Dame Harriett Baldwin
MP for West Worcestershire · Conservative · United Kingdom
“I welcome the Chancellor to his new role. I paid close attention yesterday to the long speech he made to reset the narrative and drive growth Britain. In paying tribute to his predecessor, will he recognise that she left the highest tax burden on record? Instead of postponing the words he could utter to my hon.”
“I welcome the new Prime Minister to the Dispatch Box. I note that in his statement he referred to the biggest issues facing the country as being “the economy and the cost of living crisis”. Will he accept that one of the things that has damaged our economy and caused prices to be higher is the tax-and-spend Budget in November 2024?”
“Could the Leader of the House make a commitment that the new Chancellor of the Exchequer will come to the House on the first day we are back from recess?”
“With a stroke of his Whitehall pen, the Secretary of State has just abolished Malvern Hills district council, Worcester city council, wonderful Wychavon district council and Worcestershire county council. He said in his statement that this is about making “real improvements to people’s lives and…communities”.”
“In recent weeks in West Worcestershire, I have met local police and the police and crime commissioner; the police and crime commissioner is being abolished, and the police are being reorganised. I have met the local health commissioners; they are being reorganised, and Healthwatch is being abolished.”
“Will the Leader of the House confirm that, given that the other place is sitting next week, there is nothing to stop him tabling a business statement to enable this House to sit next week? Given the enormity of the events happening in the Government next week, does he not think that would be a good idea?”
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“Mr Speaker, you were kind enough to grant me a debate in Westminster Hall yesterday on the regulation of independent financial advisers, which was extremely well attended by colleagues and generated an enormous amount of interest nationally. Will the Leader of the House consider holding a debate on the important topic of the regulation of the Financial Services Authority, and its performance against statutory objectives?”
“It is a great pleasure to serve under your chairmanship, Mr Caton. I hope the Minister will forgive me for holding this debate on a day when he probably has quite a few other things on. As he knows, however, such debates are a bit of a lottery, and I was not expecting mine to come up today. According to the Library, this is the first time that the regulation of independent financial advisers has been debated in a Chamber of the House, and we have to ask why. Colleagues on the Treasury Committee discussed the topic yesterday, and I have put my toe in the water by asking for a 30-minute debate today. Given the interest that I have encountered in the issue—I have had a binder full of correspondence since the debate was announced last Wednesday—I anticipate that this is not the last that we will hear of it.”
“With auto-enrolment beginning in a few years’ time, people will also have to decide whether they need to opt out. Many younger people will leave university with student loans. Many older people will need to buy annuities or to make arrangements to pay for long-term care. All those transactions require some financial advice.”
“Yes. I thank my hon. Friend for that suggestion and I would be delighted to support it. IFAs are regulated by the soon-to-be-abolished Financial Services Authority, the independent statutory regulator set up by the previous Government. Banking supervision is to return to the Bank of England, while many other regulatory functions will go to a new consumer protection body. Thus, this seems an opportune time for the House to debate some of the implications of those policies and some of the functions involved. Fewer people are benefiting from defined-benefit pension schemes. More individuals are being asked to contact an IFA to obtain advice. Many will receive lump sums from an inheritance or perhaps a redundancy payout, and they will need professional advice to make the most of them.”
“There are indeed advantages, and I thank the hon. Gentleman for his helpful intervention. He obviously has a lot of experience of dealing with the sector. It is estimated that there are about 45,000 IFAs in the country, many of whom are sole traders.”
“Like banks, they have mis-sold high-income precipice bonds. Often, they have sold products that simply performed badly or carried high charges. There is no doubt that the industry’s reputation could be improved.”
“I thank my hon. Friend for that interesting intervention. I shall come to precisely that point in a moment. The market for financial advice suffers from comparatively low consumer trust. Consumers find it difficult to engage with the financial services industry—banks are not exactly the most popular institutions in the country at the moment. Economists would describe buying financial products as a transaction in which consumers have asymmetric information; in plain English, the buyer knows a lot less about the product than the seller. There is therefore a need for proper independent advice. Along with banks, IFAs have been guilty of selling certain products because they give a better commission. Like banks, IFAs have been found to have mis-sold private pensions to public sector workers.”
“I thank my hon. Friend and neighbour. He is a distinguished practitioner and member of the Treasury Committee. I am very interested to hear about the evidence yesterday. We should not underestimate the costs of mis-sales to consumers. The FSA’s cost-benefit analysis assesses the cost to consumers of the pensions mis-selling scandal at £45 million per annum. In reaction to such circumstances, the FSA has spent the past several years consulting on how to address the issues involved. I share its goal of improving consumers’ perception of the industry and access to high-quality investment advice.”
“My hon. Friend raises an important point, and I will come to that. The FSA has come up with proposals to address the issue. They are close to final, and the board is likely to take a decision in December. Under the current plans, the proposals will be implemented by the end of 2012. As they stand, the proposals are known as the retail distribution review. As colleagues have suggested, they raise real questions about the role of regulation and the laws of unintended, and indeed intended, consequences in terms of regulation.”
“Someone who, today, is a qualified and approved IFA but who does not meet those requirements by 31 December 2012, will no longer be able to practise his or her profession, despite many years’ experience.”
“My hon. Friend, who is also a member of the Treasury Committee, makes an extremely important point, which I will mention in a moment. The impact of the proposals has been brought to my attention by a range of independent financial advisers, who are also constituents. Acting independently of one another, they all came to see me in my advice surgeries. Under the RDR proposals, each IFA should pass a set of exams and then spend at least 35 hours per annum on continuous professional development. Hon. Members should note that the requirement is 35 hours and that 34 hours would not be acceptable. IFAs also need to obtain a statement of professional standing from an accredited body.”
“Consumers with smaller amounts to invest are much less likely to seek advice if they have to pay for it explicitly. Smaller firms of IFAs are the most likely to exit the market.”
“My hon. Friend makes a good point, which I am about to make myself, so I thank him for his helpful intervention. Advisers will have to charge explicitly for their services and will not be able to accept commissions. Oxera, the market research firm employed by the FSA to assess the costs and benefits of the changes, expects the net present value of the compliance costs to the industry to reach between £1.4 billion and £1.7 billion. Worryingly, the estimate in 2008 was £600 million. That cost will be passed directly to consumers. The latest estimate represents an astonishing 180% increase. Oxera expects the increase in compliance costs to be passed on to consumers, so they will pay for the changes. Charges will be higher, so sales of financial products will decline. The majority of adviser firms expect a reduction in turnover.”
“I agree, because according to Oxera’s survey for the FSA, 25% of firms are very or quite likely to leave the market. That will reduce access to advice for those living in rural constituencies such as mine. It will reduce access to advice for those with smaller amounts of money; the charges for explicit advice will be for those with higher sums of money.”
“Yes, I agree. In London it does not really matter if one person goes out of business—there will be lots more financial advice available; but in rural constituencies such as mine and that of my hon. Friend there will be a significant impact on access. The IFAs in West Worcestershire who have come to my constituency advice surgeries have also raised concerns about the exam. Most of the advisers I have seen have been—I know we should not mention age—in their late 50s or 60s. Speaking for myself—and obviously I am still very young—I am not as good at taking exams now as I was when I left university. That does not mean that I have not accumulated something else over the years. I hope that I have a little more wisdom and experience than I had then.”
“Yet it is those experienced IFAs, who are often sole practitioners, who will find it hardest to take the time required to pass the specified exams.”
“Indeed, that is a helpful intervention. I received a letter from someone in the north of England who was concerned about having to learn a lot about non-domiciled investors, which they did not think was very relevant in Sheffield. In financial markets wisdom and experience are valued. Someone who has lived through a boom and bust cycle in the past is much less likely to believe that the latest investment fad will defy the laws of investment gravity. Someone who has seen a few economic cycles is much more likely to understand the ravages of inflation on savings. Someone who has been to a range of conferences over the years is more likely to know when something is really too good to be true. No exam can test that.”
“My hon. Friend raises an interesting point that I had not even thought of. The experienced IFAs, who are often sole practitioners, will find it hardest to pass the exams. However, someone who has just graduated from university with a bachelor’s degree in financial markets—and I am not knocking that—will be immediately accredited by certain institutions. In the full file that I have received in the past few days are stories from experienced IFAs with unblemished regulatory track records, years of experience, happy clients and no complaints. Yet as a result of the rules, if they do not pass the exams they will not be able to ply their trade on 1 January 2013.”
“Consumers could then be educated and could choose an unqualified adviser if they preferred, but would come to know over time that there was a brand to the qualification.”
“Does the Minister believe that it is proportionate in the present case to impose a regulatory burden of £1.7 billion on consumers? Is the Minister concerned that up to 25% of smaller advisers are likely to leave the industry, handing a competitive advantage to banks and bancassurers? Is he convinced that the banks will not be able to find a way to reward employees for pushing certain products? Does he share my concern that the FSA’s own impact assessment suggests that those who get reduced access to advice are likely to be the smaller, poorer consumers in more remote areas? Does the Minister think that there might be a more proportionate way for the FSA to achieve its objectives? For example, IFAs who have passed exams could add the letters of qualification to their business cards.”
“There is an important point to be made about how some of the larger organisations, and indeed some banks and bancassurers, will most readily be able to have their staff trained for the exams. However, that raises the question whether the exams will really test the skills needed by a good financial adviser. In the investment world, experience is valued and the FSA is imposing on the market a one-size-fits-all, prescriptive approach to education, at great cost to consumers, in return for a modest benefit. I have written to the chief executive of the FSA and to date have received a letter, beginning, “Dear Mr Baldwin”, simply reiterating the FSA’s consultation paper conclusions. I would like to ask the Minister to answer a few questions. The FSA is the independent statutory regulator. However, it is answerable ultimately to the Treasury.”
“I thank my hon. Friend for that helpful suggestion. I would also like to ask the Minister how changing from commissions, which are currently exempt from VAT, to advice, which will attract VAT, will not add a further cost for consumers.”
“Yes, that is a question to be considered as well. Does the Minister really believe that consumers should not be allowed to choose whether they pay explicitly for advice or whether they pay through commission? Does he believe that it is consistent with UK legislation retrospectively to change the qualification regime for a whole class of practitioners? Finally, does he agree with one commentator, who described the RDR as “a sledgehammer to miss a nut”?”
“T10. The auditors of the Department have not signed off the accounts for many years. Will the Secretary of State’s announcement today keep the auditors happier in future?”
“Given my hon. Friend’s medical background, will he explain whether it is appropriate for someone with hepatitis C to receive incapacity benefit?”
“Will the review also examine something that is being debated a lot with the Department for Work and Pensions: what happens when an individual is being assessed for their ability to work? Can we agree in this House today that it would be good if we exempted all these individuals—the 2,700 surviving patients—from any further assessment of their capacity to work? No money could ever compensate these victims for what has happened. Their health can never be repaired, but let us ensure that as a result of this debate and of this inquiry we ensure, once and for all, that the patients do not experience further financial disadvantage from this terrible situation.”
“A payment of £100,000 to every sufferer would involve £467.2 million—I believe I have those figures right. That puts the £3 billion cost into context; it would work out to be £642,000 per individual. Colette has not been able to work since she was 38 and has had to pay for her NHS prescriptions. She looks ahead to the future, but her general practitioner is unable to assure her that she will have access to specialist nursing at home if her condition worsens. I welcome what the Minister said in her statement and the fact that she will look urgently at a number of issues. However, will she clarify whether the compensation that will be recommended by the review will reflect the length of time that individuals have had to suffer and been unable to work because of the illness?”
“She has contracted cirrhosis of the liver and lives in fear of developing liver cancer in her damaged liver. As we all know, it is not possible for doctors to undo the damage to Colette’s health and it is not possible for her ever to be adequately compensated for the harm that was done to her by the infected blood products. The question is what we should do now, as a society, to compensate people such as Colette and her family. We have heard about the Skipton Fund, and I think that everyone in this debate acknowledges that the payments of a maximum of £45,000 are not adequate to compensate someone for that treatment. We have also talked a lot about different numbers, and I wish to help the House. As 4,672 people have been infected over the years, a payment of £1 million to each of them would involve £4.672 billion.”
“Thank you for allowing me to speak in this historic debate, Mr Deputy Speaker. Like so many of my colleagues, this issue has been brought to my attention by the impact it has had on the life of a constituent—in my case, the constituent is Colette Wintle. Colette was born in 1959 and was diagnosed with haemophilia in 1962. When she went to have her tonsils out in 1976, she was given American blood products which first caused her infection with hepatitis. In 1982, at a hospital in Kent, she was given factor VIII concentrate, which infected her with hepatitis C. In 1985, at a hospital in London, she was once again given treatment with blood products, which made her very ill with hepatitis C, although mercifully she did not contract HIV. Subsequently, she has been so weak with illness that she had to stop work at the age of 38.”
“I am interested in the hon. Gentleman’s point of view on this. Does he believe that it is possible for the Government to negotiate to a satisfactory conclusion with the PCS given its position in all the negotiations?”
“One theme that has come up in all debates on the Bill, including in Committee, was that we want better treatment for the low paid. I agree with my hon. Friend. I would have thought that the Opposition would welcome the low-pay aspects of the Bill and the improvement in the negotiating position.”
“Businesses in West Worcestershire welcome the cuts in corporation tax that were announced in the June 2010 Budget. Does the Minister agree that the most basic economics primer would say that, if they are possible, lower tax rates for business can lead to higher tax revenues from business?”
“As a Back-Bench MP, I receive child benefit. Prior to entering the House, I was even better paid and received child benefit. Was the Secretary of State as surprised as I was to learn that the new Leader of the Opposition would like to restore child benefit to people like me?”
“A couple of years ago, HMRC lost my personal information and that of 25 million other people on the child benefit disc, and in my constituency surgeries each week, HMRC problems consistently generate the most casework. In opening the boot—or the bonnet—of the car that is the computer system at HMRC, what other problems is the new mechanic going to find?”
“I want to clarify the hon. Gentleman’s point about severance, because the Library research paper states that early severance can cost “6 years’ pay” under the 1987 terms. Is that the case?”
“Redundancy is always a very difficult decision for an employer to take. In my experience, most employers will try very hard to help employees to move within the organisation or reduce their hours. There are many examples in the current downturn of people accepting less work and remaining employed. We acknowledge that redundancy is very expensive, not only financially but in human terms, and that all good employers will go out of their way to try to avoid it. However, we can also see that in a flexible, modern and changing economy, redundancies will occur. Therefore, the provisions are significantly more generous than one would see in private sector employment today.”
“I wish to add to the comments of Members on both sides of the House my recognition of the work that our civil servants do throughout the country. I have spent my working life so far in the private sector. Until I read about this legislation and the background negotiations that brought us to this point, I had not realised that there were still jobs in this land in which people could expect at redundancy to receive a payment of several years’ pay. As we heard, in rare cases people can receive up to six years’ pay. Most of my constituents would be astonished to learn that some who are faced with redundancy—it is inevitably shocking and stressful—are cushioned by a payment of several years’ salary. I thought I might share with the House some observations from the labour market in the private sector.”
“Countries that have more flexible employment laws have much stronger periods of job creation when they move into economic recovery. I agree with colleagues on both sides of the House that it is a shame that we have to discuss the Bill and that it would be much better if we came to a successfully negotiated conclusion. Let us hope that while the Bill goes through Parliament, the negotiations bring about a more reasonable scheme that is both affordable for the public purse and fair to the very many valuable public servants who are covered by the current scheme.”
“It is one of the counter-intuitive laws of economics that companies that have very generous severance terms tend to hire fewer people than companies that are more flexible. It is also counter-intuitive that the mobility of staff within organisations that have more flexible employment terms is improved. That can often help with morale and job satisfaction. We have spoken today about protecting the lowest-paid, but perhaps we should talk less about protecting them and recognise that the more junior staff are often able to move up. In other words, instead of talking about protecting junior staff, let us talk about promoting and creating more opportunity for mobility for them within the organisation. It is also been observed that similar counter-intuitive laws of economics apply to countries.”
“We all agree that something must be done, and as the right hon. Member for Dulwich and West Norwood (Tessa Jowell) said, the CSCS is simply not appropriate for a modern civil service. It would be right to do something about the situation in good times, just as it is right to do something in tough times, but it would clearly be better, as everyone agrees, if the unions and the Government successfully negotiated a change. It would be more attractive if the redundancies that are being discussed were voluntary. It is often the case that managing a redundancy process that has a significantly more generous voluntary element makes the process much less painful for the work force. In addition, it would be better if we negotiated a change so that the public sector is more vigorous and stronger when new jobs are created.”
“We can also acknowledge that when redundancies are made in the civil service—I gather that in the three years from 2005, there were 16,500 redundancies, which cost the public purse about £1 billion at an average of about £60,000 per redundancy—the money must be found from the taxpayer. I differ from my colleagues who said that the decision to introduce the Bill was made because of the deficit. I submit that even if we did not have a deficit, the sums of money being paid out in redundancy would seem no less huge. We have talked a lot about fairness in today’s debate. Is it fair that some of the taxes paid by an individual who finds work after being made redundant in the private sector—the average redundancy payment in the private sector is approximately £9,000—go to pay significant redundancy payments in the civil service?”
“I thank the hon. Gentleman for his intervention. I have obviously been in completely the wrong line of work, given that I was unaware of such significant redundancy packages. We all recognise that people are reluctant to make employees redundant, and that they would make every effort to move people to new jobs. However, the Minister made an important point when he said that when redundancies need to happen, people want to avoid the situation in which the most recently hired and lowest paid are let go because decision making is distorted by the packages that must be offered to more highly paid people who have been with a company for a long time.”
“If those two excellent individuals are to work for an initial period of 12 months, will that be enough time for them to read the 11,000 pages of tax code applied by the previous Government?”
“I would like to make some observations as a new Back-Bench Member on the 24-hour media cycle. One of the things that strikes me is that, because the House does not sit on some days until 2.30 pm, the news media have ample opportunity to coax information out of Ministers that might be better given to the House. I, for one, would like to put it on the record that I would be very willing to come in and go home much earlier for sittings and have a much more family-friendly set of hours.”
“I thank the Minister on behalf of residents in West Worcestershire. I can assure him that councillors in my local area feel the same way. What advice would he give to them about developers who are now taking things that were rejected on the basis of the Pickles letter to appeal to the Planning Inspectorate?”
“I welcome the fact that my right hon. Friend has said that an extra £20 billion will be going into patient care by 2014. Can he clarify how much more that is under our Budget, compared with Labour’s Budget, which would have cut the NHS budget?”
“Was the Minister as surprised as I was to learn that the Ministry of Defence has some 1,500 works of art, complete with curating staff? Does he agree that the MOD should focus on running our armed forces rather than an art gallery?”
“In addition to considering the opinions of the public and residents regarding the location of wind farms, does the Minister plan to give any guidance to local councils on how close to private homes such wind farms may be built?”
“On behalf of my constituents, I thank the Government for taking things forward this far, but I agree with many of my fellow speakers that it would be helpful to have swift further clarification of the other matters that we have raised.”
“I have some specific questions for the Minister. First, what guidance can he give Malvern Hills district council? Bloor homes has applied for outline planning permission to build the 4,000 homes in west Worcester, which is causing severe blight and concern. Planning permission was applied for at the beginning of the year, before the proposed abolition of the regional spatial strategy, and the council is looking for guidance on whether that proposed abolition is a material consideration and on what the next stage of the plans is. Secondly, will the abolition of the regional spatial strategy automatically abolish the characterisation of Worcester as a new growth point? Will the Minister clarify exactly how we will go forward on that?”