Monthly Report for December 2008
Below is a summary of my work in Parliament and in Southampton for the month of December 2008. Click here to read previous reports.
If you'd like to know more about any of the work I've been doing, or if you think there is another issue you think I should be acting on, you can always contact my office.
Work in Parliament
Pre-Budget Report
The Chancellor has announced a package of measures to stimulate the British economy to counteract some of the worst effects of the global economic downturn. The headline measures include:
Help for everyone: everyone in Southampton who pays income tax will get a tax cut worth £145 starting from April 2009.
Help for the most vulnerable
- Every pensioner will get an additional £60 payment in January.
- Every parent will get an increase in their child benefit payments to £20 per week starting in January.
- All 900,000 carers who currently receive the Carers Allowance will get an additional £60 paid in the new year
The VAT cut
VAT has also been cut from 17.5% to 15%. Research by the Treasury suggests this will effectively mean £20-£30 off the average family’s monthly payments. The VAT was necessary for 2 reasons. First, other changes to the tax system would have taken longer to implement (remember the 10p tax rebate was announced in May but could not be physically introduced into the system until December). Secondly, if we had instead gone for bigger income tax cuts, it is likely that rather than spending that extra money, people might instead have saved it, which would not have had the desired effect of stimulating the economy. Finally, even if businesses choose to not alter their prices at all and pocket the extra 2.5% themselves, that still effectively equates to an increase in government subsidy for businesses which will help keep some companies afloat through the downturn.
Help for mortgage holders
The new Homeowner Mortgage Support Scheme will enable households that experience a significant and temporary loss of income as a result of the economic downturn to defer a proportion of the interest payments on their mortgage for up to two years. The Government will guarantee the deferred interests payments in return for banks’ participation in the scheme.
Under this new scheme borrowers experiencing an inability to meet their mortgage payments as a result of a temporary shortfall in income will be able to defer a proportion of their interest payments for a period of time while they get their finances back on track. We will make this possible by guaranteeing lenders against the risk of loss from those deferred interest payments.
The result will be more affordable monthly payments for homeowners needing a bridge through difficult times. The new scheme will help those families who are not eligible for the existing support for those on benefit, which we are separately extending next month to offer more help, more quickly.
This is a voluntary scheme but already the country’s eight largest lenders, representing 70% of lending, have agreed to support the new scheme and have pledged to work with Government to develop it. The Government wants to see all the lenders join the scheme so that all customers have the option to stay in their home when they suffer a loss of income.
The scheme will help significant numbers of households avoid the risk of repossession over the next 2 years. It is in addition to help already available through Support for Mortgage Interest for home owners who lose their job and through Mortgage Rescue for vulnerable households.
Help for businesses
In addition to the VAT cut, the PBR included specific measures targeted towards helping small businesses:
- Defer the planned increase in the small companies rates of corporation tax.
- Setting up a new HMRC Business Payment Support service to allow any business in temporary financial difficulty to pay their tax bills (VAT, corporation tax, income tax and NICs) on a timetable they can afford.
- For 09-10 - empty commercial properties with a rateable value below £15,000 will be exempt from business rate, now covering 70% of all empty properties.
- Launching ‘Small Business Guarantee Facility’ - new temporary guarantee scheme enabling up to £1bn of new Govt-supported lending by banks. Allowing businesses to borrow any sum, from £1,000 to £1m, at cheaper rates and for a longer period.
- More generous tax relief for businesses experiencing losses - allowing temporary additional carry-back of up to £50,000 in new losses to be set against taxable profits from last three years. 75,000 businesses benefit with 90% having their losses fully wiped out.
- A capital fund of £50 million providing equity or quasi-equity to SMEs who are overleveraged. This will be funded from existing Enterprise Capital Funds and a £10 million Regional Development Agencies contribution.
- The Export Credit Guarantee Department, in conjunction with the banks, will introduce a temporary guarantee scheme to support a £1 billion facility providing smaller exporters with better access to short-term working capital.
Mythbusting
There are some conservative commentators who argue that rather than funding this stimulus package through increasing borrowing, we should instead be funding it through cutting public expenditure. Leaving aside for a moment that government is making significant efficiency drives, and also leaving aside that the Conservatives still have not identified what additional cuts they would make if they were in government, it is important to understand that increasing expenditure in one area through cuts in another does not increase the amount of funds circulating in the economy overall, and it is a net increase in spending that is needed. Increasing borrowing does increase the overall spending, although it is right that this will have to be paid back over the long term. However, it is again wrong to say that increasing borrowing now means taxes will eventually be higher than if we had done nothing. If we had not increased borrowing in order to increase overall spending in the economy, it is very likely more businesses would have gone bankrupt, tax revenues would have fallen and social security costs would have risen. By taking action now, we are reducing the long term damage of this recession, which would almost certainly lead to higher taxes and cuts to public spending.
The government has announced the stimulus package will be paid for partially through a new higher rate of 45% on earnings over £150,000 per year, and an increase in all national insurance payments of 0.5% to be brought in after 2011. However, because of the £145 increase in the personal allowance, no-one earning under £40,000 will be worse off as a result of the NI increase. Those earning over £40,000 a year are likely to pay £2.50-£3 per week more, however, this increase is very likely to be far overtaken by rises in average earnings over the same period.
In Southampton, the Office of National Statistics reports that at least 75% of the city’s population earn £26,000 a year or less. The median wage is £19,000 a year. There are not definitive numbers for how many people earn above £40,000 per year and £150,000 because the numbers are so small they are subject to a large margin of error.
More information about the pre-budget report
Other activities
I have asked questions about export of waste and on planning permission for renewable generation devices: have spoken in debates on fuel poverty and energy policy and on the electoral commission, and have participated in the committee Stage of the Political Parties and Elections Bill. I have also taken part in the campaign in Parliament to change the law to enable pleural plaque sufferers to be compensated.
Prior to the proroguing of Parliament, the Energy Bill and the Climate Change Bill, two pieces of legislation in which I was strongly involved during the previous session, passed into law.
In Southampton
Ford meetings
I, Chris Huhne and Sandra Gidley all met with the chiefs of Ford Europe at the end of November. The positive news coming out of that meeting is that Ford has committed to a future of the Swaythling plant after 2011, with at least 35,000 chassis cabs per year to be produced. However, this is still significantly below the production levels at the past. We are now looking at what other bodies, including both the government and possibly EU institutions, can do to build on this production commitment.
We held another meeting with the unions who represent Ford workers at the Labour offices in Southampton this Monday. I think the Conservative’s decision to cancel a similar meeting because of concerns about ‘bad publicity’ is not defendable in the slightest.
Carers Rights Day
On Carers Rights Day I met with Carers at Mencap Southampton to discuss the New Deal for Carers, announced earlier in the year, and the additional payment of £60 to all carers announced in the pre-budget report. We also discussed how to further increase take-up of help already available to carers, but that often goes unclaimed.
Energy Bills
I am currently in the process of writing to about 10,000 households in Southampton Test to let them know about the government’s Energy Savings Package, which in addition to other support also offers a subsidy of at least 50% for households who want to install cavity wall or loft insulation in their home. Households over 70 are automatically eligible for 100% free insulation measures.
A lot of help from the government is now available to reduce energy bills for customers in different financial circumstances this winter:
- Winter Fuel Payments for all pensioners have increased from £200 to £250 for households aged 60-79, and from £300 to £400 for households aged 80 and over
- Cold Weather payments for households on low incomes have been raised from £8.50 per week to £25 per week
- All UK energy providers are now obliged to offer social tariffs, which can reduce a yearly energy bill by up to £250 per year. The government has required energy companies to extend who is eligible for social tariffs, meaning a total of 600,000 households in the UK now qualify.
- Warm Front funding has increased, which means more low incomes families, pensioners & other groups can now access grants worth up to £2700 to make major improvements to their home’s heating system. These improvements reduce energy bills by an average of £300-500 per year- more than half the annual fuel bill for many households.
- Funding for individual grants of up to £2500 for microgeneration devices for both individuals and community organisations has been extended until 2010.
- The government’s Decent Homes programme, which requires all Council properties to be warm, weatherproof and have reasonably modern facilities, has nationally reduced energy bills for Council tenants by £150 per year.
So, there is a lot of support available, but as this rather long list shows, the help appears a bit fragmented and complicated. To help combat this problem, I am producing a small booklet explaining all the help available to reduce your energy bills, who to contact and what the potential savings are. It should be ready for publication and distribution in the New Year.
Last week I visited a Southampton resident who had benefited from major Warm Front improvements to her home. Warm Front is quietly doing some excellent work across the constituency- over £2 million of improvements have been carried out in Southampton Test, primarily in low and fixed income households. Warm Front is particularly effective, I think, because it offers a comprehensive service. It is not just there to sell one product, but to take a comprehensive look at client’s overall position in relation to fuel poverty and how it can be improved. This can involve not only major funding to improve someone’s boiler or insulation, for example, but also conducting benefits checks to ensure a client is getting all the help they are entitled to. Warm Front’s statistics show the benefit checks alone result in an average weekly increase in a client’s income of £25 per week (which incidentally further highlights just what a foolish decision it was for the Conservatives running the City Council to cancel the benefits take-up programme we introduced, which has the potential to reach many more people).
Christmas lights
The Conservative Council in Southampton has refused to put up Christmas lights around the city centre. I have said publicly that this is unhelpful and petty, and that if the Council changed its mind we could still possibly have the lights up for the last week before Christmas. Sadly that opportunity has probably now passed.
Other activities
This month I also welcomed the beginning of the new community payback scheme in Southampton, spoke at the Go Green Fair, and congratulated the Southampton youth charities who have been awarded £2 million by the government to expand their work on reducing youth crime. I also held my regular surgeries, and two roving surgeries in Coxford and Shirley.
My sincere thanks to everyone who has taken the time to write to me or complete one of my surveys over the last year. Merry Christmas!