It is always good practice not to bring allowance put in place by the previous Government had our personal affairs into discussions of such important been restricted at 20% tax relief—which it was not, by matters of state. the way, but even if that had happened and we had The amendment mentions action on tackling carried out the previous Government’s proposals— unemployment, which was discussed at length, particularly individuals would receive £33,000 more in tax relief by the hon. Member for Edinburgh East and my hon. each year than they will under the scheme that this Friend the Member for Ipswich. In an intervention Government are putting into practice. before he made his speech, my hon. Friend made the good point that, under every Labour Government, unemployment has been higher on their leaving office Chris Leslie: As usual, the Minister is throwing a bit than on their entering it. That is absolutely correct. I of dust in the air by—if I may mix my metaphors— can confirm that unemployment was 1.65 million when comparing apples with pears. He is quoting figures the previous Labour Government entered office in 1997, from an era before the global financial crisis, as though yet it had risen to 2.48 million—an increase of more nobody would have looked at the revenue arrangements than 700,000 people—by 2010. from 2008 onwards. It is a completely crazy comparison. I want the Minister to listen to the question that I am Chris Leslie: Will the Minister illuminate us about asking. As my hon. Friend the Member for Airdrie and whether there has been an increase or a decrease in Shotts asked, how many people are benefiting from the long-term unemployment in the constituency of 45p rate? [Interruption.] Shall I repeat the question? Bromsgrove in the past 12 months? How many individuals are benefiting from the 45p rate of tax relief under the proposal—not the 40p tax relief rate, but those who will gain 45p tax relief under the Sajid Javid: I can illuminate the hon. Gentleman of current arrangements? the fact that the constituency of Bromsgrove has one of the lowest levels of unemployment in the country; it has been going down for months. I can also illuminate him Sajid Javid: First, I remind the hon. Gentleman that of the fact that my hon. Friend the Member for Ipswich the financial crisis began in 2007, and that the annual was right to point out that youth unemployment in the allowance was a lot higher in 2007 than it is today, and hon. Gentleman’s constituency during the last term of than what the Government are proposing—[Interruption.] the previous Government rocketed by 76%, but it is If he has forgotten when the financial crisis actually down by 8% since this Government came to office. That started, I worry about some of the amendments that he equally applies to the constituency of his fellow Opposition is putting forward. spokesperson, the hon. Member for Kilmarnock and Loudoun, where the figure went up by 60% under the On the question about the higher tax rate, the previous Government, but has come down by 7% under Government have already been very transparent—far this one. more transparent than the previous Government—and published our analysis of the reduction of the higher The hon. Member for Edinburgh East, who talked so tax rate from 50p to 45p. The important thing is that we much about the importance of tackling unemployment believe in a tax system that taxes the wealthiest the and north-south issues—she is right to look at regional most, but involves taxes that they actually end up variations—did not highlight that during her party’s paying. last term in office, youth unemployment in her constituency went up by 70%, but is down 8% under this Government. That equally applies to the constituency of the hon. Paul Uppal: My hon. Friend has cited some truly Member for Middlesbrough, who also intervened on shocking figures. We referred earlier to our friend John the importance of unemployment, where the figure Mills, who has given out £1.5 million of shopping went up by 58% during the Labour Government’s last channel shares. Perhaps his motive was the allowance term in office, but is down under this Government. that we are discussing, and perhaps he wanted a return to the previous allowances that the Minister mentioned. Sheila Gilmore: The problem with the Minister picking out those dates is that we have had an economic recession. During the vast bulk of the Labour Government, Sajid Javid: My hon. Friend makes a good point. unemployment in Edinburgh was on a downward Under Labour’s regime, individuals such as the one he trajectory—it fell—which was a very good news story. mentioned would have been able, if their income was high enough—I have no doubt that that individual’s Sajid Javid: The hon. Lady talks about the recession. income was—to save more than £100,000 in tax by As we are learning, there has been only one recent utilising Labour’s annual tax allowance. Most bankers recession in this country, and that was when her party’s in the City were no doubt using the allowance that Government were in office. Importantly, if she analyses Labour had generously given them, but the Opposition the figures carefully, as I am sure she does for her now turn round and pretend that that was somehow constituency, she will find that youth unemployment wrong. began to rise significantly, and not just in her constituency, before the last recession—the largest peacetime recession 3.15 pm in British history—which began under Labour. It rose by more than 70% throughout the country between Chris Leslie: I wonder whether the Minister has personal 2005 and 2010, and that is why this Government will experience of using those generous tax allowances. Did take no lectures from the Opposition on how to tackle he use them before coming into Parliament? unemployment. 385 Public Bill CommitteeHOUSE OF COMMONS Finance Bill 386

Pamela Nash: I am sure that the Minister remembers, unemployed. We have introduced a £1 billion youth like the rest of us, that the recession was global. Is he contract to support 50,000 young people in employment blaming the Labour party and the Labour Government and education, and we have introduced a more flexible for a recession throughout the world? JSA regime to support jobseekers in their search for employment. Sajid Javid: Clearly there are global elements to what Under this Government, since the first quarter of happens in the British economy, but I do not hear much 2010, more than 1.25 million new jobs have been created from the Opposition about the impact of the eurozone by the private sector. and other global elements on the British economy over the past three years. They choose to make things global when talking about their time in office, but when they Sheila Gilmore: The Minister consistently gives us talk of this Government, they think that everything is these figures. One of the many interesting things about domestic. It is relevant that during the last term of the the figures is that as early as January 2011, the Government previous Government, youth unemployment in the hon. were telling us that 500,000 new private sector jobs had Lady’s constituency went up by 139%—it is hard to been created, which, even if the 1.25 million figure is believe that figure as I look at it; I thought it must be a correct, suggests that the rate of creation has in fact mistake, although I believe it is not—but under this slowed down. Many economists have argued that the Government it is down. 500,000 jobs created by January of 2011 were a result of the economic stimulus applied by the previous Government. On top of that, the Minister fails to take into account Paul Uppal: It often suits Opposition Members to use the jobs that have been transferred from the public the global argument. However, to recall that period sector into the private sector, the 100,000 people on between 1997 and 2010, the Chancellor talked about unpaid work experience or the fact that many of the golden economic rules and his love affair with prudence. jobs have very low hours. When he kicked prudence out of the door, started bending those golden economic rules and steered away from Conservative spending plans, we saw the inheritance Sajid Javid: If I understand the hon. Lady correctly, they bequeathed us. she is suggesting that 1.25 million new private sector jobs since the first quarter of 2010 is not enough and Sajid Javid: As always, my hon. Friend makes an she wants more. I would like to see more, but I thought excellent point with which I agree wholeheartedly. that she would welcome the fact that it is a near-record I can bring together two elements regarding the rate of job creation—one of the fastest rates of job amendment and the discussions we have had on creation that Britain has ever seen in the private sector—a unemployment. I have highlighted—and, I hope, made faster rate of job creation than any other G7 country clear to the Committee—that while the previous last year and almost the highest number of people that Government were making annual allowances more generous this country has ever seen employed in the private in 2006, unemployment was soaring in this country. We sector. must look at the actions of the previous Government when we analyse their policy recommendations now. Youthunemployment was rising significantly from 2005 Ian Mearns: The Minister has reiterated the oft-quoted to 2010 onwards, up more than 70%. figure of 1.25 million new jobs. Every job is welcome, but I would like clarification on the full-time equivalence While youth unemployment was soaring the previous of those 1.25 million jobs. Government were busy seeing how to increase and make more generous annual pension allowances. It is shameful. If the hon. Gentleman wants to rise to apologise, Sajid Javid: I noted that point when the hon. Gentleman I will gladly accept the apology. raised it earlier. I respect the fact that it is something he cares about and I was about to respond. I do not have Chris Leslie: I want to put the Minister on notice that the breakdown between full-time and part-time, but the I will write to the chairman of the UK Statistics Authority. ONS publishes the numbers, so if he looks at its website, We have already seen a series of Ministers who have I am sure that he will find the information easily. If he unwittingly misled Parliament or the public on these has any trouble doing that, I will be happy to provide matters. I am sure that is not the Minister’s intention, him with the numbers. I am confident that the vast but I suspect he is mistaken in his use of statistics and I majority of the jobs in the figure I quoted are full-time, will let him have a copy of the reply that I receive. but it is important to point out that there is nothing wrong with part-time jobs. Many people up and down the country prefer part-time work to full-time work. I Sajid Javid: I welcome scrutiny, which was very know that he is making a legitimate inquiry about the unwelcome to the previous Government. I look forward breakdown. I am sure that he respects the fact that to receiving a copy of the reply received by the hon. many people prefer the flexibility that comes with part-time Gentleman. Perhaps if it corroborates the numbers that work, and many women in particular prefer part-time I have used, the hon. Gentleman will stand and issue an employment. apology in this Committee for even questioning the numbers that are coming from the Treasury. The Government are determined to help those seeking Ben Gummer: I cannot recall the precise figure either, employment. We have already heard references to the but I remember from the most recent ONS survey that Government’s Work programme, a £3 billion to £5 billion part-time jobs are converting to full-time jobs at the payment-by-results support programme for the long-term fastest rate since figures began. 387 Public Bill Committee6 JUNE 2013 Finance Bill 388

Sajid Javid: I thank my hon. Friend. I was not aware deliver than that of the previous Government, and it of that information, but I welcome that news and shall leaves the vast majority of pension savers unaffected. I use it in debate in future. therefore ask that the amendment be withdrawn and that the clause stand part of the Bill. Sheryll Murray (South East Cornwall) (Con): Does my hon. Friend agree that a lot of people are in part-time Chris Leslie: That was an interesting speech from the employment, as I was before I came to this place? It Minister. I do not disagree with the proposal to reduce gave me the opportunity to serve my community as a the annual allowance to £40,000, and I am glad that he local councillor, which was a good thing. A lot of accommodated in his response some of the issues that people benefit in that way from part-time work. relate to defined-benefit schemes. I disagree very strongly, however, with the Government’s decision to opt for tax Sajid Javid: My hon. Friend makes a good point. relief of 45% on pension contributions for people earning Part-time work and the flexibility it offers allows many £150,000, at a time when such money could help the people the opportunity not only to enter public service, many people who are suffering from acute long-term as she did, but to dedicate their other time to good unemployment. Given that every single Member on the causes, such as charities, in their locality, as I have seen Government’s Front Bench has seen an increase in in my constituency, and I am sure that happens in all long-term unemployment in the past 12 months, I would constituencies. have thought that they would, at the very least, have taken the more reflective attitude, perhaps, of the hon. Ian Mearns: I accept entirely that many people in the Member for Ipswich. I think he recognises that there is general population who are lucky enough to be in work an issue to address, but he is clearly struggling under the relish the chance to have a part-time job. I hope that the burden of ideology that shackles his party in so many Minister will accept that significant numbers of employed ways. One of these days, he will break free from that, people are, regrettably, underemployed. Part-time work and take a more moderate mainstream perspective. is not in tune with their wishes, because they would The need to tackle long-term unemployment is clear, prefer to work more hours. and we know that there is resource that would be better committed to doing that. My hon. Friends have spoken Sajid Javid: The hon. Gentleman makes a good point. eloquently of the fact that action is available to be taken There are clearly people who are underemployed. That if only the Government would listen, not just to the is a tragedy wherever it occurs, and the Government advice of the Opposition but to that of the International have put in place their various work programmes and Monetary Fund and other institutions that have other assistance to do everything they can to help the recommended a focus on tackling long-term unemployment. rate of job creation and to create full-time employment, where that is required by individuals. Stephen Doughty (Cardiff South and Penarth) (Lab/ Co-op): Did my hon. Friend not find it strange, as I did, 3.30 pm that, given its failures, the Minister was lauding the Before I conclude, I want to touch on the point about Work programme as part of the package? In Wales, the the impact of the annual allowance on individuals with Jobs Growth Wales scheme has been up to eight times defined-benefit pensions. As we know, the vast majority more successful than the Work programme, and it was of people with defined-benefit pensions are in the public welcomed by the Chief Secretary to the Treasury himself. sector, but we estimate that about 1.9 million people in the private sector also have such pensions. Some 99% of Chris Leslie: For it is he, the Chief Secretary, who public sector workers have pension savings of less than sometimes takes a different view on these matters from £40,000 a year, so it is fair to say that the vast majority other Treasury Ministers, even if he is one of the most will not be affected by the change in the annual allowance. conservative Liberal Democrats I have come across in The Government recognise, however, that the restriction my time. Maybe he is on a journey of his own, although of relief may create challenges for members of final long-term unemployment possibly beckons after the salary schemes because of how promised benefits are general election. But I digress. He may well benefit from valued in some of the schemes. Individuals may, therefore, the support that we think can be put in place by carry forward unused annual allowances from up to changing the priority from a tax relief for the highest three previous years, which limits the impact of unusually earners in society. It would be perfectly feasible for this large accruals—from bonuses or promotions for example— review to focus on those sums of money and look at job and provides protection for most people on moderate creation for the long-term unemployed. Although I do incomes. not oppose the clause as it stands, we do support My hon. Friend the Member for Rochford and Southend amendment 14, and I would like to test the view of the East asked the related question about whether there was Committee on it. a difference in tax treatment between public and private Question put, That the amendment be made. defined-benefit schemes, and I can confirm that there is no such difference. The Committee divided: Ayes 8, Noes 17. At a time when the public finances are under pressure, Division No. 5] it is right that we take action to ensure that pensions tax relief is fair, sustainable and affordable. By restricting AYES the level of the annual allowance to £40,000, the Ashworth, Jonathan Leslie, Chris Government are creating what they believe is a more Doughty, Stephen McDonald, Andy appropriate level of tax-privileged saving for retirement. Gilmore, Sheila Mearns, Ian That approach is far less burdensome for industry to Jamieson, Cathy Nash, Pamela 389 Public Bill CommitteeHOUSE OF COMMONS Finance Bill 390

NOES defer a decision on their annuity until new rules were Baker, Steve Mowat, David finalised. In July 2010 the Government launched a Duddridge, James Murray, Sheryll consultation about annuitisation, in which they stated Gauke, Mr David Newmark, Mr Brooks that they wanted to increase flexibility while ensuring Gummer, Ben Offord, Dr Matthew that people did not exhaust savings prematurely in Javid, Sajid retirement and fall back on the state, or use pension Pugh, John Jones, Mr Marcus savings as a tax-privileged means of passing on wealth. Kwarteng, Kwasi Stephenson, Andrew We do not disagree with that goal, because it is important Menzies, Mark Thornton, Mike to ensure that individuals cannot deplete their pension Mills, Nigel Uppal, Paul savings and fall back on the state. However, the Government’s proposals, unwittingly, Question accordingly negatived. would have severely reduced the amount of income that Clause 48 ordered to stand part of the Bill. pensioners who were affected would have been able to claim. In response to the consultation, the Government Clause 49 proposed to reduce the maximum withdrawal through the draw-down from 120% to 100% of comparable DRAWNDOWN PENSIONS AND DEPENDANTS’ annuity levels, and to review the situation occasionally. DRAWNDOWN PENSIONS A great deal of concern was voiced by those who would Question proposed, That the clause stand part of the have been affected by the proposal, which resulted in Bill. the Chancellor’s U-turn in the 2012 autumn statement. Clause 49 returns the capped draw-down limit level to 120%. Clearly, the proposal has caused many people a Chris Leslie: We now come to the question of draw-down lot of frustration, and the change would have had a pensions, one of the lesser spotted U-turns that the considerable impact on the annual income levels of Government have made since their omnishambles Budget. some pensioners. The Government’s change of heart is It is a welcome U-turn, but a U-turn nevertheless. It therefore welcome. comes on top of a number of changes of mind that the Government have had. We welcome the change, but it has caused significant stress, anxiety and problems for 3.45 pm those who have had to grapple with or consider the I want to ask the Minister some questions about the mess that the Government have made of pensions planning, clause. Why has HMRC historically focused the comparable in particular for individuals thinking about how to annuity amount at 120%? What is the logic for picking make ends meet in their remaining years of retirement. that figure? I understand that the Government needed Although this issue is relatively complicated, the Treasury to change their mind because the 100% figure caused ought to have got it right in the first place when it great anxiety, but can he explain why 120% was chosen? decided in April 2011 to decrease the draw-down limit Is the settlement long term? Where are we on the review to 100%. It has now reversed that decision. cycle? We know that the Government plan to review the Savers with defined-contribution pensions have two situation every so often. It would be quite useful if he main options when they want to use their pension pot could reiterate where we are. Are we back to this situation to generate an income and a lump sum: they can either now for at least three years? Is HMRC intending to buy an annuity that provides an income for the rest of look at the matter again in three years’ time? Does the their lives, or they can opt for income draw-down, Minister now admit that the Government made an where they withdraw from their pension pot but leave error with that decrease to the 100% level? Can he at the bulk of the money invested. The Government estimate least explain to the public what went wrong and why the that 200,000 people have draw-down arrangements and Government made that particular choice? Will he at 7.9 million people have defined-contribution pension least take the opportunity to apologise to those who funds. have been affected by this particular change and recognise The amount of money that can be withdrawn by an that it was the wrong thing to do? individual who is not eligible for draw-down is set by A smaller but none the less significant set of questions the pension scheme administrator, based on figures relate to draw-down and pensions. May I ask the produced by the Government Actuary’s Department Minister—this might be something he will want to write and based on the yields for 15-year UK gilts as reported to me about, as I have not given him notice of the by the FTSE UK gilts indices. The fall in gilts, combined question—about individuals who suffer from serious with the reduction from 120% to 100% of comparable illnesses and who are in need of particular pension annuity incomes, has resulted in some maximum draw-down provision because they might have a life expectancy of amounts falling by 40%. Many campaigners have therefore 12 months or less? A number of representations have been calling on the Government to increase the withdrawal been made to me and to other members of the Committee limit back to 120% of comparable annuity levels—that on the matter. If life expectancy is less than a year, and a is what we are talking about in percentage terms—and recognised medical practitioner confirms the medical remove the link between gilt yields and maximum income details, pension benefits can be paid out as a serious draw-down calculations. The Government eventually illness lump sum payment, so it is a draw-down of sorts. relented, which is why clause 49 exists. Those lump sums are often needed to provide for people As many hon. Members will be aware, concern has in their last years of life, or to ensure that they do not existed for a long time about annuity levels. The requirement leave their families with debt. for compulsory annuitisation by the age of 75 was However, if a person is projected to have more than removed, and temporary measures in the Finance Act 12 months but less than five years to live, the annuities 2010 allowed those who turned 75 after 22 June 2010 to are usually bought and therefore there are fewer options. 391 Public Bill Committee6 JUNE 2013 Finance Bill 392

Lump sum payments may be just as crucial for people Sajid Javid: I was turning to the hon. Gentleman’s in those horrendous situations. As we know with specific questions. He used the term “U-turn”, but the employment and support allowance, there are medical only recent U-turns I recognise are those performed by circumstances in which, sadly, some people know about the Opposition. The clause and the changes we are their low life expectancy, but they may have more than that talking about are not a U-turn, because the cap has 12-month period left. In those horrendous circumstances, increased to 120% for all ages, whereas the age-related lump sum payments can be just as crucial, so does the restrictions imposed by the previous Labour Government Treasury have any plans to look at that particular set different caps for different ages. This policy is not boundary level timing? Will the Government consider the same as the one in existence before, so it is not a extending the provision of serious illness lump sum U-turn. To further answer his question, the policy reflects payments to people who have terminal illnesses but a changes that have taken place in the gilt market and in life expectancy of, say, three years? It would be possible other investment returns. It is appropriate for the to limit the availability of those lump sums to those Government to keep tax policy under review and make with modest pension funds. They will obviously be in changes where it is considered appropriate. desperate need. I do not have information of the costings involved, but obviously I do not wish to incur any cost to the Exchequer. Some insight from the Minister’s Chris Leslie: Let me get this absolutely clear: is the officials on such matters would be extremely useful, Minister saying that this was always part of the plan? because they are, sadly, of concern to a large number of people. I will be more than happy for the Minister to write to me on that matter. Sajid Javid: What the Minister is saying is that we always keep tax policy under review to ensure that it is appropriate for the circumstances. When the circumstances Sajid Javid: Clause 49 raises the annual withdrawal change, especially those in the markets—the hon. limit on the income individuals can take from their Gentleman will know that the Government do not set draw-down pension fund. It increases the limit to 120% gilt yields and investment returns in general—we look of the value of an equivalent annuity. In the Finance at the policy and ensure that it is appropriate and Act 2011, the Government reformed the rules surrounding consistent with its original intentions. This change reflects draw-down policy to improve flexibility for individuals that. while ensuring that pension savings provide a sustainable income over their lifetime. Chris Leslie: What market factor was so significant Before April 2011, those aged under 75 could withdraw between 2011 and 2013 that it justified this change of 120% of the value of an equivalent annuity, and those heart? aged over 75 could withdraw only 90%. Individuals also face an effective requirement to purchase an annuity by the age of 75. The Government removed the restrictions Sajid Javid: Since 2011, a range of factors have by making income draw-down available throughout the affected draw-down rates, such as the gilt yields. I am whole of an individual’s retirement with a single annual sure that the hon. Gentleman can see for himself the withdrawal limit. That single limit was set at 100% of an changes in gilt yields and investment returns since we equivalent annuity to ensure that people did not prematurely introduced the last change. Those factors have exhaust their draw-down funds, and for simplicity. combined with the change in the annual withdrawal However, in the short term other factors have affected limit to reduce an individual’s total draw-down income. draw-down and annuity rates, such as gilt yields and The changes in the clause will help mitigate that other investment returns. Those factors have combined impact. with the change in the annual withdrawal limit to The hon. Gentleman also raised the issue of individuals reduce significantly flexibility and individuals’ pensions suffering from serious illness. He talked not just about in a way that was not intended under the Finance Act individuals who may be in the last 12 months of their 2011. life, but those in the last two to three years—still serious Clause 49 raises the annual limit of capped draw-down conditions for individuals that have them. So far, I have pension arrangements to 120% of the value of an not received many representations on that, but it is a equivalent annuity. That will benefit around 500,000 good point. Any Government should have an open individuals in draw-down arrangements. The higher mind and ensure that the rules are sensible and annual limit applies to all new draw-down pension practical enough to help individuals in such situations. years starting on or after 26 March 2013 and applies to He kindly invited me to write to him, furnishing him both existing and new draw-down pensioners. In general, with more information on some of the representations the Government’s decision has been welcomed by pension and on our current approach, and I will take him up on providers and pensioners. that. Before I conclude, I will turn to a couple of the In conclusion, the Government recognise that exceptional specific issues the hon. Gentleman raised. factors have reduced the amount of income available to pensioners in draw-down arrangements in recent years. Raising the draw-down limit to 120% will increase the Chris Leslie: It is the words “before I conclude” that amount of income available each year to individuals bring me to my feet. I cannot let the discussion of the with draw-down arrangements and provide greater decision on draw-down pass without asking the Minister flexibility. a straightforward question: do the Government regret deciding to go to 100%? They are having to change their Question put and agreed to. mind. Does he regret that? Clause 49 accordingly ordered to stand part of the Bill. 393 Public Bill CommitteeHOUSE OF COMMONS Finance Bill 394

[Sajid Javid] The tax rules require that a scheme pension must be payable for life and must not reduce, apart from in Clause 50 specific circumstances; this is one of those circumstances. Currently, legislation allows the pension to be reduced BRIDGING PENSIONS if the individual is aged between 60 and 65, 65 being the Question proposed, That the clause stand part of the existing state pension age. However, the state pension Bill. age is increasing, and if no changes were made bridging pensions for individuals whose state pension age is 66 or older would have to reduce before the individual’s state Chris Leslie: Clause 50 enables a registered pension pension age in order to comply with the tax rules. That scheme to continue to pay a bridging pension until a would mean that the pensioner would face either an member reaches state pension age. That is where the unintended gap in their level of retirement income or an issue becomes quite interesting, because it relates to the unintended tax charge on their pension. choices made about the state pension age by the current and previous Administrations. Previously, a bridging The hon. Gentleman asked whether the measures pension had to be reduced by the age of 65. were related to the change in the state pension age; that is correct. He also asked about proposed changes by the A bridging pension is a supplementary pension paid Department for Work and Pensions to the state pension by an occupational pension scheme to a member who age; they would necessitate a further review of this retires and starts drawing a pension before reaching legislation to make sure that it achieves the purpose that state pension age. Bridging pensions are designed to I have set out. The changes made by clause 50 will ensure that members receive a regular income from the enable schemes to pay bridging pensions to members date they retire. When the member reaches state pension until the state pension age where that is later than the age, their pension is reduced by the amount of the state age of 65. The change is supported by industry as well pension. I think that clause 50 is designed to try to align as by individuals who would be affected. the tax rules on the payment of bridging pensions with the DWP changes to the state pension age. Will the Before I conclude, the hon. Gentleman also asked Minister confirm that that is indeed the intention? about consultation. I can confirm that the clause was subject to a two-month consultation period, during The clause means that schemes that continue to pay which we received two responses from the pensions bridging pensions will not face an additional tax charge industry.The responses raised concerns about the technical as a result. However, it does not force schemes to interaction of the new legislation with the existing continue to pay bridging pensions. It will have effect in pensions tax rules. Those concerns were found to be relation to bridging pension payments made on or after without basis. 6 April 2013. Although it is a relatively uncontroversial proposition, will the Minister say what representations The measures ensure that the rules for bridging pensions he has received on it? What were the views expressed in keep up with changes in the state pension age and allow the consultation, which I think was a while back now, in pension schemes to continue to provide their members 2011? with a bridging pension from retirement to state pension age without a gap in the level of income for pensioners. Will the Minister also set out the estimated cost to businesses of the policy change and its administration? Question put and agreed to. Clearly there is a changing picture in relation to the Clause 50 accordingly ordered to stand part of the Bill. state pension age—it is not fixed, and a number of changes have been set out by not just the previous Administration, but the current Government. I would Steve Baker (Wycombe) (Con): On a point of order, be grateful if the Minister could help on those Mr Amess. I have learnt this afternoon that one member administration issues and on the costs to businesses that of the Committee will tonight be celebrating 30 years as have to host such pensions. a Member of Parliament. Would it be in order for the Committee to give you, Mr Amess, our very best wishes Sajid Javid: Clause 50 makes changes to align the tax for your celebration tonight? rules on the payment of bridging pensions with the changes to the state pension age. Bridging pensions may be paid by some pension schemes when an individual The Chair: Although that is not a point of order, it is starts receiving a pension before they reach state pension an extremely nice thing to say and I thank the Committee. age. The idea is that where an individual retires at, say, Ordered, That further consideration be now adjourned. the age of 60, their pension is higher at the outset to —(Brooks Newmark.) compensate for the absence of a state pension. When the individual reaches state pension age, their scheme pension is reduced by approximately the level of the 4.1 pm state pension, providing a level income throughout their Adjourned till Tuesday 11 June at ten minutes past retirement. Nine o’clock.