Finance (No. 2) Bill — House of Commons, 2017-12-11
Topic: Macroeconomics
Gareth Thomas (Labour, Centre-left): I would always commend the work of a Committee chaired by my hon. Friend the Member for Leeds West (Rachel Reeves), and if the hon. Lady agrees with my hon. Friend, I welcome that. I commend the Government for setting up the Taylor review in the first place, but we clearly need radical measures to tackle the problem that it identified The context to my second broad point is that in all but a handful of cases, the major players in markets—particularly markets where there are fewer businesses operating—are plcs, owned by shareholders in the UK and abroad. Too often regulators treat this business form as the default, whereas in other European countries markets have a mix of plcs, publicly owned businesses, co-operatives, mutuals and social sector firms How might the Government use this Finance Bill to rectify those two broad problems? First, I hope that Ministers will find the courage to recognise that if productivity is to improve, workers and staff will have to drive that change. Basic measures such as a significantly higher living wage are essential, as is creating disincentives for businesses to opt for Uber-style employment practices. At the moment, there is too often too little incentive for the employee to go the extra mile, as they are unlikely to benefit directly from the extra profits that innovation and higher productivity might deliver This Finance Bill could have been the moment for that to change, and indeed even at this late stage I hope it will be, so let me offer the Minister the example of France, where businesses with 50 employees or more have to set aside 5% of their profits as a reward for their staff. If those who are helping to generate profits know they are going to share in them—if they know it is not just the chief executive and the rest of the executive team who are going to benefit—their motivation and commitment to helping the business prosper might just be a little stronger I was interested in the comments of the hon. Member for North West Hampshire (Kit Malthouse)—who, sadly, is no longer in his place—because I share his view that businesses in which employees have a say and a stake tend to be more productive; they tend to be better at incentivising their staff and channelling workers’ ideas and talents. Indeed, a 2007 Treasury review found that employee ownership can boost productivity by as much as 2.5% over the long run. So, as the hon. Gentleman asked, why are there no further tax incentives to encourage genuine employee share ownership The Government should revisit the idea of compulsory employee representatives on company boards, mirroring the success of Germany and Sweden, where employees have sat on boards for decades. Given that the idea was in the Prime Minister’s personal manifesto when she ran for leader of the Conservative party and that a significant number of Conservative MPs backed that manifesto, and given that we on the Opposition Benches support employee representation on boards, I suggest that there is a majority in the House willing to vote for such a measure if only the Government could find the courage to act. Why not, at the very least, have more favourable tax treatment for firms that are employee-owned? The hon. Gentleman also touched on that point extremely well Ministers must also overhaul the regulation of markets and recognise that key markets have become too uncompetitive and, in a number of cases, oligopolistic. This Bill could have begun the process of changing that. Let me give two examples. Banking and energy have both had highly critical regulator investigations, noting the lack of innovation and the excess profits in crucial consumer markets. Where is the commitment to create diverse and vibrant markets in those areas, with the plc model no longer favoured over other business forms such as building societies, mutuals and co-operatives? I suspect that regulators know that there simply is not the political will on the Treasury Bench to confront the Institute of Directors’ insistence that big plc businesses know best The Social Market Foundation is not necessarily a think-tank that we on these Benches would reach for first when it publishes a report, but it has recently produced an interesting interim report on the lack of competition in key markets. The Innogy/SSE merger is just the latest example in the energy sector of the trend towards even more uncompetitive markets. If it goes ahead, it will lead to two big firms dominating the energy market. It should be blocked by the competition authorities, and it would be good to see Ministers encouraging that to happen. We also need a new generation of energy co-operatives, mutuals and municipal businesses encouraged to put consumers in the driving seat in the energy market, holding real economic power in that market, and keeping the profit from the generation of energy in local communities In many industries there are, in theory, ombudsman services, able to support consumers to seek redress from large businesses offering poor customer service. In practice, such ombudsman services often have limited powers and limited ability to enforce any redress they suggest. What is needed now is a proper champion for consumers, with the teeth to hold businesses to account. A consumer ombudsman with class-action powers and the information-gathering ability to match has always been opposed by big business groups in this country, but it is needed to help the consumer stand up to powerful big businesses when their concerns are ignored I draw the Committee’s attention to the case of the consumers taking action against Bovis Homes for shoddy building work, which has recently attracted some media attention; they are having to crowdfund the funding for court action. If there was a strong consumer ombudsman, those people who have moved into Bovis homes that are badly in need of further work would not be having to raise their own funds; instead, they could have turned to that ombudsman to take their case forward The truth is that markets need robust competition, and big plc businesses need strong challenges from other types of business. When 85% of all current accounts are held in just five big banks, of course it is no surprise that the regulator should find that there is not enough innovation in the retail banking sector. I therefore gently ask Ministers why they are committed to a long-term future for RBS as just another private sector bank. Why not turn it into a mutual, or a new building society, to challenge what would then be just four privately owned plc-style businesses Why are we not learning from the USA and Germany in encouraging more regional, mutually owned savings and investment banks that are focused on driving long-term investment—perhaps the patient capital that the hon. Member for North West Hampshire referred to—rather than on short-term dividends for shareholders, which are then used to justify ever-higher levels of executive pay? With sub-prime lending on the rise, and with the UK having the largest and fastest-growing consumer credit market in Europe—mostly, sadly, in high-cost options—it is difficult to understand why Ministers and regulators alike do so little to champion responsible finance operators such as community banks and credit unions On the point about credit unions, I welcome the limited moves in the Budget to help credit unions to expand, but I wonder why Ministers are not considering a wider package of reforms of the objectives and powers of credit unions, to allow for more innovation in services and in particular to enable them to provide a full retail banking offer, including in areas such as insurance and secured car lending. Why is there not more help for credit unions to market their low-cost credit offer to ordinary working people? If the Treasury were minded to take such action, that would bring UK credit union legislation into line with best practice in America, Canada and Australia. As the balance within the financial markets shifts farther and farther away from unsecured personal loans and cash savings, credit unions need the freedom to be able to rework their offer, and, as I understand it, legislation would be necessary to enable that to happen. I therefore encourage the Minister and his colleagues to consider that question sympathetically Lastly, I want to raise the issue of funding for public services. Sadly, there was no mention in the Budget of extra resources for policing. In my London borough, we have seen a reduction of 170 police officers since 2010. The recent terrorist incidents, which the whole House is familiar with, and the concerns of senior police officers that more resources need to be put into community policing—to ensure, among other things, that intelligence can be obtained about future attacks—should surely have prompted the Treasury to make additional funding available for policing.