Budget Resolutions
Tuesday 28th November 2017
(6 years, 11 months ago)
Commons ChamberRead Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts
19:01 - The House divided: - Ayes: 316 / Noes: 293 - Question accordingly agreed to.
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
It is a great pleasure to open this final day of the Budget debate. In his Budget statement last week, the Chancellor described the choice before our country, standing as we do on the brink of a technological revolution—a choice between embracing the future, building on our strengths and taking our place as one of the nations at the forefront of the new world of innovation, or rejecting that, assuming a defensive posture and letting other countries seize the initiative. We choose emphatically the former. The Budget and the industrial strategy set out a long-term approach in which we can make our economy one that can prosper during the years ahead.
Not just in Britain but across the world, this is a time of change and opportunity. Artificial intelligence and the analysis of big data will transform the way in which we live and work, from the way in which we diagnose and treat cancer to the security of online transactions. The whole world is moving from being powered principally by fossil fuels towards energy sources that are clean, with enormous impacts not just in the energy sector but in the products and services that make use of it.
One such area is transport, where extraordinary innovation is changing how we move people and goods around our towns, cities and countryside. As a result of medical advances and rising prosperity, people across the world are living longer than ever before. One stunning statistic illustrates that transformation. In the United Kingdom today, 15,000 centenarians are alive, but of the people who are alive in Britain today, 10 million can expect to live to their 100th birthday—a transformation in our generation. An ageing population creates new demands in care to maintain their health so that they can make the most of their longer lives.
In all these areas, Britain is extraordinarily well placed to lead. We are an open, enterprising economy built on invention, innovation and competition. Our universities and research institutions are hotbeds of discovery, among the very best in the world. In a world where many of tomorrow’s businesses have not yet been founded, our powerful reputation for being a dependable and confident place to do business, with high standards, respected institutions and the reliable rule of law, is an enormous asset.
John Woodcock (Barrow and Furness) (Lab/Co-op)
Given that, will the Secretary of State back our local campaign to find a new buyer for the business manufacturing cephalosporins in Ulverston and Barnard Castle, given the highly unwelcome and damaging decision by GSK to review that landmark investment, which was announced by the Chancellor and Prime Minister after the 2011 Budget?
Greg Clark
I am happy to talk to the hon. Gentleman. He will know that we work closely with the life sciences sector. The industrial strategy published yesterday included an important life sciences sector deal in which all the companies are working closely with each other, local institutions, local leaders and the Government. I am happy in that context to meet him and have those discussions.
Sir Edward Davey (Kingston and Surbiton) (LD)
The Secretary of State talks about giving certainty to businesses and investors. Does he agree that the contracts for difference regime can be used to bring in zero-subsidy CfDs to give real certainty to people wanting to invest in our renewable energy? Will he commit to considering the case for zero-subsidy CfDs?
Greg Clark
Contracts for difference have brought down the price of renewable energy substantially. We have commissioned a review from Professor Dieter Helm—I know that the right hon. Gentleman knows him well—which has reported, and we will make our response to it. It would be wrong to pre-empt our consideration of that, but I hope that the right hon. Gentleman and others will give their thoughts on the Helm review. We have launched a consultation on that, as he knows.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I note the Secretary of State’s comments about the Dieter Helm review, but will the Government commit to moving away from their nuclear obsession, given—as he acknowledged—CfD has brought down the cost of renewable energy?
Greg Clark
It is my view that we need to have a broad base of power supplies for our security in the future. We are now the world leader in offshore wind, which demonstrates that one comes not at the expense of the other, and that is the right and prudent way to proceed.
We have many world-leading industries, from financial services to advanced manufacturing, from the life sciences to the creative industries. In many cases, they are at the forefront of the technological revolution that is sweeping the world.
Damian Collins (Folkestone and Hythe) (Con)
What further assistance are the Government planning to give to research and development for small modular reactors as part of the nuclear sector, potentially a very important and useful source of energy? What consideration has the Secretary of State given to the suitability of existing nuclear sites, such as Dungeness in my constituency, as locations for SMRs?
Greg Clark
I know that my hon. Friend takes a great interest in this. We have an energy innovation programme, about which we will make some announcements before long. That will address the question of what types of technologies should be moved along from research to development and implementation. He will have an interest in that and I will make sure that he is given the details.
To capitalise on our strengths, we need to reinforce them and project them into the future. We also need to address our weaknesses. We are proud of the fact that more people are employed in this country than ever before—an extraordinary achievement, with 3 million extra jobs created in a time when the Labour party predicted that millions of jobs would be lost. But compared to some of our competitors, on average, we work harder and longer to produce at the same level as they do. We need to raise our productivity, as the Chancellor made clear in his Budget statement.
As the House knows, to a large extent, it is a problem of disparities, rather than a uniform picture. We have industries, companies, people and places that are among the most highly productive on the planet, but we have what the Bank of England has called an unusually long tail of companies and places whose level of productivity is below that of the top performers. The challenge is clear: to reinforce the performance of the top and build on those strengths, while spreading that excellence throughout the economy and the country. That is exactly what the Budget and our industrial strategy White Paper will do, by reinforcing strengths and addressing weaknesses in areas across the board. We talk about innovation, skills, infrastructure, the business environment and local economies.
Heidi Allen (South Cambridgeshire) (Con)
I wish to put on record my thanks to the Government for finding funding for the initial cost analysis for a station at Addenbrookes. Connecting that science and those brains with the wider country is exactly what we need to do. It is a vital piece of infrastructure and I am very grateful for it.
Greg Clark
I am grateful to my hon. Friend. That is a good illustration of how a strategy can bring forces together. That £5 million investment means that the infrastructure in and around Cambridge can be improved, and that will make the area even more attractive for companies and researchers to locate there, and it builds on the area’s strengths. The part of the world that she and the Economic Secretary to the Treasury, my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay)—one of her close neighbours—represent has enjoyed great success, but I think they would both recognise the opportunity to extend that success to a larger area. That is exactly what we have in mind.
Vernon Coaker (Gedling) (Lab)
I agree with the Secretary of State about regional disparities and the way in which the industrial strategy tries to tackle them. The east midlands needs investment in capital to raise productivity, so I ask him to look into that. Will he also speak to the Transport Secretary and others about the Government’s failure to electrify the midland main line? As he knows, many of us have campaigned for that over a number of years, but the Government have now rowed back on it.
Greg Clark
I absolutely recognise that one of the big strengths of the east midlands is that it is connected to the rest of the country, and it is essential that those connections continue to improve. The hon. Gentleman will know that a fund was established in the Budget for cities and city regions to improve the connections in and around those cities. That is important, but it is in addition to the importance of connections to the rest of the country, so I will raise his point with the Transport Secretary.
Let me say something about ideas and the importance of innovation to our economy. We can be the world’s most innovative economy, given the strength of our science base and our researchers. Throughout our industries, we have some of the most creative people in the world.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I just want to probe the Secretary of State about what thinking has been going on in government following Bill Gates’s speech in the spring about taxing robots. We only have to go into a high street shop to see that many jobs have been displaced by machines, which are not taxed. If a person was still working there, they would be paying tax to the Exchequer, and that money could help future innovation. Have the Government given any thought to all these labour-saving devices and to getting some revenue from the way in which robots are doing many of the jobs that people used to do?
Greg Clark
We need to embrace the technologies of the future. If we are in the lead, we can benefit from being the place that develops, applies and manufactures many of these products. Whenever we have taken the lead in this country, we have reaped the benefits. It is in those areas where we have lost our advantage that we have ended up importing goods and services from around the world. We need to lean into the future and ensure that we are the place in the world where the firms of the future locate to develop and manufacture their products.
Tony Lloyd (Rochdale) (Lab)
The Secretary of State will probably not agree with this, but I believe that we still have a financial gap in this country, particularly when it comes to science and technology, because venture capitalists simply do not know how to make assessments on such things. Those people are also disproportionately located in this city region rather than other parts of the country. Will the right hon. Gentleman look seriously at the capacity of those industries to see whether we could make some structural changes that would benefit the whole nation?
Greg Clark
I will indeed. I am coming on to precisely that point. The hon. Gentleman has a distinguished record of leading Greater Manchester—with some success—in promoting the vitality and attractiveness of that important part of the economy.
John Howell (Henley) (Con)
Surely one of the ways in which we can improve innovation and productivity is by having better broadband and telephony. I heard what the Secretary of State said yesterday, but in my area we have zero G, not 5G. Would he like to encourage my area by saying that the strategy is meant for the whole country, not just towns and cities?
Greg Clark
It certainly is. There are significant opportunities in many of our rural areas, and it is essential that the progress we make in our towns and cities is shared with our rural areas, of which my hon. Friend’s constituency is a particularly attractive and productive example.
Several hon. Members rose—
Greg Clark
Let me make some progress now, because I am about to come on to the points that hon. Members are raising.
Last week’s Budget outlined the biggest increase in public research and development investment for 40 years. It is growing as a share of GDP and contributing to our commitment to invest 2.4% of GDP in research and development by 2027, rising to 3% in the long term. One aspect of this increased funding is a strength in places fund, which will grow our research and innovation strengths in every part of the United Kingdom, recognising that there are strengths in all parts of the country, not just in London and the south-east.
Kevin Hollinrake (Thirsk and Malton) (Con)
Rebalancing the economy is a key part of the industrial strategy, and one of the reasons why London gets a much better deal on investment is its ability to attract private sector investment, which the north has very little capability to do. Has my right hon. Friend any plans to try to resolve that issue, so that we can attract more private sector funding for infrastructure investment in the north?
Greg Clark
I have indeed, and I will come on to that in a moment, if my hon. Friend will bear with me.
Let me say something about skills. We are creating new job opportunities, but I say to the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil), who raised a point about robots, that if jobs change, we need to ensure that people have the ability to train and develop the skills they will need for the jobs that are being created. The consultation on the industrial strategy established what every Member knows: job opportunities, especially in companies in the technical sectors, require education and training, particularly in maths, digital skills and other aspects of our technical education. There are skills shortages around the country, and great careers would be available to young people and to those who are changing career if only they had that educational base. The significant investment in maths, digital and technical education that was announced in the Budget is therefore important, as is the national retraining scheme, which will work with employers and trade unions, beginning with digital and construction training.
On infrastructure, I can tell the hon. Member for Gedling (Vernon Coaker) that the Chancellor has announced an £8 billion increase in the national productivity investment fund, taking it to £31 billion, and extended it to 2022-23. That will enable us to invest in our physical infrastructure and also, as my hon. Friend the Member for Henley (John Howell) said, in our digital infrastructure as we develop the next generation of full-fibre networks, trial the use of 5G and boost mobile communication on our railways. That, too, is important right across the country. We will also support electric vehicles through the charging infrastructure fund. If we are going to manufacture those new vehicles, we have to be the place in the world in which they can be deployed most effectively.
Antoinette Sandbach (Eddisbury) (Con)
Green growth is clearly part of our future as we move forward in the economy. Does my right hon. Friend agree that hydrogen batteries are as important as electric vehicles?
Greg Clark
My hon. Friend is absolutely right to say that hydrogen offers big advantages. It is a clean fuel, and this country has great expertise in developing and applying it.
Let me say something about business finance, which has already come up in the debate. In a strategy that connects our areas of strength, it is essential that we allow the businesses that are growing across our country to benefit much more than previously from our financial services sector, which is one of the most significant in the world. The deep pool of capital that we have should be available to growing companies up and down the country. The Budget therefore includes a new £2.5 billion investment fund, incubated in the British Business Bank, to drive forward more investment into growing companies across the country. The British Business Bank will establish a network of regional managers by autumn next year, ensuring that it is not just in London and the south-east that these sources of finance and advice are available, as it is essential that they are in place right across the UK.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The reality is that the Office for Budget Responsibility downgraded forecasts for business investment, productivity and growth in the economy for the entire forecasting period, so what the Chancellor announced in last week’s Budget clearly does not go far enough.
Greg Clark
I think the hon. Gentleman misunderstands what was said. The OBR recognised that its forecast that the productivity rate would recover after the financial crisis, which it has been making for many years, has not been realised. There has been no new event; it has just recognised what has happened, which has had consequences for the financial forecasts. Faced with that, the right thing to do is to look seriously for the long term—I do not think that this matter divides Members—at how we can act on the foundations of productivity. Talking about investment in research and development, the infrastructure that we depend on and sources of finance for growing businesses in every part of the country is a serious response to the OBR’s revised productivity forecast.
Mims Davies (Eastleigh) (Con)
As 100 new jobs come to Hedge End and 500 to Chandler’s Ford, productivity and accessibility are really important to the Solent area. Will the Secretary of State work with local enterprise partnerships to ensure that infrastructure and the need for local investment feed into the industrial strategy?
Greg Clark
I will indeed. Throughout my time in this House and in this Government, I have promoted the importance of places and local leadership and of ensuring that investment decisions benefit from local knowledge and local decisions. The Budget and the industrial strategy reinforce that. To have a prosperous United Kingdom, every part of it needs to be maximising its potential, so the strategy very much works with cities, towns and regions across the UK. We are inviting areas to promote local industrial strategies that state what needs to be done locally to make a particular town, city or county fit for the future and able to attract new business investment.
Andrew Bridgen (North West Leicestershire) (Con)
Following the Secretary of State’s announcement of the industrial strategy, we had a meeting in Leicester just yesterday to discuss the infrastructure needs of the east midlands. The east midlands has traditionally been at the bottom of the Government funding league for infrastructure, but it is delivering the highest economic growth and the fastest wage growth in the UK outside London and the south-east. Think what we could do if we had our fair share of infrastructure spending.
Greg Clark
I will take that representation. My hon. Friend is right that the performance of the east midlands has been extremely positive. Some of its institutions—I think of universities in Leicester and Loughborough—are having a huge impact on the local economy. I look forward to visiting Leicestershire again soon to have discussions as part of the plan for local industrial strategies. I mentioned the fund for improving transport connections between city centres and the towns around them, and that is essential investment in the future competitiveness of our economy.
Angus Brendan MacNeil
The Secretary of State is being generous in giving way. How might the industrial strategy develop if we find ourselves with open borders and no border checks, which was talked about as recently as yesterday? If we are to have an open border with the Republic of Ireland, the UK will need an open border with everywhere else, meaning that the UK will not be running any tariffs at all. How will that affect the industrial strategy? Under most favoured nation status, if we have an open border with Ireland, we will have an open border with everywhere else.
Greg Clark
I am conscious that many Members want to speak and the hon. Gentleman is tempting me into a discussion that would take more time than I have. However, our future as a successful economy is about trading more with Europe and the rest of the world. That should be free of tariffs and free of friction, and that is what we want to achieve through our negotiations.
None of the investment in and improvement to the productive capacity of the economy would be possible without a fundamentally strong economy. The essential foundation of future prosperity is to be a place in which global investors can have confidence. It is sometimes easy to take for granted the progress that was made by my right hon. Friend the Chancellor and his predecessor in rescuing the economy from the catastrophic situation in which we found it when the Labour party left office. Britain had its largest deficit as a share of GDP since the second world war. So reckless had the Labour Government been with the public finances that in their last year in office—almost unbelievably—for every £5 of Government spending, £1 had to be borrowed. Unemployment rose by nearly half a million, the welfare bill ballooned and the number of households who had never worked had doubled. If we had continued on that course, Britain’s reputation as a dependable place for global investors to entrust their assets would have been lost, and it would have taken many generations to recover.
As a result of the steady and painstaking work of the British people, however, backed by the leadership of Conservative Members, we have cut the deficit by three quarters at the same time as cutting income tax for 30 million people. Britain has been one of the job creation hotspots of the world, with employment up by 3 million in just seven years and unemployment lower than at any point since 1975. However, just when the deficit is being tamed and we can look forward to falling national debt, which has to be repaid by future generations, the Labour party—I hope it will contradict me—has adopted a platform that is even more extreme than the policies that produced the previous situation. Labour’s proposal is to borrow an extra quarter of a trillion pounds. As if that were not enough, it also wants to increase taxation to what the Institute for Fiscal Studies has called the highest peacetime level in the history of this country. That would, as the IFS also said, make the UK a
“less attractive place to invest”.
It is no wonder that the reaction of employers the length and breadth of Britain has been one of alarm. The chief executive of the EEF said that those policies are from a bygone era. Do they have credibility? The answer is clearly no.
Greg Clark
I am about to conclude.
If we want a strong, competitive economy that is fit for the future, we need to live within our means, create good jobs and pay people well. We need to be a beacon of free trade and internationalism. That is what our industrial strategy and this Budget are about. Prosperity for all is the best alternative to the high-tax, anti-enterprise, job-destroying ideology that has taken over the Opposition Front Bench. Our Budget takes us into the future; the Labour party takes us into the past. I commend the Budget to the House.
Rebecca Long Bailey (Salford and Eccles) (Lab)
I am surprised by the Secretary of State’s comments, which are usually quite measured, and he seems to be struggling with reality today. However, let us talk about the Budget. A substantial section of the Chancellor’s speech on Wednesday focused on the productivity crisis, and rightly so. Labour analysis has shown that we have to go back to 1820, when George IV ascended the throne just after the Napoleonic wars, before we can find a time when productivity increased by less than this over a 10-year period. The result has been catastrophic. People are earning less now than they were 10 years ago and, as the Institute for Fiscal Studies states, average earnings look set to be nearly £1,400 lower by 2021 than was forecast last year. The Chancellor and the Secretary of State have tried to paint that as a phenomenon that is quite separate from the Government—like a sort of freak accident that is nothing to do with them—but that could not be further from the truth. To help the Secretary of State with his recollection of history and reality itself, I will take him on a little trip down memory lane.
By late 2008, it was clear that monetary policy alone was not working in the traditional way—people were not spending and the economy was not recovering. To quote economist Paul Krugman,
“the truth is that mainstream, textbook economics not only justified the initial round of post-crisis stimulus, but said that this stimulus should continue until economies had recovered.”
But what did the Conservatives do? The polar opposite: slashing Government spending and investment, and essentially pulling the rug out from under the UK economy.
Not only that, but the financial crash had shown clearly that our economy was becoming dangerously over-reliant, both regionally and sectorally, on financial services in the south-east of Britain.
Antoinette Sandbach
Does the hon. Lady accept that, in effect, 12 previous years of Labour Government had left the economy in that state?
Rebecca Long Bailey
Frankly, I expect better from the hon. Lady; she usually makes very measured contributions. If she lets me continue, I will explain a little about what happened. Perhaps she will make different comments if she asks another question later.
It made perfect sense to use that economic turning point as an opportunity to invest in the development of our industrial base and to address the deep structural problems that had been emerging in our economy since the early 1980s. However, what happened was the scaling back of investment and funding in the tools that business needs to grow and succeed, such as skills, infrastructure, research and development, and access to long-term patient capital.
Oliver Dowden (Hertsmere) (Con)
As the hon. Lady is taking a trip down memory lane, does she recall the Labour party’s repeated predictions when we embarked on this necessary course of public spending restraint that it would lead to 1 million jobs being lost? In fact, 3 million jobs have been created.
Rebecca Long Bailey
Again, we have a Conservative Member who struggles with reality. I urge him to speak to workers in his constituency and ask them about the quality of said employment. I speak to workers in my constituency, and they are struggling in an era of casualised, low-paid, insecure work.
Our productivity was certainly impeded, but the picture worsens still when we focus on the recent productivity and investment figures of many British regions and nations. Stark research recently published by the Centre for Cities shows that London and the south-east are up to 44% more productive than many other British regions, and the Institute for Public Policy Research’s commission on economic justice has found that Britain is the most regionally imbalanced country in the whole of Europe.
What have we seen after seven years of this Government’s single-minded obsession with cutting the national debt? Higher debt and unprecedented downward revisions of GDP growth. As every economist knows, the only way substantially to manage the national debt is by growing the economy, but this Government have simply tried to deflect attention away from their miserable performance on GDP.
Alex Chalk (Cheltenham) (Con)
Will the hon. Lady assist the House by saying how much extra it would cost in annual interest payments if she led a Government that borrowed an additional £500 billion?
Rebecca Long Bailey
The hon. Gentleman should refer to comments made by the shadow Chancellor. It is not as straightforward as putting a figure on interest repayments. Each investment is dealt with on the basis of the level of return to the Government, so each infrastructure project, for example, needs to be assessed on its own merits. The hon. Gentleman should know that. He is a clever young man, and I would have expected him to know a little more about this subject.
Alison McGovern (Wirral South) (Lab)
I have been in this House slightly longer than my hon. Friend, so I saw the former Chancellor, George Osborne, having to U-turn on his deficit reduction plan. He failed to meet every one of his debt targets. Labour kept debt at 40% of GDP, and now it is 80% of GDP. Does my hon. Friend agree that the carping from Conservative Members is in total ignorance of the facts?
Rebecca Long Bailey
I could not agree more. That is very articulately put.
It is not as if the Government were not warned of the problems of austerity by my right hon. Friend the shadow Chancellor. Indeed, the International Monetary Fund warned the Government that
“episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output… The increase in inequality engendered by financial openness and austerity might itself undercut growth, the very thing that the neoliberal agenda is intent on boosting.
Refusing to heed that advice was a deeply reckless act.
The current Chancellor may well turn around and lament post-crisis productivity, but let us remember that he was in the Cabinet while this economic mess was being created. He is not absolved of responsibility, but he has the opportunity to admit that that approach was wrong and to change course.
Unfortunately, although the Chancellor admitted in his Budget speech last week that there is a big productivity problem—a big gold star for Phil there—there was very little to give our economy the upgrade it desperately needs, nor was there any attempt meaningfully to level up regional investment spend.
Indeed, despite the Chancellor’s jovial attempts at talking up our ability to harness the fourth industrial revolution, the Office for Budget Responsibility looked at his future investment plans and cut its forecast for growth in productivity, but he still had one last chance—the industrial strategy. I waited with bated breath yesterday, desperately hoping that the action would match the rhetoric. It started well enough with the strategy’s stated goal to create an economy that boosts productivity and earning power throughout the UK. “That’s spot on,” I thought. But sadly, having looked into the strategy in a little more detail, it seems little more than a repackaging of existing policies.
Unfortunately, the Conservatives have form on this. There has been a long line of PR gimmicks that simply do not deliver. Members may recall that, back in 2011, the previous Chancellor announced a march of the makers, but UK manufacturing has since grown at less than half the European average. Similarly, much was made of the northern powerhouse, which sounds great, but only two of the top 20 infrastructure and construction projects in the Government’s pipeline are in the north-east, north-west or Yorkshire and the Humber, leading my hon. Friend the Member for Bolsover (Mr Skinner) to call it the “northern poorhouse.”
No one can argue with the core principles outlined in the 255-page document we saw yesterday but, as the Financial Times summarised today,
“the judgment being passed…is that it amounts to a good start—but much still remains to be done to ensure success.”
Although the strategy certainly acknowledges many of the fundamental problems our economy faces, I fear that the level of detail and proposed investment simply do not match the surrounding rhetoric, falling far short of what is needed.
The White Paper gives us a handy one-page summary of the strategy’s key policies to strengthen the “foundations of productivity.” It is perhaps poignant to point out that even the previous Chancellor was trying to fix our foundations and outlined a productivity plan called “Fixing the foundations” two years ago. What happened to that? I digress slightly.
Let us look at the first foundation: ideas. The key policies are raising total R and D investment to 2.4% of GDP by 2027, increasing the R and D tax credit and allocating some of the increased spend to a second wave of the industrial strategy challenge fund. Although increasing R and D spend is, of course, a step in the right direction, it is an unambitious target.
Vicky Ford (Chelmsford) (Con)
Given that this is the largest increase in research and development and innovation funding in more than 40 years, what part of it is unambitious?
Rebecca Long Bailey
The hon. Lady misses the point. The UK has been below the OECD average of 2.4% of GDP for years, and we are way behind global leaders such as South Korea, Japan, Finland and Sweden, which all spend at least 3% of GDP on R and D. If we are to be in any way capable of competing on a world stage, we have to up our game. If the Government really want us to be at the forefront of the fourth industrial revolution, they should be aiming above the average, rather than just trying to catch up.
Furthermore, not reforming where and how it is spent risks widening regional divides, as almost half of all research funding currently goes to the south-east. To quote a Conservative Member:
“If we just put more money into the same funding streams we will have the same outcomes and continue to spend half the science budget in just three cities.”
Angus Brendan MacNeil
The hon. Lady is talking about competing with our international competitors. Where will her industrial strategy be on trade defence? We know the Conservative Government do not seem to have trade defence, but she supports them on the UK being out of the customs union, and I presume she has the same view of not wanting to partition Ireland with a customs union. Therefore she would be running no tariffs on the Irish border and there would be no trade defence. Where would that leave her industrial strategy, given that, we must remember, there was not a hair’s breadth between the Tories and Labour on austerity? Labour was going to do £7 billion-worth of cuts and, with students, it is responsible for £6,000 of the £9,000. Where is Labour different from the Conservatives on trade defence and industrial strategy, particularly with reference to the Irish border?
Rebecca Long Bailey
I thank the hon. Gentleman for his extremely long comment. He made some valid and interesting points, and we can all agree that the Government’s shambolic handling of Brexit undermines our industrial strategy going forward. Labour’s industrial strategy, however, is committed to achieving 3% of GDP spent on research and development by 2030 and reviewing Government channels for disbursing public R and D funding, with a view to encouraging greater regional equality.
Lucy Powell (Manchester Central) (Lab/Co-op)
My hon. Friend and neighbour is making an excellent speech. On research funding, is she aware that more than two thirds of health innovation research money goes to the “golden triangle”, despite the fact that Greater Manchester has a cutting edge in life sciences? Would that not be a good place to start?
Rebecca Long Bailey
I thank my hon. Friend and neighbour for her contribution, and she is correct in what she says. I do not think we saw anything in the industrial strategy that goes any way towards rebalancing the regional divides in investment spending in R and D. Critically, a Labour Government would also ensure that the UK maintains our leading research role by seeking to stay part of Horizon 2020 and its successor programmes after we leave the EU. As with so many areas outlined in the White Paper, the UK’s research role is compromised by the Government’s reckless and cliff-edge approach to Brexit.
Let me turn to the second foundation: people. Key policies include establishing a technical education system, investing £406 million in maths, digital and technical education, and creating a national retraining scheme with an investment of £64 million. Again, the intent is good, but let us remember that the Government cut £1.15 billion from the adult skills budget from 2010 to 2015. Similarly, on first analysis the £406 million appears to be the sum of the amounts the Government have already spent on maths, computing and digital skills. The reality is that the Chancellor has overseen the steepest cuts to school funding in a generation, at £2.7 billion since 2015, according to the National Audit Office, and a cap on public sector pay that has seen the average teacher lose £5,000 since 2010. [Interruption.] Unfortunately, the long term results of that are clear, and I do not know why Government Members are protesting. The Government have missed their recruitment targets five years running, and for two years in a row more teachers have left the profession than joined. The policies contained in the White Paper are a start, but they are not even enough to undo the damage since 2010, let alone form part of a decent industrial strategy.
Rebecca Long Bailey
I am going to make some progress.
The strategy identifies infrastructure as the third foundation of productivity and outlines £31 billion of investment through the national productivity investment fund, with some ring-fenced for the necessary infrastructure for electric vehicles and boosting digital infrastructure. As I outlined yesterday, TUC analysis shows that that £31 billion increases investment to just 2.9% of GDP, whereas the average spent on investment by leading industrial nations in the OECD is at least 3.5%. In addition, it is unclear whether the extra £7 billion announced in last week’s Budget is new money at all, rather than a re-allocation from other areas of capital spend which was previously budgeted—it would help if those on the Government Front Bench listened to this question, as it is important. Perhaps the Secretary of State can confirm the meaning of footnote 3 in table 2.1 of the Budget Red Book, because it does not appear to be very clear.
Key policies to improve the business environment are sector deals; a £2.5 billion investment fund incubated in the British Business Bank, as announced in the Budget; and yet another review of encouraging growth in small and medium-sized enterprises. That is, sadly, another case of lacking ambition—
Andrew Bridgen
Can the hon. Lady explain how the Labour party’s declared policy of huge increases in corporation tax is going to encourage companies to invest in R and D, and become more competitive and productive? Is she not part of a party that still believes it can tax the country to prosperity?
Rebecca Long Bailey
I applaud the hon. Gentleman’s attempts at crowbarring that in there. I was talking about access to SME finance, so I will carry on.
Ruth George
As there is tax relief for R and D, the higher the rate of corporation tax, the greater the incentive for companies to invest in R and D, as the hon. Member for North West Leicestershire (Andrew Bridgen) would do well to learn.
Rebecca Long Bailey
I thank my hon. Friend for her comments. The Government’s proposals on unlocking access to finance for business lack ambition and fail to recognise the impediments many businesses face when attempting to access finance. Indeed, Craig Berry, a member of the Industrial Strategy Commission, has said:
“the plan for unlocking private investment is under-cooked and, frankly, pitiful.”
Furthermore, the proposed sector deals appear very narrow and the strategy as a whole will do nothing to help the millions who work in retail, hospitality, care and other large low-wage, low-productivity sectors. A large proportion of those people are women, but, as we know, the Government do not have the best record when it comes to supporting women in the economy. [Interruption.] If I were a Conservative Member, I would listen to this, because these are the stark statistics: men are expected to receive 46% more of the funding from this Budget than women; and the Budget made no impact on the shocking fact that 86% of tax and benefit changes since 2010 have come at the expense of women, according to Labour and House of Commons Library research. That is scandalous.
Rebecca Long Bailey
I will make some progress. Key to improving productivity and living standards is not just supporting those sectors we know we have strengths in and the ability to generate high returns, but using our endeavours to transform what have been traditionally viewed as low productivity sectors and make sure that they become the leading sectors of the future.
Briefly, while we are on employment, let me say that I am shocked to see the Government lauding the fact that some workers do not have adequate employment or trade union rights as some kind of competitive advantage. Celebrating the flexibility of our labour force when their recent Taylor review clearly highlighted the imbalance of flexibility between employer and employee in many workplaces seemed a little bizarre when I came across it in the White Paper. True two-way flexibility, where employees can indeed choose it to improve their lifestyle, rather than have flexibility imposed upon them because there is no choice, should be celebrated, but we cannot celebrate these rare examples at the expense of providing workplace security and enabling workers to make a valuable contribution to the running of a firm, which in turn helps improve productivity. This is why strengthening trade union rights and the ability of people to join trade unions is an important way to boost productivity, and it should be central to any industrial strategy. The White Paper does not even mention trade unions—why is that?
I turn now to the final foundation: places. The Government will agree local strategies, create a transforming cities fund and pilot a teacher development premium
“for teachers working in areas that have fallen behind”.
I am afraid we have heard all this before. The northern powerhouse, one of the Chancellor’s flagship policies to transform northern cities, is not delivering, as I outlined earlier. Without a substantial increase to level up regional investment, as Labour called on the Chancellor to do in the Budget, the local industrial strategies will simply fail. I am afraid the policies that the Government have identified as key to the industrial strategy are simply not going to deliver the scale of change needed to turn the economy around.
I am coming to the end of my remarks, but I wish briefly to say something about the Government’s grand challenges. I am pleased that they have chosen to talk about grand challenges, as that mirrors the Labour party policy of advocating missions to deal with the big issues of our time. One of the Government’s four grand challenges is to
“maximise the advantages for UK industry of the global shift to clean growth”.
That is simply laughable in the context of their track record on supporting green energy, and especially so given that last week’s Budget essentially closed down support for much low-carbon development in the UK. There will be no new low-carbon electricity levies until 2025, with no alternative funding outlined. Nor was there any support for, or indeed any mention of, specific renewable projects such as the Swansea tidal lagoon. There is a huge contradiction between the Government’s rhetoric on clean growth and the reality of their policies.
There are some moments in history that can have a lasting impact for years and decades to come. What we do at such moments will determine not only our future but the future of our children. The 2008 recession and its aftermath was one of those moments, but the Government’s austerity policies and the reduction of investment have done lasting damage to the UK economy. Today, we are again at one of those critical moments. We are about to leave the European Union—a critical point in this country’s history that will shape our economy long into the future. Although this week’s industrial strategy might have contained the right rhetoric, without the investment and detail to match, prospects for productivity growth are considerably bleak.
A few weeks ago, I opened a food bank in my constituency. I usually love going to ribbon-cutting opportunities, as they are a chance to celebrate the great things that happen in my city, but on that day I felt nothing but shame—shame that in one of the world’s richest economies in the world, one of the world’s leading industrial nations, with the greatest minds and businesses of our time, we have built an economy that has simply squandered that greatness and that forces even those in work to rely on charity just to get by. This is not the Britain of the future and it is not the Britain that I want to create, so it is time the Government woke up and halted the greatest act of recklessness in a generation.
Mr Kenneth Clarke (Rushcliffe) (Con)
I am afraid that time will prevent me from following the hon. Member for Salford and Eccles (Rebecca Long Bailey) too far in some of her analyses. I shall certainly resist the temptation to go into her rewriting of history, in which she glossed over a Government who carried on borrowing money during an entirely artificial boost in tax revenues, at a time of an artificial credit boom, and then found themselves hopelessly in debt at the time of the crash, leaving the 2010 Government with a colossal deficit and a huge burden of rapidly mounting debt, which they have managed strongly so far. I wish to look at where we are now and to look ahead. I should certainly resist the temptation to start re-fighting the battles on how the Labour party ruined the economy of the 2000s.
Ruth George
In spite of what the right hon. and learned Gentleman just said, I wonder whether he agrees with the organisation Full Fact, which says that for most of Labour’s last term in office public sector national debt was down and that it was 36% in 2008-09. Yes, it then went up to 65% in 2009-10, but that was as a result of the global economic crash and the subsequent recession, which happened globally.
Mr Clarke
In its period of office, the Labour party was so out of control and so wrong in its reaction to events that early on it almost started to repay the national debt at the time of the dotcom boom, which boosted tax revenues to an extraordinary extent. The Labour Government found that their tax revenues had been boosted for reasons that they did not properly analyse, and they just carried on borrowing on top of that. The figures looked quite respectable until suddenly the floor fell away. There was the credit crunch. Down went the tax revenues. They were left exposed, with an accumulation of errors that led to the soaring deficit and the soaring debt that are a burden on us now and will be a burden for our children.
Mr Clarke
No. I said that I am not going to re-fight the politics of the 2000s and I am not.
This was a strong and sober Budget that I am glad to welcome, just as I welcome the industrial strategy of my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy. It was not dramatic. Some Budgets have plenty of glittering prizes and dramatic changes. This was not exactly a non-event, but it contained quiet, small and valuable measures. That was what we needed. Indeed, it was a sign that the Chancellor of the Exchequer resisted some of the ridiculous lobbying he faced from all sides of the public sector and some of the ridiculous advice he was getting from those who wanted him to buy political popularity or to believe that reckless spending can solve all economic problems. This was the Budget of a competent Chancellor of the kind that this country very much needs at this difficult time.
Luckily for the Chancellor, the background to the Budget was made a little more gloomy by the OBR’s choosing this Budget to change the forecasts that it had, unfortunately, got wrong, and most people did not realise it. There were not many people who pointed out at the time that the OBR was going to be wrong, but the OBR took on a more sensible productivity projection, which gives us considerable problems for the years ahead. The Chancellor has also delivered a Budget at a time when growth has slowed because of the initial impact of the Brexit vote: devaluation and the effect of that on consumer demand.
The background is also one in which monetary policy is not of much assistance. Because of the actions the independent Bank of England had to take after the crisis, we are still being sustained by the aftermath of quantitative easing and quite artificially low interest rates, with the Governor having little opportunity to move rapidly to get back to something like normality. Those interest rates are actually having a distorting effect on some aspects of the markets inside this country. Consumer borrowing is rising to worrying levels and we are now beginning to see demand ease because of the effect of inflation on prices and on the ordinary customer, so it was hardly the kind of Budget that one would envy the Chancellor’s being faced with giving. He faces a lot of problems, and he had also to deal with the uncertainty over the next two or three years.
Uncertainty extends beyond our domestic obsessions: there is great uncertainty globally. We could be threatened if oil prices continue to rise—that has had a dramatic effect on our economy in the past. We are currently being helped by rapid growth in some of our most important markets. The US and eurozone economies are growing at strong rates, and they are important markets to us, particularly the second. Both look fragile, though, and I do not think anybody would guarantee that that growth is going to be sustained for the next two or three years.
The Chancellor and the Government must be careful because, quite plainly and indisputably, the reality is that we do not yet know what form our exit from the European Union will take—this is not the day for debating that—and we do not know what kind of trading deal we will have in a couple of years. As the Governor of the Bank of England confirmed yesterday, if, by mistake, we have a hard Brexit, or a deal-free Brexit—I am talking about mistakes on both sides of the channel because no sensible person would want that —it will be quite a serious shock to the economy of the western world and to this country in particular. Therefore, a prudent Budget was what was required.
Nevertheless, the Chancellor was able to relax fiscal discipline a little—it was rather more than one expected, but he did not lose control. He resisted all the lobbies that were piling in from every public service, with some really quite distinguished public servants giving dramatic descriptions, as they quite often do before a Budget, of the effect on their services. Tens, if not hundreds, of billions will be put in. He was able to ease some of the financial pressures on the national health service within a reasonable level. He rightly found some resources for housing, because we have a dysfunctional housing market. However, he would have been extremely reckless and irresponsible had he gone any further than the slight fiscal easing that he carried out.
How the Chancellor must have wished to give the traditional first Budget of a new Parliament. A Chancellor facing a new Parliament with a decent parliamentary majority does not set out to do a popular Budget— they do the tough and difficult things. One judges a Budget not by whether it makes good headlines the next week and whether everybody is getting very excited about it, but by its impact on the performance of the British economy and on the daily lives of its citizens in two or three years. Had we had a reasonable majority, the temptation would have been to take some tough and necessary decisions, which would have made it easier to shift into other areas. One day, we will stop a fuel tax freeze. One day, we will address the anomaly whereby self-employed people—if they can get themselves so categorised—pay far less in taxation than people in employment doing similar jobs. However, the idea that we can have a majority for either of those measures in this particular Parliament is, regrettably, an illusion.
Dare I say it, but one day, someone will address some of the happy gifts that I receive from the Government as a man past the ordinary retirement age still in full-time work, earning rather more than the national average income? I have just received my tax-free, cash present before Christmas, with which Mr Gordon Brown tried to buy my vote, and the winter fuel benefit. I get my free bus pass of course. I am receiving a retirement pension, which is protected by the triple lock, so that part of my income is rising much faster than that of most of the people I know. When it comes to paying taxation on my salary, which we all receive in this House, I pay less taxation than most people sitting in this Chamber because I pay absolutely no national insurance. Now that is very nice. If I could remember which party gave my generation all those bribes, I would probably vote for the one that gave me most of them, but I cannot for the life of me remember who put them in various Budgets over the years. I could go on.
There is a serious point. Before we all start making reckless promises for—dare I say it?—the next election that absolutely nothing of that kind will be touched by a future Government, we should remember that there are younger people who are in a less fortunate position than I am who are paying taxation to pay for all that and that there are constraints on the Government who would like to spend some more money—as we all would—on very important public services when the opportunity arises. The generational injustice—to use a rather corny phrase that is now very fashionable, but it sums up the problem—which exists in these affairs in this country will one day have to be addressed.
We are still able to do some adventurous things. The industrial strategy of the Secretary of State for Business, Energy and Industrial Strategy shows that, looking ahead, the right things are being addressed and the right priorities are being chosen. We are seeking to advance those changes that have to take place in our economy that will give the next generations the best prospect of making this country, once again, one of the most rapidly growing and prosperous nations in the world.
I applaud the priorities that have been chosen. Plainly, we must invest more in infrastructure. However, I add, as we all agree that we should spend more on infrastructure, that we should avoid believing that all infrastructure spending is automatically a good thing for the environment. Successive Governments of the past have gone in for prestige projects or politically useful ones in marginal seats and so on. All of them need to be appraised sensibly with the help of the private sector and a good business case, so that we prioritise in our infrastructure spending those things that actually boost the real economy and manufacturing and services in this country.
I welcome all that has been said about continuing to address the kind of education required for a modern economy and about dealing with the productivity problem, which has baffled most people. We are not the only country that has found that productivity—for some unforeseen and, actually, not totally understood reason—has failed to rise in the aftermath of the crash. I think that the two things to concentrate on are education and skills training. We have to be sure, and I am not sure myself, that we are going to have the right human capital for the kind of economy that we wish to develop. I represent an east midlands seat, and it has to be conceded that it is particularly in the midlands and in the north of the country that we need to get our schools’ education standards up to the norm in the more prosperous areas. We also need to get skills training of the quality required to provide attractive employees in the kind of sectors of the economy that the Business Secretary described.
Skills training is probably the biggest problem facing the country, except perhaps housing. I have been here for a long time—as I am occasionally reminded by Mr Speaker when he is in the Chair—and we have known for decades that this country has a skills problem. Successive attempts have been made to tackle it, and we are still talking about the same things. It is the quality of the skills training and the relevance of the skills training to the local employment market that we still have to get right.
Finally, a big gap that we still have to address is retraining. Most people will not have one career for their whole life. Even people in work will want to improve their skills or their education to prepare themselves for the next step.
Mr Stephen Hepburn (Jarrow) (Lab)
Will the right hon. and learned Gentleman give way?
Mr Clarke
I am running out of time; I do apologise.
We are still extremely weak in this country in providing the opportunities for reskilling and midlife training that future workforces will require.
I conclude as I started. This was the right kind of Budget. It shows that we have a competent Government. The Chancellor is the nearest one gets to the strong and stable Government that we promised before we started. He keeps his head, and that is what we require. He has a view to the national interest and a very considerable resilience to the short-term, silly pressures to which he is subjected, particularly by an Opposition who, as never before, go through every problem that is mentioned by saying that the only thing we need to debate is the quantity of money being spent on it. They promise untold billions of unfunded spending in an apparent belief that there is no question in the whole field of government that is not soluble by a little more borrowing and a little more printing of money. That just makes it more important that this side of the House gets it right. The Chancellor and the Business Secretary are getting it right, and I hope that they stay steady on the course they have set for the country.
Stewart Hosie (Dundee East) (SNP)
It is always a pleasure to follow the right hon. and learned Member for Rushcliffe (Mr Clarke). I was struck by his discussion of his bus pass, state pension and winter heating allowance. It might be that the right hon. and learned Gentleman does not need these things, but if we begin to erode them and means test them, the problem is that those who do need them will not claim, and—I suppose this is an ideological position from the Scottish National party—we would then begin to erode social cohesion on other important matters.
I welcome much of what the Business Secretary says about the future economy, including on tackling long-term underinvestment in research and development, addressing the long tail of underproductive companies, recognising the importance of innovation, big data, the life sciences and the other sectoral areas he mentioned, and the absolute imperative for UK businesses to export more. However, the future economy cannot simply be about supporting new businesses with new products selling into new markets; it must also be about supporting businesses that are already here delivering for their customers, their shareholders and the economy, and particularly, as the right hon. and learned Member for Rushcliffe said, into the EU, which is a substantial market for the UK. So while I certainly welcome many of the specifics in the White Paper and what was said today, I make no apologies at all for talking about the impact of Brexit, which has the very real potential to undermine the good intentions of the plan.
I say that because the uncertainty created by the hard Tory Brexit plans is already harming the economy. The UK Government’s failure so far to secure a transitional deal is pushing many banks, in particular, and other companies to start looking to relocate to other parts of the EU for fear of being unable to trade freely there in April 2019. Indeed, the Bank of England has warned that 75,000 jobs might be at risk in the banking sector alone, and many of those may well move to the EU. It is vital that we remedy that, and do so quickly, as FinTech, which is mentioned in the White Paper, is undoubtedly one of the areas that ought to be able to make a positive contribution to the future economy of the UK. However, if we do not resolve this issue, meaning that banks’ head offices and decision-making functions go, I fear that FinTech and the ability to fund it will be subsequently reduced.
I also make no apology for saying that Brexit has the capacity to undermine the Chancellor’s plans for raising productivity, which we all agree will be vital if our future economy is to deliver success and prosperity for everyone across these islands. The UK is now at the bottom of the G7 for economic growth. The eurozone and other advanced economies are enjoying higher growth, as well as higher levels of consumer and business confidence. These plans and the money to be spent on them—some of the cash is substantial—might barely mitigate the damage of Brexit, rather than kick-starting the economy to power ahead, which we all hope they will do.
Let me put some flesh on the bones of that, because it is important. The OBR has slashed its forecasts for productivity, economic growth and pay growth. The new forecasts show that the economy is expected to grow at below its long-term trend of around 2% until well into the next decade. The downgraded OBR expectations lower significantly the predicted level of growth. Although the OBR previously said that growth would proceed at much the same pace as before the crisis, it has turned out to be much lower.
This goes back to something the Minister said as a throwaway. Borrowing will still be at £26 billion a year in 2022-23, but he said we want to live within our means. We all want to live within our means, but when we see a national debt of 87% on the treaty calculation, and when we see borrowing of £26 billion by 2022-23—the current account was supposed to be in balance or in surplus in 2015—I think we can say with some certainty that the Government have failed to deliver every single one of the targets they have set since they came to power, with a Tory Chancellor, in 2010.
Sir Edward Davey
Does the hon. Gentleman agree that the real story behind this Budget was the growth forecast, which will impact not only the borrowing he is talking about, but public spending and, frankly, the whole shape of the British economy and British society in the years ahead? Do we not need an urgent debate on how we really raise that growth rate? The industrial strategy was simply not up to that job, which is so tricky.
Stewart Hosie
I agree with the first part of that intervention entirely. The big story from the Budget was that the growth figures were marked down over the entire forecast period that productivity per head was almost halved for that period and that pay growth was marked down, which has an impact on real people. As for a debate, we have been having debates about the productivity conundrum and growth since before I was an MP, and given that I am now about 110, that was some time ago. I suspect that we need to look at the work that has gone into the White Paper. Let us get behind the things we can support and make suggestions when we can improve things—my goodness, there are some we can most certainly improve—but we do not need to go back to the drawing board again.
I think that each and every one of us, if given a blank piece of paper, would come up with broadly the same plan with regard to fairness about investment, infrastructure, education, and supporting R and D and exports. I do not think that there is anything particularly new there. The question for me is: can we deliver that this time, or will this be to no avail if Brexit undermines the potential of any of these plans?
Angus Brendan MacNeil
Both Labour and the Conservatives recently voted in this House to come out of the customs union. That will increase trade barriers with 27 countries, as well as another 67 countries that rely on 38 to 40 other deals with the European Union, so we stand a very real risk of increasing trade barriers with up to 94 countries. Surely to goodness that is putting an already perilously placed UK in an even more perilous position? That was supported by the Labour and Conservative parties, hand in hand, damaging together.
Stewart Hosie
My hon. Friend is right. Every single assessment that we have seen, starting with the leaked Treasury document of a couple of years ago, says that the worst-case scenario—if there are tariffs, other regulatory barriers and an immediate reversion to World Trade Organisation rules—is a 10% hit on GDP, full stop, before we start. I do not understand why anyone—even Tories, and certainly the bulk of the Labour party—voted to come out of the customs union. That was an idiotic thing to do. If we must leave at all, we should look to have the closest possible formal links, so that we maintain as much trade as possible on current terms.
Stewart Hosie
I will in a little while.
The Resolution Foundation has reported that productivity growth in the 10 years to 2020 will be the lowest for 200 years. As a result, we have the worst economic growth forecasts that the OBR has ever delivered. Equally importantly, the forecast for the UK’s balance of payments current account as a share of GDP has also been downgraded significantly due to a slowdown in business investment and the deterioration of the UK’s net trade balance. That is expected to be a whole 1% deeper in deficit this year and next, and for the following year a 2% fall is predicted compared with the spring forecast.
We know that this is not a new problem. The Tory plans for post-Brexit policy—trade is vital if the future economy plan is to work—are delusional. The Tories aim to leave the single market, but apparently want to keep all the benefits of the club, while creating this preposterous “Empire 2.0” nonsense and signing trade deals across the globe. However, as my hon. Friend the Member for Na h-Eileanan an Iar (Angus Brendan MacNeil) pointed out, the UK already has trade deals with almost 90 non-EU countries, besides the 31 other members of the European economic area, thanks to our membership of the single market and the customs union.
Stewart Hosie
In one second. These existing trade agreements will be vital if our economy is to thrive. I give way one more time.
Sir Edward Davey
I am very grateful to the hon. Gentleman. I was trying to tee him up before. Given the growth forecast and the shocking impact that the situation will have on people’s incomes and the public finances, is not now the worst possible time to be leaving the European Union, the customs union and the single market? Is this not the most disastrous economic decision, given the economic forecasts?
Stewart Hosie
Of course, leaving the world’s most successful trade body and access to half a billion customers, tariff-free, would be an idiotic thing to do at any point. The fact that we are doing it now—and, more importantly, unprepared—is key. I will say a little more about that.
The existing trade agreements that are being discussed are vital if our economy is to thrive. The Government have suggested more support for exporters to new markets, but that seems to be at the expense of the trade routes that companies already have. To put some flesh on the bones of the last intervention, the EU accounts for 43% of the UK’s goods and services exports, and 54% of imports. The UK Government have failed in their intention of starting to negotiate the future economic relationship with the EU at the same time as negotiating the divorce settlement. The delays in the first phase of the negotiations are deeply worrying and undermine the plan. We risk approaching a Brexit deadline without having concluded negotiations, and without a transitional arrangement.
In case anyone is in any doubt about how our friends in the EU view this, Federica Mogherini has said:
“It is absolutely clear on the EU side that as long as a country is a member state of the EU, which is something that the UK is at the moment…there are no negotiations bilaterally on any trade agreement with third parties. This is in the treaties and this is valid for all member states as long as they remain member states until the very last day.”
We have heard all the rhetoric from the Trade Secretary, who has conceded that his staff do not have the ability to cut the deals. At the same time, the EU is continuing talks with multiple countries across the globe, including Australia and New Zealand, which many Members point to as post-Brexit allies. That means that we will be playing catch-up with the EU’s trade policy, and it will take years—possibly decades—simply to replicate the arrangements we already have, if we can even do that. Doing so is vital to the trading future of Scotland and the UK and to our future economy.
Another point to make about the EU concerns the free movement of people. Part of the plan is to attract the best and brightest. In my view, we must not just continue to attract them, but keep the ones we have. The 128,500 EU citizens employed in Scotland contribute some £4.2 billion to the Scottish economy. We must not send a signal to people—to those who are here, to those from the EU or around the world who want to come here, or to those who seek the collaborative partnerships in research and development contained in the plan—that the door is now closed. That would be catastrophic, whether it is said officially or that impression is given. It would add to the potential loss of 7% of gross value added to Aberdeen, of 6% to Edinburgh and of 5.5% to Glasgow—a £30 billion loss of GVA to the cities of the UK alone. We will therefore continue to defend Scotland’s economic interests now and in the future, and we will prioritise maintaining membership of the single market and the customs union for Scotland—and, so far as I am concerned, the free movement of people, on which this plan, to a large measure, is predicated.
I do, however, welcome much of what the Secretary of State has said alongside the publication of the industrial strategy, which aims to tackle the productivity slowdown and address the challenges and opportunities brought about by technological advance. We agree with many of the five foundations of productivity that he has laid out and many of the key policy areas that he has suggested, including raising R and D investment to 2.4% of GDP by 2027 and the increase in R and D tax credits rate to 12%, as well as the £725 million industrial strategy challenge fund.
We also welcome some of the smaller things, because although many of them are England-only or England and Wales-only, they are still good for the Secretary of State to do. They include the introduction of the T-levels, the additional money for maths, technical and digital education, and the £64 million for retraining. We welcome many investment announcements, including for infra- structure, broadband, energy and transport.
We would not disagree with the four main challenges—artificial intelligence and the data revolution; clean growth; mobility; and an ageing society—although I am rather at a loss to see how the Government can trumpet clean growth when they have refused for a decade or more to address the challenge of the imbalance in connectivity to the grid, which damages the potential of offshore wind in the north-west of Scotland. If the Government could finally resolve the imbalance, which means that a charge is paid by the Western Isles whereas central London receives a subsidy, there might be unequivocal support for the policy of clean growth.
Angus Brendan MacNeil
My hon. Friend brings up a fantastic point, on which his view is shared by the SNP and the Scottish Government. The UK Government choose to penalise the place where the wind resource is, but unfortunately the wind just will not blow at the whim of the bureaucratic pen of the UK Government. I would have thought that they would have realised that after all these years.
Stewart Hosie
One would have thought so, given the number of times the Government have been told that this is an ongoing problem. I could almost repeat it verbatim: there is £23 per kWh charge in the north-west of Scotland and a £7 per kWh subsidy down in the south of England. At some point soon, now that the Government have a clean energy strategy as part of the future economy, I hope that even they might think to address that fundamental inequity.
I want some real joined-up thinking. I know that the industrial strategy recognises, as the Secretary of State said in his statement yesterday, the contribution of the Scottish Government and the other devolved institutions. It is worth putting on record that the Scottish Government already have an economic strategy, with strategic plans for trade, investment, manufacturing, innovation and employment. Following the recent enterprise and skills review, they are aligning their agencies and resources behind those plans. The UK Government should have such a joined-up approach.
The Scottish Government are taking action to support the economy and to counter some of the uncertainty brought about by Brexit, despite the real-terms Budget cuts. This includes the £500 million Scottish growth scheme to target high-growth, innovative and export-focused small and medium-sized enterprises. The first tranche of that money was delivered in June, and a further tranche will be made with an expansion of the SME holding fund, along with the leveraging in of private capital. The Scottish Government are also taking forward infrastructure investment plans, with projects valued at more than £6.5 billion either in construction or starting this year.
In addition to the innovation and investment hubs in London and Dublin, the Scottish Government have established hubs in Berlin and Paris. They are maximising the opportunities there while also developing our existing presence in Brussels into a hub. That is important because there is no point in just supporting big businesses that already export. If we are ever to mitigate the potential loss of export trade with the EU, we need to have the people and resources in place to hold the hands of businesses and ensure that more of them start to export. The Scottish Government are establishing a new south of Scotland enterprise agency.
The Scottish Government are implementing a number of other measures, the most important of which is the roll-out of digital connectivity. Had the roll-out of 4G been left to the market and the UK Government, I understand that we would be about 60% of the way there. However, because of the additional hundreds of millions put in by the Scottish Government, we are at 95%, and we are driving forward the “Reaching 100%” project to deliver superfast broadband access to all residential and business premises by 2021.
Angus Brendan MacNeil
My hon. Friend is giving a long list of impressive boasts by the SNP Government, but he may not know that people on the west side of one of the smallest islands in the Outer Hebrides can get 48 megabits per second. I believe that central London and many other places cannot match what the SNP Government have achieved in the west of the highlands and islands of Scotland.
Stewart Hosie
That sounds to me like a pitch for inward investment for Barra, given what my hon. Friend says about 48 megabits per second. The whole point is that it is possible to deliver to some of the most remote communities the kind of access to technology that every business and individual needs.
We welcome the fact that the UK Government have published their industrial strategy, and we are committed to working with them to ensure that the strategy delivers the maximum benefits for Scotland. However, as my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) said yesterday, we are disappointed that the Scottish Government were not formally consulted ahead of the publication of the strategy, even though the White Paper recognises the critical role that the Scottish Government have to play. That is a worry in areas such as life sciences, in which Scotland is a world leader, because a sectoral deal seems to have been agreed without any consultation with the Government in Scotland.
We have set out our programme for government in Scotland, which includes a commitment to create a Scottish national investment bank to deliver infrastructure development, finance for high-growth businesses and strategic investments in innovation. That mirrors much of what the UK Government have said—[Interruption.] I am conscious of the time. I have had 20 minutes, but I will finish soon; I am sure there will be plenty of time for Labour Back Benchers. We are also committed to a transition to a low-carbon economy, as this is an important economic opportunity for Scotland.
Finally, let me make a point that my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey also made yesterday. We welcome the plan and the substantial sums that are being invested, but we note that the £7 billion for the extension of the innovation fund will not to be spent until 2022-23. If it is important to spend that money, and it is, and if it is important to mitigate the damage that Brexit might do, and it is, I simply say to the Secretary of State that he should perhaps bring forward that spending.
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. The House is obviously aware that a great many people wish to speak and there is limited time, so we will begin with a time limit of seven minutes.
Damian Collins (Folkestone and Hythe) (Con)
I rise to speak in support of the Budget and, in particular, the key strategic priority it places on the housing market and increasing housing supply. The Chancellor was right to say that we should have a national target for new home completions of 300,000 a year, but that number should not be a mere aspiration; it is an absolute necessity.
For many people in this country, getting on the housing ladder is becoming increasingly difficult. The prices of new homes to buy are rising much faster than people’s earnings. That has been the case for a long time. It is therefore no surprise that the percentage of people who are able to own their own home has declined. We are not looking at investment in the housing market just for homes to purchase. We need to build a lot more units that are affordable to buy and to rent, and we need a much more active strategy to do that. I was pleased that the Government announced that as part of the Budget.
I have supported the proposed development of the Otterpool Park garden town in my constituency, which would create up to 12,000 new homes. Any planning decision involves a degree of difficulty and it is important that we get the local consultation right, but we do need to prioritise building a lot more homes.
Building creates not only new places for people to live, but a considerable number of jobs in the construction sector. Many people who work in construction say that even now, it is difficult to find the people to do the work that is available. Therefore, it was right that a strong priority was placed on training people to work in the construction sector.
I welcome the Chancellor’s announcement of the £3 billion resilience fund to be spent over the next two years on preparations for Britain leaving the European Union. My constituency of Folkestone and Hythe contains the channel tunnel. Investing in preparedness to manage cross-border trade is a necessity. Anything that, for whatever reason, slows the progress of road freight in and out of the country will cause congestion and delay. That is bad for the economy and has a detrimental impact on people’s quality of life and the businesses in my constituency and elsewhere in Kent.
For me, a key priority in building the physical resilience we will need is not only to manage the electronic processing of freight as it passes in and out of the country, but to ensure that we have the physical infrastructure to hold lorries if they have to queue before leaving the country or if there is any requirement for customs checks as they arrive. The delivery of the lorry park on the M20 at Stanford West that was envisaged and proposed two years ago as a relief for Operation Stack is a vital piece of national infrastructure. I was disappointed that the Government had to withdraw their planning application to build it because of a judicial review, but I know that it is being looked at again. I see that the Financial Secretary is in his place. I raised this matter with him last week and welcome the letter he sent me to confirm that the ring-fenced budget of £250 million that the Government allocated for the delivery of that lorry park is still there. It is a vital piece of infrastructure and we need to ensure that it is delivered.
On the other spending commitments in the Budget, I welcome the additional £2 billion this year and into next year for the national health service. It is important that that reaches the places that need it most. The Health Secretary is not here, but I believe that greater consideration needs to be given to GP services and primary care in coastal communities, where the often complex, unique and challenging requirements have led to the average number of patients per GP being much higher than the national average. We are struggling to recruit GPs in such areas. I have spoken to the Health Secretary about that issue on numerous occasions and know that it is a priority for him. However, we need to ensure that the extra money for the health service goes to the parts of the country where it will make the biggest difference.
There has been a lot of talk about increasing investment in research and development and about increasing the research and development credit. That is incredibly important for the future of the economy, and I want to touch on artificial intelligence, which will be an important driver of growth in the future, as the Secretary of State set out in his remarks. Effectively, artificial intelligence is the robotic harvesting of the data footprint that we leave as we increasingly conduct our lives online and the designing of new products and technologies around that to meet people’s needs. That throws up a number of ethical issues.
Algorithms that run programmes are private property—they are copyrighted; they are not shared, and many platforms, such as Google and Facebook, fiercely guard the information—but we need to make sure that, when new services are designed based on our data footprint, companies behave ethically and responsibly and that we are able to check they are safeguarding the interests of the people they seek to serve through that technology. That is why the announcement of the creation of the centre for data ethics and innovation is incredibly important. The Digital, Culture, Media and Sport Select Committee, which I chair, will be looking at the distribution of disinformation and how companies’ algorithms either support or could act against it. There is, however, an important ethical question about the right of third-party organisations to check the work being done. Innovation through AI can, then, transform the economy, but it throws up some ethical issues that we have to get right.
The Government have taken an interest in driverless cars, but driverless cars, though an exciting technology, do not work without a signal to allow them to receive the information they need, which is why the creation of the national 5G network is so important. Without a signal, a driverless car would suddenly stop in the middle of the road. The investment in the 5G network requires investment not just in poles and masts but in fibre infrastructure. A key part of the industrial strategy has to be the move to a full fibre economy as quickly as possible. We simply cannot deliver on massively important new technologies such as 5G for the whole nation without that infrastructure to support it.
As an adjunct to that, I know that my right hon. Friend the Minister for Digital has talked about whether there should be a universal service obligation for 3G mobile signal. In many parts of the country, including Elham valley in my constituency, the 3G signal is weak. Ofcom will shortly be publishing a study on the real level of service delivery by mobile phone operators and whether it falls below the requirement stated in their licences. If it does, there will have to be some further inducement to act to make sure that basic coverage is better than it is. In the longer term, however, we need investment in a 5G network.
Finally, the joint working between the Government, the CBI and the TUC on retraining is crucial. Technology means that people’s jobs will change faster and faster throughout their lives, and people need the ability to retrain throughout their working careers to take advantage of this.
Edward Miliband (Doncaster North) (Lab)
It is a pleasure to follow the hon. Member for Folkestone and Hythe (Damian Collins), who made some important remarks about Brexit and the risks we face.
I want to start my remarks about the Budget with the words of the Prime Minister at the Conservative party conference in 2016. She said this about the EU referendum:
“It was about a sense – deep, profound and let’s face it often justified – that many people have today that the world works well for a privileged few, but not for them. It was a vote not just to change Britain’s relationship with the European Union, but to call for a change in the way our country works – and the people for whom it works – forever.”
I agree. The referendum told us that the status quo was not good enough—in fact, was not nearly good enough. Surely, then, the test of the Budget is whether someone listening to it and seeing its contents would conclude that this was a Government determined to live up to her words.
One or two policies in the Budget look somewhat familiar. The energy price cap used to be part of a Marxist universe; now it is Government policy. The “use it or lose it” policy on land banking was described by the Foreign Secretary—an eminent person—as “Mugabe-style” land expropriation; now it is on the way to becoming Government policy under the wise counsel of the right hon. Member for West Dorset (Sir Oliver Letwin)—an unlikely authoritarian Marxist.
On the fundamentals, however, on the underlying economic strategy, I am afraid it is not change, but more of the same. I want to highlight two issues: the refusal to address deep inequality in our country and the continuation of austerity. We all know about the cost-of-living crisis—it is not contested any more, although the Secretary of State did not really talk about it. I will give people just one fact: on the path suggested by the OBR, the average worker will not get back to 2008 earnings until 2025. That is the scale of the challenge we face. Are the Government making things better or worse when it comes to this and the gulf in living standards between the top and bottom? I am afraid they are making it worse. According to the Resolution Foundation, tax and benefit changes since 2015, including those in the pipeline, mean:
“The poorest third of households will lose an average of £715 a year compared to average gains among the richest third of households of £185 a year.”
The Prime Minister apparently believes that the message from the Brexit result was that people felt that the country worked for a privileged few but not for most. The Budget, however, makes the position worse rather than better.
I should love to hear from whoever winds up the debate what Ministers’ defence of these distributional figures is, because this is discretionary Government policy. It is a political choice, not an economic necessity. We need only look at what is happening to corporation tax to understand that. Corporation tax has been cut by more than £10 billion since 2010—and, by the way, businesses have not even been asking for those cuts. The Chancellor could have pointed out that the current rate of 19% was the lowest in the G7 by some distance, and that there were other priorities, but no: he is going to spend billions more pounds on cutting corporation tax to 17%. It seems that he can afford to spend those billions, but he cannot afford to keep benefits at the same level and has to cut them. That is the political choice of this Budget.
Let me turn from the issue of distribution to the issue of debt and the deficit, which the Secretary of State talked about. I am old enough to remember when the Government said that they would balance the budget by 2015. In fact, that was not so long ago: it was in 2010. I am also old enough to remember the 2015 election campaign, when I was told that if we did not balance the budget by 2018, catastrophe would follow. What does Robert Chote, the director of the Office for Budget Responsibility, say? He says:
“If the deficit is to continue falling at the average rate expected beyond the end of this spending review, then it won’t reach balance until 2030-31.”
What an extraordinary failure! A deficit promise is to be kept not five years late, not 10 years late, but 16 years late, and the Government have the cheek to go on about the deficit. They have failed to deliver on the promises that they made, but they are pulling off a remarkable feat: they are both failing on those deficit promises and cutting spending. The Secretary of State did not mention that. According to the Institute for Fiscal Studies, there will be day-to-day departmental cuts of £10 billion per capita by 2022, with welfare cuts on top. If ever we needed proof that austerity had failed, that would be it. The Government are not meeting their deficit promises, and they are carrying on with the cuts.
There is a deeper point, however. The Prime Minister’s words were right. People were not just voting on immigration in Europe, although of course they were doing that; they were also voting for a big change of direction. Continued austerity, continued spending cuts and worsening inequality constitute not a change in direction, but more of the same. We know what the Government should have done. They should have realised that cutting taxes for the richest, and the largest corporations, is not the way to ensure that a country succeeds. They should have put an end to austerity and cuts in public spending, and they should have recognised, more than they did, the cruelty and pain caused by welfare cuts that we all see, as constituency Members—including what is happening with universal credit.
I do not know what the precise Brexit settlement will be, but it is already clear from last year’s autumn statement that the impact on the economy and public finances will make it harder—let us be frank about this—to deliver the fairer society that was one important part of the mandate of the referendum, which makes it all the more important for us to have a Government who are committed to action to bring that about. On that score, and by the standards that the Prime Minister set herself, the Budget fails. It proves to me, yet again, that this Government cannot bring the change for which the people voted in the referendum.
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. I must now reduce the speaking limit to four minutes.
Andrew Bridgen (North West Leicestershire) (Con)
It is a pleasure to follow the right hon. Member for Doncaster North (Edward Miliband). I may not agree with his message, but I admire the passion with which he delivers it.
Let me, in the time available to me, welcome the Budget and, in particular, the proposals for infrastructure, business and the housing market. In my constituency, we are certainly doing our bit for the housing market. We have completed more than 600 new homes in each of the last three years, and this year we expect to complete more than 700. It is worth bearing in mind that if every constituency were building new homes at the same rate as mine, well over 400,000 new homes would be available this year.
I welcome what the Chancellor said about supporting the building industry, SME builders and releasing public land for building, but I hope that Ministers will bear in mind the need to ensure that the bidding process for the purchase of public sector land as it comes available—regulated by the Homes and Communities Agency—is not so onerous that it deters SMEs from taking part. Otherwise we will miss out on a valuable aspect of that policy.
My constituency is home to some of the UK’s major house builders, and the major brick and aggregate producers. In recent years, one of the biggest deterrents to investing in building materials and energy-intensive industries is uncertainty about climate change-related policy costs, with potential threats including EU emissions trading reforms that would put many firms out of business, even state of the art brick factories. The last two brick factories built in the UK are in my constituency. One was built in 2008, at the end of the economic crash, and one will come on stream in the next few months. They involve considerable investment—about £55 million—and each plant can produce 100 million bricks a year, but even with a target of 200,000 new houses a year, we import 300 million bricks. If we want to build 300,000 houses, we need to build new brick factories or we will have to import bricks from all over the world, and that is not efficient. The uncertainty for energy-intensive users needs to be removed as soon as possible, so that investment can go in and we can be self-sufficient in bricks and tiles.
I welcome the national productivity investment fund of £30 billion. Some of that money is already supporting the 6 million square feet SEGRO warehousing development in the north of my constituency. That will create 11,000 jobs. Unemployment in my constituency has fallen since 2010 by 70%, youth unemployment is down by 80% and only 470 people are on the unemployment register. Those jobs need to go out to the cities of Derby, Nottingham and Leicester, and we need better public transport to give people access to the jobs that we are creating. The continued cuts in corporation tax will ensure that businesses in my constituency and across the country continue to create the jobs and the wealth we need in the future.
Hilary Benn (Leeds Central) (Lab)
When the British people voted to leave the European Union, they did not vote to damage the Good Friday agreement, they did not vote to undermine the public finances, they did not vote to run the risk of falling off the edge of a cliff without a deal, and they certainly did not vote to end the benefits to Britain of the customs union and the single market. None of those things are inevitable consequences of the vote in June 2016: they are the result of political choices, made by the Government, that will have profound consequences for the future of our economy, our public services and the people we represent. Those choices and consequences dwarf this Budget and will determine the shape of just about every Budget in the years ahead.
The truth is that the Government have been far from transparent and open about those consequences. The simple question for the House is “Why not?” Why have the Government been so unwilling to acknowledge that the decisions that they have made will produce that result, and why have they been so reluctant to share that analysis? We know what the benefits of the customs union are: it gives us frictionless trade. The Government say they want frictionless trade, but we have it now through the customs union. We know it gives us access to a load of agreements with other countries in the world negotiated by the EU. We know—referring to the point made by the hon. Member for Folkestone and Hythe (Damian Collins)—that it enables the lorries that come off the ferries at Dover to move out seamlessly to help to turn the wheels of industry and stock our supermarket shelves.
Some 60% of our exports go to Europe and those markets we access through the trade deals. Is it possible to imagine any business saying to its biggest customers, “Well, we’ll try and keep on doing what we are doing with you at the moment, but actually we’re more interested in trying to sell stuff to other people around the rest of the world.”?
The place where this falls into the starkest relief is in Northern Ireland. The Government say that they do not want a border, yet they also say that they want to leave the customs union and the single market. When it is pointed out to Ministers that that could be a bit of a problem, they say that technology will come to their rescue, even though their ideas are untested. One organisation has even suggested that airships and drones could hover above a non-existent border. I hate to say this, but I do not think that tethered Zeppelins or other airships are going to deal with the problem in Northern Ireland. The truth is that, whatever the weather and no matter how radical the technology is or how much the Government spend, it is hard, if not impossible, to see how this problem can be reconciled if we are to avoid a return to a hard border. That is why there is a crisis in the negotiations with the EU, and why the Irish Government are pushing so hard.
This is what lies behind the argument we are having about the impact assessments that apparently never existed. That is what this debate is about. It is not about process, or about what has been released to the Select Committee. We know that what we have been given has been edited, filleted and sanitised. What this is really about is the process by which the Government took the decision to leave the single market and the customs union. Did they consider the fiscal, economic and employment consequences of the two most important decisions that have been taken since the vote in June 2016? If they did not consider them, why not? And if they did, when are we going to see them? None of us knows how this is going to turn out, but frankly, the Government owe it to the House and to the people of Britain to come clean about how they reached that decision.
Oliver Dowden (Hertsmere) (Con)
It is a pleasure to follow the eloquent remarks of the right hon. Member for Leeds Central (Hilary Benn). I am conscious that we are on a tight time limit, so I shall confine my remarks to the question of productivity and its implications for public spending. By the OBR’s own recognition, many of the numbers that it has produced are speculative, but it is clear that we have a long-term productivity challenge, as the Chancellor has rightly recognised in his Budget. This challenge has been disguised in recent years by our membership of the European Union, in that we have had large-scale migration of highly skilled migrants from eastern Europe, and we have principally had to compete only with European markets. Both of those factors are rightly going to change as a result of the vote, and we consequently need to raise our sights and think about the public spending choices made by this country relative to those of other countries, such as South Korea, which are likely to be our competitors in the years to come. When we look at that, we see that we have some difficult questions to answer.
The amount that this country spends on welfare includes almost £100 billion on in-work welfare and more than £100 billion on retirement welfare. In comparison, South Korea spends but 2% of its national income on welfare, so we have some choices to make, and we must be clear about those choices. Every £1 that we choose to spend on welfare is £1 that we cannot spend on our education system, on our research and development or on our infrastructure. All that money could be used to increase the long-term productive capacity of our economy, and a failure to spend in those areas reduces that capacity and reduces our potential output. We therefore have to look at each of those areas and ask what more we can do.
Bim Afolami (Hitchin and Harpenden) (Con)
I commend my hon. Friend on his speech. In relation to the more productive ways in which he thinks Government funds could be spent, will he elucidate further on what aspects of the Budget he feels could be upgraded or extended?
Oliver Dowden
We should consider whether we are able to release further resources for infrastructure spending. For example, the materials used for digging Crossrail 1 could be released straight into Crossrail 2, and we could look at HS2 and see whether we can release resources into HS3. It is those sort of long-term decisions that countries such as South Korea, China and India are making and that we are constrained from making due to excessive spending on current priorities.
I therefore urge the Government to continue with their agenda for in-work benefits, whereby we are increasing the personal allowance, so that people on the lowest incomes pay less tax, and increasing their income through the national living wage, so that they are less reliant on the state. We are also reforming welfare through universal credit to ensure that people keep more of what they earn and that they are constantly incentivised to move further away from reliance upon the state and towards self-reliance, and the case for doing so is both economic and moral. I urge the Government to ignore the Opposition Members who constantly harp on about universal credit. If they actually go to their local jobcentre, as I had the privilege of doing just last week, they will hear countless stories of how universal credit actually incentivises people to take on more hours of work and creates a smooth path out of welfare and into work.
My right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) eloquently made the case for looking at retirement benefits. It cannot be right that people who are perfectly capable of looking after themselves have access to universal benefits that they simply do not need. Equally, we need to look at the balance between the younger generation and the older generation. The previous Government rightly committed to a deal whereby we increased retirement benefits, so that people had dignity and security in retirement, but we need to consider the rate of increase and ask ourselves whether it is fair that the older generation’s benefits are increasing at a faster rate than those of people who are in work. Surely equality demands that such benefits should be increased only with increases in working-age benefits. If we do not embrace and make such choices, we will surely have them forced upon us as we fall poorer and experience lower living standards than those of our competitor nations.
Stella Creasy (Walthamstow) (Lab/Co-op)
It is always interesting to follow the hon. Member for Hertsmere (Oliver Dowden), who makes a wonderful case for why this country needs not just an Opposition, but an alternative. Let us give him that alternative today. It was a privilege to attend this morning’s commendation service for my local police. I heard extraordinary stories of police constables and their bravery, but those PCs are facing an uncertain future. That is the test for this Budget. How did we get to a place where people who have tackled rapists, run into burning buildings and taken countless criminals off our streets face potential redundancy, while the Government are throwing billions of pounds into the mess that Brexit is creating?
This Budget speaks volumes not only about this Government’s priorities, but their performance. After seven years, the Chancellor boasted of “peaking” the debt, when they said that they would balance the books. Another year or more has been added to the austerity timetable. Our constituents yet again face wage stagnation. Our public services have been cut to the bone. Universal credit has been made more complicated to administer and more difficult for people to understand. The stamp duty exemption will push up prices and do nothing for the millions of people with no deposit who are renting. Personal debt is at record levels. Home ownership is at a 30-year low, yet one in 10 people now have a second home—it is all right for some, but not enough. Growth has slowed. Inflation is rising. Our teachers are buying basic supplies for their schools. Our nurses cannot afford to feed themselves.
The most terrible travesty of this Budget is that there is money to be raised. Buried away is the Government’s agreement to close the tax loophole on commercial property sales for foreign companies. I welcome that U-turn. Britain desperately needs that magic money tree. However, it is indicative of this Government’s capability that they cannot even get that right. They think that they will raise only half a billion pounds a year, when they should be raising £6 billion a year.
This debate is about productivity. I am worried about the productivity of our Ministers. I was deeply disappointed by the Government’s response to my parliamentary questions and their belief that double taxation treaties mean that the tax would be paid. They do not seem to understand that the Luxembourg treaties will override that and that many real estate companies are based in Luxembourg, so will be exempt from this very tax and from our magic money tree, as will anybody who acquires new real estate and puts it in a Luxembourg holding company before the rule comes into force.
Those are not new problems, but I put them on the record because, clearly, the Ministers with responsibility for HMRC have not even bothered to read the Paradise papers, which set out such deals in great detail. It is little wonder that this Government do not really care about evidence or data and do not want to know the real impact of their policies on the people they represent.
There is clear and explicit evidence of the link between gender equality and global competitiveness. Productivity is a massive challenge in our economy, yet this Government have absolutely no interest in understanding the impact of their policies on addressing inequality.
In the time left to me, I put the Government on notice. As a country, we cannot afford for them to ignore these matters any more, just as they have failed to get to grips with Brexit, failed to deal properly with tax loopholes and failed to pay our public sector workers properly. The Opposition refuse to let the Government’s poor performance, poor priorities and, indeed, poor people skills condemn the future of this country. They say this Budget is about being fit for the future, but they are not fit for office and it is time they left.
Mrs Kemi Badenoch (Saffron Walden) (Con)
It is a pleasure to follow the hon. Member for Walthamstow (Stella Creasy), even though I disagree with almost everything she said.
There is much to welcome in the Budget, and I am grateful to the Chancellor for listening to concerns about tax increases and for accepting a request from me, my right hon. Friend the Member for Harlow (Robert Halfon) and others to freeze fuel duty. I represent a large rural community where almost everyone has to drive, and the freeze will help us to keep down the cost of living.
Fuel duty is not the only duty that was frozen. The freeze on air passenger duty was warmly received by many of my constituents and local businesses, especially Stansted airport. Aviation is a key growth industry for us, and the freeze will help to ensure that Britain’s skies remain open post Brexit and will promote the global Britain programme.
Every day I receive letters from residents who want to know what the Government are doing to ensure a smooth transition as we leave the EU. Businesses in my constituency are pioneering new types of British exports worldwide—the English Cream Tea Company in Dunmow has managed the phenomenal feat of selling tea to China, and the exceptional craftsmanship of luxury products by Geoffrey Parker games in Wimbish village is recognised as some of the very best British manufacturing. They will be reassured to hear of the further £3 billion of investment, on top of the £700 million already committed, to prepare effectively for EU exit.
As the Government continue to push to increase the supply of much-needed housing, I stress the need for accompanying transport infrastructure in our industrial strategy. A new station at Cambridge South will help my constituents with their daily commute, will make it easier to get to Addenbrooke’s Hospital and will improve tech corridor research and development links with Chesterfield research park and with companies around Stansted. However, we also want to see further improvements to the West Anglia main line soon, ideally four-tracking to keep up with increased demand.
We have heard a lot over the past few days about the need for improved productivity. The announcement of an additional £8 billion through the national productivity investment fund, taking the total to £30 billion, is by far the most exciting measure, not just because of the investment in rail, broadband, science and innovation but because of the investment in emerging technologies such as artificial intelligence and driverless cars.
I know that many in this House consider driving a recreational activity and see driverless cars as a threat to their hobby, but spare a thought for people like me who hate driving, a chore that eats into time better spent on other things. The productivity improvements from driverless cars will be immense. The average car is used just 10% of the time, and autonomous vehicles could increase that to 90%. Imagine a world that needs fewer cars. We could say goodbye to road rage, drink driving, texting at the wheel and unfit drivers ruining lives, and say hello to more free time, less congestion and cleaner air. It is a game changer for tackling rural isolation and geographical exclusion and, pardon the pun, will ensure that Britain remains in the driving seat in a competitive global market. The future is coming and I cannot wait, which is why I commend this Budget to the House.
Mr Jim Cunningham (Coventry South) (Lab)
This is a Budget from a Government who have run out of ideas and are lacking in imagination. They heralded it as a Budget that will help everyone, but nothing in this Budget will help ordinary working people. In seven years under this Government, we have seen wages fall, and they are now lower than they were in 2010. Personal debt levels are rising, and with interest rates starting to rise we are heading for a massive problem. There has not been nearly enough progress in closing the gender, race and disability pay gaps—that is simply unacceptable. Britain is meant to be the sixth largest economy, yet public and business investment is among some of the lowest in advanced countries. We are also seeing low productivity.
On Brexit, there is uncertainty in all sections of society because of the shambolic negotiations that we have seen so far. The OBR’s downgrading of economic growth and productivity make for bleak reading, and we seem to have a Government who have refused to learn from their mistakes. They cannot even hit targets they set for themselves; they promised to eradicate the deficit by 2015, 2016 and 2017, and now they have pushed it back to 2020 and probably beyond.
Coventry and the west midlands stand to lose out hundreds of millions of pounds in EU structural funding after Brexit. This Government’s policies and, in particular, this Budget do not do enough to stimulate investment and growth and to help replace the funding that will be lost. The Government are not building a strong economy and they certainly are not leading the way for Britain to remain a major world player.
The Budget does nothing to help ordinary people who are struggling up and down the country. The national living wage has been revised down, so it will not reach £9 by 2020, as previously promised, and the Government are persisting with the horrendous roll-out of universal credit, instead of pausing the roll-out to allow the system to be improved. The Chancellor’s offer of help will not help people enough, as it is only a fraction of the £3 billion a year cuts they have made to this scheme. Only £1 of every £10 cut has been put back, and that just is not enough to help vulnerable people. More than 100,000 people in Coventry have used a food bank in the past few years—that is unacceptable in 2017. These changes are made worse because they are being implemented alongside jobcentre closures, and the services on offer are also being privatised. The Government are removing jobs and services from parts of the country that need them the most, including Coventry. That will have long-lasting repercussions
The housing crisis has not been addressed either. Last year, fewer than 6,000 social houses were built, and that is simply unsustainably low. The Government pledged to build 300,000 homes by the mid-2020s, but houses are needed now—not just any houses, but affordable houses that help first-time buyers. The OBR said that the stamp duty cut would actually end up raising house prices, so this is yet another policy that has not been thought out.
Despite being a key issue during the recent general election, and despite it being a sector in desperate need of investment, there was, shockingly, absolutely no mention of social care in the Budget. Local government services in Coventry continue to have funding slashed, and there is no additional money for the police or fire services, making provision of vital services more and more impossible.
The NHS has again—[Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. I was going to let the hon. Gentleman finish his sentence.
George Freeman (Mid Norfolk) (Con)
It is a privilege to rise on behalf of my constituents to welcome this Budget and the industrial strategy announced by the Business Secretary yesterday. In the past week, the Chancellor and the Business Secretary have sent a strong signal that this economy and this country are in the hands of safe grown-ups in the Treasury—[Laughter.] I would not laugh yet. This country knows that what we need is a sensible, one nation Conservative Administration, not a Marxist shadow Chancellor committed to the overthrow of capitalism. [Interruption.] The hon. Member for Stalybridge and Hyde (Jonathan Reynolds) thinks that is funny; I do not. We do not need Labour’s £500 billion spending spree, which would put more debt on to the backs of our young, and we do not need dangerous talk of requisitioning private property and exploiting the crisis we face to fulfil Labour’s Marxist fantasies.
I wish to highlight three particularly encouraging aspects of the Budget. First, on public sector pay, I welcome the fact that the Government have shown they are listening carefully to the concerns of those in the public sector who feel that, after seven years of the pay cap, we need a different model to inspire our best. I welcome the easing of the pay cap, so that those on the frontline of our public services—the heroes who run into burning buildings and take bullets for us—can get the pay rise that they deserve that is appropriate and affordable. I also welcome the signal that those in the public services who are responsible for management and delivering productivity are rewarded for, and on the basis of, that productivity.
I particularly welcome the announcement of a public sector leadership academy, which my right hon. Friend the Chief Secretary to the Treasury and others have been instrumental in pushing forward. In the next few years, we need to go further and signal an ambition for our public services to work in partnership with the private sector to drive a recovery. We want an innovation economy in which the public sector embraces innovation, and is a partner for innovation, to modernise our public services. I call that public sector enterprise. Let us be bold and unleash the power of the NHS to work with our life sciences sector to pull innovation through for modern healthcare. Let us be bold in procurement, so that the public sector drives innovation in our economy, and let us incentivise our best public sector leaders to be part of that.
Secondly, I warmly welcome the industrial strategy. I am proud to have done my bit over the past few years, working with the former Chancellor and Member for Tatton; Lord Willetts, who was in the Gallery earlier; Lord Heseltine; and my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy. Do not take it from me that a Conservative generation has led the way on industrial strategy; take it from Lord Mandelson, who said at Davos a few years ago that it was a new generation of Conservatives who were setting the pace on 21st-century industrial policy. Do not take it from me; take it from the life science sector, which yesterday announced £1 billion of inward investment to create new jobs in the economy. That is the vote that I care about—the vote of business and of the wealth and job creators, not the vote of the wealth and job destroyers on the Opposition Benches.
Thirdly, on skills and infrastructure, I strongly welcome the east-west rail announcement. For too long we have seen investment in our commuter lines, but not enough in the east-west lines. I relish the prospect of an innovation express from Norwich to Cambridge to Oxford to Reading to Southampton—an arc that links our east and west clusters. I also relish the announcement of a new Victorian-model rail company that undertakes development to fund rail infrastructure, allowing garden towns and villages to be built by a modern railway company—the first to be created in such a way for more than 150 years.
On skills, we need a response to the industrial strategy from each locality. That is why I have been working with Cambridge, Norwich and Ipswich to put together the “accelerate east” skills gateway. I would like us to offer every school and college leaver a skills passport into the 21st-century economy.
This was a Budget for business and for Britain, but the big B is Brexit. We need to make sure that in the next 18 months we negotiate and deliver a Brexit deal that supports our modern economy.
Lucy Powell (Manchester Central) (Lab/Co-op)
It is a pleasure to follow the hon. Member for Mid Norfolk (George Freeman). Perhaps he could take the Prime Minister to the public sector leadership academy now that he has a bit of time on his hands.
The key issue of the Budget is productivity, but that is nothing new at all. The productivity gap is now widening. An average worker in Germany produces the same output in four days as we produce in five. The issue is not how we can stretch those who are operating at the high end, although that is a good thing, but that we have an extremely long tail of low skills, with too many people working below their potential and, often, their skill set. That is set to get even worse with automation, with many more millions of low-skilled workers chasing fewer and fewer jobs. There is very little in the Budget to address this issue, which really does need to be the key driver of Government policy.
Lucy Frazer
The hon. Lady says that there is nothing in the Budget about that, but what about T-levels, maths and computer science training, and adult learning? There is a whole raft of measures to upskill our workers.
Lucy Powell
I will come back to those issues later in my speech. There are some advances, but they are not backed by resources. We have seen huge cuts in post-16 education over the past seven years, which has meant that the gap has widened further and further.
As the Social Mobility Commission again stated today, we do know how to pull up this long tail because we are doing so in London. It requires a pool of talented teachers, resources, and a clear local and national strategy. There was nothing in the Budget on the key issue of teacher retention and recruitment, which is now reaching a crisis point, and nothing on teacher pay or teacher workload. I could not believe it, but nothing was said on school budgets.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Everybody wishes to speak and that is not a problem, but the hon. and learned Member for South East Cambridgeshire (Lucy Frazer) must understand that this would be her second intervention. I will keep moving her down the list, because that is the way that we will move forward.
Lucy Powell
I will not take any more interventions, Mr Deputy Speaker.
There was nothing at all about school budgets, which was one of the key issues in the general election, and they are still falling in real terms. The Institute for Fiscal Studies said that, after the Secretary of State’s announcement in the summer, there was still a 5% cut in real terms, because the number of pupils is going up. We need a much bigger conversation about what education and skills are for in this country. They need to be about delivering for the economy and the society of the future.
Nearly 60% of graduates are working in non-graduate jobs. That is the third highest level among OECD countries, exceeded only by Greece and Estonia. I know that we have many debates in this place about tuition fees, but it is no wonder that they are not being repaid when so many people are not working at the level at which they are qualified to work.
We are in the bottom four of the OECD countries for literacy and numeracy to 18. T-levels are welcome, but with the huge cuts to further education, they will be difficult to deliver. Given that the maths GCSE contains more A-level content, we must ask about the desirability of prioritising compulsory and ongoing GCSE resits over looking at the curriculum and functional skills.
The Government are right to identify maths as the future. The future is about algorithms, matrices, digitisation and automation. Even for the most able, however, our curriculum is going in the wrong direction, which is why the OECD has said that it is
“a mile wide and an inch deep”.
By going down a route of rote learning rather than conceptual understanding, we are moving in the opposite direction to all our competitor countries.
There was absolutely nothing about social mobility in the Budget—in fact, the Chancellor did not even mention that in his statement. Social mobility is especially crucial in the early years if we are looking to close the productivity gap. Development at the age of five is still the biggest indicator of how a person will do in their GCSEs and beyond, yet we are also going in the wrong direction there. As others have said, these are political choices. Of the £9 billion the Government are spending over this Parliament on the early years, 75% will be for the top half of earners, with less than 3% going to the lowest. That is just wrong. This ticking time bomb entrenches social advantage.
Childcare is, yes, about increasing productivity, but the design of the current system under this Government means that we will fail to deliver some of the productivity gains that can come with childcare. We really need a social mobility strategy right across Government to tackle these issues.
Finally, let me talk about regional inequalities and disparities within regions, which are all connected to the points that I have raised. It is even more urgent that we get our fairer share of spending on infrastructure outside London and the south-east, and that we develop even stronger place-based solutions to deal with local job markets and skills. For example, if the Government wanted to be ambitious—this is not a difficult thing to do—they could devolve post-16 further education to places such as Greater Manchester. They could do a lot more to devolve early years solutions for transforming school readiness, as we are attempting to do in Greater Manchester. It is high time that places outside London got their fair share of transport infrastructure expenditure. We absolutely need to see the northern powerhouse rail connecting Liverpool to Hull via Leeds and Manchester. Critical to that is ensuring that we have a future-proofed Manchester Piccadilly station.
Victoria Prentis (Banbury) (Con)
It is always a pleasure to follow the hon. Member for Manchester Central (Lucy Powell) when she speaks so passionately about education. I must confess that her remarks about the Prime Minister have encouraged me to focus my speech on house building, which the Prime Minister and her Chancellor quite rightly view as the most important issue facing us.
For my constituency, the biggest excitement from the Budget is, of course, the funding to support Oxfordshire’s statutory spatial plan, which commits to 100,000 new homes by 2031. Cherwell District Council is the national leader in house building—an achievement only made possible by strong local leadership and the sheer hard work of the many volunteers who got our local plan adopted. I see a new finished house almost every day when I return home from Bicester North station, and three houses a day are currently finished locally. I built my own house; it is what we do in our area.
I hope that £30 million a year for five years will help to alleviate the pressure on our infrastructure by enabling us to move forward with larger projects such as the London Road crossing. When we talk about infrastructure, we so often mean roads and railways, but locally we are learning on the job that infrastructure means so much more than that. Those on the Treasury Bench will be pleased to learn that vast products and expenditure are not the only way forward when we look to build new communities. It is noticeable that the residents of well-built houses are happy, and more effort needs to be put into ensuring high standards in building across the board. This is a no-cost measure that the Government are working on.
Where we do need to invest for growth, it does not need to be in enormous, prestige products, as my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) outlined. House builders need to deliver on time. Even when they do, councils must be prepared to spend relatively small sums to alleviate the difficulties caused by enormous growth—for example, for around five years of stretched budgets while new schools are created. Children do not arrive in neatly packaged classes of 30 four or 11-year-olds, and existing schools also suffer while numbers are in flux.
I share the concern of my hon. Friend the Member for Folkestone and Hythe (Damian Collins) that GP services in high-growth areas need small amounts of additional funding to tide them over in times of enormous growth. My hon. Friend the Member for Bracknell (Dr Lee), who is on the Front Bench, will appreciate that people seem to need their GP more when they move to a new area, to sort out their existing medication and to deal with difficulties in changing specialists. We need to ensure that the infrastructure spending on such issues is readily available.
Mapping needs to be done before the build. Post boxes and street lamps should be provided without the intervention of an MP. Development can only be a positive experience if we bring hearts and minds along with us. I am afraid that closing maternity services at our local Horton General hospital at the same time as building 23,000 new houses does not sit well with us locally. Many new houses in our area have three or more bedrooms, and it would not come as a surprise to learn that some couples want to have babies to fill those new rooms.
Finally, and quite separately, a high point of the Budget for me was the announcement of a consultation into the horror of single use plastics. I encourage everybody in the Chamber to get out their phone, look at the App Store and add the Refill app; it tells users what to do and helps to get rid of single use plastics.
Mr Stephen Hepburn (Jarrow) (Lab)
We were told that this Budget was going to be a game-changer. We were informed that it would lead to a bright future. I would just like to know, for who? This Budget should have been about tackling the emergency crisis in our public services such as the NHS, where dissatisfaction is up, waiting lists are up and waiting times are up. In fact, the only thing that is down is staff morale, which is at rock bottom.
When we look at what is going in areas like mine, we find that, since 2010, we have had closures of successful NHS walk-in centres used by 26,000-plus people a year and closures of wards, with more to come, under an NHS plan called the “The Path to Excellence”. Local people, having come through cuts and closures throughout the years, call this NHS plan, which was brought up by local NHS management, “the road to ruin” because they have experienced the bogus consultation exercises, only for the result at the end to be that their valued local service was closed.
On pay, there might be a pay increase in the future if NHS staff increase productivity. What a disgrace! It is NHS staff who have kept the NHS going—whether the porters, the nurses or the ambulance drivers—during all the years since 2010 and during these Tory party cuts.
Let me go on to employment issues and social issues. The Chancellor said at the weekend that unemployment did not exist. Well, he wants to come to Jarrow, where unemployment is nearly 2,000—real people and individuals. Everybody on the Government Benches is talking about the jobs boost, but two out of three of those jobs in the north-east are on temporary contracts and that sort of thing. They are insecure jobs—they are not proper jobs.
Somebody should have tackled the right hon. and learned Member for Rushcliffe (Mr Clarke) when he criticised Labour for creating the crash. In the 1970s, the crash was caused by the tripling of the oil price by OPEC in the middle east. The right hon. and learned Gentleman said that Labour caused the crash in the 2000s, but it was an American crash, which George Osborne now acknowledges, caused by the banks.
The right hon. and learned Gentleman talked about the decades of skills we have lost, but that predominantly started in the ’80s, when he was a member of the Government and Thatcher was closing the shipyards, the pits and the steelworks. They were privatising all the utilities and taking out of Britain the skills that we need now. People would not have to be employing Polish plumbers now—they would have a plumber trained in England—if we had the services we had in the past.
As for what we have heard about housing, I laugh—I mean no disrespect—because the 2,000 people on the waiting list in my area cannot afford that sort of thing. They need council housing; they want housing that they can afford—that is what they need. They cannot afford stamp duty and these gimmicks such as Help to Buy, which are absolute rubbish. If that is an example for the northern powerhouse, heaven help us with where we are going.
To sum up, there is lots I would like to say on universal credit, the Women Against State Pension Inequality campaign, social care and education, all of which are so important to the productivity of this country. All I will say is that the Budget was a whitewash, and we cannot wait for a Labour Government to bring in our programme.
Gillian Keegan (Chichester) (Con)
It is a pleasure to follow the hon. Member for Jarrow (Mr Hepburn).
There is no doubt that we are living through a period of profound change created by the digital revolution. We should all, therefore, welcome the Chancellor’s announcements in the Budget about investing in the skills and technologies to equip our country and to give us the confidence to rise to this challenge. And we should feel confident: throughout our history, the UK has pioneered change that has rippled out across the world. From the advent of the steam engine to the invention of the internet, we are good at embracing change.
In the mid-1990s, at the start of the dotcom boom, I spent a few years working in Tokyo to develop chips with enough memory to enable digital cash on a bank card or in a phone. The new technology we were developing was a million times smaller than the chip in an iPhone today. The rate of progress in the digital age is phenomenal and will continue to be.
The UK is a global leader in tech, supported and driven by the finest academic institutions in the world and by bold businesses that challenge the norm. In Chichester, we are home to Rolls-Royce, which uses state-of-the-art technology to manufacture its engineering masterpieces, which even include an electric Rolls-Royce. My constituency is also home to a £1 billion fresh food industry, where I have seen at first-hand how robots ensure the perfect growing conditions for herbs and salads, as they move from potting, to germination, all the way through to packaging. Technology is already having a big impact on the way we do business in Chichester.
To achieve our full potential, we need an integrated plan that embraces education from primary, where eight-year-olds now learn basic coding, through to secondary and tertiary, and that includes maths and digital skills at all stages. To anybody sat in a local comprehensive school in Liverpool, as I was, I say: these are the keys to your social mobility. It is not just tech; Chichester University has a new STEAM—science, technology, engineering, arts, and mathematics—centre, adding art, design and creativity to technology, which is a winning combination.
The Government’s ambition is clear, with a further £2.3 billion being invested in science and innovation—the highest level in 30 years. The Chancellor is also investing in infrastructure to develop fast fibre broadband and 5G networks. That is important, as all this talk of advanced technology must be baffling to some of my constituents as they struggle to stream music or even download a film.
As we leave the EU, we must be more flexible and innovative. On our side are centuries of competitive advantage, thanks to our geography, language, time zone, common law and institutions, including the one that I am standing in. Having worked in tech for more than 20 years, I know that this makes us an attractive hub for business, trade and technology, and we have a head start. The UK is host to 18% of the world’s data flows, so we already have a well developed platform from which to grow—in all parts of the country, as we expand tech cities into a tech nation.
I welcome the Budget and the industrial strategy, and I am optimistic about the future of this country and the economy. The Government are investing for the long-term success of our nation, in industry, technology, houses, including council houses, construction, our NHS and, most importantly, people and the skills that they need to secure their future prosperity.
Mr Pat McFadden (Wolverhampton South East) (Lab)
It is a pleasure to follow the hon. Member for Chichester (Gillian Keegan). We began the debate talking about industrial strategy. I approve of the Government’s industrial strategy. The reason I like it so much is that I launched it eight years ago, and it is nice to see the Government picking up on some of our ideas. However, the big story in this Budget is the downgrade in our growth prospects—the biggest downgrade since the financial crisis and in the history of the OBR. It was described by the Resolution Foundation as
“the mother of all downgrades”.
The prediction is that the economy will, in a few years’ time, be 2%—or in financial terms, £42 billion—smaller than was thought only last year. That means borrowing £13 billion more in a few years, and £17 billion a year after that. It means austerity going on into the mid-2020s. For our constituents, it means lower than expected pay. Average income is expected to fall by £1,400 to £1,500 a year. Those are the real effects of the mother of all downgrades.
There is one area where the Government are setting aside huge sums of money, and that of course is Brexit—there is £3 billion for it in the Budget, on top of the £700 million already announced—and we are told that the Cabinet has agreed to pay a £40 billion divorce bill. In a few short weeks, we have gone from “go whistle”, to £20 billion in the Florence speech, to £40 billion now. There is a lot that we could do with £40 billion. We could build more than 70 new hospitals, or over 1,100 new schools. It is more than the total housing and environment budget. It is more than the total public order and safety budget.
In my constituency, the West Midlands police have lost 2,000 officers and £145 million from their budget in the last seven years. They could do with some of the £40 billion that will be spent on Brexit. We have almost 10,000 people on the local housing waiting list. I see these people in my constituency surgery, desperate for a home. They could do with some of the £40 billion set aside to pay for Brexit. The social mobility study out today describes the midlands as a coldspot where social mobility suffers. Nursery schools in my constituency facing cuts could do with some of the £40 billion set aside for Brexit.
There might be an argument for some of that expenditure if it was going to buy us a better deal, but the Government have said that they want to secure exactly the same benefits for goods and services as the ones we have now, not by staying in the single market and the customs union but by leaving them. Countries normally pay for access to the single market, but we have chosen to pay to leave it. The Government are not investing £40 billion in getting us a better deal than the one we currently enjoy; they are prepared to spend £40 billion, which could go towards public services in our constituencies, on a worse deal. That was not an inevitable result of the referendum. The Government could have chosen to stay in the single market and the customs union, but they did not, and that is a bad deal for Britain.
Alan Mak (Havant) (Con)
It is a pleasure to follow the right hon. Member for Wolverhampton South East (Mr McFadden).
The Red Book tells us:
“The Budget sets out a long term vision for an economy that is fit for the future—one that gives the next generation more opportunities.”
I speak in this Budget debate in support of the Chancellor and the industrial strategy, because I particularly welcome their emphases on upskilling our workforce and helping Britain to lead the fourth industrial revolution, as technology transforms the way we work and live.
Looking at the Budget more generally, I am pleased to see the Government devoting more funds to science and innovation and helping this country to meet the OECD average spend of 2.4% of GDP on R and D. I welcome our funding for upgraded broadband and 5G, putting digital connectivity at the heart of our productivity plan. Economic success is not built just on steel, concrete and fibre optic cables, however, and I welcome the investment in human capital most of all. The British people will help us to make a success of Brexit, and our engineers, scientists, inventors and entrepreneurs will help us to lead the fourth industrial revolution. It is right that the Budget invests in their skills, education and future.
Getting our workforce prepared for the challenges and opportunities of the new technological revolution is vital to boosting productivity, increasing economic growth and making sure that the whole country is prepared for the challenges ahead. As the Budget rightly notes, employers sometimes report that they struggle to recruit enough people with science, technology, engineering and maths skills to grow their business, and we know that STEM skills correlate to higher average earnings and greater productivity in our economy. That is why I am particularly pleased to see the measures in the Budget that focus on skills and education. From the significant package of support for maths in schools to further support for T-levels and computer science, the Government are equipping our young people—in Havant and across the whole United Kingdom—to succeed in the new economy.
I also welcome the measures on lifelong learning, including the commitment to establishing a national retraining partnership with the TUC and the CBI, the £30 million to help people to retrain in digital skills and the £8.5 million to support unionlearn. Those are all valuable initiatives. As the fourth industrial revolution gathers pace and technologies such as artificial intelligence and robotics become more widespread across all sectors of the economy, we will undoubtedly see an unprecedented level of restructuring in our labour market, including in many white-collar professions that have traditionally been resistant to such challenges. That is why I particularly welcome the Government’s laying of the groundwork for a modern skills system that will help us to tackle those challenges head-on.
In conclusion, I strongly support the Budget and the related industrial strategy, which came out yesterday. They help our country not only to get fit for the future, but to get ahead. They will allow us to reach the future first, ahead of our competitors, and secure our prosperity in the years ahead.
James Frith (Bury North) (Lab)
An assessment of this Budget is as easy as a, b, c—austerity, Brexit and calamity. We have had seven years of bad luck for Britain from austerity, the Tories’ self-inflicted Brexit wounds and a calamitous Government with no distinction or record of leadership. There has been reboot after reboot for the Prime Minister, who has no control of her Cabinet. This is a Budget for the driverless car from a driverless Government. Our economy is staring, and yet stalling, at a crossroads. Forecasts have been revised down for five more years. Productivity is down, and real wages are down. Employment is strong, but in-work poverty is the child of this Government’s failed economic approach. The Budget sees the deficit revised up, with no easing of austerity, and inflation picks the pockets of hard-working families. Seven years in, all the pain is for nothing, and into a second scorned decade we go.
There is nothing in the Budget for business concerned by the Government’s no-deal Brexit rhetoric; nothing for students plunged into debt; nothing for schools in the next two years, while they await the jam-tomorrow national funding formula; nothing for local authorities, such as mine in Bury, which has faced 70% cuts since 2010; nothing for social care or carers; nothing for the rise in crime or to cover for police pay rises; and nothing for mental health. Nothing has changed—nothing!
The bits the Chancellor did get right were the result of learned behaviour, although they were all nicked from the Labour party in a desperate attempt to pick the pieces out of their arrogant early election. To give some perspective, London’s Elizabeth line will cost £15 billion, but this Budget allocates just £1.7 billion to the English regions, including Greater Manchester.
We needed a Budget for Brexit, but this does not come close. The Chancellor shows no appreciation of the fact that the prism through which Brexit and this Budget play out for the rest of the country is increasing daily uncertainty, a thirst for vision and a practical guide to the future. We have a country mixed with impatience from leavers and anxiety from remainers, and the country is in need of unity. The Chancellor is not even out of first gear in demonstrating the threat that Brexit poses, and this Budget is insufficient in dealing with that task. On the referendum, this Government took a public result and shrouded their work to deliver it in secrecy, wasting all the time they have had since the result. We needed a Brexit Budget; instead, the Government published a UK industrial strategy yesterday, but they still refuse to publish in full their assessment of the UK sectors facing Brexit.
There is a promise to build infrastructure and to build 5G networks, but in some areas of Bury it is more Bee Gee than 3G. [Laughter.] I promised I would get that in.
The future of our economy relies not on Tory rhetoric from those on the Government Benches, but on brilliant businesses such as mine in Bury—for example, Milliken, which makes 80% of the airbags fitted to all cars in production; or Dream Agility, which is making possible Silicon Rammy in Ramsbottom. We have a Government who say little about what they want to achieve and who have a tin ear about life away from Westminster. At its heart, Brexit for many of those who voted for it was, from the start, about kicking the status quo and giving a voice to the people left behind. For too many, this Budget still says nothing of their experiences of life, work and business in Bury or across Britain.
Ben Bradley (Mansfield) (Con)
Frankly, before last Wednesday, I expected to be a bit grumpy about the Budget. I was concerned that there would be no offer for younger people and that my constituents would lose out again, as they have so many times in previous Budgets. Imagine my surprise, therefore, when I was greeted by the Chancellor’s fair, inclusive and progressive Budget last week.
As I have repeatedly said in this Chamber, the people of Mansfield have in the past felt ignored and neglected by Westminster, and successive Governments have not addressed the needs of that area in their Budgets, but I am optimistic that this Budget covers many of the challenges my constituents face, and there are a number of small steps in the right direction. Although the increase in the national living wage is welcome everywhere, nowhere is that more true than in Mansfield, where 38% of workers are in low-paid employment. That, coupled with the increase in the personal allowance announced by the Chancellor, means that more of my constituents can keep more of their hard-earned cash.
These changes are overwhelmingly welcome in my constituency, but the predominance of low-paid and low-skilled work is a cause for concern. That is why I am delighted to hear that the Government will be offering support for skills in maths and computing, as well as introducing T-levels. My belief is that it is only by diversifying education and offering more technical and vocational options to young people, as is being done with great success in Vision West Nottinghamshire College in my constituency, that we can generate the skilled workforce this country needs to thrive.
There is of course more to be done in creating quality qualifications that lead to long-term employment. I would like to see direct business involvement in education. For example, the University of Lincoln currently offers an engineering programme delivered directly by Siemens. Such involvement allows companies to shape their own highly skilled workforces and provides young people with an open door to quality, long-term employment.
Apprenticeships are also a challenge, particularly for smaller businesses, to manage and I look forward to continuing conversations with the Secretary of State for Education on that front. As MPs with small teams of staff, we know how challenging it can be to organise work experience for even one person, never mind an apprenticeship. We need to offer more support to SMEs.
In recent months, I have been working to highlight the challenge of engaging and inspiring young people—it is no secret that my party has struggled on that front—and I have been talking to younger colleagues in this place about the steps we can take to tip the balance back in favour of those who feel they are worse off than their parents. Housing was one of our primary asks when we visited the Chancellor before the Budget, and I am delighted to hear his announcement on stamp duty and the unprecedented spending on house building. The commitment to a council tax levy on empty homes, which are a huge problem in Mansfield, is welcome news. I hope that it will free up more homes for the private rented sector and for social housing.
That is a big step in the right direction, but I would like the Government to take a lead on the issue and invest in their own house building programme. If we want homes built, let us build the kind of houses we need and make sure that we meet the 300,000 a year target. I am sure that that discussion will continue to be at the top of the agenda.
Yesterday, we heard the announcements on our industrial strategy. I welcome the commitment to spread growth and wealth across the whole UK. In a modern, digital world, it is no longer the case that every business has to be based in a city centre or in London. There are huge opportunities for Mansfield and the east midlands more broadly. The investment in our digital infrastructure is welcome, as is the support for retraining in STEM subjects and the technical education commitments I have mentioned. I hope that those measures are rolled out not just in cities, but across the whole UK. Mansfield has a high proportion of SMEs. Supporting them to grow and employ more people in rewarding jobs is vital for the future and for raising aspiration in an area that is among the lowest in the UK for social mobility.
Although many of the announcements are not earth-shattering in isolation, they show that the Government have a vision. These small steps in the right direction, while limited by the clear economic and political realities, show a commitment to advances in housing, health reform and education that are incredibly positive. It is a vision that I am very happy to support.
Several hon. Members rose—
Mr Deputy Speaker (Mr Lindsay Hoyle)
After the next speech, the time limit will go down to three minutes.
Alison McGovern (Wirral South) (Lab)
Apart from failing to address the inequality for the WASPI women, last week’s Budget failed the central test; it should have taken this on. Our economy faces the incredible challenge of Brexit and last week, the Chancellor should have come to the Dispatch Box, been honest with the country and said, “This isn’t working. Let’s stay in the single market. Let’s stay in the customs union. Let’s build up our economy from there, and then we will be able to afford truly to invest in our economy.” I will come back to that point, but first I want to turn to housing, which is what the Chancellor said his Budget was all about. He will say that his stamp duty cut is a headline winning move that shows his commitment to a homeowning democracy. Actually, the policy is a failure. It took my two excellent members of staff here, Tom Railton and Ella Crine, precisely 14 minutes from receiving the Budget Book at the Vote Office to send a message alerting me to the OBR’s judgment on the central policy in the Budget. The OBR states that
“the main gainers from the policy are people who already own property, not the FTBs”—
first-time buyers—
“themselves.”
I cannot imagine that it took the Treasury’s fine team of talented economists any longer to tell the Chancellor, than it took Tom and Ella to tell me, what the OBR would make of his policy. The question, therefore, must be: was he told? Did he ignore advice? What estimate was made of the impact of the policy before the Budget was completed?
This is no small measure. It will cost £125 million this year, £560 million next year and £600 million in every other year of the Budget period. That is money forgone that could have been used to secure the future of our health service or to get us one step closer to ending child poverty in our generation.
While I am on the subject of child poverty, this Budget does precisely nothing to address the growing number of kids in poverty in our country. The Tories on the Front Bench should realise that if they do nothing, they will see 400,000 extra children in poverty by the end of the Budget forecast period. If they think that this subject will go away, they can think again. It is not just people on this side of the House who will not forgive them; every single one of their constituents will be asking them about child poverty at the time of the next election. Either they do something about it or we will.
Finally, I come to Brexit. This may be my final point, but it is the most important of all. As a country, we now know that we have lost one decade of growth and that we face another. We are at a fork in the road and face the biggest choice in our generation. The referendum may have been won for Brexit, but we in this House have to decide what that means. We have to make a deal. We have to find a deal that suits us and our partners in Europe. The answer is not to kowtow to those who would dog whistle on immigration. Our borders must be secure, yes, but that does not mean that freedom of movement has no place. We have to accept the world as it is, not as we would wish it to be. We need to make a deal, stay in the single market and protect our country’s future.
Mike Wood (Dudley South) (Con)
Dudley South has one of the biggest shopping centres in the country, a new enterprise zone and one of the largest secure industrial parks in Europe, but it has no railway station and on a good day it is probably half an hour from the nearest motorway junction. Infrastructure is absolutely vital, therefore, if the potential of local people and businesses is to be realised, which is why, before I was elected, one of my first campaigns was for a new tram extension to join my constituency with the midland metro network and the main line rail network.
The extension has been on and off the agenda since the days of the old West Midlands County Council in the early 1980s. Understandably, when I knocked on doors, the most common response I got was, “Yes, we’ve been told this for 30 years. It’s never going to happen.” Along with West Midlands Mayor Andy Street, we have continued to make the argument, however, which is why we were absolutely delighted when the Chancellor and the Prime Minister announced at the start of last week £250 million for transport infrastructure in the west midlands, of which £200 million will be used to fund the tram extension out to my constituency, with a tramline to Brierley Hill.
Amanda Milling (Cannock Chase) (Con)
Does my hon. Friend agree that the Budget has been great for the west midlands? As he says, it is about transport infrastructure, which is so important for investment and business growth in our area.
Mike Wood
My hon. Friend hits the nail on the head. This has been a great Budget for the west midlands, but not only for the west midlands; it also builds on the Government’s commitment to rebalance the economy and deliver for every part of the country and every sector of the economy.
The £200 million being invested in the tramline to my constituency will have the transformative effect we need in the Black country in supporting our local economy. Independent analysis by Lichfields found that it would have a multiplier effect, increasing the benefits from other economic initiatives in the region. For example, it will increase the annual delivery of new homes by nearly 1,500—an increase of 250% against the baseline if the tramline were not going ahead; increase the number of direct and indirect permanent jobs by nearly 8,500; and almost double economic output from the 2 km corridor around the tramline from £14.4 billion to £28.6 billion, vastly increasing both council tax and business rates receipts by nearly £400 million.
This is only a snapshot of the economic activity that the metro will bring to my constituency and neighbouring constituencies. It will enable the Black country to capture more effectively the numerous growth opportunities presented by both HS2 and the DY5 enterprise zone in my constituency. It will increase the ability of businesses to attract investment, while the enhanced transport between the towns and cities of the west midlands will bring greater access to work and reduced journey times and offer better access to a wider labour market, to the benefit of both businesses and employees. With better transport comes better access to local shops and services, including a wide range of social and community networks. That is why the Budget delivers for my constituency and why I wholeheartedly support it this evening.
Marsha De Cordova (Battersea) (Lab)
Although expectations had been managed, many of us thought that the Chancellor’s Budget would mark a change in direction, given the overwhelming evidence that seven years of austerity have damaged our economy, lost a decade of growth and caused unnecessary harm and hardship to so many people. Instead, the Government have decided to tinker here and there, producing a Budget that lacks the vision and investment that are necessary to breathe new life into our economy. Productivity and growth have been downgraded, which means that people whose wages have stagnated for a decade are now set to lose out and to be £900 a year worse off. We have some of the lowest wages in Europe, along with higher levels of debt. We have a Government who use the deficit, rather than productivity, growth and living standards, as a marker for economic success.
It is remarkable that on so many of the key issues that my constituents raise with me, the Chancellor misses the mark, or simply does not even give them a mention. For instance, he had a real opportunity to tackle the seriousness of the housing crisis, yet the Government’s flagship policy is designed to increase demand. As the OBR says, the main gainers from the ending of stamp duty will be people who already own properties, not first-time buyers. The policy will also increase house prices. All that shows is just how ideologically driven the Government are.
Another glaring omission is social care, which is one of the biggest economic and social challenges that we face in the UK. The OBR has made it clear that local authorities are on their last legs, and that those with social care responsibilities have dwindling reserves. This “head in the sand” position has implications for the Government’s broader fiscal objectives. It is time for them to address the social care crisis and to build a social care system that is fit for disabled and older people—a system that is fit for purpose.
The Government also need to address the public sector pay cap. On Tuesday 10 October, I asked the Secretary of State for Health when he would scrap the pay cap. His response was
“the pay cap has been scrapped.”—[Official Report, 10 October 2017; Vol. 629, c. 154.]
I ask again: when will the Government take action and lift the public sector pay cap?
I could not complete my speech without touching on universal credit. While the package that was announced last week is welcome, it by no means goes far enough. The removal of the seven-day wait can be deemed nothing more than a gesture. On its current form, universal credit will push thousands of disabled people further into poverty and hardship owing to the Government’s decision to abolish the severe and enhanced disability premiums. There was no mention of disabled people in the Budget. There were no proposals to reduce the disability employment gap, or to increase the employability of disabled people. The country deserves better.
Robert Neill (Bromley and Chislehurst) (Con)
Nearly 36% of my constituents work in the financial and professional services sector, and most of them commute to London. This was a good and sensible Budget for them, because it was a good and sensible Budget for economic confidence in the City and financial services, in which Britain is a world leader. It is critical that we maintain that position, and that we do so during the process of leaving the European Union. Investing in and supporting financial services, like investing in and supporting London, is actually an investment for the whole country.
It is worth bearing in mind data released in a report published by the City of London corporation, according to which the total tax contribution from the financial services sector reached £72.1 billion in the year to 31 March 2017, which amounts to 11% of all Government tax revenues. The bulk comes from employment taxes and corporation tax, and also a bank levy—the banks are now paying a significant sum to support our public services. Maintaining London’s position in that regard will be critical as we leave the European Union. For banks, some 35% of the total tax take comes from employment taxes, but the proportion depends on where they are based. If we shed jobs as we leave the EU, the tax base will be diminished.
I do not believe that that is necessary. I believe that the Chancellor and the Prime Minister want a good deal that will protect our financial services sector, and I support them very much in that. What would damage the financial services sector would be a poor deal—I do not believe that that outcome is necessary or desirable, and I am sure that we can avoid it—and an anti-business, left-wing Labour Government who would scare away those jobs and that tax revenue and undermine that great driver of income for our public services. It is self-defeating for those who believe in public services to damage our tax revenue. It is worth bearing in mind that the amount of tax paid by that sector in one year comes to half the value of the NHS. I suggest to Labour Members that they should not put that at risk.
It is also worth bearing in mind that, because of our access to the European markets, the sector processes transactions worth £880 billion every day. That is 100 times our net annual contributions to the EU—
Bob Stewart (Beckenham) (Con)
The financial sector is crucial to our constituencies, and I very much applaud what my hon. Friend says.
Robert Neill
I am grateful to my hon. Friend.
That sum is also 15 times the highest amount that has been spoken of as a potential financial settlement. It therefore makes sense in terms of Brexit to support the financial sector and get a good deal, and it also makes sense in terms of the Budget to make sure that we have a favourable tax and regulatory regime in the UK that is attractive to financial services.
Preet Kaur Gill (Birmingham, Edgbaston) (Lab/Co-op)
The King’s Fund, the Nuffield Trust and the Health Foundation estimate that the annual funding gap for social care will now reach £2.5 billion by 2019-20. That will have a crippling effect on the provision of social care, a sector that is already under severe strain and in desperate need of relief, but the Budget offered it nothing whatever.
The condemnation from social care professionals has been as universal as it has been damning. Margaret Wilcox, the president of the Association of Directors of Adult Social Services, said she was “extremely disappointed” by the lack of extra funding and:
“Adult social care needs to be tackled as urgently and at least as equally as the needs of the NHS, in a way which recognises the inter-dependency of these services and encourages a collaborative approach.”
After the Government’s calamitous manifesto U-turn on the dementia tax, the country needed strong leadership and an appreciation of the seriousness of the situation facing social care. That same manifesto described the social care system as not working and promised to fix it, but there was no mention of social care in the Budget, let alone any new funds to address the chronic shortfall—another Tory manifesto commitment broken.
Nearly 1.2 million older people are estimated to have unmet care needs. The figure is up 48% since 2010 and up 18% from last year alone. The Budget offers no solutions to address the forecasted 150,000 additional deaths associated with constraints on health and social care. This is an issue of not just numbers but the Government’s failure to get a grip on the social care crisis.
Having worked in the sector, I have seen at first hand the amazing and vital work dedicated staff carry out on a daily basis. Now those staff who are employed by local authorities will have to carry on with their jobs knowing that their hard work, the squeeze on their living standards and years of wage stagnation still do not qualify them for a pay rise. When will the Government accept that these people are already going above and beyond, and deserve to have their service recognised?
Labour committed in our manifesto that, as we moved towards a new national care service, we would invest £8 billion over the course of the Parliament to stabilise the care sector. It is Labour that recognises that the sector is in crisis; it is Labour that appreciates the hard work of those who work in social care and would treat them with the respect they deserve; and it is Labour that would commit to taking active measures to solve this crisis, not merely offering false platitudes. The Budget, like the Government, is failing those in the social care sector.
Bim Afolami (Hitchin and Harpenden) (Con)
I have been listening to the debate for some time, and it is worth reminding the House of the Treasury document published as a result of a report done by a senior civil servant, Sir Michael Barber, on the public value framework. It indicated that the way in which we get value in our public services is not simply the input of money, but what is delivered. As we talk about all these millions and billions of pounds that we will spend on this, that and the other, I urge the House to consider that output and delivery are more important that what we put in.
Owing to time constraints, I will not say all the wonderful things that I could say about the Budget. The hon. Member for Birmingham, Edgbaston (Preet Kaur Gill) talked about certain areas of the public sector, and Conservative Members always need to remember the public sector as well as the private sector. In particular, however, I want to talk about my constituents in Hitchin and Harpenden, who are very dear to me. In their professional lives, they are overwhelmingly focused on financial services and small businesses, and there was one particular measure in the Budget that will really help them: the expansion of the enterprise investment scheme. I have done my homework on this, so I know that the EIS is critical and that the Government have doubled the annual allowance for investment in early-stage businesses and innovative growth capital.
Mrs Badenoch
I wanted to mention the enterprise investment scheme earlier, but I did not have time. Saffron Walden is right next to the Oxford-Cambridge corridor and houses many knowledge-intensive industries. Does my hon. Friend agree that increasing the allowance for the EIS will provide a boost to the small and medium-sized companies that are the backbone of this country—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Lady had a good go when she spoke earlier, and a lot of Members have been waiting a long time to speak. Interventions must be very short. I also ask Members to be restrained in giving way; otherwise, it is not fair to all those who are waiting.
Bim Afolami
Thank you, Mr Deputy Speaker. I thank my hon. Friend for her intervention. I would add to her point by saying that the EIS funnels private capital that might otherwise be sitting in housing assets or on a bank balance sheet into our most early-stage, innovative and risky creative businesses. That is the magic of the EIS. Such tax reliefs and allowances are beneficial to the country because they effectively mitigate the risk for private investors in risky, early-stage businesses. We need to recognise that fact and welcome the doubling of this investment allowance, alongside the addition of a new test to ensure that the money is going not into lazy, low-risk ventures, but into high-risk, creative businesses.
A point I often make about tax schemes such as the EIS and entrepreneurs relief, which this Government introduced to ensure that we remain one of the best places in the world to develop early-stage businesses, is that they ensure that we do not have to ask our banks to make risky investments. One of the reasons why we found ourselves in the financial crisis was that the banks were making very risky investments, as we discovered from their balance sheets. The EIS allows private capital to be used in productive ways. Many of my hon. Friends have already described the Budget as balanced and reasonable, and I hope that it is also the beginning of a long-term process of a radical entrepreneurial vision for the British economy.
Fiona Onasanya (Peterborough) (Lab)
I want to pay tribute to my hon. Friend the Member for Bury North (James Frith), who talked about this being an ABC Budget. I also want to mention my hon. Friend the Member for Birmingham, Edgbaston (Preet Kaur Gill), because my constituency has also seen a huge increase in demand for services. In particular, there has been a rise in the number of people who find themselves homeless and in the number of adults and elderly people who require care.
Apart from a small announcement on mathematics, there was no extra money in the Budget for the education system. This is not as simple as saying, “2 plus 2 is 4, minus 3 that’s 1—quick maths.” These announcements mean real-terms cuts and the potential continuation of the recruitment and retention crisis in our education system.
The right hon. and learned Member for Rushcliffe (Mr Clarke), who is unfortunately not in his place, said that he could not understand why the Opposition were saying that the Budget does not do all that it needs to do, but it fails to recognise the scale of the emergency in our public services. There is no point in burying our heads in the sand saying, “Things are absolutely fine,” because we know that they are absolutely not. While both sides of the House have acknowledged that universal credit needs amending, there was a real opportunity to pause and fix it, but it was not taken.
Austerity is hurting and not working, but instead of pausing and reflecting on that, we are continuing with business as usual. We are acting as though everything that is happening is par for the course and absolutely fine. People say, “Why do Opposition Members seem to think there is a problem?” There is a problem because our constituents come to us with their problems. There is a problem because we seem to be avoiding paying attention to their real needs. Instead of taking the opportunity provided by the Budget to assist them, we have decided just to carry on with things as they are. It is fantastic that we will have driverless cars, but we will have all the gear and no idea when people in our constituencies are suffering.
Lucy Frazer (South East Cambridgeshire) (Con)
I have been disappointed by Opposition Members, who have failed to recognise a number of facts. They have criticised the gender pay gap when it has actually narrowed. They have criticised school funding without recognising that the fairer funding deal puts an extra £1.3 billion into our schools. They have suggested more spending without being able to respond to an intervention asking what the interest payment bill would be on increased borrowing of a trillion pounds. The Opposition look only at spending; they do not see the optimistic opportunities presented by our future.
Our great country has been a leader on the world stage for decades. We have been the choice of location for foreign investment. We are a global economic power at the same time as being in the top 20 happiest places to live in the world. We are now at a crossroads, forging new relationships with the EU and the rest of the world while, as the Secretary of State for Business, Energy and Industrial Strategy pointed out, an industrial revolution sweeps across our globe, and we start from a good place. Out of 137 countries, we are ranked second for the quality of scientific research institutions, third for the capacity to attract talent, fourth for technological readiness and 12th for overall innovation. The measures set out in the Budget will ensure that we continue to be at the cutting edge of technology, innovation and business growth, with £31 billion for the national productivity investment fund, £2.3 billion for investing in R and D and £500 million for a range of initiatives from artificial intelligence to 5G and full-fibre broadband.
However, as we progress through the technological revolution, we must remember that it is equally as important to recognise and value the skills of those who serve us in our communities: those who teach us, nurse us and protect us. The Secretary of State rightly pointed out that we have an ageing population that we need to care for, and the answer is not just technological; we need more people in the caring professions. I therefore welcome the Chancellor’s announcement that he will put more money into the NHS and his offer to fund increased pay awards. We also need to ensure that we improve our skills base, and the Budget includes £40 million to train maths teachers across the country, tripling the number of trained computer science teachers. I welcome the Budget and the industrial strategy, but we must also remember to embrace the new world.
Yvonne Fovargue (Makerfield) (Lab)
This Budget leaves many with little to celebrate. There is nothing for the WASPI women, who kept their contract with the Government, and nothing for my sixth-form colleges, which work so hard to improve the life chances of children in my constituency. The right hon. and learned Member for Rushcliffe (Mr Clarke) said that a Budget’s purpose is to improve people’s future lives, but the Chancellor chose to freeze working-age benefits until 2020, most affecting those struggling with basic living costs now and doing nothing to provide a family with a Christmas dinner, the cost of which has risen 20% this year. The freeze, and the rise in food inflation, means that huge chunks of the population are unable to afford the weekly food shop or to pay the rent. People are making hard choices, like the mum I saw who regularly goes without her lunch three times a week to feed her family. Those are the people going to payday lenders; those are the people going to BrightHouse; those are the people who cannot afford to save every month—it is about time there were saving schemes designed around people’s lives, rather than expecting people’s lives to be designed around Government saving schemes—and those are the people who are likely to fall into debt.
Some 2.9 million individuals and households are currently struggling with severe problem debt. How many more will there be after this Budget? Demand for debt advice is at record levels. People helped by the debt charities are increasingly struggling to meet the bills. Addressing personal debt has to become a priority for this Government.
The basic cause of debt is lack of money. There has been a freeze on working-age benefits and a 1% cap on public sector pay rises while inflation, particularly food inflation, has risen. Low-income households spend more money on food and basic necessities than those on higher incomes. Household debt is already rising, and it is set to rise further. With more debt, more mental health issues, more strain on GPs, more strain on local services, less disposable income and less spending power—less spending power is bad for businesses as well as for individuals—this is a Budget that does not deliver for individuals or for businesses.
Antoinette Sandbach (Eddisbury) (Con)
It is a pleasure to follow the hon. Member for Makerfield (Yvonne Fovargue), who amply illustrates why we need a responsible and balanced Budget. When she describes her constituents’ debt, she needs to consider the situation in the country. We are spending £42 billion a year on interest payments. If Labour borrowed its £250 billion, those interest payments would be dramatically higher and would ultimately lead to a reduction in public services.
I welcome this balanced and responsible Budget that invests for the future. My constituency of Eddisbury has the Winsford industrial estate, which is the UK’s first green business park and first industrial business improvement district. Some 4,000 people work there in industries from food manufacturing to chemical supplies, packaging and engineering. I welcome the measures in the Budget, particularly those on R and D investment and on investment in artificial intelligence.
Technology is fundamentally changing the way that businesses operate, and it is changing the future landscape of the business world. By investing in this way, we can equip our companies to steal a march on international competitors and to ensure that British and Cheshire-based businesses are at the forefront of new global markets. PwC estimates that global GDP could be up to 14% higher in 2030 as a result of artificial intelligence, and it is therefore welcome to see artificial intelligence being backed in the Budget.
I welcome the Budget’s skills provision, particularly in STEM. Winsford—population, 30,000—currently has no sixth-form provision in the town. That will change in September 2018, with Mid Cheshire College planning to open a new STEM centre there. The measures on maths teaching will benefit my constituents. The fuel duty measures will help those in rural areas who have to drive long distances because they cannot access fuel locally.
This is a responsible and appropriate Budget for straitened circumstances. When Labour talks about austerity, let us remember it is really talking about spending within our means. This Budget is a good Budget, both for investing for our future and for spending within our means.
Jack Dromey (Birmingham, Erdington) (Lab)
The latest lame defence from this Government, as we stand up for the people of Britain, is that somehow we are talking Britain down—that is nonsense. This failing Government are letting the people of Britain down, driving it down the international league table. We have the worst record in the G7 on wages, productivity, skills and growth, and we are bottom bar one—Lithuania—in the EU on worker participation, and all this from a Prime Minister who promised workers on the board. Today’s Social Mobility Commission report has shown that the heart of England, the midlands, is the worst region for social mobility for those from poor backgrounds. The historical comparisons are staggering. This is the worst decade for productivity growth since Napoleon was retreating from Moscow, then to be defeated at the battle of Waterloo in 1815. The last time wages were stagnant for so long a royal prince was about to get married—Prince Arthur, Victoria’s son—Disraeli and Gladstone were in Downing Street, and trade unions were illegal. That was 150 years ago.
Over the past seven days, I have seen the consequences of this Budget. I have seen the consequences for schools and headteachers, with one in tears at the fact that there was not one penny more and at now being faced with having to lay off teachers and teaching assistants. I have seen the police despairing at 2,000 police officers having gone and at rapidly rising crime, with violent crime up 6%, gun crime up 15% and knife crime up 17%. At a packed meeting last Friday, local people were pouring out their hearts, with a woman who had been 60 years in Slade Road saying that she no longer goes out at night because she is afraid so to do. I have heard the concern expressed by carers on Carers Rights Day, when 200 of them gathered together. There are none so noble as those who care, but they are finding it increasingly difficult because of the lack of support for them directly and because of the crisis in social care. All that is allied to the disastrous mishandling of Brexit, the impact of which is increasingly being felt where I was on Friday, at the Jaguar factory in my constituency. This jewel in the crown of manufacturing excellence has transformed the lives of thousands, but it now faces an uncertain future.
The Chancellor cracked all sorts of jokes in his Budget—he has a new found sense of humour. As our Amy used to say, “Dad, you should be on the stage. There’s one leaving in half an hour.” There was a new found sense of humour, but the reality is that this was a bad joke Budget, because in terms of facing up to the challenges facing the people of Britain, it let the people of Britain down. It was the same old Tories; in the words of the Prime Minister herself, “Nothing has changed.”
Richard Drax (South Dorset) (Con)
It is a pleasure to take part in this debate and to listen to the hon. Member for Birmingham, Erdington (Jack Dromey). I do not agree with 99.9% of what he said but there was an element there with which I may have agreed. Steady as she goes is what the Government and the Budget have portrayed to the country, and in the circumstances that is eminently sensible. Sadly, we simply do not have the money, for the reasons many Conservative Members have explained, to splash out, as the Leader of the Opposition claims that he does.
Nobody has said that leaving the EU is going to be easy, but the people of this country voted to do so and that is what we must do. I have been longing to hear some cohesion in the House, with the majority of MPs, who voted to initiate article 50, getting behind the Prime Minister and our country to do all we can to get the best deal we can. Divided, we are not going to get the best deal because they see a divided country. The future for us when we leave the EU, particularly in business and other opportunities, is enormous.
I shall tell the House a little story. Lord Digby Jones came down to my constituency to attend the apprenticeship fair, which is now in its fifth year. I set it up with the help of the local college, for which I give many thanks. He gave a speech. For those who do not know, let me say that he was a trade ambassador—I think he still is, actually—and he had been to India to meet up-and- coming businesses over there, as that country is going to be a huge powerhouse in the years ahead. He sat in the back of a taxi and he noticed the taxi driver’s eyes staring at him in the mirror. The taxi driver asked who he was and he said, “I’m Lord Jones. I’m a trade ambassador. Who are you?” The taxi driver gave his name and said that he had two sons, and Lord Jones said, “And what are your two sons doing?” He said, “They are at university. And I’m spending every waking minute in my car earning every penny I can to support them in their futures.” Lord Jones, with the eyes still fixed on him—of course, the car was still going straight down the road, we hope—said, “Where do you see your children in the years to come?” Without pausing, the taxi driver said, “Where you’re sitting.” The point of my story is that there are tens of thousands of young people in the rising Asian economies who are so hungry, lean and mean—in the business sense—and they want a share of what we have had and of what we need to engender in this country. We have to get hungry, mean and lean again. Government Ministers can help enormously with that by following Conservative philosophy.
Anna McMorrin (Cardiff North) (Lab)
This was not a serious Budget—and I am not referring to the bad jokes that littered the Chancellor’s speech and which were as weak as the Tory Government of the man who delivered them. Last Wednesday, my Opposition colleagues and I waited desperately for an hour to hear something that would help the people we represent to live a decent life. Instead, we got a Budget that includes more spending on an ultra-hard Brexit to appease the Conservative party, which will harm the country, than there was spending on the NHS. The improvements to universal credit were welcome, but they are too little, too late. The relief from the reduction in the six-week wait is only minimal when compared with the thousands of pounds that many of the families dependent on benefits are set to lose.
The Government’s worst legacy by far must be the public sector pay cap. Cardiff North has 19,000 public sector workers—the highest proportion in Wales—and they really hoped that the Budget would end the disgraceful pay freeze that has seen nurses using food banks and care workers struggling to make ends meet. One thing we have learned to appreciate since the spring Budget is how desperately dependent we are on public services. The Chancellor’s Budget leaves public sector workers worse off than they were seven years ago. Austerity is not a policy choice: it is political.
Yesterday, the Secretary of State for Business, Energy and Industrial Strategy launched his industrial strategy to address weaknesses in the economy. The UK’s economy has been systematically underperforming on almost every key measure. Our productivity is down and we have the most geographically unbalanced economy in Europe. Part of the boost to productivity should be investment in renewables, which are set to be the backbone of our modern energy system. The plummeting cost of wind power means that onshore and offshore wind can help to improve the UK’s competitiveness and productivity. It is therefore hugely disappointing that the strategy does not set out how we can continue to support onshore wind, which is the cheapest of the new generation of energy production. We have yet to see an announcement on the Swansea tidal lagoon. That was a missed opportunity to invest in infrastructure for the future. With a cap on funding for renewables until 2025, the Government have shown they have a long way to go before they can deliver on clean growth.
Finally, I am frustrated about and fearful of the prospect of the financial impact of a shambolic Tory Brexit on the British and Welsh economy. The Budget includes £1 billion of additional capital funding for Wales, but more than half that must be repaid. The Budget is a missed opportunity. We needed to see one that truly transformed the economy, not more of the same.
Mims Davies (Eastleigh) (Con)
It is a pleasure to follow the hon. Member for Cardiff North (Anna McMorrin) and to speak briefly about the Budget and its focus on the future successful economy that we need. The Budget is one of fair taxes, improving productivity, tackling our housing issues, supporting public services and making sure that we build the homes the country needs.
It is this Government who are tackling the gender pay gap. They are bringing forward T-levels and maths training, and Barton Peveril College and Eastleigh College in my constituency will be helping with that. They are increasing the personal tax allowance to nearly £12,000. They are freezing fuel duty and duty on beer, wine and spirits. They are embracing technology and establishing a new national creative industries policy, while also focusing on improving our environment. What is not to like about that?
Let us move on to house prices. One of the concerns most regularly voiced by my constituents is not only that they cannot afford a house, but that their children and even their grandchildren cannot afford a house or imagine a future that their parents had. Work done by this Government has saved nearly £2,000 on stamp duty for first-time buyers in my constituency. That will help to get people on to the housing ladder, which, a couple of years ago, would have been deemed simply unachievable, so my message to the Chancellor is: thank you.
My other message to the Chancellor is: please can we have the Botley bypass and the Chickenhall link road? As long as we work with the Department for Business, Energy and Industrial Strategy and the new industrial strategy, those projects, dear Ministers, will not only help our productivity, but tackle local air pollution and the low productivity issue in the Solent. Those are real benefits for real people of all ages.
I must also thank the Chancellor for not raising air passenger duty, as that really matters to our regional airports. It is a testament to this Government that hard-working people are being supported to get on in life. My local paper highlights the fact that nearly 600 new jobs have been created in Hedge End and Chandlers Ford. This is a good Budget, which should be applauded and supported in this House. I look forward to walking through the Lobby in support of it and making sure that we deliver the technology, the productivity and the opportunities for Britain.
Kerry McCarthy (Bristol East) (Lab)
On a positive note, I welcome the proposed tax on single use plastic packaging. We know the huge environmental damage that is being done and, at the moment, there is little pressure on producers to reduce resource use and to make their packaging recyclable. It is left to local councils to clear up the mess and to local taxpayers to foot the bill.
I am afraid that that is about the only thing in the Budget that I feel inclined to welcome. Figures show that the public sector pay cap has reduced the disposable income of workers in my constituency by more than £45 million since 2010. Last week, I met representatives from the Royal College of Nursing to hear how low pay is causing a recruitment crisis: applications to study nursing have fallen by almost a quarter this year, at a time of acute staff shortages in the NHS. For nurses, who have seen a real-terms drop in their earnings of 14% since 2010, this Budget offered nothing.
What I am hearing from those charged with delivering essential public services in Bristol is that we simply cannot go on like this any longer. Bristol City Council is having to find more so-called savings worth £100 million over the next five years. Non-statutory services are being cut to the bone. What was particularly shameful was the complete failure by the Chancellor to mention social care, which accounts for close to a quarter of the council’s budget.
Avon and Somerset’s police and crime commissioner and chief constable were in Parliament last week. They did all they could when faced with Government demands for savings worth £66 million: modernising the way they conduct policing and streamlining their operations. They have been widely commended for the way in which they went about making those savings. Despite the loss of more than 600 officers since 2010, because of the cuts, neighbourhood policing was protected. The police and crime commissioner and chief constable said that the reward for all their work was to be told by the Government that they needed to come up with another £17 million of savings. They were here to tell Ministers that it simply cannot be done. They will not be able to provide the police service that the public expect and deserve if these cuts go ahead, but the Government are not listening to them, and there was not one mention of policing in England and Wales in the Chancellor’s speech.
Another example is St Brendan’s, a sixth-form college in my constituency, which was commended for its financial management by Ofsted in February. The principal is now telling me that he cannot go on like this. Sixth-form funding has been frozen at £4,000 per pupil since 2015—a real-term cut of more than £200. He is determined not to cut the curriculum, as many school sixth forms have been forced to do. This Government pay lip service to social mobility, but in truth they are squeezing young people’s life chances and denying them educational opportunities and the extra-curricular support they need.
The economic picture revealed by the Chancellor in his Budget shows us that austerity is not working. A braver Chancellor would have acknowledged that, put up his hand and admitted that he had got it wrong and chosen to invest in our councils, in our schools, in our colleges and in our nurses and police. The Budget was a failure.
Kevin Hollinrake (Thirsk and Malton) (Con)
I will focus my remarks on chapter 4 of the Budget, which is on productivity, because as it says in the Red Book, that is how we boost wages, improve living standards and improve overall prosperity across the nation. Incredibly, if we could close the productivity gap with Germany, we would increase our GDP by 33%. Competition is the key to improving productivity, and the Red Book states that boosting productivity makes businesses “more efficient”. I began my own experience in business at a time when most of my competitors were closing down. It was a few years later, when new competition came into the market, that we really raised our game and became more competitive, efficient and effective. The key to more competition is ensuring that we have a level playing field.
The first thing we need to deal with is access to finance, and the Budget deals with a number of different issues for people who cannot borrow from the high street lenders. Increasing productivity is about unlocking £20 billion of patient capital; doubling the enterprise investment scheme allowance, which certainly provides more capital for those early-stage and higher-risk businesses; and providing more support for challenger banks. Those measures tackle the issues of people who cannot borrow, but the reality is that many people in business will not borrow because they do not trust the high street banks.
We have seen some issues over the past few years, with scandals at the Royal Bank of Scotland Global Restructuring Group and other banks meaning that assets were often taken away from small businesses totally inappropriately, and those businesses have no recourse. We need an independent financial services tribunal, along the lines of employment tribunals. It is not just about the money; it is about the human cost of a life’s work being taken away. A tribunal would provide an independent means of redress for such businesses.
The Chancellor also mentioned the VAT threshold in his speech. He has not tackled that yet, but we do need to tackle it. Anecdotal evidence suggests that this is a barrier to productivity and expansion, and that has been supported by a report from the Office for Tax Simplification, which says that there is a bunching effect around the VAT threshold.
Finally, rebalancing the economy means more investment across the nation. There is too much focus on London. It is not just the Treasury doing this—in fact, it is not the Treasury. It is about access to private sector capital, and we need to find ways for the north also to access that private sector investment.
Sir Edward Davey (Kingston and Surbiton) (LD)
This Budget had one redeeming feature: it was honest. It was honest about the weak growth prospects and how weak our economy is. I hope that the whole House will reflect on these dismal forecasts, because they have dramatic implications for our economy, people’s livelihoods, public finances and services, and the way in which we debate the issue of the day—namely, Brexit.
Look at what the Office for Budget Responsibility’s growth figures really mean for ordinary people and their incomes. Compared to the Budget just a year ago, it means that people will be earning £687 less by 2021. Wages in 2021 will still be lower—still buying less—than they did in 2008. The IFS talks about the danger of losing two decades of earnings growth in the longest squeeze on living standards in more than 60 years. This is dramatic stuff. Guess who is going to have the worst of it? The poorest households—the Resolution Foundation says that the poorest 20% will be hit the hardest. That is just unacceptable.
Let us look at the implications for our public services. The details of the Budget show that public service spending will be 3.6% lower in 2022-23 than today. If we exclude the NHS, it will be more than 6% lower. What does that mean? It means that our schools, police services, councils and care services will face cuts not just this year, but next year and into the future. This is not about jam tomorrow. It is about maybe jam in six or seven years’ time.
That is something I am incredibly worried about in my constituency. Already our schools are under huge pressure. We are dealing with an £11 million deficit in our special needs budget alone, and when we see that this Budget had nothing for our schools, tackling that will be really difficult. In my constituency, and across London, we are also seeing crime up and police officer numbers down. The Budget will do nothing to tackle the criminals and to fight back against the big increase in crime.
What does the Budget mean for Brexit politics? It means that the Conservative Brexit is failing our economy and failing our country. People who voted leave thought they were voting for better wages because there would be less competition from immigrants. Their wages are going to be lower. They thought they were voting for more money for our public services, such as the NHS. They are going to get less. They thought they were voting for an economy that will be better than before. They were not—it will be worse.
I say to the right hon. and hon. Gentlemen on the Treasury Bench that it is time they thought again about Brexit. The OBR has told people the truth.
Vicky Ford (Chelmsford) (Con)
This is my first time taking part in a Budget debate, and I would like to say some thank yous.
Thank you to my Conservative colleagues for the work they have already done on controlling the deficit, restoring the public finances and rebuilding a strong economy, so that we can afford the many measures we take today.
Thank you on behalf of young people. I remember that, under Labour, nearly 1 million young people were not in employment, not in education and not in training. Today, youth unemployment is at all-time lows.
Thank you for investing in skills and especially in maths. When I went to university, I was a very rare breed: a girl who did maths. Today, that breed is still too small. So, girls, listen: if you do maths and a science at A-level, you will earn 30% more than your peers. The £600 per pupil taking A-level maths that will go to each school can be transformational for this country.
Thank you for removing stamp duty for first-time buyers. It is hard to get on the property ladder in my constituency, and that will make a difference.
Thank you for listening on universal credit. We must help those most in need. Thank you especially for making it easier for the housing element of the benefit to go straight to the landlord. That is an idea I pitched to the Chancellor, and he had no tin ear.
Thank you for funding the NHS, and especially for underwriting the pay increases for our nurses and for investing in the capital budgets. I am glad that south and mid-Essex will be among the first to benefit.
But most of all, thank you for the support for innovation. I am proud to live in a country where there are 40 start- up businesses every hour—that is three a day in my constituency. I am proud that there are 28 great British start-ups that are now billion-dollar businesses. I am proud that this Government are investing more money in science and research than any other Government for the past 40 years, because scientists are the people who find real solutions to real problems, and they will build us a better future.
Ms Nusrat Ghani (Wealden) (Con)
Will my hon. Friend give way? [Hon. Members: “ Oh.”] I will be very quick. Is my hon. Friend also thankful for the £21 million—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Two people cannot be stood at the same time.
Come on, Nusrat!
Vicky Ford
Absolutely, because we need to make sure that we invest in not only the ideas and the innovators but the skills, the people and the places.
Brexit is coming, and it does bring huge risks. Now, more than ever, is the time to back ideas, back the innovators, invest in our infrastructure and inspire our industry. I am very proud to be supporting this Budget.
Daniel Zeichner (Cambridge) (Lab)
It is a pleasure to follow my near neighbour, the hon. Member for Chelmsford (Vicky Ford), although I have to say that I do not find many people on the streets who echo her thanks to her colleagues quite so effusively.
Reading the comments of the OBR, it is hard to come to the conclusion that they are anything other than somewhat gloomy. I would suggest to Conservative Members that just one of the factors may have been the lack of an industrial strategy over the last seven years, so there is some welcome for the fact that we do now have an industrial strategy.
The city I represent has been mentioned many times, and I just want to make a couple of comments, particularly on life sciences. Cambridge has been tremendously successful. I am grateful to Savills for pointing out that, in terms of one measure—global bioscience venture capital funding per capita—Cambridge is streets ahead of all our international competitors and anywhere else in this country. But alongside the success stories that the Government trumpeted when they launched the strategy yesterday, I urge colleagues to look—I do not normally do this—at The Daily Telegraph; a couple of days ago it had a report that Johnson & Johnson, the major American healthcare giant, had pulled out of plans to build a new research and development facility in the UK, just outside Cambridge. It said those plans
“have been put on hold over concerns that the UK is both politically and economically weak while negotiations to leave the European Union are ongoing”,
so there is a mixed picture.
The missing element in all this is the people. The reason why these industries are successful in Cambridge is that people can come and go freely. In the context of Brexit, that will be a real challenge. In every lab I go to, I find people from other parts of the world, but they are leaving, and the next generation is not coming. The industrial strategy has to be seen in that context. What makes people come here? Good schools, but there is nothing in the Budget, as hon. Friends have pointed out, to improve schools, and most of all, there is nothing on housing.
Housing is complicated in Cambridge. The city council is doing a fantastic job; it is trying to build council housing, but it is dogged by Government policy changes. The council bravely bought itself out of the housing revenue account, only for the Government to change the strategy entirely a year later, completely undermining its policies. Yes, lifting the HRA cap would be good, but can we have any faith that that will continue over the next few months and years?
On the Oxford-Milton Keynes-Cambridge arc, it would be good to have more housing there, but look at the details in the Budget Book. There is talk about shifts from section 106 and the community infrastructure levy to a strategic infrastructure tariff. That is very complicated, detailed stuff, mirroring what happens in London. However, the governance arrangements on that arc are not one mayoralty; there is not one, unified structure there. This is complicated stuff, and it will not happen soon. The industrial strategy may be a very glossy, colourful document, but for most people, life is being lived in gritty black and white.
Tonia Antoniazzi (Gower) (Lab)
It is a great pleasure to follow my hon. Friend the Member for Cambridge (Daniel Zeichner).
The Budget is a prime example of the contempt that this Government continue to show towards the devolved nations. By holding the purse strings on infrastructure investment, the Government are sucking the hopes and dreams out of future Welsh generations. The announcement that electrification to Swansea was cancelled followed months of weasel words from the Tories. They professed that that was a crucial project and that it would happen, and it did not.
I now have the privilege of sitting on the Welsh Affairs Committee, which, only last week, listened to evidence from two experts. It was a revelation to hear evidence of fake news on electrification from those on the Government Benches. The Secretaries of State for Wales and for Transport have frequently told us that we would be welcoming bi-modal trains to Swansea. I do not share their enthusiasm for bi-modal trains in Swansea; I would prefer electric trains. If the Government’s target is to lower carbon emissions, here is an interesting fact for them: these wonderful bi-modal trains use the same dirty old diesel engines that are found in diesel high-speed trains. People welcome bi-modal trains because they are, allegedly, lighter and therefore more efficient than the current diesel high-speed trains. That claim too can be blown out of the water: whereas a nine-carriage diesel high-speed train weighs 408 tonnes, a bi-modal train weighs 432 tonnes, as it has 9 tonnes of diesel fuel under every coach—an interesting fact.
If only the Government would further devolve transport and give that power to Wales, so that we were in the same position as Scotland, we could successfully move ahead with electrification and increase the productivity of the Welsh economy. The whole of Wales has been let down by the refusal to electrify from Cardiff, let down by the refusal to sign off on the Swansea bay tidal lagoon and let down by the refusal further to devolve rail transport to Wales. Those constant refusals highlight that the Government are not interested in Wales, its future or, more importantly, the economy that is to provide the opportunities for young people in Wales to prosper.
Gerard Killen (Rutherglen and Hamilton West) (Lab/Co-op)
This is a “nothing has changed” Budget from an out-of-touch Government enabled by Conservative Members who have no idea of the reality of people’s lives. In the midst of it all has been a battle between the SNP and the Scottish Conservatives to claim credit for the Chancellor’s climbdown on the VAT charges imposed on Scotland’s emergency services. As ever, the reality has been lost in the performance that has played out between them. I thought for a moment earlier that the hon. Member for Dundee East (Stewart Hosie) might break into song in his praise of the Scottish Government, but of course he failed to mention that growth in Scotland is even lower than it is in the UK.
The whole VAT situation could have been avoided if the SNP had listened to Unison’s advice at the time, although that is not to let the UK Government off the hook on the matter. It was wrong to impose charges on Scotland’s emergency services, and the Chancellor has admitted that with the Budget. It says very little for the persuasive powers of the Secretary of State for Scotland that the election of 12 new Scottish Tory MPs was seemingly required to convince the Chancellor to introduce the exemption.
Perhaps the new intake will bend the Chancellor’s ear once more and use their new-found influence to get back the £140 million that Scotland’s police and fire services have already paid in VAT. Surely, if it is wrong to pay it in 2018, it has been wrong to pay it all along. If that money is refunded to the Scottish Government, I hope that it will be ring-fenced. I know that my constituents do not want to have to repeat the successful local campaigns that they had to launch to save police stations in Rutherglen, Cambuslang and Blantyre from the threat of closure. That additional funding for the emergency services is much needed.
The Budget also failed to address the misery that is being caused by the Government’s social security programme. The move from an initial six-week wait to a five-week wait for universal credit payment will be cold comfort to the people who contact my office in desperate need of help. Some of them tell my staff that they feel suicidal, because the Government are driving them into debt and they have nowhere else to turn. What must it be like for them to spend Christmas worrying about whether they will have a roof over their head or food to put on the table? Here is an opportunity for the Government to get two things right amid this woeful Budget: backdate the VAT refund for the Scottish emergency services and pause the roll-out, to fix universal credit.
Liz Twist (Blaydon) (Lab)
I declare an interest as an elected member of Gateshead Council.
I want to speak about what is not in this Budget, because those things are important to my constituents in Blaydon, many of whom are struggling to cope with daily life and supporting their families. First, I want to mention the absence of any reference to social care. We all know that the demand for social care is growing, and we know from experience that it is essential that people have access to high-quality social care when they need it, but the Government continue to cut the local authority budgets that go towards providing that support.
In my council of Gateshead, we spend more than half our budget on the most vulnerable adults and children. Our funding has been cut by 52% since 2010, and the number of people who use and need our services is rising. I checked the Tory manifesto earlier and found this on long-term care:
“Where others have failed to lead, we will act.”
But there is no action on social care in this Budget.
There is nothing in this Budget for education, other than for maths teaching. Maths teaching is, of course, hugely important, but many of our schools are struggling to balance their budget so that they can provide the best education possible for our young people, and despite changes to the schools funding formula over the summer, 91% of schools still face a real-terms reduction in their budgets as per pupil funding has reduced. We may have a commitment to maths funding, but increasing pupil numbers and increasing demands versus decreasing funding means that the sums do not add up for schools.
On housing, we had a raft of measures that the Chancellor says will increase house building, but the announcements fall far short of a proper plan to help to fix the housing crisis. We need all councils to build again to create the houses we need.
I heard the Chancellor repeat this morning that the public sector pay cap has gone. But NHS workers, who were specially mentioned by the Chancellor, will receive an increase only on condition that they increase productivity by renegotiating their terms and conditions under “Agenda for Change”. This does not just affect the NHS; for staff right across the public sector, work has increased and pay has fallen in real terms. The Government need not only to lift the cap that they imposed, but to fund the NHS, local government, fire and rescue services, the police, education, the delivery of universal credit and many other areas, to give those staff the rise that they need, without further reducing services.
Margaret Greenwood (Wirral West) (Lab)
This Budget has failed to deliver for our vital public services and our families, and it has failed to step up to the very serious challenge posed by climate change.
Pupils and teachers in our schools are feeling the squeeze of Tory austerity, with increased class sizes, a crisis in teacher retention and a reduced curriculum offer. Education is the key to our future, yet the Budget had nothing for school budgets. The Government announced extra funding for maths teaching, which is fine, but we will not be able to draw on all the talents of our young people unless we address the neglect of arts education under this Government. Arts subjects are important for the development of the individual, as well as for our cultural offer of film, television, theatre, music, art and dance, which are all significant for the economy. Labour would abolish university tuition fees, but there was no money in this Budget to do that. Individuals are leaving university with an average of £57,000 of debt, but there is no sense in leaving people to carry such a burden.
Our communities are feeling the impact of seven years of Tory austerity, with huge cuts to our police services. Merseyside police has lost 1,000 officers since 2010. My constituents are concerned about antisocial behaviour in areas where there have never previously been any problems. The first duty of any Government is to keep their people safe, yet under the Conservatives, we have lost 20,000 police officers from our streets. When we consider the fire service it is the same story. Funding for fire services up to 2019-20 was set in a four-year settlement announced in February 2016. It meant cuts each year for Merseyside Fire and Rescue Service, putting firefighters and the communities they serve at risk. It is very disappointing that the Government have failed to revisit the funding for those services. Both fire stations in my constituency are closing as a direct result of central Government cuts, which will mean longer waits at fires and road traffic accidents, and the loss of precious minutes in life and death situations.
There is also the Government’s failure to deliver on the NHS. The extra £1.6 billion of funding does not meet the £4 billion that the chief executive of NHS England has called for. The Health Foundation and the Nuffield Trust agree that that amount is needed to prevent patient care from deteriorating. It also does not match the £6 billion that Labour would commit. Providing more money for the NHS is only part of the answer to the problems in services. It was notable that the Chancellor failed to give any money to tackle the crisis in social care funding, despite the fact that Members on both sides of the House recognise that there is such a crisis, with 1 million people not having their needs met.
There was also precious little to address the very serious threat of climate change, so this Government are delivering a Budget that is a huge disappointment. They are in denial about the seriousness of the problems caused by austerity. The Government do not have the vision to understand the value of a broad educational offer, and they are failing to be ambitious in taking the action we need to address climate change.
Tony Lloyd (Rochdale) (Lab)
The huge gulf across the Chamber between Government Members’ world of disbelief and Opposition Members’ world of reality mirrors how modern Britain is divided. Ministers are looking astonished, but Britain is a very divided society. The rich are doing extraordinarily well, but many other people are struggling. Public sector workers will once again have another year of pay cuts, and there is no money to fund any realistic investment in our public services. The police in Greater Manchester have been cut by 2,000 officers. There is less money for our local authorities, and in Rochdale, where social care and children’s services have been decimated by this Government, there has been no relief whatsoever.
I want to concentrate on productivity, which this Government claim they intend to make the keynote of this Budget. Let us look at the reality of what is taking place for those with intermediate skills. Rochdale, like many other towns across the north of England, needs investment in education and training, but what have we seen? Let me take Meanwood Primary School. It is a great school with great teachers, but this Government are putting the “Mean” into Meanwood because the school, despite the rhetoric of Conservative Members, has faced cuts this year. It has lost a teacher and teaching assistant hours. In effect, the school has been made worse for children from some of the most deprived parts of my constituency, which cannot be right. The further education college has been damaged by cuts. The figure of £4,000 per pupil has been consistent over the years but, de facto, that means cut after cut, and the real number of hours per student is far less than in almost any other OECD country. Intermediate skills are simply not being invested in as they should be.
I challenge this Government. Rochdale needs a Rochdale education challenge, just as there was a London challenge under the previous Labour Government. It is now up to this Government to get real and to have the ambition to change this nation. Quite frankly, given the complacency of Conservative Members, it is hard to believe that this Government can have the ambition that the people of this country deserve, so it is about time that they went and we had a Labour Government to show such ambition.
John Woodcock (Barrow and Furness) (Lab/Co-op)
No party has a monopoly on damaging people’s faith in politics and in government, but I genuinely believe that the Budget could do significant further damage to people’s faith in the ability of the political process to deliver for them. That is not so much because of what is in the Budget, as because of the huge mismatch between the scale of the economic challenge facing the country and the behemoth of Brexit coming down the track, and the sense of a lack of grip and lack of ambition in the Budget to deal with any of those things. That is combined with some truly extraordinary contributions from Government Members, who talk about the Budget as if it is a genuinely transformative experience for the country. That is simply not the lived experience of many of our constituents. It does the Conservative party no favours to pretend that we are in that situation.
Briefly, given the time I have left, I will look at how my constituents will feel let down by the Budget. Once again, WASPI women get nothing and Cumbria’s infrastructure needs are ignored. For people in Furness and across the country, wage growth has not kept up with increases in living costs for years, and that will potentially be true for another decade. The public are sick to the back teeth of austerity measures being imposed with no end in sight.
The rest of my remarks will focus on the most ominous omission from the Budget speech and almost entirely from the Budget documents: defence. On the face of it, there are continuing increases in the defence budget, but it is no accident that the Chancellor—a former Secretary of State for Defence—chose to ignore defence completely. He knows and the Government know about the terrible crunch in the defence equipment programme and the amount of damage that may be done in the coming months, let alone years, by the way in which our nation’s resources are being starved. There may be no way back from that and the Government must pay heed.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
This Budget was guided by the political considerations of the Tory party, rather than the day-to-day reality faced by my constituents in Hampstead and Kilburn. It was well briefed before the Budget that the Chancellor’s hands would be tied, but I refuse to accept that Brexit allows for a total cop-out and a Budget that is so utterly feeble in confronting London’s problems.
In the short time I have, I will focus on education and policing. The Red Book reveals worrying cuts for school buildings and says next to nothing about concerning signs over the Government’s childcare promises. I want answers on why the Budget statement did not include a single mention of counter-terrorism in a year when we have seen five terrorist attacks, four of them in the capital. I want answers on the total failure to acknowledge the immense financial strain that our police are under. The omission of police funding is simply scandalous. Today, I want to provide a voice for those in my corner of north-west London who are concerned by rising crime on our streets, the continued terror threat and the Government’s utter failure to compromise with the Met commissioner and the Mayor of London.
Capital investment in schools is crucial, yet the small print of the Budget reveals that over the next four years, there will be £1 billion less in the Department for Education’s capital budget than was outlined in the Chancellor’s spring Budget. The Chancellor failed to announce that at the Dispatch Box, but local parents and pupils will lose out as a result. The verdict of headteachers in my constituency could not be clearer. My local paper, the Camden New Journal, published an open letter to the Chancellor signed by 41 school heads saying:
“We cannot see how we will be able to continue to provide our current level of provision in the future with such drastic cuts to our funding.”
The absence of early years funding from the Budget is similarly concerning. As the chair of the all-party parliamentary group on childcare and early education, it has been a privilege to hear from colleagues from across the House about their experiences of the roll-out of the 30 hours of childcare policy. In principle, getting parents back to work and ensuring that every child has the best start in life is something that unites us. However, as I wrote in my letter to the Minister for Children and Families last week, the policy is underfunded. As was revealed in the latest Ofsted figures, more than 1,000 nurseries and childminders have gone out of business since 2010.
On police funding, I will echo the Mayor of London’s response to the Budget last week in the short time I have left. Given the cuts of £600 million since 2010 and the fact that we are set to lose another £400 million before 2020, I wonder at what point the Government will stop compromising the safety of Londoners.
Alex Norris (Nottingham North) (Lab/Co-op)
This is my first Budget, so I was geared up for tweeting furiously, poring over Budget papers and analysing it in the local media, but it is striking how little of any of those things I have had to do, because the Budget represents an incredible lack of anything at all for my city of Nottingham and my constituency.
The right hon. and learned Member for Rushcliffe (Mr Clarke), who is no longer in the Chamber, termed the Budget as “not exactly a non-event”, and he meant that as a compliment: there was just above nothing in the Budget, and that for him was a good thing. For my constituency, only a grade above a non-event is not good enough. On the issues that really matter to us, such as decent wages, a fair benefits system, healthcare, schools, transport, community safety and so on; on the things that are making people’s everyday lives more difficult than they ought to be; and on the issues leaving children in working families in poverty with no way out —on all these things—we feel let down by the Government, and the Budget is emblematic of that failure.
Another incredible omission was the fact that the east midlands was not referenced at all. Treasury stats show that, whether it is transport investment or infrastructure investment in general, the east midlands will always come last, and once again the Budget and the industrial strategy do nothing to fix that. After the cancellation of the midland main line electrification, we are in desperate need of more money for our transport links, but that has not come. It is not just for getting to and from the capital that we need midland main line electrification; this is also about east-west connectivity. Both those things have excellent business cases and are crying out for a bit of vision to support them.
It is not a coincidence that today’s Social Mobility Commission report has the east midlands as the region with the worst outcomes for those from disadvantaged backgrounds, but we know that that is not inevitable. The poverty profile of my constituency is similar to a number in London, but while 17 out of 20 mobility hotspots are in London, none is in the east midlands. My area is one of the coldspots, and that is because of the level of investment into the community. I say that not because I want London’s investment for Nottingham; I want investment levelled up, because it works. It is good for society and for the Exchequer. That shows what we should expect from the Budget, but instead we have something that is not quite a non-event which, frankly, is not quite good enough. In fact, it is not good enough at all.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
I am grateful for the opportunity to contribute to this important debate on the Chancellor’s autumn Budget, which has truly exposed the appalling reality of the Tory party’s failed austerity experiment. The UK economy is now forecast to be £72 billion smaller than under the spring 2016 forecast, and average earnings are not expected to recover to pre-crisis levels until 2025.
In a major shift in their assessment of the UK’s growth outlook, the OBR has forecast that growth will remain below trend until 2022. This is the first time in recorded economic history that growth projections have been so low. That in turn significantly weakens the UK’s fiscal position, because it reduces revenue forecasts, household incomes and therefore the ability to reduce the deficit, which let us not forget was the Tory party’s primary test of economic success on coming into government in 2010. That now will not happen until 2031.
The reality could not be more stark now: austerity is a vicious cycle of self-defeating decline. Real wages are lower than they were in 2010, and the Budget confirmed a further hit to living standards, with disposable income set to fall in 2017. Working age benefits have been frozen since 2015. Meanwhile, prices measured by CPI have risen by 6.9%. Under this Government, it is clear that the poor are getting ever poorer, while an increasing share of national wealth flows to the richest in our society. That is a betrayal of my generation, which is the first in recorded history in which people are seeing their living standards falling below those of their parents.
The key reason for this downward revision in growth was the major shift in the OBR’s outlook for productivity. In the past, its prediction was that productivity growth would return to pre-crisis rates, but it now believes that the slowdown is evidence of structural weakness. That structural weakness is a result of the Government’s self-defeating policies, which have created a cycle of weak earnings and cheap labour, with firms using low-cost labour rather than investing in more efficient processes and plant that would drive productivity growth.
The industrial strategy White Paper that was published yesterday demonstrates that the Conservatives have once again missed the opportunity to take the radical action that is needed to meet the UK’s productivity challenge. Raising research and development investment to 2.4% of GDP by 2027 will only bring the UK in line with the OECD average, after years of lagging behind, but we need to be above the average, not below it. World leaders such as South Korea and Japan spend over 3% of their GDP. That is why Labour is committed to that target.
There is the key question of ensuring that UK firms are leading this effort and that it is balanced across all UK regions. In Scotland, for example, 70% of R and D activity is undertaken by overseas-owned companies, but there is nothing in the industrial strategy to address that. The country stands on the cusp of a great disruptive opportunity as the fourth industrial revolution emerges, but this lacklustre Budget and industrial strategy prove beyond doubt that the Government are simply not up to the huge economic challenges facing the country. Only the Labour party has the true ambition and vision to harness our nation’s industrial potential.
Alex Sobel (Leeds North West) (Lab/Co-op)
As we have just heard from my hon. Friend the Member for Glasgow North East (Mr Sweeney), we are on the cusp of the fourth industrial revolution, but if we are to be ready for it, we must do more than this industrial strategy does. The Britain of five to 20 years from now will look very different from the country in which we live and work today. If we are to ensure that new technology does not lead to higher levels of underemployment and a workforce whose skills have become obsolete, we must first ensure that automation leads to innovation. If Britain is to be a world leader in new technology, as the Government contend, we must think bigger and be bolder.
Our economy has drifted from manufacturing to the financial and service sectors. Between 1978 and 2017, the number of service sector jobs rose by more than 20%. That shift was highlighted by representatives of a civil engineering firm in my constituency who told me that, although demand for their services was increasing, recruiting staff with relevant skills was becoming increasingly difficult. I welcome the £64 million investment in retraining that is mentioned in the White Paper, but, in the context of £1.5 billion worth of cuts in the adult skills budget, it hardly scratches the surface of the investment that is needed to end a skills shortage that will hamper any serious industrial strategy.
We should aim to create an energy revolution by taking steps such as reforming ownership of the grid, including common, state and mutual forms of ownership. That will open the energy market to smaller companies, and will create a more competitive market. We need look no further than Leeds, where we created White Rose Energy. We also need an insulation revolution that gives not just homeowners but landlords and housing associations incentives to insulate their houses, so that we can save energy, create jobs and provide warmer, safer houses.
I am pleased that there is to be some investment in infrastructure for electric vehicles, but the Government need to listen to the Industrial Strategy Commission’s recommendation that infrastructure investment should be universal. My constituency does not have a single public charge point. How shameful is that? We also need to take more urgent action to tackle climate change. I urge the Government to listen to Labour Members and to commit to themselves to ensuring that 60% of the UK’s energy comes from low-carbon or renewable sources by 2030.
We need a Government who will think bigger. We need a Government who show a commitment to our planet and the health of future generations. We need a Government who are not afraid to be bold and invest in this country and its people. As Britain looks to a future outside the European Union, it has never been more crucial to embrace change and lead the world, not only in producing and welcoming new technology, but in shaping our society to ensure that change works for the many, not the few.
Alan Brown (Kilmarnock and Loudoun) (SNP)
This is the Budget that was trailed as the “Ruth” Budget for Scotland, and it is the Budget that the Scottish Tories have apparently stepped up to the plate and delivered for Scotland, so let us look at what they have delivered. They claim credit for the VAT exemption for the police and fire services. The SNP raised that in the Chamber 63 times and forced a vote on it, so we have clearly led the way. The Scottish Tories do not even seem to care about the need for a refund of the £140 million that has already been stolen.
What else have the Scottish Tories delivered? Nothing. Not one original idea in the Budget can be credited to them. We are still left with a rail budget that has been cut by £600 million in real terms, and with no Ayrshire growth deal. There was nothing about the £200 million CAP convergence uplift that was meant for Scotland and nothing about renewable energy, and we are faced with a real-terms revenue budget cut of half a billion pounds over the next two years. The 10 Democratic Unionist Members who still sit on the Opposition Benches managed to get a £1.5 billion package for a couple of key votes, and we are meant to believe that they are a solid voting lobby.
There was one welcome measure for the oil and gas industry in relation to the transferable tax history, but, as is pointed out in paragraph 3.54 of the Red Book, the idea was first mooted in a Government paper in 2014, so it is certainly nothing to do with Scottish Tories. The fact that it is predicted to bring in £70 million makes it an easy decision for the Treasury anyway.
Today’s theme may be the future economy, but that future economy has already been curtailed by the £30 billion of tax giveaways in the last Budget—£30 billion that could have been spent more wisely. The incoherent policies continue with the flagship announcement of a £3.2 billion stamp duty giveaway that is now predicted to do no more than increase house prices and bring in nothing for the Treasury bung. While increasing the pay gap for the young, the Government think that they can woo young voters back with the promise of a railcard, but paragraph 4.46 suggests that it will be funded by other rail users rather than the Treasury. Tuition is free in Scotland, but the Tories think that freezing fees at £9,250 per annum will bring young voters flocking back to them. I say to them that they are aff their heids.
Justin Madders (Ellesmere Port and Neston) (Lab)
Three minutes to speak is not long, but it is about the same time as it normally takes a Tory Budget to unravel. I wish to focus first on the automotive sector. Ellesmere Port is home to Vauxhall Motors, and we had several requests for the Budget to improve the competitiveness of the plant, but I am sorry to say that none of them appears to have made it into the Budget. We have heard a lot of talk about how we are lagging behind in terms of productivity, and one of the asks I had was about changing the way that business rates operate and currently act as a disincentive to invest in certain types of plant and machinery.
On the housing announcements, expanding the ability of local authorities to borrow against housing revenue accounts is welcome, but it is far from clear who will be able to bid for that extra borrowing capacity, with it being apparently only available to areas with what are termed as “high affordability pressures”. I do not know of any local authority that does not have a significant waiting list, so rather than make councils jump through hoops, should not this facility be available to any council that thinks it can take on the extra borrowing?
The stamp duty offer for first-time buyers attracted a lot of attention on the day of the Budget, but its coverage was inversely proportionate to the impact it will actually have. As we know from the OBR, the concern is that it will do nothing more than increase upward pressure on house prices. Indeed, five years ago a stamp duty holiday for first-time buyers was abandoned by the coalition Government because it had been “ineffective”. We are already seeing developers take advantage—“You and Yours” reported yesterday that developers have pocketed the stamp duty savings where they had an agreement with purchasers to stand the cost of stamp duty.
Surely the best use of taxpayers’ money in housing is to increase supply. One way to increase supply would be to help all those people who have ended up with an unsellable house because they were duped into buying a leasehold property. Coming up with a scheme to release people from that trap might do much to increase housing supply, and it would also be the right thing to do.
Laura Pidcock (North West Durham) (Lab)
As a nation, we have been socialised to think of the economy in abstract terms. It is analysed as a distant entity that needs to be served, slavishly, to keep the big, scary beast from collapse. When we hear the Chancellor tell us that inequality has narrowed, that there are more people in work and that our public services are protected, we could almost believe him. That is, if we did not actually speak to any real people outside the Westminster bubble. We could suspend disbelief if we never spoke to any workers or reflected on what is happening in our communities.
Every time Government Members cheer about the new jobs on the Government’s watch without any critical analysis of the nature of those jobs —short-term, insecure and low-wage—they lose credibility. On behalf of my community in North West Durham, I must convey extreme disappointment and anger at the Budget. Aside from the pantomime proceedings, it offered nothing to my community.
I shall give one example in illustration—the stamp duty giveaway. In the north-east, average house prices for first-time buyers are £125,591. That would mean a tiny giveaway of £11.82. Please forgive those people who have endured seven years of pay freezes—a typical prison officer, for example, who is now only £30 better off now than seven years ago—if they do not jump with joy at those announcements.
We need something completely different. We must be brave enough to say that borrowing is necessary for investment and that people must have a wage that they can live on—it is not fine to pay them a minimum wage that keeps them in starvation. I have met people who have been broken by this system and it is not their fault. The global banking crisis was not their fault. The recession was not their fault. The rules and traps of the system were not of their making.
To see the tears of grown working women and men flow directly as a result of Government policy tells me that we need a complete overhaul of our economic system. If the Government are not brave enough to do that, they must move over. If the economy does not work for everyone, it is not worthy.
Helen Hayes (Dulwich and West Norwood) (Lab)
The measure of the Budget must surely be the promises that the Conservatives made to the British people over and again during the election campaign in June. They promised the British people a strong economy that would deliver investment in our public services. The Budget reveals just how badly the Government are letting down the British people and just how high the costs of the Government’s botched and divided process are proving to be. Instead of the strong economy that was promised, we see a forecast of poor productivity leading to exceptionally weak economic growth, wage stagnation and rising inflation. We were promised a strong economy, but instead, families up and down the country are facing an unprecedented further five years of falling living standards. They are running to stand still, but the best that the Chancellor can offer is that by 2025 average wages will have reached the same levels as in 2008. And instead of committing to the £350 million a week for the NHS promised by his colleagues in the Vote Leave campaign, the Chancellor is committing more taxpayers’ money to fund the cost of Brexit than he is to our NHS.
It is on the NHS that I wish to focus the remainder of my remarks today, as the scale of the financial challenges facing it makes the Budget look like a sticking plaster on a gaping wound. We are approaching the most pressured time of year for the NHS, and its hard-working staff are approaching the winter in fear and trepidation because the pressures under which they are already working absorb all the resilience and reserves they can muster. The local hospital in my constituency is King’s College Hospital. Prior to 2010, King’s was performing well and was financially stable, but when I contacted it recently on behalf of a constituent who had spent five days waiting on a trolley to be allocated a bed on a ward, I was told that the hospital was more than 100% full. King’s is an exceptional place full of exceptional people, but it is being asked by this Government to deliver the impossible.
The performance of our NHS is inextricably linked to the performance of social care services, yet the Budget made no mention at all of social care. Funding sufficient high-quality social care would be the single most transformative measure that the Government could introduce for our NHS. The failure of this Budget on social care is just one of the many ways in which the Government continue to disadvantage women, who make up the overwhelming majority of hard-pressed carers, both paid and unpaid. It is one of the many ways in which the Budget is failing people up and down the country.
Ruth George (High Peak) (Lab)
After seven years of Conservative-led Government and seven years of austerity, my constituents in rural Derbyshire will tell this House that austerity is not working. Both our hospitals are facing closure. Three nurseries have already closed, and more are saying that they cannot continue. Schools are being squeezed by 5% cuts and saying that they cannot continue and are having to lose teachers. We have lost more than 400 police officers in Derbyshire. There are not enough to respond to serious incidents; there are not even enough to police Buxton carnival. And our firefighters have been reduced to a retained service.
Austerity is hitting us hard—it is hitting every community hard—but it is not working. After seven years of telling us that we must not borrow to invest in public services, the Conservatives are borrowing up to the hilt. The national debt clock, which they were so keen to talk about at the time of the 2010 election, now stands at £1.95 trillion. They have almost doubled the national debt, and what have we got to show for it? We have public services that are on their knees. We have public servants who cannot afford a house. We have millions of people on benefits visiting food banks. That is an absolute disgrace.
We in the Labour party believe that we should borrow, but that we should borrow to invest. We should borrow to invest in our economy, in our public services, in our workers, in our jobs and in our communities. Then we would see an economy that could grow. People would be able to spend in their local businesses, and businesses would be able to thrive. Communities would be able to prosper once again. Instead, all that this Budget has offered us is more of the same—more of the same cuts and more of the same poverty—and we ain’t seen nothing yet. The little Red Book has shown that we are just at the start of those cuts. We have another four years of freezes to benefits and school budgets, and cuts to our police, to our hospitals and to the NHS communities. That is what is happening. This Budget was a chance for the Government to come up with big new ideas, but they did not. This Government need to make way for one that can.
Peter Dowd (Bootle) (Lab)
As the Chancellor gave his Budget speech last week, there was a collective groan across the country not just at the bad jokes, but at the content of the most uneventful Budget speech of recent times. There was no game-changing investment announcement and no lasting solutions for the growing difficulties facing our country. The Chancellor’s speech personified this Government: out of touch, inconsistent and directionless.
The Cabinet is morbidly and irrevocably split on Brexit and, rather than focusing on their individual briefs, Ministers now spend their days attempting to steal each others’. The International Trade Secretary wants to run Britain’s foreign policy. The Environment Secretary is learning all about hypothecation, apparently fancying himself as Chancellor, and The Times reported that he is busy researching the difference between a J curve and a J-cloth. Meanwhile, the Foreign Secretary continues to scheme for the top job. He is the first to praise the Prime Minister, while constantly plotting to undermine her—Iago on steroids. Ironically, the only person who does not want to be in No. 10 is its current occupant. She remains, as in the Monty Python parrot sketch, nailed to the perch and “off the twig”. The Prime Minister’s metabolic processes are, politically speaking, history.
The most important announcements made last week were not the Chancellor’s recycled policies, but those from the Office for Budget Responsibility. The OBR lowered UK growth forecasts, business investment, productivity rates and wage growth for the next five years, blowing a hole in the Government’s economic credibility. As for balancing the books, under the Government’s current projection, the UK budget will not be in surplus until 2030 at the earliest—a full 15 years after the former Chancellor said that the deficit would be eradicated. Workers who have already endured a decade of stagnant wages and lost earnings will not see their pay return to pre-crisis levels until 2025. And there is more. UK households face the biggest squeeze in disposable income since records began. The message from the OBR is clear: Britain under the Tories is now facing a record 17-year downturn in pay.
The Budget did nothing to eradicate the impact of austerity on women, who have disproportionately borne the brunt of it. The abolition of stamp duty for first-time buyers is of course welcome, but the OBR rightly points out that the move will increase house prices. Many Government Back-Benchers called for action to help the next generation, but the best the Chancellor could muster was a millennial railcard that young people cannot even use to commute to work and that will not even cover the cost of the 3.6% rail fare increase next year.
On universal credit, the Government finally listened to Labour and scrapped the seven-day waiting time, but they have done nothing about the roll-out.
The Government once again ensured that the NHS and its staff will remain underfunded and underpaid, and the extra money announced in the Budget does not even meet NHS England’s call for extra funding. Far from being dead and buried, the public sector pay cap remains alive and well. Public sector pay is now set to fall to its lowest level by comparison with the private sector, and the Chancellor is trying to divide public sector workers.
As I have said so many times at this Dispatch Box, the UK’s economic growth wholly depends on our ability to raise productivity rates, and there was nothing of any substance whatsoever in the Budget to help that. The Government continue to fail in delivering the infrastructure and investment that the regions so desperately need. Like so many of this Government’s policies, their industrial strategy White Paper released yesterday is thin on details and thinner on ideas—another damp squib. It is about time that this Government went. They should pack their bags, get the Prime Minister out of No. 10 and hand things over to the Labour party to do the job properly and get growth back for this country.
The Chief Secretary to the Treasury (Elizabeth Truss)
We have had an excellent debate this afternoon. We heard my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy lay out an optimistic vision for our industrial strategy. We heard my hon. Friends the Members for Banbury (Victoria Prentis), for Mansfield (Ben Bradley), for Dudley South (Mike Wood) and for Hitchin and Harpenden (Bim Afolami) and my hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer) talking about the positive measures in the Budget on skills, housing and tax. We also heard the usual fiction and portents of doom from the Opposition.
I repudiate the Opposition’s predictions. Our destiny is not preordained. We have the power to shape the future and to boost our growth and productivity. If we want to know what high productivity looks like, we need look no further than our high-growth companies. When it comes to start-ups, we are world leading, with more than 650,000 companies founded in 2016 alone. We have more than twice the number of $1 billion tech companies than anywhere else in Europe. By enabling companies to grow and, even more, to start, we can make sure all people in this country benefit from our world leadership in areas such as driverless cars and artificial intelligence.
The real revolutionaries in this country are not sitting on the Opposition Front Bench clutching their iPads and looking up debt numbers, while denouncing enterprise; the real revolutionaries are the businesses across Britain that take risks, create jobs and improve our lives. They are the people who are delivering day out, day in for our country. This Budget is about liberating those businesses to achieve their ambitions and to deliver for our future, and it is about making sure that they have the people, the capital and the space to succeed.
Of course we want to attract the brightest and best to our country, which is why we are doubling the number of high-skilled visas that can be granted each year, but we also need to unleash the talents of our own people, both to help power the economy and to make sure they can share in the opportunities that enterprise brings. The fact is that the previous Labour Government let down our children and young people. They left Britain short of skills; they dumbed down the curriculum; they created rampant grade inflation; they failed on technical education; and they left office with rising youth unemployment.
When Labour left office, youth unemployment was at 20%, which is why we brought in higher standards for English and maths, new academies and free schools, and new T-levels. Under this Government, we have seen more apprenticeships and the lowest level of youth unemployment for 13 years. I suggest the Opposition engage with the facts.
We are announcing even more in this Budget. We are tripling the number of computer science teachers and, as my hon. Friend the Member for Chelmsford (Vicky Ford) pointed out, we are giving schools £600 for every additional student studying maths A-level or core maths, the most valuable qualifications in the jobs market. We are learning from the best in the world, and I am delighted that my right hon. Friend the Minister for School Standards is here today because he championed the Shanghai and Singapore maths mastery programme that we are rolling out to a further 3,000 schools. We are also making sure that adults already in jobs have the opportunity to improve their skills through the national retraining scheme.
The Government know that private investment in high-growth businesses benefits us all through new technology, higher living standards and more jobs. This year, a record £2 billion was invested in FinTech alone. This Budget builds on that success by unlocking more than £20 billion of investment to finance growth in innovative firms. As my hon. Friend the Member for Mid Norfolk (George Freeman) said, £1 billion is also being invested in the life sciences sector.
We also want to make it easier for brilliant women founders to access capital. Research shows that, when making identical pitches, women are half as likely to secure early-stage investment, despite investors who invest in female-led businesses being, on average, more successful. We have asked the British Business Bank to look at that so we can see more brilliant women founders and start-ups getting that investment.
Finally, these high-potential businesses need space to grow and high-quality infrastructure. We are making it easier for businesses to expand their operations through new planning freedom and manufacturing zones. We are also investing a huge amount in infrastructure. As my hon. Friend the Member for Saffron Walden (Mrs Badenoch) pointed out, this Budget includes the highest amount any Government have spent as a proportion of GDP on economic infrastructure for 40 years. How can the Opposition talk about a lack of investment in infrastructure, given that this is the highest for 40 years? It is much higher than anything that happened under the previous Labour Government. This spending includes plans for the Oxford-Milton Keynes-Cambridge corridor and for the northern powerhouse. [Interruption.] Let me say to the Opposition that we are investing £337 million in a new fleet of trains for the Tyne and Wear Metro, and £300 million to ensure HS2 can accommodate future northern and midlands rail services. We are also creating a £1.7 billion transforming cities fund, which will give our great cities the investment they need, and they will be able to invest in local trams or light rail systems as they see fit.
Sir Edward Davey
Does the right hon. Lady agree that British companies—our new entrepreneurial companies —would like a nice big market to sell their goods to, on our doorstep?
Elizabeth Truss
Absolutely, which is why our focus is on getting the best possible deal in the Brexit negotiations. Maintaining a tight grip on Government finances is, as my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) pointed out, vital for any Government, and Opposition Front Benchers would do well to look at that when they are considering—[Interruption.] I see that the shadow Chancellor is on his iPad looking up what the—[Interruption.] I can help him out without an iPad. His plans would mean an additional half a trillion pounds-worth of debt. If hon. Members want to know how much extra interest the British public would have to pay every year, I can tell them that it is £7 billion. I do not need an iPad to know that.
This Government are prioritising our country’s long-term growth prospects. We are investing in the infrastructure and in the skills that our country needs to succeed. Whatever the Opposition say, it is not politicians or Whitehall that will turbo-charge our economy and bring the growth and improved living standards we all want; it is the enterprises up and down the country that are going to deliver that. The Opposition want to tax new industry to the hilt or, even worse, to run it themselves. I cannot think of a more scary prospect for businesses across Britain. We take the opposite view; we want to unleash enterprise and to make sure that businesses have the people, space and the conditions to succeed. This is a Budget that recognises where the true value of our economy is created. It is not through issuing blank cheques that we cannot afford, but by making sure that our enterprises have the skills, talent and space that they need to grow and to ensure that all our citizens benefit from our powerhouse future. That is why the House should support the Budget in the Lobby tonight.
Question put and agreed to.
Resolved,
That income tax is charged for the tax year 2018-19.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
Mr Speaker
I am now required under Standing Order No. 51(3) to put successively, without further debate, the Question on each of the Ways and Means motions numbered 2 to 44, on which the Bill is to be brought in. These motions are set out in a separate paper distributed with today’s Order Paper.
I must inform the House that, for the purposes of Standing Order No. 83U, with which I feel sure all colleagues are personally and closely familiar, and on the basis of material put before me, I have certified that in my opinion the following founding motions published on 22 November 2017 and to be moved by the Chancellor of the Exchequer relate exclusively to England, Wales and Northern Ireland and are within devolved legislative competence: motion 3, on income tax (main rates); motion 35, on stamp duty land tax (higher rates for additional dwellings); and motion 36, on stamp duty land tax (relief for first-time buyers). Should the House divide on any of these motions it will be subject to double-majority voting.
The Speaker put forthwith the Questions necessary to dispose of the motions made in the name of the Chancellor of the Exchequer (Standing Order No. 51(3)).
2. CORPORATION TAX (charge for financial year 2019)
Resolved,
That (notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills) provision may be made taking effect in a future year charging corporation tax for the financial year 2019.
3. Income tax (MAIN RATES)
Resolved,
That for the tax year 2018-19 the main rates of income tax are as follows—
(a) the basic rate is 20%,
(b) the higher rate is 40%;
(c) the additional rate is 45%.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
4. Income tax (Default and savings rates)
Resolved,
(1) That for the tax year 2018-19 the default rates of income tax are as follows—
(a) the basic rate is 20%,
(b) the higher rate is 40%;
(c) the additional rate is 45%.
(2) That for the tax year 2018-19 the savings rates of income tax are as follows—
(a) the basic rate is 20%,
(b) the higher rate is 40%;
(c) the additional rate is 45%.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
5. Income tax (starting rate limit for savings)
Resolved,
That section 21 of the Income Tax Act 2007 (indexation) does not apply in relation to the starting rate limit for savings for the tax year 2018-19 (so that, under section 12(3) of the Income Tax Act 2007 as amended by section 4 of the Finance Act 2017, that limit remains at £5000 for that tax year).
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
6. Transferable tax allowance
Resolved,
That—
(1) Chapter 3A of Part 3 of the Income Tax Act 2007 (transferable tax allowance) is amended as follows.
(2) Section 55B (tax reduction: entitlement) is amended in accordance with paragraphs (3) to (5).
(3) In subsection (2) (conditions for entitlement to tax reduction)—
(a) for paragraph (a) (individual is spouse or civil partner of maker of election in force under section 55C) substitute—
“(a) the individual is the gaining party (see section 55C(l)(a)) in the case of an election under section 55C which is in force for the tax year,”, and
(b) in paragraph (d), for “individual’s” substitute “relinquishing”.
(4) After subsection (5) insert—
“(5A) In this section “the relinquishing spouse or civil partner”, in relation to an election under section 55C, means the individual mentioned in section 55C(l)(a) by whom, or by whose personal representatives, the election is made.”
(5) In subsection (6) (reduced personal allowance for transferor)—
(a) after “under subsection (1)” insert “by reference to an election under section 55C”, and
(b) for “individual's” substitute “relinquishing”.
(6) Section 55C (elections to reduce personal allowance) is amended in accordance with paragraphs (7) and (8).
(7) In subsection (l)(a) (individual may make election if married or in civil partnership)—
(a) after “the same person” insert “(“the gaining party”)”, and
(b) in sub-paragraph (ii), after “when the election is made” insert “or, where the election is made after the death of one or each of them, when they were last both living”.
(8) After subsection (4) insert—
“(5) The personal representatives of an individual may make any election for the purposes of section 55B that the individual (if living) might make in relation to—
(a) the tax year in which the individual dies, or
(b) an earlier tax year.”
(9) Section 55D (procedure for elections under section 55C) is amended in accordance with paragraphs (10) and (11).
(10) In subsection (3) (elections which are not automatically continued in force for subsequent years), after “is made after the end of the tax year to which it relates” insert “or is made after the death of either of the spouses or civil partners”.
(11) In subsection (4) (election may be withdrawn only by individual who made it), after “by whom the election was made” insert an election made by an individual's personal representatives may not be withdrawn”.
(12) The amendments made by this Resolution—
(a) come into force on 29 November 2017,
(b) have effect in relation to elections made on or after that day, and
(c) so have effect even where a relevant death occurred before that day.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
7. Deduction for seafarers’ earnings for duties performed outside UK
Resolved,
That provision may be made in connection with the application of Chapter 6 of Part 5 of the Income Tax (Earnings and Pensions) Act 2003 in relation to employment in the Royal Fleet Auxiliary Service.
8. Exemption for armed forces’ accommodation allowances
Resolved,
That provision may be made exempting, from income tax, amounts paid as accommodation allowances to, or in respect of, members of the armed forces of the Crown.
9. Benefits in kind: cars
Resolved,
That provision (including provision having retrospective effect) may be made amending Chapter 6 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003.
10. Foreign-service relief for benefits on termination of employment
Resolved,
That provision may be made amending Chapter 3 of Part 6 of the Income Tax (Earnings and Pensions) Act 2003 in connection with restricting, in relation to payments and other benefits received in connection with the termination of a person's employment, relief given by that Chapter by reference to service within the definition of “foreign service” given by section 413(2) of that Act.
11. Employment income provided through third parties
Resolved,
That provision may be made in connection with—
(a) the application and operation of Chapter 2 of Part 7 A of the Income Tax (Earnings and Pensions) Act 2003, and
(b) the operation of Part 11 of that Act in connection with Schedule 11 to the Finance (No. 2) Act 2017
12. Disguised remuneration schemes (earnings charged to tax)
Resolved,
That—
(1) In section 554A of the Income Tax (Earnings and Pensions) Act 2003 (employment income provided through third parties: application of Chapter 2 of Part 7A), after subsection (5) insert—
“(5A) Subsections (5B) and (5C) apply where—
(a) a payment to a person other than A, or to A as a trustee, is of earnings from A's employment with B, and
(b) the earnings are, in whole or part, charged to tax under the employment income Parts otherwise than by virtue of this Part,
and for this purpose it does not matter whether all or some only or none of the tax is paid (but see sections 554Z5 and 554Z11B).
(5B) For the purposes of subsection (5C), an arrangement is a “redirected- earnings arrangement” if it (wholly or partly) covers or relates to redirected earnings; and for the purposes of this subsection and subsection (5C) “redirected earnings” means—
(a) the payment mentioned in subsection (5A)(a), or
(b) any sum or other property which (directly or indirectly)—
(i) represents, or
(ii) is derived from,
that payment.
(5C) The circumstances mentioned in subsection (5A)—
(a) do not prevent a redirected-earnings arrangement being within subsection (l)(b), and
(b) do not prevent rewards or recognition or loans being in connection with A's employment with B for the purposes of subsection (l)(c) where there is use of redirected earnings for the provision of the whole, or part, of the rewards or recognition or loans.”
(2) The amendment made by paragraph (1)—
(a) come into force on 29 November 2017,
(b) has effect for the purposes of the operation of Part 7 A of the Income Tax (Earnings and Pensions) Act 2003 in relation to relevant steps taken on or after 22 November 2017, and
(c) so has effect in the case of payments within the new subsection (5A)(a) whenever made (including ones made before 6 April 2011).
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
13. Trading income provided through third parties
Resolved,
That provision may be made about information for the purposes of the operation of Schedule 12 to the Finance (No. 2) Act 2017.
14. Pensions
Resolved,
That provision (including provision having retrospective effect) may be made about the application of Part 4 of the Finance Act 2004 in relation to—
(a) pension schemes that are Master Trust schemes,
(b) pension schemes established under section 67 of the Pensions Act 2008,
(c) pension schemes that have a dormant sponsoring employer, and
(d) pension schemes treated as registered by virtue of paragraph 1(1) of Schedule 36 to the Finance Act 2004.
15. EIS, SEIS, SI and VCT reliefs
Resolved,
That provision may be made about reliefs under Parts 5, 5A, 5B and 6 of the Income Tax Act 2007, including—
(a) provision having retrospective effect, and
(b) (notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills) provision taking effect in a future year.
16. PARTNERSHIPS
Resolved,
That the following provision relating to partnerships may be made—
(a) provision as to how tax legislation applies where a partner is a bare trustee;
(b) provision for determining the income tax liability of indirect partners;
(c) provision about income tax returns for partnerships.
17. Research and development expenditure credits
Resolved,
That provision may be made amending section 104M(3) of the Corporation Tax Act 2009.
18. INTANGIBLE FIXED ASSETS
Resolved,
That provision may be made amending Part 8 of the Corporation Tax Act 2009.
19. Corporation tax treatment of oil activities: tariff receipts etc
Resolved,
That provision may be made about the meaning of “tariff receipt” for the purposes of Part 8 of the Corporation Tax Act 2010.
20. Hybrid and other mismatches
Resolved,
That provision (including provision having retrospective effect) may be made amending Part 6A of the Taxation (International and Other Provisions) Act 2010.
21. Corporate interest restriction
Resolved,
That provision (including provision having retrospective effect) may be made relating to Part 10 of the Taxation (International and Other Provisions) Act 2010.
22. Corporation tax: Education Authority of Northern Ireland
Resolved,
That provision (including provision having retrospective effect) may be made relieving the Education Authority of Northern Ireland of liability to corporation tax.
23. Chargeable gains (indexation allowance)
Resolved,
That provision may be made restricting indexation allowance for gains chargeable to corporation tax.
24. Chargeable gains (transfer of assets to non-resident company)
Resolved,
That provision may be made amending section 140 of the Taxation of Chargeable Gains Act 1992.
25. Chargeable gains (depreciatory transactions)
Resolved,
That provision may be made amending section 176 of the Taxation of Chargeable Gains Act 1992.
26. First-year tax credits
Resolved,
That (notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills) provision may be made about first-year tax credits paid in connection with relevant first-year expenditure under the Capital Allowances Act 2001.
27. DOUBLE TAXATION RELIEF
Resolved,
That the following provision relating to double taxation relief may be made——
(a) provision in relation to counteraction notices given under Part 2 of the Taxation (International and Other Provisions) Act 2010;
(b) provision restricting credit relief under that Part, or deductions for foreign tax paid, by reference to amounts attributable to an overseas permanent establishment of a company that are used to reduce a foreign tax;
(c) provision (including provision having retrospective effect) to secure that the double taxation arrangements to which effect may be given by Order in Council include arrangements modifying the effect of earlier such arrangements and arrangements conferring functions on public authorities within or outside the United Kingdom.
28. bANK LEVY
Question put,
That provision may be made amending Schedule 19 to the Finance Act 2011, including (notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills) provision taking effect in a future year.
Relevant consideration | Percentage |
So much as does not exceed £300,000 Any remainder (so far as not exceeding £500,000) | 0% 5%” |
1. Cigarettes | An amount equal to the higher of— (a) 16.5% of the retail price plus £217.23 per thousand cigarettes, or (b) £280.15 per thousand cigarettes. |
2. Cigars | £270.96 per kilogram |
3. Hand-rolling tobacco | £221.18 per kilogram |
4. Other smoking tobacco and chewing tobacco | £119.13 per kilogram”. |
Finance (No. 2) Bill
Monday 11th December 2017
(6 years, 10 months ago)
Commons ChamberRead Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts
22:17 - The House divided: - Ayes: 271 / Noes: 312 - Question accordingly negatived.
22:31 - The House divided: - Ayes: 313 / Noes: 269 - Question accordingly agreed to.
Mr Speaker
I must inform the House that I have selected the amendment in the name of the Leader of the Opposition.
The Financial Secretary to the Treasury (Mel Stride)
I beg to move, That the Bill be now read a Second time.
The Chancellor recently set out a bold and forward-looking autumn Budget. It reflected and responded to current circumstances, and it will build a Britain that is fit for the future. The UK economy has shown great resilience. Our GDP growth has remained solid, continuing for more than 19 quarters. Employment has risen by 3 million since 2010 and is close to a record high, while unemployment is at its lowest rate since 1975. Those employment trends are not being felt only in the south-east. Indeed, since 2010, 75% of the fall in unemployment has occurred elsewhere, and the biggest falls in the unemployment rate took place in Yorkshire and Humber, and in Wales.
The deficit has been reduced by three quarters from 9.9% of GDP in 2009-10—that figure was a shocking indictment of the last Labour Government—to 2.3% of GDP in 2016-17. In the coming years, borrowing is set to fall even further, reaching 1.1% of GDP in 2022-23, which will be the lowest level since 2001-02. However, at 86.5% of GDP, public debt is still too high and productivity growth remains subdued. This Budget therefore balanced short-term action with long-term investment, while rightly sticking to the principles of social responsibility that will continue to improve the health of our public finances, with our debt due to start falling from next year.
Gareth Thomas (Harrow West) (Lab/Co-op)
Given the recent terrorist attacks in this country and the fact that senior officers say that more funding is needed for community policing to help to tackle the risk of more terrorist attacks, will the Financial Secretary tell the House why there was no additional funding for policing in the Budget?
Mel Stride
As the hon. Gentleman will know, we made sufficient provision for policing prior to the Budget. We recognise the challenges that the police face, but I gently say to him that to secure our vital public services, including the police, the most important thing is that we have a responsible approach to bringing down the deficit and getting the public finances under control. Having looked at the proposals put forward by his party, I have my doubts that that would be the case were he in government.
It is sensible that all this is underpinned by the tax policies contained in the Finance Bill. The Bill is a mere 184 pages—under a third of the length of the previous Bill. Its length is partly the consequence of the Government’s move to a single annual fiscal event. In this transitional year, with less time than normal between Budgets, there is less legislation in process, which should prove some welcome respite for me, as I do not think that there are many Financial Secretaries who have presented two Finance Bills to the House within their first six months in post. The Bill’s size also reflects the Government’s serious commitment not to overburden people or to overcomplicate the tax system. It is a crucial plank in the Government’s legislative programme that will help young people to buy their first homes, improve UK productivity, and further the Government’s already excellent track record of cracking down on avoidance and evasion.
The Government support the aspiration of home ownership and are particularly committed to helping young people on to the property ladder. The Government’s package on housing that was set out at the Budget will boost housing supply and address the problem of affordability. In this critical endeavour, the tax system should not act as a barrier. First-time buyers are usually more cash-constrained than other purchasers, so to help these people—typically younger people—to get on to the property ladder, the Bill permanently scraps stamp duty for first-time buyers purchasing properties worth up to £300,000. Buyers will save nearly £1,700 on an average first-time buyer property, and those buying a house worth £300,000 to £500,000 will pay the existing 5% marginal rate of stamp duty only on the portion above £300,000. In doing so, they will make a saving of £5,000. This means that 80% of first-time buyers will not pay stamp duty at all, while 95% of all first-time buyers who pay stamp duty will benefit from the changes. Over the next five years, the relief will help more than 1 million first-time buyers to get on to the property ladder.
The joy of home ownership will be greatly diminished if, at the same time, we do not protect and preserve the environment in which we all live. Therefore, as a response to the Government’s national air quality plan that was published in July, the Bill establishes measures to improve air quality through the taxation of highly pollutant diesel cars. Diesel vehicles—even new ones—are a significant source of emissions. A test of the 50 best-selling diesel cars in 2016 found that on average they emitted over six times more nitrogen oxides in real-world driving than is permissible under current emissions standards.
Charlie Elphicke (Dover) (Ind)
The Financial Secretary is making a powerful argument. It is important to protect funding for the environment, schools, hospitals and, as the hon. Member for Harrow West (Gareth Thomas) pointed out, the police. Will my right hon. Friend tell the House how much money was raised from the banking sector last year compared with in the last year of the Labour Government?
Mel Stride
As my hon. Friend will know, we brought in a variety of measures in 2015 that changed the basis of taxation for banks. Over the period of the coming forecast, we will be receiving some £4.5 billion in additional income from banks by way of taxation as a consequence of those changes.
From April 2018, new diesel cars will go up one vehicle excise duty band in their first-year rate, and the existing company car tax diesel supplement will increase by one percentage point. However, drivers of petrol and ultra low emissions vehicles—cars, vans and heavy goods vehicles—will not be affected, and nor will those who have already bought a diesel car. As the Chancellor said at the Budget, white van man and white van woman can rest easy.
Dame Margaret Hodge (Barking) (Lab)
White van man and white van woman will rest easier if the Government successfully bring in all moneys due. Will the Minister explain why he has limited the scope of the Finance Bill in such a way that amendments cannot be tabled to ensure that we have a date by which measures such as country-by-country reporting, which is crucial to bringing in tax that is otherwise avoided, should be introduced?
Mel Stride
I think that the right hon. Lady is referring to an amendment of the law resolution. The previous Finance Bill was introduced under exactly the same Ways and Means procedure. There is nothing in the resolutions that prohibits full, open and proper discussion and scrutiny of the Bill. It will go through all its usual stages, including two full days in Committee of the whole House, and eight sittings—if it takes that amount of time—upstairs in Committee, before coming back to the Chamber for Third Reading.
Since the financial crisis, UK productivity growth has slowed. It now stands at just 0.1%. The Government know that restoring strong productivity growth is the only sustainable way to increase wages and improve living standards in the long term. Consequently, a quarter of a trillion pounds of public and private investment has been funnelled into major infrastructure projects since 2010, including the biggest rail modernisation programme since Victorian times, the Mersey Gateway bridge and, more recently, Crossrail. Many others are detailed in the Infrastructure and Projects Authority’s national infrastructure pipeline. The Government have also cut taxes to support business investment and improved access to finance through the British Business Bank. However, we can and will go further.
To boost productivity and create sustainable economic growth, the Government are making further provisions to support the UK’s dynamic, risk-taking businesses. The UK continues to be a world-leading place to start a business, with 650,000 start-ups in 2016 alone. However, some of the UK’s most innovative new businesses with the greatest potential are struggling to scale up due to lack of finance. Specifically, 10 of the UK’s largest 100 listed firms were created after 1975, compared with 19 in the United States of America. In order properly to understand these barriers to finance, the Treasury commissioned the patient capital review, led by Sir Damon Buffini. Supported by Sir Damon’s industry panel, the review concluded that knowledge-intensive companies, which are particularly research and development-intensive, often require considerable up-front capital to fund growth. It may be many years before their products can be brought to market and, despite their growth potential, such companies often face acute funding gaps.
In response to the review’s findings, the Government are acting. We are setting out a £20 billion action plan, combining investment with tax incentives. As part of the plan, the Bill will make more investment available to high-risk, innovative businesses. It does so by doubling the annual limits for how much investment knowledge-intensive companies can receive through the enterprise investment scheme and venture capital trusts schemes to £10 million, and doubling the limit on how much investors can invest through the EIS to £2 million, providing that anything above £1 million is invested in knowledge-intensive companies. In 2016-17, 62% of investment by EIS funds was aimed at capital preservation, rather than higher-risk, higher-potential, long-term growth companies. The Bill therefore reforms the schemes, redirecting low-risk investment into growing entrepreneurial companies, while changing venture capital trust rules to encourage higher-growth investments. In all, we expect these changes to result in over £7 billion of new and redirected investment in growing companies over the next 10 years.
Additional efforts to boost productivity also focus on increasing funding for research and development. At the 2016 autumn statement, £4.7 billion was allocated to R and D, and this Budget extended the national productivity investment fund to £31 billion and increased R and D investment by a further £2.3 billion. This means that the Government will be investing an additional £7 billion in R and D over the next four years—the largest increase in four decades.
We have already announced initial plans for this investment, including £170 million to help the construction industry to build cheaper and better homes; £210 million to develop new technologies that enable the early diagnosis of chronic diseases; a commitment to supporting the development of immersive technologies and artificial intelligence; and more than £300 million to develop and attract the skills and talent necessary to deliver our scientific ambitions. These efforts are complemented by our decision to increase the rate of R and D expenditure credit from 11% to 12%, as set out in the Bill.
The Bill will ensure that the tax system is fair, balanced and sustainable. To that end, it freezes the indexation allowance that currently allows companies but not individuals to reduce their taxable gains in line with inflation. It allows Scottish police and fire services to recover future VAT payments, which would otherwise be lost following the Scottish Government’s decision to restructure those services. I should pay tribute to my Scottish colleagues on the Government side of the House who lobbied so effectively in that respect.
The Bill narrows the scope of the bank levy so that, from 2021, all banks—UK and foreign-headquartered—will be taxed only on their UK operations.
John Howell (Henley) (Con)
Is not the important point about the bank levy that we are trying to get a fair contribution paid by the banks, matched against the risk they pose to the whole UK economy?
Mel Stride
My hon. Friend is entirely right, which is why we have generally moved away from a levy on the capital assets of banks as regulation has improved, and towards a tax on the profitability of banks as that profitability has recovered following the events of 2008, which happened on the watch of the last Government. This re-scope forms part of the broader package of reforms announced between 2015 and 2016 that included an 8% surcharge on bank profits over £25 million. The package will help to sustain tax revenues from the banking sector in the long term.
Charlie Elphicke
To follow on from my previous intervention, will my right hon. Friend confirm that the amount of tax paid by banks under this Government is nearly 60% higher than under the previous Labour Government?
Mel Stride
My hon. Friend is entirely right. A number of measures have driven the improved tax take from banks. Along with the 8% surcharge, there is the fact that we have restricted banks’ ability to carry forward losses to offset against profitability. We also exempted banks’ ability to offset charges in respect of mis-selling and payment protection insurance activities, which has also helped to improve the tax take.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
The mention of banks gets me going because all the Financial Secretary’s good words sit ill with the fact that the Royal Bank of Scotland is going through a huge series of closures, particularly in my constituency. We bailed the bank out, so there is great unhappiness—indeed, anger—that it is acting in such a way all over Scotland.
Mel Stride
The hon. Gentleman raises an important issue, but these will be matters for the Royal Bank of Scotland. The most important aspect when one considers the Royal Bank of Scotland is clearly that it is brought back to being a fighting-fit organisation, employing as many people as possible as a business, contributing to the Exchequer, and creating value going forward.
Steve McCabe (Birmingham, Selly Oak) (Lab)
I am interested to hear the Minister’s confidence about the money he will be taking through the bank levy. How does the money the hon. Member for Dover (Charlie Elphicke) says has been raised so far compare with the amount the taxpayer has already paid to bail out the banks, and how much of that money have we had back?
Mel Stride
It is interesting that the hon. Gentleman mentions the amount that was required to bail out the banks, given that it was the then Labour Government who caused the problem that required the bail-outs in the first place. There is a long and detailed history of exactly what happened: we had lax regulation, and the Bank of England was not in a position to regulate the institutions concerned. The hon. Gentleman might like to look up the answer to his question himself and then inform other members of the Labour party of what he discovers.
Vicky Ford (Chelmsford) (Con)
Does my right hon. Friend agree that since the bank levy was introduced, the risk of bank failure has decreased dramatically due to new capital requirements on banks, and the considerably reduced risk that British taxpayers will have to fund cross-border bail-outs, given that we have international agreements on such matters?
Mel Stride
Yes, my hon. Friend is entirely right. We have made huge progress in making sure that the banks are fit and able to withstand whatever external shocks there might be. The Bank of England has been heavily engaged in that, as have the Government, and we are in a much more secure position—certainly than we were when we inherited the economy we saw when we first came to office in 2010.
Kirsty Blackman (Aberdeen North) (SNP)
The Minister is being very generous in allowing interventions. I was concerned by the response he gave to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone). Given the Government’s stake in RBS, does he not feel that they should take some responsibility and use their influence to convince RBS not to go ahead with these closures? There have been over 90 since the start of the year, and this cannot continue.
Mel Stride
I am gratified by the hon. Lady’s confidence in Ministers making commercial judgments in respect of our banks and businesses, but it is far better to allow those businesses to take sensible commercial decisions, even though those sometimes have consequences that, in an ideal world, we would not wish to see. I go back to the point I made to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone): we need RBS to improve its strength, grow, employ more people and, ultimately, pay more tax to support our vital public services.
Gareth Thomas
I am grateful to the Minister for giving way to me a second time. May I just remind him of the Competition and Markets Authority investigation into banking, which noted the lack of competition in banking and highlighted the lack of innovation and the fact that the big five banks control 85% of the retail banking market and make excess profits? Might keeping the bank levy at its current rate not be compensation to the consumer and the taxpayer for those excess profits?
Mel Stride
At the heart of the hon. Gentleman’s point rests the notion, which I agree with, that we expect the banks to pay their fair share and recognise that they received bail-outs some years ago, and tax policy towards the banks has been geared towards making sure that they make a fair and proportionate contribution to our tax take.
The hon. Gentleman mentioned the importance of competition in the banking sector, and I wholeheartedly agree with him on that, which is one reason why we are keen to ensure that as many banks as possible are headquartered in our jurisdiction rather than in others. That goes to the heart of the changes in the Bill to ensure that banks domiciled here are not penalised by being charged on capital assets held overseas—a situation that does not pertain to overseas banks that operate in our jurisdiction.
We have included an 8% surcharge on banks’ profits over £25 million. The package will help to sustain tax revenues from the banking sector in the long term, and it is forecast to raise an additional £4.6 billion over the current scorecard period.
The Bill continues the Government’s already vigorous efforts to crack down on tax avoidance, tax evasion and non-compliance. Since 2010, the Government have introduced over 100 avoidance and evasion measures, securing and protecting over £160 billion of additional tax revenue. This has helped reduce the UK’s tax gap to a record low of 6%, which is one of the lowest in the world.
Grahame Morris (Easington) (Lab)
The Financial Secretary says that it is a record low tax gap, but it does not take account of the vast treasure trove unearthed by the Bureau of Investigative Journalism in the Paradise papers or of other vast sums of wealth, on which we have no idea how much tax is actually due. So the figure he gave is not really correct, is it?
Mel Stride
I am afraid I have to dissent from that view. The simple fact is that the International Monetary Fund has identified the tax gap measure as one of the most robust measures of its kind in the world. At 6%, our gap is among the lowest in the world, and it is the lowest we have had in our history since we have been measuring the tax gap. If we had the same tax gap today as we had under the previous Labour Government, we would be out of pocket to the tune of £12.5 billion a year—enough to fund every policeman and policewoman in England and Wales.
Stella Creasy (Walthamstow) (Lab/Co-op)
On the subject of tax avoidance, the Minister will know of my support for the Government’s willingness to close the tax loophole on the sales of commercial property by overseas companies. As my hon. Friend the Member for Easington (Grahame Morris) said, the Paradise papers show some of the ways in which tax is being avoided, including through holding companies in Luxembourg. When I asked the Minister about that before, he did not seem to know about the Luxembourg treaty and how it could affect this policy. What are his plans to address the problems created by the Luxembourg treaty, which could see us losing out on £5.5 billion a year of the tax collected through his changes?
Mel Stride
As the hon. Lady will know, a number of the measures coming out of the OECD’s base erosion and profit shifting project, which we have been in the vanguard of—including common reporting standards and access by our tax authorities to a variety of information in real time in overseas tax jurisdictions—are essential to bearing down on exactly the issues that she mentions. There are further measures in the Bill to deal with those who place their moneys in trusts, typically those coming under our non-dom reforms. By abolishing permanent non-dom status, which Labour failed to do in its 13 years in office, we have made sure that when individuals have assets that are protected while in trusts, those moneys fall due to tax in our country as soon as they are brought out of those trusts, even if people cycle them through third parties and other approaches. That means that we are securing more than £12 billion a year more for our public services than would have been the case had the tax gap remained at its peak of nearly 8%, which it reached under Labour.
The autumn Budget continued that work with a package of measures forecast to raise £4.8 billion by 2022-23, some of which are included in the Bill. It is important to note that the provisions in the Bill form part of a broader anti-avoidance and evasion agenda dating back to 2010. Since then, the Government have worked tirelessly and carefully to introduce an ambitious raft of anti-avoidance and evasion legislation. That commitment is borne out again in this Finance Bill, which implements several measures, including provisions cracking down on online VAT evasion to make online marketplaces more responsible for the unpaid VAT of their sellers; closing loopholes in the anti-avoidance legislation on offshore trusts, as I mentioned; tackling disguised remuneration schemes used by close companies; preventing companies from claiming unfair tax relief on their intellectual property; ensuring that companies are not able to claim relief for losses on the disposal of shares that do not reflect losses incurred by the wider group; closing a loophole in the double taxation relief rules for companies; and tackling waste crime by extending landfill tax to illegal waste sites. Those measures will help to raise vital revenue and ensure that individuals and corporations all pay their fair share.
Kirsty Blackman
I was not particularly pleased with the answer that the Minister gave to the right hon. Member for Barking (Dame Margaret Hodge) as to why the Government have not tabled an amendment of the law resolution, which would allow the Opposition to put forward more measures in relation to tax avoidance and evasion, for example. Why did they not put forward an amendment of the law resolution?
Mel Stride
We did not have an amendment of the law resolution on the previous Finance Bill, so we are carrying on with the situation that pertained to that Bill. As I explained, what matters is that we have an opportunity fully to scrutinise in this House the various measures provided and amendments that may be tabled in relation to those measures. There is nothing preventing that. As I have outlined, the Bill will go through its various stages, allowing for very thorough scrutiny.
Together, the measures that I mentioned continue the Government’s sustained crusade against tax avoidance, evasion and non-compliance—an endeavour that we will pursue with undiminished vigour right through the course of this Parliament. Let no one ever doubt, for even the briefest moment, this Government’s commitment to hard-pressed families, and to championing business and the wealth creators of the future. On the matter of taxation as set out in the Bill, let no one misunderstand us: we will continue to keep taxes competitive and fair, but we will also continue our vigorous and ceaseless drive to bear down on avoidance and evasion so that all pay their due. We will ensure that all pay a just and fair share for the support of our vital public services: for doctors, paramedics and nurses; for our police, our teachers, our fire services, and our brave armed forces who make our country so great. I commend the Bill to the House.
Peter Dowd (Bootle) (Lab)
It is a shame that the Chief Secretary to the Treasury is not in her place at the Dispatch Box. Notwithstanding the fact that the Financial Secretary is fantastic at doing his job, we should have the Chief Secretary here today. In my opinion, it is disrespectful to the House that she is not here. I think she is most probably looking for Shergar, frankly.
I wish to use my remarks to convey a message from the British public to this increasingly divided and out-of-touch Tory Government. It is a message that comes from all corners of the UK—from my home town of Bootle, from the city region of Liverpool, from Manchester, Leeds and Newcastle. It is a message from Edinburgh, from Cardiff, and from Kent; from Birmingham, from Oxford, and from Nottingham: from every region. It is a message from people who live in rural communities and urban centres alike. It is a message from public sector workers, private sector workers and those on zero-hours contracts; from the young and the old, as well as all those in between, all of whom have been let down by this Government. [Interruption.] They have been let down by them—private sector workers and public sector workers believe that, and that is why they are turning to Labour. [Interruption.] Conservative Members can laugh until the cows come home, but that is the reality.
It is a crystal clear message to the Tories: enough is enough. People across the country are fed up with this Government’s inaction and economic incompetence—and incompetence is the word. With this shambolic Government, every day—every single day—feels like groundhog day. Day after day, we are told that there are fresh cuts to Departments and that our overstretched public services face even more austerity, while we receive the same empty pledges—we have heard more of them today from the Minister—that at some point in the ever-distant future, the deficit will be eliminated.
Kelly Tolhurst (Rochester and Strood) (Con)
The hon. Gentleman speaks about incompetence from the Government. Does he not recognise, when he is speaking about people travelling towards Labour, that perhaps the Opposition’s incompetence is in making promises that they cannot deliver on?
Peter Dowd
Let us have a general election and we will deliver on those promises.
On Brexit, there is no abating the deep divisions between warring Cabinet Ministers. Within a few hours of the ink drying on the joint statement between the Prime Minister and the European Commission and the agreement to move on to trade talks, we had the Environment Secretary contradicting the Prime Minister and briefing the press that unhappy leave voters can tear up any Brexit deal that is negotiated, while on the Sunday talk shows the Brexit Secretary undermined the Prime Minister further by downgrading the agreement reached to merely a “statement of intent”. Given that there is much talk of a divorce bill, perhaps I can take the matrimonial analogy a little further. Do people make proposals of marriage or simply statements of intent? Did the Brexit Secretary propose to his wife or make a statement of intent?
Charlie Elphicke
The hon. Gentleman’s talk of bills reminds me that the Labour party has made a massive number of pledges and wants to go on a borrowing binge, but 22 times it has failed to explain how it will fund those pledges. It has gone from “You don’t need a number” to “You can’t put a figure on it at the moment” to “It’s not difficult.” May I ask the question for the 23rd time and invite him to tell the House how Labour would pay for its plans?
Peter Dowd
With the greatest respect, I am not the hon. Gentleman’s research assistant. I refer him to Labour’s proposals in “Funding Britain’s Future”. I know that he can read, so I suggest that he should go and have a look at that document.
The Brexiteers in the Cabinet continue to undermine any attempts to progress the talks and compromise with our European partners. We had a bizarre scenario today—everyone telling the Prime Minister how wonderful she was. Last week she was a basket case, as far as I could tell, but this week she is a wonderful woman. The Brexiteers are happy to continue to create economic uncertainty to the detriment of businesses and workers alike.
Dan Carden (Liverpool, Walton) (Lab)
Was my hon. Friend surprised, as I was, that the Financial Secretary did not mention wages once? He did not mention that real wages will not return to pre-crash levels for almost a decade. Do this Government care about people’s wages?
Peter Dowd
The answer to the last question is no, they do not. The Budget proved yet again that the Government are completely unable and unwilling to recognise the challenges that the country faces. The Chancellor and the Prime Minister are instead more concerned about sorting out the Democratic Unionist party and the fringes of the Tory party.
Leo Docherty (Aldershot) (Con)
The hon. Gentleman is presuming to tell us about the opinion of the electorate, but I appeal to him to bear in mind my constituents’ opinion during the rest of his remarks. They fear the unleashing of Marxist mayhem by the shadow Chancellor. Can the hon. Gentleman confirm that in 2013, the shadow Chancellor said that
“I’m straight, I’m honest with people: I’m a Marxist”?
Peter Dowd
The hon. Gentleman can ask as many questions as he likes—[Interruption.] And the hon. Member for Croydon South (Chris Philp) can say “Yes or no?” But the Conservative party is in a state of chaos, it is as simple as that. After seven years, the verdict on Tory austerity is clear for all to see. Economic growth stands at its lowest point since the Conservatives came to power, and it has been revised down by the Office for Budget Responsibility for every year of the forecast. The UK has the slowest growth in the G7, and the Institute for Fiscal Studies has warned of two decades of lost earnings growth. That relates to what my hon. Friend the Member for Liverpool, Walton (Dan Carden) said.
Steve McCabe
I agree with my hon. Friend that the predictions suggest that the economy is not in good shape. Was it not extremely sad and disappointing that we did not hear from the Financial Secretary a word of acknowledgement of the pressures that are being inflicted on public services, such as children’s services? They have been damaged not only by cuts but by Government errors. The Minister did not say a word to suggest that the Government would make reasonable adjustments, even in cases in which they have acknowledged that errors have been made. Birmingham, for example, has lost £100 million as a result of mistakes that the Government now acknowledge, and that is money that could be spent on children’s services and social care.
Peter Dowd
My hon. Friend is prescient, and I will come to the point that he makes in a minute. Let us continue with a few more statistics, because it is worth our while to look at them. The Minister referred to productivity rates, and UK productivity rates have fallen far behind those of the French, the Americans and the Germans. The OBR’s decision to revise down UK productivity rates for every year of the forecast is seismic, and it reflects years of inaction from a Government who have refused to invest in our infrastructure and skills or in the UK workforce.
Rachel Maclean (Redditch) (Con)
The hon. Gentleman is coming out with some excellent statistics, but I hope that he will not forget to mention the jobs miracle that has occurred under this Government. Unemployment is at a 43-year low, which means more people earning money rather than being unemployed under a Labour Government.
Peter Dowd
The Chancellor did not know what the unemployment figure was the other day. Let us put it like this: no matter how many people are in work, the bottom line is that it is not right that they should have low and stagnant wages, poor terms and conditions, zero-hours contracts or insecure work. The Government should be dealing not just with the employment rate, but with terms, conditions and wages.
Grahame Morris
Does my hon. Friend agree that the WASPI women, who had expected to retire at age 60 and who are being compelled to work for another six years, are also furious and feel terribly let down by the Government?
Peter Dowd
My hon. Friend makes an excellent point. The Government have reached the stage where they blame anyone they can. The gaffe-prone Chancellor has blamed disabled people for bringing down the productivity rate. He is so out of touch that such comments are water off a duck’s back to him.
As the Minister said, this is the third Finance Bill of the year. All three of them have failed to address the challenge that our economy faces.
Helen Whately (Faversham and Mid Kent) (Con)
The hon. Gentleman referred to low wages, but he knows that the Finance Bill contains measures to raise the national minimum wage, so we are addressing that. He seems to be reluctant to answer people’s questions, so I want to bring him back to some that he was asked a few moments ago. My hon. Friend the Member for Aldershot (Leo Docherty) asked him a simple question about the shadow Chancellor of the Exchequer, and the hon. Member for Dover (Charlie Elphicke) asked him a clear question about the cost of Labour’s proposals. The answer is not written down anywhere, so may I ask—this is the 24th time—about the amount and cost of borrowing that would result from Labour’s tax proposals?
Peter Dowd
The hon. Member for Aldershot (Leo Docherty) might not like the answer that I gave to his question, but I have referred him to the documentation. If the hon. Lady is incapable of going to the internet and looking up the facts and figures, it is not for me to do that for her. The bottom line is that there is nothing in the Bill for public sector workers, who head into the new year with their wages continuing to fall and the cap sticking.
Alex Burghart (Brentwood and Ongar) (Con)
Will the hon. Gentleman give way?
Peter Dowd
No; I am going to make some progress. Public sector wages are now at their lowest level as against private sector pay for 20 years. Nor is there anything to address the botched roll-out of universal credit, which will cause real suffering to families this Christmas. Similarly, the Bill contains no measures to redress the disproportionate effect of austerity on women, and particularly on black and minority ethnic women. Instead, the Bill proposes a stamp duty cut that will, according to OBR analysis, increase house prices; and it fails to introduce measures to encourage the building of affordable homes to address the housing crisis.
The Bill includes plans to continue with the Government’s 2015 bank levy cut. It goes further, as the Minister seemed proudly to proclaim, by exempting all foreign banks from the levy and ensuring that from 2021, all banks will only have to pay the levy based on their UK balance sheets.
Vicky Ford
Looking back in history, the Conservative-led Government introduced the bank levy in 2011, but Labour voted against it. In 2015, we introduced the 8% surcharge so that banks would pay more. Again, the Conservatives voted for that, but Labour voted against it. Why is the hon. Gentleman now rewriting history?
Peter Dowd
It is not a question of rewriting history. We do not support Bills that continue austerity year in, year out. The Government got rid of the bankers’ bonus tax, which brought in significantly more money than the bank levy. My hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) referred to the bank levy earlier. I happen to have some figures here, which I will share with him if the Minister does not want to answer his question. Taxpayers bought £76 billion of shares in the Royal Bank of Scotland and Lloyds and contributed £250 billion in guarantees, another £280 billion in insurance and a further £100 billion in annual implied subsidy, according to the Bank of England, so we are asking for the bankers to pay a little bit more, after the billions of pounds that we spent on helping to bail them out.
While we are on the subject of regulation, let me say that in August 2007 the right hon. Member for Wokingham (John Redwood) produced a report on “Freeing Britain to Compete”, which was ratified by the Conservative party in opposition. In paragraph 6.1, he said in effect that we should not be regulating the banks so much and that the Labour Government were regulating them too much. He went on to say that the Labour Government claimed that if they did not regulate the banks so much, the banks would “steal” all “our money”. Many people believe that is right, especially when they look at the figures and the facts on the bail-out of the banks.
Peter Dowd
I will give way to the hon. Gentleman, but then I must make some progress.
Leo Docherty
I know Labour Members are not necessarily very good at numbers, but for the benefit of people watching, will the hon. Gentleman say very clearly how much his proposed policies will cost, including the renationalisation of our major industries? Will he give us a figure, and where does he expect the money to come from?
Peter Dowd
I am not quite sure whether the hon. Gentleman is actually listening to anything I say. I am not going to repeat what I have said. If we continue to have spurious interventions like that one, it prompts the question: what is the point? [Interruption.] It is the third or fourth such intervention.
The bottom line is simple: the bank levy will take £4.7 billion less in tax revenue, and this at a time when the crucial services on which many children and families rely are at risk of collapse.
Several hon. Members rose—
Peter Dowd
I will not give way.
In addition to the funding crisis in the NHS, social care and the police, which my hon. Friend the shadow Policing Minister has highlighted so effectively, there is a developing and significant funding crisis in children’s services, which face a £2 billion funding gap by 2020. Last year, 72,000 children were taken into care, while the number of serious child protection cases has doubled in the past seven years, with 500 new cases initiated each day. There are stresses on other parts of children services, including, among others, child and adolescent mental health services, school transport, and education, health and care plans. All are inadequately funded, with the buck passed to professionals who are already hard pressed to manage and deliver services.
Kevin Hollinrake (Thirsk and Malton) (Con)
Will the hon. Gentleman give way?
Peter Dowd
I will come back to each hon. Gentleman in a moment.
All of this is directly linked to the Government’s cuts to local authority budgets, which has meant a 40% reduction in resources for early intervention to support children and families. Central Government funding has also been cut by 55% over the past seven years, representing a cost of about £1.7 billion. The message from the Conservatives is quite clear: if you are a banker, you can expect a handout, but if you are a child at risk, do not expect a hand-up—you are on your own.
Despite the recent revelations in the Paradise papers, there are few serious avoidance measures. The UK accounts for 17% of the global market for offshore services, and the UK is at the heart of a network of offshore tax havens that aid and abet tax avoidance across the globe; yet the Government continue to ignore the Labour party’s calls for a public register of the information already provided by overseas territories or to take any meaningful action to tackle tax avoidance. Similarly, there is nothing in the Bill to address the huge resource crisis that HMRC is facing and the effect of that crisis on its ability to tackle tax avoidance and bring tax dodgers to justice.
Stephen Lloyd
I want to enhance exactly what the hon. Gentleman is saying. Does he agree it was absolutely appalling that the Chancellor of the Exchequer and the Government completely ignored the 5,000 headteachers who said their schools are desperate for more money? The Tories have ignored them.
Peter Dowd
The hon. Gentleman is right. The only people to whom the Government seem to pay attention are the DUP and right-wing Tories.
The bottom line is that, since 2010, HMRC’s staffing levels have been reduced by 17%. The Bill creates even more powers for revenue and customs officers, with even more work, but very little if any resource to go with it.
Gareth Thomas
I know that my hon. Friend is a proud Liverpudlian, but on his point about children’s services, may I tell him—Londoners will agree—that over two thirds of London councils are reporting a huge increase in demand for very expensive placements? I hope he agrees that it would be good to hear from the Exchequer Secretary, when he winds up the debate, how the Government will help local authorities—particularly those in London, but also others across the country—to deal with that huge increase in the pressure on children’s services.
Peter Dowd
I say to my hon. Friend that—to use an old phrase—he should not hold his breath.
The Government need to wake up and face the cold, hard reality that the Exchequer is losing billions every year and letting multinationals, which do not pay their fair share, off the hook because HMRC simply does not have the resources.
Kevin Hollinrake
The hon. Gentleman is very clear and honest in his plans about wanting to spend a lot more money—half a trillion pounds in manifesto commitments—but at the same time the manifesto said that Labour would reduce the national debt. How is that possible?
Peter Dowd
I have the greatest respect for the hon. Gentleman, but I refer him to the answer I gave earlier. He should have a look at and dig into the documents, which are very easy to find.
The bottom line is that, wherever they are in the country, businesses that play by the rules are disadvantaged, so it is unfair not just to individual taxpayers but to business taxpayers. Meanwhile, back in Westminster, the Government continue to have absolute contempt for parliamentary oversight.
Peter Dowd
I will give way to the Minister, who may tell me that the Government do not have such a view.
Mel Stride
The hon. Gentleman is being very generous in accepting interventions. From what I can understand, every time the shadow Chief Secretary is asked a question about what Labour promises and pledges will cost, he reverts to saying that people can go and look it up: they can dig into the documents and get on the internet. Equally, he is saying that the public are shifting his way. Is his message to the electorate to get on the internet and to look at his policies in order to understand them?
Madam Deputy Speaker
I am very pleased that the hon. Gentleman—from a sedentary position, which he is not allowed to do—has apologised. If the Minister was making an intervention that was too long, I would stop him so doing. I have allowed the hon. Gentleman and several other Members to make fairly long interventions because I thought we were having a meaningful debate, but we will not have shouting from a sedentary position. I will allow the Minister to finish his intervention.
Mel Stride
I had largely made my point, but if I am to have a second bite at the cherry, let me just add a final point. Is the shadow Chief Secretary’s message to the great British electorate that when it comes to costing his own party’s plans, they should get on the internet and start googling to find out what those costs are?
Peter Dowd
My message to the great British public, who have showed their support for Labour on this, is to get out and vote Labour. That is the message. The other point is that the Minister’s hon. Friends have been waving an iPad around. I suggest they get on their parliamentary iPads and do their work.
Ruth George (High Peak) (Lab)
Does my hon. Friend agree that it is a bit ironic to be asked to take lessons in finances from a Government who have doubled the debt and doubled austerity at the same—[Interruption.]
Peter Dowd
My hon. Friend is right. Of course, as ever with the Tories, when we tell them the truth, we get shouted down, which is exactly what has just happened to her.
By refusing to base the Finance Bill on an amendment of the law resolution, the Minister has deliberately restricted the scope of amendments to this Bill, and the ability of the Opposition to scrutinise it properly and improve it. I know the Financial Secretary was president of the Oxford union and his debating skills were honed in its atmosphere, but I am sure he would never have dreamed of putting the same restrictions on the debates he chaired as his colleagues are putting on debates in this Chamber of the mother of Parliaments. What is good enough for the Oxford union should be good enough for this place. “No gagging” is the call from the Opposition; the Government instead want a muffled and restricted debate. That is why this measly Bill contains few policy and tax changes, and will have no positive or constructive impact on the majority of ordinary people’s lives.
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. The hon. Gentleman is not giving way.
Peter Dowd
Thank you, Madam Deputy Speaker.
Mind you, anything to avoid even more embarrassment for an enfeebled Prime Minister. Our stretched public services and crumbling infrastructure desperately need investment. We need bold, imaginative and innovative answers to tackle our slowing economic growth and falling productivity and to give workers the pay rise they deserve.
As my hon. Friend the Member for High Peak (Ruth George) said, since 2010 the Government have added more than £720 billion to the national debt, yet they have failed at every opportunity to invest. Instead, they have borrowed record amounts just to cover day-to-day spending. Labour Members are clear: it is high time the Government borrowed to invest in infrastructure, jobs and skills that will grow our economy sustainably. That is not controversial, no matter how much Conservative Members fulminate about it. [Interruption.] Well, they can simply ask the Secretary of State for Communities and Local Government, who wants to borrow £50 billion to solve the housing crisis. Where will that money come from?
If we asked any business owner, they would tell us that they borrow to grow their business and, in so doing, they reap the rewards. They do not borrow to pay the day-to-day bills, as the Government have done, year after year. They borrow to invest—an alien concept to the Government. If this clapped-out Government are unwilling to invest in our people and our nation, its talent and its entrepreneurial spirit, I assure the Minister that the next Labour Government will.
We will invest in infrastructure across every region and nation to create high-wage, high-productivity jobs and start a large-scale house building programme, backed up with controls on rent. We will tackle debt, introducing further controls on high-interest, short-term lending, and we will scrap tuition fees.
While we are at it, we will lift for the whole of the public sector the public sector pay cap that has so damaged the morale of our staff in vital services. We will fix universal credit and put the compassion that the Government have sucked out back into our social security system. We will introduce a £10-an-hour real living wage that people can live off, not get by on. In doing all that, we will ensure that people in every region and nation, in every community and age group, have a Government that listen, act and ensure well-paid jobs, roofs over their heads and an economy that works for the many, not the few.
Kit Malthouse (North West Hampshire) (Con)
It is a great honour to be the first Back Bencher to be called; it has never happened to be me before. It must be Christmas.
“So the last shall be first, and the first last”.
Thank you, Madam Deputy Speaker.
I welcome the Bill, and particularly the fact that it will be the last Finance Bill for some time—hopefully for at least a year. In my business life—I draw attention to my entry in the Register of Members’ Financial Interests—the shifting sands of British tax policy, with two Budgets a year, as became the norm after Gordon Brown’s chancellorship, caused an enormous amount of uncertainty for British business. It propelled a lot of short-term thinking and hampered the ability to plan for the long term. Having fewer Finance Bills is an enormous boon and benefit, particularly to the business community.
Contrary to what my fellow Scouser, the hon. Member for Bootle (Peter Dowd), maintained, the Finance Bill contains a veritable smorgasbord of large and small measures, which will touch many people’s lives. For example, the staircase tax rectification is very welcome to small businesses, particularly the removal of the retrospective claims that the judgment in the Supreme Court brought down on those who happened to have a staircase between two rooms. That is a brilliant move, for which many Conservative Members campaigned.
Smaller but equally beneficial to those affected is the exemption from tax of the armed forces accommodation allowance. That will make a difference, as will the extension of the seafarers’ earnings deduction to the Royal Fleet Auxiliary Service. Those two measures will reward two groups of people who deserve it.
However, in my hopefully brief remarks, I want to concentrate on two matters. First, the Government’s response to the patient capital review is welcome. The Minister referred to the increase in the research and development tax credit from 11% to 12%, which is enormously welcome, especially alongside the Government’s stupendous support for British science. The Conservative Government have recognised that our future economic success will rest largely on our ability to invent and sell things to the rest of the world. The Government’s standing shoulder to shoulder with Britain’s scientists and inventors is therefore critical. I am sure that the enormous amounts of money that are being devoted to primary research in this country, with, for example, the Francis Crick Institute opening a couple of weeks ago, will pay dividends in the future. It is exactly the sort of investment that the country needs.
However, all that Government expenditure will pale into insignificance or be much less effective unless we can energise private capital to sit alongside it. The Government have therefore attempted in the Bill, through amendments to the enterprise investment scheme, the seed enterprise investment scheme and the venture capital trust regime, to promote the idea that we should all invest much more in business.
Some measures are particularly welcome, such as the increase in the lifetime allowance for investment in business, and the increase in the amount that an individual can invest in one year. Those people who are wealthy enough—there are not that many—to put £2 million a year into business should do so. It is their duty, having done well out of the British economy, to reinvest that money in risk-taking businesses to create wealth and jobs for everybody else.
I strike a slight note of caution about one or two of the Government’s measures. The notion of a knowledge-intensive company test effectively introduces an extra layer of regulation into the system that may deter people from investing more money. Although the Government rightly seek to stamp out capital preservation schemes that take advantage of tax-efficient structures, I hope that Ministers will watch carefully over the next few months to ensure that the capital going into British industry through those routes does not start to drift away.
I have given several speeches in the House making the case that the tax relief incentives are not necessarily strong enough to bridge the risk-reward divide. Through EIS, UK individuals are investing about £1.8 billion a year. That figure has been pretty constant over the past few years. Similarly, SEIS rose on its introduction but has been pretty static at a few hundred million pounds a year. Against a country with a GDP of $2.6 trillion, those numbers are frankly paltry. In the past 200 or 300 years, we have been incredibly good at starting and building large, innovative and dynamic businesses, but we have spent the past 20 or 30 years selling a lot of them, and we have not really generated any more. We have had one or two huge British successes—Vodafone, Virgin, Arm—that have come from nowhere, but we have not yet invented a Google, a Facebook or a large conglomerate. We need to do that, which requires private capital to play its part.
Stephen Kerr (Stirling) (Con)
Does my hon. Friend think that the banks’ lack of willingness to lend to small and medium-sized businesses—there are several in my constituency that suffer from chronic lack of availability of capital from banks—is killing the nursery of burgeoning businesses that we need in this country?
Kit Malthouse
Small-ticket debt definitely has its place in starting businesses, but they need—the Government are trying to propel this into the economy—patient capital: money that will be invested and sit as a shareholder in the company for some years. In truth, while it is wonderful to build a company like Instagram—I think it was built in 14 months, went from zero to a valuation of more than $1 billion and then was sold—such things happen rarely. Most businesses are built over a much longer period, often over many generations. That is why, certainly in my youth, all those businesses had family names—Marks and Spencer, Reckitt Benckiser. They were family businesses that had come together over two, three, four or five generations to take on the world. We need to create an atmosphere in which people do exactly that—invest for the long term.
I hope that Ministers will monitor the scheme carefully and, if we are not getting the kind of capital flowing through that we need, we can tweak it. If we see an overall reduction, as we may, as capital that was previously going into protection schemes now does not immediately transfer to risky schemes, we might need to look at this on an emergency basis.
My second, related point is on the general availability of shares and assets. The Government are doing a lot in the Bill to help the housing market and have rightly identified that home ownership has fallen relatively significantly over the last few years. They should be commended for the action that they are taking, certainly with regard to young people, but housing is not the only asset class available. The solution to the housing market will be a long-term one. We are trying to build as many houses as we possibly can—we need 250,000 to 300,000 houses a year to bridge the demand and supply problem—but that will take some time to do. It is possible, however, to get assets into the hands of people, particularly young people, much sooner than that, through employee share ownership plans.
I have said before in the House that it is my view that as well as creating a pool of dynamic private capital, we must democratise capital. That means spreading the ownership of British business as far and wide as we can. I urge the Government, as part of the patient capital review, to look at how they can improve the employee share ownership options for companies, to make it easier and even favourable through the tax system for employees to be gifted shares in their businesses. We know that employees who own part of their business are much more productive, and companies that have employees as shareholders are much more stable and tend to be much more successful in the longer term. It creates a much better environment and relationship between management and the employed. Just ask the postal worker wandering up the front path to deliver Christmas cards what the price is of their shares; I bet that they can tell you, with a big, broad grin. British Steel recently rewarded its workers for the company’s turnaround by giving away 5% or 10% of the equity in the business to them. The way forward is for everybody, young and old, to participate in the balance sheet of UK plc.
Kirsty Blackman
I agree that employee share ownership schemes are a good thing, and I would like to see an increase in them, but does the hon. Gentleman agree that the issue that people have is not that they do not know about or cannot access employee ownership schemes, but that they do not have the money to save, given that 50% of households have less than £100 of savings? Is not that the biggest problem?
Kit Malthouse
The hon. Lady refers to schemes that require the employees to pay for the shares. In my view, businesses should be allowed to gift shares to their employees, and that should not necessarily form part of their remuneration package. At the moment, there are a series of ways for companies to give shares to their employees, but none is particularly tax efficient or confers particular advantages to a company. I would like a company that had a certain percentage of its shares in employees’ hands to pay a lower corporation tax rate than one that failed to involve its employees in the balance sheet. That would address the general idea that the Prime Minister has talked about—that employees should be more involved in the way that businesses, especially large businesses, are run. If shareholders at the annual general meeting every year are also employees, so much to the good. Dynamising and democratising capital has to be the way forward.
Vicky Ford
My hon. Friend has made excellent points about share ownership, but I want to bring him back to property ownership. Does he agree that reducing stamp duty for first-time buyers will make it so much easier for people to get on the property ladder—it is worth more than £3,000 for the average first-time buyer in my constituency?
Kit Malthouse
There is no doubt that stamp duty, as a frictional cost, causes all sorts of problems and distortions in the property market, and one may be at the lower end, particularly when dealing with an asset class that is highly geared—where taxation effectively has to be paid out of equity or deposit. That is operating throughout the property system. We are seeing a slowdown in the number of transactions, largely because of the frictional cost of exchange. That mechanism operates in any capital market. I may be out on a limb, and I am not the Chancellor of the Exchequer, trying to collect money to pay for everything else, but a general loosening of the stamp duty regime, and therefore more transactions in the property market, is more likely to mean that more people can access it at all levels.
Kevin Hollinrake
Employee shared ownership is something that I did with my business—I draw attention to my entry on the register—but my hon. Friend is right: there are no incentives to do that, other than trying to build loyalty in the workforce. We were advised against it by our tax advisers on the grounds of complexity and cost. We went ahead with it anyway, but putting incentives in place would increase the number of companies that consider taking that important route.
Kit Malthouse
My hon. Friend makes a strong point. How can it be that an enlightened farmer is deterred by the tax system from spreading to his employees the wealth that his company creates? Something is fundamentally wrong if that deterrent is created.
I know that the Minister can see the truth of my argument and will want to address it in a future Finance Bill. I am sure, given his performance thus far, that his tenure in the job will be a long one—so much to the good, for us and for the economy.
I have one small note of caution about clauses 46 and 47. They would give Her Majesty’s Revenue and Customs the power to enter premises and break into vehicles or vessels without a warrant. I stand to be corrected, but as I read them, they would grant more powers to the taxman than the police have to pursue crime. That makes me a little nervous.
Over the last few years, we have seen a general trend towards a new style of legislation and law on the powers of the Revenue. We have seen legislation that allows the taxman to help themselves to money in someone’s bank account without judicial oversight. We have seen the extension of retrospection, and we have seen a reversal of the burden of proof—not “You’re innocent until proven guilty”, but “We think that you need to prove that you are innocent”, in certain circumstances. While I understand that the powers are merely an extension of the old excise men’s powers to deal with smugglers in ports and airports—Daphne du Maurier fans who have read “Jamaica Inn” will know of the problems in the 18th and 19th century—I question whether such powers are appropriate today. I hope that Ministers will think carefully about whether it might be more appropriate for a warrant to be obtained to access someone’s premises, in the same way that the police do when they have suspicions.
I understand that the imperative for the Government is to deal with criminality that is often clever and smart. Sometimes such powers are contemplated because we cannot think of any other way, but unless we maintain the rule of law, especially on taxation, and unless we have a sensible, level playing field, the relationship between business, individuals and the Revenue becomes much more antagonistic. That would be an unfortunate development.
All in all, the Bill is solid and welcome. Those who are perhaps a bit more radical might like the Government to go a bit further in the next two or three years, in particular on the idea of dynamic capital and spreading share ownership, but the Minister is to be congratulated on his conduct. I look forward to Report.
Kirsty Blackman (Aberdeen North) (SNP)
I am really pleased to have the opportunity to stand here on behalf of the Scottish National party for the Second Reading debate of this year’s third Finance Bill.
First, I would like to tackle the issue of the amendment of the law motion, which I have already raised with the Financial Secretary. I am particularly concerned that the Government are doing their best to use the rules of the House to dodge proper scrutiny and transparency. It is not the normal state of play to have no amendment of the law motion after a substantive Budget. I get that it is not easy for Ministers to try to hold a minority Government together when their Members are simultaneously pointing in about 300 different directions. Even so, they should be keen to come before the House, stand up for what they believe in, and allow proper scrutiny.
I would like to take the opportunity again to highlight deficiencies in the Budget process. The “Better Budgets” report, published by the Chartered Institute of Taxation, the IFS and the Institute for Government, pointed out several ways in which scrutiny could be improved. One suggestion is for the Finance Public Bill Committee to take evidence in public. I am firmly of the opinion that such a change would improve scrutiny and increase Committee members’ understanding of a Budget’s measures. This will be my third Finance Bill Committee, so I feel that I can now speak with some expertise on the subject. I urge the Minister to consider this request once more, given that the previous two Finance Bill Committees I served on sat for only six sittings each. We have extra time in the legislative timetable before us, and two hearings on the first day, for example, would not stretch that. That has been the Government’s main objection, so I push the Minister to consider the proposal again.
Let me turn to economic impact assessments on particular tax measures. The Minister will be pleased to know that my point is not about Brexit, but the fact that the Government failed to carry out impact assessments on Brexit is not particularly surprising given that the tax measures that come forward in Budgets do not have economic impact assessments attached to them either. Whenever Ministers are asked about reviewing tax reliefs, we are told that they are regularly kept under review and that reviews consistently happen. Last year, however, I asked parliamentary questions on this matter, and the answers I received on the Government’s scrutiny of the tax reliefs that they had put in place were not very satisfactory. The Government were not particularly clear about whether the tax reliefs had achieved their aims. They were also not able to tell me how much money they had cost or gained for the Exchequer. If the Government are going to put forward tax reliefs—I agree that they should in certain circumstances, as they can be a good thing to encourage investment—they need to explain to the House whether they have worked. What is the point of having an absolutely massive tax code with a huge number of tax reliefs if we do not know whether they are incentivising people to do good things?
Stephen Kerr
Will the hon. Lady share with the House the economic and revenue impact of the SNP Scottish Government’s land and buildings transaction tax?
Kirsty Blackman
The hon. Gentleman has spoken to me before about the land and buildings transaction tax. I refer him to my earlier answer: 93% of people who have paid the tax in Scotland on properties over £40,000 paid either less than they would have done in England, or no tax at all.
Kirsty Blackman
I will not let the hon. Gentleman intervene again. He is becoming one of my more regular commentators. I appreciate his interest, but I am going to make some progress.
On scrutiny and the amendment of the law motion, the SNP and the Labour party have been clear that the Government have not gone far enough on tax avoidance, so we would like the opportunity to table amendments. I am sure the Minister does not imagine that he and his team have a monopoly on good ideas. An amendment of the law resolution would have allowed the Opposition to put forward what the Government might consider to be good ideas to reduce the amount of tax avoidance. That would be a better situation for everybody. There are 650 Members of the House, many of whom have a lot of expertise and do not sit on the Government Benches. An amendment of the law resolution would allow better amendments to come forward to make better law.
The Budget and the Bill can be criticised for what they do not include, as well as for what they do. First, there is still no acceptance of the economic impact of Brexit and there are no taxation measures to fix that. In the 12 months to June, real household disposable income shrank by 1.1%. That is the longest period of falling living standards in six years. The increase in the price of food means that families are £7.74 a week worse off, and that is before we leave the European Union, the single market and the customs union. Coupled with what the IFS says about there now being two decades of wage stagnation instead of one, and the threat of 80,000 jobs being lost in Scotland, things are looking pretty bleak. The Minister and various Members have already spoken about the public sector pay cap. That does no good for increasing incomes. I would like the Government to change their mind on the public sector pay cap and to fund changes to it.
I have already called for the Chancellor to bring forward an emergency Budget and I have no hesitation in doing so again. Given that the UK and the EU have now come up with a deal on the payment of billions of pounds by the UK to the EU, the Chancellor needs to tell us how that will be paid for. We have already had two Budgets this year, but I would have no aversion to seeing another one to take that payment into account and explain where the money will come from.
We cannot continue to have the Chancellor pulling rabbits out of hats on Budget day. I believe firmly that there must be more openness and transparency, and better scrutiny. I would welcome it if the Opposition parties could move meaningful amendments on the Floor of this House, if nothing else to show how much better we could do things. Every time that the shadow Minister took an intervention from Conservative Members, they asked how his party would pay for things. If he had the opportunity to move meaningful amendments, he would be able to set out tax measures that he and his party thought appropriate. That would avoid the accusation about the magic money tree. The Government have chosen their route so that they can avoid scrutiny, but they then criticise the Opposition for not carrying out proper scrutiny. That is not a good way to run things.
I welcome the UK Government’s change to VAT liabilities for the Scottish police and fire services. My colleagues and I have raised this matter inside and outside the House over 140 times. It is particularly convenient that the Chancellor should suddenly U-turn and fix this inconsistency for Scotland’s services at exactly the same time as he should need to do so for combined authorities, police and crime commissioners and the London fire commissioner. If he now agrees that these liabilities should not apply, surely they should not have applied in the first place. Our police and fire services would very much like the £140 million in VAT that they have paid so far to be returned. I eagerly await Scottish Tory Members, using all the power they apparently have, joining us to convince the Chancellor to pay back that £140 million. If they do not do so, they will have to explain why to police and fire services in Scotland.
Kirsty Blackman
I will not.
On transferable tax history, I am pleased that the UK Government have committed to changing the tax regime for late-life oil and gas assets. The Minister nods, because he has heard me go on about this on a number of occasions. I welcome the change. I ask him to work with stakeholder groups on a deal for the oil and gas sector. Given the changes to the oil price, there is still a feeling of pessimism around Aberdeen on some days. I would like the UK Government to commit to supporting the Oil and Gas Authority’s “Vision 2035” for the sector, which I think has cross-party support. This is incredibly important. It is critical to the future of the north-east of Scotland in particular, but also that of the United Kingdom as a whole, for the oil and gas sector to be supported and for our supply chain to be anchored in the UK so that it can continue to pay taxes even when North sea oil has run out. “Vision 2035” is key, and it is part of the sector deal that Oil & Gas UK and other stakeholder groups are seeking. I hope very much that the Minister will sit at the table with those groups and ensure that what they need for the future—what they need to ensure that they continue to pay tax—is realised in a sector deal.
As we have heard, the Bill makes changes to allow first-time buyers to get on to the housing ladder. I have already made clear my concerns about the changes to land and buildings taxation that are proposed, which echo concerns that have been raised by the Office for Budget Responsibility, as well as a number of experts. To improve access to the housing market, the UK Government should follow Scotland’s lead and commit themselves to more social housing.
I spent eight years as a local authority councillor. By far the biggest part of my casework was presented by people who came through the door and said that they were unable to obtain a secure tenancy in a social house in the knowledge that the landlord would not chuck them out in a year provided that they continued to pay rent. The fact that that problem still exists, in Scotland and throughout England, is due to Margaret Thatcher’s right to buy. Unlike us in Scotland, the UK Government have not made any reductions in the scheme, and council housing stock has been decimated as a result. We in Scotland are trying to right the damage that has been done. We are focusing on social housing and will continue to do so, and I urge the UK Government to do the same.
Alison Thewliss (Glasgow Central) (SNP)
My hon. Friend is making a very good point about the right to buy. Apparently about 40% of the houses that were sold off as a result of the scheme are now in the private rented sector, and a greater cost is being incurred in the form of housing benefits, so the policy does not even make economic sense.
Kirsty Blackman
I agree with my hon. Friend. Having observed the real-life impact on people who came through my door, who were having to squash themselves into two-bedroom council houses with their parents, brothers, sisters and children, I am certain that we need to build up our council housing stock, and that is what we continue to do in Scotland.
The last substantive issue that I want to raise is the unfairness that faces the WASPI women. The UK Government continue to fail those women. They could have made changes in this Budget and the Bill, but they failed to do so. We will not rest until fairness is won for the WASPI women.
There are so many problems with the Bill. It does not fix the many unfairnesses that the UK have created. Wages continue not to rise, and people and families are feeling poorer as a result of continued austerity and economic mismanagement. This Government are not strong and stable, and they are not helping those who are “just about managing”.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
I think it only right for me to support a comparatively brief Finance Bill in a comparatively brief speech.
The Bill translates into action the autumn Budget’s excellent provisions for promoting innovation. As a member of the Select Committee on Science and Technology, I was looking for ways in which the Government would seek to promote technological innovation in the Budget, and I was not disappointed. Research and development expenditure credit has been increased slightly—by 1%, to 12%—boosting corporation tax relief for companies that engage in R and D. Encouraging more private sector investment in R and D in that way is a welcome step forward.
The Bill also doubles the annual limit for individuals investing in companies through the enterprise investment scheme from £1 million to £2 million, as long as any amount above the old £1 million threshold is invested in knowledge-intensive companies. That is another great measure to promote innovation, and we can say the same for the doubling to £10 million per annum of the amount that knowledge-intensive companies can source through the enterprise investment scheme and the venture capital trust scheme.
The Government have set the ambitious target of increasing overall R and D funding to 2.4% of GDP within a decade, and they are on course for an eventual 3% figure. That is an unprecedented investment in the future of the United Kingdom, and it represents the forward thinking that we will need if we are to make the most of the technological revolutions that are to come. These provisions are vital to ensuring that the private sector, which is an essential partner, plays its role in achieving our goals.
Alongside the other commitments made in the Budget—the extra £4.7 billion in R and D funding over the next four years is very welcome, for example—there are provisions in the Bill that constitute a great step forward for innovation. The United Kingdom is no stranger to innovation in many respects, but let me select just one. In 1928 the world’s first true antibiotic, penicillin, was discovered by Sir Alexander Fleming, a Scottish physician, biologist and Nobel prize winner, who was born in Darvel, Ayrshire, in 1881. Penicillin has been described as the most important advance ever made in the history of medicine. We await with interest the next generation of innovation.
However, the Bill does more. Having served as a firefighter for 31 years, I am particularly pleased that the Government will mend the muddle of the Scottish Government, namely their poor judgment in surrendering the VAT exemptions for the Scottish fire service and Police Scotland. The Bill creates a special exemption for Scotland’s police and fire services, which lost their exemption despite the SNP in Holyrood receiving the best advice from many sources. My friend the hon. Member for Glasgow Central (Alison Thewliss) shakes her head, but the simple fact is that the SNP Government will never accept advice from the police force, the fire service, the Convention of Scottish Local Authorities and eminent people in Scotland, because of their arrogance and their relentless desire to pursue their centralisation agenda.
Mike Amesbury (Weaver Vale) (Lab)
The Bill does nothing to address the shortfall in firefighters, who are essential to my constituency in Cheshire. Since 2010, the number of full-time equivalents has been cut by 160.
Bill Grant
I note what the hon. Gentleman says, but how that local authority spends its money on funding the fire service is a matter for the authority itself.
There are innovations in respect of smoke detectors and sprinkler assessments. The Scottish fire service is going through a similar process. It is undergoing a review, with the possibility of the closure of fire stations. We are moving on with a fresh look, and I hope that fire stations will not close, but there is that risk. Having served for 31 years, I know more than most Members in the Chamber about the work that firefighters do. I hope that we can move forward, and that the pay restraints of recent years will be eased.
With the approach of the new year, I hope that we can all raise a glass, in Scotland and elsewhere in the UK, to support the freezing of the duty on spirits such as whisky and gin, and that we will have a joyous and safe new year and enjoy spirits that are mainly produced in Scotland.
The Bill is good for growth, good for technology and innovation, and good for Scotland and the rest of the United Kingdom. I am delighted to lend it my support.
Gareth Thomas (Harrow West) (Lab/Co-op)
It was interesting to listen to the hon. Member for Ayr, Carrick and Cumnock (Bill Grant), not least because of his reference to that great Scot and great Brit Sir Alexander Fleming. If I remember rightly, he did his pioneering work on penicillin at what is now St Mary’s hospital in London. I raise that point to gently chide the hon. Gentleman about the funding crisis in the national health service, particularly in London, which has led Lord Kerslake, following a distinguished career in public service, to resign from his position chairing a key NHS trust.
I commend my hon. Friend the Member for Bootle (Peter Dowd) for his speech, but I want to make two different, broad points about the productivity challenge facing our country, and to propose some additional solutions that I hope the House will consider incorporating in the Bill. I also want to make a brief point about credit unions and, finally, press for further measures in the Bill to fund more investment in public services, not least policing.
The OBR’s devastating indictment of seven years of underinvestment and austerity and the prospect of many more such years to come was the real headline of the Budget. Productivity gains across all parts of the UK would mean higher wages and higher living standards, so if the OBR is right and productivity is to remain stagnant, the personal finances of too many people in our country will remain grim for the foreseeable future. We are already more than 15% less productive than the rest of the G7, Greece is the only developed country where real pay has fallen further, and the UK has now slumped to fifth in the G7 table for productivity.
To be fair, the Government at least acknowledge that there is a problem, but their solutions largely ignore, first, how to motivate employees, who are fundamental to productivity improvement, and, secondly, the growing concentration of power in key markets in the hands of a small number of very big companies, which stifles the innovation that is fundamental to productivity improvement.
Let me give some context for those two broad points. The average UK worker has not had a real-terms pay rise since 2006. Zero-hours contracts and bogus, Uber-style self-employment are creating an economy in which work is transient and precarious. Too often there are simply not incentives for a business to invest in its staff, and if there is no guarantee of work tomorrow there is not enough incentive, or indeed time, for staff to go the extra mile for the business they are with.
Rachel Maclean
The hon. Gentleman is talking about zero-hours contracts. Does he therefore welcome the work we have done in the Select Committee on Business, Energy and Industrial Strategy, chaired by his colleague the hon. Member for Leeds West (Rachel Reeves), looking at the Taylor review and making sure that, where there are zero-hours contracts, they are fair and are a mechanism of choice for a worker rather than being forced on them?
Gareth Thomas
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.
Stephen Lloyd
Does the hon. Gentleman share my disappointment that the armed services were not even mentioned in the Budget, either generally or in relation to the pay and salary of their staff?
Gareth Thomas
The hon. Gentleman makes his point well, and I agree with him. He also made a point earlier that many Members have raised before, when he expressed disappointment at the paltry level of additional funding for schools. Similarly, we have heard about the scale of cuts to local authorities such as Harrow, which has lost some £83 million over the past four years. The council is facing huge difficulties in meeting the demand for increased children’s services, for housing people who are homeless and for meeting the growing social care challenge in our borough. Even at this late stage, I encourage Conservative Members to press Ministers for more investment in public services. Brutally, this was a grim Budget, and the Bill holds out no hope for anything better.
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. Before we proceed, let me enlighten those Members who might not be aware that, because this is a Finance Bill, the debate may continue “until any hour”, as they will see on the Order Paper. There is no limit on today’s debate. Approximately 18 people have indicated to me that they wish to speak, and if they each take about 15 minutes, they will be able to calculate for themselves that we will be here until around midnight. Now, it might be their intention to cause that to happen, and it is not for me to say whether that is a good or a bad idea—I am always in favour of debates—but I merely point this out so that Members can behave honourably and with due consideration to other Members, and work out for themselves for just how long they ought to keep the Floor. This puts a lot of pressure on Mr Alister Jack.
Mr Alister Jack (Dumfries and Galloway) (Con)
Thank you, Madam Deputy Speaker. I will shorten my words accordingly.
I would like to congratulate the Chancellor of the Exchequer on proving that he can do a lot of good with what is, at 184 pages, a relatively—I stress the word “relatively”—short Finance Bill. While the Bill is short on sheer word count, it is certainly not short on provisions that will help to make both Scotland and the United Kingdom fairer and more prosperous places to live. For example, as my hon. Friend the Member for Ayr, Carrick and Cumnock (Bill Grant) has said, the Bill gives effect to the announcement in the Budget that the UK Government will clear up the Scottish National party’s mess and create a special exemption from VAT for Police Scotland and the Scottish Fire and Rescue Service. That special exemption has had to be made because of the stubbornness and incompetence of the Scottish Government, who pressed ahead with the centralisation of Scotland’s police and fire services even though they knew that the way in which they were conducting that centralisation would cost those services their VAT exemption.
Alison Thewliss
Is the hon. Gentleman aware of the extensive correspondence on the Scottish Government’s website that provides evidence of the Scottish Government’s efforts to persuade colleagues down the road here that the exemption was valid? If the exemption in the Budget for combined authorities in England and Wales is valid now, surely Scotland’s fire and rescue services are due their £140 million back.
Mr Jack
This House made it clear at the time that if the Scottish Government went ahead with the centralisation, they would not be able to reclaim the VAT. It is no good the SNP having a grievance and looking back to claim that £140 million when Budgets are clearly forward-looking and we have to be responsible for the public finances. However, we have now sorted that problem out.
Stephen Kerr
Does my hon. Friend agree that this was all designed in order to create a grievance—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. I do not like to interrupt the hon. Gentleman, and I let him do this earlier, but if he faces away from the Chair, no one can hear him. I certainly cannot hear him. He has to speak to the Chair, and not to the Member upon whom he is intervening. But I am sorry—I interrupted him, so I will allow him to finish his intervention.
Stephen Kerr
Thank you, Madam Deputy Speaker. I had in fact finished my intervention, in which I asked my hon. Friend whether he felt that this was a designed grievance-manufacturing moment for the SNP.
Mr Jack
Clearly I agree. I would like my hon. Friend the Member for Stirling (Stephen Kerr) not to make too many more interventions, however. He is very keen on them, but we have to crack on.
That centralising dogma cost those services £140 million. The hon. Member for Kilmarnock and Loudoun (Alan Brown) referred to that money as having been stolen, but I can assure him that it was not stolen by anybody. It was, however, wasted by his party and his fellow nationalists in the Scottish Government, who cost the police and the fire services the option to reclaim that VAT. As I have said, the Conservatives have acted to clear up the Scottish Government’s mess. That is one of many cases in the Budget that prove that 13 Scottish Conservative MPs can deliver much more for the Scottish people in six months than 56 nationalist MPs could deliver in two whole years.
The Scots are used to the SNP putting confrontation and grievance ahead of public services, as my hon. Friend the Member for Stirling has just said, and we in Scotland are sick and tired of it. If the SNP would like to turn over a new leaf this evening and take a more collaborative approach, I suggest they join us in voting for the Bill. It would be the height of pettiness for the nationalists to vote against a Bill that rectifies their own mistake and ensures that Scotland’s police and fire services finally get the funding that they deserve.
On a wider note, the Bill brings into effect many of the positive measures that were announced in last month’s excellent Budget, such as the additional measures to tackle aggressive tax avoidance. When someone does not pay their fair share of tax, the rest of us have to pay instead through higher taxes, less funding for public services or higher borrowing. I am therefore pleased that this Government have such a strong record on reducing tax evasion and aggressive tax avoidance. The UK tax gap is now just 6%—down from 6.7% in the final year of the last Labour Government—and the measures that this Government have put in place to reduce the gap have saved £12.5 billion in the past year alone, meaning billions of pounds of extra funding for public services, billions of pounds in lower taxes, and billions of pounds in less borrowing.
The Budget is good for Scotland and specifically for Dumfries and Galloway with the Borderlands growth deal. In fact, it is a good Budget for the entire United Kingdom, with provisions that lay the groundwork for future growth and a fairer country. I will therefore be proud to vote for this Bill, which is an integral and positive step in putting the Budget into effect.
Stella Creasy (Walthamstow) (Lab/Co-op)
It is a pleasure to follow the hon. Member for Dumfries and Galloway (Mr Jack), because I am going to enjoy setting out for him why I believe he is mistaken in considering this Finance Bill to be the best that we can do for this country. I hope he was here to hear the remarks of my Front-Bench colleague, my hon. Friend the Member for Bootle (Peter Dowd), who set out some strong ideas about alternative ways to manage the public finances, and the remarks of my hon. Friend the Member for Harrow West (Gareth Thomas), a fellow member of the Co-operative party, who set out how the Co-operative’s approach to public finances is different.
I was struck by what the hon. Member for Dumfries and Galloway and several other Government Members said about their pride in how light and narrow the Bill is. Look at the country’s economic challenges; it sums up the Government perfectly that they should boast about how little they have to offer to tackle those challenges. They admit that this country has a productivity challenge—a long-overdue admission—but they have so little to offer to address it. They seem pleased to tell us that they are peaking their borrowing, rather than meeting the commitments made in 2010, when we all sat here and listened to the previous Chancellor tell us that austerity was the only way forward. Well, what a myth that has turned out to be. The Government are presiding over stagnating wages, meaning that my constituents will be lucky to see a pay rise within the next 10 years. Decades of austerity mean that we are a nation up to our eyeballs in personal debt—not by accident, but through this Government’s choices. We have not even begun to talk about the black hole of Brexit that is sucking both time and money from our Exchequer.
A light Finance Bill is not something to be proud of; it is indicative of a Government who are not serving the British public. The Government try to tell us that they are doing something about the massive housing crisis, but it is clear that their stamp duty proposals will simply push up house prices and do little for our constituents who have no savings and cannot get a deposit together to even begin to consider buying a property and paying stamp duty. The Bill will do nothing about the crisis in our private rented sector that is the cause of so much personal debt. People in our communities are now putting their mortgage or their rent on their credit cards in a desperate attempt to keep a roof above their head this Christmas.
People have the spectre of universal credit hovering over them, sucking out their time and energy as they try to make ends meet, because there is just too much month at the end of their money. We have not even begun to talk about the impact of the cuts on our public sector. My hon. Friend the Member for Harrow West ably pointed out the lack of police on our streets; we will lose 3,000 in London alone due to this Budget. Teachers are having to buy resources for their pupils. People need us to manage the public finances properly, which is what this Bill would do if it was meatier contribution to Britain’s future, but it is not.
I know what Government Members will say to Opposition Members: “Where would you find the money?”. I want to answer that question, say what this Bill could have done for the British public, and set out why the Government need to move from policy-based evidence making to evidence-based policy making by using impact assessments. These assessments are not necessarily popular, as we have seen from the Brexit Secretary, but they are absolutely the way forward when it comes to understanding what could be done for this country.
Let me turn first to one of the places where we could be saving money as a society. I know that Members on both sides of the House are worried about the private finance initiative, and all of us have seen its impact on the public finances. Governments of all colours have used private finance contracts; indeed, they continue to be used through private finance 2 schemes. We know that £1 billion of the money that should be going into our NHS will be leeched out in profits by private finance companies. That money could have built hospitals several times over, and could certainly deal with the crisis in NHS recruitment and the lack of resources in healthcare. I have called on the Government to learn the lessons of the Paradise papers and introduce a moratorium on public sector contracts going to such companies until we are clear about where their tax liabilities lie. However, I am disappointed that, yet again, Ministers have missed that opportunity.
As Ministers have pointed out, we will only get one such Bill a year in future through which to tackle how these companies operate. A small number of companies are leeching so much money out of our public services through the high costs of private finance contracts, and their high rates of returns and interest rates. Government Members can look at them as hire purchase agreements for the public sector. The Bill could have been the opportunity to set a clear red line for those companies, and to tell them that, instead of continuing to rip off our schools and our hospitals, we want them to come to the table to renegotiate contracts. The Bill could have been the opportunity to set up that moratorium, or to use the banking levy as a model for a windfall tax on such companies—a tax that could claim back the excessive profits that they are clearly making from the public sector. This is money that could have properly funded our police or gone towards ensuring that we pay our public sector workers properly, but we will all end up paying for that omission from this Bill. With the PF2 contracts coming online, it is clear that the Government have not learned the lessons about the cost of public sector borrowing that would have informed the Bill.
This Bill is being considered in the context of the Government having agreed to close the tax loophole whereby overseas-based companies sold UK commercial property without having to pay capital gains tax—what we called the magic money tree—but it has sadly become apparent since the Budget that the Government have not got to grips with the loophole. They think that they are going to raise only half a billion pounds, but it is clear, given the sums involved in commercial property sales in the UK, that we could be looking at £5 billion or £6 billion.
With this Bill, the Government could have learned the lessons of the Paradise papers, particularly as regards the loophole for companies that register properties in Luxembourg, because the Luxembourg treaties will allow those companies to avoid capital gains tax. I have repeatedly raised that with Ministers, because we know that our public sector desperately needs the £5.5 billion extra a year that properly closing the tax loophole could represent, yet Ministers seem not to care. They tell me that the Government’s policy is that
“all double taxation treaties should permit gains on the direct and indirect disposal of UK immovable property to be taxed in the UK.”
However, from their consultation document, I can see that they recognise that there is a loophole within their loophole. Paragraph 4.36 admits that Her Majesty’s Revenue and Customs understands that there is a problem if the properties are registered in Luxembourg. The Bill could have been the opportunity to address that and to state, “When we say we are going to close a tax loophole, we close it properly.” We know that £5.5 billion could make such a difference—but it will not. That is indicative of a Government who do not seem to do their homework.
That brings me on to why impact assessments matter so much, and why so many Members from Labour and other parties have been speaking about their importance, particularly when it comes to gender. One of the Minister’s colleagues actually suggested to me that the debate about gender impact assessments was a bit like the debate around foxhunting. Perhaps he confused fair game with the fairer sex; I am not quite sure. As a colloquialism, we have been calling this the lady data campaign, because it is about what happens when we start to identify the impact of policies on particular people.
There will be some, particularly on social media, who will roll their eyes at yet another one of those feminists getting up to bang on about women and all the special treatment they want. Let me be very clear: the point about lady data is a cold, hard economic argument. Bridging the UK gender pay gap has the potential to create an extra £150 billion a year in GDP by 2025, which is a 5% to 8% increase in GDP for all our regions. This should be a no-brainer for all concerned, but to be able to do that, we need better to understand where inequality lies in our society, and where individual policies help or hinder us in tackling it.
Luke Graham (Ochil and South Perthshire) (Con)
I support any measure to try to close the gap in gender equality of income. Does the hon. Lady welcome the moves made by this Government to introduce gender pay gap reporting, and to make it a legal obligation for all companies with more than 250 employees by April 2018?
Stella Creasy
I am so glad a new Member has raised one of the legacies of having an amazing feminist MP like my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman) in Government, fighting for gender pay gap reporting in the Equality Act 2010. I am glad to see the hon. Member for Ochil and South Perthshire (Luke Graham) nodding, because it is wonderful to see the feminist soul of so many Government Members coming through. I hope we can tempt them to support these measures.
The reality is that if the Government do not measure something, they cannot be held to account on what they are doing about it. That is the challenge we have. Good data keeps Governments honest and on track. For the avoidance of doubt, I am not suggesting that inequality in British society is about one single issue, or indeed about one single group. It is about understanding where inequality lies and where individual and collective policies will make a difference. That is why it matters. We do not live in an equal society, so particular policy measures, such as those that this Finance Bill introduces, will have a differential impact.
We might have the Equal Pay Act 1970 and the Equality Act, but equal pay is stagnating in Britain. Indeed, the figures for the past couple of years suggest that the gap is widening, not narrowing—crucially, among not just older women, but younger women. Among black and ethnic minority women, the gap is 26% for Pakistani and Bangladeshi women, and 24% for black African women. Women are twice as likely as men to receive the lowest pay. Only 36% of older women receive the full state pension. Therefore any finance measure that affects the tax and benefits situation in our country will have a differential impact.
Thankfully, organisations such as the Women’s Budget Group, the Fawcett Society, the Equality and Human Rights Commission, the Institute for Fiscal Studies and the Runnymede Trust have done what this Government have failed to do and started to identify the impact, so that we can understand just what the consequences are. Their research does not make happy reading for anybody who recognises that equality is one of the biggest economic motors we could have, and one of the best ways we could address the productivity gap in our society. Their figures show that this Government’s Budget will mean that women lose 10 times as much as they gain, with black and ethnic minority women losing 12 times as much.
What does that mean in practice? Forty-three per cent. of people do not earn enough to reach the tax threshold as it is—66% of them are women, and 41% of them have dependent children. When the Government raise the higher rate threshold, 73% of the beneficiaries are men. When we change corporation tax, we have to recognise that we do it in an environment in which shareholders, business owners and managers are disproportionately men. Men benefit more.
This is not about being a victim. This is not about pleading for special treatment. This is about understanding what measures the Government are introducing and how they are making it harder for us to unlock the potential of 51% of our society. It is about having a better economy and a better society, because there is a link between diversity and prosperity.
I am tired of people who eye-roll at this, and of Government Members who see this as being like foxhunting. Frankly, even if they do not get the strong economic or social case for this, they are legally required to do it. The public sector equality duty was introduced in 2011, and it means that the Government have to not just manage these things but do something about them. That includes being able to track the difference they are making, yet this Government have still failed to do any equality impact assessment, let alone a cumulative one. The only equality impact assessments that are published are in the tax information and impact notes, which have a sentence or two buried away in line 324b saying that most of the Government’s policies have little impact at all, or denying any impact. There has certainly been no impact assessment on things like alcohol excise duty rates or fuel duty giveaways—two policies that, again, have a differential impact on men and women.
We have not even begun to talk about the public sector pay cap, and Members on both sides of the House recognise that, when two thirds of our public sector workforce are women, a failure to pay the public sector properly clearly pushes more women into poverty. We can argue about the underlying inequalities that might cause the environment in which these policies operate, and we can argue about the policies’ impact, but we cannot let this Government get away either with saying that they cannot do these calculations when others such as the IFS have, or with arguing that any inequality caused by policies in a Finance Bill will be offset by spending in another Bill. It simply does not make sense. If they cannot measure it, how can they decide it is being offset by something else? That is why it is time that we had this data. [Interruption.]
I understand that the Government Whip, the hon. Member for Beverley and Holderness (Graham Stuart), would like me to sit down. I am sorry to disappoint him, but 51% of this population are being held back by a Government who do not even know what damage they are doing, and 100% of us deserve better. The way we do that is by holding this Government to account on the public sector equality duty, which says that the Government have a legal duty before making any decisions. It is not enough to consider the impact on equality afterwards. The duty is ongoing, and it is about not just a buried report once in a while, but consistent impact assessments. The duty also says it cannot be delegated—that Ministers cannot leave it to somebody else to figure out what damage they are doing. It also says that, when a problem has been identified, the Government have to act, and that a lack of resources—having just set out where the Government can get some resources, I do not accept there is a lack of them—is not an excuse.
These are examples of how this Budget and this Finance Bill are failing this country. We are in denial of some of the major challenges we face on productivity. This is about having the information so that we can understand how we can make better choices, and about how we have a Government who seem unconcerned that they are breaching the public sector equality duty. That is indicative of a wider problem facing the British public. They have a Government who, right now, have run out of ideas, who are lacking in leadership and who are struggling under the weight of Brexit, but we all know who is going to pay. It is the men and women in our communities who are struggling with debt—the men and women in households who are being disproportionately hit by Government policy.
Inequality is expensive for us all. All of Britain is held back when talent is held back because it is living in poverty. I hope I have shown that there is money to be found and data to be collected if there is a political will. The Brexit Secretary says that he does not have to be very clever to do his job, but I believe the British public do need competency. If they cannot get it from the Government Benches, they can certainly find it on the Labour Benches.
Jack Brereton (Stoke-on-Trent South) (Con)
This is an important Bill for the long-term future of our country. It builds on hard-won progress, develops on the transition to Brexit, and sets out necessary measures to ensure that the UK economy is fit for a successful and sustainable global future. I welcome the emphasis the Chancellor gave in his Budget to the importance of improved skills, cutting-edge technology, world-class infrastructure, and the domestic fairness of a sustainable cost of living for the British people.
At a time when we are focused on the historic change that will come from Brexit, it is critical to stick to the Government’s commitment to financial and fiscal stability so that we can build a Britain and a Stoke-on-Trent fit for the future. I particularly welcome continuing efforts to make the tax system fairer and simpler. The latest raft of anti-avoidance measures ensures that legitimate reliefs are not abused.
It is important that the tax system can encourage behaviours that are beneficial to the economy, thereby supporting businesses to create more jobs and allowing our workers to prosper. For my constituency, it is essential that we continue to support our communities enabling them to flourish, and a critical part of that is ensuring families can take home more of the money they earn.
I am pleased that the Government are doing more to ensure we see not only more jobs, but better pay and improved skills. Continuing to increase the national living wage and the personal tax-free allowance will mean that my constituents will take home more in their pay packets.
Alison Thewliss
The national living wage that the hon. Gentleman speaks of is not actually set at the national living wage rate. Does he agree that there needs to be a real national living wage that is available to everybody, including those under the age of 25?
Jack Brereton
If the hon. Lady looks at this, she will see that the national living wage is continuing to increase. I know what she is referring to, but we are continuing to increase the national living wage, which will mean people taking home more money in their pay packets. We are reducing taxes on people’s earnings and helping constituents right across the country.
For areas such as Stoke-on-Trent that have a strong manufacturing tradition, opportunities have arisen for a sustained revival of our industry. Goods exports have been rising faster than service exports. “Despite Brexit”, as some attempt to say, the latest purchasing managers’ index for manufacturing activity hit an encouraging 51-month high. The revival is in no small part thanks to the path of national financial stability that the Bill continues, working in tandem with our modern industrial strategy. In addition to that work within the UK, we can look forward to the Government championing new trade agreements beyond our shores, both with our close friends in the EU and with overlooked partners in the wider world, allowing manufacturers in my constituency to trade more of their fantastic products abroad.
Only last week I was delighted to welcome the Secretary of State for International Trade to my constituency to see with his own eyes the reality of, and the further potential for, Stoke-on-Trent’s manufacturing export revival. He told me that in the past year there have been 58,000 tech start-ups across the UK, which is more than in any other country, and that our uniquely attractive intellectual property regime is key to this success. I want to ensure that Stoke-on-Trent shares in this growth, that our industries feel encouraged by IP protection, and that tech jobs are increasingly accessible to my local residents. By getting our skills base right, including the skills that many businesses need to become exporters for the first time, we will enable our businesses to trade more of the fantastic goods we produce. Having a workforce that is more skilled and productive means that our people and communities can become more prosperous.
Stoke-on-Trent’s part of the deal is to keep making the best products in the world, particularly in ceramics, which is the lifeblood of Stoke-on-Trent. The Government’s role as the driver of global Britain must be to open world markets to our local manufacturing excellence while, of course, guarding against unfair dumping by rogue competitors. In short, we need to grow our skills base while ensuring a level playing field in global markets.
Despite the sheer hard work of my constituents to improve productivity locally—it is, indeed, up—gross value added in Stoke-on-Trent is comparatively low compared with that of the rest of the country. It can be tempting to say that this is all a function of trends of economic geography, yet we have shown in recent years that we can indeed increase our local rates of productivity. We clearly have a great deal of potential that is yet to be realised, and key to achieving that will be to work with an enabling Government in developing a sector deal for ceramics. We need to invest in new infrastructure to enable businesses to innovate, prosper and create the skilled jobs that people need. This means local partners coming together to diversify and advance skills, working towards our global ambition for a dedicated ceramics research park. This will turn an old quarry into a world centre of excellence: a place rooted in the authentic heritage of the potteries where innovation in science, technology and design come together to drive economic growth. As I stressed to the International Trade Secretary, in Stoke-on-Trent we make not just world-class ceramic art and decorative goods, but advanced components for the high-tech automotive, aerospace, defence, digital, renewable energy and medical industries.
Far from being an industry of the past, ceramics is at the very forefront of the digital, high-tech future that the Government have rightly chosen to champion and that the Chancellor absolutely dedicated himself to in his Budget. Just as there is an internationally important life sciences cluster just to the north of Stoke-on-Trent, so there can be an advanced design and manufacturing cluster in Stoke-on-Trent itself. The UK ceramics industry is hugely ambitious. It seeks to secure significantly increased year-on-year growth and to increase our international market share. A sector deal could double the GVA and exports of the industry within the next decade. I am delighted that my hon. Friend the Minister for Climate Change and Industry wrote to me recently to confirm that the Government are actively considering the proposals from the sector, and that she welcomes the sector
“being so positive about the future opportunities”.
We are indeed positive about the future opportunities, no matter how much the Labour party seeks to talk Britain down.
One area where more needs to be done is in improving the rail services in Stoke-on-Trent, as there has been a lack of attention to this over many decades. I welcome, however, the commitment made by the Secretary of State for Transport that Stoke-on-Trent will be served by HS2. Enhanced rail connectivity could transform the future prosperity of the city and help to deliver new housing and jobs growth. I also welcome action to expand the rail network’s capacity, and to open, or reopen, many new local stations. There is also clear potential for increasing the frequency of services through my constituency, and for new or rebuilt stations at Fenton, Meir and Barlaston, and for World of Wedgwood and the bet365 stadium, for Stoke City football club. All those are in my constituency. With a heritage action zone now announced for Longton in my constituency, an enhancement of rail services there could propel the town as a visitor destination. There will be similar projects across the country, and it is to the Government’s credit that they have enabled so many of them to come forward as part of the localism agenda.
The Government have worked hard to increase our international competitiveness and to rebalance the economy domestically. We are also working hard to enable smaller businesses to grow and compete with global players. Local workers on the ground in Stoke-on-Trent should be the focus for a global Britain. We are talking about those who voted overwhelmingly for not just Brexit, but an improved quality of life. Improving the skills base, alongside boosting wages through lower taxes and an increased national living wage, will enable local workers to access the opportunities of global Britain. I am glad the Government recognise that embracing our global future means delivering for my constituents. That is what Brexit must mean, and it is in this context that this Bill moves the Government’s agenda of reform forward. I will be proud to support it in the Lobby tonight.
Judith Cummins (Bradford South) (Lab)
It is a pleasure to follow the hon. Member for Stoke-on-Trent South (Jack Brereton). This Finance Bill has short-changed my constituents, the city of Bradford and the people of the north in ways too numerous to list in the short time I have available today. But there was one instance where the north was not just short-changed but plain snubbed: it was starved of the vital investment needed to unleash the potential of its people and its businesses. In this Finance Bill, Ministers did nothing to redress the imbalance in favour of London in spending on transport, whereby it gets seven times more per head than the north. That is illogical, given the Government’s much publicised commitment to rebalancing this country’s two-speed economy.
Modern and efficient transport infrastructure is a catalyst for growth, and improved regional transport connectivity is the key to unlocking prosperity in my home city of Bradford. It is essential to the fostering of wider prosperity throughout west Yorkshire and the whole of the north of England. It is fundamental to addressing the regional differentials in the economy. With clause 33 and schedule 9, the Financial Secretary has found the money to cut the bank levy, but he cannot find the funds for trans-Pennine electrification to fulfil the Conservative manifesto promise made ahead of the 2015 general election.
Kevin Hollinrake
Does the hon. Lady welcome the huge investment in northern powerhouse rail and the latest proposals for the route to go through the centre of Bradford?
Judith Cummins
I thank the hon. Gentleman for raising that point; unsurprisingly, I am going to mention that later in my speech.
Just yesterday, I read with great interest that the ambitious plan for full trans-Pennine electrification is to be scaled back, with the scrapping of the line connecting Manchester to Sheffield and Leeds via the HS2 network. The north is being starved of the investment it needs to prosper. The north wants, needs and deserves full and fair funding, and transport infrastructure fit for the 21st century.
In stark contrast, in his Budget the Chancellor committed the Government to multi-billion pound public investment in transport improvements across the Oxford, Milton Keynes and Cambridge arc. I have no quibble with investment in transport infrastructure in London and the south-east—connectivity in that region is important, too—but it should not and must not be at the expense of rebalancing the country’s economy. It should not and must not be to the disadvantage of the business community in Bradford, west Yorkshire and throughout the north. Regional business in the north deserves the Government’s attention and support just as much as the London-based business community. Indeed, the Government talk about fixing the country’s productivity problem, and the key to that is addressing regional differences. The Government have missed an opportunity to tackle that in the Bill.
Clause 19 will increase the rate of the research and development expenditure credit from 11% to 12%. I am sure that business innovators in the north will welcome that, but the one constant that I hear from business is the need for better transport infrastructure. As well as R and D, physical connectivity is crucial for industry. As a region, the north’s economic output by gross value added was £304 billion in 2014, which would make it the 10th largest economy in the EU if it were a country. As a region, though, it trails substantially behind the south-east in economic output per capita. That has to change if our nation as a whole is to prosper and our productivity is to increase.
Bradford and the north of England are in desperate need of transformational investment in their creaking railway infrastructure. Spending in the area has multiple benefits, with just two examples being the easing of congestion and the reduction of air pollution. On that last point, the Minister had an opportunity to address air pollution from vehicles by investing to make public transport better. Instead, clause 44 makes changes to vehicle excise duty and clause 9 makes changes to benefits in kind for diesel cars. Both measures seek to address vehicle emissions. Few in the House, if any, would disagree that reducing air pollution is both necessary and desirable, but I fancy that more carrot and less stick would have been welcomed by my constituents.
Tackling congestion and air pollution through a modal shift, moving more journeys from private cars to public transport, is an option, but not one currently available to my constituents. The creaking rail infrastructure that my constituents have to contend with currently makes the motor car not just a more attractive option but in many cases the only option. The Minister could have shown real determination to change that, with a commitment to investment in modern and efficient public transport systems. As I have said, the much delayed, now much diluted, partial trans-Pennine electrification would be a key first step in addressing the north’s transport woes, but it would be just that: a first step. What is really needed is a game-changer, but on that the Bill is silent.
My home city of Bradford is a leading voice in northern powerhouse rail. In recent months, in a bid to maximise the value of the project to Bradford’s economy, Bradford Council launched Next Stop Bradford in partnership with the city’s business community. Next Stop Bradford is a cross-party campaign calling for an NPR stop in Bradford. Initial research suggests that a Bradford station would bring an annual boost of £53 million pounds to the local economy, and at least £1.3 billion pounds for the region as a whole. If the media reports from over the weekend are accurate and Bradford is now included on the NPR route, that is welcome news for the Bradford economy and for my constituents.
Bradford is a growing city, with one of the youngest populations in the country. It has huge potential. As I have said in the House before, Bradford is Britain’s fifth largest local authority, with a population of 530,000 residents, and it is the biggest city in the country without a through stop connecting it directly to the intercity rail network. An NPR stop in Bradford would be a huge step change in our regional connectivity. Faster services and higher capacity would draw the region closer together, and it would connect people to jobs and businesses to new opportunities across the region and the country. The currently disconnected economies of the great cities of the north would be united. The economic opportunities would be enormous, as would the boost to this country’s productivity. This is a priority for my constituents, but a priority that is not in the Finance Bill.
During the recent Budget we learned that, as a country, we face an era of economic stagnation unseen in modern times. Wages in my home city are flat, real incomes are falling and the cost of living is rising, all of which is not helped by a 3.4% hike in rail fares from January. Crucially, productivity improvements have stalled. That point is massively important in the context of my remarks today, because arguably the single most potent driver for improving productivity is sustained investment in transport infrastructure. I ask that the Minister and this Government commit to NPR with a Bradford stop, and the resulting transformation that that will deliver.
This Finance Bill concentrates on many of the wrong priorities as far as my constituents are concerned and, importantly, does not seek to redress the economic imbalance between the north and the south.
Luke Graham (Ochil and South Perthshire) (Con)
I rise to speak in support of both the content and the intent of this Finance Bill. As I said in a previous debate, a Budget is not simply a piece of accounting but a statement of intent by the Government for the coming year. As a new Member, it was an honour to lobby and to argue on behalf of my constituents and to be able to see, on 22 November, that the Government had delivered for all of our constituencies in Scotland. I thank my right hon. Friend the Financial Secretary for that.
I wish to take a moment to reiterate the key areas in which the UK Government have delivered for those of us who represent Scottish constituencies: a duty freeze for the Scotch whisky industry; a tax break for the oil and gas industry through the transferable tax history scheme; and a funding commitment to a number of city deals across Scotland, including for my constituency of Ochil and South Perthshire with the Tay cities deal and the Stirling and Clackmannanshire city deal.
Finally, and perhaps most significantly, the Chancellor removed the VAT payments for the Scottish police and fire services, which are worth an estimated £35 million to £40 million a year. That in particular should not be underestimated. The Scottish police and fire services were liable to pay VAT in the first place only due to the centralisation of the services by the Scottish National party Administration in Edinburgh. Since that centralisation, the cost to Scotland and its key services has been £140 million.
Luke Graham
Not just now. I wish to make more progress.
That decision was made in the face of warnings. It was an entirely political decision, fuelled by the SNP’s central belt bias and obsessive power-grabbing in Edinburgh. It therefore fell to the Scottish Conservative group to fight for Scotland and to the Conservative Chancellor to rectify those extremely damaging errors inflicted on Scotland by the SNP.
Having been shown who is truly “stronger for Scotland”, the SNP has made it its mission to undermine the hard-won successes for Scotland and to dismiss the efforts of the Conservative group here in Westminster and the Conservative Government, who have helped to deliver so much for Scotland. We all know why it has done so: it does not fit in with its narrative of grievance for the Conservatives not only to act in the best interests of their constituents and to have them at heart, but to deliver on those interests.
Ahead of Thursday’s Scottish Budget, we can all safely expect the SNP Administration in Edinburgh to carry on with their shameless Westminster finger-pointing, blaming Westminster for giving them the exemption on VAT; chastising Westminster for giving them the “wrong” money; and demanding even more from the Scottish people in the form of tax increases imposed by Holyrood.
Those are all significant broad-brush statements, but I wish to go into some detail about what the measures in the Budget mean for our constituencies in Scotland. For those who are not familiar with the hugely beneficial impact of the Barnett formula in Scotland, let me explain that Scotland benefits to the tune of £1,750 per head by remaining a part of the United Kingdom. It is also worth reminding Members that, in practice, that represents a higher rate of spending per head than England and Wales. Before we get into a dispute about figures, let me tell the House that those statistics are from the SNP’s own Government expenditure and Revenue Scotland figures. In addition, we very much welcome the £600 million more that will be spent on rail, which is an increase on the last spending period.
Stephen Kerr
Does my hon. Friend agree that those are indeed the dividends of the Union?
Luke Graham
I could not agree more, and I will go further into those dividends shortly.
The Government have delivered an additional £2 billion to Scotland in the Budget, which should be a reason to rejoice. However, they are being criticised by SNP Members. [Interruption.] The House can hear them trying to talk me down now, which is not a surprise, because no matter how high the price or how good the deal, the SNP is not satisfied. It reminds me of the Roald Dahl story, “Charlie and the Chocolate Factory”. We have the political manifestation of Veruca Salt sat just across from us; SNP Members go from room to room, shouting what they want and demanding more and more, yet they are never satisfied. Conservative Members have heard the interests of our constituents and we have delivered for them.
Alison Thewliss
Does the hon. Gentleman not accept that the Government are actually creating far more families like Charlie Bucket’s, with old people huddling together in bed because they cannot afford to live?
Luke Graham
I could not disagree more. More money is going directly to frontline services, and we are lowering taxes for the working families who are most in need, so the hon. Lady will see that Charlie and Grandpa are on the Government side tonight, not the SNP side.
As we look ahead to the Scottish Budget on Thursday, colleagues in this House and in Holyrood will be waiting with bated breath to learn precisely how the SNP plans to pass the additional money to local authorities for the roll-out of broadband and other key areas of investment that it has thus far undermined. To see how contradictory some of the SNP’s behaviour is, it is worth looking at how the party misuses the powers it has, refusing to pass some of the increases in the block grant to education and health funding—matters that are explicitly devolved. As we heard in the Budget, the block grant has increased to more than £31.1 billion, which is a real-terms increase over the spending review period and up from £27 billion in 2011-12. What does that mean for our constituents? Well, we have a breakdown of how devolved spending is carried out in public services, thanks to Jim Gallagher. Under the SNP, NHS Scotland is underfunded and understaffed. Health spending in Scotland has increased more slowly than in England over the past 10 years, growing by 34% compared with 50%. Per head, that translates to spending growth of 39% in England but only 28% in Scotland.
SNP Members may complain about Tory austerity, but their argument does not stack up. Her Majesty’s Treasury figures show that total health spending increased by 9% in England between 2011-12 and 2015-16, but only by 3.4% in Scotland over the same period. After 20 years of devolution and 10 years of an SNP Administration, people living in Scotland still have the lowest life expectancy in the United Kingdom. That is a damning indictment of the financial choices the SNP has taken in Holyrood with funding from this place. I could go on, but I am conscious of time.
Luke Graham
Well, education is another area that I could touch on. Reading scores and mathematics and science results are down in Scotland since 2006. England and Northern Ireland now outperform Scotland in every category.
Luke Graham
I will not, because I am conscious of time.
Under the SNP, more money goes in but fewer services are delivered. With a record like that, it is disappointing for Conservative Members that SNP Members stand in this Chamber and criticise what this Budget has delivered for Scotland. There is £2 billion extra for Scotland.
Luke Graham
Yes, there is, and there is a real-terms increase, as the hon. Lady knows. There has been a whisky duty freeze, and police and fire service VAT has been returned to Scotland. Those are good things. I hope that colleagues in all parties in Holyrood can use this funding productively and work constructively so that the two levels of Scottish government can work together and deliver for their constituents.
Liz McInnes (Heywood and Middleton) (Lab)
I am grateful for the opportunity to contribute to this debate.
As my hon. Friend the Member for Bootle (Peter Dowd) said, this Finance Bill is testament to an out-of-touch Government with no idea of the reality of people’s lives and no plan to improve them. In the time that I have, I want to make particular reference to the lack of any apparent willingness on the Government’s part to invest in the west to east Crossrail for the north that we in the so-called northern powerhouse so desperately need and want.
In the Budget, the Chancellor made no mention of investment to improve the trans-Pennine rail route other than an announcement about improved wi-fi. As the Mayor of Greater Manchester, Andy Burnham, said, at least we will be able to text and tweet our families and friends to let them know that we will be late. It is not just northern voices saying this: Derek Robbins, senior lecturer in transport and tourism at Bournemouth University, said:
“I would…describe the lack of progress towards a modernised and reliable transPennine rail route as more than disappointing, given that it is an essential investment for future economic growth in the north.”
Labour is planning to borrow to invest, unlike this Government who borrow to cover day-to-day spending. Investment that gives higher returns than the cost of financing the extra debt makes sense. The £10 billion cost of Crossrail for the north would unlock £85 billion of additional economic growth. However, I do not believe that this Government have the imagination or the will to make the northern powerhouse anything more than just a slogan. When I asked the Secretary of State for Transport what conversations he had had with the northern powerhouse Minister about Crossrail for the north, his response was to talk about the electrification of the line from Manchester to Liverpool. That lack of response led me to believe that the answer to my question was probably none. Maybe the Secretary of State has the same problem I have encountered when trying to set up meetings with the aforementioned Minister for the northern powerhouse. I am still waiting for a response to a request for a meeting that was sent in October.
Yesterday, we witnessed an historic moment for Manchester’s rail network, with the opening of the Ordsall Chord—an £85 million scheme linking the main central Manchester stations of Victoria, Oxford Road and Piccadilly. However, our enthusiasm for this achievement was tempered somewhat by our concern over Government investment in rail in the north. For Manchester to really benefit from the Ordsall Chord, we need investment in Piccadilly and Oxford Road stations. For High Speed 2 to bring any benefit to the people of Greater Manchester, we need expansion of Piccadilly station, and that expansion must also take in and plan for HS3—Crossrail for the north. Yet the Government have indicated that Piccadilly might get only a digital upgrade, rather than the extra platforms that are needed. This decision has been met with despair from rail action groups, which have pointed out the very real need for physical capacity for more trains to go through the station, and that digital signalling is just not enough.
As I said immediately following the Budget statement, that statement was notable more for what it did not say than for what it did say. There was nothing for our police and fire services, nothing for social care, nothing for children’s services and no adequate equality impact assessment. For the last seven years, we have had nothing from this Government but missed opportunities and missed targets. The five-year austerity plan did not work; now it is the 15-year austerity plan. The Government keep missing their targets, but they keep returning to them—just with a longer timeline every single time.
This Government’s obsession with deficit reduction is at the expense of investment for our future, and it is people in the north who are losing out the most. In terms of transport spending, London has received over five times more public spending in the last five years than the north-west—hardly a country that works for everyone.
Helen Whately (Faversham and Mid Kent) (Con)
It is a pleasure to follow the hon. Member for Heywood and Middleton (Liz McInnes),although I could not help but notice that her speech was almost entirely about spending, with almost nothing about raising money for that spending. The Finance Bill is about raising revenue.
Liz McInnes
If the £10 billion was spent on Crossrail for the north, it would bring revenues of £85 billion. I have talked about spending and raising money.
Helen Whately
I appreciate the hon. Lady’s point, but I still think that she very much spoke about spending and not about the content of this Finance Bill.
Our job in this House is to make difficult decisions not just on what we spend money on but on how we raise that money—who we tax and what we tax, when we are reluctant to tax people and would much rather they had the money in their pockets to spend themselves. Our aim is to make things better for our constituents, young or old and those in between. It is not our job to make promises that cannot be kept, to write cheques that we cannot cash, and just to say things that sound nice, like massive amounts of spending, but might turn out to have nasty consequences like high unemployment. Labour Members may tell us differently, but spending that we cannot afford is not the moral high ground—it is the moral low ground.
This Finance Bill builds on the tough decisions of the Governments led by Conservative Prime Ministers over the past seven years who have reduced the deficit by 75%, while as of next year debt will fall as a share of GDP. Let us not throw that all away, as Labour Members would, with uncosted proposals and unquantified borrowing. As we heard earlier, they could not answer our questions on how much their borrowing would cost.
Helen Whately
I think it was at least 25 times that Labour Members were asked, and still no answer other than “See if you can look it up for yourself.” Why it could not be said at the Dispatch Box, I do not know, but I fear that they are inevitably planning to pile up debt for future generations.
I welcome three things in particular. First, there is the Government’s commitment to help people on low wages. The continued increase in the personal allowance is taking people out of tax and enabling them to keep more of what they earn to spend as they need to. Alongside that, the minimum wage is rising, but at a rate that is manageable for businesses so that they do not have to lay people off in order to pay it. Policies in the Budget to increase the supply of houses should bring down rents, which, we acknowledge, have been going up far too fast. In this Bill, there is a stamp duty cut for first-time buyers to bring buying a home within reach of more families—a particular challenge for my constituency in the south-east. As Shepherd Neame brewery is the largest employer in my constituency, I should mention the very welcome freeze on beer duty, which will be good for it and good for beer drinkers across the country.
Secondly, I welcome the actions on tax avoidance and evasion to make sure that we collect more, if not all, of the tax owed. That builds on the Government’s track record in this area, as the Financial Secretary to the Treasury pointed out. Particularly in the context of my constituency, I welcome plans to cut down on online VAT evasion, with the advantages that gives to online businesses in paying VAT, because I want us to achieve a more level playing field between online businesses and those with premises such as our high street shops. Regarding the policy on landfill tax, in my area we have an ongoing problem with rogue land fillers who start off in line with the law and seem to end up not in line with it.
Thirdly, I welcome the incredibly important commitment to addressing our productivity challenge. This has been acknowledged by this Government many times—it is not suddenly news. In fact, the measures in the Budget and the Finance Bill are the product of a huge amount of work looking at how we can improve productivity—a long-running problem in this country. It is vital that we raise productivity because that means that people get more money for every hour that they work. That is the key to improving living standards and funding the public services that we want, particularly with NHS costs going up as people need and want more care. There are many factors underlying our productivity challenge. Skills are a challenge for us. There is an issue with companies investing in workers, and workers investing in themselves. It is, to some extent, a cultural challenge. One venture capital investor told me that the key difference that he notices between British and American start-ups is that it is common to see in the business plan of American start-ups investment in training for themselves as the founders of the business. He rarely sees that in British start-up companies. That is, to some extent, a cultural challenge; we do not see investing in ourselves and our skills as part of life.
We know that we lag behind other countries in the use of technology and investment in automation. One specific example is our robot density. In Japan, there are 305 robots per 10,000 employees. In Germany the figure is 301 and in the Netherlands it is 120, but in the UK it is just 71. That is just one example of where we lag behind in investment in technology and automation. We have to drive up investment in those areas, as the Finance Bill does. Such investment cannot just come from Government spending more; we have to stimulate private investment in those areas, as my hon. Friend the Member for North West Hampshire (Kit Malthouse) said eloquently. We have to mobilise private capital through incentives such as the EIS, which really works. I welcome the increases in that area, which will help to ensure that more businesses start and grow in this country, to provide the jobs and the higher wages that our constituents want.
There are no easy answers; what matters is getting the right answers. We need to help people on the lowest wages to keep more of what they earn, get a fair contribution from high earners and global businesses, build a more productive economy and invest in skills and technology. We want people to have higher wages in the jobs of the future so that they can live as they aspire to.
Grahame Morris (Easington) (Lab)
I am pleased to be able to speak in this important debate, and to follow the hon. Member for Faversham and Mid Kent (Helen Whately). I am speaking in support of Labour’s reasoned amendment, setting out our opposition to the Finance Bill. That includes our opposition to the £4.7 billion reduction in the banking levy while children’s services are cut, the lack of adequate equality impact assessments, the lack of provision for lifting the public sector pay cap, and the lack of provision for addressing the funding crisis in social care and our NHS. I also oppose what I see as a lack of concrete action to tackle tax avoidance and evasion properly.
There are a number of areas that I will not be able to cover, but I did not want to make a contribution without mentioning the Women Against State Pension Inequality. We in the Opposition want justice for the WASPI women. I am sorry that the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman), is no longer in his place, because there will be an opportunity for the Government to do something about the matter on Thursday, after the Backbench Business Committee debate.
I am concerned that the Budget does not do enough for disabled people. I am concerned about stagnant pay and the failure to provide resources to lift the pay cap. I am concerned about the failure to provide resources for local government and the funding of our police and fire services. On housing, the hon. Member for Faversham and Mid Kent said that Labour were not proposing any concrete, tangible solutions. I have been around for a few years, and I can look back at what works. Legitimate concerns have been expressed about the stamp duty proposals, which are feared to be the wrong solution. My understanding is that 40% of council houses that were sold under the right to buy are now in private ownership and, on average, rents in the private sector are twice those for council houses in the social housing sector. That costs this nation £10 billion—not as a one-off, but each and every year.
Surely a sensible person would say that in those circumstances, we should be building many more social houses. The Government’s target is, I believe, about 200,000 or 250,000 houses a year—[Interruption.] It is 300,000; I am grateful for that sedentary intervention. The last time we got anywhere near that was in 1973. As I am sure Members will recall, that is the year that Sunderland won the FA cup. Ian Porterfield scored the goal, and Jimmy Montgomery made a marvellous double save from Trevor Cherry and Peter Lorimer. In 1973, 100,000 council houses were built. That is the scale and magnitude of the challenge we face, and the Government should take that into account.
Like several of my hon. Friends, I want to concentrate, in the short time I have, on making the case for more investment in integrated transport networks, particularly in the north-east—we have heard about the north-west; I want to put the case for the north-east. The Budget is the time when the Government make political choices, and they should be held to account. I acknowledge that the Government have announced an investment in the Metro on Tyneside, which is certainly important, but the Metro is 40 years old, and the investment is to replace the rolling stock.
I represent the constituency of Easington, and I would love to see the Metro extended to the hinterland of Tyne and Wear, providing opportunities for expansion to towns such as Seaham and Peterlee in my constituency. That would naturally promote economic growth in the north, help to join up communities, and allow access to jobs in places such as Sunderland, Gateshead and Newcastle.
I know that Ministers like to have an evidence base, and I draw their attention to an excellent Library publication, “Transport Spending by Region”, published just last month. It gives transport spending totals overall, with the margin of discrepancy, with population factored in, between investment in the north-east and London. Overall, there is 10 times more investment in London and four times more in the south-east than in the north-east, while for railways there is 20 times more investment in London and five times more in the south-east. They say there is a big investment in the Metro system, but we have to recognise that, in the five years from 2011 to 2016, there has been a massive lack of investment. We have had terrible under-investment during that period.
Kevin Hollinrake
The hon. Gentleman makes a very good point about the disparity in investment, but he might be interested to know that the moneys from central Government are very similar across the country. What lies behind those figures is the ability of London to leverage in private sector and local authority investment, because those local authorities also get a much better deal.
Grahame Morris
I thank the hon. Gentleman for his intervention; I am sure that what he says is true. I have had conversations about the nature of the very large-scale transport infrastructure investments that are, in effect, self-funding, and I think we should apply those principles. I was a great fan of the documentaries about opening up the west with the railways, in which Michael Portillo argued that investment was not put into the existing cities on the east coast, but into the west, to open it up and bring in jobs and investment. There is an enormous case for doing that.
I want to speak briefly about the A19, which is vital to the economic health and wellbeing of my constituency. However, it is a dangerous road, and at this time of year it is a nightmare for people travelling on it. I want the Government to future-proof our regional transport infrastructure. There are multiple housing developments in my constituency, which will create tens of thousands of more vehicles and journeys in my area. We want to encourage new businesses to locate on the A19 corridor, but the road is already too dangerous and not fit for purpose.
If Ministers do not believe me—I do not have a Library paper to support this—I urge them to google the A19, and they will find a whole list of terrible headlines. One, about an “11-CAR pileup on the A19”, is from the Daily Mail. They may be more inclined to believe that newspaper than the Sunderland Echo, which has reported this afternoon that the A19 has reopened after a six-vehicle crash near Seaham in my constituency brought traffic to a standstill. They will find a whole list of accidents and crashes.
The Government need to future-proof our transport infrastructure, and the Budget is an opportunity to do that. There is the possibility of investment north of Nissan, linked to the automotive hub, and in my constituency, preparatory work has begun on a 55-acre industrial park, the Jade Park development, adjacent to the A19. I welcome the fact that that will bring new, bespoke manufacturing jobs and a variety of others, but the failure of the A19 will make it more difficult to attract future businesses. If we are to accommodate new developments, I urge the Government to use the Budget to take action.
The A19 is one of the principal economic drivers in my constituency. It is vital for manufacturing, export-focused businesses such as Caterpillar, NSK and, until it closes the week before Christmas, Walkers crisps. The lack of investment, maintenance and upgrading of that vital economic highway is holding back business in my constituency. I have raised the issue several times: I have tabled questions and even an early-day motion, but we need the Government to recognise the problem. They need foresight; they need to realise the value of investment, try to future-proof our economy, and support our regional development.
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure to follow the hon. Member for Easington (Grahame Morris). We share an economic interest in the A19, so I agree with many of his points.
I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests on my business background, and I am also vice-chair of the all-party parliamentary group on fair business banking. I want to focus on the latter in the short time that the Whips have allocated to me this evening.
Productivity was an important element in the Budget, and it is the key to improving living standards. However, as the Budget also states, competition is the key to driving productivity. The Budget addresses that in many different areas, particularly through access to finance. It deals with those who cannot currently access finance.
However, there are two sectors of the business community: those who cannot and those who will not access finance. The £20 billion investment in patient capital, the doubling of EIS relief—I have benefited and suffered from my investments in EIS; I declare an interest there, too—and challenger banks are all positive moves in the right direction when it comes to opening up finance to small and medium-sized enterprises.
There are also difficulties in terms of people who will not borrow. Some people do not want to borrow because they want to run a certain type of business, perhaps a lifestyle business. In the UK, we are good at start-ups. We are at the top of the league table in Europe for the number of start-up businesses. However, we are well down the league table—13th out of 18—in scale-ups. There is a problem in moving from start-up to scale-up, and some people will not borrow because they are worried about experiences—sometimes their own—of borrowing from banks.
We have seen an example of that in the Royal Bank of Scotland and Global Restructuring Group scandal, in which viable businesses were totally inappropriately taken away. Not all businesses that went through that scheme were viable, but around 16% were, according to Promontory, which undertook the independent report into the GRG scandal, yet the businesses were taken away. This is about not just financial, but human cost. Somebody’s life’s work in starting and building a business has been totally inappropriately taken away from them. The human cost is huge; sometimes it is the ultimate cost.
Ruth George
Does the hon. Gentleman agree that it is terrible that more than half of small businesses fail in the first five years, largely due to lack of capital investment, as he says? Does he agree that it is time for more radical ideas, as the hon. Member for North West Hampshire (Kit Malthouse) said, and that Labour’s proposal for a business investment bank would help those companies?
Kevin Hollinrake
Businesses fail for many reasons. Business is an extremely risky undertaking—I have been in business most of my life—which is why we should pay tribute to all people who take the step forward to create wealth and jobs. I accept that we need to find more different and innovative ways to get finance to business start-ups and scale-ups.
Business banking is unregulated. If a bank acts inappropriately, it is usually far too wealthy for an individual or business to sue. To rectify that problem, we need an independent redress scheme for businesses. I have a constituent who was mis-sold an interest rate hedging product that resulted in him paying £18,000 a month in interest payments from a relatively small business. It was put into receivership. The bank eventually compensated him for the mis-selling of the product, but did not compensate him for the business he lost. That cannot be right. The Government propose expanding the financial ombudsman scheme to deal with the problem, but that will not be enough.
We need an extension of the tribunal system, similar to the employment tribunals, so that small businesses can seek redress without going to the huge cost of suing a bank in the courts. Financial services tribunals already exist, but for the wholesale markets. We need to expand that system to bring in SMEs, so that judges preside over cases, instead of us having a cosy internal system involving ex-bankers who now work in a different part of the sector. Such a system would be low cost and funded by the banks. It would increase confidence in the banking system and, crucially, result in banks lending more money, because people would have confidence in the system. I hope the Minister will look at the financial services tribunals. I am meeting the Economic Secretary in January to discuss this in more detail, but I believe it is one of the missing pieces of the jigsaw when it comes to improving productivity. I welcome the many measures in the Budget and will support the Bill this evening.
Ruth George (High Peak) (Lab)
The Chancellor’s Budget speech set out the serious state of our economy, including on the key issue of productivity, as Members on both sides have agreed. Our productivity is now 29% lower than Germany’s. It grew by only 0.2% in 2016 and not at all in 2017. It is serious when the OBR is saying that there are few signs of recovery and that the recent weakness will prove more enduring. Surely this is the time when the Government need a big plan to improve our productivity.
We already have the lowest GDP growth of any OECD country except for Portugal and Greece. Household incomes have fallen 6% compared with inflation, and we are now predicted to have another decade of falling incomes. It is no wonder that household debt is rising and 8.3 million people are now in problem debt. Added to the lack of productivity, we now have the lowest Government investment of any OECD country except for Portugal and Greece. That leads to increased Government borrowing for which we see nothing in return. Last year £52 billion more was borrowed, and it is £60 billion more this year. The OBR’s prediction of lower productivity growth will add another £26 billion to borrowing. That is the cost of the Government’s policy of austerity that is hurting but not working.
Our national debt is now nearly £2 trillion, which is nearly 90% of GDP and higher than that in both Germany and France, although it was lower in 2010. In spite of biting austerity, we see lower growth, lower productivity and lower Government investment. It is no wonder our productivity is so low when we now have the longest commuting times in Europe and the most expensive privatised public transport. Some 3.7 million workers spend more than two hours a day travelling to work. The average travel time of almost an hour is the highest in Europe. That adds to our people’s misery and our lack of productivity, but still we see no investment for a Crossrail of the north. East midlands rail electrification has been cut. Even the small improvement of dualling the track on sidings in my constituency to speed up journey times between Manchester and Sheffield—fully funded by Network Rail—has been stuck with the Department for Transport for four years. We await a decision on half a kilometre of track to make small improvements to our productivity, and our freight and transport times.
The Bill does nothing to help public services that are crying out for proper support. It does nothing for our public servants who are suffering under an unfair pay cap. It does nothing for the people suffering £1,000 of cuts to tax credits since 2010, with another £4.6 billion due to be cut under universal credit, or the 1 million more children due to be in poverty by 2020. The Bill does nothing to reverse those trends, nothing to support public services and nothing for hard-working people. Yes, we have seen 3 million extra jobs, but we have also seen zero-hours contracts, short-hours contracts and 3.7 million working people in poverty. That does not help our economy.
The Bill is a wasted opportunity. It continues to reduce corporation tax—it is now down to 19%, which is less than the rate of income tax—and creates a false impetus for creative accounting. The reduction in corporation tax for the largest companies does not go to the workers, despite what the Government promised when they kept cutting it. From my time negotiating with the shopworkers’ union, the Union of Shop, Distributive and Allied Workers, I know that the reductions in company accounts for corporation tax are far greater than the amount that goes in extra pay for workers. Instead of the handouts to large companies with over £1.5 million a year of profit that we have seen over the past seven years, Members on both sides of the House agree that it is smaller companies that need investment. I refer to Labour’s proposals for a business investment bank to borrow to invest in the companies that drive our productivity and growth. Instead, only four in 10 small companies survive for five years. They have been hit by the rise in VAT and business rates, cuts to regional development funds, and the lack of investment in our infrastructure.
The Government introduced austerity in 2010 and immediately strangled Britain’s economy, which was starting to grow again. Since then, they have borrowed nearly £1 trillion more, cutting and cutting. As my hon. Friend the Member for Bootle (Peter Dowd) said, a nation’s economy is like a business: it needs investment to grow. Any respectable businessperson will tell you, “You can’t cut your way out of a recession.” The Government would do well to learn that lesson.
We needed a big plan for Britain. The Bill is like shuffling the deckchairs while our economy continues to sink. Those of us on the Opposition Benches have plenty of ideas, but it is typical of this Government’s attitude that they will not allow the Bill to be amended, they will not let the whole House vote on those ideas and they will not let Britain’s economy grow.
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
I rise to welcome the Bill. It continues the Government’s prudent financial management that has delivered growth, reduced the deficit, and reduced unemployment to its lowest level not just in my lifetime, but since before I was born. This prudent management has allowed us to invest in our public services such as the national health service. There is perhaps no public service so dear to the heart of the British people than the NHS. As a consultant paediatrician, I have worked in the NHS for the past 15 to 20 years. I have seen the very important work done by its staff on a daily basis.
The Government’s investment of £2.8 billion to 2019-20, and another £10 billion in capital investment to upgrade buildings and facilities, is extremely welcome, but that money is not just about numbers. It will save lives, improve people’s care and help us to achieve many of the targets that have been set, such as reducing stillbirths and equilibrating mental and physical healthcare. It will allow us to buy the most up-to-date diagnostic equipment, such as 3T scanners for magnetic resonance imaging, and the very newest and best medical drugs. It will ensure that the locally designed plans of sustainability and transformation partnerships have the investment that they need.
We all know that in winter the NHS is under more pressure than it is during the summer, especially given the change in the demographic of our country as people become relatively older. I therefore welcome the £350 million in the Budget that will give an extra boost to the health service—not next year, but now—by giving doctors, nurses and allied health professionals access to the resources that they need to save lives this winter. It is important to ensure that the money is well spent, and I have every confidence that our Secretary of State will ensure that it is. It needs to be spent in areas where it will directly improve patient care.
Rachel Maclean
My hon. Friend is making good comments about investment in the NHS. Will she join me in welcoming additional funds to support mental health services in schools, which will benefit young people by helping them to secure the best start in life and to deal with the challenges in their lives?
Dr Johnson
I certainly will. As a children’s doctor, I have seen a dramatic increase in the number of young people who are admitted to hospital because they have taken an overdose or self-harmed. When I was a very junior doctor, a senior house officer, a young person would be admitted on a Friday—it was usually on a Friday—who had been in such severe mental distress that he or she had taken an overdose or self-harmed in some other way. Now it is normal to see children—sometimes several—admitted to the ward every day with similar symptoms. This investment cannot come soon enough to ensure that every one of those young people is given the best possible care. As my hon. Friend said, we must ensure that it is translated into care that makes people feel better.
We must bear in mind that care is not just provided by frontline staff. People often say that we need to get rid of managers and administration, but we should not forget that secretarial support for clinicians is particularly important. None of us wants letters to be sent by secretaries weeks after they were dictated, which is something that I have experienced during my clinical career.
We need to measure outcomes. It is important for us to know how many patients we have treated, how effective their treatments were, and how long people are waiting so that we know how best to direct the funds that we have to the areas that will make the greatest difference to our constituents. We also need to avoid spending large amounts on recording and measuring so that we can spend it on treating and diagnosing.
With the advent of GP at Hand, digital taxation and online access to the Driver and Vehicle Licensing Agency, more and more of our life has entered the online world, so I welcome the Government’s investment in technology of £500 million to ensure that our economy is fit for the future. They have invested in artificial intelligence and 5G, for instance.
Alex Burghart
Given my hon. Friend’s experience of the NHS, I should be interested to hear how that £500 million investment in future technologies could benefit the health service in the future.
Dr Johnson
I shall give an example from my constituency. United Lincolnshire Hospitals NHS Trust is considering setting up a body to look at how best to deliver rural care, examining ideas such as using Skype to have consultations with people who might otherwise have to travel a long distance. There are also the possibilities of using telemedicine to monitor patients’ blood pressure, for example, while they are in the community. In such ways, we can ensure that we deliver the best possible care using very modern technology.
Kevin Hollinrake
Does my hon. Friend agree that all these opportunities to reduce the cost of providing health services in rural areas mean we also need to invest in superfast broadband and digital networks to make sure that people can actually receive this kind of new innovative care?
Dr Johnson
My hon. Friend brings me to my next point. These investments are welcome, but we also need to invest for those people who are currently receiving poor service. Church Lane in Kirkby-la-Thorpe in my constituency has among the lowest broadband speeds in the entire country. In some parts of this country, downloading a film takes longer than flying from London to Sydney. There are children in that area who are unable to do their homework, while shopping is impossible and dealing with tax online is difficult. The Government have invested strongly in this, and now over 90% of people have access to superfast broadband, but I urge them to take any steps they possibly can as soon as possible to ensure that those few remaining homes that cannot yet do so can receive superfast broadband and are connected to this vital utility which, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) said, will be vital for the provision of healthcare.
People in rural communities face long travelling distances when they go from their home to school or work. That is why I welcome the Chancellor’s freezing of the fuel duty for the eighth consecutive year. This is the longest such freeze for 40 years.
Robert Courts (Witney) (Con)
My hon. Friend is making many excellent points. Does she agree that there is a link between the point she has just made about broadband and what she is saying about long travelling distances? The quicker the broadband speed, the shorter the distance anyone will have to go to work, because instead of having to go to an office, they might just have to go from their kitchen to their living room.
Dr Johnson
It is indeed true that slow broadband speeds can be a challenge for people running businesses in rural areas.
The freezing of fuel duty means that the average car driver in the UK is £850 better off since 2010, which is not an insignificant amount, while the average van driver is £2,100 better off. Therefore, through this measure, the Government are supporting hard-working families and small businesses, particularly in rural areas.
Ian Paisley (North Antrim) (DUP)
The economy of our kingdom largely turns on the wheels of white van man. The initiative the hon. Lady speaks in support of is critical to ensuring that our economy moves forward. I would welcome further reductions in that tax.
Dr Johnson
I thank the hon. Gentleman for his intervention.
Finally, I welcome the £668,000 the Government have given through LIBOR grant to the International Bomber Command Centre in my constituency. Bomber Command No. 166 Squadron suffered the highest losses of any allied forces unit during world war two, with an attrition rate of 44%. The centre will open next year, the year of RAF100, which is a good time for it to open in terms of remembrance. It will serve as a point for the recognition and remembrance of the sacrifice of people from 62 nations around the globe, 57,861 of whom lost their lives saving the future for us and our children and grandchildren.
The International Bomber Command Centre will record for the future the memories of those who served in Bomber Command. They include people such as 92-year-old William Leslie Anderson, my constituent and relative through marriage. He served as a flight engineer in No. 166 Squadron. A flight engineer works not only on the planes on the ground to ensure that they are fit for take-off, but with the pilot throughout the flight and then again preparing the aeroplane once it is back on the ground. People such as Mr Anderson worked hard to secure our future, and it is important that we think about the future of those who will go ahead. That is why I reject completely the Labour party’s plans to spend, spend, spend. It is our children, our children’s children, and our children’s children’s children who would pay the debt interest on such ever-increasing spending plans.
We have asked Labour Members so many times today—perhaps 25 or 26 times—how much their plans would cost, but still we have had no answer—[Interruption.] I appreciate that we have had an answer. We have been told that we can look it up on the internet, but I would like to know which page and document to look at, please, because I have not been able to find it.
Stephen Kerr
My hon. Friend will be aware that the Opposition’s position is that it will cost what it will cost. Sounds horrific, doesn’t it?
Dr Johnson
It certainly does sound horrific. Spending money might sound lovely now, but we would be spending the money of our children, and it is they who would suffer for it.
Alex Burghart
We were asked earlier to look things up on the internet, so I looked up something about universal credit. It turns out that £2 billion has been set aside for universal credit but, according to the shadow Secretary of State for Work and Pensions, the £1.5 billion set aside by the Chancellor in the Budget represents only £1 in £10 that needs to be put in, therefore creating a £13.5 billion black hole. Does my hon. Friend agree that that is unacceptable?
Dr Johnson
I do, and that is why I will be supporting the Finance Bill today. It is good for my constituents and it will ensure that we have an economy that is fit for the future.
Rachel Maclean (Redditch) (Con)
Thank you, Mr Speaker, for calling me to speak in support of this critically important Finance Bill. I listened with a great deal of interest to the hon. Member for Bootle (Peter Dowd), as I do at every opportunity. I am sure that we will have many more such opportunities in our careers. He came up with a long list of things that he was dissatisfied with in the Government’s approach to this country’s finances. Unfortunately, he missed out certain things that he really ought to have mentioned, and I would like to take this opportunity to list the things in the Bill that he ought to have praised and welcomed.
The first is the jobs miracle. Unemployment is at a 43-year low. Unlike my hon. Friend the Member for Sleaford and North Hykeham (Dr Johnson), I had actually been born 43 years ago, but I definitely do not remember the figures. Everyone up and down the country—including my constituents in Redditch—is currently benefiting from record high levels of employment, enabling them to work and bring home money for their families. They have a pay packet at the end of the week, and they have secure long-term jobs and the prospect of fulfilling their potential in life. I welcome that, and it is a shame that the hon. Member for Bootle does not.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Does this jobs miracle include apprenticeships for 65-year-old WASPI women?
Rachel Maclean
I am delighted that the hon. Gentleman has raised that point, which we discussed in another debate recently. I made it clear at the time that an apprenticeship is not right for every woman, but it may be right for some. This Government have set their face against ageism. If someone wants to work and they are 60, 61, 62, 65 or even 70, they can still contribute. Some Members on the Government Benches are older, and they are still contributing and doing an excellent job. We should stand against discrimination, because ageism and sexism together are a toxic combination. Indeed, if my constituents see fit to re-elect me, I hope to be in the House when I am 65, 66, 67 and maybe even 70 or 75.
Alan Brown
I thank the hon. Lady for giving way one more time. I went to see my local WASPI group on Saturday morning, and I ask her to go and speak to WASPI women in her constituency to see whether they think it is sexist or discriminatory to promote apprenticeships to them. I can assure her that they are not happy at the suggestion.
Rachel Maclean
I thank the hon. Gentleman for that intervention. I assure him that I have spoken to WASPI women in my constituency, and I have spoken to many other women of that age or older who have welcomed my comments.
The next thing that the hon. Member for Bootle omitted from his long list is that 31 million people have seen a tax cut during this Government’s time in office, meaning that people take home more of what they earn—more hard-earned money in their pocket at the end of the week.
Let us talk about the jobs that have been created.
Kevin Hollinrake
Is my hon. Friend aware that no Labour Government have left office with unemployment lower than when they entered office?
Rachel Maclean
I am delighted that my hon. Friend has reminded me of that excellent point. He is absolutely right. This Government understand how jobs are created. That is a serious point, because jobs are created when businesses grow and risk their hard-earned savings—[Interruption.] The hon. Member for Brent Central (Dawn Butler) is talking to me from a sedentary position. Does she want to intervene?
Dawn Butler (Brent Central) (Lab)
Besides my being offended by the use of the term “miracle”, which does not describe anything that the hon. Lady has described, I want to say that many businesses are not investing due to Brexit. Are zero-hours contracts included in her “miracle”?
Rachel Maclean
I thank the hon. Lady for that intervention, in which she makes two broad points. This Bill is not about Brexit, so she will forgive me if I leave it to my esteemed colleagues to discuss that, but we recognise that it will have an impact. Does she realise that it is what the country voted for? My constituents voted for Brexit, and the Prime Minister and the Government are getting on and delivering it. The Government actually have a plan for Brexit, but the Opposition Front Benchers seem to have changed their plans several times in the past day—maybe even in the past hour—and I do not think that their constituents really understand what their plan is.
I will now move on to discuss zero-hours contracts.
Eddie Hughes (Walsall North) (Con)
If the figures that I have read are correct, only 2.8% of people in employment in the UK are on zero-hours contracts, which is a very small percentage. The opportunity to take up flexible working of that nature is important to some people.
Rachel Maclean
I thank my hon. Friend for his characteristically direct and pertinent intervention. In my previous career I was a member of the Chartered Institute of Personnel and Development, the industry expert on the world of work. The CIPD has carried out many studies on zero-hours contracts, and it recognises that the vast majority of people on such contracts have taken them by choice.
Stephen Kerr
Is my hon. Friend aware that, in their report on employment practices in the modern economy, Matthew Taylor and his distinguished group of independent thinkers came out firmly against the Labour party’s policy of outlawing zero-hours contracts?
Rachel Maclean
My hon. Friend is absolutely correct. Matthew Taylor has clearly stated that banning zero-hours contracts is completely the wrong thing to do. The Conservative party wants everybody to have good work in a decent job with secure working conditions, which is why we commissioned Matthew Taylor to carry out his report. As my hon. Friend, a fellow member of the Business, Energy and Industrial Strategy Committee, says, this is an incredibly important issue. The Taylor report is a detailed piece of work that looks at the rights of employees, the self-employed and workers to make sure that everybody’s rights are protected, because no business should be afraid of treating people well and giving people a decent job. That is what this Government are doing.
Alex Burghart
My hon. Friend is being extraordinarily generous with her time. Like her, I enjoyed the speech of the hon. Member for Bootle (Peter Dowd), although I did not agree with all of it. He says that there is nothing in the Bill for low-paid workers. Perhaps my hon. Friend would like to remind him that there is a tax cut for 31 million workers, from which low-paid workers will benefit.
Rachel Maclean
My hon. Friend is absolutely right. He reminds us that, in fact, there are a lot of measures in the Bill that will help low-paid workers in our country. He mentions the tax cut and how people are being taken out of tax, but what he did not say is that the increase in the personal allowance next year will mean that, in 2018-19, a typical taxpayer will pay at least £1,075 less tax than in 2010-11.
I should explain to Labour Members that taking someone out of tax is the same as giving them a pay rise, because they get to keep more of their money. [Interruption.] The hon. Member for Bootle is laughing—perhaps he would like to intervene.
Bill Grant
I remind my hon. Friend that Scotland is the highest-taxed part of the United Kingdom. Scottish National party Members will keep me right, but they are minded to alter the tax band and take more money from the pockets of those who are working hard. Does she agree that that is not the best way forward for the economy of Scotland?
Rachel Maclean
My hon. Friend is completely right. He reminds us of why we see so many Conservative Members representing Scotland, and I am proud to sit with them. Even though I have a Scottish surname, I am not from Scotland, but I love that part of our country. I am delighted that the Scottish people have Conservative representatives fighting for low tax.
Peter Dowd
I like the logic of the hon. Lady’s analogy about giving people a tax cut and giving them a pay rise. Does she therefore agree with me that, by her logic, giving the bankers a cut in their levy is the biggest pay rise in this Budget?
Rachel Maclean
I am glad the hon. Gentleman made his intervention, because I would like to set the record straight. The Labour party talks a lot about banks. Shall we remind ourselves that it was the Labour party and Ed Balls—its former shadow Chancellor—who created the light-touch regime that led to the crashing of our entire economy? Millions of people were thrown out of their jobs; they lost their jobs and were in poverty because of the decisions of the former Chancellor of the Exchequer.
Mr George Howarth (Knowsley) (Lab)
Will the hon. Lady remind the House which party criticised the last Labour Government for having too onerous a regulatory regime in the banking system?
Rachel Maclean
I thank the right hon. Gentleman for his intervention. I was not in the House at that time, but I am certain one of my Front-Bench colleagues will pick up on that point in the wind-up. What I do know is that we are imposing more measures on the banks. We are bringing in more measures in this Finance Bill, which is collecting more money from the banks. We are clamping down on that regime—that lax regulation—that led to the banking crash, which put thousands of people out of their jobs, crashed the economy and led to a lot of the problems that we see today in our country. I find it astonishing that Labour Members talk so much about the banks and what they would do. They say that they are the party for the many and not for the few, but it is actually the Conservative party that has done more for the many, getting them into work, getting jobs for people and creating an environment in which businesses can flourish.
Let us just look at the facts—let us just look at the businesses that have started up under this Government. These are businesses backed by entrepreneurs—wealth creators—who are creating jobs for people to feed their families. We asked the hon. Member for Bootle many times to explain how he was going to pay for his policies. My hon. Friend the Member for Sleaford and North Hykeham said that we had asked 26 times—it might be 27, 28 or 29, I am not sure—but he cannot do this. That is why people in Redditch, and people up and down the country, are terrified of the idea of a Government led by—
Dr Caroline Johnson
Does my hon. Friend think Labour Members are not answering this question about how much their spending plans would cost because they do not know or because they do not want the public to know what the answer is?
Rachel Maclean
My hon. Friend is completely right and I fear that it may be a combination of the two issues. We know that Labour Members have been questioned on this point many times by journalists and usually their answer is, “Well, that’s not for us to say.” I do not know why it is not for them to say. Do Members not think the ordinary voter has a right to know what Labour would cut to pay for its policies? We have just heard from the hon. Member for Bootle that he is going to scrap tuition fees and renationalise all the industries, and yet he still says that all he is doing is—
Peter Dowd
I referred earlier to “Freeing Britain to Compete”, and I have the reference here on my iPad. It said that we claimed
“that this regulation is all necessary. They seem to believe that without it banks could steal our money, bakers would put nails in our bread…and builders would construct houses that fell down when the wind blew.”
Does the hon. Lady agree that they might not have blown down but they burned down because of deregulation?
Rachel Maclean
I thank the hon. Gentleman for his intervention. I fear that the combination of the Labour Front-Bench team would be a lot, lot worse for our banks and for our country. Let us just look at the record, because he has mentioned that a few times. Under this Government banks are paying 58% more tax than under Labour. In 2016-17, the banking sector paid £27.3 billion in corporation tax, which represents an increase of £2.9 billion. That is going to pay for an awful lot of hospitals and schools, for the police service, and for roads and sanitation in our constituencies. It is certainly going to pay for a lot more of those things in Redditch.
I remind the hon. Member for Bootle that the average amount paid by the banks every year under the Conservative party is 13% higher than it was under Labour. HMRC data shows that the average annual amount of tax paid by the banking sector between 2010-11 and 2016-17 was £23.2 billion.
In conclusion, this Government and Conservative Members represent the true party for the many working people up and down this country.
Robert Courts (Witney) (Con)
It is an honour to follow my hon. Friend the Member for Redditch (Rachel Maclean), whose impassioned speech took in so many detailed points with respect to the Opposition Front-Bench team. It was a forensic dissection of their economic policy from which they will struggle to recover for months and years.
This is a Budget and Finance Bill that the people of Witney and West Oxfordshire will warmly welcome. It is strategic and finely focused on the challenges that the country faces. Moreover, it operates within a constrained and careful financial climate. The Government understand the requirement for sensible fiscal policy. They understand that it is not possible simply to promise endless spending without any idea of how it will be paid for. They do not think it is simply a matter of appealing to certain groups by promising them whatever it is suggested might be wished for at the time. The Government take a sensible, practical attitude—one of financial probity and, one might even say, prudence, a concept that was once respected and beloved by the Labour party. For all those reasons, I welcome the Bill, which forensically and strategically identifies the challenges the country faces and puts in place methods and means by which to combat them.
I start my brief remarks by looking at the positives achieved by the Government and their predecessors since 2010. It is worth repeating this because it is an extraordinary record, and I hope very much that the Minister will repeat some of it, if he thinks these achievements are worthy of repeating. We have an extraordinary financial and economic record. The Government have achieved an economy that has grown by 15.8% since 2010. The deficit has been cut by two thirds and debt is scheduled to start to fall next year.
Alex Chalk
Does my hon. Friend, like me, welcome the fact that at the same time as the economy has been growing the tax system has been made more progressive so that the top 1% now pay 27% of the entire tax revenue—
Alex Chalk
I am corrected: they pay 28%, which is a higher proportion than ever before.
Robert Courts
My hon. Friend makes an extremely good point that we have not heard often enough. We should absolutely keep making the point that although we hear talk of a progressive tax system from the Opposition, we see action from the Government. The 1% of highest earners now pay 28% of tax. That proportion is higher than it ever was under Labour. That is a record to be proud of. It is real progressive, practical politics from the Conservative Government.
Stephen Kerr
My hon. Friend quite rightly talks about the progressive nature of the tax regime that has been very carefully fostered by this Conservative Government. Is he aware that, for the Scottish Budget this Thursday, the Liberal Democrats in Scotland are proposing to increase income tax on people who earn £18,000 a year? Can he tell me what he thinks about the progressive nature of such a suggestion from the Liberal Democrats in Scotland?
Robert Courts
That is a horrifying suggestion. I am not surprised that that is the attitude of the Liberal Democrats in Scotland, because it is one that we see in many parts of this House—from those who do not understand that when we raise taxation on the lowest paid, it means that those people have less money in their pockets, which reduces their ability to make the decisions that they need to make with regard to themselves, their family and their life chances. When we take money away from people, we remove their freedom of action, their freedom of manoeuvre and the investment choices that they may make for their children. It is a totally unprogressive attitude.
Ian Paisley
Does the hon. Gentleman agree that the change by this Government in the manner, timing and way in which VAT is paid by small companies up and down the country has been significant and progressive, and has been welcomed by hundreds and thousands of businessmen and women?
Robert Courts
The hon. Gentleman makes a very, very good point. As chairman of the all-party group for small and micro business, that is something that is very close to my heart and the hearts of those for whom I endeavour to speak in Parliament. That matter has been a concern. I know that the hon. Gentleman has campaigned on it, as have I and many others. The simplification of the VAT regime and the ability to pay online will streamline the tax process for small businesses. I am grateful to the Government for the action that they have taken in ensuring that that burden is not too onerous.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
I thank my hon. Friend and neighbour for giving way. Is he aware that since 2010 we have raised £160 billion from tackling tax evasion, yet the shadow Chancellor says that he will raise even more from tackling tax evasion. Does that not show that he is living in fantasy land?
Robert Courts
My hon. Friend is absolutely right. This is a Government who are cracking down on and taking serious, practical and effective measures against tax evasion. What we hear from the Opposition are measures that will drive businesses and investment abroad. They will not invest in the businesses that we need to help grow the economy and grow jobs. What we see from the Government is effective management of the economy, and what we see from the Opposition is, as my hon. Friend quite rightly said, fantasy. The irony is that their measures will destroy jobs, destroy the economy, destroy productivity and destroy the tax revenues on which our public services depend. The policies from the Opposition will mean less, not more, for the public services.
Rachel Maclean
As my hon. Friend is explaining so clearly, when we lower taxes on small businesses, we raise more money—in fact £20 billion more, which is a significant investment.
Robert Courts
My hon. Friend is absolutely right. It is quite important that we have sensible measures in place to ensure that more money is raised for our public services.
Robert Courts
I will not give way, as I wish to make some progress in the short time that I have available to me.
I have highlighted the positive attributes and achievements of this Government. There is a range of Budget measures that I am particularly pleased to see, including: the establishment of the National Productivity Investment Fund; the increase in the national living wage; and the rise in the personal allowance, all of which are progressive policies designed to help the lowest paid. I am particularly pleased to see the new house building measures. Homes are what we need to ensure that people in this country have somewhere to live, somewhere that is of high quality, and somewhere that they can afford. I am pleased to see the stamp duty measures, and measures in relation to skills and research and development.
Recently, I was lucky enough to visit Johnstone Safety Products in my constituency in Minster Lovell. It is based in an old mill in the heart of the Cotswolds country, a beautiful, bucolic area. When a visitor arrives at this old mill, what they will see is a thriving factory. When they go around, they see robots churning out up to 40% of the safety products for above neck height. When we see how the world’s market depends on that business in my Witney constituency, we realise quite how important it is to rely on research and development and the robots, which are bringing manufacturing jobs back to this country. They are not taking jobs away from this country because those jobs would not exist without that technology. In the heart of rural west Oxfordshire is a thriving economy based on manufacturing. That is just one of the great many things that the Budget has brought to my constituency and, indeed, to the whole country.
I welcome the air quality measures in the Budget. If I may, I will concentrate on Oxfordshire for just one or two moments more. I very much welcome the £150 million of infrastructure money—£30 million of capital funding a year for five years—that has been promised, and the £60 million for affordable homes. We have heard from my hon. Friend the Member for Sleaford and North Hykeham (Dr Johnson) that LIBOR funding is going to her constituency. West Oxfordshire has also been the beneficiary of LIBOR funding. I am glad, Mr Speaker, that you have resumed the Chair because you will remember me recently mentioning ZANE: Zimbabwe a National Emergency, and Tom Benyon. Well, that charity has received £1.3 million in LIBOR funding, which is going towards 583 Commonwealth servicemen looked after by ZANE. In addition, RAF Brize Norton has been given £250,000 for renovations.
There are so many things in the Budget, and I could go on; I wish I could. [Hon. Members: “Hooray!”] I am delighted that the entire House is so keen to hear me continue to speak, but I will now draw my remarks to a conclusion.
Stephen Kerr (Stirling) (Con)
I rise to make a few remarks in support of the Bill, which addresses fundamental issues on which the Government are doing the right things. The public finances are not in a state where we can take them for granted. Although much progress has been made on the deficit, there is still much to be done and there is certainly no room for complacency.
I turn briefly to the subject that I mentioned in an intervention a little earlier: the need to keep taxes low. By doing so, we allow people to spend more of their hard-earned money as they wish. That is something that the Scottish Government should learn as they put the final touches to their Budget on Thursday. If they raise taxes, they hurt people’s ability to make decisions for themselves, and we all know that people are capable of making decisions for themselves. The Scottish Chambers of Commerce as recently as last Thursday told the First Minister to her face that the last thing that Scotland’s businesses and economy need is a reputation for being the highest taxed part of the United Kingdom. She will ignore the voice of Scotland’s businesses at her peril and at the peril of Scotland’s economic future.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I have to leave later this evening to get back to my constituency so that I can have a tooth removed tomorrow morning. I am expecting that to be immensely painful, and in the last few moments I might have had a foretaste of what I will experience tomorrow.
The debate has made clearer than ever the tunnel vision of this Government, who are carrying on regardless, ignoring call after call to change economic course. Just as with the Budget, this Bill is not fit for purpose and not fit for the future. It falls woefully short of preparing the country for the challenges it faces: from the chaotic no-deal Brexit that this Government still will not rule out to the longest squeeze on wages since Napoleonic times; from record rates of child poverty to our slowdown in productivity, which is unique among comparator countries; and from what was, in the first half of this year, the third slowest GDP growth in the whole OECD to the huge regional disparities in investment that were set out with crystal clarity by my hon. Friends the Members for Bradford South (Judith Cummins), for Heywood and Middleton (Liz McInnes), for Easington (Grahame Morris) and for High Peak (Ruth George).
Mr Speaker, thank you very much for selecting our amendment, which I am formally moving because the official Opposition cannot accept the Bill as it stands. First, it does not provide measures to comprehensively lift the public sector pay cap. We will have to wait until next summer to ascertain even whether the conditional rises suggested by the Government will be put into place. Nor does it take action to boost the incomes of low and middle earners. As was powerfully argued by my hon. Friends the Members for Harrow West (Gareth Thomas) and for Walthamstow (Stella Creasy), such incomes have stagnated in recent years.
The change in the Bill to stamp duty will, according to the OBR, only increase house prices in the absence of action to decisively increase supply—[Interruption.] I am sorry, but that is the assessment of the OBR. I have read its assessment: the measure will fail to deal with our housing crisis in the absence of measures to increase supply—the kind of measures described so eloquently by my hon. Friend the Member for Easington. In that regard, I would add to the points made by my hon. Friend the Member for Harrow West, in that there is no action to promote alternative business forms. There is no action in the Bill to deal with the inequitable situation where some housing co-ops are facing higher rates of stamp duty than private housing providers.
The Bill also fails to reverse the Government’s 2015 cut to the bank levy, as so many of my hon. Friends have said. The Government are denying themselves £4.7 billion of tax revenues from banks over five years. As many have mentioned, the Bill also further reduces the scope of the bank levy. As we all know, that follows the Government’s decision to deny themselves yet more revenue by reducing the rates of corporation tax and income tax for the very best-off. Contrary to the Minister’s claims, the bank levy and the surcharge receipts are projected to fall under the Government’s plans from £4.6 billion in 2016 to £3.2 billion in 2022-23. Even I can calculate that that is a 30% fall from both those measures combined, so less money is coming from the banking sector, not more.
As my hon. Friend the Member for Bootle (Peter Dowd) set out, these tax cuts occur while experts are warning that children’s services are strained to breaking point after seven years of budget cuts. For example, we have seen the halving of funding for early intervention, despite the number of child protection plans doubling.
We have heard concerning details about local pressures on services, particularly from my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe). That hardly amounts to the Government following the principles of social responsibility, which the Financial Secretary said animated the Government.
This is at a time when the meagre measures in the Bill show, as my hon. Friend the Member for Walthamstow eloquently argued, that the Government have not learned the lessons of the Paradise papers. She mentioned a number of examples and I will throw in one of my own. In the previous Finance Bill, the Government restricted the tax deductibility of interest payments to intra-group companies, albeit taking the most permissive option offered by the OECD rather than tightening up significantly. That measure at least followed the OECD’s call for profit shifting to be counteracted. In clause 21 of this Bill, in contrast, we see not an attempt to counteract profit shifting, but instead just a new approach to assessing its value—incoherence!
That is compounded by the Government’s determination to push ahead with the restructuring of HMRC, which is leading to the loss of so many experienced staff at the very time when we desperately need them to protect Government revenues and to run our customs procedures. Staff numbers at HMRC and the Valuation Office Agency have plummeted by 17% between 2010 and the present day, and we heard just last week that the VOA will be cut even further. Its headcount will go down by a quarter at the same time as there are 200,000 outstanding appeals and valuations will be occurring more frequently.
In contrast to the Government’s giveaways to profitable corporations and the best-off taxpayers, the brunt of their cuts have, of course, fallen on those least able to afford them. Sadly, despite requests from a variety of people on both sides of the House for an equality impact assessment of the Finance Bill, which have been amplified by the Treasury and the Women and Equalities Committees, we still do not have one. Just last week, when the Chancellor was asked in the Treasury Committee about the existence of an equality impact assessment by my hon. Friend the Member for Wirral South (Alison McGovern), he had to ask a civil servant—and I use his phrase—“Do we have it?” The answer that came back, after some circumlocution, I took as, “No.” That response was frankly astonishing. It comes at the same time as a recent report by the Runnymede Trust and the Women’s Budget Group shows that as a result of tax and benefit changes and lost services since 2010, by 2020 it is the poorest families who will lose the most, with an average drop in living standards of about 17%. Lone parents, nine out of 10 of them lone mothers, and black and Asian households within the lowest income quintile will experience an average drop in their living standards of about a fifth.
Sadly, it seems as though the Government are unaware of these failings, since they have not introduced this Bill under an amendment of the law resolution. This flawed decision, as the hon. Member for Aberdeen North (Kirsty Blackman) indicated, limits Members’ ability to table amendments and thereby improve the Bill. As with the increased use of secondary legislation under the European Union (Withdrawal) Bill and the previous Finance Bill, we are again seeing reduced scrutiny and less ability for the House to debate very significant matters that our constituents rightly expect us to be able to influence in their names. This approach to a Finance Bill was perhaps acceptable just after a general election, as with the previous Finance Bill, but it is not acceptable as a matter of course, as was underlined by my right hon. Friend the Member for Barking (Dame Margaret Hodge).
In 2016, the Government agreed to exempt solar panels from an increase in domestic VAT after pressure within Parliament, yet there is no scope within the current arrangements for us to take similar action this year to counteract the Bill’s many failings. While I am on the topic of green measures, although the Minister and other Conservative Members made much of the Bill’s commitment to levy landfill tax on illegal waste dumps, I fear that without appropriate staff in the Environment Agency, we will not see where those dumps are, as many of us have discovered from our constituency casework. This is yet another measure seen just on paper and not in practice.
Despite all this—despite these failures—we are determined as an official Opposition to take every opportunity within the constrained environment we face to try to amend this Bill. It is what our constituents deserve and it is what parliamentary scrutiny deserves. I only wish we could do so in the manner that is merited through a proper debate and with the ability to table proper amendments.
Mr Speaker
Order. Before I call the Minister, I think that the hon. Lady was moving the amendment, was she not? [Interruption.] It would have been helpful for her specifically to say “and I so move.” [Interruption.] In that case, it was not audible, and it is not her fault that there was too much noise, but I am grateful for the confirmation that the amendment has been moved.
Amendment proposed: To leave out from “That” to the end of the Question and add:
“this House declines to give a Second Reading to the Finance (No. 2) Bill because it contains no measures to address the fact that the UK has the slowest economic growth in the G7 while the IFS warns of two decades of lost earnings growth, it fails to reverse the Government’s 2015 Bank Levy cut resulting in £4.7bn less in tax revenue from banks over five years and contains measures to further limit the scope of the Bank Levy resulting in a further fall in revenue, whilst at the same time crucial services that many children and families across the country desperately rely on are at risk due to seven years of budget cuts, it proposes a stamp duty cut that, according to the analysis of the OBR, will increase house prices, instead of helping to address the housing crisis through measures to build more affordable homes, it proposes policies without the benefit of an adequate Equalities Impact Assessment, it arises from a Budget which made no provision for lifting the public sector pay cap or addressing the funding crisis in social care and the NHS, it includes no measures properly to tackle tax avoidance and evasion and it is not based on an amendment of the law resolution, thus restricting the scope of amendments and reducing the House’s ability to properly scrutinise and improve the Bill.”—(Anneliese Dodds.)
Question proposed, That the amendment be made.
The Exchequer Secretary to the Treasury (Andrew Jones)
We have had a very comprehensive debate, as is fitting for a Finance Bill. I thank all Members who have contributed.
Some Members mentioned the public sector pay cap. They might not have noticed that it was lifted on 12 September in a statement made by the Chief Secretary to the Treasury. That was confirmed in the Budget on 22 November. Lots of Labour Members commented on the bank levy, failing to recognise that our changes will be raising taxation from the banking sector, and failing to remember that Labour voted against introducing the bank levy in 2011 and against introducing the bank surcharge in 2015.
Many Members have spoken at some length about transport schemes. They will be delighted to know that, excluding in the exceptional years following the financial crisis, public investment as a proportion of GDP will have reached its highest level in decades during this spending period. This includes a 50% increase in transport investment that is funding the biggest road programme in a generation. That will be welcomed by those who are interested in the A19, such as the hon. Member for Easington (Grahame Morris) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). We are also seeing the biggest rail transformation in modern times, which will please many Members.
We heard some comments about tax evasion. It might be worth reminding the House that this Government have taken more action to clamp down on tax evasion than any other Government. The 100 measures we have introduced since 2010 have raised more than £160 billion. The Government’s pledge is that we will continue to act in that way. If Members want the clamping down on tax evasion to continue, they should support the Bill, because it includes measures to take that forward.
One key area that my constituents have raised with me is housing. They have highlighted the fact that in my constituency, the ratio of the average house price to the average salary has reached 14:1. Across England and Wales, the ratio has reached 8:1, which means that it has doubled in just two decades. I had a meeting this morning with the new Conservative Mayor of Cambridgeshire and Peterborough, who highlighted that in his area the ratio is more than 20:1.
The autumn Budget set out our plan to deliver the pledge we have made to the next generation, namely that the dream of home ownership will become a reality in this country once again. A comprehensive set of reforms will not just boost housing supply, but help those who are looking to buy now with the up-front costs that can often get in the way. The stamp duty measure in the Bill will make sure that the tax system does not act as a barrier to first-time buyers who are seeking to get on to the housing ladder.
Let me finish by saying that the Bill is central to the Government’s vision for a brighter future for Britain. It will help to deliver that vision by helping more people to purchase their own home, promoting further economic growth, and delivering a fair, balanced and sustainable tax system. Those are significant steps towards making us fit for the future. We are building on our progress and past successes. The economy is 15.8% bigger than it was in 2010. Unemployment is at its lowest level since 1975 and income inequality is at its lowest level since 1986. We have cut the deficit by more than two thirds and, based on our plans, the OBR expects debt to fall from next year. People have talked about unemployment, which has fallen significantly. Employment has increased by more than 3 million since 2010. Opposition Front Benchers often talk about employment in London, and perhaps they should be aware that employment in London has grown by nearly 900,000 during this period. This Bill builds on successes, and I commend it to the House. [Interruption.] I have run out of time, I am afraid. [Interruption.]
Mr Speaker
Order. I think the Minister has concluded his oration.
Question put, That the amendment be made.
Proceedings | Time for conclusion of proceedings |
|---|---|
First day | |
Clause 33, Schedule 9, new Clauses and new Schedules relating to the bank levy | 3 hours from commencement of proceedings on the Bill on the first day |
Clause 40, Schedule 11, Clause 41, Clause 8, new Clauses and Schedules relating to stamp duty land tax, new Clauses and Schedules relating to the income tax treatment of armed forces’ accommodation allowances | 6 hours from commencement of proceedings on the Bill on the first day |
Second day | |
New Clauses and new Schedules relating to the effect of the Bill on equality | 3 hours from commencement of proceedings on the Bill on the second day |
New Clauses and new Schedules relating to the effect of the Bill on tax avoidance or evasion | 6 hours from commencement of proceedings on the Bill on the second day |
Finance (No. 2) Bill
Monday 18th December 2017
(6 years, 10 months ago)
Commons ChamberRead Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 18 December 2017 - (18 Dec 2017)
21:10 - divided: - Ayes: 313 / Noes: 258 - Question accordingly agreed to.
21:28 - The Committee divided: - Ayes: 260 / Noes: 313 - Question accordingly negatived.
23:04 - The Committee divided: - Ayes: 226 / Noes: 313 - Question accordingly negatived.
The First Deputy Chairman of Ways and Means (Mrs Eleanor Laing)
With this it will be convenient to discuss the following:
Amendment 1, in schedule 9, page 132, line 32, leave out from “in” to end of line 33 and insert
“accordance with the provisions of section (bank levy: Part 1 of Schedule 9: pre-commencement requirements)”.
This amendment paves the way for NC3.
New clause 1—Review of operation and effectiveness of bank levy—
“(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.
(2) After paragraph 81, insert—
Part 10
Review
82 (1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer shall undertake a review of the operation and effectiveness of the bank levy.
(2) The review shall consider in particular—
(a) the effectiveness of the levy in reflecting risks to the financial system and the wider UK economy arising from the banking sector,
(b) the effectiveness of the levy in encouraging banks to move away from riskier funding models,
(c) the revenue effects of the changes to the levy made in Schedule 2 to the Finance (No. 2) Act 2015,
(d) the effectiveness of the anti-avoidance provisions in paragraphs 47 and 48 of this Schedule.
(3) A review shall also compare the effects of the bank levy with those of the bank payroll tax (within the meaning given by Schedule 2 to the Finance Act 2010) in relation to—
(a) revenue, and
(b) the matters specified in sub-paragraph (2)(a) and (b).
(4) A report of the review under this paragraph shall be laid before the House of Commons within one calendar month of its completion.””
This new clause requires the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims, the revenue effects of the changes made in 2015 and the comparable effectiveness of the bank payroll tax.
New clause 2—Public register of entities paying the bank levy and payments made—
“(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.
(2) After paragraph 81, insert—
Part 11
Public register of payments
83 (1) It shall be the duty of the Commissioners for Her Majesty’s Revenue and Customs to maintain a public register of groups paying the bank levy and the amounts paid.
(2) In relation to each group, the register shall state whether it is—
(a) a UK banking group,
(b) a building society group,
(c) a foreign banking group, or
(d) a relevant non-banking group.
(3) In relation to each group, the register shall state the amount paid in respect of each chargeable period.
(4) In relation to chargeable periods ending between 28 February 2011 and 31 December 2017, the Commissioners must public the register no later than 31 October 2018.
(5) In respect of subsequent chargeable periods, the Commissioners must public the updated register no later than ten months after the end of the chargeable period.””
This new clause requires HMRC to prepare a public register of banks paying the bank levy and the amount they have paid.
New clause 3—Bank levy: Part 1 of Schedule 9: pre-commencement requirements—
“(1) Part 1 of Schedule 9 shall come into force in accordance with the provisions of this section.
(2) No later than 31 October 2020, the Chancellor of the Exchequer shall lay before the House of Commons an account of the effects of the proposed changes in Part 1 of Schedule 9—
(a) on the public revenue,
(b) in reflecting risks to the financial system and the wider UK economy arising from the banking sector, and
(c) in encouraging banks to move away from riskier funding models.
(3) Part 1 of Schedule 9 shall have effect in relation to chargeable periods ending on or after 1 January 2021 if, no earlier than 30 November 2020, the House of Commons comes to a resolution to that effect.”
This new clause requires the Government to provide a separate analysis of the impact of Part 1 of Schedule 9 nearer to the time of proposed implementation in 2021 and to seek the separate agreement of the House of Commons to commencement in the light of that review.
New clause 11—Review of effects of bank levy on inclusive growth and equality—
“(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.
(2) After paragraph 81, insert—
Part 10
Review on inclusive growth and equality
82 (1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer shall undertake a review of the bank levy.
(2) The review shall consider in particular—
(a) the effects of the levy on inclusive growth,
(b) the impact of the levy on equality.
(3) A report of the review under this paragraph shall be laid before the House of Commons within one calendar month of its completion.””
This new clause requires the Government to carry out a review of the bank levy, including its effects on inclusive growth and inequality.
The Financial Secretary to the Treasury (Mel Stride)
The Finance Bill makes changes to the bank levy, in particular restricting its scope to UK activities. These changes support our vision to help keep UK banks globally competitive. They reflect improvements in international banking regulation that reduce the risk of overseas operations to the UK, and they complete a set of changes announced in 2015 and 2016 that significantly increase the tax we raise from our banks.
Let me be clear from the outset that this Government believe that banks should make a significant contribution to the public finances, beyond general business taxation, that reflects the risk they pose to the UK economy. That has been the record of Chancellors since 2010. As part of that, in 2011 the Government introduced the bank levy on the balance sheet equity and liabilities of banks and building societies, but this additional tax contribution made by banks has to support our broader objectives for the sector. It therefore needs to be responsive to international commercial and regulatory changes in banking. Any tax changes should ensure that we can continue to secure the additional contribution from the banks from a sustainable tax base, and they also need to ensure we retain a strong, stable and competitive banking sector that supports the wider economy by lending capital to both businesses and individuals.
Alberto Costa (South Leicestershire) (Con)
Does the Minister agree that in pursuing the policies he has just outlined in a strong and stable way we can have sustainable banking that gives the significant contributions to the Treasury that are much needed, and that the policies espoused by the parties opposite would do great damage to our economy and our public services?
Mel Stride
I thank my hon. Friend for that perceptive and helpful intervention. There is no question but that a healthy banking system is absolutely central to a healthy economy, which is why we have invested so much time and energy since 2010 in making sure that the regulation of the banks is tightened up, which was, of course, part of the original rationale for the bank levy. The fact that we are reducing the bank levy over time from 2015 and moving towards taxing profits is in itself an indication of the health of our banking system.
Mr Jim Cunningham (Coventry South) (Lab)
Is the Minister satisfied that the banks have enough in reserve to cope with any emergency should there be a downturn in the world economy?
Mel Stride
As the hon. Gentleman will know, the Bank of England carries out stress tests on our banking system. In the latest round, the banks came through very strongly—not a single one failed. The tests stress the system to a greater extent than the effect of the last financial crash in 2008, so we can be certain that the measures the Government have put in place, the operation of the independence of the Bank of England and carrying those things through are having the desired effect that he rightly seeks.
Alex Burghart (Brentwood and Ongar) (Con)
After 2008, a bank levy was needed because there was not much profitability in the banks to enable their assets to be taxed, but as we have improved regulation it is now worth moving to tax their profitability. Does the Minister agree that this is the right time to make this shift in raising revenue?
Mel Stride
My hon. Friend is entirely right. The Government since 2015, and the coalition Government, oversaw the restoration of the banking sector to a healthy central part of our economy. He is absolutely right. The shift from the bank levy to the taxation of profits which was introduced on 1 January 2016 indicated that the risks themselves were diminishing under our stewardship, and that our banking sector was profitable enough to bring in considerably more tax revenue. Since 2010, under Conservative Chancellors, we have secured more than £44 billion in additional tax—I stress the word “additional”—from the banks, over and above the tax that we would be applying to them were they non-financial businesses.
Robert Jenrick (Newark) (Con)
In 2010, tax receipts from the financial services sector amounted to about £53 billion; today they amount to £71 billion. We are making the banks and the wider financial services sector pay their fair share, but we do not want a race to the bottom. We want the sector to be competitive, because tens of thousands of well-paid, highly skilled jobs throughout the country—not just in London but in cities like Nottingham, near my constituency—depend on it.
Mel Stride
My hon. Friend is entirely right. The additional tax raised from the banks amounts to £9 billion between 2010 and the present time, and a further £25 billion is projected over the current forecast period. Far from taxing the banks less over time—as, no doubt, the Opposition will shortly have us believe we have done—we are securing more tax revenues than we did in the past.
Alex Chalk (Cheltenham) (Con)
As circumstances change, it is right for us to move from a bank levy to taxing bank profits. I am sure that, in due course, we shall hear a great hue and cry about how appalling it is to lose the bank levy. Is that not a little perplexing, given that Labour voted against its imposition in 2011?
Mel Stride
That is a valid point. I am waiting with some interest to hear what Opposition Front Benchers have to say about that point in particular. Even my shadow, the hon. Member for Bootle (Peter Dowd), is waiting expectantly to hear what he himself has to say, which is intriguing.
Dan Carden (Liverpool, Walton) (Lab)
Did the big banks not lobby for this change, and are they not likely to benefit from the surcharge that has replaced the levy? Did not bigger, riskier banks pay more than other banks in the system?
Mel Stride
When we consider who benefits and who does not, we must assume that overall, given that more tax is being raised than hitherto, the banks are probably paying more tax on average as a consequence of these measures. However, the measures will obviously have different impacts on different banks, depending on their profitability and on whether they are at or above the capital threshold of £20 billion at which the levy itself begins to kick in.
In 2015 and 2016, the Government announced a set of changes in the way in which banks were taxed. We set out a phased reduction in the rate of the bank levy to 0.1% by 2021. We announced the changes that the Bill makes in the levy, reducing its scope so that it applies to banks’ UK rather than global balance-sheet liabilities. However, we also introduced an extra 8% tax on banks’ profits over £25 million, on top of general corporation tax. I hope that when the Opposition spokesmen respond to my comments and to the amendments and new clauses, they will at least recognise the important increase in taxation that has been applied to the banks since 2016.
Rachel Maclean (Redditch) (Con)
I, too, look forward with great interest to hearing from Opposition Front Benchers. Has not part of the Government’s overall approach been to back the independence of the Bank of England? Has that not also helped the overall regulation of banks, and ended the situation which, under Labour, led to some of the problems in the banking sector?
Mel Stride
My hon. Friend is absolutely right. I think it would pay all Members dividends to consider the comments made by Mervyn King at the time of the last crisis, when he said that the Bank of England had very limited scope to deal with the issues that were faced at the time. Since then, of course, we have fundamentally changed the structure of the oversight of banks. We have ensured that the Bank of England is at the heart of it, and that the independence of the Bank and the other institutions that we have set up is paramount. That is partly why the position of the banks is so much stronger than it has been hitherto.
We prevented the banks from reducing their corporation tax liabilities when they were required to pay compensation for misconduct, effectively applying additional taxes. The shift towards taxing profits means that the recovery in banks’ profitability will translate into higher tax receipts for the Exchequer, while also ensuring a sustainable long-term basis for the taxation of banks.
Mark Menzies (Fylde) (Con)
It is important that we raise record sums from the banks to pay for vital public services, but is there not a balance to be struck? We need healthy banks, not only to support small businesses and provide mortgages for first-time buyers, but to ensure that there are banks in our high streets.
Mel Stride
My hon. Friend is right, and this is all about striking the right balance. We recognise that banks need to pay their fair share because of the systemic risk that they can feed into the economy, and because, some years ago, the British taxpayer stood behind the banking system. The other part of the balance is to ensure that our banking system remains competitive in comparison with others in the world, and can, in turn, leverage the competitiveness of our own industries through its lending.
Nigel Huddleston (Mid Worcestershire) (Con)
My hon. Friend is making an important point. Rather than setting a tax rate for party political purposes, we should aim to maximise tax revenue while also securing economic growth.
Mel Stride
My hon. Friend is absolutely right, as we know from recent experience. For example, although corporation tax has been reduced from 28% in 2010 to 19% and then to 17% under this Government, the corporation tax take has increased by 50%. Labour’s policy is the reverse. It foresees raising taxation not just from banks but from all the businesses in the country, large and small, including high street businesses, which, as we know, often struggle.
Dan Carden
A branch of Barclays bank in County Road in my constituency has closed, and I know that many other Members will have fought to keep local bank branches open. Are the Government willing to take any action—at least in the case of RBS, which we partly own—to ensure that high-street banking is still available to the most vulnerable and elderly constituents whom we all represent?
Mel Stride
Conservative Members believe that it is better for commercial organisations to be left to run their own businesses. They tend to do it rather better than Ministers, dare I say—although I think I could be quite handy at running a bank or two; who knows?
The issue of bank closures is very important. We are working hard to reinvigorate our post offices and to ensure that the banking facilities that they provide—which are available, typically, to more than 90% of personal and business customers—are promoted in all the 11,500 branches in the United Kingdom.
Stephen Lloyd (Eastbourne) (LD)
A constituent who came to my community surgery on Saturday made a simple suggestion that I thought might well work. Banks face structural challenges, and many are closing, especially in rural areas. Why do the Government not encourage three or four banks to work together to establish a single branch in an area where there are currently no branches? Such a collegiate approach would solve the banking problems of rural areas in particular.
Mel Stride
The hon. Gentleman raises an interesting idea, but I would argue that that is already effectively in practice in the form of the post office: post offices are able to deal with the customers of the major banks, to take cash, and to offer banking services—albeit not the full range, but certainly the most basic and most important to local communities—and, as I said earlier, there are more than 11,500 of them across the UK.
James Cartlidge (South Suffolk) (Con)
All of us who represent rural constituencies are concerned about the issue of access to bank branches and closures, but does that not mean that there is an extra onus on providing access to fast broadband in rural areas so that people can access online banking? To that end, should we not welcome the announcement in The Sunday Times that there will be further help this week for speeding up broadband in the most hard-to-reach rural areas?
Mel Stride
My hon. Friend raises an important point about connectivity, particularly in rural areas, including in constituencies such as mine where making sure there is good broadband is often one way of reducing sparsity and people being cut off from each other, and that is why we have invested so heavily in that area.
These changes are expected to increase the additional tax contribution from banks by more than £4.6 billion over the current forecast period to 2022-23.
Mr Jim Cunningham
Will the Minister look into a situation that a number of us have had letters about? In the case of certain banks, including HSBC, where a person who is on a bank’s pension retires, that retirement pension is deducted because of their old-age pension. I do not expect an answer right away, but will the Minister look into that?
Mel Stride
I congratulate the hon. Gentleman on the ingenuity with which he has shoehorned in that question, which is possibly a Department for Work and Pensions matter, although I am not sure. But I will certainly come back to him on that point, and if it is not for me to respond, I will make sure the appropriate Minister in the appropriate Department does so.
We expect to raise over £25 billion from the additional taxes that banks pay over this period, on top of the £19 billion that we have raised to date since 2011. By 2023 we will have raised more than £44 billion in additional bank taxes introduced since the 2010 election.
I will now turn to the changes made by the current Finance Bill, and set out the reasons for changing the scope of the bank levy. Hon. Members will be aware that the bank levy aims to reduce the risk banks pose to the wider UK economy. It is currently chargeable on the global balance-sheet equity and liabilities of UK-headquartered banks, but overseas banking groups only pay bank levy on UK activities. However, regulatory developments currently being implemented across the G20 as a result of the standards set by the Financial Stability Board and the Basel Committee on Banking Supervision will reduce the risk that overseas operations of UK banks pose to the UK economy, for example with stricter international standards on the need for subsidiaries to be independently capitalised.
We have also made it mandatory for the largest UK banks to separate core banking services from their investment banking activities by 2019. This ring-fencing will help to insulate UK borrowers and depositors from failures arising in banks’ overseas branches, before the changes to the scope of the levy take effect. As such, there will now be less need for the bank levy to address the risks posed by overseas operations of UK banks, and as the bank levy is less necessary to cover these risks, we have an opportunity to boost the competitiveness of UK banks by reducing its scope.
At present, UK-headquartered banks pay the levy on their worldwide operations, while foreign-headquartered banks only pay on their UK operations. We want the UK to stay at the forefront of global banking; we want banks based in the UK to compete and win business overseas, bringing jobs, prosperity and tax receipts with them. So we have decided that from 2021 the bank levy will apply only to UK balance-sheets for UK-based and foreign banks alike. This will allow UK banks to compete and win business on a more level playing field in these overseas marketplaces, and it is a change we are making as part of a package of reforms that secures revenue while boosting competitiveness.
The corporation tax surcharge, the reduction in bank levy rates, and changes to compensation relief restriction were legislated in 2015. Following detailed consultation, this clause and schedule implement the final element of our plan: changes to the scope of the bank levy. The clause and schedule narrow the scope of the bank levy so that from 2021 it will be chargeable only on the UK balance-sheet equity and liabilities of banks and building societies. Broadly, this means that overseas activities of UK-headquartered banking groups will no longer be subject to the bank levy. However, the levy will continue to apply to the UK operations of UK and foreign banks.
Robert Jenrick
Will the Minister re-emphasise the point he has just made: that the practical effect for our constituents of the move he is making today will make it much more attractive for important British international banks such as HSBC and Standard Chartered, who have a choice of locations in which to be registered—HSBC recently considered whether to move to Hong Kong or even mainland China—to remain in the City of London?
Mel Stride
As is so often the case, my hon. Friend has hit an important nail on the head: in terms of improving our competitiveness, it is clearly deeply unattractive to have a situation where UK-domiciled banks are being taxed on their foreign operations whereas foreign banks are not being taxed by us on their foreign operations, but are only being taxed on their operations in the UK. He is right that the future of HSBC, Standard Chartered, Barclays and other banks, who make a huge contribution to our tax-take and our economy, are much more secure if they are not being disadvantaged by being taxed on overseas operations unlike their foreign counterparts. As part of these changes, the schedule also provides for a reduction in the amount on which the levy is chargeable for certain investments a UK bank makes in an overseas subsidiary.
I shall now briefly turn to the amendments tabled by Opposition Members. For the reasons I have described, we believe that a combination of taxing profits and balance-sheets is the most effective and stable basis for raising revenue from the banking sector. The bank payroll tax was intended as a one-off tax; even the last Labour Chancellor pointed out that it could not be repeated without significant tax avoidance. I can assure the House that information about the bank levy will continue to be published as part of the normal Budget cycle. Official statistics are published on the pay-as-you-earn income tax and national insurance contributions, bank levy, bank surcharge, and corporation tax receipts from the banking sector as a whole. The Government have published a detailed tax information and impact note on the proposed changes introduced by part 1 of the schedule. We have also published information about the overall Exchequer impact of the 2015 package of measures for banks, and these figures have been certified by the Office for Budget Responsibility.
Finally, new clause 2 proposes that HM Revenue and Customs should publish a register of tax paid by individual banks under the levy. Taxpayer confidentiality is an essential principle for trust in the tax system, and HMRC does not publish details of the amount of tax paid by any individual business. While this Government continue to consider measures to support transparency over businesses’ tax affairs, we must balance that with maintaining taxpayer confidentiality in order to sustain public confidence in our tax system.
Dan Carden
Is it not right that these banks, some of which were bailed out by, and may well look in the future for bail-outs from, the public, are treated slightly differently from other companies across the UK economy, and that we should have a public register for that reason?
Mel Stride
I would maintain that the banks are indeed being treated rather differently from other sectors of the economy, not least—as I have been at great pains to point out this evening—because they are being taxed far more heavily than other types of business. On a fundamental issue of principle relating to tax confidentiality, it would not be right to single out any particular bank, whatever its history, to make an example of it and treat it differently from other financial institutions.
The changes in this schedule are part of a package of measures that provide a sustainable basis for raising revenue from the banking sector in the long term. These measures continue to apply additional taxes to banks, to reflect the special risk that they pose to the UK economy. They put the taxation of banks on a more certain and sustainable footing to ensure that the banks will continue to pay additional tax, and they reduce the impact of the bank levy on UK banks’ international operations. In doing this, we will ensure their continued health and competitiveness, which are essential for us if we are to go on raising yet more tax from our banking sector. I commend the clause to the Committee.
Peter Dowd (Bootle) (Lab)
I rise to speak to the amendment and new clauses in the name of my right hon. Friend the Leader of the Opposition and others. Banks have a crucial role to play in the proper and smooth functioning of our nation’s economic wellbeing. In addition, it is important to ensure that the banks are not all lumped together with a one-size-fits-all approach for the purpose of a bank-bashing session, as was suggested by Conservative Members. Further, it is neither reasonable, fair nor sensible to homogenise the people who work in the banking sector as either saints or demons. Neither beatification nor demonisation of the banks is appropriate; it does no credit to the complexity of the landscape facing us. It is important when dealing with fiscal issues relating to banks that we keep a sense of proportion during the process. That is why it is important to ensure that, in an objective sense, we examine the context in which the Government have decided to cut the take from the bank levy. So, what is that context?
Alberto Costa
Will the hon. Gentleman be fair enough to confirm at the Dispatch Box that since the Conservative party came into government in 2010, the tax take from the banking sector has increased, especially since 2015?
Peter Dowd
I will come to that in the course of my speech.
I was asking about the context for these measures. First, there is the political context; then there is the ideological context. Politically, we saw a new low for the Government last week. We witnessed an increasingly weak and ineffectual Prime Minister being pulled between the troika of the Democratic Unionist party, her hard-line Front-Bench Brexiteers and, latterly, rebels on her own Back Benches.
Leo Docherty (Aldershot) (Con)
The hon. Gentleman mentioned ideology. The shadow Chancellor is on record from 2013 as being a self-declared Marxist. Does the hon. Gentleman share that ideology? Is he a Marxist, too?
Peter Dowd
The hon. Gentleman is nothing if not persistent in asking that question. We are dealing with the bank levy, not the political opinions of the shadow Chancellor. I will be happy in due course to pitch our policies against those of the Conservatives.
Alex Burghart
Does the hon. Gentleman regret the fact that his party opposed the bank levy when this Government introduced it in 2011?
Peter Dowd
I will come to that in due course as well, if I may. I am beginning to think that my staff have been leaking my notes. I shall have to have words with them.
Last week, in true one nation mode, the right hon. and learned Member for Beaconsfield (Mr Grieve), among others, gave the Brexit Front Benchers every opportunity to acquiesce to his reasonable requests. In effect, he tried to give them a “get out of jail” card, but they could not take yes for an answer, and the remnants of the Government’s credibility went down the pan. There is a civil war going on within the Government, and this goes to the heart of the matter. The Government are throwing everything into the mix to try to distract us from the civil war that is going on in the Tory party.
Alex Chalk
I am grateful to the hon. Gentleman for talking about civil war. By contrast, in the interest of showing the solidarity among Labour Members, does he agree with the shadow Chancellor’s listing of his hobby in “Who’s Who?” as
“generally fermenting the overthrow of capitalism”?
Peter Dowd
I know that the hon. Gentleman was disappointed when he was unable to ask that question last week because the Whips wound up his ability to do so. The reality is that that is of absolutely no relevance to the matter in hand. It does not matter; it is a complete irrelevance. We are in danger of getting swamped by red herrings.
Dan Carden
On the topic of the shadow Chancellor, it was he who called for an independent assessment of the bank levy, the balance between fairness and competitiveness, and how the Government’s calculation was arrived at. Does my hon. Friend support the shadow Chancellor in that call?
Peter Dowd
Of course I am more than happy to support the shadow Chancellor, because that is the very point that we are trying to make—[Interruption.] I referred to red herrings a moment ago, and I hear Conservative Members mentioning Marxist herrings. That is very witty; it is nice to hear a witty comment from the Conservative side on occasions.
Rachel Maclean
The hon. Gentleman refers to red herrings, but surely the views and political ideology of his shadow Chancellor are relevant. I will therefore give him another opportunity to answer the question: is he a Marxist, like his fellow shadow Treasury spokesman? Does he agree with that ideology, or is there civil war in the Labour party as well?
Peter Dowd
I think that the shadow Chancellor is more interested in Groucho Marx than Karl Marx, quite frankly.
James Cartlidge
It is very kind of the hon. Gentleman to take so many interventions on the trot. [Laughter.] This is not a minor issue. Let us not forget that Marxism destroyed the economy of half our continent. I very much admire the hon. Gentleman, but he did mention ideology in the first place. It is therefore not only in order for me to raise the question in his terms, but pertinent. Is he a Marxist—or is he perhaps a Leninist, a Bolshevist, or an adherent of one of the various other isms?
The Temporary Chair (Sir Roger Gale)
Order. It may be in order in the hon. Gentleman’s terms, but it is not in order in my terms. I should like to return to the bank levy.
Peter Dowd
Thank you for bringing us back to the land of reality, Sir Roger. I very much appreciate it.
Mr Jim Cunningham
Let us get real and say to the Government that at the end of the day, when we are in government, our Chancellor will carry out the policies of that Labour Government, whatever his personal views are. More importantly, many comments have been made about the previous Labour Government tonight, but the previous Chancellor said that it was not the Labour Government who created the financial crisis. If we had not capitalised the banks, many of those on the Conservative Benches would be in the poorhouse today.
Peter Dowd
As ever, my hon. Friend makes a reasonable point. The Government are so lacking in confidence that they are gerrymandering Public Bill Committees to reflect their control-freakery. We have to ask ourselves how long the Government can treat the House with such disdain. It is the kind of disdain that saw the Government ensure that there was no amendment of the law resolution, which has deliberately restricted the scope of the Bill and effectively limited parliamentary scrutiny and debate. [Interruption.] A Whip says from a sedentary position that that has happened before, but the procedure is used rarely and not in these circumstances. It is the Government’s control-freakery and fear of scrutiny that makes them do such outrageous and virtually unprecedented things.
Perhaps if the Bill set out a bold plan—let us call it a long-term economic plan—to get the economy back on track, we could all put up with the Government’s guileful procedural gymnastics. However, as I said on Second Reading, there is little in the Bill to solve the growing problems facing our economy—from sluggish growth and slow productivity to a lack of investment in our infrastructure and our people. The Government have instead decided to dedicate their efforts to offering the banks another tax break by further limiting the scope of the bank levy, ensuring that from 2020 UK banks will pay the levy only on their UK balance sheets, not their overseas activities. It is the same old Tories looking after the same old interests.
Alex Burghart
I am very grateful. I want to give the shadow Minister another opportunity to answer the question. Does he regret his party’s decision to vote against the bank levy in 2011?
Peter Dowd
I will come to that in a moment. In future, if two hon. Members want to make an intervention at the same time, they should perhaps have a ballot.
Leo Docherty
The hon. Gentleman mentioned tax. If we had a Labour Government, by how much would corporation tax rise?
Peter Dowd
We discussed this issue last week, but the bottom line is that we are here to talk about the tax policies of the Government, not the Labour party. I suggest that the hon. Gentleman reads “Funding Britain’s Future”, which we call the grey book. As I said to one of his colleagues last week, I am not his research assistant. The Independent Parliamentary Standards Authority provides the hon. Gentleman with enough money to employ his own research assistant, so he should not need a shadow Minister to do his research for him.
Labour’s position on the bank levy has been clear. We have consistently argued for a higher bank levy and pointed out that the levy, introduced in 2011, would raise substantially less then Labour’s bankers’ bonus tax. In short, we have always stood against the Government’s divisive austerity agenda. That was why we voted against the 2011 Finance Bill, which introduced the bank levy along with cuts to corporation tax and tax giveaways for the most well-off. That was also why we voiced our concern in 2015 over the Government’s cuts to the bank levy and the introduction of a corporation tax surcharge. It is why we will vote against the measures in the Bill.
Alex Burghart
Given the hon. Gentleman’s love of punishingly high corporation tax, does he not regret supporting the corporation tax surcharge on banks in 2015, when he was in the House?
Peter Dowd
No matter how many times Government Members ask rather tangential questions, I will not be drawn down that particular avenue, much as I would love to have that debate with the hon. Gentleman. The bottom line is that we have always stood against this Government introducing austerity measures at the same time as giving banks a tax cut. That is what it comes down to.
Peter Dowd
No, I will push on for a moment.
It is worth pointing out that the bank levy was not the brainchild of a Conservative Government. It was not introduced by the previous Chancellor after he had listened to the clear public outrage aimed at the reckless decisions made by some in the banking sector, who plunged the world into one of the greatest economic crises in modern times. As much as Government Members would like to blame the Labour Government for a world financial crisis, that is stretching credibility a little too far. [Interruption.] It is nice to see that the Chief Secretary to the Treasury is shouting across the Chamber, but I cannot quite hear her, so if she wants to intervene—or shout a little louder—so that I can actually hear her question, I will be more than happy to answer. It is nice to see her in the Chamber.
Mr Jim Cunningham
It is probably right to look at the history, rather than listening to the made-up stuff coming from Conservative Members. Let us be clear that the financial crisis started with Lehman Brothers in America. We recapitalised the banks, and we kept our triple A rating so that we could borrow to bail out the banks in the first place. The Government are trying to take the credit for something that they did not do.
Peter Dowd
My hon. Friend is right. Conservatives always try to take the credit. They take responsibility for the good things and no responsibility for the bad things—it is the way they are made.
The banking levy was not designed to ensure that the banks received enormous and unprecedented bail-outs from the taxpayer, such as the £76 billion of shares the Government purchased in RBS and Lloyds. It was designed to make them pay their fair share. In fact, the very concept of a levy was developed at the G20 summit in Pittsburgh in 2009. It was championed by the previous Labour Government, who subsequently introduced the bankers’ bonus tax. In the coalition’s 2011 austerity Budget, the Government decided to dump the bankers’ bonus tax and adopted the bank levy. At the time, Labour made it clear that the levy threshold was far too low in comparison with the money that would be raised if the Government stuck with Labour’s bonus tax. Instead, Ministers wilted under pressure from the banks and set the levy at a puny £2.6 billion.
James Cartlidge
The hon. Gentleman is talking about where the bank levy came from. I remind the Committee that it was actually Geoffrey Howe who introduced a deposit levy in a Budget in the early ’80s as part of his stabilisation of the financial system inherited from a previous Labour Government.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
If we are talking about the 1980s, let us remember that corporation tax spiked to over 50% in 1983 under a Conservative Government. Government Members are giving us lectures, but they should perhaps look at their own history rather than judging ours.
Peter Dowd
That is a fair comment.
The threshold was established despite Treasury officials considering it to be far too low. Under the original plans, the levy would have raised £3.9 billion a year—nearly £1.5 billion more than £2.6 billion—but the Government of the few ensured that the threshold remains low.
At 0.078% for short-term liabilities and 0.039% for long-term liabilities, the level set was—not to put too fine a point on it—an embarrassment when compared with that in other countries that introduced a similar levy. It was less than a third of France’s level, substantially smaller than Hungary’s, which was set at 0.53%, and even lower than that of the USA. They are all well-known Marxist countries.
In 2015, under pressure from the Minister’s and the Government’s chums, once more the then Chancellor cut the bank levy rate, and the current occupant of No. 11 has continued on that sojourn. In so doing, he has ensured that, by 2020, the UK’s biggest banks will have received a tax giveaway worth a whopping £4.7 billion. That is £4.7 billion that could have been spent on our public services—notably on children’s services, for example.
Stephen Kerr
It is all well and good for the hon. Gentleman to say what he is saying, but he is neglecting a simple fact. The financial sector is paying 35% more in tax today than it did in 2010 under a Labour Government.
Peter Dowd
Yes, because the sector returned to profitability after a Labour Government supported it throughout. That is why the sector has returned to profitability. Ultimately, if a Labour Government had not gone in and supported the sector, there would have been no banks, no profits and no tax whatsoever. I remind the hon. Gentleman of that one.
Alex Burghart
I am enjoying the hon. Gentleman’s potted Marxist history of the past 10 years. There seems to be a little bit of history that he has forgotten, which is of course the lax and inappropriate regulatory regime that the Labour party introduced under Ed Balls. That regime contributed to the terrible state in which our banking sector was left after 2008. Perhaps the hon. Gentleman would like to remind the Committee and his party of that.
Peter Dowd
First, we did not regulate the banks in the United States, where it all started. I ask the hon. Gentleman—I have said this a number of times—to go and look at “Freeing Britain to Compete,” the document produced by the right hon. Member for Wokingham (John Redwood) for the shadow Cabinet in, surprisingly, August 2007.
The Chief Secretary to the Treasury (Elizabeth Truss)
They were not the Government.
Peter Dowd
“They were not the Government” is shouted across the Dispatch Box, but that brings me to the point I am making. The bottom line is that chapter 6 of “Freeing Britain to Compete” called for significantly less regulation of the banks. As I have said before, the right hon. Member for Wokingham effectively said in that document that the Labour Government at the time believed that, if we did not regulate the banks, they would steal all our money. Many people out there believe that that is, in effect, what happened. The taxpayer had to bail out the banks. Why did the taxpayer have to bail them out? Because of the lack of regulation. The shadow Cabinet at the time ratified a policy of less regulation. If we had followed the right hon. Gentleman’s exhortations, as ratified by the shadow Cabinet, we would be in an even worse state. I ask the hon. Member for Brentwood and Ongar (Alex Burghart) to go and have a look at that one.
Rachel Maclean
The hon. Gentleman is discussing the strictures and exhortations of my right hon. Friend the Member for Wokingham (John Redwood), who was then an Opposition Back Bencher. Surely the hon. Gentleman must recognise that it was the Labour party, in government, that deregulated the banks and took power away from the Bank of England. Whatever my right hon. Friend may or may not have said—he is an incredibly intelligent and learned person—he was not in government and was not making policy. It was the Labour Government who made the policy to deregulate and allow the financial crisis by taking away strength from the Bank of England at a time when it should have been strengthened.
Peter Dowd
If the hon. Lady wants to take back to the Conservative party the independence of the Bank of England, she should feel free. We will not support it— [Interruption.] That is what I heard her say. She was complaining about the independence of the Bank of England. So a new policy has been introduced by the Conservatives to take away the independence of the Bank of England.
To offset the cuts to the bank levy, the Government introduced the 8% corporation tax surcharge, which they falsely claimed would offset the reduction. If we look at their Red Book and the forecasts from the Office for Budget Responsibility, however, we can clearly see that the surcharge will not make up the fall in the bank levy. Under the forecasts, the surcharge is set to increase by £0.3 billion a year, while the receipts the Exchequer receives from the levy will fall by £1.7 billion a year, which is a £1.4 billion gap. That is a fact. That is in the Government’s own Red Book.
Dan Carden
I am grateful to my hon. Friend and constituency neighbour for giving way. There is a lot of displacement activity coming from Conservative Members in the form of interventions. This is the second debate I have attended on the Finance Bill in which not one Conservative Member has mentioned living standards, wages, public sector pay or any real life conditions.
I encourage my hon. Friend to carry on with his speech and to talk about the review that should take place into the bank levy and the real life consequences of this Tory Government’s policies.
Peter Dowd
I thank my hon. Friend for his advice, which I will take.
In 2017, we are still feeling the effects and economic consequences of the actions of the banks. Every day we are told by the Government that there is no money to invest and that austerity must continue, yet the Government have gone out of their way to undermine any remuneration from the banks that caused this sorry state of affairs in the first place.
Once again, the Opposition’s ability to amend this Bill is hamstrung and limited by the Government’s continued use of arcane and outdated parliamentary procedure. In football parlance, not only have they moved the goalposts but they have put boards across the goalmouths so that the Opposition cannot score any goals—a recreant act, if ever there was one, from a pusillanimous Government frightened of their own shadow.
By tabling new clause 1, we seek, first, to require the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims—Sir Roger, you will be glad that we are back on the bank levy. Secondly, we seek to establish the extent of the revenue effects of the cuts made in 2015. Thirdly, we seek to calculate how much would have been raised if the Government had stuck with Labour’s bankers bonus tax. Let us have the comparisons.
Such a report would shine a light on the Government’s malpractice in cutting frontline services while offering tax giveaways to the banks. It would require the Minister to reassure the House directly that certain banking practices are not simply in hibernation. “Once bitten, twice shy” is a fair assessment of most people’s views, including many in the sector itself. A by-product of the process would be to show that far more would have been raised under Labour’s bankroll tax.
We are also calling for a separate review of the changes introduced by clause 33 and schedule 9 and their overall impact on revenue and risky behaviour. That review would make the Treasury explain the rationale for further limiting the scope of the bank levy and forgoing billions of pounds while, at the same time, pushing for more cuts to departmental budgets and frontline services.
It is, of course, unsurprising and indicative of the Government that they have failed to keep track of the banks that regularly pay the levy and a full list of what they have paid. That is why, in the name of transparency—a very novel concept for the Government—we would ensure fiscal accountability. The Opposition have tabled an amendment that seeks to create a public register for the bank levy.
The Minister talks about commercial sensitivity. Well, that old chestnut is brought out time after time. When we supported the banks with billions upon billions of pounds, nobody talked about commercial sensitivity then. In this particular case, I am sure many in the banking sector would be happy to have such transparency. It is shocking that the Government consider this tax cut for the wealthy few to be a good use of nearly £5 billion.
Alongside demanding that the Government change course, we must also understand the impact of the lower levy rate introduced in 2011, as well as the revenue effects of lowering the levy in 2015. That, among other things, is what our amendment seeks to tease out.
Robert Jenrick
I am confused by the hon. Gentleman’s position on the bank levy. He says that he voted against it in 2011 because it was set at too low a threshold, but between 2011 and 2015 the then Chancellor raised the bank levy seven times and, on each occasion, the Labour party voted against it. Why did it do that?
Peter Dowd
I suggest that the hon. Gentleman goes back and reads Hansard when it is printed to see exactly what I said.
Once we can see the true costs of the Government’s policies, we can grasp the extent of the choices they have been making and how they have favoured a small, wealthy group over the many citizens of this country time and again. Let us look at the example of children’s services. Only a week before the Budget, the chief executive of Action for Children, Sir Tony Hawkhead, described the “devastating cost” of cuts to children’s services, which he said have been left on a “dangerous and unstable” footing. These prevention and protection services are vital to provide proper care for our nation’s children, and the banking levy could help with that, yet we have seen deep cuts of 55% of funding for local government and a gap of £2 billion in funding by 2020.
There is widespread talk and reports of local councils having to seek permission from the Government to raise council tax to cover the costs, in effect, of cuts to the bank levy—this money may have been available for children. So cuts to bankers and council tax up seems to be what we are being told today. As these services have been decimated over the past seven years, we have seen a doubling of serious child protection cases and twice the number of children put into care protection plans. Last year, 70,000 children were placed into care. The support for foster care, adoption and Sure Start children’s centres has all been reduced. Youth centres are closing and parenting classes are being axed. Short breaks for disabled children, provided by local councils to give their parents a little respite from full-time care, are being taken away and are under strain.
Taken together, those cuts mean that some of the most vulnerable children in our country are paying the price for seven years of failing economic strategy. When are the Government going to change their strategy? It is still shocking to see the Government put the needs of others ahead of those of our youngest citizens, who are picking up the bill for austerity
Alex Burghart
Will the hon. Gentleman not acknowledge that, as we have reduced the rate of corporation tax, so revenues have increased and there is now more money to spend on public services than there would otherwise have been? Does he not acknowledge that there is a real risk that, if his party were to increase corporation tax rates, there would be less money coming in, and cuts to public services and so on would be on his party’s head?
Peter Dowd
In short, no. The Institute for Fiscal Studies has made no link whatsoever between the rate of corporation tax and tax take. This is one of these myths that have been presented to the House time after time, which in the main we have tried to ignore, but at some point we have say that it is complete and utter claptrap, not to put too fine a point on it.
The banking surcharge, supposedly introduced to compensate the taxpayer for this levy loss, will not come close to making good the difference. The Chancellor still has a choice though: he could reverse the cut to the bank levy and end the crisis in our children’s services instead.
It is increasingly clear that the oldest political party has run out of steam.
Lucy Frazer (South East Cambridgeshire) (Con)
Does the hon. Gentleman therefore think that France’s recent proposal to cut taxes for higher earners in order to woo bankers over to France is an incorrect policy, and that France has got it wrong because low taxes do not encourage investment and growth in a country?
Peter Dowd
The only thing that is going to attract people over to France is the shambles that the Government have made of their Brexit negotiations. That is a significantly bigger factor than, for example, the banking levy.
Gareth Snell
France has a corporation tax rate of 33%, so I am not entirely sure the point the hon. and learned Lady was making is valid. Would my hon. Friend care to comment on that?
Peter Dowd
My hon. Friend is right on that. Other countries, including the United States, have a corporation tax of 36% and the German rate is higher than ours, so even if we went back to the 2010 level of 26% that we had under a Labour Government, we would still have the lowest rate of all our competitors. That is the reality. Interestingly, they are doing much better than we are, notwithstanding that higher level of corporation tax.
Stephen Lloyd
Does the hon. Gentleman agree that the Conservative party continues to cut corporation tax aggressively, but that perhaps next year rather than cutting it still further it might take that money to ensure that the WASPI women—the Women Against State Pension Inequality Campaign—get a fair transition payment?
Peter Dowd
There are many, many calls on the taxpayer, and that is one of them. The Government would do well to pay attention to the exhortations of the hon. Gentleman.
Peter Dowd
I am more than happy to give way in relation to corporation tax, but it is important that I maintain the theme of the austerity project. It has not led us to prosperity. It has delivered misery for this country, yet the Government stick to the same old rules: tax breaks for wealthy bankers and cuts for the rest of us. It is like a stuck record.
James Cartlidge
I am sure that, coming from where he does, the hon. Gentleman takes a close interest in the Republic of Ireland, a country he has not mentioned. Is he aware that, by keeping its corporation tax rate low, it has revolutionised its economy and become an export tiger, and that that has been a key factor in helping it to recover from the crash?
Peter Dowd
Huge amounts of support from the European Union have revolutionised the Irish economy. My forebears came from Ireland, but I do not think even the Irish would compare themselves as a small country of 3.5 million people or thereabouts with the United Kingdom with its 60 million—this is chalk and cheese. The hon. Gentleman will appreciate that that is a ridiculous comparison to make in the debate.
Our amendment will finally help to demonstrate the true cost to the public purse of the Government’s favourable approach to some. In that way, we can understand exactly what the cost in revenue is. This should be all the evidence the Government need to change course—things simply are not working. Productivity is low, inflation is up, wages are stagnating, public services are in absolute decline and the NHS is under strain, as is social care, yet the Government just do not get it. They seem to think that we live in Shangri-la, but, unfortunately, we do not. We know that the Conservative party relies on support from vested interests for its own survival, but the question we must ask ourselves is: should the survival of a clapped out, atrophying, self-centred, out-of-touch, diminished Tory party take precedence over the needs of children? I know the answer, so I will simply leave Conservative Members to answer it in the silence and solitude of their own consciences.
Stephen Kerr
It is my great privilege to follow the hon. Member for Bootle (Peter Dowd), whose speech was greatly entertaining, if a little devoid of something approaching accurate history. We were treated to a festival of revisionism on this country’s economic history over the past 10 years. I did agree with one thing he said—it was almost the first thing he said—which was that it is wrong to create a single category to describe bankers. He alluded to the fact that some may be called saints and others may be called sinners—he may have said that, but I cannot recall exactly the term he used—and that is undoubtedly the case, so to generalise about banking and bankers, as we often hear Opposition Members do, is extremely rash.
As for culpability for the events from the end of 2007 to 2009, the hon. Gentleman may wriggle on the issue, but the fact is that the Labour Government were indeed culpable, as were other politicians of that time who were holding senior office in this country, including the then First Minister of Scotland, Alex Salmond, who positively encouraged the Royal Bank of Scotland to engage in some of the more reckless initiatives that the leadership of that bank were engaged in. The result was that not only did they upend a great Scottish institution, but they nearly upended the whole United Kingdom economy.
Ian C. Lucas (Wrexham) (Lab)
Does the hon. Gentleman recall the shadow Chancellor at that time, the then Member for Tatton, calling repeatedly for the relaxation of what he described as the strict regulation that the Labour Government were imposing?
Stephen Kerr
The important thing to remember is who was in government and whose hand was on the tiller at the time, and it was a Labour Government’s.
Stephen McPartland (Stevenage) (Con)
Does my hon. Friend remember the City Minister, Ed Balls, saying in 2006 that nothing could endanger the light-touch regulation of the banking system?
Stephen Kerr
I thank my hon. Friend for that useful intervention because I absolutely do remember that. The reason why those words might linger in mind longer is that they came from someone holding an office of state. Cabinet members at the time were positively encouraging those whom they considered their friends in the City to become increasingly reckless, as was the First Minister of Scotland, as I have mentioned.
Gareth Snell
Now that the hon. Gentleman has demonstrated that his memory is fully functioning, will he answer the question asked by my hon. Friend the Member for Wrexham (Ian C. Lucas)? Does he recall the comments made by the former Chancellor, who was shadow Chancellor at the time? It appears that the views of shadow Chancellors are quite important to Conservative Members.
Stephen Kerr
It might be a function of my age, but I must confess that I have no recollection of anything to which the hon. Member for Wrexham (Ian C. Lucas) referred. I apologise to the House for the lapse in my memory, but I am of an advanced age and it is perhaps a senior moment—I do not know.
I support the Bill and the plan that goes with the banking levy, which is a fair way to ensure that banks make a fair contribution to the tax system and that they make the right contribution to society. The changes proposed in the Bill are fair. They provide for a level playing field for all banks, whether domiciled in the UK or based outside it.
Sandy Martin (Ipswich) (Lab)
Will the hon. Gentleman explain how we can know there is a level playing field and that such levies are fair if there is not complete transparency?
Stephen Kerr
I was about to describe the level playing field as I see it. The Bill will remove any disincentive there might have been for banks to base themselves in the UK, which is important. I remind all Members of the reputation that our country and particularly the City has. I think we would all agree that the City is the financial capital of the world.
With respect to the bank levy, the banks’ contribution must go beyond the paying of taxes, as outlined in the Bill. Given the banking sector’s behaviour—I referred to the comments by the hon. Member for Bootle about saints and sinners earlier, but I am generalising now—the banking industry does have a responsibility to make a fairer contribution to society, which is what the measures taken by the Government since 2010 and 2015 have made happen.
Let me mention in passing the Financial Conduct Authority’s report on the Royal Bank of Scotland and its treatment of small and medium-sized business customers.
James Cartlidge
I do not want to distract my hon. Friend from his excellent speech, but he referred earlier to the former First Minister, Alex Salmond; does he recall the encouragement that Mr Salmond gave to RBS with respect to ABN AMRO and anything related to that purchase, which many people thought at the time was a risky investment?
Stephen Kerr
I have a very bright recollection of that. There is a famous document that shows the First Minister wrote to the chief executive of RBS and added at the end some personal notes that went above and beyond encouragement.
Given recent history, it is right that the banks make a more-than-fair contribution, and that is what they have been doing. I return to the FCA’s report on the RBS and its treatment of small and medium-sized business customers. I refer specifically to the conduct of RBS’s global restructuring group, about which the FCA’s report makes depressing reading. When I looked at the report, I lost count of the number of times the words “inadequate”, “inappropriate”, “systematic” and “failure” were linked repeatedly to a wide range of RBS’s activities, and particularly the global restructuring group’s conduct towards small and medium-sized businesses. The words I highlighted were appended to the description of how the group laid charges and managed loans and communications and to the description of its valuation practices. There is also the fact that the complaint procedures were completely ignored.
Many Members from all parties will know of examples of how the systematic failings in RBS’s global restructuring group affected constituents and their businesses. My constituency is no different. I am mindful of ongoing investigations involving cases in my constituency and have no desire to jeopardise their progress as I address the issue of bank levies. I shall simply say that from the cases I have seen there remain many unanswered questions that RBS needs to address.
Many Members present will be aware of RBS and the Bank of Scotland having closed their bank branches.
James Cartlidge
My hon. Friend reminds us that, what with Royal Bank of Scotland and Bank of Scotland, there is clearly a theme among these great institutions that failed. Has he considered the fact that the bank levy is one function of a system in which ultimately the lender of last resort is the most important function? That system would simply not exist had Scotland gone independent and been left with massive liabilities to pick up. It would not have been able to cope.
Stephen Kerr
My hon. Friend makes a first-class point. He provides me with an opportunity to remind the House that, thankfully, in September 2014, Scotland had the good sense to vote overwhelmingly to remain part of the United Kingdom. Part of the reason for that was, I am sure, the lessons we had learned as a country from our experiences between 2007 and 2009, particularly the recklessness of the Scottish National party Government and the First Minister at the time, Alex Salmond, in the way he conducted himself with respect to RBS.
Just so that the hon. Member for Glasgow North (Patrick Grady) is aware, I am talking about the bank levy in relation to bank closures. It is my firm belief that having bank branches in communities is part of the covenant between the public and their financial institutions, but that covenant that is clearly broken. People should expect the banking sector to keep businesses going with cash flow, loans, financial planning and so forth. People should also expect that bank branches are close by and serve the communities in which they live. Earlier, the hon. Member for Liverpool, Walton (Dan Carden) reminded us that high street banking is particularly important for people in our constituencies who are elderly or whose mobility is challenged in other ways.
In Bannockburn, Dunblane, Bridge of Allan and the Springkerse estate in Stirling, RBS and the Bank of Scotland are leaving communities without adequate access to banking. It is important to state these things in the context of our consideration of the bank levy.
Ian C. Lucas
The hon. Gentleman is making a powerful argument about local banking. Does he therefore support the Labour party proposals for the introduction of regional banks? A nation such as Scotland could have its own banking system to serve local communities, rather than the incredibly centralised system we have now.
Stephen Kerr
I am in favour of some fair competition in retail banking. We need to consider many important issues in the context of the future of retail banking, especially how it appears in the heart of our communities.
RBS is closing its branch in Bridge of Allan, which happens where I live. In the past eight months alone, the Clydesdale bank, the Bank of Scotland and the TSB have all closed their branches, and now RBS is, too. That leaves the post office on Fountain Road as the only place where anyone will be able to do any over-the-counter banking.
Gareth Snell
Given that the Government are the major shareholder in one of the banks to which the hon. Gentleman referred that has closed and left his community devoid of proper facilities, does he not agree that it is time for the Government to step in and use their shareholder clout to ensure that bank branches stay open?
Stephen Kerr
I thank the hon. Gentleman for his comment. In fact, I have made representations to Ministers—as have my colleagues on the Government Benches—because of the impact that the closure of the bank branches, particularly the recent announced closures of the Royal Bank of Scotland branches, will have on communities such as the one from which I come in Bridge of Allan. I do have concerns about the capabilities of the Post Office branches to be able to deal with the kinds of cash amounts that they will now have to handle. It is a different scale of operations that they will have to be prepared to lift themselves to. Yes, I have made representations, and I will continue to do so. In fact, there is an Adjournment debate on the subject following these debates.
Peter Dowd
Does the hon. Gentleman agree that using state money to keep banks open in local communities amounts to Marxism?
Stephen Kerr
Well, I have mentioned what I did in my earlier years. In all those years, I was never accused of being a Marxist. I am concerned when communities become devoid of a basic service, such as a bank branch of any description. Frankly, I consider it to be unacceptable. These banks have had so much money from the British people and have been bailed out by them. I have already mentioned the recklessness of the banks, particularly of the Royal Bank of Scotland, for which I do not apologise.
I should say that I did actually work for the Royal Bank of Scotland when I left school. Perhaps I should have mentioned that earlier. [Hon. Members: “Yes, you should.”] I was 16 at the time. I was a junior bank officer for RBS at the East High Street branch in Forfar. The Royal Bank of Scotland is a great institution. I just pause to pay tribute to its staff because they do a great job, and they have done a great job over these past 10 years in particular in very great difficulties. I pay them my compliments for that. Nevertheless, it does not excuse the Royal Bank of Scotland. In addressing the bank levy, it is important to remember that the greed and the calumny that they were guilty of means that they owe the British people something more. I fully acknowledge that that something more has been extracted and is being extracted, but I also think that there is a case for them having the social responsibility to maintain a presence in the communities of my constituency, such as in Bannockburn, Dunblane, Bridge of Allan and the rural parts of the constituency. I am afraid that a mobile bank does not quite meet the need.
The other consequence is that many more empty units are appearing on our high streets. That is on top of the units that have been left empty by the Scottish Government and their inaction on business rates. I was about to say, Sir Roger, that I wish that I could show you the picture of King Street in Stirling, but, in retrospect, I am glad that I cannot, because there are so many empty units and so many “to let” and “for sale” boards. That is a situation that leaves someone such as me, who loves Stirling and the great history of my constituency and everything that it stands for, more than a little concerned. There is a feeling that we need to see a change in this respect. Certainly, when the banks, which are 72% owned by the taxpayer, decide to vacate these prime sites, it leaves a big hole at the heart of these shopping centres and communities.
Karin Smyth (Bristol South) (Lab)
I just want to be clear: is the hon. Gentleman asking for a further Government subsidy from either the Scottish Government or the UK Government for those institutions?
Stephen Kerr
I do not think that I have mentioned the word “subsidy”. I am talking about corporate social responsibility. [Interruption.] Corporate social responsibility has nothing to do with subsidy.
The Temporary Chair (Sir Roger Gale)
I am listening with interest to the hon. Gentleman. He is talking about social responsibility, but I need to remind him that he should be talking about the bank levy.
Stephen Kerr
I appreciate that reminder, Sir Roger. My comments about social responsibility are in the context of why we have a bank levy at all and why it has been an important part of the Government’s focus in, quite rightly, raising the billions of extra revenue.
I promise that I will take only a few seconds more. There was some comment earlier about the effect of taxation. Someone mentioned the Laffer curve, which is well known to Members. It was certainly well known to the former Member for Gordon and the former First Minister of Scotland, Alex Salmond, who used to regularly quote the Laffer curve in his models. He argued with great eloquence in many places—perhaps he even did so here, I cannot be sure—for lower corporation tax. That was one of the things that Alex Salmond absolutely stood for. The lack of any intervention on me means that I am obviously not going to be corrected on that score.
Rachel Maclean
My hon. Friend is talking about Scotland, but is he aware that, in the whole UK, while we reduced corporation tax from 28% to 19%, the amount collected has increased from £37 billion to £50 billion during the period 2010 to 2017. Will he comment on that as well?
Stephen Kerr
I am delighted to offer a comment on that, because that is exactly in line with the point that I am trying to make, which is that the Laffer curve is exactly that—we increase revenue as we reduce taxation rates. It is very much at the core of what we believe on the Government Benches. At one time, it was what the SNP also stood by, but now the Financial Secretary in the Scottish Government has not even heard of Laffer. He told a Select Committee in Holyrood that he had never heard of the Laffer curve. That is where we are at in Scotland. When it comes to incentive, hard work and industry—I am referring this to the bank levy and the bankers’ bonuses that were mentioned by Opposition Front Benchers—we are now at a point where £33,000 a year is classified in Scotland as “rich”. I think that that is dismal. We are talking not about people with yachts in the marina bays of the west of Scotland, but doctors, teachers and middle managers—the working men and women of Scotland. Therefore, when it comes to the bank levy and to bankers’ bonuses, and we talk about incentives to work hard, to exercise initiative and to take a few risks, it is just not on in Scotland now. The Scottish Government are sending out a clear message, which I find dismal and dismaying, that that is not the kind of Scotland that they want. It is the kind of Scotland that I want. It is the kind of United Kingdom that I want, which is why I unreservedly stand to support the Bill.
Kirsty Blackman (Aberdeen North) (SNP)
You will be delighted to know, Sir Roger, that I will be talking about the bank levy and the new clauses that have been tabled both by the Opposition and by our party. I wish to start by saying that I have rarely been more embarrassed to be part of this House than I am this evening. This debate followed hot on the heels of a statement on bullying and harassment and we ended up in a situation in which there was a ping-pong between Government Back Benchers and the Opposition Front-Bench team. It just was not acceptable. I appreciate the fact, Sir Roger, that you intervened and brought Members back to the matter under discussion.
Kirsty Blackman
No, I will not give way.
The other concern about the tone of this debate thus far is that it has basically been a history lesson. Both sides have been talking about the history and how we have ended up in this situation. Very few people have spoken at any length about the future and about how the bank levy in the future will affect the tax take of the Treasury, as well has how it could be made to be more fair and ensure that we redistribute taxes and wealth in a positive way.
The SNP has a manifesto commitment to support the reversal of the reduction in the bank levy. We stand by that commitment and have been consistent in our views on that. We have also been consistent in supporting the introduction of a tax on bankers’ bonuses.
I am pleased with the way in which Labour’s new clause 1 has been written; there is a lot to commend it to the Committee. The suggestion of looking at the effects on revenue of the bank levy compared to the bank payroll tax is utterly sensible. It strikes me that this information should be in the public domain, so that we can all talk from a position of knowledge about the actual effects that this has had, rather than the projected effect that the Treasury thought it would have when it was first put in place or even thinks it might have now. It is totally reasonable for us to ask for a review of these things.
We would be able to go further and ask for more drastic changes if the Government had proposed an amendment of the law resolution, which would allow us to be more flexible in tabling amendments. As I think I have said before—if not, I am quite happy to say it now—the fact that the Conservative Government are not proposing an amendment of the law resolution means that future Labour Governments will be likely to do the same thing, so this creates a situation whereby the House is less transparent and there is less Opposition scrutiny. It would be much better for all parties if there was an amendment of the law resolution.
New clause 1 states that the proposed review would consider
“the effectiveness of the levy in reflecting risks to the financial system and the wider UK economy arising from the banking sector”.
That is key. Despite all that has happened since the financial crash, there are concerns about ensuring that banks continue to make less risky propositions and continue to be safe places for people to put their money. It is reasonable to look at the bank levy in the context of discouraging risky behaviour by banks, and the reference to the incoming revenue is key.
New clause 11, tabled by the SNP, would deal with two things: inclusive growth and equality. We will hear an awful lot in the debate tomorrow about equality, and this should apply across all measures. The review proposed in our new clause would consider whether reducing the bank levy would disproportionately affect, for example, people of a certain gender or people who are not wealthy. People who work for banks are more likely to be male and wealthy. Therefore, reducing the bank levy is more likely to support them than it is to support groups that are disadvantaged in the first place.
We in the SNP have been absolutely clear and consistent in our support of inclusive growth. We have also been clear that things such as quantitative easing—certainly since the first round of QE—do very little to support those people at the bottom of the pile or to inject money into the real economy, but actually have a disproportionate effect in organisations such as those in the FTSE 100. We will keep being clear that inclusive growth is important, which is why we have proposed progressive options for taxation. Particularly in this place, it is difficult to get any sensible answers from the Government about how their proposals will affect people across the spectrum. That is not necessarily because the Government have not done the work; they may have done the work, but they are unwilling to publish it. They do not produce comprehensive reviews of how the tax takes have changed as a result of the changes they have made to the tax system.
Hon. Members will be unsurprised to hear me calling again for the Government to be more transparent, but that is what I am doing. I will also be very clear that we are keen to support new clause 1 if Labour decides to push it to a vote.
James Cartlidge
It is a pleasure, as always, to follow the hon. Member for Aberdeen North (Kirsty Blackman). Interestingly, she mentioned inclusive growth, to which I will return shortly. It is also a pleasure to follow my hon. Friend the Member for Stirling (Stephen Kerr), whose speech was a real tour de force. The hon. Member for Aberdeen North criticised him for not talking about the future and dwelling on the past. Actually, he was talking about the present—the challenges facing his constituency today, in the here and now. The bank levy is incredibly important because it is all about the future prosperity of those constituents, so I very much welcome my hon. Friend’s comments.
Interestingly, the Opposition’s new clause 3 gives us a good way of looking at the bank levy as it stands. Subsection (2) of new clause 3, which would affect schedule 9—the schedule that contains the details about the bank levy—states:
“No later than 31 October 2020, the Chancellor of the Exchequer shall lay before the House of Commons an account of the effects of the proposed changes in Part 1 of Schedule 9—(a) on the public revenue, (b) in reflecting risks to the financial system and the wider UK economy arising from the banking sector, and (c) in encouraging banks to move away from riskier funding models.”
I accept that those three points are incredibly germane. In fact, let us not wait until 31 October 2020. Let us stand here now and think about how a review would fit under Labour’s very own new clause.
Look at subsection (2)(a) of new clause 3, which is about the impact “on the public revenue”. What do we see? Well, the banking sector paid 58% more tax in 2016-17 than in 2009-10. That is under a Conservative Government. The average amount paid by the banks every year since 2010 has been 13% higher than under Labour. In 2016, the Government introduced an additional tax on banks—the 8% corporation tax surcharge, which we have been discussing—which will raise nearly £9 billion by 2022.
Sandy Martin
In 2009-10, the banks were recovering from the worst position they had been in since the 1930s. In many cases, they went under and needed Government support to get out. Does the hon. Gentleman accept that it would therefore have been extraordinary if the banks were not making more profit in 2016-17 than they were in 2009-10, that that is the reason why there is more take from the bank levy than there was in 2009-10, and that it is not simply because the Conservatives have reduced the amount of it?
James Cartlidge
I consider the hon. Gentleman to be a friend because we work together in Suffolk as MPs; we are always happy to do that. I will be coming to the issue of the crash and the way in which the banks went back to the 1930s, as he puts it, because I experienced that myself.
Stephen McPartland
Is my hon. Friend aware that the total tax take from banks now is 6% higher than it was in the year before the financial crash?
James Cartlidge
My hon. Friend makes an excellent intervention and provides the rebuttal for me. The key point is that more tax is being raised now than before the crash.
My point is that were we to apply now the test of the impact on the public revenue under Labour’s very own review as proposed in new clause 3, we could only come to one conclusion, which is that all the taxes we have put in place on the banking sector—not just the bank levy—have been raising significantly more revenue. The rising revenue has contributed to paying off the deficit and supporting UK public services. [Interruption.] The shadow Minister, the hon. Member for Bootle (Peter Dowd), is shaking his head. I am happy for him to intervene and tell me that we are not raising more tax from the banks. He was very generous in giving way to me, but it appears that he is not going to intervene.
Subsection (2)(b) of new clause 3 states that the review that Labour would introduce of the bank levy would look at
“reflecting risks to the financial system and the wider UK economy arising from the banking sector”.
I always find it amusing to see a Labour amendment—particularly from this Labour party—talking about risks to the financial system; indeed, I think the shadow Chancellor himself has referred to Labour as a risk to the financial system. One wonders whether, in its own review, Labour will be modelling what the impact of a run on the pound—let alone a run on the banks—would be on the banking system. I certainly think it would be most profound.
The hon. Member for Aberdeen North said we are going back in time, but of course we have to go back, because the bank levy was born out of what happened in 2008. The bank levy came from the crash, which has had very many wider impacts, but particularly on this aspect of our tax system.
Let us remember the real bank levy—the real cost to the public. The cost of the bail-out of the banks was £850 billion. That was the figure the National Audit Office published in 2009 while there was still a Labour Government. That consisted of all kinds of costs. There was £107 million for City advisers—that’s right, a Labour Government spent over £100 million on City advisers. There was £76 billion to buy shares in RBS and Lloyds. There was £250 billion to guarantee wholesale borrowing to strengthen liquidity. There were many more hundreds of billions of such costs, including hundreds of billions for the Bank of England to insure itself in providing liquidity. People forget that. When we talk about the cost of the bail-out, we are not talking just about buying shares in the banks; this huge amount of subsequent activity that took place ultimately has to be accounted for, and it is borne by the whole of our economy and all our taxpayers.
Gareth Snell
I am very interested to hear the hon. Gentleman give us his rhetoric about history. What, at the time, were the suggestions from the Conservative party in terms of dealing with the impending crash? Anecdotally, I know that chief execs of banks were talking about money running out at cashpoints. What would the Conservative party have done differently in 2008 from what happened under the Labour Government?
James Cartlidge
I would say three things. First, the hon. Gentleman talked earlier about the shadow Chancellor, but I have to go back and quote the City Minister at the time—Ed Balls—who said in 2006:
“nothing should be done to put at risk a light-touch, risk-based regulatory regime”.
Gareth Snell
If we are going to trade quotes across the Chamber, the then Member for Witney, who was the leader of the Conservative party at the time, said:
“I want to give you…less regulation.”
If we are talking about regulation and the state of the banks at the time, the Conservative party is as culpable as anybody else.
James Cartlidge
I am happy to have that debate. I will tell the hon. Gentleman what I said. I started a mortgage broking company in 2004—we have expanded since then, and I should declare that I still have interests in that business. I wrote an article for The Guardian in 2004 about the next general election. [Interruption.] Just a closet Marxist. At the time, the big issue being talked about was public services, but I said—this was in 2004—that the big risk we were not talking about was consumer debt. I knew that because, having just started a business in that area, I was stunned by what was happening in mortgage finance, which, of course, was the type of borrowing that laid the seeds for our destruction in 2008.
Sandy Martin
May I tell the hon. Gentleman how prescient he was in 2004? He was clearly right. Does he have the same concern about the rising level of private debt now?
James Cartlidge
The hon. Gentleman makes a very good point, and I will come back to that once I have set out the context of my remarks. The key point is this: there are some concerns, but in a growing economy, consumer debt will tend to rise, so we have to separate out that which is perfectly acceptable and that which may give cause for concern. I will come back to that point, but it is very fair.
In respect of proposed subsection (2)(b) of the Labour new clause, which talks about
“reflecting risks to the financial system”,
we conclude by reminding ourselves that it was the very explosion of the financial system that created the need for this bank levy. As I say, we have to debate the past—why we are here in the first place and where this all came from—and the fact that we are on a journey. The reason this tax is being tapered off is that the banking sector is once again becoming profitable, and we are allowing it to flourish again as a free enterprise-based banking system, but, of course, in the context of very strict regulation and a prudential regime.
Let me go back to the point about personal experience. It amazes me when members of the Labour party stand up and, like Pontius Pilate, wash their hands of the huge impact of that crash. At the time, many of us approached the regulator—the Financial Services Authority—which Gordon Brown launched early in the first Parliament after Labour won in 1997. He claimed that that would avoid future financial crises. We must remember that and have accountability.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Will the hon. Gentleman be reasonable or fair enough to acknowledge that while it is entirely possible to say that the system of regulation on the eve of the financial crisis was not adequate— no one is making the case that it was—surely it is illogical and ridiculous to suggest that the Conservatives would have been doing anything different. After all, the banks themselves were not aware of the level of risk they had undertaken, so it was no surprise that the regulator did not appreciate it. One cannot claim that the Conservatives advocated anything different from the overarching framework of regulation that existed at the time.
James Cartlidge
I entirely disagree. The absolute root cause of it all was not saving enough and having a bad culture of over-reliance on debt. I well remember that back in ’98 and ’99 when Francis Maude was the shadow Chancellor, he kept saying, with regard to the low savings ratio, “We are storing up problems for the future.” At every Budget, no matter how high Labour was in the polls, our shadow Chancellors and shadow spokesmen—people like Howard Flight—would say that the savings ratio was way too low and we were storing up problems for the future. We did warn, we did say it, and we were ignored.
Alison McGovern (Wirral South) (Lab)
The hon. Gentleman is making the case that people borrowed too much because they were somehow feckless or immoral. [Interruption.] He mentioned the poor savings culture in this country and said that people were unable to save. Actually, is it not the case that the picture has worsened since then, because the simple fact is that wages have been held down and people are now unable to save? How has his party in government fared on the issue that he has raised?
James Cartlidge
I never talked about fecklessness or being immoral. I was talking about the economic fact that the savings ratio was dangerously low throughout much of the Labour Government’s time in office, and they were warned about it. Labour Members are saying that we never said anything, and that simply is not true.
The hon. Lady seems to think that Labour had good policies on debt. I remember when someone could get a self-certified mortgage, with no proof of income, on an annual percentage rate relating to bad credit, so they could have a history of failing to pay debt. Not only that, but it was interest-only, so they were not even repaying the capital. There was a whole menu of different types of sub-prime such as light-adverse, medium-adverse or heavy-adverse. As I have said before, basically the question was, “Do you have a pulse?”, and then one got a mortgage.
Peter Dowd
Will the hon. Gentleman simply acknowledge that in August 2007 the Conservatives had a policy of significantly more deregulation, including of the banks, and that was ratified by the Tory shadow Cabinet at the time?
James Cartlidge
I do not accept that. Those mortgages were being advanced. The FSA knew about them and the Government knew about them. The fact is that when you are in charge of the financial system, you have a responsibility to act in a prudent manner. The Governor of the Bank of England always says, “Your duty is to take the punchbowl away when the party gets started.” The problem was that when the party got started under the new Labour Government in terms of debt and borrowing too much, they did not take the punchbowl away—they came out with a new round of tequila slammers, and when that was not enough, they brought out the Jägerbombs, until in 2008 we had the biggest hangover in our history, with the crashing of our economy on the back of the most reckless oversight of financial regulation that this country has ever seen.
Mr Mark Prisk (Hertford and Stortford) (Con)
My hon. Friend is making a very strong case. However, he is relatively new to this place. May I remind him, and the Committee, that when I was on the Opposition Benches for 10 years, the then Labour Chancellor of the Exchequer told us that he had abolished boom and bust? That is the political context in which Labour ruined the economy.
James Cartlidge
My hon. Friend is absolutely right. The types of borrowing that I have talked about were the reality, but what have we done since? It is no longer possible to get self-certified mortgages. It is very difficult—almost impossible—to get interest-only mortgages as a residential purchaser.
James Cartlidge
The hon. Lady did not give way to me, but because I believe in inclusive growth and equality, I will give way to her.
Kirsty Blackman
The hon. Gentleman is making a very sensible case about the issues there were with mortgages before, but there are currently issues with consumer credit. The Bank of England has raised concerns about, for example, the card credit that people are taking out, and the fact that half of households have less than £100 in savings. When is he going to take the punchbowl away?
James Cartlidge
I did say that I would come to the current position on credit. I want to finish on the analysis of the three tenets in new clause 22 under which Labour says that we should consider how the bank levy has worked. According to subsection (2)(c), we should look at it in terms of
“encouraging banks to move away from riskier funding models.”
It is quite amusing to see a Labour new clause that contains the phrase
“encouraging banks to move away”.
My colleagues will appreciate that the whole point of reforming the bank levy is not to encourage banks to move away, but to encourage them to stay here and create wealth and jobs. Let us not forget that in all the figures we have heard about, we have not heard the key one. Banks contribute £116 billion of value added to our economy, not including any of the tax take.
Peter Dowd
We have talked about the rewriting of history. The Shadow Cabinet at the time—we are talking about what happened at the time—said:
“We need to make it more difficult for ministers to regulate, and we need to give the critics of regulation more opportunity to make their case against specific new proposals.”
The Conservatives’ direction of travel at that time was towards not more regulation, but less. Does the hon. Gentleman acknowledge that at all?
James Cartlidge
All the financial plans of that shadow Government would have been about fiscal prudence, and the context would have been completely different. The Labour Government crashed the economy on every single front, which is why we are where we are today.
There is one final point I want to make. We had a wide-ranging discussion earlier about Marxism, which I thought particularly intriguing. We have to decide, as a country, whether we want to be a flourishing free enterprise economy or a centrally commanded one in which everything remains in, or is taken into, the public sector. When the banks were nationalised, they were bailed out on the basis of rescuing the economy from an extreme threat that could have left us resorting to barter. The point is that we have put the banks on a stable footing so that they can flourish again and become competitive businesses. The bank levy, to me, is about striking a balance but having a competitive financial services sector to drive our exports and growth, and that is why I will be voting to support it.
Karin Smyth
We have had an interesting, if not very factually correct, history lesson this evening. I want to bring us back to the question of how we spend £4.7 billion of taxpayers’ money, and the political choices that the Conservative party are making in this Finance Bill. Politics is about priorities, and I would like to talk, as the hon. Member for Aberdeen North (Kirsty Blackman) suggested we should, about the future and how we might spend the money differently. For my constituents in Bristol South, and, I think, for the country, the biggest issue in the Budget is productivity. I would like to think that we could use that money for something better, such as technical qualifications, to help to reduce the skills gap in my constituency.
Of all the constituencies in the country, mine sends the smallest number of young people into higher education, and only 24% have a level 4 qualification. For a city that contains two universities and has two more close by, that is scandalous. Because of that, I have followed the apprenticeship levy very closely and supported the Government in its introduction, but the figures are hugely disappointing. Large employers are using the levy to train current executives, and small employers simply do not know how to navigate the system. That has led to the 62% drop-off in apprenticeship starts since last July. It is outrageous that in the Budget, the Chancellor could only give a nod to the apprenticeship levy by saying that he would keep an eye on it, at the same time as deciding to grant the banks a tax giveaway of £4.7 billion.
T-levels have had very little debate in this House since they were announced in October, and they are mentioned only in passing in the Budget. I welcome the Government’s approach to trying to improve technical education as an alternative to the academic option, because it could really help social mobility in my constituency and those of many other hon. Members. The Government have said that T-levels were
“the most ambitious post-16 education reform since the introduction of A-levels”,
but if they are, the current signs are very worrying. Let us compare that £4.7 billion with the sums of money that the Government have committed to T-levels: £60 million in 2018-19, £445 million in 2021-22 and £500 million every year afterwards to ensure that the supposedly hugely ambitious T-levels are a success. However, while the overall investment is welcome, it pales into a rather small figure compared with the other sums we are talking about.
Robert Courts
It is a great honour to speak in the debate on this very important matter, and particularly to follow the hon. Member for Bristol South (Karin Smyth). She made some very interesting points, and I am glad that she supports many of the technical education measures that the Government are bringing in. I entirely agree with her that this is one of the great challenges the country faces, and I applaud the Government’s work in setting out a framework for technical education in the future.
I want to talk directly about the bank levy. All hon. Members on both sides of the House probably accept that it is very important for the banks to pay a fair contribution towards public services and the tax yield in this country. They are significant employers with significant operations and they are wealthy and profitable enterprises, but it is very important to have a balance. Such a balance throws into relief the fact that banks are responsible not just for being profitable and therefore for paying tax, but for introducing liquidity into the system and enabling us to borrow.
If any hon. Member has ever borrowed to buy a car or a house or to invest in a business—many of their constituents will of course have done so—the money will have come from a bank in most cases. It is very important that banks are enabled to provide precisely that service, so there has to be a balance. Yes, they must pay a fair share towards the economy and society in which we all live, but that share should not be so large that their ability to lend is decreased. I suggest that this Government have got the balance right. In 2010, the Conservative coalition Government increased regulation, and in 2011 they introduced the bank levy, which reflected the risk inherent in the banking sector. It is an inherently risky sector because of the very nature of the way in which it operates, and the bank levy was introduced precisely to recognise that risk. It was introduced to incentivise the banking sector as it then was to invest in a way that was less risky than the ways in which it had operated up until that time.
That spirit of balance, which is the keynote point of my few remarks this evening, is why we need reform now. There is a gradual shift from the levy to taxing profit, recognising that the regulatory regime globally, as well as in this country, has moved on considerably since it was introduced. Since 2016, we have had an 8% tax on bank profits—the corporation tax surcharge—which will raise £9 billion between 2017 and 2022. The bank levy rate will be reduced to 0.1% over the same period. Of course, there is the additional fairness brought by ensuring that the levy affects only UK balance sheets. UK-based banks must never be disincentivised from being based here, rather than being based abroad and operating here. We can make those changes now because of the improvements in global regulation.
Members from all parts of the House should recognise that it is important that we, as politicians, do not become too fixated on the rate of taxation, but rather look at the revenue that is earned. I suggest that this Government have got that balance—that key focus—correct. That is the economic paradox of taxation rates. We heard about the Laffer curve from my hon. Friend the Member for Stirling (Stephen Kerr). If there is 0% tax, 0% taxation is received. If there is 100% tax, 0% taxation is received. The point is where precisely the balance is struck. I suggest that the Government have got it correct.
The measures that we have brought in since 2015 have introduced an additional £7 billion through to 2023, bringing in a total of £30 billion over and above what would have been brought in through corporation tax in any event.
Peter Dowd
I am not quite sure that the hon. Gentleman is correct about that, because the Institute for Fiscal Studies states:
“Cuts to corporation tax rates announced between 2010 and 2016 are estimated to reduce revenues by at least £16.5 billion a year in the short to medium run.”
Even the Treasury’s own figures show that the cost has been significant.
Robert Courts
I simply do not accept that point, with the greatest of respect to the hon. Gentleman. It is quite clear that the reduction in corporation tax, which I am glad he has mentioned, has led to an increase in revenues over that period. It is accepted that GDP is expected to increase by 1.3% in the long run. The receipts have increased by 50% since the Government have been reducing the corporation tax rate, from £36 billion to £55 billion between 2010 and 2016. That is an increase to £55 billion going to the Exchequer over that period.
Ian Paisley (North Antrim) (DUP)
The hon. Gentleman is absolutely right. We have seen the boost in spending generated by the proposed reduction in VAT on the hospitality trade in Northern Ireland before the measure even kicks in. I suggest that if the Government had the bottle to do away with air passenger duty—that would be an exceptionally good move—we would see even more air travel and an increase in tax take overall.
Robert Courts
I thank the hon. Gentleman for those excellent points, which reinforce the point I am making.
Of course there has to be taxation, but we must strike a balance with the level of taxation. I know it is paradoxical, but sometimes when tax is reduced, there is an increase in the amount of tax that is taken because it sponsors the amount of work that business is able to do. When business is able to do more work, it earns more money, it pays more tax, it is able to employ more employees, those employees pay more tax and hopefully their wages increase. I am sure that Opposition Members will be glad to ensure that we have measures that increase wages. That is something we should all aim to do, not least because it increases the tax take and the funding for our public services.
I suggest that the Government’s measures can in no way be described as a bank tax giveaway, because 58% more is being paid in tax than was the case under Labour. An additional £27.3 billion was taken through corporation tax, the bank levy, national insurance, the bank surcharge and income tax in 2016-17 than would otherwise have been the case. A 35% increase in the amount of taxes paid by the financial services sector since 2010 is an extraordinary figure. It has been made possible by this Government’s sensible tax policies.
Nigel Huddleston
My hon. Friend is making a very important point about tax fairness. Whether corporations or individuals, the top 1% of income tax payers pay more than double what the bottom 50% pay. It is a similar principle.
Robert Courts
It is exactly the same principle with personal taxation. My hon. Friend makes an absolutely outstanding point. He is quite right and we must not forget that the principle is the same for personal taxation as it is for corporation taxation. Not only is the tax yield increasing, it is also borne by those who earn the most. It is indeed progressive and, I would hope, something all Members could support.
I know other Members wish to speak, so I will conclude with this point. An Opposition Member suggested that no one on the Government Benches has spoken about wages, public services and so on. I would very much like to concentrate on them in these last few seconds of my speech. It is through our tax regime, the sensible taxation policies that this Government have put in place since 2010, that we are now able to see an increase in—
Peter Dowd
Given those sensible taxation levels and rates, will the hon. Gentleman explain why productivity is the lowest of all our competitors, inflation is higher than our competitors, wage stagnation is almost becoming endemic, investment is slower, and economic growth is on the floor? If having these so-called lower rates of tax is such a fantastic opportunity for businesses, how come we are still in this particular situation?
Robert Courts
I am grateful, as ever, to the hon. Gentleman for making his points. He makes a number of them and it will not surprise him that I do not agree with him. We have record investment, an extraordinary economic miracle and a jobs miracle. We are still having to recover from the economic mess the Labour party left us in. There is absolutely no two ways about it: the Labour party left us with record levels of national debt.
Our economy is seeing an increasingly benign environment. That has been made possible by the sensible taxation measures the Government have allowed to take place and have sponsored. It is through that tax regime that there is more to spend on public services: companies can look to increase wages, hire more staff, pay more tax and thereby fund the public services we all need.
Rosie Duffield (Canterbury) (Lab)
The Chancellor, in his Budget speech, offered nothing at all for our vital children’s services, which are already struggling and stretched. He was, however, able to find £5 billion of tax relief for bankers, so it is certainly a happy Christmas for them this year. The additional new surcharge on banks and the changes announced to the bank levy mean that the amount received will reduce by a third over time.
A less happy Christmas awaits the staff, parents and children who use the Riverside Sure Start children’s centre in my constituency. On Thursday, I was told that Kent County Council is considering plans to close this beloved centre. The council talks about making efficiency savings and bringing services in house, but we all know what that could mean: more victims of Kent County Council’s ruthless cost-cutting drive in line with this Government’s. When it comes to cuts, it seems to me that Kent County Council is doing its very best not just to throw metaphorical babies out with the bathwater, as real children and babies are being betrayed by this heartless agenda to keep the council in the black.
Kent County Council does not know when to stop. Many families in my community and from local schools rely on the services provided by our children’s centre. Those services include stay and play sessions, vital family support and outreach for parents. They also include advice and help with all aspects of childcare, school choices, breastfeeding support, health visitor and midwife clinics, post-natal depression advice, parenting skills, and speech and language services. Furthermore, the centre threatened with closure in Canterbury also offers advice on employment and opportunities to engage in adult education and training. Riverside children’s centre celebrated its 10th birthday last year. Since it opened in 2006, almost 7,000 children have attended the activities provided and nearly 2,000 families have registered with the centre.
Alison McGovern
My hon. Friend is making an excellent speech. Given the comments that we heard earlier about recent history, does she agree that the brutal cuts to important children’s services such as those that she describes go completely against the rhetoric with which David Cameron and George Osborne came to this House when they went into government in 2010, after the events we heard described just a moment ago?
The Temporary Chair (Albert Owen)
Order. As the hon. Lady continues, rather than concentrating on recent history, will she get back to the bank levy, which is what is under debate?
Rosie Duffield
I thank my hon. Friend the Member for Wirral South (Alison McGovern) for her intervention, but in the light of your comments, Mr Owen, I shall continue with my speech.
These parents and children will no longer be able to meet or play together, and the children will be unable to socialise with children their own age in a safe, well-equipped space. Loneliness is a—[Interruption.] This is about real cuts to real people, affecting their lives.
The problem of loneliness has been much talked about lately. New parents often experience feelings of isolation and can lack confidence, and that is especially the case for parents who have recently moved to a new area or do not have English as their first language. It goes without saying that they are helped enormously by being able to meet others in similar circumstances, sharing their common fears and trepidation at a time of huge life change. Taking away a lifeline such as Sure Start cuts them off from friends, health advice, skills sharing and their communities.
Gareth Snell
My hon. Friend is setting out in her excellent speech exactly the same point as that made by my hon. Friend the Member for Bristol South (Karin Smyth): reducing the bank levy will have a direct impact on community services. Could the services she has mentioned be saved if the Government were to drop their plans to cut the bank levy?
Rosie Duffield
Absolutely. We have heard a lot about Marxism and some filibustering speeches, but the real people watching today are interested in cuts to services such as children’s services. That is why I am speaking about them.
We know that two thirds of councillors from 101 local authorities that were surveyed said that not enough money was available to provide universal services such as children’s centres and youth clubs. How does the short-sighted and drastic cutting of the funding that children’s services need help the children and families of tomorrow? This short-term, household budget-style approach will leave a generation of communities bereft, isolated and without the many essential services that are so needed by parents and children.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
I wish to support Labour’s new clauses 1 to 3, which call for a review of the change in the scope and rate of the bank levy, the funds from which should be invested in young people’s and children’s services. Given the desperate state of young people’s and children’s services across the country, I am surprised that the Chancellor has chosen to reduce the bank levy, effectively depriving the Government of funds that could be spent on those vital services.
It has now been 26 days since the Chancellor delivered his Budget—his second Budget, and the 10th since the Tories took office in 2010, which is now nearly eight years ago. By coincidence, it is also nearly eight years since my baby was born, who is still my baby despite being eight years old. Every parent wants the best for their child and wants them to have every opportunity to fulfil their potential, but for the almost eight years of her life, we have seen her opportunity rationed and funding for children’s and young people’s services slashed. Sir Roger, I will quickly—[Interruption.] I am so sorry, Mr Owen.
Emma Hardy
You have been promoted, Mr Owen.
I want quickly to draw the House’s attention to the funding cuts to Hull City Council’s children’s services budget since 2010 and to argue that rather than reducing the bank levy the Government should be properly funding children’s services. The headline figures for Hull City Council are as follows. Spending on children’s and young people’s services is down by £19.5 million, with more than a quarter of its spending power cut since 2010. That is just half of the £37 million that the council has to cut before 2020. The time taken to get a diagnosis of autism is up, with the average waiting time now at 14 months. The number of Sure Start centres in the city is down since 2010. Those centres were instrumental in supporting me when I had my two girls.
Karin Smyth
Is that not simply incomprehensible at a time when productivity is such a major issue for our economy? Is not the proven, evidence-based value of Sure Start early intervention with children at the youngest age one of the biggest drivers for improving productivity, and is not cutting that totally detrimental?
Emma Hardy
I completely agree. The Education Committee has been looking into fostering. We know that in some of the most deprived areas of society the number of looked-after children is increasing, and we know that one of the reasons is that there is no money for social services departments to support families and give them the early intervention that they so desperately need. It is a false economy to pull funding away from early intervention, saying that that will save money. It will not; it will cost a lot more in the long run.
Those horrendous headlines do not tell the whole story. They do not tell of the worry experienced recently by breastfeeding mothers in Hull who panicked at the possibility that their peer-to-peer doula support would be cut because the council could not afford to pay for it. The council is having to make impossible choices. If it supports those breastfeeding mothers, it will have to pull funding from somewhere else. That is simply not fair.
Those headlines do not tell the story of the child in need who has fallen behind at school and finds it difficult to catch up again because of Government cuts in Sure Start’s speech, language and communication services. The Minister recently published an article in a newspaper complaining about the fact that children were starting school before they were school-ready. Why do the Government think that that is happening? It is happening because there is no money for the early intervention and Sure Start centres that are so desperately needed. Again, more potential is being missed and more opportunity wasted.
As I said in my maiden speech, I do not want a single child to have their life story written on the day they are born. Can we really say that the Bill will create the conditions in which all children can be given the support that they need and the opportunity to fulfil their potential? Does it, as the Prime Minister said on the steps of Downing Street just after taking office,
“do everything we can to help anybody, whatever your background, to go as far as your talents will take you”?
Until we can answer yes to those questions, a reduction in the bank levy is a luxury that we cannot afford. I urge Members to back Labour’s new clauses 1, 2 and 3, because the future of our economy, and our children, depends on them.
Mel Stride
We have had a very wide-ranging debate. On occasion, we even touched on the matter at hand—the bank levy.
The hon. Member for Bootle (Peter Dowd) was very generous in giving way, but less generous and less forthcoming in his answers. He was asked whether he recognised that we would be raising more tax from the banks. He said he would come back to that, but I do not think he did. He was asked why Labour had voted against the bank levy in the first place. On two or three occasions he said he would come back to that, but I am not sure he did. When he was asked whether he supported the overthrow of capitalism, he declined to answer. When he was asked by how much Labour would increase corporation tax, he told his interlocutor to go away and look it up. He was asked whether he was a Marxist. He was swamped by red herrings at one point, which caused my hon. Friend the Member for South Suffolk (James Cartlidge) to say that he was the victim of too many interventions “on the trot”—boom boom!
My hon. Friend the Member for Stirling (Stephen Kerr) stressed the importance of a fair playing field, which is exactly what the Bill is introducing for the banks. The hon. Member for Aberdeen North (Kirsty Blackman) talked about the importance of less risky behaviour by banks. I certainly subscribe to that, which is why the Bank of England’s Financial Policy Committee has been conducting the stress tests to which I referred earlier. They have all been very successful, including one that is based on a no-deal Brexit scenario.
My hon. Friend the Member for South Suffolk also took us through the amount of tax that has been raised from the banks under the Conservatives. He slightly ruined it all by saying that he had once written an article for The Guardian, and that he was, indeed, a closet Marxist at least.
The hon. Member for Bristol South (Karin Smyth) talked about the importance of productivity while my hon. Friend the Member for Witney (Robert Courts) highlighted the importance of a balanced approach to tax so that the banks could lend and stay healthy. The final two contributions were on childcare support, on which this Government have a proud record: by 2019-20 we will spending a record £6 billion per year supporting childcare. On that note, I commend clause 33 and schedule 9 to the Committee.
Question put and agreed to.
Clause 33 accordingly ordered to stand part of the Bill.
Schedule 9
Bank Levy
Question put, That the schedule be the Ninth schedule to the Bill.
The Temporary Chair (Albert Owen)
With this it will be convenient to discuss the following:
That schedule 11 be the Eleventh schedule to the Bill.
Clause 41 stand part.
Amendment 2, in clause 8, page 4, line 16, at end insert—
“(4A) Regulations under this section may not increase any person’s liability to income tax.”
This amendment provides that the power to make regulations in consequence of the exemption from income tax in respect of payments of accommodation allowances to, or in respect of, a member of the armed forces may not be exercised so as to increase any individual’s liability to income tax.
Amendment 3, in page 4, line 17, leave out from “section” to “may” in line 18.
This amendment is consequential on Amendment 2.
Clause 8 stand part.
New clause 4—Review of Relief for First-Time Buyers—
“(1) The Commissioners of Her Majesty’s Revenue and Customs shall undertake a review of the impact of the relief for first-time buyers introduced in Schedule 6ZA to FA 2003.
(2) The review shall consider, in particular, the effects of the relief on—
(a) the public revenue,
(b) house prices, and
(c) the supply of housing.
(3) The Chancellor of the Exchequer must lay a copy of a report of the review under this section before the House of Commons no later than one calendar week prior to the date which he has set for his Autumn 2018 Budget Statement.”
This new clause requires a review to be published prior to the Autumn 2018 Budget on the impact of the relief for first-time buyers, including its effects on house prices and on the supply of housing.
New clause 10— Annual Report on Relief for First-Time Buyers—
“(1) The Chancellor of the Exchequer must prepare and lay before the House of Commons a report for each relevant period on the operation of the relief for first-time buyers introduced in Schedule 6ZA to FA 2003 not less than three months after the end of the relevant period.
(2) The report shall include, in particular, information in respect of the relevant period on—
(a) the number of first-time buyers benefiting from the relief,
(b) the number of purchases benefiting from the relief,
(c) the average age of first-time buyers benefiting from the relief,
(d) the effects on the operation of the private rented sector,
(e) the effects on council housing and other social housing,
(f) the effects on the supply of affordable housing, and
(g) the effects on the operation of collective investment schemes under Part 17 of the Financial Services and Markets Act 2000 in the provision of cooperative housing.
(3) For the purposes of this section, “relevant period” means—
(a) the period from 22 November 2017 to 5 April 2018,
(b) each period of 12 months beginning on 6 April during which the relief is in effect, and
(c) the period beginning on 6 April and ending with the day on which the relief ceases to have effect.”
This new clause requires an annual report on the operation of the relief for first-time buyers, including information on the beneficiaries and effects on different aspects of housing supply.
New clause 5—Parliamentary Scrutiny of Regulations Relating to Armed Forces’ Accommodation Allowance—
“(1) Section 717 of ITEPA 2003 (regulations made by Treasury or Commissioners) is amended as follows.
(2) In subsection (3), leave out “subsection (4)” and insert “subsections (3A) and (4)”.
(3) After subsection (3), insert—
‘(3A) No regulations may be made under section 297D unless a draft has been laid before and approved by a resolution of the House of Commons.’”
This new clause requires that regulations setting conditions relating to the availability of the income tax exemption in relation to armed forces’ accommodation allowance shall be subject to the affirmative procedure.
Mel Stride
The Budget set out an ambitious plan to tackle the housing challenge—a plan that will raise housing supply by the end of this Parliament to its highest level since the 1970s. However, the Government also recognise that we need to act now to help young people who are trying to get on to the housing ladder. This Bill therefore introduces a permanent relief in stamp duty land tax for first-time buyers, which I will turn to shortly. Alongside that, I will also cover clauses 8 and 40, which respectively introduce an income tax exemption for accommodation payments made to members of the armed forces and make minor changes to the higher rates of stamp duty land tax.
Home ownership among young people has been falling. Today, the average house in London costs almost 12 times average earnings, nearly 10 times average earnings in the south-east and more than eight times average earnings in the east.
Kelvin Hopkins (Luton North) (Ind)
Does the right hon. Gentleman not accept that the only solution to the housing crisis is to build millions more houses, not to pump demand into the demand side, which just pushes up prices in the end?
Mel Stride
The hon. Gentleman makes an important point. We announced plans in the Budget along the exact lines that he has suggested in order to free up the supply side and to increase supply to 300,000 units by the mid-2020s. In the last 12 months, we have achieved 217,000 new builds, so we are on our way, although it will take time. He is quite right that the supply side matters.
Sammy Wilson (East Antrim) (DUP)
Does the Minister accept that, although it is important to increase the supply of houses, this measure has been welcomed by young people who see this as at least an opportunity for them to be able to get a deposit for a house and to have fewer up-front costs?
Mel Stride
My hon. Friend is entirely right. The point about up-front costs—alongside the costs of conveyancing, surveyors and so on—is a critical one, particularly for young people getting on to the housing ladder.
Gareth Snell
Average wages in Stoke-on-Trent are £100 a week lower than the national average, and the average house price is only £123,282, so will the Minister tell me the tangible benefits of lifting the stamp duty threshold to £300,000 for my constituents in Stoke-on-Trent?
Mel Stride
There is not an area or region of the country that will not see benefits for first-time buyers. [Hon. Members: “Yes, there is.”] No, I am afraid that that is simply not the case. This measure will benefit first-time buyers in every single region of the country. It is the case that property is a lot more expensive in some parts of the country than in others. Arguably, that is where the particular need is. As I have said, the average house price in London is 12 times average earnings, and it is 10 times average earnings in the south-east.
John Spellar (Warley) (Lab)
Can the Minister give us any indication of his Department’s estimate of the cost of this measure and of the incidence—how it falls— in different regions of the country? In other words, how much is it going to cost globally and what other housing could the Government have built with that money? Equally importantly, how much of this will be in the south-east and how much in other regions?
Mel Stride
In addition to what I just said about every region seeing benefits, I can tell the right hon. Gentleman that the average benefit for the average first-time buyer will be around £1,700, which is a significant amount. For people purchasing a property at the £300,000 to £500,000 level, the benefit is no less than £5,000, which is a considerable sum.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
Does the Minister disagree then with the Office for Budget Responsibility, which says that the measure will actually increase house prices by 0.3%? Is the OBR wrong?
Mel Stride
As the hon. Gentleman may know, the figure of 0.3% takes a static view of this policy and its effect on house prices. It does not take into account the supply side changes that I have mentioned. As we increase supply, prices will inevitably begin to fall. There is no single solution to this challenge and no magic bullet.
Mel Stride
I will make a little progress, if I may.
The Budget announced an ambitious package of new policies to tackle the housing challenge, including planning reform; spending; and a new agency, Homes England, to intervene more actively in the land market. Together with the reforms in the housing White Paper, the housing package announced in the Budget means that we are on track to raise annual housing supply by the end of this Parliament to its highest level since 1970 and to 300,000 a year on average by the mid-2020s. That means that housing supply is on track to be higher over the 2020s than in any previous decade. However, it will take time to build these new homes, and the Government want to act now to help those young people who are aspiring to take their first step on to the housing ladder. That is why the Bill permanently abolishes stamp duty for first-time buyers purchasing a property for £300,000 or less. First-time buyers purchasing a house that is between £300,000 and £500,000 will save £5,000. To ensure that this relief is targeted at those who need it most, purchases above £500,000 will not benefit from the relief.
Gareth Snell
I thank the Minister for taking a second intervention from me. To my earlier point, though, there are fewer than 15 properties currently on the market in Stoke-on-Trent between the value of £250,000 and £300,000. I say again: the average wage in Stoke-on-Trent is £100 a week less than the national average. How will young people in Stoke-on-Trent benefit, when the housing supply does not exist and the wage level will simply not allow them to purchase a property of that value?
Mel Stride
The figures the hon. Gentleman chose to use were, I think, a range between £250,000 and £300,000, and he says there are 15 properties in that category. Of course, stamp duty kicks in at £125,000, so it is the range from £125,000 to £300,000 that we would actually be considering in that example.
First-time buyers are typically more cash-constrained than other buyers, and stamp duty requires cash up front, on top of a deposit and conveyancing fees, for purchases over £125,000. The Government think it is right to reduce the up-front costs that first-time buyers need to pay, giving them an advantage over the rest of the market.
Alison McGovern
I thank the Minister for giving way, but he simply did not answer the question from my right hon. Friend the Member for Warley (John Spellar), who quite legitimately asked him where the money from this cut is going. The Minister talked about the average gain that will be made. Will he tell us the average benefit to a first-time buyer in the west midlands?
Mel Stride
As I say, the average across the piece will be £1,700 per average first-time buyer. I also stated quite clearly that, in every region of the country, there will be those who benefit from this measure.
John Spellar
I thank the Minister for giving way, but surely his Department must have done an analysis, first, to convince the Treasury of how much this would cost and, secondly, to work out how much this would affect each region—in other words, how much benefit was going to the south-east, how much to London, how much to Yorkshire and how much to the west midlands. Why is he so reluctant to open up about those figures?
Mel Stride
What I am able to tell the right hon. Gentleman is that, as I have said, the average benefit will be £1,700 for the average first-time buyer. Every region in the United Kingdom will see benefit from this measure, and those regions—particularly in the south and south-east—where the ratio of salaries required to mortgage levels is particularly high will especially benefit.
However, the other thing we need to do as a Government, as I have already stated, is to make sure we get the supply of housing right. That is why we will be moving from the current level of 200,000 new builds a year up to 300,000 in the middle of the 2020s.
Ian Paisley
It is important to put on the record that Northern Ireland probably benefits disproportionately as a result of this measure, compared with any other part of the United Kingdom. The average house price in Northern Ireland is £128,650—in some areas west of the Bann, it is about £109,000—so hitting house prices over £300,000 would involve such a limited market. Many, many people in Northern Ireland are going to benefit from this, and I welcome the move the Government have made.
Mel Stride
I thank my hon. Friend for those comments, which illustrate the point that there are benefits accruing across all regions of the United Kingdom.
The changes made by this Bill include the largest ever increase in the point at which first-time buyers become liable for stamp duty. This relief will help over 1 million first-time buyers who are taking their first steps on the housing ladder during the next five years. It provides immediate support while our wider housing market reforms take effect.
The changes made by clause 41 ensure that over 95% of first-time buyers who pay stamp duty will benefit by up to £5,000, including 80% of first-time buyers in London. That means that over 80% of first-time buyers will pay no stamp duty at all, and it saves the buyer of an average first property nearly £1,700, as I have said.
In summary, this change to SDLT will help millions of first-time buyers getting on to the housing ladder. Together with the broader housing package we have announced, we are delivering on our pledge to make the dream of home ownership a reality for as many people as possible.
Mel Stride
I am going to make further progress.
I will now move on to other changes relating to stamp duty. Clause 40 brings forward some minor changes to the higher rates of stamp duty land tax for additional properties, which will improve how the legislation works. The changes help in a number of circumstances, including in relation to those affected by divorce or the dissolution of a civil partnership, where they have had to leave a matrimonial home but are required to retain an interest in it, and in relation to the interests of disabled children, where a court-appointed trustee buys a home for such a child.
We will also close down an avoidance opportunity. The Government have become aware of efforts to avoid the higher rates by disposing of only part of an interest in an old main residence to qualify for relief from the higher rates on the whole of a new main residence. This behaviour is unacceptable, and the Government have acted to stop it with effect from 22 November.
Clause 8 introduces a new income tax exemption for payments made to members of the armed forces to help them to meet accommodation costs in the private market in the UK. The exemption enables them to receive a tax-free allowance for renting accommodation or maintaining their home in the private sector. The allowance will also be free of national insurance contributions. That measure will be introduced through regulations at a later date. By using the private market, the Ministry of Defence will be able to provide access to similar accommodation, but with more flexibility.
Opposition Members have tabled amendments 2 and 3 to the armed forces accommodation clause, and I look forward to hearing about them in the debate. The amendments seek to prevent the Treasury from laying regulations that would increase the liability of a member of the armed forces to income tax. I am happy to reassure the Committee that the Government do not intend to use the power to increase tax liabilities either now or in the future. The regulation-making power is retrospective so that the allowance can be provided tax free before regulations take effect. As a standard safeguard, the Bill expressly provides that the Government would not retrospectively increase tax liabilities. I hope that, in the light of that, hon. Members will not press their amendments.
New clause 5, also tabled by Opposition Members, would require the House to expressly approve any regulations made under the clause. The Bill provides for regulations to be made under the negative procedure. Regulations made under the clause will align the qualifying criteria for the proposed exemption with the Ministry of Defence’s new accommodation model once more details are available. Any future regulations will ensure that the tax exemption reflects changes to the model. It would be a questionable demand on Parliament’s time, particularly over the next two years, for it to be called on to expressly approve regulations in these circumstances. The negative procedure provides an appropriate level of scrutiny. I therefore urge the Committee to reject the new clause.
The stamp duty relief for first-time buyers is a major step to help those getting on to the property ladder, and one that has been widely welcomed. The other changes made by these clauses provide relief from some tax costs associated with housing for several groups that deserve them. The clauses also tackle avoidance. I commend clauses 41, 40 and 8, and schedule 11, to the Committee.
Jonathan Reynolds
This country is in the grip of a severe housing crisis that the Conservatives have allowed to spiral out of control over the past seven years. Making sure that people have a roof over their heads and can raise their families somewhere safe, decent and affordable is more than just a matter of sound public policy—it is surely a yardstick of a decent society. At the moment, we are falling short of this yardstick to a degree that is shameful for one of the world’s most affluent nations.
Now, after seven years of Tory government, the Government say that they have noticed the problem, yet it is on the brink not of being resolved but rather exacerbated. The Chancellor’s autumn Budget, from which the measures in the Bill are drawn, falls woefully short in addressing the scale of what is needed. Since 2010, house building has fallen to its lowest level since the 1920s, rough sleeping has risen year on year, rents have risen faster than incomes and there are almost 200,000 fewer homeowners in the UK.
Lucy Frazer
Can the hon. Gentleman confirm whether Labour built houses when it was in office or house building fell when Labour was in office?
Jonathan Reynolds
Labour’s record in office is 2 million more homes, 1 million more homeowners, and—something that is particularly important to me as a Labour councillor during some of that time—an incredible investment in social housing. In local government, we used to ask whether we could ever fulfil the backlog in repairs that the Thatcher and Major Governments had created, but we did, and it made a tremendous difference to people’s lives.
The one headline-grabbing move that the Chancellor made in the autumn Budget was the abolition of stamp duty land tax for first-time buyers up to the value of £300,000. I acknowledge that this was a Labour policy included in our manifesto for the June 2017 general election, but we were very clear in that manifesto that the measure should be proposed only if there were accompanying measures to increase supply. Without these, stamp duty land tax cuts risk further inflating a housing bubble that is snatching the idea of home ownership out of reach for the younger generation.
Mrs Anne Main (St Albans) (Con)
In St Albans, we are very grateful for the Chancellor’s abolition of stamp duty. Is the hon. Gentleman saying that the Labour party is against it, and that he does not wish it to happen?
Jonathan Reynolds
I have just explained that the policy was our idea to begin with, but it is effective only if it is accompanied by measures to increase supply.
Rachel Maclean
The hon. Gentleman says that he will support the policy if it is accompanied by measures to increase supply. That is exactly what the Chancellor has introduced in the Budget, so will the hon. Gentleman support the measure, or is he against cutting stamp duty for first-time buyers?
Jonathan Reynolds
No, we are not, as I have just explained, but there have to be measures that genuinely increase supply. I will explain to the hon. Lady that the measures in this Budget do not in any way contribute to that, and we will get on to the Office for Budget Responsibility’s definition.
Lucy Frazer
The Budget states that 300,000 houses will be built every year. That is a measure to increase house building, so will the hon. Gentleman commit to supporting the stamp duty measure?
Jonathan Reynolds
Members have become accustomed to the fact that the number of homes that the Government claim to build is not always the actual number that are built. I will get to some of that record of failure later in my speech.
Mr Kevan Jones (North Durham) (Lab)
Does my hon. Friend think it is a bit ironic that when a similar measure was proposed in 2015, it was derided as a gimmick by the then Chancellor?
Jonathan Reynolds
My hon. Friend is entirely correct. As we know, sometimes the situation in the Government means that they tend to look around for ideas, and they often find best practice in the Labour party.
Sammy Wilson
Does the hon. Gentleman accept that the additional capital that is being put into housing, the attack on companies that engage in land banking and the aid to enable small builders to build more houses are all supply side measures?
Jonathan Reynolds
We will get on to whether those measures will be effective, based on the assessments that have been made. I am old enough to remember when a tax on land banking was described as Venezuelan-style socialism, so it is good to see some permutation of that idea among Government Members.
The analysis by the OBR on the likely outcome of the policy shows that it will push up prices by 0.3% in 2018.
John Spellar
My hon. Friend is talking about land banking by the big house builders. Is not the evidence of that the utterly obscene bonus being paid to the chief executive of Persimmon, which is so outrageous that the chairman of the company has seen fit to resign in disgust?
Jonathan Reynolds
My right hon. Friend identifies another feature of a dysfunctional market. That will be corrected only by a change in Government policy, but we have not seen one in the Bill.
Conservative Ministers’ review of a previous stamp duty cut concluded that the tax relief, in itself, had
“not had a significant impact on improving affordability for first time buyers”.
That is why Labour has tabled an amendment calling for the publication of a review prior to the 2018 Budget on the impact of the relief on first-time buyers, including its effect on house prices and the supply of houses.
The Minister, as usual, talked an extremely good game on funding for new housing, which he said would help to ameliorate the supply issue. On further scrutiny, however, we find that no measures in the 2017 Budget will directly increase house building. Only one third of the £44 billion announced in the Budget is genuinely new, and there is no extra Government investment in new affordable homes. That builds on a legacy of failure. Let us remind ourselves that not one of the 200,000 starter homes promised by the Tories three years ago has yet been built. That lack of action is having a serious impact across every part of our society. During the Government’s seven years in power, homelessness has doubled. Shockingly, recent statistics from the Department for Communities and Local Government show that nearly 80,000 households were homeless in September; that includes 120,000 children. The situation is extraordinarily urgent.
Mr Kevan Jones
Does my hon. Friend agree that one of the mistakes that former Chancellor Osborne made was the cap on rents, which threw into complete chaos the planning of social landlords and housing associations in budgeting for building new houses? It had the effect of reducing the supply, rather than increasing it.
Jonathan Reynolds
Absolutely. A combination of policy measures—not just the failure on new housing completions, but a range of other measures—has contributed to this toxic situation. We see it perhaps most visibly in Greater Manchester—I live there and represent part of it—than in any other part of the country, and thank goodness that we in Greater Manchester have a Labour Mayor in Andy Burnham who is so determined to make a difference on this matter. If Labour was in power, we would set up a taskforce, led by the Prime Minister, to end this, and we would start by setting out plans to make available at least 4,000 homes for people with a history of rough sleeping.
The homelessness statistics obviously include the hundreds of families who tragically lost their homes in the Grenfell Tower disaster in June, four-fifths of whom are still living in temporary accommodation. Although Labour welcomes the additional funding for mental health services for those affected by Grenfell, we have profound concerns about the fact that no new money has been allocated for fire safety throughout the country. The Government ignored calls to fit sprinklers to all social housing tower blocks in 2013, after the disastrous and fatal events that happened at Lakanal House and Shirley Towers, so it remains the case that only 2% of tower blocks in the UK have sprinklers installed. That figure should be of serious concern to us all.
We can see that the measures included in the Bill fall far short of what is needed to fix the housing crisis in Britain. We want in particular to discuss one measure that the Opposition are concerned may be being used as a fig leaf for just another cut. This is in regard to clause 8, the income tax exemption for the armed forces accommodation allowance, which the Minister mentioned. The explanatory note to the clause states that this is
“to allow members of the armed forces to give up their entitlement to accommodation in exchange for an allowance to be used to rent or maintain accommodation in the private market.”
Labour is concerned that this manoeuvre is designed to force more servicemen and women into the private rental sector, as part of a Government shift towards selling off the military housing stock in which armed forces personnel would ordinarily be housed.
Lucy Frazer
The hon. Gentleman has mentioned that Andy Burnham is the Mayor of the area he represents. Does he remember that, in 2010, when Andy Burnham was standing for the leadership, he said:
“These issues are important, particularly stamp duty as it stands in the way of young people getting on in life”?
Jonathan Reynolds
I commend the hon. and learned Lady for googling that so fast. I do not think that Andy Burnham’s resolution to tackle homelessness should be laughed at; it is admirable. As someone who has lived in Greater Manchester for nearly 20 years now, I see the scale of the social and urban decay on the streets around us. Anyone who travels to Manchester and moves a short distance in any direction from Manchester Piccadilly station will see what an appalling state of affairs we have reached. It is simply the case that every time the Conservatives are in power, they increase homelessness. For me, that is the most visible sign of a Conservative Government in office, and I commend any politician—Andy Burnham is leading on this for us in Greater Manchester—who makes the difference.
Gareth Snell
The shadow Minister is making an excellent contribution. I want to point out, as he has in relation to Andy Burnham in Greater Manchester, that continual cuts to local government are forcing many local authorities to disinvest in their homelessness prevention services. For example, Stoke-on-Trent—a Conservative-run council—is cutting £1 million out of its homelessness prevention budget in the next five years. What does he say about such a situation, and what does he think could solve it?
Jonathan Reynolds
I agree with the point my hon. Friend has made. The fact is that we know the impact that a series of Government measures have had, and we can reverse or improve on them. Fundamentally, we can change the availability of housing stock, but we can also create a policy framework that prevents people from being made homeless in the first place, and that is what we need to do.
Lloyd Russell-Moyle
Does my hon. Friend agree that some of the wider measures, such as forcing through universal credit and local housing allowance caps, are forcing large numbers of people out on to the streets?
Jonathan Reynolds
Absolutely. There have been 13 consecutive cuts to housing association budgets, the cumulative impact of which is exactly as my hon. Friend describes. As constituency MPs, we are left requesting our local housing association simply to try to absorb the costs of this Government policy failure. In many cases, the housing association does so, but there is ultimately a cost. The cost is taking away available resources to build further houses, thus getting us into a situation in which the problem is never truly resolved.
I will return to the armed forces accommodation allowance. The Ministry of Defence has a target in the 2015 national security strategy and strategic defence and security review to sell off 30% of its estate by 2040, but the Conservatives have a track record of making poor decisions on selling off service family housing in the name of short-term savings. Annington Homes bought most of the service family accommodation from the Ministry of Defence for £1.6 billion in 1996. A 999-year lease was granted back to the Ministry of Defence at a discount, with the stipulations that the MOD would be responsible for maintenance and that Annington Homes could terminate individual leases and had the right to include five-yearly rental reviews and a breakpoint at 25 years. The National Audit Office has said that the MOD has therefore not benefited from the rise in house prices since the agreement and, in fact, has paid higher rental costs to Annington Homes. In 2016, Annington’s annual statement estimated its property portfolio to be worth £6.7 billion.
Mr Kevan Jones
Having tried to get out of the Annington Homes contract when I was responsible for armed forces housing, may I say that the situation is worse than my hon. Friend describes? The MOD is still paying not only for empty houses, but for houses that have been demolished. It was the worst deal possible for the taxpayer.
Jonathan Reynolds
I am grateful to my hon. Friend for sharing his expertise with the Committee. It truly is an appalling record of failure.
As every Member knows, there are enormous problems in the private rented sector in respect of affordability, quality and security of tenure. By forcing service families into the private rented sector, we risk reducing the quality of their accommodation and their quality of life. It might therefore impact on recruitment and retention rates.
The Government have so far offered little detail on which members of the armed forces will be entitled to the new allowance or what the rate will be and have not said whether the Treasury has done an impact assessment on local housing supply. The proposal ignores the fact that there is not a supply of affordable housing to buy or rent near many military bases.
It seems clear that the Government are attempting to rush the proposal through to make short-term savings, without considering the potential repercussions. Labour is demanding more consultation with armed forces personnel and a full and robust impact assessment of any proposed changes. Clear communication with armed forces families must be a top priority throughout this process and their long-term interest must be considered, as well as the long-term value for money for the taxpayer. Committing to sell this Government-owned housing risks shackling the public purse to ever-rising rents, as well as poor outcomes for armed forces personnel.
Given Labour’s concerns over the lack of detail over the armed forces allowance and any potential safeguards for members of the armed services in the private rental sector, Her Majesty’s Opposition have tabled an amendment that calls on the Government to publish a review of the measure to Parliament before it is enacted.
Overall, the measure forms part of a housing package that barely scratches the surface in addressing the country’s housing crisis. All the measures are too minimal to make a serious difference to the housing pressures that people face and too late to make up for the Government’s lack of action over the past seven years.
Robert Courts
It is a great pleasure to speak in this debate. I only wish to make some very brief comments because I have already spoken this evening and I am conscious of the fact that other Members wish to speak.
I will make a few comments about the armed forces exemption that we have just been discussing, because it has particular relevance to my constituency, where a great amount of the Royal Air Force is based at Brize Norton. We are awaiting the redevelopment of the two REEMA sites, which are particularly important. Already, a great number of Royal Air Force and Army personnel live either on the base or outside it, in particular in Bampton, Witney, Carterton and Brize Norton village.
I am glad that the Government have proposed this welcome measure. It falls into a similar bracket as the Armed Forces (Flexible Working) Bill, which we have discussed in the House over the past few weeks and months. It is important that we understand that expectations are changing. The armed forces offer must be able to stand alongside what can be received in the civilian world. This measure has the potential to provide exactly that.
At the moment, there is the anomaly that if personnel live in Ministry of Defence accommodation, it is essentially provided tax free, but if an armed forces allowance is given, there is taxation on it. That is how the rules work at the moment, so clearly personnel would be disadvantaged. We have to accept that in many cases, armed forces personnel wish to live outside a base, perhaps close to where their spouse works or where their children go to school. I welcome the measure because it moves us a step along the road towards realising that.
Sir Mike Penning (Hemel Hempstead) (Con)
The people who serve in our armed forces today—I have some experience of this—are looking for a different model and a different way of life for their families to grow up in. In the old days, they would have been in the garrisons or the ports. My constituency is further from the sea than anywhere else in the country, yet I have Royal Marines bringing their families up in the town. They are penalised for doing that because of the way the scheme works now. The new scheme will help them and they tell me that they are looking forward to it.
Robert Courts
I am very grateful to my right hon. Friend for making that point. His constituency is very similar to mine in that respect. I welcome this measure and I anticipate that my constituents will as well.
Those brief comments are the only ones I wish to make. I very much welcome this measure because it is in the interests of west Oxfordshire, in particular Brize Norton. It helps to bring forward the offer to which my right hon. Friend refers. We have to accept that there is a change in expectation on the part of many members of the armed forces and this is welcome.
Sandy Martin
I am concerned about the lack of impact that financial incentives for first-time buyers appear to be having on encouraging housebuilding. The recent pay-offs for Persimmon Homes executives are surely good evidence that a substantial proportion, if not all, of the Government’s money is going into exceptional profits for private housebuilders, rather than genuinely making homes more affordable. We need to know that any money or tax incentives that the Government put into housing will genuinely help people to achieve the housing they need.
The cost of housing for residents is not just about the building itself, but the costs of running the building. New houses are still being built which make short-term savings for the builders at the cost of a long-term expense for their owners or tenants, and also at a long-term cost to the environment. Ipswich Borough Council had a substantial plan to install solar PV panels on all suitable roofs on its substantial council housing estate. It was all set to go in 2013 when the Government moved the goalposts and blew a hole in the business case. The Government seem to be willing to promise vast sums as guarantees for new nuclear powers stations, but they are not willing to use the extensive potential tax powers at their disposal either to incentivise housebuilders to install photovoltaics in original buildings or to adequately incentivise owners to install them on existing buildings.
Increasing the number of solar panels on the roofs of this country would be one of the most cost-effective ways of generating the electricity we need. It would be more beneficial to the residents of those buildings. It would take effect far sooner than waiting for the construction of nuclear power stations and it would predominantly employ working people and small businesses in this country.
Many of us were hoping that the Government would have found further substantial incentives for solar panels in the Bill. I can only hope that a review of the operation of housing finances and an equality impact assessment of the way the Bill will affect low-paid people might encourage the Government to look again at how they can make housing less expensive for those who live in it.
Alison McGovern
I want to talk about the cut to stamp duty for first-time buyers, but before I do so I would like to take the opportunity to briefly remind Ministers on the Treasury Bench that in March my constituency suffered a terrible disaster: the gas explosion in New Ferry. The Department for Communities and Local Government currently has Wirral Council’s plan for the rebuild. I trust that, in the context of discussing new housing, Treasury Ministers will look kindly on the plan should it come before them.
I want to argue against the cut to stamp duty and for the Opposition amendment, which calls for a review of the policy, and a review of the place of first-time buyers in the housing market and the supply of housing. My argument against this specific policy is, first, that it looks set to fail against the targets the Government have set themselves; and secondly, that in the current economic context it is simply the wrong policy priority. Perhaps we might consider this policy if we were experiencing the same growth as other countries in Europe or we had dealt with our budget deficit, but even if it was not set to work against what the Government have tried to achieve, it would still be the wrong policy because it is not the country’s priority.
I imagine this policy coming before Treasury Ministers during the Budget preparations and their thinking to themselves, “Well, this might be attractive on the face of it, but ought we not to ask our bevvy of economists here in the Treasury what the likely impact might be?” The hon. Member for Spelthorne (Kwasi Kwarteng) just rolled his eyes at me, and he did so because he knows as well as I do—we have debated it often enough—that the advice from the OBR was entirely predictable.
It was entirely predictable that anyone looking at the policy in the current economic climate would say that we have clear, credible evidence from previous changes to stamp duty that the value of this tax change will accrue not to first-time buyers but to those who already own properties. That is what the OBR says, and it is what advice from the specialists in the Treasury would have told Ministers. I do not know—I have no evidence of this—but I have confidence in the Government Economic Service and I think they would have told Ministers that.
Furthermore, it is very unlikely that the Treasury does not have the full analysis requested by my right hon. Friend the Member for Warley (John Spellar). All Members across the House know in their own minds whether their constituencies will benefit from this, and all members of the Cabinet know whether constituents in their constituencies—which are largely in the south-east of England—will benefit. Those of us who have watched house prices in our constituencies barely grow at all in the past 10 years will know that our constituents will benefit very little from this very expensive tax change.
Mrs Main
I am listening carefully to the hon. Lady, because obviously I have a constituency in one of the higher value areas. I am confused. The shadow Minister just said that the stamp duty cut was not appropriate because the right measures were not in place for affordable housing, whereas she seems to be saying that a stamp duty cut is not what she would like to see. Which is it? Does she think that the stamp duty cut should not happen at all? I would like a simple yes or no answer.
Alison McGovern
I thank the hon. Lady for that intervention, but I have already answered her question. I said that in better economic circumstances this might be something that we might want to do, but it is not a priority for now. I answered her question before she even asked it.
Given what the OBR has said, I ask Ministers once again to look at that and at the evidence. The value of this tax cut will not go to first-time buyers. That is absolutely clear. If Ministers think that they can come back to this House after having a review and persuading the OBR that the Treasury is correct and the OBR is wrong, then fine, we can look at it, but I see no reason to think that, and here is why. When we asked the Chancellor about this measure in the Treasury Committee, he gave the same line as the Minister just gave at the Dispatch Box. He said, “Ah, yes, but the OBR assessment —their model—doesn’t take into account our reforms, which will make a huge difference to the supply of housing.”
Anybody can look at page 28 of the Budget—at the Budget scorecard. This year, the stamp duty land tax cut will cost us £125 million. How much extra will we spend on the housing infrastructure fund? A big fat zero. Next year, 2018-19, the stamp duty land tax cut will cost us a whopping £560 million. How much extra will we spend on the housing infrastructure fund? A big fat zero. In fact, according to the Budget we will not spend anything on extending the housing infrastructure fund until 2019-20, when we will spend £215 million. In the same year, we will spend £585 million on the tax cut. And so it goes on, and on. We are frontloading a tax cut and pushing back spending on housing infrastructure. How can the Chancellor come to this House and say, “Oh no, the OBR has got it all wrong, because we are going to build all these houses and that will sort out the housing market”? Honestly, Mr Owen, I do not know what he is talking about.
Sammy Wilson
Does the hon. Lady not accept that, for a variety of reasons—planning permissions, procurement, or whatever—the capital expenditure cannot be turned on immediately? There is always a delay. It is not a question of “pushing it off”; it is simply a fact of life.
Alison McGovern
The hon. Gentleman seems to be arguing that it takes a little bit of time for capital expenditure to get going. That is an argument for us to increase capital expenditure now, and wait until we have increased supply to make the tax cut. It is the front-loading of the tax cut versus pushing off our investment until sometime in the future.
In proposing the stamp duty land tax cut, the Government have admitted that they have no further ambitions to rebalance our economy between the regions, and no further ambitions to tackle the disgraceful inequality between different parts of the country. In the north-west and the north-east, house prices have grown barely at all, whereas in the south-west, for example, they have shot up and wages have been held disgracefully low. This policy gives money to those who already have assets. It is a charter for inequality, and if it is ever to be implemented, it should not be implemented now.
The number of children in poverty is due to increase by nearly half a million: there will be 400,000 more children in poverty over the period of this Budget. The Government may say, “That is unfortunate, but benefits have to be frozen, and we need to focus on investment so that we can build our way out of these difficult economic circumstances.” This tax cut, however, is not investment. It is just a revenue cut—a tax giveaway—at a time when we could be ensuring that child poverty does not increase. The two-child policy that the Government have stuck to is an absolute disgrace. It shames our country that we are saying, “If you are the third child in a family, in poverty, the Government have nothing to say and will do nothing to help you.”
If the Tories who are now in power actually believed their rhetoric of compassionate conservativism, they would agree with me that if there were ever a time for this tax cut, it would not be now. Let me leave them with this comment. They may think that they can get on with this, and that they will have decent headlines on the front pages of the newspapers because newspaper editors might like the idea of first-time buyers being able to buy properties that they, perhaps, own. They may think that they will get a fair wind because tax cuts of this kind are popular.
I will tell you what is really unpopular in our country, Mr Owen. As we heard earlier from my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), what is really unpopular in our country is having to step over rough sleepers while walking home. What is really unpopular in our country is having to watch other parents taking paper into schools because our schools cannot even afford the basic necessities. And what is deeply unpopular in our country is watching the number of food banks grow because jobs do not pay enough.
People will remember that while all that was going on, the Tories were busy cutting stamp duty for people who could afford to buy houses. I do not think they will ever forget that.
Mr Kevan Jones
I agree with the hon. Member for Witney (Robert Courts) and the right hon. Member for Hemel Hempstead (Sir Mike Penning) about the armed forces allowance. In my experience, as in theirs, the modern member of the armed forces, whether male or female, wants choice. I have nothing against that, but I think that this is the wrong way of providing it. As we heard from my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), the problem now is that much of our military housing stock was locked into what was a terrible deal for the taxpayer during the last year of the Major Government, who sold most of the housing stock in England.
John Spellar
May I correct my hon. Friend? In the last few months of the Major Government, Michael Portillo, in a hugely criticised deal at the time, basically gave Nomura the deal of the century.
Mr Jones
My right hon. Friend is right: the taxpayer got about £1 billion and it has been a shoddy deal, because not only did it lock us into a long-term contract, but it locked us into a ludicrous situation whereby, once houses became surplus and were given back to Annington Homes, the taxpayer had to refurbish them and also in some cases—when they were having to be knocked down, for example—if they were within the wire of a base, we were still paying the rents on what were basically empty spaces. I had a look at this when I had ministerial responsibility in the Ministry of Defence, and I am sure my friend the right hon. Member for Hemel Hempstead (Sir Mike Penning) did as well. We must not blame Nomura; it made a great deal for itself, but it was a bad deal for the taxpayer.
The right hon. Gentleman and the hon. Member for Witney (Robert Courts) raised an interesting point: the way our armed forces operate these days has changed. Many more people travel long distances at weekends: it is not unusual for servicemen and women who live in the north-east to travel to the south coast at weekends and back again. When Labour was in government, we put a lot more money into single living accommodation; that was the way forward.
We have been promised the new housing model by the MOD, but it has not yet materialised. I was working on that at the time, because I, like the right hon. Gentleman and the hon. Gentleman, recognised that the fit we have at the moment does not work. The Army did not like it, because the Army—or a certain general—held the very traditional view at the time that we needed the regiment around the base.
I cannot understand why this is being done in advance of that new housing model being brought forward. The hon. Member for Witney raised a point in respect of his area that I have also looked at: if we are going to bring in this change, we will have to bring it in over a number of years and provide housing locally, to ensure there is a supply of housing locally for those who want to live locally. We were looking at working with local housing associations and others to provide that.
There is nothing wrong with the model of this housing allowance, therefore, but if it is done in the vacuum in which it is being done, it can lead to situations whereby people take their housing allowance and then find that they are at the mercy of the over-inflated local housing market in and around some of our garrison towns and ports.
Sir Mike Penning
The hon. Gentleman—my friend—and I agree on most things, but no one is going to force people into doing this. We must wait for the model to come forward, and I would not vote for something where we forced people into such a scheme, as the Opposition Front Bench claimed. But my friend is wrong to say we will have to address this just around the localities: we will have to do that, but these people often want to find accommodation in their own home towns, so they can be around their family structure. That is the way the armed forces are now, rather than just having the garrisons, and the super-garrisons, which are coming.
Mr Jones
I do not disagree with the right hon. Gentleman, but unless we do some work on where we are going to house these people and families, we will be throwing them out to the market. That is why the last Labour Government introduced the early support for members of the armed forces who wish to purchase their own property, a move that was cancelled in the first Budget in 2011. There is a mixture here: some members of the armed forces want to buy, while others will want to rent as they move around.
To do this without any thought about how we are going to provide the housing behind it is a little strange, and I cannot understand why this measure is being brought in now. The right hon. Gentleman said people are not going to be forced, and I agree, but if they think it is attractive and then suddenly realise it is not, will they be able to go back?
Instead of having a piecemeal approach like this one, or putting the cart before horse, we should have waited for the new housing model before this proposal was brought forward. As part of this mix, I would also like people to be able in some cases to opt not for rental allowance, but for support for mortgage payments; we introduced that, but it was cancelled in the first Budget in 2011.
Jim Shannon (Strangford) (DUP)
I am doing the armed forces parliamentary scheme, which gives me the opportunity to speak to Army, Royal Navy and Royal Air Force personnel. The issue that comes up all the time is accommodation for families. If we do not get the accommodation right for families, we will not retain the personnel. We need to retain the personnel, so does the hon. Gentleman agree that we need to work on those issues and that the introduction of this policy could provide an opportunity to ensure that Army personnel can be retained and that the accommodation is up to standard?
Mr Jones
I do agree with the hon. Gentleman. Anyone with a close involvement with the armed forces, as he has, will know that we rely on those men and women to go on operations and that a key issue for morale is to ensure that their families are supported during those times.
I am a bit wary about this proposal for another reason. When the Australians introduced this type of rent allowance, they did it gradually, over a 10-year period. There was therefore a transition period with new starts and other people coming in. The proposals in the Bill seem a bit piecemeal, and if they are not done in a thought-out way, we could end up in a situation in which Annington Homes retracts the existing accommodation and people’s options become limited. Again, I think this is the right move forward but it is not being done in the right way. Anything that the Treasury can do to extract the Ministry of Defence from the Annington Homes contract would be universally welcomed—[Interruption.] The right hon. Member for Hemel Hempstead is shaking his head. He has obviously looked the same thing as me. Let us wait and see what the new housing model delivers, but let us hope that it adopts a joined-up approach that will be of benefit to members of our armed forces.
I want to turn now to stamp duty. My right hon. Friend the Member for Warley (John Spellar) asked the Minister which regions would benefit the most from this proposal. The Minister, as usual, sidestepped the answer, but it is in fact quite clear. The average house price in County Durham is £138,000. In London, it is £488,000, so it is quite clear where the money will go. As my hon. Friend the Member for Wirral South (Alison McGovern) said, the Government are completely ignoring the idea of trying to eradicate inequalities throughout the regions. Indeed, they will actually increase them through these moves.
There is a broader point, however. I passionately believe that people who aspire to own their own home should be able to do that, and we should be able to help them to do it. The problem with this Government, however, is that they have one trick in their armoury, which is the idea that the private sector should deliver all this. They believe that the only way to achieve the mythical 300,000 new homes is to allow the private sector to deliver them. Well, I am sorry, but if they are going to rely on the private sector to do that by supplying 300,000 new homes for purchase, that will not deliver the homes that we need in most areas—not just in London but throughout the regions.
John Spellar
Does my hon. Friend agree that the underlying problem is that the private sector supply side is becoming increasingly dysfunctional? Indeed, it is becoming an oligopoly, and many of the companies involved are no longer construction companies but just land banks.
Mr Jones
They are indeed. My hon. Friend the Member for Ipswich (Sandy Martin) mentioned the example of Persimmon earlier. Many of those companies are no longer housebuilders in the traditional sense. They are employment agents who employ contractors to do things. In my constituency, some of the complaints about new builds are pretty horrendous, and I think that that experience is shared across the House.
Gareth Snell
Where private developers are developing houses, they are all too often quick to run to the district valuer to argue that affordable and social housing makes development schemes unaffordable, so fewer affordable social houses are being built through private development.
Mr Jones
My hon. Friend makes a good point. Added to that is the fact that the definition of “affordable” in London is completely out of reach for most people.
The Government have this one idea that we are going to solve our housing problem through the private sector. I accept that it has a part to play, but the social sector, meaning both councils and very good housing associations, could step up to the mark and actually provide houses where we need them. If we look at the amount of money that is going into the subsidy, as mentioned by my hon. Friend the Member for Wirral South, we would not even have to spend money directly on social housing. We could provide new housing by just underwriting the debt of some of the social housing providers. In my area, Derwentside Homes and Cestria have now come together as an organisation called Karbon—I emphasise the k for the Hansard reporters, but I think it is a stupid name—which has been able to do small-scale developments by borrowing against its assets. If it had Government support for that borrowing, it could do a lot more.
Helping local authorities to take a share in things by putting land into deals or by setting up their own corporations of social landlords and councils could lead to the development of the houses that we need. Social housing is not a static model. People think that social houses are just for rent, but Karbon has a good subsidiary called Prince Bishops Homes, which allows people to start by renting and then, as their circumstances change, purchase the house and convert their rental into a mortgage. We need to look at schemes like that. Are they expensive in terms of what my hon. Friend the Member for Wirral South referred to? No, I do not think they are, and they will provide housing where we need it. I accept the particular pressure on housing in London, but there is pressure everywhere, not just from first-time buyers, but people who want to rent for the first time.
If the Government put their ideological baggage away and said, “Are we actually going to do what we say and produce the houses that people need?” they could do things in a different way. The Minister can talk about 300,000, half a million or a million homes—I say the same to my Front-Bench team—and it is fine to pluck figures out of thin air, but delivering them is a different thing altogether. If we look back at the history of housing in this country, we only actually build large numbers of houses when we have direct Government intervention, and we need that direct intervention now. It is easy for the Government to argue that the previous Labour Government failed here, but we did not. We actually transformed a lot of social housing. Two housing associations in my constituency received over £100 million to bring their stock of homes up to a decent standard, which was transformative for residents and tenants. Houses with 40-year-old bathrooms had them changed. There were new rooms, new central heating systems, new kitchens and more energy-efficient measures. I am not going to shy away from talking about what the Labour Government did when we were in power to change the lives of many people in this country.
Turning to land banking, there is evidence that certain companies are using land banks. In some cases, companies submit planning applications and then just sit on the land. I welcome any approach to deal with that, but we need to be a bit more imaginative about allowing local government to be a bit more forceful with their planning powers. When Labour was in government, I was a huge critic of something called the regional spatial strategy, describing it once as Soviet-style five-year planning. It was too blunt an instrument.
We need to allow Country Durham and other areas like mine to expand housing, because we are increasingly becoming commuter belt for Tyneside and Teesside. Somehow restricting the allocation of housing to the urban conurbations fails to understand that, without new houses, a lot of villages and communities in my constituency will struggle to survive. More powers should be given to local authorities not only to form local plans but to implement them, too.
John Spellar
I start by welcoming the service accommodation proposals. I echo the comments of my hon. Friend the Member for North Durham (Mr Jones) on the short-term gain taken by the Ministry of Defence and the Treasury in a bid to shore up the finances of the Major Government, which did them absolutely no good in the 1997 election. Service personnel and their families have been suffering from the impact of that ever since.
On the basic question of the stamp duty measure, I suppose that it could be welcomed, superficially, as a reversal of the intergenerational transfer of wealth, but in fact, as my hon. Friend the Member for Wirral South (Alison McGovern) said, the reverse is the case, as the main beneficiaries will be the existing owners of housing. In a tight housing market with a large amount of stock and limited flow, the net effect of adding extra liquidity into the system is most likely to be an increase in the price of housing.
The other beneficiaries will be not just individual householders who seek to trade down, or even up, but private sector landlords who have been buying up property and forcing up prices. Many youngsters are not able to get together the sort of deposit that is now required unless they can go to the bank of mum and dad. With the average house price in London at nearly £500,000, they are having to find a deposit of some £50,000. We are targeting a considerable public subsidy towards one small group without actually dealing with the problem.
It was very instructive that the Minister was unable—or probably unwilling—to give the figures I asked for about how much the measure will cost in aggregate and how the costs will break down by region. It is inconceivable that such analysis was not carried out as the policy was drawn up and ground through the mills of the Treasury. To save me from tabling a parliamentary question, I urge the Minister to come up with those figures in his winding-up speech. I think that the figures will show a considerable disparity between regions, which is not uncommon under this Government, much as they seek to hide it. Just recently, a letter from the Secretary of State for Transport told us that we had it all wrong and the average spend on transport was roughly equal between the north and the midlands, and London and the south. The only issue was, as my hon. Friend the Member for North Durham found out, that the Government had omitted to include the £32 billion—I believe that is the figure—for Crossrail from the London figures, because that had somehow been designated as a national scheme.
Mr Kevan Jones
I can inform my right hon. Friend that it was actually worse than that, because the Government had also deemed the north as being the north-west, the north-east and Yorkshire.
John Spellar
I do not get involved in those arguments.
In essence, we are seeing major transfers of wealth to areas that the Government see as their political homeland. However, let us also look at the big house builders, as they are euphemistically called—really they are land bankers and, as my hon. Friend said, employment agencies. They also indulge in a number of other unsavoury practices. Several of them have now been exposed for their involvement in the racket of escalating leaseholds, which they have now been forced to back down from. They have had to pay considerable sums to buy back those leases from individuals—speculators—who bought them and were then exploiting residents on that basis. Is that not a symptom and a symbol of the dysfunctional nature of our housing market? The Government are not tackling that in any particular way.
Nor are the Government tackling the increasingly oligopolistic nature of the house building industry. There has been a significant decline in medium and small builders, who used to be the backbone of the building industry and of many towns. Building, by its nature, is subject to cycles, and banks have been incredibly reluctant to lend money to small builders, who have steadily either gone out of business, or been absorbed into the big builders. That has flowed into the lack of training that has taken place, because so many of the big house builders are mainly just the name outside a project and are not particularly interested in the small sites—brownfield sites—around our towns. With the breakdown in training, we then have the cry from those same builders that need to bring in more and more builders from abroad because of insufficient supply in this country. That is because over several years, if not decades, they have not been training people.
Nor do the Government have any programme, as far as I can see, that is equivalent to the better homes programme which, as a number of colleagues have said, contributed enormously, not only to bringing many properties back into effective use, but to improving the lives of many of our constituents. Finally, what we see here is figures being plucked out of the air. This is reminiscent not of an efficient market, but very much of Soviet planning, with declarations of 300,000 houses but no visible means by which that will actually be achieved.
Lloyd Russell-Moyle
I will try to be brief, because we all want to get to the vote and then move on, but I will say that the measures we are considering are far too little and far too late. Homelessness has doubled in Britain, and in Brighton it has tripled, with 10% of adults now on the housing register. How do these proposals help them? The measures will increase house prices for first-time buyers. I know the Minister says that he has better data than the OBR, but I tend to believe the OBR, which was set up by the Conservative Government to provide independent analysis, over the books that are cooked in the Treasury—[Interruption.] Yes, the books that are cooked in the Treasury. What we need are clear supply-side measures—[Interruption.] The evidence for cooked books is that the OBR does not believe the Government’s figures. The evidence comes from the independent regulator. Let me get back to what I want to say, otherwise I will be distracted and we will be here for longer.
We clearly have a problem with young people and first-time buyers getting into the property market. In my constituency today, only five studio flats are on the market for less than £200,000. With average earnings in Brighton lower than the average for the rest of Britain, the introduction of a stamp duty waiver will make not one jot of difference, because people cannot afford to raise money for a deposit and to go to banks to ask them to lend. What we really need is decent social and council housing so that people can move into secure tenancies. I asked the Prime Minister whether she would lift the housing revenue account cap. We see in the Bill that there will be a lift to the value of £1 billion, if councils apply, but of course £22 billion would be made available, at no direct cost to the Government, if they just lifted the cap completely. Why will they not? Because they are scared—they are chicken—to allow working people to have decent homes. Clearly they want to keep people subjugated and in poor-quality rented private property. That is the only conclusion I can draw from their miserable set of proposals.
Another thing we need is planning regulation that is stronger, not weaker. Until very recently, I sat on my local council’s planning committee. Time and again we were toothless in enforcing the social and affordable housing requirements. We do not need to give councils less power to enforce those requirements; we need to give them more powers to enforce them. The measures in the Bill to try to deregulate the planning sector go in completely the opposite direction.
I could make other points, but I am not going to talk anymore—let us go home. It is quite clear that I will be voting against the Government’s measures, because they are absolutely useless for dealing with homelessness and house building. In fact, they will make matters worse.
Ruth George (High Peak) (Lab)
I echo my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) in saying that I am proud of Labour’s record on housing. I am proud of how we invested in 2 million more new homes, increased home ownership by 1 million, and made sure that more than 1 million homes were brought up to a decent standard, fit for human habitation, which is what we need to see now.
Since 2010, we have seen home ownership fall by 200,000 as house prices have risen by an average of 32%. Of those homes that have been built, less than 20% have been affordable, as councils’ rights to impose affordable limits have, as my hon. Friend the Member for Brighton, Kemptown (Lloyd Russell-Moyle) said, been taken away, with the rug pulled out from under their feet. What have we had instead? We have had £10 billion invested in the Help to Buy scheme, which even Morgan Stanley said has almost entirely gone towards raising house prices and increasing the share prices of the biggest house builders.
In my constituency, those house builders are not content with all the assistance from Help to Buy. Almost all their new homes are sold on leasehold—or fleecehold, as it has been called—so people do not feel that they actually own the home in which they live, despite having paid an inflated price for it. They still have to pay ground rent; they are still being fleeced with maintenance charges; and they still have to pay fees to a third party. It does not feel like home ownership any more. This is actually private rental as well as home ownership.
Stephen Pound (Ealing North) (Lab)
I hope my hon. Friend will forgive me for interrupting her flow. She is making a precise and pertinent point. Would she not wish to encourage all people of good heart here present to support the Bill that has been presented by my hon. Friend the Member for Westminster North (Ms Buck) on this very subject?
Ruth George
Absolutely. I hope that Members on both sides of the House will give their encouragement to that Bill so that we can make homes fit for human habitation.
On the subject of universal credit, whether or not homes are fit for human habitation, unfortunately landlords are not prepared to rent. A representative of a lettings agency came to my surgery just last week and showed me the books for its tenants. At the moment, 20 tenants are on universal credit—we still have not seen it rolled out—of whom 18, or 90%, are in huge arrears. Nine of them—45%—have had to be evicted because landlords cannot get any redress for arrears. They cannot afford to see those arrears build up. Now that they no longer claim mortgage interest relief, they know that they will have to pay a big tax bill come the end of January, so they need to ensure that they can make their homes pay.
This Government’s housing policy is simply racking up disaster on disaster. Homelessness is doubling and home ownership is falling, and universal credit is yet to come. We needed big ideas from the Chancellor, as the Secretary of State for Communities and Local Government told him in no uncertain terms. We see nothing in this Bill but tinkering at the edges that will do nothing to help solve the enormous housing crisis in this country.
Mel Stride
We have been debating important measures. Clause 8 introduces an income tax allowance for members of the armed forces to help them to meet the cost of accommodation in the private market in the UK. Clause 40 makes sensible legislative adjustments to the additional rate of stamp duty land tax to ensure that people in some specific—often disadvantaged—circumstances are not unduly penalised. Clause 41 announces the Government’s abolition of stamp duty land tax for first-time buyers purchasing properties under £300,000. This key part of the Government’s drive to ease the burden on young first-time buyers will go a significant way towards levelling the playing field in those people’s favour. It is notable, and equally lamentable, that this particular policy, which predominantly assists the young, appears to be something that the Labour party rejects and indeed derides. I commend the clauses and schedule to the Committee.
Question put and agreed to.
Clause 40 accordingly ordered to stand part of the Bill.
Schedule 11 agreed to.
Clauses 41 and 8 ordered to stand part of the Bill.
New Clause 4
Review of relief for first-time buyers
“(1) The Commissioners of Her Majesty’s Revenue and Customs shall undertake a review of the impact of the relief for first-time buyers introduced in Schedule 6ZA to FA 2003.
(2) The review shall consider, in particular, the effects of the relief on—
(a) the public revenue,
(b) house prices, and
(c) the supply of housing.
(3) The Chancellor of the Exchequer must lay a copy of a report of the review under this section before the House of Commons no later than one calendar week prior to the date which he has set for his Autumn 2018 Budget Statement.”—(Jonathan Reynolds.)
This new clause requires a review to be published prior to the Autumn 2018 Budget on the impact of the relief for first-time buyers, including its effects on house prices and on the supply of housing.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Finance (No. 2) Bill
Tuesday 19th December 2017
(6 years, 10 months ago)
Commons ChamberRead Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 19 December 2017 - (19 Dec 2017)
16:40 - The Committee divided: - Ayes: 273 / Noes: 309 - Question accordingly negatived.
17:36 - The Committee divided: - Ayes: 271 / Noes: 311 - Question accordingly negatived.
Dawn Butler (Brent Central) (Lab)
I beg to move, That the clause be read a Second time.
The Temporary Chair (Mrs Eleanor Laing)
With this it will be convenient to discuss the following:
New clause 7—Equality impact analyses of provisions of this Act (No. 2)—
‘(1) The Office for Budget Responsibility must review the equality impact of the provisions of this Act in accordance with this section within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the impact of those provisions on households at different levels of income,
(b) the impact of those provisions on people with protected characteristics (within the meaning of the Equality Act 2010),
(c) the impact of those provisions on the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and
(d) the impact of those provisions on equality in different parts of the United Kingdom and different regions of England.
(3) A review under this section must give a separate analysis in relation to the following matters—
(a) income tax (in sections 1 and 3 to 6),
(b) employment (in sections 7 to 10),
(c) disguised remuneration (in sections 11 and 12 and Schedules 1 and 2),
(d) pension schemes (in section 13 and Schedule 3),
(e) investments (in sections 14 to 17 and Schedules 4 to 5),
(f) corporation tax and other aspects of business taxation (in sections 2, 19 to 32, 36 and 37 and Schedules 7 and 8),
(g) the bank levy (in section 33 and Schedule 9),
(h) settlements (in section 35 and Schedule 10),
(i) stamp duty land tax (in sections 40 and 41 and Schedule 11),
(j) air passenger duty (in section 43),
(k) vehicle excise duty (in section 44), and
(l) tobacco products duty (in section 45).
(4) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
“regions of England” has the same meaning as that used by the Office for National Statistics.
(5) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.” .
This new clause requires the Office for Budget Responsibility to carry out a review of the effects of the provisions of the Bill on equality in relation to households with different levels of income, people with protected characteristics, the Treasury’s public sector equality duty and on a regional basis.
Dawn Butler
New clause 6 stands in the name of my right hon. Friend the Leader of the Opposition and those of other Members on both sides of the House. The aim of both new clauses is basically to help the Government. We want them to set an example to every Department and public sector organisation by fulfilling their own obligation under the public sector equality duty and publishing a meaningful equality impact assessment. The equality duty covers nine protected characteristics: age, disability, gender reassignment, pregnancy, maternity, race, religion or belief, sex and sexual orientation.
The Prime Minister says that she understands the problems faced by members of protected groups and that her Government are committed to tackling inequality in the ways set out in the equality duty, but one thing confuses me. If she understands all that, why does she allow her policies to undermine and hurt women and other groups with protected characteristics? Such “words over deeds” undermine people’s trust in politics and politicians.
How can I be sure that the Prime Minister knows these problems so well? There have been two stand-out moments. The first was in 2010, when the Prime Minister said:
“there are real risks that women, ethnic minorities, disabled people and older people will be disproportionately affected by proposed cuts to public spending.”
The second was when she said, on the steps of No. 10, that she wanted to tackle the “burning injustices” in our society. But all that she has done is make things worse. She has added fuel to the fire, and those injustices now burn brighter than ever. The Chancellor said that this Budget would be full of new opportunities—for whom? He failed to address the position of women born in the 1950s, violence against women and girls, the crisis in social care, falling wages, and a social security system that is leaving millions of children in poverty.
I am sure that the Minister will disagree with some of what I am saying, but let me challenge him. This is his opportunity—his moment—to carry out a comprehensive equality impact assessment, publish it, and prove me wrong.
Mr Jim Cunningham (Coventry South) (Lab)
One of the issues that my hon. Friend has not mentioned—although I am sure that she will come to it—is the underfunding of women’s refuges.
Dawn Butler
My hon. Friend is right: I will indeed come to that issue.
As we approach Christmas, I ask the Minister to consider the impact that the Government’s policies are having. More than 128,000 children will be in temporary accommodation over Christmas, women’s refuges—as my hon. Friend has just said—are in crisis, and universal credit will leave people penniless and homeless over the Christmas period.
Dawn Butler
It is not nonsense. I challenge the Minister to sit in one of my surgeries and hear that it is not nonsense.
The Government have made £28 billion of cuts affecting 3.7 million disabled people, and the additional caring responsibilities have fallen on the shoulders of women. It is the same with the cuts in social services—women take up the slack—and the pay cap, which hurts women more than men. Indeed, 86% of the Government’s cuts are falling on women. Labour Members are not the only people who are saying that. In June, the UN Committee on Economic, Social and Cultural Rights said that the Government’s changes adversely affected
“women, children, persons with disabilities, low-income families and families with two or more children.”
If the United Nations can see that, and if Labour Members can all see it, why can the Government not see it and do something about it? The best policies are evidence-based policies.
Mr Jim Cunningham
My hon. Friend is making an interesting point. I am sure she agrees that, given that this Government and the previous Government talked about £12 billion in cuts, and therefore universal credit must fit that target, that is why they will not conduct an impact study.
Dawn Butler
Absolutely. My hon. Friend makes a powerful statement, and it points to the crux of the new clauses: if the Government would only do impact assessments even as the policy goes forward, they would be able to say, “Okay, this isn’t working: it’s hurting; it’s damaging people. Let’s do something different.” But, in their arrogance, they refuse to do that.
The House of Commons Library uses a different calculation in its assessments. I admit that some of the assessments are not straightforward, but that does not mean that they should not be done; after all, they are the Government. Most recently, the Government have argued that the equality impact analysis carried out by the Women’s Budget Group and the Runnymede Trust does not take into account the impact of increases to the national living wage or spending on services that benefit women such as health, education, childcare and social care. I say again: “Oh yes it does.” Their report, “Intersecting Inequalities”, includes the impact of both the national living wage and changes to spending on a wide range of services. When the cuts to services are added, the impact is more severe. The Treasury says that individual Departments are responsible for the equality impacts of their own policies; yes they are, but the Treasury should also be responsible for publishing the equality impact of policies, since it sets the overall budget limits, and any impact assessments carried out should be available for everyone to see, and not hidden away.
The Government’s arguments are just excuses, allowing them to evade accountability for the impact of their policies. That shows a lack of commitment to tackling the major inequalities in our society. This Government are so evasive: we are still awaiting a response to the cross-party letter sent to the Minister for Women and Equalities on 29 November highlighting major concerns on this very issue.
If we were in Scotland or Wales, we would be legally obligated to carry out and publish equality impact assessments. We are the mother of all Parliaments and we should be leading the way. What is wrong with getting the facts and making policy based on them? That is sensible and it is right; people outside this place will not understand what the reluctance is all about.
The Minister will probably talk in his response about “due regard”, but what does “due regard” mean? There is some legal definition of due regard. The courts have said that it means sufficient information, so even on a lower bar of “due regard” this Government and their Departments are still failing, as they tend to produce superficial equality impact assessments.
I concede that more needs to be done to establish robust analysis, but if Scotland and Wales can do it, why cannot we? Current analysis should be taken as a starting point for Government action, not an excuse for inaction, so I call upon the Chancellor to give the country a Christmas present and to commit to doing things properly.
As my Christmas gift to the Government, here are three things as a start in that process. First, they should consider the impact of their policies at all stages of the legislative process. That means the Government examining the differential and intersectional impact of their policies and, if necessary, changing course to ensure equality of outcome. Secondly, they should work with organisations such as the Equality and Human Rights Commission, the Women’s Budget Group and the Runnymede Trust to produce analysis with a high level of detail. Thirdly, they should commission the Office for Budget Responsibility to carry out an independent review into the effects of the provisions of this Bill.
Everyone in this House can help tackle the burning injustices that blight our country today by voting for new clauses 6 and 7.
Sarah Champion (Rotherham) (Lab)
I rise to speak in support of new clauses 6 and 7, proposed by my hon. Friend the Member for Brent Central (Dawn Butler).
Under the public sector equality duty, all public bodies, including the Treasury, are obliged to have “due regard” to the impact of their policies on equality. Yet, once again, this Government have refused to carry out a meaningful equality audit of their Budget.
I am grateful that the House of Commons Library has done research, and it has consistently shown that 86% of the burden of Tory tax and benefit changes since 2010 has fallen on the shoulders of women. Today, I will tell the stories of women impacted by this, and show how they are bearing the brunt of failed Tory austerity.
Women make up two thirds of public sector workers so have suffered most from the Tories’ pay cap. Women have to struggle with more caring responsibilities due to the ever-increasing gap in social care funding. Some 54,000 women a year are forced out of their jobs through maternity discrimination. Women in my constituency of Rotherham earn 11.9% less on average than men. And, shamefully, 94 women and 90 children are, on a typical day, turned away from refuges due to lack of space, according to Women’s Aid.
Let me talk about some specific cases. I want to talk about Martha, a single mother. A recent report by the Runnymede Trust and the Women’s Budget Group shows that by 2020 single mothers like Martha will have experienced an average drop in living standards of 18% since 2010. As a part-time NHS worker, Martha’s real pay has been slashed under the Tories. NHS staff have suffered a 14% real-terms pay cut since 2010. With inflation at a near six-year high of 3.1%, more and more women like Martha are struggling to put food on their table. Martha is not just about managing; Martha is only just about surviving.
The Women’s Budget Group and the Runnymede Trust analysis shows that black employed women, like Martha, are set to lose the most from cuts and changes to universal credit—around £1,500 a year. These changes include cutting the first child premium, which came into effect this year and would have been worth £545 a year to Martha.
Mr Jim Cunningham
A good example of the burden being been put on women is through tax adjustments. Under the last Government and this one, women have lost £14 billion in that way. Another good example is Sure Start. Women cannot get out to work because there are no Sure Start facilities.
Sarah Champion
That is the biggest frustration. We need the Government to audit all their policies and start to recognise the trends when certain groups are disproportionately impacted. We all pay our taxes and we all want the same services, but surely the best thing for the economic growth of this country is for everyone to be able to reach their economic potential. That is surely the best way to get this country back on its feet economically.
According to research by the Child Poverty Action Group, 61% of parents working part time who wanted to work more hours said that the cost of childcare was a barrier, and no wonder, when Government cuts mean that there are now 1,240 fewer Sure Starts than there were in 2010. Yet there was no mention of childcare in the recent Budget. When 41% of women in work have part-time jobs, compared with just 13% of men, it is clear how these policies have a disproportionate impact on women. An equality impact assessment would put a spotlight on those inequalities and on the need for action—but of course we can only assume that that is why the Government refuse to carry out such assessments.
Stella Creasy (Walthamstow) (Lab/Co-op)
I rise to make my case to the five Conservative MPs on the Government Benches today. Inequality is an incredibly expensive business for everyone. I am pleased to see five fellow feminists sitting among the many of us on these Benches—
Stella Creasy
Goodness! The Minister says eight, but I can assure him that we have a good many more than eight feminists in total on this side of the House if he would ever like to test us. Our policies and our manifesto certainly speak to that fact.
The case that I want to make to the five men on the Tory Benches, given that gender inequality and equality impact assessments can sometimes be seen as special-interest issues, is that everything we are doing today is in everyone’s interest. Inequality costs us all dear. It holds everybody back in our society. Indeed, feminism is not about women; it is about the fact that power is unequally balanced in society so that 51% of those in our communities miss out on achieving their potential. That is what is behind new clauses 6 and 7. Good data help to drive good decisions. It is also good for Governments to follow their own policies. We have a public sector equality duty in this country, but the fact that the Government are not following it themselves makes it much harder for them to force other people to do so. Ultimately, we are here today to make the case that Britain will be better when we know more about the conditions that we face and about what impact policies are having.
Let me start with that cold, hard economic argument, because I am sure that the Minister, who once proclaimed his feminist credentials, already knows this, but I am not sure whether it has yet been put on the record. Bridging the gender gap would generate £150 billion in GDP by 2025. The economy has been struggling with a productivity problem for decades, and there is nothing stronger or faster that we could do to address that than to ensure that everybody in our society is able to realise their potential, but we should do more to help women in particular. We need to tackle the barriers and the discrimination they face that means they do not have that level playing field. Indeed, studies show the strong correlation between diversity and economic growth, so those who think that this is special pleading do not understand the maths behind the case Labour is making today. I would argue that the reason why they do not understand the maths is that we do not do the calculations, which is why it is so important to get the data.
Data is a good thing. It leads to difficult conversations. It makes us ask why, after the Equal Pay Act was passed in 1970, we still do not have equal pay in this country. I was born after that Act came into effect, but if the current policy continues, I will be dead before we have parity. That harms us all, because the 14% pay gap between men and women is not stagnating, but growing. There will be women in our constituencies who are missing out on equal pay because we are not acting as a country. Having this kind of data helps us to ask why that is and whether Government policy is helping to minimise the gap or exacerbate it.
This is not just about gender. The gap is much worse for women from ethic minority communities. The pay gap is 26% for Pakistani and Bangladeshi women and 24% for black African women. This is also not just about ethnicity, because the same applies for disability and age. Only 36% of women in the constituencies of the Conservative male Members here will be getting their full state pension. When those women come to see those Members about the Women Against State Pension Inequality Campaign, they are coming because they have been living with poverty for decades. They are asking for help to make things right, because they do not want to be dependent on the state. They want a level playing field, but historical inequality in our society has held them back, and it is holding us back now. Having the data helps us to understand where that is happening and why. It would show us whether Government policies—individual Budgets—are going to make it easier to tackle that inequality, so that fewer women will come to constituency surgeries asking for a referral to a food bank, or whether they will make things worse.
If the Government want to tackle inequality, they need to know that data also tells us that this Budget, and the Budgets of previous years, are causing more problems. I do not doubt the sincerity of the five Conservative Members here or that they do want to tackle inequality in our society, but when I look at this Budget I do doubt whether they are going to be able to do that. This Budget will hit women 10 times as hard as it will hit men—13 times for women from an ethnic minority background. Going back to the equal pay issue, 43% of people in society do not earn enough to benefit from raising the personal income tax threshold, and 66% are women. We have unequal pay in our society, so 73% of the people who will benefit from changing the higher rate threshold will be male. Having the data and then looking at what is being done with tax and benefit policies will help us to understand just how much further this Budget is moving the goalposts for women and ethnic minorities. This applies to other policies, too. Corporation tax changes disproportionately benefit men, because we still do not have parity in the boardroom, in enterprise or in the number of women shareholders.
The lack of data also leads to bad decision making. As my colleagues have already set out, this Government have not done any equality impact assessments to understand just how far the goalposts are moving in getting to this House’s shared aim of an equal society. Tax information and information notes dismiss the issue and do not help Ministers to make good decisions. I am sure that the Minister, with his feminist soul, wants to make good decisions, but those assessments claim that there is little or no impact. Indeed, we do not even have TINs for all the policies that we know have a differential impact such as excise duty rates or fuel duty giveaways, because we live in an unequal society.
The lack of data also means that Ministers simply cannot come to the Dispatch Box and tell us that any concerns we may have about the differential impact of individual tax and benefit changes can be offset by the impact of other policies. If we do not know the impact of one policy, how can it be said that that can be offset by another? Even if we are concerned that men have received a windfall from Budgets for several years, it is simply not good enough for Ministers to try to tell us that women are being compensated through public services, because they cannot provide the analysis to show us that either case is true. Indeed, when we look at the impact of public service cuts—surprise, surprise—women, ethnic minorities and the disabled tend to be disproportionately hit again.
As I said at the start, it is also a matter of following our own laws. The public sector equality duty came into force in this country in 2011. It is a legal requirement, and it has driven some of these difficult conversations, whether in the Bank of England or in the BBC. It helps us to challenge everyone to do more to unlock the potential of every member of our society by reducing barriers and breaking down the discrimination that means, 40-plus years on, we still do not have equal pay.
If the Government themselves are not upholding their duties, what hope do we have in asking other organisations to do so? It is important to recognise that the legal duty is not passive. It is a duty not just to manage inequality but to do something about it. It is a duty to know the numbers before we make a decision so that we do not make things worse, as this Budget clearly does, and it is an ongoing duty that cannot be delegated. Ministers cannot leave it to a civil servant in the back office; they have to take direct responsibility. Crucially, it is a duty that, once a problem has been identified, the Government have to act, and not having the resources is no excuse for not acting.
The arguments Ministers are making against calculating the figures are not just about the practicalities, but they are completely surmountable. As the Women’s Budget Group, the Fawcett Society and the Institute for Fiscal Studies have shown, it is perfectly possible to make these calculations, and it is worth doing because it would help the Government to make better decisions. That it is possible to do it both for individuals and for households is important because, as my hon. Friend the Member for Rotherham (Sarah Champion) said, single parents, who tend to be women, are disproportionately hit by these changes. Even if the Minister were to quibble about calculating the figures across households, we could certainly see the impact we are having on some of the most vulnerable people in our society.
The reason why we have called it “lady data” is to try to help Ministers understand what they are missing and why it matters, but in truth this is everyone’s data. Getting this right and having that information would help us to make better decisions and would help us to understand why it will take us 100 years from today to have parity, so that women who are still struggling with unequal pay—including women in the communities of the Members to whom I have referred—can have some confidence that they may still live to see that wonderful day when everyone in this society is treated equally and so that people from ethnic minority backgrounds and disabled people living in poverty, and a poverty that is getting worse, can have some confidence that the Government are not ignoring them but understand where the challenges are and are considering a Budget that will do something about it.
Frankly, when we see the analyses that are being done, we know why the Government oppose new clauses 6 and 7. They do not want to do the maths because the figures tell the ugly truth about the inequality we have in Britain and its stubborn supporters, who unfortunately sit on the Government Benches. Jane Addams said:
“Social advance depends as much upon the process through which it is secured as upon the result itself.”
We cannot take the journey to a more prosperous, more successful and more egalitarian Britain if we do not know the direction of travel. The numbers will give us the direction of travel, but it is the political will that will give us the way forward.
Ministers should not dismiss this case as special pleading but should look at the economic argument for why tackling gender inequality matters and vote accordingly today to put Britain on a better path, because everyone will be richer for it.
Laura Pidcock (North West Durham) (Lab)
As my hon. Friend the Member for Brent Central (Dawn Butler), Labour's shadow Minister for Women and Equalities, said, new clause 6 would require the Chancellor to carry out and publish a review of the Bill’s effect on equality. In short, it touches on the fundamental difference between the Labour party and this failing Government, whose policies work for only the richest few. New clause 6 seeks to shed light on the truth of who benefits from Government choices and who does not.
In order to change society, we must understand society; and in order to have a fully functioning democracy, we need transparency. People in my constituency deserve to know what is going on, not least because this Government are failing the country on so many levels that it is hard to know where to start.
New clause 6 refers to equality in relation to
“households at different levels of income”.
Real pay has fallen and is now lower than it was in 2010. Too many jobs that have been created are insecure and entrench poverty through low pay. These employment models fuel inequality, and certain parts of the country, particularly in my north-east region and my constituency, have a disproportionate number of workers on these contracts, where there has been a long-term move towards casualisation. This poverty is not just about worklessness; 60% of people in poverty live in a UK household where someone is in work. Many professionals have joined the queues at food banks, where, nationally, 1.4 million emergency food parcels were handed out last year—that has to be a perfect symbol of a failed state, does it not?—yet the Government just don’t get it.
Mr Jim Cunningham
Does my hon. Friend agree that the limit on child benefit now increases poverty? Does she recall that one of the Government’s slogans used to be, “Let’s make work pay”? Well, it does not pay because poverty wages are being paid.
Laura Pidcock
Absolutely. We are seeing lots of inadequacies in the universal credit system, which completely smash out of the water the idea that work pays under the Conservative Government.
Even taking account of housing costs, which I know take a huge slice of wages from people in the south-east, in the north-east we are still £84 a week worse off. The disparities in investment in my constituency create a vicious circle. We cannot attract the large-scale business investment that we desperately need without the infrastructure and the skilled people, and as much as Derwentside College in my constituency is a beacon of excellence in the education it provides, it is like every other further education establishment in the country in that it has a dwindling budget with which to educate the future skilled workforce that we need.
Ian Mearns (Gateshead) (Lab)
My hon. Friend is making an excellent point. There are very good FE colleges all over the north-east of England, with my local one in Gateshead being a very good example, but I am sad to say that when young people are leaving those colleges with skills, they are doing what generations of Geordies have done: leaving to come south for jobs because there is not the investment in the north-east of England.
Laura Pidcock
It is heartbreaking. Of course we want to keep as many of those brilliant young people in my constituency as possible, with the education they have received being put back into infrastructure and a rich economy, but the long-term employment just is not there.
New clause 6 would also address gender inequality, because it is women in my constituency and right across the country who have borne the brunt of inequality, as most women always do. Women, particularly working-class women, suffer structural inequality throughout their lives. On average, women earn less than men, have lower incomes over their lifetime and are more likely to be living in poverty. As has been mentioned, women are therefore less likely than men to benefit from cuts to income tax, and are more likely to lose out because of cuts to social security benefits and public services.
In conclusion, I urge Members to support new clause 6 and I call on the Government to carry out equality impact assessments so that my constituents can see, in black and white, the hard facts and the truth. If the Government are so proud of their achievements, why are they not shouting them from the rooftops so that they can receive full credit? Why not let everybody know what Government policy has achieved? Unfortunately, Opposition Members know that the facts will tell the truth and reveal that the Government do not care one jot about my region and that they are happy for wages to stagnate and for people to experience poorer lives with all the consequences that that entails. People in my constituency work extremely hard, and they definitely deserve much better. Please support the new clause so that we can see what the Government are actually doing to our region.
Bim Afolami (Hitchin and Harpenden) (Con)
I rise to respond to some of the points that have been made by Opposition Members. I shall start with what the hon. Member for North West Durham (Laura Pidcock) said about the Government, or the Conservative party, talking about how work is the best route out of poverty. Do correct me if I have misquoted you, but you went on to say that the work in our economy at the moment exacerbates poverty. You felt that it is currently not the best route out of poverty. Is that correct?
The Temporary Chair (Albert Owen)
Order. Is the hon. Member for Hitchin and Harpenden (Bim Afolami) referring to me, because he is saying “you”? He should refer to the hon. Lady, and if he wishes to take an intervention, he must sit down.
Laura Pidcock
In my speech I was talking about precarious work. In debates on universal credit, Government Members talk about it getting people into work faster, but we know that the system is for people who are in work and that they receive a top-up payment because their pay is low. I meet many people in my constituency, including social care workers who do not get paid for their mileage. They are working, say, 14 hours a day and getting paid for six hours. That entrenches their poverty because they do not have a proper contract and they are not being paid a fair rate, but they have all the outgoings that they would have if they were not receiving state help.
Bim Afolami
Whether it is in respect of the Bill, the new clause or what we are discussing now, the important thing is that it is of course the Government’s intention to create more better-paying jobs. That is what the Treasury team and everybody across Government strive to do every single day. That is not to say that every single person in this country is currently at the level of prosperity we would like, but that is the aim of all the activity that is coming out of the Bill and out of the Treasury.
Stella Creasy
If that is the aim, what data are the Government collecting to be sure that they are achieving it and to find out whether there are any variations? That is what we are talking about. The issue is not the policy, but whether it is having an impact and whether we can understand that impact. Does the hon. Gentleman understand that?
Bim Afolami
I do indeed understand that. There is currently so much data, much of which has already been talked about by Opposition Members, on regional disparities, and on disparities of race and age, and between urban and rural areas. There is so much data, so Government policy must aim to bear it all in mind, which is what Ministers do.
Sarah Champion
I am grateful to the hon. Gentleman for his generosity in taking interventions. We need to hear a few facts. The data that he is talking about, which we are citing as evidence of why this is so important, is being collected by charities and the House of Commons Library. With respect to both the duty of care and the provisions of the Equality Act 2010, this work should be done by the Government. That is what we are asking for.
Bim Afolami
If the hon. Lady will permit me, I will make a bit of progress and then I will respond to her remarks in the fullness of my speech.
It is important to make my next point in relation to new clause 6 clear. We have heard Opposition Members say that women, or certain members of ethnic minorities, are more likely to be lower paid than other members of society. By taking the lowest paid people out of tax and increasing the national living wage, we are benefiting those groups of people who might suffer from low earnings. In addition—
Ian Mearns
When Government Members talk about, and celebrate, the fact that people are being taken out of income tax altogether, what they are doing is celebrating an economy of low pay. They are celebrating an economy where people are being paid so little that they are just above, or just at, the income tax threshold. For me, that underlines what it is actually like out there in constituencies such as mine in Gateshead.
Bim Afolami
I am afraid that the hon. Gentleman is mistaken. It is not celebrating low pay to say that people who are currently earning lower amounts should take home more of their money. That is not a celebration; it is about making their lives, every day and every week, that bit easier. It is worth saying that taking the lowest paid people out of tax and raising the national living wage is having significant benefits for many of the people—
Stella Creasy
The hon. Gentleman is being very generous with his time. I think he may have missed one of the points that we are making. For example, when the Government raise the tax threshold, 66% of the people who do not benefit—because they do not earn enough—are women. Seventy three per cent. of the people who benefit from a rise in the higher income rate threshold are men. What he is talking about and what we are talking about are two different things. We are talking about the differential impact of policy, and asking the Government to do the sums that are currently being done in the charitable sector, so that we can make better policy. Surely he wants those sorts of policies to have an equal benefit, but at the moment they do not, because we do not have equal pay.
Bim Afolami
I believe that all policy in this area, or, frankly, in any area, should be set to make sure that we are trying to generate as innovative, dynamic and successful an economy as possible. The hon. Member for Walthamstow (Stella Creasy) mentioned cutting corporation tax in her speech. She thought that that effectively benefited more men than women because men are more likely to be shareholders than women. The way we should deal with that, in my view, is to encourage more women to be entrepreneurs. We should work to make sure that women have access to being shareholders and that women have more ability to reap the benefits of that—
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
Will the hon. Gentleman give way?
Bim Afolami
If I may, I would like to make a bit of progress.
As the evidence has shown, cutting corporation tax increases, rather than decreases, the tax take going to the Exchequer. If that shows this country to be a better and more dynamic place in which to set up and start a business, that will benefit all people in this country. That is the approach that the Government should take. If we want to improve the performance of the British economy and if there happen to be more men than women who are shareholders, it is no answer to say that we should therefore not take action to improve the activity of the British economy.
Stella Creasy
I have a very simple question for the hon. Gentleman, although I appreciate that he is getting some assistance from the hon. Member for Spelthorne (Kwasi Kwarteng): can he produce the data to prove that men and women will benefit equally from the changes to corporation tax?
Bim Afolami
I do not have the data now to be able to respond to the hon. Lady. What I do know is that Conservative Members will never take lectures from the Labour party; we have our second female Prime Minister, the gender pay gap is the lowest on record, and this Government have done more for childcare and support for families than the Labour Government ever did. The idea that this Government should take lectures on this issue from Labour Members is disgraceful.
Laura Pidcock
The hon. Gentleman is celebrating two female Prime Ministers somehow drastically pulling every single woman out of poverty. That is not the answer. We need structural change and the evidence to tell us whether women are equal, not the tokenism of two female leaders. Margaret Thatcher did not do much to pull women in my community out of poverty.
Dawn Butler
I am sure that the hon. Members around the hon. Gentleman are trying to get him to stop talking, but Labour Members do not mind. It is actually nice to see you go through your journey of trying to put the pieces together and understand the problems we are talking about. You cannot justify any of your statements because you have no data.
The Temporary Chair (Albert Owen)
Order. Too much “you”. The hon. Lady is an experienced Member of the House and she should set an example.
Dawn Butler
My apologies, Mr Owen. I am getting carried away in my enthusiasm to try to educate the hon. Member for Hitchin and Harpenden (Bim Afolami). The Government cannot justify anything you are saying, because you have no data to back it up. We are having to rely on data from voluntary groups and charities, which do an amazing job of crunching the numbers and looking at the intersectionality of the Government’s policies. But in order for you to make your statements, you need to have the data.
The Temporary Chair
Order. That was a very long intervention with too many “yous”. Let us get used to the parliamentary language and have a proper debate.
Bim Afolami
I will conclude my remarks by saying that it is important when we talk about these issues—in this House or outside—always to remember that improving the performance of the health service, the economy or anything relating to Government policy will benefit everybody in this country, if we make the right judgments and the right policy.
Jim McMahon
Well, well, well. When it comes to naivety, there is a very fine line; it can often be endearing before it eventually becomes quite offensive. And I did find the speech of the hon. Member for Hitchin and Harpenden (Bim Afolami) offensive. It began in the spirit of naivety. I could see that he was nervous at the beginning of his contribution—quite rightly, it turned out, towards the end—because he did not have the data that was being presented.
The debate went on and Labour Members presented the data, but rather than actually taking account of it, the hon. Gentleman continued, in a very odd way, to try to defend what most reasonable people would say is a quite indefensible position. He was essentially saying, “Listen—if men are doing okay, surely women will eventually do okay too.” I am not sure whether the solution he came up with to the shareholder conundrum was for women to find wealthy husbands who are shareholders, as if that might somehow lift them out of poverty and allow them to be the beneficiaries of the cuts in corporation tax.
Ian Mearns
We have discovered a new phenomenon: it is called trickle-down gendernomics. It is going to be the resolution to all the problems of poverty and the disparity in earnings between men and women in all our communities up and down the country—I don’t think so.
Stella Creasy
Obviously, having had two women Prime Ministers, that is quite enough women earning a serious level of income—the 33 million other women in this country do not deserve equal care and attention. This data would help us to find out just how much inequality there is and what we could do about it. Does my hon. Friend agree that facts should override fiction?
Jim McMahon
I think that where the hon. Gentleman was trying to get to—I will be generous—was that these things are symbolic and that symbolism in politics is quite important. However, to me, it is more symbolic that 46% of women have to skip a meal so that their children can eat. It is quite symbolic that women continue to be underpaid compared with men, and it is symbolic that the decisions the Government are taking disproportionately affect women on low incomes—the people who are trying to keep households together and who are raising the next generation of young people, who, because of this Government, will not have better life chances than the generation that went before them.
Chris Stephens (Glasgow South West) (SNP)
Will the hon. Gentleman confirm that it is also important that it was women politicians and women workers who campaigned and argued for the Equal Pay Act 1970? Will he also confirm that outstanding equal pay cases are at an all-time high?
Jim McMahon
That is absolutely right, but let us be honest: the Government are not in listening mode. They do not want to take into account what could have been constructive new clauses—new clauses 6 and 7. What they want to do is to maintain their stubbornness and their silence. They think that if they ignore this issue, there is not a problem in society, when we know that there is.
In terms of the pressures on income that many people in our communities face, the new clauses go beyond just gender inequality, and talk about disability and race as well. The Prime Minister has been clear that she wants to address the discrepancy in terms of opportunity, incomes, housing and the criminal justice system with members of the ethnic communities in this country. However, when we look at the way the Government have approached the Budget, the evidence just does not support that. If we look at the public sector, for instance, little effort is being made to widen participation in public sector jobs to members of the ethnic minority communities. In my constituency, a third of residents are predominantly Pakistani and Bangladeshi, but they are nowhere near properly reflected in the make-up of public services. In towns such as Oldham, where industry has, by and large, been hollowed out, the public sector is the place where people go for decent-quality, well-paid and, previously, quite secure employment. If people are restricted from entering those jobs, for different reasons, that has a material impact on their ability to lift themselves out of poverty, to get on in life and to do well.
When the coalition Government came into power, it was interesting that one of their very first acts of many that devastated towns such as Oldham was to cut the funding that went to Remploy. Remploy had a network of factories across this country that used to support people into supported employment. Those were not sympathy jobs, in the way I heard people say they were at the time; they were real jobs, and they produced goods of quality that people wanted to buy. In Bardsley, in my constituency, that meant a full factory employing 114 people making windows that they would sell to industry, housing associations and the private market.
Sarah Champion
The reason we want the equality impact assessment is not handouts; we are looking for a level playing field so that everybody can reach their economic potential and Government policies are not hampering that. Does my hon. Friend agree?
Jim McMahon
That is absolutely right. This is really odd from my point of view, because I have come from local government. In local government, when people are setting their annual budget, they have a legal responsibility to make sure that these audits are carried out and that proper consideration is given to the impact on protected groups. The Government now seem to believe that legislation passed in this House is good enough for one part of the public sector but not the other, but I am afraid that that just does not hold water. A lot of public bodies—whether it is the NHS, local government, a police force or anywhere else in the public sector—will be looking at the Government and thinking that there is a lot of hypocrisy in the laws passed here, which the Government do not seem to apply to themselves.
Justin Tomlinson (North Swindon) (Con)
Specifically on Remploy, yes, there were some great practices there, but the Government made that decision because very few were able to progress into work, and we wanted to create more opportunities so that more people can benefit. That is partly why we have seen an extra 600,000 disabled people find work, which is a great thing.
Jim McMahon
How dare the hon. Gentleman suggest that the 114 people working in that factory in Oldham were not in proper employment? They were producing, they were manufacturing, they were selling, and people wanted to buy the goods because they were of a high quality. It was not a handout or a giveaway. They were not sympathy cases: they were people who were working hard in a supported environment to produce something that people wanted to buy.
In some ways, this is the problem that we face. When the problem is so disconnected and not part of the everyday experience of Conservative Members, it is easy for them to ignore it. I cannot ignore it. When I go back to Oldham West and Royton, it is my community. I see the impact of cuts, of austerity, and of suppressed wages. I see the hollowing out of our employment structure. All right, people at the top are doing very well, and there are more jobs at the bottom, but the middle has been completely taken out. People talk about an economy that will support people into better employment, while 8 million adults and children are living in poverty in working households.
That is the economy we have in this country, because the routes of progression in employment simply do not exist. We are happy to be the bargain basement employment capital of Europe in this new relationship—let us be honest. Providing that the bankers and the insurance services are all right, we really do not care what it means for the rest of the economy as long as there are people working at Costa Coffee to serve the coffee in the morning. That is what the Government really believe. It is okay hon. Members shaking their heads, but where has the investment in our key industries gone? We need investment in manufacturing and engineering, creating jobs that produce things that people want to buy, pay decent wages, and support people into a lifelong career so that at the end of it they have a decent pension.
Speaking of pensions, what did the Government do in the autumn statement for the WASPI women? These women have worked and contributed all their lives, doing everything that was asked of them by Government. At the last minute, planning for their future, they were left cut adrift, and when they came to the Government to ask for support, the Government turned away.
Jim McMahon
I absolutely give way to the hon. Gentleman if he can justify that.
Bim Afolami
Would the hon. Gentleman welcome anything at all in the Government’s recently announced industrial strategy, which was, in many respects, targeted towards some of the poorer communities in this country?
Jim McMahon
I am going to give the hon. Gentleman a real answer on this point and not just grandstand, because it is important. I will explain the problem with the industrial strategy as it stands. For a town like Oldham, it is absolutely critical that the UK has an industrial strategy that holds water—that is forward thinking, ambitious, and has a framework of funding to support growth. I would welcome an industrial strategy that did that, and I think that when it started, that is what it tried to do. The problem is that something fairly dramatic has happened in the meantime, and that is Brexit. What I would have expected the Government to do in the context of the referendum result is not just to dominate Parliament’s time with the transitional and transactional relationships with Europe now and when we leave. I would have expected the Government of the day to produce a real, compelling vision of what type of Britain there is going to be when we leave the European Union. That has not taken place. The domestic legislation coming through this place is non-existent. Money is being taken out of vital public services that would be the foundation for the type of industrial strategy that is being talked about. Money is being taken away from our education and skills system, which would be the starting point for any investment strategy in our economy, particularly in manufacturing and engineering.
So would I welcome anything in the industrial strategy? I would simply welcome the principle of an industrial strategy, but it cannot be done on the cheap. We have seen—let us be honest about this; it transcends different Governments—a complete turning away from UK manufacturing and engineering, at the cost of the communities that people in this place represent. In order to replace that with a forward-thinking industrial strategy, the resources then have to follow, and we have not seen that—we have seen the opposite. Money has been taken away from our Sure Start centres and from our schools. Our colleges are chronically underfunded, with many on estates that are crumbling, struggling to keep up even with basic maintenance. Our apprenticeship system is in tatters since the introduction of the apprenticeship levy. All these things matter if we have a forward view about what type of country Britain can be.
The new clauses are important in that context because if we want to create, after Brexit, an inclusive and fair Britain that allows everybody to benefit, we have to make an honest assessment of where Britain is today. We are not in a good place. Our economy is shot. Our job market has been hollowed out, and the good, well-paid jobs in the middle have been taken away. Our housing stock is not fit for purpose and we are investing £9 billion a year into the pockets of private landlords, although we know that 40% of that stock does not even meet the decent homes standard. Those are the really important issues that Members need to think about. If they do not take proper account of what the information tells us, how on earth can we collectively make informed decisions that send us in a different direction?
Stella Creasy
My hon. Friend is making a powerful case. Whether Members on either side of the House agree with the policies, having good data to enable us to understand their impact helps us to make or dispute an argument. I am struggling to understand why any MP would be against having the facts about the impact of policy, which is all that the new clauses will do. If we had that information, Government Members could confidently tell us what great proposals they are making to improve the country’s prosperity, rather than using anecdotes—or two women.
Jim McMahon
I believe it comes down to priorities. If the Government were determined to do something about this, having the evidence base would be of great benefit to them. They do not want to do anything about it, so the evidence base is a hindrance because the Opposition can use it to attack the Government about the fact that progress just is not being made. That is the real reason why the Government are not making progress, and why they are determined not to support the new clauses. It would be far better for the country if the Government were to step up, to be honest and to recognise that the country has some really ingrained challenges that we need to face. Understanding the scale of the challenge from day one is important in making sure that we get into a better position.
My challenge is this: why not? If the Government believe that they are doing the right thing, and that by virtue of their second female Prime Minister they are the party of gender equality and the champions of all that is equal, now is the time to prove it. Members have two choices: they can go through one or other of the voting Lobbies. Perhaps they have a third choice, which is to stay away completely. They can get behind the new clauses and support our request for the data set, which will inform decisions; they can shirk responsibility entirely and stay away from both voting Lobbies; or they can keep their heads down and maintain their own position on the Government Benches, and vote against new clause 6 because it happens to have come from the Opposition. I would say that that is not putting the interests of the country first.
Kirsty Blackman (Aberdeen North) (SNP)
I would like to start by correcting an omission that I made yesterday. I should have said that our thoughts are with the Chairman of Ways and Means and his family at this time. It sounds like a really horrendous thing for a family to go through, particularly at Christmas time.
I thank the shadow Minister, the hon. Member for Brent Central (Dawn Butler), not just for tabling new clause 6, but for the way in which she engaged with us in advance of the debate. I appreciate the time that she took to speak to us about the new clause so that we could discuss how it looked. I think it is absolutely brilliant; it is one of the best new clauses that we have seen when considering a Finance Bill, and I have tabled a few in my time. I want to speak in favour of the new clause and state our support for it.
I will start by covering why we need the new clause. Although there has been a bit of discussion, we have not talked about what it means in its widest sense. Subsection (2) talks about
“the impact of those provisions on households at different levels of income”,
as well as on protected characteristics, the public sector equality duty and
“equality in different parts of the UK and different regions of England.”
A lot of the debate today has focused on women, which is completely reasonable, but the new clause captures several other things that could have been more fully discussed.
Why do we need an assessment of the impact on various groups, particularly those mentioned in new clause 6? We need it because people in the protected groups or at the lower end of the income spectrum have been disproportionately hit by the actions of this UK Government, as can be seen in a number of ways. It can be seen in the fact that we have young people in jobs on zero-hours contracts. We have those jobs, and the Government say it is wonderful to have so many people in employment, but despite that, we are not seeing an increase in household disposable income because people are not receiving the wages they should receive for such employment. They are in precarious jobs and they are not receiving enough money, and the benefits freeze has been a major added factor. It means that people are earning even less, because the benefits freeze has hit them doubly.
The Government have caused another issue by reducing disability payments. The UN has said that the UK has not done enough to ensure that the UN convention on the rights of persons with disabilities is being met, and no Government in any developed country or nation should seek to be in such a position. We have not had a proper assessment of the impact on disabled people of the changes that this UK Government have made.
The UK Government have also not taken seriously their responsibility to young people in society. We have a living wage that people cannot live on: it is not calculated as something that people can live on; it is a pretendy living wage put forward by the Government. It is not applicable to people younger than 25. Therefore, we have a living wage that people cannot actually live on, but the Government somehow think that the labour of people under 25 is worth less than that of those over 25, even though they may be in exactly the same job and should therefore be earning the same amount.
As has been pretty widely covered, the Budget and successive policies of this UK Government have a disproportionate impact on single parents, the majority of whom are women. We see a disproportionate number of them coming through the doors at our surgeries. Do you know what, Mr Owen? It is absolutely and totally ridiculous that we are seeing a rise in rickets in this country. We are seeing people who cannot afford to eat or to give their children nutritious food because of the decisions of this UK Government.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Does my hon. Friend agree it is a scandal that many children will be getting food and presents this Christmas only through the actions of food banks and charities, such as Moray Firth Radio’s Cash for Kids in my constituency? That should not be allowed to happen. With universal credit, this is happening far too often across the nations of the UK.
Kirsty Blackman
I absolutely agree. This year—in 2017—my office has referred 35 people to food banks, and we have gone to the food bank on five occasions on behalf of constituents who have come through the door and told us that they have not eaten for a number of days. This is supposed to be a country that cares for people who are just about managing, but it is failing them. The people who go to food banks nowadays are working. They are not earning enough money from their jobs to feed their families, so they are having to go to food banks.
We have seen this Government attack people who have protected characteristics, but we have not seen any impact assessments because the Government do not want to admit what they are doing. We have seen attacks on the WASPI women, who, despite having worked all their lives, are being asked to wait even longer for their pensions. We have seen changes with the rape clause and the two-child policy, meaning that women should not have more than two children and, if they conceive as a result of rape, they must write that down on a form and say so explicitly. Why should they have to relive that just to please this Government? We have seen increasing household debt—that has been raised as an issue by the Bank of England—and decreasing household savings. We have seen young women unable to go to school because they cannot afford tampons and towels to provide themselves with a basic level of human dignity.
Another change that has not been talked about hugely in this place is the attack on a group of people with protected characteristics. A massive and increasing number of people come to my surgery because they have no recourse to public funds. It is a particular issue with those fleeing domestic violence, the majority of whom are women. The UK Government have determined that they should have access to public funds for only six weeks if they are from outside the EEA, and not at all if they are from inside the EEA. If they have been living on a joint income with their partner and are fleeing domestic violence, they have no protection from the UK Government because they are giving them no recourse to public funds. That is an attack on a group of people with protected characteristics, and we should no longer tolerate that.
The hon. Members for Oldham West and Royton (Jim McMahon) and for Brent Central (Dawn Butler) mentioned what local authorities have to do in relation to impact assessments. I was a local councillor for eight years before being elected to this place. When we produced budgetary measures, or anything we were going to do in the city that would have an impact on communities, we had to produce an impact assessment specifying how it would affect people with those protected characteristics. If a local authority making decisions for the third largest city in Scotland has to do that, why are the UK Government making decisions that affect every man, woman and child across these islands without producing an impact assessment? Is it because they are ashamed of what they are doing and unwilling to be honest with the people?
In Scotland we are looking at having a progressive taxation system. We are lifting the pay freeze and next year we will be the fairest taxed part of the United Kingdom. [Interruption.] The hon. Member for Beverley and Holderness (Graham Stuart) says that we will be the highest taxed part. Some 70% of taxpayers in Scotland will pay no more tax next year than they do this year. Only the highest earners will be paying moderately more. [Interruption.] No one earning less than £33,000 next year will pay any more income tax than they would in England.
Chris Stephens
Is it not a bit rich for some Government Members to try to shout down my hon. Friend, complaining about people on high incomes paying a bit more tax but saying nothing about disabled individuals losing £30 a week in benefits?
Kirsty Blackman
Absolutely. If Government Members cared about what they were doing to disabled people, they would produce the impact assessments that are being requested today, and they would be honest about the changes they have made and how the heaviest impact has been on the most vulnerable in society.
There are folk who have been left behind by this Government. There are folk who have been failed by the safety net. Those are the people we see—I am sure that Government Members see them, too—walking into our surgeries on a regular basis. They say, “I have worked hard all my life, but I still cannot afford to feed myself and my family.” People who have worked every day for years now find that their state pension is being pushed back as a result of this Government’s policies. People find themselves homeless because they have made one or perhaps two bad decisions in their lifetime, which is far fewer than those of us who have bought a safety net and have support structures in place are able to make.
We need a culture change. The conversations we have had in this Chamber are along the same lines as those that have been had in the context of the #metoo hashtag. Women have come forward with #metoo to say that they have been sexually harassed, sexually assaulted or even raped, and people have replied, “We don’t believe you,” “It can’t be that bad,” or “You’re trying to make a big thing of this.” What the SNP and the Opposition are trying to do in this debate is to highlight the fact that these disadvantaged groups are being actively disadvantaged by the UK Government’s policies. We are asking the UK Government to produce the impact assessments, because if they deny that that is the case, they should not be scared of producing them.
Mel Stride
This Government are committed to equality. That is not to say that no further steps need to be taken—a situation that pertains perhaps to every Government who have ever been in office—but we have a strong record on equality. More women are in work than at any time in our history, at 70.8%. Last year, over 60% of growth in employment was through women joining the workforce. We have the lowest gender pay gap for full-time employment on record and we have taken action to ensure that companies with 250 employees or more will, from next year, be required to publish details of their gender pay gaps.
For those who are disabled, we are spending more than £50 billion a year on benefits for disabled people and those with health conditions. In the Budget, the Chancellor announced an extra £42 billion for the disabled facilities grant to encourage and assist those with disabilities into the world of work.
For ethnic minorities, when our Prime Minister assumed office last year, one of her first actions was to announce an audit into the differing impacts on ethnic minorities in terms of their use of public services. The report was published in October and will inform our policy going forward.
In the Budget, we increased the national living wage by 4.4% from April, which will disproportionately assist ethnic minority people. We are committed right across Whitehall to ensuring an increase in the uptake of apprenticeships and employment within our police forces and our armed services for ethnic minorities.
David Linden (Glasgow East) (SNP)
I am grateful to the Minister for giving way, but I am afraid he has to stop talking absolute guff when it comes to the national living wage. The Government continue to talk about a national living wage, but that is in fact a con trick because it does not apply to under-25s.
Mel Stride
It applies to a large number of people and there is the national minimum wage as well. My point is that the 4.4% increase in April will be well above inflation, and will disproportionately assist women and those from ethnic minority communities.
Stella Creasy
I thank the Minister for giving way and I am listening to the case he is making. If he is so confident that the Government’s policies promote equality, why is he against having an independent Office for Budget Responsibility equality impact assessment to tell us all the good news?
Mel Stride
I ask the hon. Lady to be a little bit patient, because I am coming to those very points shortly.
On assessments, we are required, under the Equality Act 2010, to take due regard of protected characteristics, but it is not just for that reason that we do so. It is not just for that reason that I and my fellow Ministers took those issues into account at every stage; it is because we believe it is the right thing to do and we wish so to do.
To come to the hon. Lady’s intervention, a number of reports are already out there. We have heard about tax information and impact notes. I do not think the Opposition should dismiss them. They did not mention the distributional analysis the Treasury provides and publishes at the time of the Budget, or the public expenditure statistical analysis, which looks at how expenditure affects different protected characteristics and runs to hundreds of pages in length. What the Opposition are calling for is fundamentally impractical. That is the heart of the matter and the answer to the hon. Lady’s question. Such analyses almost invariably focus on the static situation. They focus on the effect of tax and income changes on individuals without considering the behavioural changes they induce and the implications of changes in the wider economy, such as the level of employment. They are selective and tend to avoid focusing on those who benefit from public services or are affected by taxation. For example, the provision of childcare, social care and health services is normally exempt from such analyses.
The final point, which has been raised already and which the hon. Member for Walthamstow (Stella Creasy) indeed recognised, is that where an individual’s income changes, that individual will almost invariably live within a household with other individuals. She said that the personal allowance increase for taxation disproportionately benefited men, but of course men often live in households with women, and income is distributed across the household. The same is true, of course, where a woman benefits and brings income into a household in which men are also present.
Stella Creasy
It is extraordinary that the Minister does not understand the concept of doing both individual and household analyses, or indeed behavioural alongside static analyses. There are many different ways the Government could be doing equality impact assessments. The problem is that they are not doing any.
Mel Stride
The hon. Lady is right: there are many ways it can be done, and the Government are indeed doing it in many ways. She need not only look to me for the observations I have made; the IFS has recognised my very point about household income. We will, however, continue to look at how we provide information and assess policies, and we will work with the ONS, as the Chancellor set out in the recent Budget.
In conclusion, the Government have a vision for a society that is equal, not in terms of levelling people down, but in terms of giving people the opportunity to go up. In yesterday’s debate on the Bill, the Labour party chose to vote against a measure to encourage young people to get a foot on the housing ladder. That is not acceptable, and that is an example of what we will do to promote equality of wealth and opportunity at every turn. I urge the Committee to reject new clauses 6 and 7.
Dawn Butler
The Minister referred to distributional analyses. The distributional analysis carried out by the IFS, the non-gendered and gendered analyses of the Women’s Budget Group, and others, such as those carried out using the Euromod tax-benefit model for EU countries, all share the same characteristic: they are static. The exact same method is adopted by the Treasury itself when it assesses the distributional impact of Budget measures in Budget and IFS documents. If the Treasury does not like other people using the model, perhaps it should not use it itself. The Government cannot criticise others for using the same method as them to analyse their own Budget.
The Minister said several times that the Government believed in equality, but their actions fail to carry that through. They say one thing and do another, and they are exacerbating inequality in our society. [Interruption.] The Chancellor says from a sedentary position, “Unlike the Labour party.” The Labour party is more competent than this Government have ever been in ensuring that this country is more equal. All the equalities legislation has come from a Labour Government—[Interruption.] Productivity, growth, all the equalities legislation has come under a Labour Government, not a Conservative Government. In fact, every time the Conservatives enter government, everything starts to go down. Food banks were not part of the Department for Work and Pensions scheme when Labour was in government. Period poverty was not part of everyday life for young women when Labour was in government.
I say to the Minister, “If you in any way believe in equality, you should not lead your merry men into the No Lobby. You should lead them into the Aye Lobby, and vote with us.”
Question put, That the clause be read a Second time.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I beg to move, That the clause be read a Second time.
It will not have escaped Members’ attention that Christmas is coming. In fact, some of us may even have thought that Christmas was already here given that we enjoyed the previous debate so much. However, I must say that discussing this Finance Bill again feels like an alternative celebration on this side of the Chamber: groundhog day. For the third time since entering this House, I rise to speak about yet another woefully thin and inconsequential Finance Bill that fails to take the action that our economy so clearly requires.
The consequences of a Government focused on the management of internal party disputes, not sustainable economic growth, have become clear for all to see over the past few weeks: growth levels the third lowest in the OECD during the first half of this year; productivity growth lower than in the eurozone and well below the average of the EU as a whole; falling living standards, with wages under their longest squeeze since Napoleonic times; and a Government who have had to revise their targets for eliminating the current deficit no fewer than five times, and who are now resolved to eliminate the deficit only by 2030—15 years after the end date promised during the 2010 general election campaign. It’s behind you, to use a pantomime phrase—my hon. Friend the Member for Brent Central (Dawn Butler) was keen on them in the previous debate. In that context, it is depressing to see the Government yet again pass up the opportunity to deal with aggressive tax avoidance and evasion in a steadfast manner.
Labour’s new clause 8 would require the Chancellor of the Exchequer to carry out and publish a review of the effectiveness of the Bill in tackling artificial tax avoidance and tax evasion, and in reducing the tax gap, within six months of it entering into effect.
Kelvin Hopkins (Luton North) (Ind)
I congratulate my hon. Friend on the first part of her speech. Some three or four years ago, the distinguished tax expert Richard Murphy estimated the total tax gap at £119 billion a year. To my knowledge, that figure has never been seriously challenged or debunked, and it may now even be higher. Does my hon. Friend accept that if the Government were serious about dealing with this matter, they could pay off the deficit and have plenty more to spend on public services?
Anneliese Dodds
I am grateful to my hon. Friend. The calculations made by economists and accountants, such as Mr Murphy, reflect the cost to our Exchequer of international profit shifting, which the Government’s estimate of the tax gap does not.
Mr Jim Cunningham
Does my hon. Friend agree that low wages mask inefficiency? One of the big problems with the economy is that we have 4 million or 5 million people in that category, which encourages less efficiency, not improvements.
Anneliese Dodds
I agree with my hon. Friend. In fact, a problem that underlines our productivity gap is the worryingly low levels of private investment in our economy, which is reducing efficiency and places Britain outside the sphere of many comparable nations on investment. Sadly, the Government did not grasp that problem in the Budget.
The Opposition are calling for a review in the absence of the ability to call for more wide-ranging changes to the Bill given the Government’s unwillingness to table a general amendment to the law motion as part of this Finance Bill. That is unfortunate given the lack of new measures in the Bill, the limitations of the measures that are included, and the fact that much of the Bill represents a cleaning-up of previously announced but ill-thought-through measures. I will deal with each of those matters in turn.
It is, to say the least, regrettable that Members from across this House are unable to introduce new measures to the Bill. Labour’s tax transparency and enforcement programme sets out several areas where the Government should be taking action to tighten up our leaky ship, but we see no such ambition from the current Administration. Again, there is an unwillingness to engage with those who do have the energy and expertise to promote new measures.
When it has been possible for Members to amend Finance Bills, they have often done so to good effect. So it was that my right hon. Friend the Member for Don Valley (Caroline Flint) amended what became the Finance Act 2016, giving the Government the power to introduce public country-by-country reporting and requiring multinational firms to indicate their profits, staff and tax paid in the different jurisdictions in which they operate. The measure is already in practice in the banking and extractive industries, where it has effectively promoted tax transparency and has offered a lot of evidence and information that has been very helpful to investors in those fields, but Members on both sides of the House who are keen to see the Government use the powers already available under the 2016 Act to make country-by-country reporting public, and who believe the Government should be playing a leadership role in this area, are sadly emasculated by the Government’s unwillingness to allow colleagues to table proper amendments to this Bill.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
Does my hon. Friend agree it is disgraceful that some of those named in the Paradise papers are now threatening court action against those whistleblowers and are trying to scare people into not releasing such information in future?
Anneliese Dodds
I absolutely agree with my hon. Friend on that. There is a particular onus on the Government to be steadfast and clear in their rejection of those legal challenges and the problems they potentially pose to our democracy. Of course it is just the BBC and The Guardian that have been threatened with legal action, not any of the other 90 or so media outlets based in other countries. It is UK-based firms and media organisations that have been threatened with that action, so I hope the Minister will make clear to us today whether or not he agrees with Appleby’s threat of legal action against those who revealed the details of the Paradise papers in the public interest.
Many of the measures in the Bill intended to prevent aggressive tax avoidance and evasion do not go far enough. I have already referred in this House to clause 21, which seems to adopt a confusing new approach to measuring profit shifting, rather than aiming to reduce it per se. Yet again, there sadly appears to be deafening silence here concerning the need for tax simplification, with only minor measures that do not meet the required standard of a thoroughgoing, holistic assessment of the overall impacts of tax reliefs, which we desperately need in this country if we are to have proper Government accounting.
Finally, we see in the Bill a number of additional measures that seem intended mainly just to clean up previous mistakes by this Government, many of them following criticism from Labour Members. In clause 35 and schedule 10, for example, we find anti-avoidance provisions in relation to payments and benefits made from offshore trusts, no doubt reflecting the concerns we raised about the potential misuse of offshore trusts by non-doms. Let us be clear, before this issue crops up yet again in this debate: this Government have not abolished long-term, non-dom status. The new measures do not apply to those whose parents are non-doms, as is often the case, and a 15-year window is provided for individuals to get their affairs in order. In another example, clause 28 closes the loophole introduced by the coalition Government in 2011 that allowed foreign companies to hold on to an asset-stripped subsidiary for six years until they were then able to claim loss relief in excess of any genuine economic loss to the group. Again, the measure tidies up a problem that was created previously by those involved with this Administration.
To conclude, this Finance Bill was a chance for strong action against aggressive tax avoidance and evasion, but, sadly, we have here a paltry Bill, which some Conservative Members have praised in some of these debates for being thin. It is not thin because it is concise; it is thin because, sadly, just like this Government, it is lacking in ideas and ambition. We need a change now, more than ever.
Alex Chalk (Cheltenham) (Con)
I welcome this Finance Bill, because it does three things so far as taxation is concerned: first, it prioritises increasing the total pot for public services while recognising the common-sense proposition that we must live within our means; secondly, it entrenches and enhances the fundamentally progressive nature of the tax system; and, thirdly, it redoubles our country’s efforts to tackle tax evasion and aggressive tax avoidance. The theme that unites those three strands is a relentless focus on discharging our obligation to the next generation: on ensuring that we are laying the foundations for a better, fairer country; one whose best days are yet to come. In doing so, we are observing our solemn duty to those who will come after us. We must not fail them, not just because history will condemn us if we do not, but because we ought to be able in this House to recognise that moral obligation for ourselves.
On tax avoidance and evasion, there has rightly been a sense that multinational corporations have been seeking to game the taxation system, using their market power to their financial advantage. That sticks in my craw, the craw of my constituents and the craw of Members across this House, because when we talk about the rule of law, that is about ensuring that we are all equal before not only the criminal law, but taxation law. Few things are more corrosive to public confidence in the enterprise economy than the sense that large corporations are wriggling out of their responsibilities to society—these responsibilities provide free healthcare and education, as well as a safe and secure environment to operate in. So I welcome the fact that the tax gap in our country has been driven down significantly, from 8% to 6%. That translates into an additional £12.5 billion per annum, which is more than the entire Ministry of Justice budget and far more than the entire annual spend on the prison system. We have the lowest tax gap in the world.
Lloyd Russell-Moyle
Does the hon. Gentleman recognise that that 6% does not take into account profit shifting? It comes from HMRC effectively marking its own homework and patting itself on the back.
Alex Chalk
Absolutely not. It is an internationally recognised statistic that shows that this country bears comparison with any other developed nation in the world, and it marks a significant improvement on the situation that prevailed under the previous Labour Government. The fact is that more than £160 billion extra has been received since 2010. To put that into context, it is more than the entire annual NHS budget.
We have addressed egregious loopholes that allowed some foreign nationals not to pay capital gains tax when they sold houses in the UK. That allowed people to live in the UK permanently but claim non-dom status; and it allowed people to avoid paying tax by calling their salary from their own company a loan. Those were abuses and we have closed them down. It is important to note that the UK has spearheaded a groundbreaking initiative to share information on beneficial ownership with more than 50 jurisdictions, including every British overseas territory and Crown dependency with a financial centre.
Alex Chalk
No, because I am going to conclude.
All that I have described shows the UK’s commitment to transparency and that we are at the cutting edge of financial propriety.
It is absolutely right that the Government take further action to raise £4.8 billion by 2022-23. First, we are tackling online VAT evasion by making online marketplaces jointly liable for their sellers’ unpaid VAT; secondly, we are investing an additional £150 million to fund HMRC staff and the latest technology; and thirdly, we are tackling further disguised remuneration schemes, because if people are gaming the system, we should call it out.
In short, the Bill bears down on aggressive tax avoidance and evasion. It sends out the clear message that we in this country believe in innovation, modernisation, investment and employment. We will back businesses that unlock human potential and generate jobs and wages, but we expect businesses to play by the rules, honour their dues to society and respect the next generation. The Bill meets those priorities and lays the foundations for a country that is fit for the future.
Sir Oliver Heald (North East Hertfordshire) (Con)
Does my hon. Friend agree that above all else, this is about persistent, detailed work over time to close the loopholes and deal with the tax gap? It is not about making a speech and pretending we can spend all the money that is being lost; it is a question of grinding away over time and getting the tax gap down from 8% to 6% and so on.
Alex Chalk
As always, my right hon. and learned Friend hits the nail on the head. There is no substitute for hard, detailed work. Ultimately, it is a game of cat and mouse, because those who seek to avoid tax will be ever more inventive. It requires detailed work to ensure that the loopholes are closed, and the Government are absolutely committed to that task. The Bill shows that and I am happy to support it.
Kelvin Hopkins
I shall speak briefly. I congratulate my hon. Friend the Member for Oxford East (Anneliese Dodds) on her excellent Front-Bench speech.
Early in his speech, the hon. Member for Cheltenham (Alex Chalk) talked about morality. There is morality in paying tax: we cannot have a civilised society without people paying tax to pay for public services and income being redistributed from those who have more than they need to those who have less than they need.
The crisis in 2008 and the problem of tax avoidance and evasion, overseas tax havens and so on, all arose as a result of Geoffrey Howe’s disastrous decision in 1979 to abolish exchange controls immediately. That led to the crisis and the massive flows of money across national boundaries around the world, causing all sorts of problems. Even the then Governor of the Bank of England, Mervyn King, suggested to the Treasury Committee at the time of the 2008 crisis that if things got really bad, we might have had to reintroduce exchange controls. I am not suggesting that I will be able to persuade the Government to do that at this stage, but in time we are going to have to look at how we manage the vast flows of money across national boundaries around the world. It is the bankers who are the crooks—not the good bankers who look after our ordinary accounts, but those who gamble with money and often worthless bits of paper on the foreign exchanges.
The hon. Member for Cheltenham talked about morality. Millions of ordinary people in this country do have a very moral sense. Many of them, including me—I am very well paid compared with ordinary people—say that they would pay a bit more tax if they could guarantee that the money went to the health service and to people who are less well off than themselves. At the same time, the mega rich, the corporates and the bankers are resisting any kind of constraint on their activities. I see where the morality lies: it lies with decent ordinary people, not with bankers. We must constrain those bankers somehow and have serious measures that will actually have the effect of stopping the tax avoidance and tax evasion that has bedevilled our society for so long.
Kirsty Blackman
The discussion that we had earlier today and that we are having now in relation to tax avoidance really goes to the heart of the question: what kind of country do the Government want to be in charge of. It was clear from the earlier debate that the Government do not want to be in charge of a country that is open and upfront about tax changes and the impacts that they will have. They also have issues with tax avoidance and evasion and with the choices that they make. Their choices are very much not the ones that Scottish National party Members would make, nor indeed, I think, ones that Labour would make.
On the issue of the tax gap in particular, the UK Government took the decision that it was more important to have immigration officers who were concerned with ensuring that the “wrong sort of people” did not get into the country than it was to have customs officers. We have ended up in a situation where there are very few customs inspections, which is a major contributor to our tax gap. We are talking about tax avoidance and tax evasion and about going forward into a situation in which we will need to make many more customs checks, when the UK Government have got rid of most of the people who know what they are talking about in relation to customs. We have a major problem that needs to be solved if we are to fix those issues.
A Transparency International report mentioned 766 UK companies that had avoided tax. A quarter of those companies are still active in the United Kingdom. The UK Government do not seem to have taken any action to ensure that they cannot dodge tax in the way that they have. Among the actions that we have been talking about is protection for whistleblowers. We continue to call for whistleblowers to be better protected. It is really important for people to feel that they can come forward safely and that they can uncover major problems that exist at the heart of some organisations that operate within this country, and at the heart of some schemes that operate within these islands. If the UK Government produced stronger guidance and stronger protection for whistleblowers, it would allow and encourage more people to come forward.
On the issues around the general anti-avoidance rule and the complexity of the tax code, we have been consistent in our criticism of how complex the tax code is. Someone posted a picture recently of the new version of the UK tax code that had just appeared: the thing was almost as tall as me. An absolutely huge number of bits of paper are required to make up the tax code. Is it any wonder that there are unintended loopholes that people can exploit? If the tax code was much simpler, if there were fewer tax reliefs and if the UK Government chose instead to give money to people rather than a tax relief, it would make things slightly better.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
The hon. Lady suggested that there is a confusion in the tax codes. It is only in recent days that the Scottish SNP Government have introduced a raft of new bands for tax and indeed increased tax. I find that anomaly quite strange.
Kirsty Blackman
It is not actually a raft of new tax bands. As far as I know, it is one more band in the tax system with slightly different numbers for the pennies. But that is only in relation to income tax. Some 70% of people will pay less tax and 55% will pay less tax than they would in England. Does the hon. Gentleman believe, therefore, that the English system is taxing people unfairly compared to the Scottish system?
Mel Stride
I thank the hon. Lady for indulging me. She says that 70% of Scottish taxpayers will pay less tax, but will she accept the fact that that is largely due to the changes made by the UK Government in raising the personal allowance?
Kirsty Blackman
The Scottish Government’s new starter rate of 19%, rather than 20%, for the first £2,000 that people earn is really positive. It is an incredibly progressive taxation measure, and it is something that the UK Government cannot claim; it is something that the Scottish Government are doing.
Martin Docherty-Hughes (West Dunbartonshire) (SNP)
If Conservative Members wish to debate the progressive taxation system introduced by the Scottish Government, maybe they should stand for the Scottish Parliament.
Kirsty Blackman
I thank my hon. Friend for his comments. I do, however, want to say one more thing on the Scottish tax system, so I hope he will indulge me.
The Scottish tax system is progressive. It is making a difference by ensuring that people who earn under £24,000 pay less tax. That is a positive measure and a good way forward. If members of the UK Government have concerns about the Scottish Parliament’s choices on tax, perhaps it would be better for them to support an increase in the block grant. They could also tell us whether they would cut the money that is going to be made up from the Scottish Government’s tax changes from education, local authorities or the health service.
I will bring the Committee back to tax avoidance. I am sorry, Sir Roger, for testing your patience slightly. The Scottish National party has been consistent in its criticism of Scottish limited partnerships. My former colleague, Roger Mullin, was like a dog with a bone; he would not let go of this matter. That was to his credit because the UK Government decided to make changes to the SLP regime as they recognised that it is massively used for tax avoidance and dodging. There was a review of SLPs, but we are yet to see changes as a result. Will the Minister let us know at least the timeline for making those changes in order to ensure that SLPs are no longer used as a tax-dodging mechanism? This is an important change that really needs to be made, preferably sooner rather than later.
Talking about the UK Government not working as they should regarding tax avoidance and evasion, the Panama papers and the Paradise papers have both been published in my time as an MP. It is very clear that the tax system—not just the global tax system, but even the system in the UK—is failing. It is allowing people and organisations to dodge tax. It is all well and good to talk about overseas trusts. In fact, this frustrates me a huge amount because the Government try to give the impression that overseas trusts are used by organisations such as rural churches in order to fix their roofs. It is not the case that they are used by organisations like that; they are used by people who are trying to dodge tax. We need the hardest possible line on that.
We cannot see the United Kingdom turn into a low-tax, deregulated tax haven. If the UK Government are deciding what kind of country they want the United Kingdom to be, they should not choose one that involves deregulation. With Brexit, they have the opportunity to put their stamp on the future, but I am incredibly concerned about the way that it will go. In bringing back control, some of the reins that have perhaps been put on the UK Government will be taken off and they will be free, for example, to take away the working time directive, and to make changes to our world-class social security system, fair society and good business practices. That is incredibly concerning.
We have called before, and we will not stop calling, for powers to deal with tax avoidance and evasion to be devolved to the Scottish Parliament. We believe that we would do a better job because we could not really do a worse one. We would put forward a fair and moral tax system and a general anti-avoidance rule in order to discourage people from dodging tax, and we would ensure that our tax gap was way smaller than the UK Government’s.
Mel Stride
This Government are committed to bearing down on tax avoidance, evasion and non-compliance like no other Government in history. While I have enormous respect for the hon. Member for Oxford East (Anneliese Dodds), the shadow Minister, and I respect the spirited nature of her attack on our record, I am afraid she is misguided.
We have a strong record. We have brought in and protected £160 billion of potentially avoided tax since 2010 as a result of over 100 measures that we have brought in. We have, as we have heard in the debate, one of the lowest tax gaps in the entire world, at just 6%. Contrary to some of the suggestions from those on the Labour Benches, that is a robust and firm figure; it is described by the IMF as one of the most robust in the world. It is, indeed, produced by HMRC, but it is produced to strict guidelines set out by the Office for National Statistics.
Kelvin Hopkins
The Minister mentioned HMRC. One of the things the Government have done over many years now is to squeeze HMRC, which has fewer offices and not enough staff. Does he not accept that every single additional tax officer collects many times their own salary? If the Government were serious about tax collection, they would expand HMRC substantially.
Mel Stride
The hon. Gentleman may know that, in the last Budget, £155 million was set aside to be invested in HMRC, for exactly the activity that he has described. That is expected to bring in £4.8 billion through a further reduction in tax avoidance over the forecast period.
The other point I would make to the hon. Gentleman is that HMRC’s effectiveness is not all about having lots of regional offices staffed with tax inspectors. Tax is collected today using sophisticated intelligence-led and data-led techniques. We need to invest in that if we are to continue to achieve the outstanding results we are achieving at the moment.
We have borne down with penalties for developers and enablers of tax avoidance schemes. On the international side, our country has been in the vanguard of the base erosion and profit shifting project. We now have over 100 countries involved in common reporting standards, so HMRC can access information in real time to bear down on non-compliance in those jurisdictions. We have introduced new measures in this Budget in relation to clamping down on the abuse of overseas trusts. Since 2010, we have brought in £2.8 billion in additional revenues as a consequence of clamping down on the activities of UK residents hiding their wealth inappropriately in overseas trusts.
We have, of course, been the Government that abolished permanent non-dom status. I have to disagree, I am afraid, with the hon. Member for Oxford East, who suggested that if someone’s parents were non-domiciled, that in some way suggests that that person would not be subject to the rules we have brought in. That is simply not the case. If someone has been resident for 15 of the previous 20 years, they will be deemed domiciled, irrespective of who their parents happen to be.
New clause 8 suggests we should have yet another assessment. We have heard consistently in all the debates we have had on the Floor of the House on this Bill about having more and more assessments, but I would say to Opposition Members that we already have a robust figure for the tax gap. As I have said, it has been described by the IMF as one of the most robust in the world, and we certainly do not need even more information out there to prove just how successful this Government have been in bearing down on avoidance, evasion and non-compliance.
However, as a consequence of this Bill, we will go even further than we have to date. Clause 38 relates to online VAT fraud, and we will make online platforms jointly and severally liable where VAT avoidance occurs, extending that approach from overseas sellers to domestic sellers, and ensuring that they are responsible for supplying accurate and appropriate VAT information on their sites. That will raise £1 billion by 2023.
Clauses 11 and 12 will complete our work on disguised remuneration, and bearing down on that will have brought in £3.6 billion by 2019, when we will be closing down on those schemes.
Clause 42 ensures that where there is illegal landfill activity, we apply the tax that would have been in place had those activities been legal, bringing in a further £145 million. There are also the changes brought in by clauses 20 and 21 to address avoidance involving intellectual property within companies.
This Government have a record that is second to none when it comes to clamping down on avoidance, evasion and non-compliance. Labour had 13 years in which to implement such measures, and did very little. In fact, the tax gap under the previous Labour Government was such that if we had it today, we would be over £12 billion short every single year—enough to fund every policeman and woman in England and Wales. We will continue to bear down, as appropriate and with vigour, on tax evasion and avoidance to ensure a fair and civilised society where those who are due to pay their fair share do so, to support our public services. I urge the Committee to reject new clause 8.
Anneliese Dodds
It is a pleasure to serve under your chairmanship, Sir Roger.
First, let me respond to the Minister’s comments. I said before that it feels a little like groundhog day, although that is in February rather than at Christmas time. While I have a huge amount of respect for the Minister, and I am very grateful for his gracious comments, I suggest that in a moment he may be in the position of the Mayor of Wisconsin, who, he may remember, was nipped by the groundhog on groundhog day. I fear that the Minister is going to be nipped slightly after saying that Labour in government did very little on tax avoidance and tax evasion. He will be very much aware, because I have said this many times to him and to other Government Members, of the huge role that was played by Dawn Primarolo when she chaired the Code of Conduct Group. [Interruption.] The hon. Member for Beverley and Holderness (Graham Stuart) makes a comment about the tax gap. We have already discussed some of the conflicts around the calculation of the tax gap, such as the fact that, sadly, it does not include international profit shifting. If it did, we would have a much larger tax gap.
I have mentioned the role of Dawn Primarolo, for Labour, chairing the Code of Conduct Group, which identified, published and eliminated 68 harmful tax measures. I can now reveal that there is much, much more that Labour Governments did. Perhaps, regrettably, the Minister has not been given sight of the letter to the Chancellor by my hon. Friend the Member for Walsall South (Valerie Vaz), the shadow Leader of the House. When she asked the House of Commons Library exactly what Labour Governments had achieved in the field of tax avoidance and evasion, it provided very full information, which she has sent on to the Chancellor. The Library made it very clear that under Labour Administrations there were 14 Budget reports, each of which included measures on preventing tax dodging. As well as those instances of action, there was the introduction of the disclosure regime and the Primarolo statement, which, in practice, revolutionised HMRC’s ability to tackle tax dodging. Labour Members will not take lessons from Government Members when we have a strong record in this area.
The Minister did not make clear what the Government’s approach will be to the inclusion of business-like trusts in registers of beneficial ownership, as is now EU policy. Will that be the UK’s policy? That has been resisted by Conservatives so far; I hope that they will now change their tune. He also did not enlighten us on his opinion of the legal action that is being taken against a British newspaper and the British Broadcasting Corporation because of their revealing the reality of international tax planning by some actors who are giving others in that area a terrible name. I regret that he did not respond to my direct questions on those matters.
I would like to respond briefly to comments made by other Members. The hon. Member for Cheltenham (Alex Chalk), when asked about whether HMRC’s figure on the tax gap included international profit shifting, refused to respond, sadly. I want to respond to the point about whether the Finance Bill protects governmental revenue. I do not want to go over the debates that we had yesterday and the many comments made by Labour Members, but I regret that in their new approach to the bank levy—reducing its rate and scope, and imposing an inadequate surcharge—the Government have decided voluntarily to reduce by a third the funds that come from the banking sector. Conservative Members can broadcast as much as they like about the additional tax that has arisen because of the banks’ profitability, but that is a natural consequence of the British economy’s return to profitability after the financial crisis. In practice, the Finance Bill does not act up to those goals in any sense.
My hon. Friend the Member for Luton North (Kelvin Hopkins) has campaigned on tax transparency for many years, and he made several prescient points. The hon. Member for Aberdeen North (Kirsty Blackman) referred to the personnel challenges being experienced by HMRC. They are of enormous concern, as she said, in the context of Brexit, as a result of which we may have more customs challenges. There has been a substantial reduction in HMRC’s headcount of, I believe, around a fifth since 2010. I take on board the points that the Minister made about having the right capabilities and the right technical facility. However, when I look back at the Home Affairs Committee’s discussion of whether HMRC would be ready with the new CHIEF system and have the capability to deliver it, I am filled, I am sad to say, with concern rather than confidence.
At this point, I will finish my remarks by commending to the Committee our new clause, which asks for a review of the provisions and whether they genuinely tackle tax dodging.
Question put, That the clause be read a Second time.
Finance (No. 2) Bill (Fourth sitting)
Thursday 11th January 2018
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 January 2018 - (11 Jan 2018)
Peter Dowd (Bootle) (Lab)
I beg to move amendment 48, in clause 26, page 18, line 35, at end insert—
‘(7A) Within 12 months of the passing of this Act, the Chancellor of the Exchequer must review the impact of the provisions of this section.
(7B) A review under subsection (7A) must consider the revenue effects of freezing indexation allowance for gains chargeable to corporation tax.
(7C) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under subsection (7A) as soon as practicable after its completion.”
This amendment provides for a review to be undertaken on the revenue effects of freezing indexation allowance for gains chargeable to corporation tax in Clause 26 of the Bill.
Peter Dowd
The measures in clause 26 are aimed at aligning and consolidating tax and accounts. This clause will freeze the indexation allowance currently in place for companies’ gains that are chargeable to corporation tax. As things stand, companies do not have to pay tax on the proportion of their capital gains attributable to inflation. Instead, as hon. Members know, what happens is that when calculating a gain on the disposal of an asset, companies apply an indexation factor on the acquisition, enhancement or disposal of the asset that reflects movements in the retail prices index over the period since the expenditure occurred.
This system is different from the treatment of individual taxpayers, for whom the allowance was first frozen in March 1998 and then abolished in April 2008. That prompts the question: why was the allowance for companies not reformed and abolished at the same time, to avoid the situation that we have had for the past nine years, whereby there has been one set of rules for individual taxpayers and another for companies? However, we are where we are. It is another example of a needless complication in the tax system that causes problems for lawmakers, tax accountants, financial advisers, Her Majesty’s Revenue and Customs and taxpayers alike.
The indexation allowance is in effect a tax relief from capital gains tax on inflation. The allowance may have been minimal before the drop in the pound, but with inflation at 2.8%, 3% and so on, it is potentially becoming a substantial amount of money. According to the Treasury’s estimates, the change could be a significant revenue raiser. It estimates that it will raise £30 million this year alone, and that that will go up to £525 million for 2022-23. Of course, that revenue would be a welcome addition to the public coffers, but we have a degree of scepticism about the figures, because in the past we have had from the Government figures and costings for measures that have been out of kilter quite heavily.
The most recent example was the revenue to be raised from the soft drinks industry levy, which was introduced in the first Finance Bill last year. Hon. Members may recall that that was dealt with in the wash-up. Opposition Members agreed to it going through its stages pretty smoothly. We always have concerns when there is a question about whether we can sufficiently challenge Government proposals, but as this was the sugar tax, and it was not just a tax-raising measure but had broader public health benefits, we were happy to allow it to go through. It was suggested in the draft proposals that the levy would raise an ambitious £520 million. However, the Chancellor announced in the 2017 spring Budget that its estimated revenue had been revised down to £380 million, and the Office for Budget Responsibility forecast in December, on the basis of the Government’s Red Book for the autumn Budget, that it would raise only £300 million. That is a whopping £220 million less than the Government’s original forecast, and a further £80 million less than the revised figure that the Chancellor provided in the spring Budget.
It is important for us to be clear. If the Government provide us with figures—I believe that they did so in good faith—we have a duty to challenge them. That miscalculation—I use that word rather than any other—only adds to the growing hole in the public finances. It is important for us to challenge the Government’s figures and assumptions.
That is why the Opposition tabled amendment 48, which would require the Government to commission a review of the revenue effects of freezing the indexation allowance for gains chargeable to corporation tax. I am sure that the Minister is sympathetic to our concern that some companies may still seek a way round the change, rather than paying an increasing amount on the inflationary element of gains. The amendment is an attempt by the Opposition to say, “Fine, the Government’s indexation proposal is okay—but let’s test the figures a little more.” Let us have a review. Let us ensure that we are not in the same situation as we were with the soft drinks levy, which does not raise as much revenue as we thought it might.
Alison Thewliss (Glasgow Central) (SNP)
The Minister will be aware that the insurance industry has raised concerns about the impact of the clause on fairly small savers, such as people with endowments that were sold door to door. There is a report on the BBC website that quotes Steve Webb, a former Minister who now works with Royal London, on the impact that the clause will have on Royal London’s savers. Standard Life is also reported to have concerns. We are therefore not entirely content with the clause. We will not oppose it at this stage, but we reserve the right to look at it again on Report.
We would like the Government to address the industry’s concerns, and I have a few questions for the Minister. It is estimated that the clause will affect 11.6 million policyholders, most of whom are basic rate taxpayers, and the industry estimates that the impact will be in excess of £250 million per year—double the figure implied by the Chancellor at the Treasury Committee in December. Individual life insurance policyholders may pay an average of £21, and in some cases up to £150, per policy per annum. That is a considerable impact given that such people have relatively small savings.
The Chancellor said in December in response to my hon. Friend the Member for Dundee East (Stewart Hosie), who sits on the Treasury Committee, that the change will have a “modest impact”, but that is not a modest impact for those savers—it is significant. The policies that the clause will affect include non-pension unit-linked, non-pension with-profits and whole-of-life policies, as well as endowments, which I mentioned. On what basis did the Government reach the conclusion that the change will have a modest impact and affect a relatively small number of policyholders? We are talking about 11.6 million people—not a small number by any manner or means. Those policies may represent a relatively small amount of money to the Government, but the change will have a significant impact for those people.
Have the Government made an assessment of the number of policies affected? Have they produced a detailed impact assessment that can be shared with members of the Committee? Will the Minister commit to providing further information on the impact of the policy on individual savers? The coverage in newspapers at the time of the Budget and since raises concerns that more policyholders will be affected than the Government at first assumed.
I would like as much clarification as the Minister can give us today. If he could write to me later with more detailed information, that would also be welcome. We want to put on record our concerns about the impact there might be; perhaps there will be unintended consequence, and maybe the impact has not been fully considered. Given the concerns that the industry is raising, it would be good get a commitment from the Government on how those will be addressed.
The Financial Secretary to the Treasury (Mel Stride)
The clause freezes the indexation allowance—a relief for inflation—for a company’s chargeable gains for disposals on or after 1 January 2018. It may be useful for the Committee if I set out the background to the clause, although other Members have touched on it, before I turn to amendment 48 and the questions posed by the hon. Member for Glasgow Central.
Removing this outdated allowance supports the UK’s competitive rate of corporation tax by removing a relief that is not available consistently across corporation tax to individuals, as the hon. Member for Bootle pointed out, or in most major comparable economies. In doing so, the Government recognise the importance of being fair and proportionate. As companies may have factored in relief for inflation before the autumn Budget, relief will remain available for inflation before January 2018. However, it will no longer be available from 2018 onwards.
Companies pay tax on the capital gains they make on the disposal of certain assets, such as property. In most circumstances, the capital gain is based on the rise in value of the asset over the period of ownership. Indexation allowance relieves a proportion of that gain from the charge to tax, based on the rise in the retail prices index, during the same period. Companies therefore pay tax only on the gains they make over and above inflation.
The economy and tax system have changed substantially since the allowance was introduced in 1982, when the rate of corporation tax was 52%; inflation in the preceding decade had been in double digits. While I certainly take on board the hon. Gentleman’s point about the current level of inflation owing to the depreciation of the pound and other factors, the Office for Budget Responsibility projects that inflation will peak at 3.1% and tail off towards 2% across the period. While there used to be a rationale for such an allowance, it has become something of an anachronism.
The amount of indexation allowance due is calculated by multiplying the purchase price of the assets by the indexation factor. As I set out, that is currently based on the increase in the retail prices index over the period an asset is owned, from the date it is acquired to the date it is disposed of. Going forward, the allowance will no longer be calculated by reference to the date an asset is sold; instead, it will be calculated by reference to the final month before the relief is removed—in other words, December 2017. That means that, where a company acquired an asset before 2018, relief from inflation will be available from the date the asset was acquired up to December 2017. The indexation allowance will not be available for assets acquired from January 2018 onwards.
I turn to the questions posed by the hon. Member for Glasgow Central. I recognise the points that she makes. While these changes affect corporation tax, they do, in the context of life assurance policies, have potential impacts on individuals and their income net of tax. I do not recognise the large number of 11 million policyholders that she mentioned. I am not sure what the source of that figure was. However, as she requested, I am happy to hear from her, speak to her or have a letter from her on any of the aspects she may have an interest in.
Kirsty Blackman (Aberdeen North) (SNP)
It would be welcome if the Government could offer clarification on the numbers before Report, because that will affect what we do on the clause then.
Mel Stride
That is perfectly reasonable. I am sure my officials are listening carefully, and we will ensure that we give a prompt response to the letter, which we await.
Opposition Members have requested a review of the revenue effects of this change. I am happy to say that the revenue forecast for the measure was confirmed by the OBR at the Budget as £30 million in 2017-18; it will raise £1.77 billion over the scorecard period. As per routine procedure, we will keep the measure under review through communication with affected taxpayer groups. I commend the clause to the Committee.
Peter Dowd
I hear what the Minister says. I am sure that he will appreciate that the figures produced by the OBR are different from those produced by the Chancellor of the Exchequer. None the less, in the spirit of co-operation, I am happy to withdraw the amendment and keep tabs on this. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 26 ordered to stand part of the Bill.
Clause 27
Assets transfer to non-resident company: reorganisations of share capital etc
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 11—Review of financial impact of postponement of charge on share exchange in overseas transferee company—
‘(1) Within twelve months after the passing of this Act, the Chancellor of the Exchequer must review the financial impact of the changes made by section 27 of this Act to section 140 TCGA.
(2) The review under this section must consider—
(a) the revenue effects of the change made, and
(b) the extent to which the change has supported UK companies to conduct international business.
(3) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.”
This new clause provides for a review of the revenue impact and the impact on business of the change to TCGA to prevent a postponed chargeable gain from becoming chargeable following further restructuring of a UK Company’s overseas business.
Mel Stride
Clause 27 will ensure that where a series of changes have been made to the corporate structure of a group, the rules for taxing the capital gain at the final stage of the change work as the Government intend.
The situation that the clause addresses is where a group reconstruction involves a part of the business that has previously converted from a branch operation into one carried on by a separate overseas company. That is done through an exchange of the foreign branch business and assets for shares in the overseas company. If the assets have increased in value, the group may be liable for tax on the capital gain. The tax system allows it to defer paying that until either the assets of the business or the shares in the overseas company are sold or otherwise disposed of outside the group. That is a sensible approach. It means that groups pay tax on the full level of gains when they realise them through selling an asset and generate a profit to pay the tax with, but they are not charged on a purely internal restructuring.
The introduction of the substantial shareholding exemption in 2002 affected those rules in a way that was not intended, meaning that the tax on the earlier capital gain may become payable if there is a later restructuring, even if that does not involve a sale outside the group. The need to undertake such reconstructions has been rare since 2002, so the anomalous tax outcome was not identified as problematic until recently. However, it is now a cause for concern to some businesses, mainly due to changes in regulatory requirements of some overseas tax jurisdictions. The clause corrects that anomaly.
The change made by the clause will affect groups that commonly operate overseas through branches. It will be welcomed by them, as it will give them certainty in arriving at their commercial decisions when considering restructuring. It is a wholly relieving measure with negligible fiscal impact, as the groups that were affected by the problem would either have found other ways to deal with it or simply not have proceeded with the proposed transaction.
Opposition Members have requested a review of the revenue effects of this change and of the extent to which it has supported UK companies in conducting international business. I am happy to provide them with further information on those points. The OBR has agreed that there will be no revenue effects, because if the changes were not made, the companies concerned would either not undertake the reorganisation or would reconstruct in a way that did not create a tax charge. In either case, they would have to suffer a less than ideal commercial structure because of an anomaly in the tax rules.
This change will help a small number of businesses. On its own, it will not make a big difference, but it will contribute to our wider approach of encouraging UK businesses to conduct international business. The purpose of the change is to remove an anomaly at no cost to the Exchequer. On that basis, I hope that the hon. Member for Bootle will not press the new clause to a vote, and I commend clause 27 to the Committee.
Peter Dowd
Clause 27 amends the Taxation of Chargeable Gains Act 1992 to ensure that tax postponed does not become due on the occasion of a subsequent corporate restructuring involving the exchange of shares in an overseas transferee company where the substantial shareholding exemption applies to the share exchange. The Government’s explanation for this change is that the measure removes an unintended tax barrier to commercial restructuring of groups. I will not go into the ins and outs of this, which the helpful explanatory notes set out.
The argument for this change is that currently, companies that use the substantial shareholding exemption can treat the gain or loss on a disposal of shares as exempt from corporation tax on chargeable gains. A by-product of that is that a chargeable gain could be chargeable on a further restructuring of the company, with the old shares of the securities treated as new ones, despite the same corporate group continuing to own them. The new clause seeks to track that unintended change.
Clearly, the Government’s case is that the unintended tax change creates barriers, particularly for financial sector businesses that have traditionally operated through a network of foreign branches and need to restructure, for example to meet changing regulatory requirements in the territories where they conduct their business. That seems perfectly reasonable, but will the Minister give us a few examples, now or in due course?
While we accept the Government’s argument about the unintended consequence of correcting the tax change, we do not necessarily accept the costings put out by the Treasury, which argues that the change would in effect have zero impact on its finances. In our view, there is a lack of information from the Treasury and the OBR about the revenue that the unintended tax change has raised. I press the Minister to, if possible, publish those figures.
That is why we have put forward new clause 11, which would require the Minister to report back to Parliament on the revenue implications, on the impact on the Exchequer and on the restructuring of UK companies’ overseas business. If the Opposition are to accept the Government’s case that the current measures are a barrier to restructuring, leading to lost revenue for UK companies and lost investment in the UK, it is only reasonable that the Minister should produce evidence to that effect.
We are also interested to know whether there are any losses of revenue to the Exchequer. The Minister says they are “negligible”. It is not that I do not accept that; I am just trying to be clear about this. The Minister should explain, if there is a loss of revenue, how that loss will be filled, how much it is, whether he will be clear in keeping tabs on the process—for example, through the review we want—and how the measure will be implemented.
Mel Stride
The first point to make is that the measure will affect an extremely small number of businesses. We are talking a multiple of handfuls. That is one of the drivers for the negligibility of the costs. I am pleased that the hon. Gentleman appears broadly to welcome the thrust of what we are doing. On the issue of cost that he raises, the figures have been verified by the Office for Budget Responsibility, so an independent organisation has had a look at them, and we are not relying on the Treasury. By “negligible”, I mean that we are looking at an impact of less than £5 million in any one year across the scorecard period.
The figures would be relatively negligible not just because of the small number of businesses involved, but because, in the absence of the changes, we would expect those companies either not to restructure in the way we are now facilitating, or to find different ways of approximating the same thing without incurring the tax disadvantages that we seek to remove through this clause.
Question put and agreed to.
Clause 27 accordingly ordered to stand part of the Bill.
Clause 28 ordered to stand part of the Bill.
Clause 29
First-year tax credits
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 12—First Year Tax Credits: Review of effectiveness—
‘(1) The Chancellor of the Exchequer must commission a review of the effectiveness of First Year Tax Credits.
(2) The review under this section must consider—
(a) the effectiveness of First Year Tax Credits on—
(i) encouraging investment in efficient plant and machinery,
(ii) reducing the consumption of energy by business,
(iii) aiding the UK’s carbon reduction obligations, and
(b) the impact on revenue of the tax credits.
(3) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section within twelve months of the passing of this Act.”
This new clause would require the Chancellor of the Exchequer to commission and lay before the House of Commons a report into the effectiveness of First Year Tax Credits.
Mel Stride
Clause 29 will extend the first-year tax credit scheme to 2023 and reduce the rate of eligible claims to two thirds of the corporation tax rate. That will ensure that loss-making companies are appropriately incentivised to invest in energy-saving equipment following reductions in the corporation tax rate.
As the Committee will be aware, first-year allowances allow companies immediately to deduct the cost of qualifying energy-efficient and water-efficient equipment from their tax liability. However, loss-making businesses are not able to benefit from tax deductions, so in 2008 the first-year tax credit was introduced, which provided loss-makers with a payable credit to ensure that they were still incentivised to invest in energy-efficient equipment. The original legislation was amended in 2013 to include a sunset clause that stipulated that the scheme would expire in March 2018 unless the Government legislated to extend it.
The first-year tax credit scheme helps as many as 100 loss-making companies annually to invest in energy-saving and water-saving equipment. It enables a business to bring forward its investment to get the machinery it needs when it is needed. The changes made by the clause will extend the life of the policy to 2023 to ensure that that support continues.
Since 2008, the tax credit rate has been fixed in law at 19%, but over the same timeframe the corporation tax rate has been reduced from 28% in 2008 to 19% today, and it is legislated to fall to 17% in 2020. Therefore, the incentives for profit-making and loss-making companies have become misaligned from their original policy intention.
The clause will therefore peg the tax credit rate to two thirds of the corporation tax rate, as opposed to a specific percentage. That will ensure that the policy is in line with its original intention by ensuring that the incentive to invest in energy-saving equipment is not disproportionately greater for loss-making companies than for profitable companies that can deduct their expenses from their tax bill. Pegging the tax credit rate to the corporation tax rate will also ensure that the scheme operates as intended when powers to set the corporation tax rate are devolved to Northern Ireland.
New clause 12 would require a review of the effectiveness of first-year tax credits in encouraging business energy efficiency and of their impact on tax revenues. As with all aspects of the tax system, the Government regularly review tax reliefs to ensure that they are effective in fulfilling their objectives. In line with that practice, and to allow an opportunity fully to evaluate the relief, the legislation includes a sunset clause that means that it will expire in 2023 unless renewed.
In addition, first-year tax credits are available only for investments made on qualifying equipment published on the energy technology list or the water technology list, which are routinely updated to ensure that the technologies listed meet efficiency criteria. The reviews of qualifying products are administered by the Department for Business, Energy and Industrial Strategy and the Department for Environment, Food and Rural Affairs respectively. The performance criteria for each review and the products that meet those criteria are publicly available.
To conclude, extending the policy will ensure that loss-making companies remain incentivised to invest in equipment with the greatest environmental benefits. Following the reduction in the corporation tax rates, the changes in the clause will also ensure that the scheme remains in line with the original policy intention.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I am grateful to the Minister for his summary of the background to the measures and their purpose. I certainly agree that their initial purpose was to mitigate the barrier of high purchase costs where the efficiency of a product might provide savings to business and wider environmental benefits. The measures were introduced under a Labour Government in 2008 before being reintroduced in 2013. The Committee is considering their extension and some recalibrations, as the Minister set out.
None the less, we have tabled an amendment requiring a review of first-year tax credits as they currently exist. As the Minister stated, our review would examine the extent to which they encouraged investment in efficient plants and machinery, reduced the consumption of energy by business, and aided the UK’s carbon reduction obligations. We would also like the review to assess their impact on revenue. After all, as is the case with every tax relief, the tax credits amount to forgone tax.
Looking at this issue as a Member of Parliament, it does not appear to me—perhaps Conservative Members have had different experience when investigating this change in readiness for the Committee—that a huge amount of information is available on the current impact of the tax relief. It is not clear exactly who is using it, the average size of the companies or their sector. From what I can gather from the experts I have asked, the overall cost of the tax relief seems to be bundled up in HMRC’s summary of the estimated cost of all capital allowances, within its overall summary of the estimated costs of principal tax reliefs.
Ruth George (High Peak) (Lab)
The total corporation tax take in the last year was £56 billion and capital allowances reduced that bill by £22.5 billion—almost half as much again of the total bill. Does my hon. Friend not agree that that makes it even more important that we review such a substantial area of reduction in corporation tax?
Anneliese Dodds
I thoroughly agree with my hon. Friend. I must admit that the UK is not alone in its general lack of consideration of the incidence of tax reliefs and their impact on forgone expenditure, but surely we need to be at the forefront of public administration and public policy globally. We should be considering the issue. As my colleagues mentioned, we are talking about not small amounts of money but very substantial amounts, which to all intents and purposes are forgone tax, although they are classified differently from expenditure within Government accounts. For that and many other reasons, I commend the amendment to the Committee.
Mel Stride
It is pleasing to see that the hon. Lady and I can agree on a measure that was introduced under a Labour Government. It is something good that we are keeping going, but improving at the same time. That is our mission.
I will be brief, and will not go into all the discussions around the climate change arguments put by the hon. Lady; I will focus on the amendment specifically and the review that it calls for. The measure affects only a small number of businesses, in the order of about 100. We will, of course, keep this tax measure under review, as we do all tax measures. On the basis of the size of the measure and the universe to which it applies, I feel strongly that it would be disproportionate to introduce a full review of its effects.
On that note, I urge the Committee to agree to the clause. I think that the Chief Whip—sorry, I mean the Whip—will intervene shortly to suggest that the Committee adjourn. With that information in mind, I thank the Committee for its deliberations today and look forward to further deliberations on Tuesday. I wish everybody an enjoyable weekend when it comes.
The Chair
I am grateful to the Minister, who is on top form. For clarification, we are not considering an amendment; it is a new clause. The vote on it will be held at a later stage, so I will put the question that clause 29 stand part of the Bill.
Question put and agreed to.
Clause 29 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned.—(David Rutley.)
Finance (No. 2) Bill
Wednesday 21st February 2018
(6 years, 8 months ago)
Commons ChamberRead Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 21 February 2018 - (21 Feb 2018)
15:27 - The House divided: - Ayes: 265 / Noes: 304 - Question accordingly negatived.
17:32 - The House divided: - Ayes: 267 / Noes: 306 - Question accordingly negatived.
17:47 - The House divided: - Ayes: 265 / Noes: 305 - Question accordingly negatived.
19:02 - The House divided: - Ayes: 228 / Noes: 305 - Question accordingly negatived.
19:17 - The House divided: - Ayes: 252 / Noes: 305 - Question accordingly negatived.
19:31 - The House divided: - Ayes: 225 / Noes: 304 - Question accordingly negatived.
19:54 - The House divided: - Ayes: 301 / Noes: 218 - Question accordingly agreed to.
Dawn Butler (Brent Central) (Lab)
I beg to move, That the clause be read a Second time.
New clause 9 stands in the name of my right hon. Friend the Leader of the Opposition and other hon. Friends.
I thank the previous Minister for Women and Equalities, the right hon. Member for Putney (Justine Greening), for the equality impact assessment response sent to me just before Christmas. Her responses are normally quite upbeat. I found this response a little lacklustre, but it highlighted why we need to support new clause 9. Her letter highlights the weaknesses of “due regard” and goes on to make a somewhat puzzling statement:
“All Departments carefully consider the equality impacts of individual policy decisions taken on by those sharing protected characteristics in line with our legal obligations and our clear commitment to equality issues.”
Therein lies the problem: this Government have not shown a clear commitment to equality issues-far from it. With 86% of the cuts falling on the shoulders of women, and with black, Asian and minority ethnic people and the disabled suffering more than any other group, I find it hard to understand why the Government try to proclaim that they are committed to equalities.
Rachel Maclean (Redditch) (Con)
The hon. Lady says that the Government have not made a clear commitment. Does she not agree that compelling companies in our country to publish gender pay gap information—the first time any Government have done that—is a very clear signal that is already making real change for women working in those companies?
Dawn Butler
I agree that it is good to get companies to publish their pay gap information, but there are no teeth if companies fail to do so. That is a real problem that needs to be addressed. We need to tackle the gender pay gap, and there needs to be punishment for companies that fail to address the pay gap—that is an unfortunate failing in the Government’s plan.
Luke Graham (Ochil and South Perthshire) (Con)
Does the hon. Lady recognise that voluntary publication schemes—such as on participation, as demonstrated by the Crossrail project—show that companies will comply through social pressure? There is a brand equity question, so we do not need a hard punishment. Through brand equity and reputation, there will be punishment enough if companies fail to comply.
Dawn Butler
Again, the problem is that very few companies have actually published, and the deadline is quickly approaching.
The letter from the right hon. Member for Putney went on to say that the Treasury would complete a cumulative impact assessment. I have yet to receive confirmation of that cumulative impact assessment, so will the Minister confirm that it has been done and whether a copy will be placed in the Library?
I know that it is often difficult for the Government to hear the Opposition’s views, so I urge them to listen to the voices of Conservative Members, such as the right hon. Member for Loughborough (Nicky Morgan), the Chair of the Treasury Committee. The Committee is obviously a little perplexed by the lack of commitment to equality impact assessments. The Chancellor has complained about the type of data gathered, but when he was asked whether he had asked the Office for National Statistics about the gathering of that data, he replied that he had not. That does not exactly show a commitment to equality, does it?
The Treasury Committee went on to say:
“The Treasury should use ONS and HMRC data to produce and publish robust equalities impact assessments of future Budgets, including the individual tax and welfare measures contained within them. A deficiency of data in respect of some protected characteristics is not a reason for failing to produce an analysis in respect of others for which data is available. Nor should the risk of misinterpretation or methodological complexity preclude the publication of an Equalities Impact Assessment.”
In short, just do it.
The only reference in the Budget to identified gender impact is where it disproportionately affects men. What possible reason could there be for that? I understand that the Treasury Committee would welcome an explanation of the Government’s thinking, and so would we. It just does not make sense. The Chancellor alluded to the fact that Ministers see the equality impact assessments for their Departments. That makes me wonder: if Ministers see them, read them and give proper due regard to them, why would they implement the policies they do?
If the Government fail to support this new clause, there can be no public confidence in the Government’s commitment to protect and not punish people with protected characteristics. For the record, let me say that the nine protected characteristics are age; disability; gender reassignment; pregnancy; maternity; race; religion or belief; sex; and sexual orientation. I understand that the Prime Minister is a little pre-occupied and weak at the moment and that she is dealing with a serious ransom note, but I honestly believe she will not be pleased that her legacy will be the hindering of women and their life chances.
More children are homeless or living in temporary accommodation now than at any time since the 2007-08 financial crash. Shelter says that homelessness is a national scandal and estimates that 140 families become homeless every day. The estimate of rough sleeping shows an increase of 134%. Every day, we see and hear the damaging effects that this Government’s policies have had on people, especially those with protected characteristics. This Government are damaging, not protecting, vulnerable groups in our society. Even when the Government conduct an equality impact assessment, they seem to ignore it. Just two weeks ago, they released an equality impact assessment that revealed more bursaries will be axed—this is for about 1,000 nurses who enter the profession each year. The assessment revealed that the latest change risks discouraging women who are ethnic minority or from poorer backgrounds, but the Government went ahead and did this in any case.
We need a Prime Minister who cares enough to start laying foundations by which we can bring about true equality for women, diverse communities, LGBT+ communities and those with protected characteristics. A Labour Government led by my right hon. Friend the Member for Islington North (Jeremy Corbyn) would do just that. A Labour Government’s success will be measured by how they reduce inequality. The next Labour Government will ensure that we publish comprehensive equality impact assessments and conduct them before implementing policies. A Labour Government would have pre-legislative and post-legislative scrutiny to ascertain whether policies are making a situation better or worse. The Labour way will enable us to truly build an economy for the many and not the few. If the Government fail to support this very reasonable new clause, more people will question—
Dawn Butler
I am sorry, but I am just coming to the end of my speech. If the Government fail to support this very reasonable new clause, more and more people will begin to question why this Government are so intent on harming and hindering women and those with protected characteristics, as opposed to helping them.
Kirsty Blackman (Aberdeen North) (SNP)
It is a pleasure to take part in the final day of debate on this Finance Bill. We have had a lot of debate during the past few weeks. The hon. Member for Oxford East (Anneliese Dodds), the Minister and I have spent quite a lot of time together in the Committee Room, on not only this Bill, but the customs Bill. It is good to be here again to talk about this. It is a great way to start talking about equalities, particularly in respect of this new clause put forward by the Labour Front-Bench team.
The new clause is incredibly important, because the way the Government and previous Governments at Westminster have done Budgets has not been particularly transparent and has not resulted in people knowing what the effects of all the policies will be. I have said before that this is a good new clause and I am delighted to support it on behalf of the Scottish National party. I wish to highlight a number of things in it and to make more general comments about transparency and the processes the Government use to create Budgets and make tax law. The new clause talks about various things, including an analysis of the impact on the different protected characteristics.
Alison Thewliss (Glasgow Central) (SNP)
My hon. Friend is making a good point on the marriage allowance, as ever. Does she agree that it creates a significant inequality, in that I, as a married woman, suddenly get this advantage over an unmarried woman? That is an injustice and an unfairness in the tax system. The Government really should not be in the business of telling people that it is financially beneficial to get married.
Kirsty Blackman
I absolutely agree with my hon. Friend that people should not feel that they should have to get into a marriage, a civil partnership or any kind of signing on a dotted line relationship, to get a tax break. People should have the choice on that. As I said, this allowance has a disproportionately positive effect on people who are married, particularly on men; it is women who tend to be disadvantaged because they cannot receive this allowance.
Turning to other things in the new clause, I have previously talked, particularly during consideration of the customs Bill, about the differential regional impacts that Brexit will have, particularly now that the leaked Government analysis shows that there will be significantly higher negative impact on areas in the north of England, for example, than in London and the south-east of England. Therefore, when the Government make policy they should be making sure they are trying to balance that out and to put in place policies that are more beneficial to those negatively impacted areas, to counterbalance the major negative effect that Brexit will have.
We need to provide the people in those areas, particularly those at the bottom of the pile, with a fairer system that is better for them. Were the Government to analyse that, we would be in a better position and could see more clearly what they thought the impact would be. Part of the problem is that the Government do not know the impact of some of these policies. They do not know what the differential impact will be because they have not looked at it. If they have all this analysis, it should be easy for them to publish it and to give it to Members, so that we can scrutinise it and make the best decisions.
Luke Graham
The hon. Lady talks about regional disparity; does she really think that the Scottish National party policy of increasing taxes in Scotland is a good way to narrow that disparity?
Kirsty Blackman
I have expressed particular concerns about those people in England who earn under £26,000 a year and will pay more tax than they will in Scotland and about whether the Government feel it is fair—[Interruption.] I am sorry, Mr Speaker, but I am being shouted at from across the Chamber. Those people at the bottom of the pile who earn under £26,000 a year will pay more tax in England than they would in Scotland. That is not fair, because those people—
John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)
Will the hon. Lady give way?
Kirsty Blackman
No thanks.
It is not fair because those are the people who most need Government support, especially given the changes to tax credits and the negative impacts we have seen, with disabled people losing £30 a week. This is a major issue for the most vulnerable people. The Conservatives shout about the fact that tax rates for those who earn a reasonable income will be slightly higher in Scotland than in England, but it is clear that they support a different system that does not involve as much fairness as the system that we are trying to support in Scotland.
On the process of Budget scrutiny and the general process of scrutiny of Finance Bills, I have previously expressed vociferously my concerns about the fact that Finance Bill Committees do not take evidence. It would be much better if they did, and if they did, I would like to see them take evidence from organisations such as the Women’s Budget Group that can talk about the gender disparity in some of the tax decisions that are made. But I honestly do not think that that is enough. It is not enough to have scrutiny after the fact. Despite the Government moving to one fiscal event in the year, which is a change that I welcome, there is not the level of consultation that there could be before tax measures are suggested and put in place—before the Chancellor stands up and reveals his Budget.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
In a Westminster Hall debate this morning, I outlined the benefit that the European Community brought to my constituency through the funding of vital infrastructure projects. Of course, there is a revenue follow-on from that, because road improvements lead to people being able to get to hospital quicker and other things like that. We are grateful for that. Does the hon. Lady agree that, in respect of the Bill, it would have been helpful had some consideration been given to the effect of the reduction of that money and what that will mean for the UK Exchequer? Indeed, it would have been helpful to consider what that would mean in terms of helping the Scottish Government to replace that funding, as and when.
Kirsty Blackman
I agree with the hon. Gentleman’s point. I made the point earlier about regional differences and the impact of Brexit. It is important not only in relation to the GDP reduction that areas might see because they will not be able to trade as easily with EU countries, but in respect of the money that came from the EU and was used for things like infrastructure projects. It is important that the Government counter those reductions.
When the Chancellor stands up to give his spring statement, which we hope will be light on tax changes—that is what tax experts and the business community are asking for—and when he delivers his Budget, it is incredibly important that he has done as much consultation as possible beforehand. He should not only speak to business organisations and Conservative MPs, as I know he does, but open the net wider and consult in advance on any tax measures that he wishes to put in place. He should also take on board new clause 9, which would ensure that an impact analysis is carried out afterwards.
John Lamont
Can the hon. Lady explain the consultation that the Scottish Government undertook before they introduced higher taxes for Scottish taxpayers? Many of my constituents do not feel that it was fair and many businesses have expressed concerns. Despite the calls for consultation, the Scottish Government’s consultation before the introduction of their own plans for higher tax was not reflected in any changes.
Kirsty Blackman
Before the vote on the Scottish Government’s budget, they produced a paper on the rationale behind their proposed changes. They consulted each of the parties in the Scottish Parliament and asked them all to put forward their tax plans, so that they could be analysed. The consultation was first put forward in October or November—I am not entirely sure—and the vote is taking place today. That left a significant length of time between the production of the consultation documents and the first discussions and the actual vote in Parliament.
Here in Westminster, we have the Budget debate and then the votes on the Ways and Means resolutions. We have votes on proposals that are being put in place from that day. That is very different from the situation in the Scottish Parliament, where a length of time is allowed for consultation because the draft budget is produced. All the parties in the Scottish Parliament are welcome to produce an Opposition budget and they are welcome to take that to the Parliament to be voted on. Some of them have chosen to do that and some have not. I suggest that those that have not chosen to do that might be struggling to balance the books, or they might have just decided that ours is clearly the best option.
I do not wish to take up any more time. The call for equality assessments and for more transparency and information would be helpful not only for the Opposition, who scrutinise the Budget, but for the Ministers who take decisions. They would take better decisions if they could see all the impacts, particularly on people with protected characteristics.
Helen Whately
I wish to make a few brief comments, particularly as I was unable to intervene on the shadow Minister, the hon. Member for Brent Central (Dawn Butler). I was quite shocked by some of the accusations she made and by what I consider to be her somewhat unsubstantiated claims about a rather illusory bright future under a Corbyn Government. I felt that she somewhat ignored the legacy of the previous Labour Government, who failed to build homes, thereby contributing to the current housing challenge; who failed on jobs, leaving many thousands of families jobless when the Conservative Government took over; and who increased inequality in our society.
Anneliese Dodds (Oxford East) (Lab/Co-op)
The number of home-owning households increased by 1 million under the Labour Government and has fallen under Conservative Governments. I thought it important to correct the record.
Mr Speaker
It may be important to correct the record and I know that the hon. Member for Oxford East (Anneliese Dodds) was led into that by the observations of the hon. Member for Faversham and Mid Kent (Helen Whately)—it is quite easy to elide into disorderly conduct—but it is important that we try to focus the exchanges on new clause 9, to which with laser-like intensity I know the hon. Member for Faversham and Mid Kent will now turn.
Helen Whately
The hon. Member for Oxford East (Anneliese Dodds) made a different point from the one I made. My point stands because it was about the building of houses.
By contrast with the previous Labour Government, the current Government have made progress on the gender pay gap. This is the Government who are requiring companies to publish data on the gender pay gap. As we well know, and as has been said this afternoon, transparency is a huge driver of change. We have seen that in many sectors, including a lot in the health sector, which is where I got most of my experience. This Government introduced and are raising the national living wage, which disproportionately benefits women; this Government have taken the lowest paid out of tax; this Government are making sure that for every £1 that the lowest-income households pay in tax, they benefit from £4-worth of public spending; and this Government have overseen a huge expansion in jobs so that millions more are in work.
On the point that the hon. Member for Brent Central made about children, it is significant that many more children are now in households in which somebody in the family is working; far fewer are in workless households. We know that work is key to getting out of poverty.
Rachel Maclean
My hon. Friend is making a great point about our record on job creation. Does she also recognise that it is this Government who have overseen the greatest expansion of women in work since records began?
Helen Whately
My hon. Friend makes a very good point. We have put in place policies to help women. The extra free childcare for three-year-olds benefits both parents but, as women are often the main child carer, it particularly helps women who have an ambition to work.
Alex Chalk (Cheltenham) (Con)
Does my hon. Friend recognise that, since the last Labour Government were in power, youth unemployment has been cut in half? That generates opportunities, the dignity of work, the chance to get on and the chance for women and children to achieve their best in society.
Helen Whately
I thank my hon. Friend for making such an important point. This Government have given thousands of young people the opportunity to have a job. It was not that long ago that everyone was always talking about NEETs—the big debate was about all those young people not in education, employment or training. Those numbers have now shrunk phenomenally under this Government’s leadership.
Stella Creasy (Walthamstow) (Lab/Co-op)
The hon. Lady has mentioned the power of numbers to be able to track progress. Obviously, new clause 9 is about the power of numbers to be able to track progress in tackling inequality. If she thinks that those numbers were so important in the battle to ensure that we did not leave young people behind, why does she not think the same when it comes to women and ethnic minorities?
Helen Whately
I am not surprised by the hon. Lady’s intervention. The point is that there is a thorough impact analysis of the Budget. Where does it get us if we endlessly go around these things, again and again?
Bim Afolami (Hitchin and Harpenden) (Con)
If we compare 2003 to 2006 under the Labour Government with 2013 to 2016, we will see that the number of women in business and entrepreneurship has grown by more than 40%. Does my hon. Friend agree that that shows the Government’s commitment to women in business?
Helen Whately
Another very well-informed point from a colleague about the great progress that women are making in the workplace with the support of this Government.
The headline point that I was keen to make is that this Government have a track record in reducing inequality. I am keen to ensure that we base what we say on the track record—the track record of improving the lives of people on the lowest incomes and of reducing inequality.
Stephen McPartland (Stevenage) (Con)
Does my hon. Friend agree that this is about not just incomes, but equality of opportunity and aspiration?
Helen Whately
I agree. We should not just look at the outcomes. The outcomes are a desired end but, in order to get to a better outcome, the key is to give people opportunities to make the most of their lives. In particular, we should help those who have a difficult start, or who find themselves in a difficult situation. They may need extra help to access the opportunities but, absolutely, opportunity is the key.
Rather than painting a picture that can mislead people into believing this illusion of a perfect world, we need to base claims on substantial policies. I know that it is controversial, but universal credit is making a difference in my constituency for people who want to work and who want to work more hours. I have heard many criticisms of the policy, but genuinely it is making a difference and giving people the opportunity to increase the work that they do. Improvements in the standard of education and the opportunities coming through thanks to the industrial strategy—these are the concrete policies that will make life better for people. That is how we reduce inequalities and that is why I am delighted to support the Government throughout this Finance Bill.
Luke Graham
Thank you, Madam Deputy Speaker, for the chance to speak on new clause 9 and more broadly.
As I said when I intervened on the hon. Member for Brent Central (Dawn Butler), I appreciate that we should look at the distribution and at the impacts of some of the Budget provisions. That is what the Treasury already does. At every budgetary event, it does look at the impact on distribution across the United Kingdom. ONS statistics also look at distribution and the impact across different households.
When we talk about making sure that we shine a light on these issues and target equality, for which I and many Members share the hon. Lady’s passion, we should recognise that this is the Government who put pressure on companies to produce these publications. Although there is not yet full compliance, I am sure that my right hon. Friend the Financial Secretary to the Treasury will continue to put pressure on the sector—I referred to this matter earlier—to follow other industry-leading programmes such as Crossrail, which use publication and peer review to add pressure and to show companies what best practice is in the UK and internationally.
Let me pick up on some broader points about the pay gap, particularly the gender pay gap. I hope that Opposition Members saw the recent study quoted in the Financial Times just a month ago—I would be happy to share it with them—which looked at male and female pay rates. Those rates were actually very equal up to around middle-to-senior manager level, after which there was a big gap. The biggest disparity, and where some of the most uneven gap appears, was at the very senior roles, as in chief executive officer and chief financial officer roles. One of the key drivers for that, as stated in that study, was women taking maternity leave. So we have already identified the pay gap problem, and we should be looking at policies to increase flexible working and to help women back into the workplace after taking maternity leave. I know that colleagues on the Front Bench have been looking into that and have reflected that in the Budget.
More broadly, let me pick up on some of the points made by the hon. Member for Aberdeen North (Kirsty Blackman) about tax and equality. Just to be clear—new clause 9 refers to every part of the United Kingdom—some of the tax increases that have just been made in Scotland are said to produce a much fairer society, but, to clarify this for the House, the tax changes mean that those on the lowest incomes in Scotland get £20 more a year—that is it. That is 38p a week. When Scottish National party Members stand in this House and lecture this Front Bench and this Government on being unfair, let us remember that the tax changes that the SNP has introduced bring in 38p a week, or £20 a year, and the tax changes that the Conservatives have introduced bring in £1,500 a year through the changes to the tax threshold. Let us leave the SNP to bicker on the sidelines while the Conservatives bring about truly transformational change.
I was also amazed by what the hon. Member for Aberdeen North said about the marriage allowance. I am glad that she was pulled up on it, because the party has been in the papers about the marriage allowance just this weekend. The Chancellor of the Exchequer of the UK Government had to stand up and guarantee to people living in Scotland that the Government will bridge the gap created in the marriage allowance by the tax changes that have been imposed by the SNP Administration in Holyrood. Yet again, it is the UK Exchequer that is having to stump up for SNP failures in Scotland.
When we talk about fairness, it is also important to recognise that it is this Budget that is increasing the block grants in Scotland in real terms. It was even recognised by the Finance Secretary, Derek Mackay, in the Scottish Parliament, that it is a real-terms increase. Therefore, on top of the £1,750 per head spending we get—or Union dividend we get—already, we are getting a further real-terms increase to spend on frontline services in Scotland.
I am conscious of the time, but one important area that impacts on equality issues is tax avoidance, which has been picked up in the Budget. I am talking not only about tax avoidance generally, but about the VAT provision. The Public Accounts Committee, of which I am a member, has been specifically interested in that. The provisions that have been included to target VAT avoidance, especially for international payment platforms and for international marketplaces, give the Exchequer a good opportunity to target those who are not currently paying VAT but who should. Hopefully, that will bring more money into UK coffers and allow us to close the equality gap further still.
Rachel Maclean
I appreciate that we are all concerned with driving equality across the country, but the Government clearly differ from the Opposition on how to achieve that. I am proud to be part of a Government who are one of the most progressive we have seen. Our record speaks for itself. It is not about slogans and words; it is about real progress and real change in people’s lives. That is what the Conservative party cares about. Labour Members would like us to introduce a review for every provision in the legislation. It is clear to Conservative Members that this already happens. The Treasury already publishes the impact analysis of these policies.
Wes Streeting (Ilford North) (Lab)
The simple fact is that the Treasury does publish the distributional analysis alongside the Budget. To the Chancellor’s credit, he brought that back in after his predecessor had decided that it was not politically convenient. The Treasury does not, however, do a breakdown of the Budget’s impact along a whole range of protected characteristics defined by the Equality Act 2010. New clause 9 would address that. The Government do not currently do this analysis, but as Conservative Members seem to be saying that the Government do already do it, they will have no trouble voting for the new clause, will they?
Rachel Maclean
I return to the point that we are already publishing the analysis. The Treasury is working on looking at the impact of the policies across a whole range of levels.
My main argument is that we need to look at what the Government have already delivered. As I said to my hon. Friend the Member for Faversham and Mid Kent (Helen Whately), more women are in work under this Government. That is real change. Those women have been able to get into work because of the wide variety of policies that we have introduced including childcare, help to get into work and retraining at all times of life.
We have seen a massive change in income inequality, which, under this Government, is at its lowest level for many years. Since 2010, households across all income deciles have seen growth in their disposable income.
Mrs Kemi Badenoch (Saffron Walden) (Con)
This Budget increased the national living wage by 4.4%—well above the rate of inflation—which disproportionately assists people like me, from an ethnic minority background, who often find themselves in low-paying work. Does my hon. Friend agree that this a great testament to the Government’s work?
Rachel Maclean
My hon. Friend makes a very important point. As she says, the national living wage helps people from all sectors of society, including those with protected characteristics. Our record on these policies speaks for itself.
Stella Creasy
The hon. Lady is promoting the Government’s record. One reason why the Labour party wants to get explicit equality impact assessments—not the tax information and impact notes, which I think is what she has been told the Government do produce—is that the evidence is showing counter to what she suggests. For example, we know that the gender pay gap between women in their 20s and men in their 20s has actually started to grow under this Government. It is now five times what it was six years ago. I do not know where the hon. Gentleman from Scotland got his data. I got mine from the Office for National Statistics, if he wants to have a look. Can the hon. Lady account for that? Does she not understand that having the data—understanding where Government policy is either promoting or helping to deal with the situation—would help us all to make progress?
Rachel Maclean
The hon. Lady is a passionate advocate for addressing the gender pay gap. I will come to the issues she raises shortly.
Alex Chalk
Is not it important to see the wood for the trees here? The wood, so to speak, is to show precisely the point that my hon. Friend has indicated—that women on lower wages now do not start paying income tax until they earn £11,500, instead of paying at £6,475 as they did under former Prime Minister Gordon Brown, and they gain over £1,000 in the process. The suggestion that we need a whole load of impact assessments is rather given the lie to by the fact that a lot of data is already published by the Office for National Statistics. If the hon. Member for Walthamstow (Stella Creasy) wishes to make her point about it in the House of Commons, she is able to do so.
Rachel Maclean
My hon. Friend really reinforces my point, which is that it is about putting pounds in the pockets of people up and down the country. That is what this Government have done, informed by fairness from the day that we came into office.
Stella Creasy
The hon. Member for Cheltenham (Alex Chalk), as ever, needs clarification. There is data that shows us that the gender pay gap is growing. We are asking for analyses of the impact of Government policy so that we can understand it. We are talking about two different things. I hope that clarifies, for him and for the hon. Member for Redditch (Rachel Maclean), why the new clause matters.
Rachel Maclean
I care passionately about addressing the gender pay gap. I chair the all-party parliamentary group for women in Parliament, which does cross-party work on this issue. There is a wider remit that Members on both side of the House take extremely seriously, especially in this—the Vote 100 year. The gender pay gap has been addressed by this progressive Conservative Government, who want to see real change in our country and who want to put an end to the situation mentioned by the hon. Member for Aberdeen North (Kirsty Blackman). She was absolutely right to say that we have men in higher-paying roles and women in lower-paying roles. However, new clause 9 would not fix this situation, as it is a complex issue that requires a range of interventions and a range of changes across the board.
Luke Graham
The hon. Member for Walthamstow (Stella Creasy) referred to me when she mentioned the figures. I was quoting a study referenced in the Financial Times that I would be happy to share. The study did not say that the gender pay gap was closing. It said that men and women up to a certain level of seniority earn pretty much the same amount in most sectors, and that it is the outliers at the senior C-level who skew the data and contribute to a lot of the pay gap. [Interruption.] The hon. Lady may shake her head, but she mentioned clarification of figures, asked where they were from and called out my hon. Friend the Member for Cheltenham (Alex Chalk), so I wanted to make sure that she had pure clarification. I also want to make it very clear to her that I am the Member for Ochil and South Perthshire, not all of Scotland.
Rachel Maclean
It is clear that we all take this matter extremely seriously.
Earlier I intervened on the hon. Member for Brent Central (Dawn Butler), who spoke from the Opposition Front Bench. She said that the Government have no teeth to act when companies do not publish the data. It is my understanding that the Government do have teeth to act. We have something called the Equality and Human Rights Commission, which can act when companies fail to publish the data. I urge Treasury Ministers to pay close attention to that.
From the work I have done in the Business, Energy and Industrial Strategy Committee, I am aware that a number of companies have published the data. That is great news because it is now in the public domain. The Conservative Government made that happen, not the Labour Government. Now many more companies are following suit, and it is making a big difference to the employees of those companies. The Equality and Human Rights Commission can issue a notice and require implementation. As my hon. Friend the Member for Ochil and South Perthshire (Luke Graham) said, this is a complex issue.
I draw Members’ attention to the work of the 30% Club, set up by Helen Morrissey, who got a load of business leaders together and urged them to take voluntary action to put women on boards. Although there was absolutely no legal right or Government mandate, she found that the business leaders were all worried about reputational damage, culture and their image with their employees, and she saw significant changes across the board. I was an employer before I came into this House, so I know that addressing the issue is not simply a matter of passing laws in the Chamber or the Government carrying out a review. It is about a societal and cultural change. I am proud that our Government, led by our Prime Minister—the second female Conservative Prime Minister—are leading from the front on this issue, and that companies and businesses across the board are following suit.
The Government’s record speaks for itself. It is not just about slogans. It is about enacting policies that make a big difference. I worry that requiring analyses and placing additional burdens on the Treasury at this time—when it has a massive amount of priorities to deliver in order to make our tax system fairer and to achieve the progress and outcomes that we all want—would have the opposite effect. I have certainly seen for myself the danger of unintended consequences when we regulate and put more burdens on businesses.
I do not support new clause 9 and will not vote for it if there is a Division.
Stephen McPartland
It is a great pleasure to be called in this debate and to follow such wonderful speeches from my colleagues. I understand that the Treasury publishes the distributional analysis of the cumulative impact of the Government’s tax, welfare and public services.
I have never been shy about voting with the Opposition if I believe that they are right, but I do not believe they are right in this case. That is because the review that they are asking for, which focuses predominantly on households with different income levels, and issues around Treasury analysis, just provides more data and more analysis, and that is not going to help people on the lowest incomes or those from disadvantaged backgrounds to move forward in life. It seems to be very academic as opposed to actually helping people to push forward and achieve opportunities. For me, the real challenge in this country is inequality in opportunity and in life chances. At the moment, the best way of changing one’s life chances is still through getting a great education. I am proud of the Government’s record, with millions more children being educated in good or outstanding schools. We should all be proud of that on both sides of the House.
As I say, I am not shy about voting with the Opposition if I believe they are right. I have campaigned on—
Sir Oliver Heald (North East Hertfordshire) (Con)
Does my hon. Friend agree that in Hertfordshire we have seen a lot of investment in the schools sector, which is helping to achieve the sort of results that he is talking about, with, for example, Highfield School in my constituency being completely rebuilt recently?
Stephen McPartland
I do agree with my right hon. and learned Friend. I have another colleague from Hertfordshire here as well—my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami). We have seen massive investment in our area. I am very proud of the number of primary schools that have been expanded and rebuilt in my constituency. A couple of secondary schools have also been rebuilt, creating great opportunities for the pupils. I am also very proud that all the primary schools in my constituency are rated “good” or “outstanding”. It is probably one of the few constituencies in the country where that is the case. Four of my six secondary schools are good, and the other two we are currently dealing with. I hope that by the time of the next election I will be one of the few Members of Parliament where every single child in my constituency will be in a good or outstanding school.
I do not believe that new clause 9 provides equality of opportunity and equality of aspiration. It will do nothing to help people in my constituency from disadvantaged—
Stella Creasy
We are all concerned to see good schools, I think. Does the hon. Gentleman recall a former Prime Minister who argued that sunlight was the best form of disinfectant? Having the numbers to track why, disproportionately, young men from black and ethnic minority backgrounds do worse in our schools, for example, and whether Government policies are influencing that, or whether their parents’ income might be an issue, would help him to understand how he gets those better schools.
Stephen McPartland
The hon. Lady and I agree on a lot of things and disagree on others. We have debated issues across this Chamber and in Committee Rooms. I do not think that figures will help those children. Figures are just retrospective and talk about what is possibly happening.
Dawn Butler
I want to clarify something. Equality impact assessment is part of the public sector equality duty. It looks at the implementation of policies, assesses them, and sees whether they have helped or hindered progress. That is all that equality impact assessment does. It is a good thing. It is not an extra burden; it makes for good decision making.
Stephen McPartland
My difference of opinion with the Opposition is that I think that a good teacher probably makes a much bigger difference to a child’s education and chances in life than an impact assessment and something from the Treasury. With regard to forecasts from the Treasury and economists, stuff that we have seen over the past couple of years, and the nearly eight years I have been a Member of Parliament, shows that in reality those figures never seem to be right.
This is about equality of opportunity and equality of aspiration. I would like to talk about universal credit. I campaigned on some of the issues on universal credit. I believe that universal credit, as a product, is the right thing to do. It was supported by both parties in the sense of stopping the cliff edge for people who could not take on an extra hour or two of work because they lost all their benefit. The idea behind universal credit was that the benefit would be reduced over a certain period. I know that there are still live issues with the Treasury over the size of the take. I hope that the Minister is taking note of that, because I continue to raise it with the Chancellor. I think that the withdrawal rate is still too high.
Universal credit is doing more than new clause 9 would do to help people’s life chances—more than a document saying what has happened and people’s opinions of what could or could not have hindered the situation.
Dawn Butler
It is good governance to have a look at the impact of one’s policies on society.
Stephen McPartland
The hon. Lady makes a very good point, but I cannot support the new clause because it will not do anything to help people practically. It will just allow academics and economists to argue over moot points, whereas I am interested in actually helping people from disadvantaged backgrounds who want the opportunity to go off and aspire to achieve and to be anything they want to be. It is very sad, in this day and age, that we are discussing the fact that we need to identify whether certain sections of society need more support than others. We should be aiming to get to a society—
Anneliese Dodds
Given that, for example, over 80% of the social security cuts enacted by Conservative Governments have fallen on the shoulders of women, would it not have been helpful for those women, and indeed for us as decision makers, to know about that before the decisions to implement them were taken?
Stephen McPartland
The hon. Lady makes a very earnest point, but I cannot accept those figures.
A huge amount of money has gone into social care. At the moment, there are people in my constituency on fixed and low incomes who are very disappointed about the 3% that is going to be levied on their council tax for social care, because that will have a negative impact on their income, although it helps other sections of society and is the right thing to do. This new clause is about academics and economists as opposed to helping real people on the ground on a day-to-day basis. Some Labour Members are shaking their heads, but they got involved in politics for the same reason that I did, which is to help people to get on in life and achieve the best that they can. That is why I am a Conservative and why most people in this Chamber are Conservatives.
Returning briefly to the welfare system, as that is my area of expertise, we want a system that works. When we look at universal credit, the Treasury’s distributional analysis provides an analysis of the cumulative impact on welfare and public services. My view is very much about developing policies to help people get on in life. New clause 9 is just about providing some information on what has affected people in the past over a number of years, and by the time we are focused on the next Budget or other fiscal event, things have moved forward again.
Bim Afolami
My hon. Friend is making, as I think everybody knows, a very powerful speech. Does he agree that new clause 9 is indicative of the fundamental difference between Labour Members and Conservative Members? We care about action and doing things and improving people’s lives; they want more analysis.
Stephen McPartland
My hon. Friend makes a very powerful point. We can see why he was selected to be the Member of Parliament for Hitchin and Harpenden. He stands up for his constituency incredibly well, as does my right hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald). I am proud that we have three Hertfordshire MPs who are speaking in this debate because we are interested in helping people to get on in life. As a result, we have incredibly low unemployment in our areas.
Dawn Butler
The hon. Member for Hitchin and Harpenden (Bim Afolami) is absolutely right: this new clause does highlight the difference between the Government and the Opposition. The Government are intent on taking actions, regardless of whether they help, hinder or hurt people, whereas Labour Members want to ensure that we have policies that help society.
Stephen McPartland
The hon. Lady makes a very powerful point that I respect, but I assure her that I only vote for policy that I believe will help people, and if I do not believe that it will help people, I do not vote for it. I have voted against the Government for that reason. I have a record of doing that and will continue to do so.
Sir Oliver Heald
I am sure my hon. Friend agrees, as many would, that the Treasury produces excellent research documents, and research is an important thing, but are these further demands for research not indicative of the difference between the parties, which is that they are the researchers, and we are the doers?
Stephen McPartland
I could never disagree with my right hon. and learned Friend. He always makes a powerful point.
One of the biggest challenges in society is intergenerational fairness. I do not think that new clause 9 captures some of the issues we face as a society and the challenges facing different generations. There are some people living in large houses, paying high council tax rates and on very low fixed incomes. There are young people who may be considered quite affluent but still cannot afford to purchase a property in their part of the country. In a different part of the country, they could easily afford to purchase a property but may not be able to get a job, so cannot get a mortgage. Intergenerational fairness is incredibly important, and the Government have tried to spread wealth throughout the country through the northern powerhouse.
I think that the Conservative Government have tried very hard. They have not always got it right, and I have voted against them when I believed they have got it wrong, but they have tried consistently to help people get on in life and provide a welfare system that is a safety net for those who need it in times of difficulty.
In this country, education is still the best way out of poverty and the best opportunity people have to change their life chances. I am proud of what the Government have done to ensure that millions more children are being taught in good and outstanding schools. When it comes to the economy, we have record rates of employment, with people out there earning, paying tax and contributing to society.
David Linden (Glasgow East) (SNP)
I am grateful to the hon. Gentleman for giving way. I have listened to him for some time. He seems to be making quite a lengthy speech; I do not know if that is just a thing that is happening on the Government Benches at the moment. He talks about equality and people getting on in life. I respect the fact that he has rebelled against the Government when he sees fit. He spoke about the importance of a good education and people coming out of school and university, but does he share my concern that under-25s are not included in the national living wage? What does he think about that?
Stephen McPartland
From my point of view, there are geographic issues with the national living wage. For instance, it is much more expensive to live in Hertfordshire. One shocking challenge we have in Hertfordshire—I imagine a lot of people in the rest of the country will not understand—is that my constituency is 19 minutes from King’s Cross, and as a result, we lose a lot of our young people to London. When I became a Member of Parliament, there were fewer than 200 apprentices a year starting work in Stevenage. We now have nearly 1,000 apprentices a year starting work in Stevenage. That was the only way of holding on to our young people.
On new clause 9 and distributional analysis of the cumulative impact, if a young person in Stevenage becomes an apprentice, the employer pays for them to get a level 4 degree. They will be earning £25,000 a year and not getting into debt in university. It is geographic.
David Linden
I declare an interest: I began my career as a modern apprentice. The reality is that under UK law at the moment, apprentices can still be paid as little as £3.50 per hour. How does that fit with building a country that works for everyone?
Stephen McPartland
In Hertfordshire, £3.50 an hour would not be acceptable. In Hertfordshire, employers have to pay far more than that to attract a young person, otherwise they just will not get them. That is the reality. I think I have the highest unemployment rate in Hertfordshire, at 1.6%.
Madam Deputy Speaker (Dame Rosie Winterton)
Order. I think it is quite important that the hon. Gentleman returns to the substance of the debate—new clause 9. Just mentioning it every now and then does not do the trick.
Stephen McPartland
You are very kind, Madam Deputy Speaker. I obviously had no intention of misleading you in trying to mention it now and again. New clause 9 and the Treasury publishing a distributional analysis of the cumulative impact of Government’s tax, welfare and public service spending is quite a wide-ranging topic. I was trying to make the point that I do not support new clause 9 because it seems academic, as opposed to helping people from different backgrounds to achieve their life chances. On that note, I shall conclude.
Wes Streeting
The speeches from Conservative Members have been so rousing that I have been moved to speak to take on the sheer absurdity of the arguments we have heard this afternoon. Member after Member has told us that they oppose new clause 9 because the Government already do this. If the Government already do this, why do they not support new clause 9?
The fact is that the Government do not already do this. What the Government do is publish an impact assessment with a distributional analysis of Budget measures by households depending on income. That measure was introduced by a previous Chancellor, until the current Chancellor’s predecessor decided it was politically inconvenient and got rid of it. The present Chancellor, to his credit, decided to bring it back. That assessment is interesting and useful. It informs Ministers when they are making decisions, but it does not cover the measures that new clause 9 addresses.
The fact is that the Government’s Budget and the Finance Bill are a reflection of their political priorities and tell the country about the problems the Government want to address and how they intend to do so through sufficient provision of resources. The simple fact is that if the Government made an equality impact assessment of their Budget measures, we may not be in a position where women in their 50s are being clobbered by changes to their state pension age at a time in their life when they have little time or opportunity to address it.
As a result of the Government’s refusal to listen to argument, evidence and reason, I see constituents in my surgery on a Friday afternoon—women in their 50s—who tell me that they have lost their job and are not able to access their pension when they expected. They had planned for retirement, and as a result, they can no longer make ends meet. There is nothing they can do about it at that stage. Had the Government considered the evidence, they might have made a different decision.
Had the Government assessed the equality impact of their Budget, we might not be in a position where disabled people have been consistently and repeatedly clobbered by changes to welfare and other areas of public policy. If, as local authorities do, the Government looked at the equality impact of their decision, they might seek to take steps to mitigate the impact on disabled people. Instead, nationally and locally, disabled people have too often had the books balanced on their backs, which is totally unjustifiable.
If the Government looked at the impact of their Budget measures on black and minority ethnic people, they might well take a different approach to the provision of resources in education to address the imbalances. They might also find, through analysis and research—words that have become anathema to this Government in their approach to public policy making—some surprises, such as the fact that detrimental changes to small businesses have a disproportionate impact on BME communities. They may choose to do something about it, or they may not, but at least their policy making would be better informed.
In the debate on this Bill, someone has to stand up and make the case for reasoned, evidence-based public policy making. It is a total disgrace that in the democratic discourse of this country, we now see the trashing of experts. We are warned that if we adopt new clause 9, academics may debate it—God forbid that people with some degree of expertise should debate the laws that we pass, because goodness knows it does not happen in this Chamber often enough. What is it about expertise and data that the Government are so afraid of? What it is about information that they find so terrifying?
Wes Streeting
Perhaps the hon. Member for Braintree will tell us. I look forward to hearing what he has to say.
James Cleverly
I am curious. The hon. Gentleman expresses his desire for experts to have a role in the production of Finance Bills. Does he therefore not regard Treasury officials as experts?
Wes Streeting
Unlike Conservative Members, I have high regard for Treasury officials, and I do not trash the data produced by civil servants in the way that Ministers of the Crown do. I think civil servants are a very good example of experts, and I would like the expertise of the Treasury and the civil service to be drawn upon to produce exactly the kind of equality impact assessment that Labour is calling for in new clause 9.
It is because I have faith in civil servants’ insight and ability to gather and garner evidence to inform Ministers that I would like to see a more evidence-based approach to public policy making. If we had such an approach, we would undoubtedly have a better quality of government—and goodness knows we need that, when we look at the current state of things. We would also have a better quality of debate in the House about what our priorities are, the challenges facing the country and how to tackle them.
Luke Graham
The hon. Gentleman makes a big play of analysis. Can he inform the House of the analysis that Labour has undertaken of the distributional impact of £170 billion of extra borrowing and the interest payments on our communities?
Wes Streeting
I am very grateful to the hon. Gentleman for that intervention because he makes exactly the point I have made since the general election. We put forward policies in our manifesto—by the way, they proved immensely popular across the country and led to a result that a lot of people were not expecting—and I think we should do a distributional analysis of such policies across the board to make sure that resources are properly targeted where they are needed.
In conclusion, we should not fear such information and evidence, which would lead to better-informed government. The greatest tragedy of this Prime Minister is not the fact that she is being held hostage by the hard Brexiteers on the right of her party; it is that she has not delivered on a single one of the sentiments in the fine words she said on the steps of Downing Street about creating a more equal society and tackling injustices that are still burning injustices even in one of the richest economies in the world in the 21st century. Sentiments are all well and good, but we need policies that are backed up by evidence and reason, and we need the ability genuinely to tackle the problems that the Prime Minister set out so long ago on the steps of No. 10, but which I fear she will never be able to implement before they boot her out next year.
The Financial Secretary to the Treasury (Mel Stride)
Before I plunge into new clause 9, as indeed I will at some length, may I concur wholeheartedly with the statement made by the hon. Member for Ilford North (Wes Streeting) when he praised civil servants for their impartiality, objectivity and professionalism? In my experience of the Treasury, I have always found them to be exactly that. We should all register that important point.
We have had a fairly wide-ranging debate. I hesitate to add that, on one or two occasions, it has been marginally informative. On one occasion—I will not name the Member—it was very informative because I actually learned something I had not previously known. The reason why it has been wide-ranging is that this is of course an extremely important issue. What I hope unites Members on both sides of the House is that every Member of the House deplores unwarranted inequality. It is not that we are all entirely equal—we are, of course, different—but we have a right to be treated with equal respect and a right to equal opportunity and aspiration, as it was eloquently termed my hon. Friend the Member for Stevenage (Stephen McPartland).
If I may, I will look at new clause 9 in a little detail. As I have suggested, it has been slightly absent from this debate, so let us bring it back to centre stage. The new clause seeks to require the Chancellor of the Exchequer to provide a
“review before the House of Commons within six months of the passing of this Act.”
In so doing, the Chancellor has to look at a number of aspects of the impact of the Finance Bill now going through the House. Under the new clause, the review would look at
“the impact of those provisions on households at different levels of income”.
As has already been pointed out at length, we have indeed brought back the household distribution analysis that looks at tax, welfare and public expenditure, and at the impact of those elements on different income levels by decile.
Under the new clause, the review would also look at
“the impact of those provisions on people with protected characteristics (within the meaning of the Equality Act 2010)”.
This is perhaps a good moment for me to say something very important. Ministers of course always seek to operate within the law, and the Equality Act is very clear about our duties as Ministers when we consider various policies that come before us. Those policies are not just those before us in the context of a major fiscal event, but policies and decisions we take day in and day out, some of which never even pass through this House. We do so not just because of the law, but because we think it is the right thing to do.
Under new clause 9, the review would also look at
“the impact of those provisions on the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and…the impact of those provisions on equality in different parts of the United Kingdom and different regions of England.”
The new clause then focuses on the specific taxes covered by the assessment the Chancellor of the Exchequer would be required to present in the report. I want to make one important general point: in looking at regional aspects of spending and tax, it is far easier, for fairly obvious reasons, to consider the spending elements than the regional distribution when it comes to taxation.
Mrs Badenoch
Does the Minister agree that it would be so impractical to carry out such impact assessments that it would slow down Government business? Perhaps one of the reasons why the Opposition have tabled the new clause is to make it difficult for us to get our policies and the Finance Bill through.
Mel Stride
I thank my hon. Friend very much for that intervention, because she touches on the important point that there is an element of proportionality. As I will come on to argue, one of the difficulties with accepting the new clause is that a lot of the information is not available. That is not an argument for not going out and finding the information, but some of it would be extremely difficult to generate. I would not go as far as my hon. Friend in suggesting that this is a Machiavellian plan to gum up the works of Government, but I am sure some Opposition Members might be pleased to see that happen. I take the new clause in the spirit of the wording in front of me.
Dawn Butler
I just want to help the Minister a bit. The Women’s Budget Group, the Runnymede Trust and lots of other organisations, as well as the ONS and HMRC, accumulate the data that would be needed, so the data necessary to carry out equality impact assessments are available. In fact, the Treasury does some assessments anyway.
Mel Stride
The hon. Lady is suggesting that one particular set of analyses is an ideal set to present, and can be seen as in no way misleading, but entirely robust and entirely objective. If we are to reach such a quality of data, we will have to achieve certain specific aims, and one of the aims is to deal with the fact that a lot of the analysis to which she is referring is very selective—it does not look at the entire picture. For example, some of the analysis reflecting changes in income tax may show a benefit for one sex over another, but it may not take into account the impact of increased spending on childcare.
Mel Stride
If I may finish this point, I will then certainly give way to the hon. Lady.
A lot of these analyses simply look at the static situation, without taking into account the fact that the measures we are bringing forward will in themselves have a dynamic effect on the economy—for example, by driving up employment. Several Members have spoken very eloquently about the record level of female employment at the moment. That is benefiting women, but the interaction of our policies with that benefit would not be reflected in such an analysis. I have already mentioned that a lot of the information being sought is very difficult to verify and very difficult to obtain, particularly where it pertains to protected characteristics, such as sexuality, gender reassignment and pregnancy. It is very hard to identify those groups and the way in which they are affected, particularly in terms of all the taxes in new clause 9—I will come on to them in a moment—that the Opposition want us to address.
Mel Stride
I will make a final point before I give way to the hon. Lady. It has been a long time since we have jousted, and I have missed it, so I will certainly give way to her. There is a very important point about the impact in particular on households, which is one of the major thrusts of new clause 9. It is very difficult to disentangle the effect of income that may go to one member of the household, but is of course subsequently shared across the household. The Institute for Fiscal Studies has itself highlighted that as a particular barrier to getting robust information. I will now gladly give way.
Anneliese Dodds
I am very grateful to the Minister for his generosity in giving way, and for his kind words. I want briefly to mention that the Department for Work and Pensions does produce this kind of modelling for social security changes, which may be similarly complex in looking at the interactions of different elements, so why does the Treasury take a different approach? In relation to that, would not the assumptions be spelled out, so that any ambiguity could be made clear?
Mel Stride
I thank the hon. Lady for her intervention, but I bring her back to new clause 9. Whatever the DWP happens to be doing, whether it is right or wrong or whether it works, what we are facing here today and making a decision on is new clause 9. As I am working through new clause 9, I am arguing that it is not a practical way to seek to achieve that which the Opposition, quite genuinely and sincerely, are attempting to achieve.
Sir Oliver Heald
I wonder whether my right hon. Friend would like to say a word about the extent of research the Treasury already undertakes and publishes. It is my understanding that more than 2,500 Treasury papers have been published, so it is really a question, is it not, of where we draw the line? If a piece of research is proving very difficult, and would be very resource-intensive and so on, that will obviously make it less likely to be done than if it is a more straightforward piece.
Mel Stride
Yes. My right hon. and learned Friend makes a very important point. As I have already pointed out, around major fiscal events we have household distributional analysis, which covers welfare, taxation and public expenditure. It takes a cumulative approach to that information and it is often relied upon by Government to take subsequent decisions. We also have, on substantial individual tax and national insurance contribution measures, tax impact and information notes—the so-called TIINs—which were introduced in 2010 and were not there under the previous Labour Government. We are, therefore, doing a number of things, both in the context of major fiscal events and on a tax-by-tax, national insurance-by-national insurance change basis, which look to provide just the kind of information that informs decisions around equality.
The third part of new clause 9 relates to the taxes to which this analysis would apply. On income tax, as I have said, we are looking at impacts on households. We may raise the personal allowance, as we did in the last Budget. That is now up to £11,500. It could be argued that that disproportionately favours one sex over another, but when we look at the effect on the household, income is typically distributed within families, within households and within the family unit. That is extremely difficult—in fact, I would go as far as to say impossible—to capture.
Stella Creasy
The Minister made that point the last time we tried to discuss this issue. Forgive me, but he seems to be presuming that a household is a man and a woman. Has he managed to get his head around single person households and single women, because women’s incomes are disproportionately hit by Government policy? At the very least, could he manage to measure the women who are affected by his tax and policy changes who do not live with a man who might confuse him?
Mel Stride
If the hon. Lady can come up with a sure-fire way of identifying women who live with men who do not confuse them, we will probably make some progress. The point I am making is that this area is riddled with huge complexity, yet new clause 9 seeks to achieve the presentation of reports and assessments that have the imprimatur of Government and the Treasury upon them. They are relied upon to take very important decisions, yet the arguments I am prosecuting suggest that we would actually end up with an incomplete picture. In fact, I would go further than that and say that they could be misleading in a way that would be unhelpful to what I know the hon. Lady is seeking to achieve and indeed what the Government are also seeking to achieve.
Helen Whately
Does the Minister share the view expressed by many of us this afternoon that while those on the Opposition Benches are looking for very complicated analysis that may, unfortunately, be rather misleading, we actually have a very strong track record, if we take a step back, of reducing inequality and making things better for those on the lowest incomes?
Mel Stride
Yes. My hon. Friend makes an extremely important point. We know that the gender pay gap is at its lowest level on record, for example. That is a very substantial achievement and we are making considerable headway in that particular respect.
Some of the other taxes mentioned in new clause 9 include employment and disguised remuneration. Disguised remuneration is a highly complicated area, as the hon. Member for Oxford East (Anneliese Dodds) will know, having discussed it in some detail in Committee. The mind boggles as to how one would possibly unpack the effects on the various protected characteristics of that particular taxation. Pension schemes are also extremely complicated. Settlements and air passenger duty are perhaps a little bit easier than some of the others, but the point is that overall—and we have to look at the new clause in its entirety—new clause 9 is extremely complicated indeed.
Finally, there should be no doubt that those of us on the Government Benches are entirely committed to ensuring that we drive the equality agenda and drive it very hard indeed. We should, as my hon. Friend the Member for Faversham and Mid Kent (Helen Whately) suggested, look to our own record in that respect. We now have more women in work than at any time in our history. In the past year, 60% of employment growth came from female employment. We have the lowest gender pay gap in full-time employment ever. Those companies employing 250 employees or more, as we have said often in this debate, are now required by law to provide a gender wage audit. Contrary to what the hon. Member for Brent Central (Dawn Butler) suggested, there are teeth. Penalties can be applied by the ECHR, and fines can follow where that is not done. For those who are disabled, we spend a record amount in excess of £50 billion a year on benefits. As has been said by a number of Government Members, the national living wage has disproportionately helped some of the most needy in our society. When we talk about equality on this side of the House, we mean it. I urge the House to reject new clause 9.
Dawn Butler
Having a detailed understanding of how policy choices exacerbate or eliminate inequality at every stage of policy making is key to tackling burning injustices and producing good policies. I wish to put new clause 9 to the vote.
Question put, That the clause be read a Second time.
Peter Dowd (Bootle) (Lab)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dame Rosie Winterton)
With this it will be convenient to discuss the following:
New clause 4—Public register of entities paying the bank levy and payments made—
“(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.
(2) After paragraph 81, insert—
“Part 11
Public register of payments
83 (1) It shall be the duty of the Commissioners for Her Majesty’s Revenue and Customs to maintain a public register of groups paying the bank levy and the amounts paid.
(2) In relation to each group, the register shall state whether it is—
(a) a UK banking group,
(b) a building society group,
(c) a foreign banking group, or
(d) a relevant non-banking group.
(3) In relation to each group, the register shall state the amount paid in respect of each chargeable period.
(4) In relation to chargeable periods ending between 28 February 2011 and 31 December 2017, the Commissioners must make public the register no later than 31 October 2018.
(5) In respect of subsequent chargeable periods, the Commissioners must make public the updated register no later than ten months after the end of the chargeable period.””
This new clause requires HMRC to prepare a public register of banks paying the bank levy and the amount they have paid.
New clause 5—Bank levy: Part 1 of Schedule 9: pre-commencement requirements—
“(1) Part 1 of Schedule 9 shall come into force in accordance with the provisions of this section.
(2) No later than 31 October 2020, the Chancellor of the Exchequer shall lay before the House of Commons an account of the effects of the proposed changes in Part 1 of Schedule 9—
(a) on the public revenue,
(b) in reflecting risks to the financial system and the wider UK economy arising from the banking sector, and
(c) in encouraging banks to move away from riskier funding models.
(3) Part 1 of Schedule 9 shall have effect in relation to chargeable periods ending on or after 1 January 2021 if, no earlier than 30 November 2020, the House of Commons comes to a resolution to that effect.”
This new clause requires the Government to provide a separate analysis of the impact of Part 1 of Schedule 9 nearer to the time of proposed implementation in 2021 and to seek the separate agreement of the House of Commons to commencement in the light of that review.
Amendment 1, in schedule 9, page 134, line 2, at end insert—
“34A After paragraph 81 insert—
“Part 10
Review of entities on which the bank levy is charged
82 (1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer shall undertake a review of the provisions in this Schedule defining which groups are covered by the bank levy.
(2) The review shall consider in particular—
(i) the adequacy of those provisions in applying the bank levy to groups that are—
(a) not a group in paragraph 4(2) and
(b) derive their income from investments in the manner of a group in paragraph 4(2),
(ii) the adequacy of the groups in paragraph 4(2) in charging the bank levy to lending and investment entities,
(iii) the degree to which the groups in paragraph 4(2) reflect lending and investment entities that have entered into contracts with public sector bodies,
(iv) the adequacy of the definition of “investment group” in paragraph 12(9) in reflecting lending and investment entities that have entered into contracts with public sector bodies, and
(v) the revenue effects of changes to include lending and investment entities that have entered into contracts with public sector bodies within groups covered by the levy.
(3) The Chancellor of the Exchequer shall lay a report of the review under this paragraph before the House of Commons as soon as practicable after its completion.””
This amendment requires a review about the appropriate extent of the bank levy in terms of the lending and investment entities which it covers, considering the extent to which it covers PFI finance groups and assessing the revenue effects of such an extension.
Amendment 5, page 134, line 6, leave out from “in” to end of line 7 and insert
“accordance with the provisions of section (bank levy: Part 1 of Schedule 9: pre-commencement requirements)”.
This amendment is consequential on NC5.
Amendment 2, page 134, line 10, at end insert—
“37 The amendments made by paragraph 34A have effect from the day on this Act is passed.”
This amendment is consequential on Amendment 1.
New clause 6—Analysis of effectiveness of provisions of this Act on tax avoidance and evasion—
“(1) The Chancellor of the Exchequer must review the effectiveness of the provisions of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the effects of the provisions in reducing levels of artificial tax avoidance,
(b) the effects of the provisions in combating tax evasion, and
(c) estimates of the role of the provisions of this Act in reducing the tax gap in each tax year from 2018 to 2022.”
This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effectiveness of the provisions of the Bill in tackling artificial tax avoidance and tax evasion, and in reducing the tax gap.
Amendment 3, in schedule 8, page 103, line 41, at end insert—
“21A After section 461 (counter-acting effect of avoidance arrangements) insert—
“Chapter 11
Review
461A Review
(1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer shall undertake a review of the effects of amending the operation of this Part in relation to the excess profits of PFI companies.
(2) For the purposes of the review under this section, it shall be assumed that the operation of this Part would be amended so as to—
(a) deduct the uncompensated excess profit amount of PFI companies from the aggregate of the interest allowances of the group for periods before the current period so far as they are available in the current period for the purposes of calculating the interest capacity of a worldwide group under section 392 (the interest capacity of a worldwide group for a period of account),
(b) provide that, for groups that contain a PFI company, the uncompensated excess profit amount for a period is equal to the group excess profit amount less the aggregate amount by which the group’s taxable profit has been reduced in prior periods as a result of such provisions,
(c) provide that the group excess profit amount for any period will be the aggregate PFI excess profit amount for each PFI company in the group, and
(d) provide that the PFI excess profit amount for a PFI company for a period will be the amount by which the internal rate of return on shares and related party debt in that company (from inception to the end of the previous accounting period) exceeds the internal rate of return set in the relevant PFI contract or, if no such return was specified, 10%.
(3) For the purposes of this section, “a PFI company” means a company which has entered into a contract with a public sector body under the Private Finance Initiative or the PF2 initiative.
(4) The Chancellor of the Exchequer shall lay a report of the review under this section before the House of Commons as soon as practicable after its completion.”
This amendment requires a review about the effects of making provision to discount the excess profits of a PFI company for the purpose of calculating the aggregate of the interest allowance of worldwide groups in the provisions of Part 10 of the Taxation (International and Other Provisions) Act 2010.
Amendment 4, page 105, line 17, at end insert—
“26A The amendments made by paragraph 21A have effect from the day on this Act is passed.”
This amendment is consequential on Amendment 3.
Peter Dowd
Let me start by reiterating the sentiments that I expressed in Committee when we were debating the bank levy. I said then that it served no one to
“homogenise the people who work in the banking sector as either saints or demons.”—[Official Report, 18 December 2017; Vol. 633, c. 814.]
Such a simplification ignores the complexity of our financial services, the individuals who work in them, and the institutional culture that informs the practices within them. About 2,000 people work in the banking sector in my constituency, particularly in Santander, and many of them are my committed constituents.
Similarly, we cannot ignore the important role that banks play in the smooth functioning of our economy. We should avoid a “one size fits all” approach that lumps all banks together for the purpose of a bank-bashing session. The House should have a grown-up, mature discussion about issues such as the bank levy, the indisputable reasons for its introduction, its effectiveness, and why the Government are now desperate to cut it further. First, however—if I can be indulged slightly—I will say a few words about the political context of today’s debate.
Since we last debated the Government’s proposed changes in the bank levy, there have been several developments. This has continued the long saga of what is now recognised as a divided and directionless Government, and it goes to the heart of the whole question of the Government’s finances. We have seen the resignation of the Prime Minister’s deputy, and a botched Cabinet reshuffle in which the Secretary of State for Health refused to budge, another Secretary of State returned to the Back Benches rather than moving to the Department for Work and Pensions, and the Conservative party headquarters wrongly announced that the Secretary of State for Transport would become the party’s chairman. That goes to the heart of the question of the Government’s competence, which also relates to the bank levy.
During the recent Black and White fundraising dinner, at which the bank levy and our review of it were no doubt discussed, and which was held at the Natural History Museum—evidently live dinosaurs were visiting dead dinosaurs—the Prime Minister, addressing the Jurassic attendees, said:
“we are on a renewed mission to fight and win the battle of ideas and to defeat socialism today”.
How did the Government plan to defeat socialism in our modern age—the age of the fourth industrial revolution and the internet of things? The answer was that they held a raffle. While no doubt discussing the bank levy and issues relating to it, they raffled, at £100 a ticket, an eight-gun, 500-pheasant and partridge shoot donated by a millionaire hedge fund supporter who must know a great deal about the bank levy. That is how the Government will defeat socialism: by slaughtering 500 partridges and pheasants.
To keep Tory MPs’ spirits up, the Chief Whip recently sent them all a letter telling them that their performance in Parliament had been “excellent”, and that
“Remaining united in Parliament is a vital part of ensuring that Jeremy Corbyn remains in opposition”—
I am not sure whether he was trying to convince his colleagues or himself. And so it goes on. It is little wonder that the Secretary of State for Exiting the European Union has suggested that Ministers would have to be locked in a room for any agreement to be reached—that is, if they could all find the same room. I would agree with that suggestion, on the condition that we could throw away the key. Meanwhile, the Treasury has been briefing the press that the spring statement will be scaled back to include no Red Box, no official document, no spending increases and no tax changes—and perhaps no embarrassing U-turns either—as well as, no doubt, an inability, yet again, to talk about the bank levy, what we could do with it, and how we could make progress with it.
Rather than the Government outlining a long-term economic plan, we have yet another Finance Bill engineered for the benefit of the few. There is little in the Bill to tackle our dreadful productivity performance, stuttering growth, high inflation and lack of investment in our infrastructure and people, but if we raised more from the banking levy, we could do something about that. In that context, the Government have come up with the bright idea of offering another tax break to the banks by further limiting the scope of the bank levy. That would ensure that, from 2020, banks will pay the levy only on their UK balance sheets, not their overseas activities.
Our position on the bank levy has been clear: we have consistently argued for a more proportionate levy and pointed out that the levy, which would introduced in 2011, would raise substantially less than Labour’s bankers’ bonus tax. In short, we have always stood against the Government’s divisive austerity fetish.
Chris Philp (Croydon South) (Con)
I must gently point out that the Labour party’s position on the bank levy has been anything but clear. Labour Members opposed the levy when it was first introduced. They then called for it to be retained, and their amendments today propose neither retaining nor abolishing it. As the hon. Gentleman’s party’s position is entirely unclear, perhaps he could take this opportunity to clarify it.
Peter Dowd
We opposed the levy because it was a reduction in the taxes that the banks were paying. I know the hon. Gentleman wants to be generous to people who already have money and very ungenerous to those who do not have money, but he should give considerable thought to that before he makes such interventions, because it does not do his party’s reputation any good, as that sort of approach is mean and miserly.
That was why we voted against the levy during our consideration of the 2011 Finance Bill, which introduced the bank levy along with cuts to corporation tax and tax giveaways for the most well-off—that is the context. It was also why we expressed concern in 2015 about the Government’s cuts to the bank levy and the introduction of the corporation tax surcharge, and it is why we will vote against this measure today. We will support my hon. Friend the Member for Walthamstow (Stella Creasy), who will—I suspect forlornly—call for a review of the effects of making provisions to discount excess profits of a private finance initiative company for the purpose of calculating the aggregate of the interest allowance of worldwide groups under the provisions in part 10 of the Taxation (International and other Provisions) Act 2010. We support that as a step in the right direction to tackle the whole construct and operation of PFI schemes, which was a policy announced last September by my right hon. Friend the Member for Hayes and Harlington (John McDonnell), the shadow Chancellor.
The bank levy was not the brainchild of a Conservative Government. It was not introduced because the previous Chancellor had been suddenly moved by public outrage about reckless decisions made by some in the banking sector who plunged us into the world’s greatest economic crisis in modern times. That is the context for this issue. The levy was not designed to ensure that banks received enormous and unprecedented bailouts from the taxpayer, such as when the Government purchased £76 billion of shares in RBS and Lloyds. It was instead designed to make banks pay their fair share, and I refer Members to the comments about schedule 9 on pages 83 to 93 of the explanatory notes, where that is laid out clearly and unambiguously.
In fact, the very concept of a bank levy was developed at the G20 summit in Pittsburgh in 2009. It was championed by the previous Labour Government, who subsequently introduced the bankers’ bonus tax. In the austerity Budget of 2011, the coalition Government decided to dump the bankers’ bonus tax and to adopt the bank levy. At that time, Labour made it clear that the levy threshold was far too low when compared with the money that would have been raised if the Government had stuck with Labour’s bonus tax. Ministers folded under pressure from the banks and set the levy at a lower rate of £2.6 billion.
The threshold was established—here we come to the issue of experts and taking expert advice—despite Treasury officials openly acknowledging it to be far too low. Under the original Treasury plans, the levy would have raised £3.9 billion a year, which is nearly £1.3 billion more than the £2.6 billion that has been indicated. But the then Government, lobbied by the privileged few, ensured that the threshold remained low. At 0.078% for short-term liabilities and 0.39% for long-term liabilities, the level that was set was—not to put too fine a point on it—a pretty tasteless joke compared with that of other countries that introduced a similar levy. It was less than a third of the level set in France, substantially smaller than the level in Hungary, which was set at 0.53%, and even lower than that of the United States of America. In 2015, under pressure from some of the Government’s friends in the finance sector, the then Chancellor cut the bank levy rate, and the current occupant of No. 11 has continued on that particular sojourn. In so doing, he has ensured that, by 2020, the UK’s biggest banks will have received a tax giveaway worth a whopping £4.7 billion. That £4.7 billion could been spent on our public services, and notably on children’s services, which have been cut to the bone.
Chris Philp
The hon. Gentleman says that the banking sector has received a whacking tax cut. I will dispute that further in my later comments, but the figures are these: in 2009-10, the banking sector paid £17.3 billion in tax; last year, it paid £27.3 billion. That represents a 58% increase. So, far from having a tax giveaway, the banks are now paying more in taxes than they were six years ago by some margin.
Peter Dowd
That is not surprising: the banks returned to profitability because the taxpayer bankrolled them. That was how they got back into profitability, and they must pay their fair share of taxes as a result. The constituents of every Member of Parliament paid towards that, and when the profits came back in, the taxes went back up. We have helped the banks out, and they have to help our public services out.
The Government claimed that their introduction of the 8% corporation tax surcharge would offset the cuts to the bank levy. If we look at the autumn’s Budget Red Book and the forecasts from the Office for Budget Responsibility, however, we clearly see that the surcharge will not match the fall in the bank levy. According to forecasts, the surcharge is set to increase by £300 million a year, while the receipts that the Exchequer receives from the levy will fall by £1.7 billion a year. That leaves a £1.4 billion gap. That is a fact that is printed in the Government’s Red Book and, as John Adams opined, “facts are stubborn things”.
In 2018, we are still feeling the economic consequences of the actions of the banks. Every day, the Government tell us that there is no money for productive investment and that austerity must continue, yet they have conspired to undermine and limit any remuneration from the banks that caused this sorry state of affairs in the first place. Once again, the Opposition’s ability to amend this Bill has been hamstrung and blocked by the Government’s continued use of arcane parliamentary procedure.
Anna Soubry (Broxtowe) (Con)
The person who said that there was no money left was actually the occupant of the Treasury who left a note for the incoming Conservative-Liberal coalition Government in 2010. The reality is that of course there is money. We raise taxes and we spend them exceptionally wisely as a Conservative Government, particularly on infrastructure which, as the hon. Gentleman must surely agree, is now at record levels. It is just that we are still having to clear up the mess that was left by the last Labour Government.
Peter Dowd
The right hon. Lady can believe what she wants, but who will pay any attention to the Chief Secretary to the Treasury who took over from a Labour Chief Secretary to the Treasury, but was out of that job within two weeks because of issues around his parliamentary expenses? Does she expect us to pay any attention to that whatever? [Interruption.] That was what happened. David Laws—
Peter Dowd
The right hon. Lady can come back later on. This is not a dialogue, as you would no doubt tell me, Madam Deputy Speaker.
We have a timid, feckless and self-obsessed Government who are frightened of their own shadow. They continue to give more money back to the banks, notwithstanding the fact that they keep telling us that the resources coming into the Government are insufficient to support our public services.
We are seeking three things by moving new clause 3. First, we want to require the Government to carry out a review of the bank levy, including of its effectiveness in relation to its stated aims. Secondly, we want to establish the extent of the effect of the 2015 cuts on revenues from the levy. Thirdly, we wish to calculate how much would have been raised if the Government had stuck with Labour’s bankers’ bonus tax. Such a report would put under the microscope for all to see the Government’s malpractice—that is what it amounts to—in cutting frontline services while offering tax giveaways to banks that can more than afford them. It would require the Minister to acknowledge that far more would have been raised under Labour’s bankroll tax and, just as importantly, that the Government’s current bank levy has done little to influence and mitigate the risky banking practices that remain in use in our financial services industry.
Chris Philp
I thank the hon. Gentleman for being generous with his time. He is trying to suggest that the Government have a bad track record on clamping down on avoidance and evasion. The key measure of that is the tax gap, which was 8% under the last Labour Government and has now fallen to 6%—that is the lowest in the world. Will he congratulate the Financial Secretary to the Treasury on that achievement and acknowledge that this Government are doing a better job in this area than the last Labour Government?
Peter Dowd
That does not take international profit shifting into account, as the hon. Gentleman knows. He should consider that.
The figures I have mentioned not only add to the growing hole in our public finances but demonstrate the Government’s complete lack of interest in taking on tax avoiders. I am glad the hon. Gentleman raised the last Labour Government’s record. So what was our record on tax avoidance? It might surprise Conservative Back Benchers to hear that Labour brought in anti-tax avoidance measures in the 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009 and 2010 Budgets. Most notably, in March 2004, the Labour Government introduced a disclosure scheme that required anyone marketing a tax mitigation scheme to give HMRC advance notice, giving the Revenue authorities an opportunity quickly to counter the scheme with new legislation. The Primarolo statement in December 2004 announced that the Government would introduce legislation, with retrospective effect, to counter any future scheme.
Labour’s tax transparency and enforcement programme has outlined 16 measures that the Government could take immediately to crack down on tax avoidance, including holding a public inquiry and publishing a public register of offshore trusts. In that fashion, new clause 6 would require the Government to commission a review of the effectiveness of the Bill’s anti-avoidance provisions and their impact on reducing the tax gap. I am proud of Labour’s measures on tax avoidance, and I am proud to stand here and say that.
Members should ponder this question: how can the Government possibly justify cuts in the banking levy while, on average, 30% of our children—it is even more in some constituencies—live in poverty? That question will not go away, however much the Government want it to.
Chris Philp
As always, it is an enormous pleasure to follow the hon. Member for Bootle (Peter Dowd), whose speeches are always entertaining and occasionally informative. He spent a great deal of time talking about the bank levy and the various new clauses standing in his name on that topic. I wish to start by addressing the central thesis of his comments on the bank levy: his suggestion that banks are not paying their fair share, particularly as two of them received state money from about 2009.
It is a matter of incontrovertible fact that banks, as organisations, are paying more tax proportionately than other kinds of corporates. It is of course right that they do, for the reason that the hon. Gentleman and my right hon. Friend the Member for Broxtowe (Anna Soubry) mentioned: they did receive taxpayer money. They pay this extra money, compared with other businesses, in two ways. The first is through the surplus profit tax of 8%—they pay about a third more corporation tax proportionately than a non-bank corporation does. The second is through the bank levy. Although the bank levy is being reduced, it will remain in force, so banks will continue to pay proportionately more tax than non-bank businesses after the implementation of this Budget. That is a vital point to get across.
The hon. Gentleman also tried to link funding for children’s services to the bank levy. In one of my interventions, I gave some figures on the total amount of tax that banks are paying. We can argue about why they are paying that extra tax. Clearly, it is at least in part due to the surplus profits rate and to the bank levy. It may also, in part, be due to the fact that the banks’ profits have increased. Whatever the cause, the bare fact is that they are paying £7 billion or £8 billion a year more in tax now than they were some time ago. So suggesting that children’s services have been deprived of money as a consequence of changes to bank taxation simply does not bear scrutiny, given that the financial services sector is paying significantly more tax than it was before, whatever the cause of that may be.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
The hon. Gentleman is, as he knows, unfairly paraphrasing my hon. Friend the shadow Chief Secretary. What my hon. Friend has pointed out is that politics is about choices and that this Government have decided, through this set of proposals, to reduce the amount of tax the banks will pay, in a situation where many core services in this country—public services that are supported by Members on both sides of the House—are on their knees. So references to the background situation or attempts to paraphrase what my colleague said are not correct. He is simply making an analysis of the choices this Government have made, which do not bear scrutiny.
Chris Philp
I thank the hon. Gentleman for his intervention but, as I say, the central, key, cold, hard fact, which will not go away, is that financial services are paying £8 billion or £9 billion more in tax now than they were before. That is money that can be spent on children’s services in his constituency or in mine, on the NHS or on schools. We should welcome the fact that the sector is producing this extra taxation, partly because it has become more successful and partly because the rate of tax has progressively been increased over the past seven or eight years.
The hon. Gentleman made a point about choices and his intervention was unpinned by an assumption: that if we increase the rate of taxation, we invariably raise more revenue. I challenge that assertion, as the famous Laffer curve clearly does. It is clear to me that it is possible to reduce the rate of taxation and at the same time collect more tax, because we, thus, incentivise investment and growth. There is no better illustration of that than the trajectory of corporation tax, taken as a whole, over the past seven years: the rate of corporation tax has come down from 28% to 19%—it is heading down to 17% in a couple of years—yet the cash take from corporation tax over that same period has gone from about £35 billion to about £53 billion or £55 billion. That goes to show that we can cut the rate of tax and, by stimulating the economy and investment, actually collect more money. Similarly, it does not follow that putting up the rate of tax necessarily means that more money is collected, because that might disincentivise investment and job creation.
Jonathan Reynolds
I feel that we have had this discussion in many of the debates on the many Finance Bills we have debated over the past 12 months. No one on the Opposition Benches denies the existence of the Laffer curve; we simply point out, as a point of fact, that the very large reductions in corporation tax that the Government have introduced have cost the country revenue. That is not in dispute. The analysis is clear that it is not the case that, had the corporation tax level remained as it was when the Conservatives came to power, more tax would not have been generated.
On new clause 3, as the hon. Gentleman knows, the bank levy is a levy on the risk-assessed capital that is on the big banks’ balance sheets. The Laffer curve would not apply to the calculation of what the return would be if the levy remained the same.
Chris Philp
Let me take each of those points in turn. The hon. Gentleman asserts that, had the corporation tax rate remained at 28%, we would now be collecting more than £53 billion. That is an assertion, and not one with which one can agree without contention. For example, because of the lower corporation tax rate, plenty of businesses have made investments that they would not have made otherwise. Several companies had located their corporate headquarters outside the UK—
Chris Philp
Just a moment; let me respond to these two points.
Those companies had located their corporate headquarters outside the UK and so paid corporation tax outside the UK, but in response to the Government’s cutting the rate of tax, they came back onshore and now pay corporation tax here. It does not follow at all that a higher corporation tax rate—28% in the case mentioned by the hon. Member for Stalybridge and Hyde (Jonathan Reynolds)—would lead to a higher tax yield. The direction of travel shows that, as the rate has come down, the amount collected has gone up. I just do not agree with the suggestion that, if the corporation tax rate were 28%, we would be collecting £60 billion or £70 billion.
Chris Philp
If the hon. Gentleman will let me answer his second point, I shall happily take an intervention. He suggested that, because the bank levy is a tax on a balance sheet, there is no Laffer curve effect. I dispute that. Banks are mostly international—for example, our largest bank, HSBC, is a very international bank—and they can choose where they deploy capital. Their finance director will sit and decide where to allocate capital around the world. If the taxation or regulatory regime in a particular jurisdiction leads to the returns in that jurisdiction being unattractive, they will rationally respond to that by allocating their resources—in this case, their bank equity—somewhere else. There is unquestionably a Laffer curve effect in relation to the bank levy.
Before I take the two interventions that I promised to take, and will, let me just say that all that links to a related point mentioned by the shadow Chief Secretary, the hon. Member for Bootle: the disapplication of the bank levy to the non-UK part of a UK-headquartered bank’s balance sheet. In these international times, a bank such as HSBC can choose where it is headquartered and domiciled. HSBC was famously thinking about moving two or three years ago. HSBC is a good example because I think the majority of its balance sheet is non-UK—it has huge operations in Africa and the far east. Were we to continue to levy the bank levy on HSBC’s non-UK balance sheet, there would be a powerful, perhaps even irresistible, temptation for it to change its arrangements such that those profits and that balance sheet were booked through some other centre, such as Shanghai, or probably more likely Hong Kong, or possibly Singapore.
It is beneficial to the UK to have those HSBC assets booked here, because, of course, we get the corporation tax, including the corporation tax surcharge, booked through London, and there are clearly jobs connected with that. If we leave the bank levy on the non-UK balance sheet—the business is done overseas but booked here—and drive the booking overseas, we will lose that corporation tax and those jobs. The change to the bank levy is a sensible measure that will protect London’s status as an international financial centre, because the relevant part of the balance sheet is very internationally mobile.
I think there are two, or perhaps even three, interventions stacking up, so I shall happily take them all.
Jonathan Reynolds
I am extremely grateful to the hon. Gentleman for giving way. This argument is integral to the economic prosperity of the UK. On the point that he has just raised, I say clearly that we should wish to keep that substantial national asset, which is our financial services industry, in the UK, but it is Brexit that will drive it away. HSBC’s plans at the minute, in terms of relocating staff, are entirely linked to wholesale banking functions under Brexit. However, if there is one phrase that I would wish to etch on to the door of this Chamber, it is that causation and correlation are not the same thing, and that applies to his corporation tax argument. The average rate of corporation tax in OECD countries is 25%. There is a diminishing return from reducing it. When even Conservative councils are effectively going bankrupt, surely that requires greater reflection and self-analysis of the disastrous trajectory of some of the Government’s tax policies over the past eight years.
Chris Philp
A number of points have been raised there. On the point about correlation and causation, of course I understand that they are not the same thing. However, in my remarks about corporation tax reductions, I did point to some of the causal links. The two causal links that I cited were, first, encouraging investment and, secondly, companies choosing to move their domicile—for example, from Switzerland back to the UK. Therefore, there are two causal explanations as to why a reduction in the rate of tax might lead to an increase in the tax yield.
Peter Dowd
The explanatory statement for new clause 3 says:
“This new clause requires the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims, the revenue effects of the changes made in 2015 and the comparable effectiveness of the bank payroll tax.”
The stated aim, as set out in the Government’s own document, is as follows:
“Its purpose is to ensure that banks and building societies make a fair contribution, reflecting the risks they pose”.
We are asking for a review. If the hon. Gentleman is so sure of his facts and his case, why not have the review and see who is right in this debate?
Chris Philp
The Government conduct analyses and reviews the whole time. I am not sure whether we need to put the review into primary legislation. As the hon. Gentleman refers to new clauses 3 and 4, which stand in his name, I will turn to them now.
The new clauses call for various reviews and registers. Of course, analysis is important. That analysis, I believe, takes place in the Treasury already—I am sure that the Financial Secretary will comment on that in due course. What is interesting about the new clauses tabled by the Opposition is not so much what is in them, as what is not in them—it is the dog that did not bark, if I can borrow from Sir Arthur Conan Doyle.
I mentioned in an intervention that the Labour party appears to have taken a number of different positions on the bank levy: it voted against it in 2011; it voted against the surplus tax in 2015; and then it stated in public that it wished to leave the bank levy in place, despite having voted against its introduction, which strikes me as rather confused. I was rather hoping that its new clauses and amendments might enlighten us on what its position actually is on the bank levy. This is primary legislation. This is a finance Bill soon to become, I hope, a finance Act. The Opposition had a chance here in this Chamber today to explain to the House and to the country how they think our tax system should work in relation to the bank levy. They could have tabled an amendment, had they chosen to, saying that they wanted to leave the bank levy in place as it was, or they could have tabled an amendment abolishing it altogether, yet they have done neither of those things; they have simply called for analysis. I am disappointed that their plans have not been elucidated.
Chris Philp
However, if I am about to be enlightened, I will of course give way.
Peter Dowd
The hon. Gentleman cannot have it both ways. The Government introduced an arcane procedure, which was first used, I think, by Winston Churchill in 1929, effectively to stop us moving any substantive amendments. Does he not recognise that, whatever we wanted to do, we would not have been able to change things anyway, because the Government were not permitting us to do so?
Chris Philp
I am not sure. This is a moment when my hon. Friend the Member for North East Somerset (Mr Rees-Mogg) is required to advise on such matters. I do not share his expertise in parliamentary procedure. However, the shadow Chief Secretary did not specify in his quite extensive—and, at times, amusing—remarks the official Opposition’s position on the bank levy. There is certainly no parliamentary procedure that prohibited him from doing so, so he could quite easily have chosen to specify his exact view—whether the bank levy should continue as it is, go or do something else—yet he did not do so. I am rather disappointed by the lack of clarity on that point.
The hon. Member for Stalybridge and Hyde said a few moments ago in one of his many interventions that HSBC might contemplate its jurisdiction in the light of Brexit. In fact, HSBC was debating where to domicile itself well before the referendum. If anyone or anything threatens the City of London’s status as a global financial centre, it is not the matters being debated today and it is not Brexit. In fact, it is the right hon. Member for Islington North (Jeremy Corbyn) and the comments he made a day or two ago, which, in the words of one commentator, threatened to turn London into a new version of Pyongyang. That is what he said. It was in the Evening Standard—a newspaper edited by a highly reputable journalist.
PwC has done some analysis of the tax contribution made by the financial services sector, finding that it paid £72.1 billion in taxes last year. That is about 9% of the UK’s total tax take. It is no laughing matter when misguided and populist politicians take a cheap shot at the City to get some headlines. If business is driven away, the implications will be very severe for our tax take and for employment. If we lose the tax revenue generated by the City, the people affected will of course be children and the NHS.
I ask the shadow Chief Secretary to convey gently to his dear leader that comments such as those made a day or two ago are very unhelpful to the City. They endanger jobs and jeopardise the £72 billion of tax that the City pays. Whether it is through fiscal measures or through words, it is a very serious matter when we endanger jobs and the tax revenue from the City that funds about two thirds of the NHS’s budget. In this Bill and in our words, we should protect that tax revenue and those jobs.
Peter Dowd
I am more than happy to convey the hon. Gentleman’s comments to the Leader of the Opposition, although I do not accept them. Will the hon. Gentleman also pass on my comments to the Prime Minister? She is making a mess of Brexit, which is far more dangerous to this country than the comments allegedly made by the Leader of the Opposition.
Chris Philp
There is no allegation; they were said publicly. I will of course convey the hon. Gentleman’s comments in a spirit of reciprocation, but I dispute the remarks about Brexit. We saw fantastic progress before Christmas and are moving on to the next stage. I look forward to the series of speeches by my Cabinet colleagues in the coming days and weeks that I appreciate are on a different topic to the one at hand.
Jonathan Reynolds
I must defend the Leader of the Opposition. The comments that he made to the EEF national manufacturing conference were simply that finance must serve industry and that this country has to find ways to increase lending to businesses, to have more productive outcomes for the economy and to lower regional inequality—all things that were previously said by the former Chancellor of the Exchequer, who now finds work as the editor of the Evening Standard. I do not think that that is unreasonable in any sense. The feedback I have had from that conference is that the reception in the room was very favourable.
Madam Deputy Speaker (Dame Rosie Winterton)
I call Chris Philp—on new clause 3.
Chris Philp
Well, I am not sure whether I can respond to the hon. Gentleman’s comments while adhering to Madam Deputy Speaker’s gentle guidance, other than to say that I think that the Leader of the Opposition’s remarks went rather further than the hon. Gentleman just suggested.
Perhaps it is time to move on to the measures relating to tax avoidance and evasion, particularly new clause 6. The shadow Chief Secretary made a series of quite serious allegations about the Government’s effectiveness over the past seven years in combating tax avoidance and evasion. I disagree quite strongly with the premise of his points. He suggested that the current Government had been slow to act—indeed, had not acted—in these areas. I gently draw his attention to the fact that in the past eight years since 2010 the Government have taken 75 different measures designed to combat tax evasion and tax avoidance that have raised, cumulatively, £160 billion.
Mr Jim Cunningham (Coventry South) (Lab)
I am sorry that I was late for the beginning of the hon. Gentleman’s speech. He has given us a litany of what Conservative Governments have done over the past seven years. The Conservative Government before the previous Labour Government did not do very much about all the loopholes that he has listed.
Chris Philp
The hon. Gentleman is asking me to comment on the actions of the Government of over 20 years ago. I am commenting on the actions of the Government who have been in office for the past eight years, whose record is one that I am proud of and stand behind.
Because of these measures, our tax gap has reduced, as I said in an intervention, from 8% to 6%—the lowest in the world, and better than under the last Labour Government. When I made that intervention, I heard the shadow Chief Secretary make reference to profit shifting. Profit shifting is a serious matter. That is why I am pleased that the UK Government were at the forefront of the OECD’s BEPS—base erosion and profit shifting—initiative. Action 5 of that is specifically designed to clamp down on so-called profit shifting. I accept that this is an issue, and I am pleased that the UK Government have been taking action in that area.
Rachel Maclean
I am delighted that my hon. Friend, from his position of expertise, is reminding us of what a great record we have of collecting tax, rightly—tax that pays for schools, hospitals and police services up and down the country, as well as in Redditch, of course, which I care about the most. Does he agree that we have collected £12.5 billion more than if we had left the tax gap in the same state that Labour left us with? That is £12.5 billion to be spent in everyone’s constituency.
Chris Philp
My hon. Friend makes a very important point. The fact that the tax gap is 6% rather than the 8% bequested to us by Gordon Brown sounds like a theoretical point, but that two percentage point difference, as she rightly says, amounts to billions of pounds funding the NHS and schools. In debating these avoidance measures, we are not talking about something theoretical and of academic interest: it is precisely these measures that fund our public services, and that is why they are so important.
Turning to the Opposition’s amendments and new clauses, I was rather surprised, on looking at the amendment paper earlier today, to see that new clause 6 once again calls for a review and analysis—analysis which, I am sure, is already conducted by the Treasury, as the Financial Secretary will no doubt point out. But there was an absence—a silence and a desert; tumbleweed was rolling across the amendment paper—where I would have expected to see an abundance of ideas that we might have adopted from the fertile mind of the shadow Chief Secretary. If he could not have proposed ideas in an amendment for some arcane parliamentary procedural reason, he might at least have done so in his speech.
The Financial Secretary to the Treasury is an extremely attentive and receptive Minister. Had the shadow Chief Secretary proposed some constructive ideas, I am sure that the Financial Secretary would have listened carefully. I am very disappointed that after all the noise and, I dare say, bluster—I hope that is not unparliamentary—that we heard in the shadow Chief Secretary’s speech, we did not hear any concrete ideas. We cry out for and are open to new ideas, yet we did not hear any in what was otherwise an amusing and entertaining speech. I am disappointed.
If the Financial Secretary is in the market for new ideas on avoidance, as I am sure he is, one idea is that we could give some thought to ensuring that the Land Registry records the ultimate beneficial ownership of property and land. We discussed that yesterday in our debate on sanctions, and it was suggested by David Cameron a couple of years ago. When the ultimate beneficial ownership of those properties changed, we might then levy stamp duty on that change as though the physical property had been transferred. A lot of high-end residential property is held in non-UK corporate wrappers, and when the property is transferred, rather than selling it, as we would sell our properties, ownership of the company is transferred. There is no record of that in the UK and therefore no stamp duty is paid. That idea might well raise some more stamp duty. I could hardly criticise the shadow Chief Secretary for his lack of ideas without proposing at least one myself. I hope that Ministers will give some thought to that idea in due course.
In conclusion—[Hon. Members: “Hear, hear!”] I am glad I have said something that finds favour among Opposition Members. I must have set a record for the number of interventions taken, though there was only one from my own side. The action on the bank levy contemplated in the Bill is the right one. We are taxing banks more heavily than non-banks. We are raising more money than ever before, but we must be mindful of the risk of driving these companies or part of them overseas at a time when they contribute 9% of our total income.
On avoidance and evasion, I am proud that this Government have delivered the lowest tax gap in the world and improved by a quarter the position that they inherited. That pays for public services, as pointed out by my hon. Friend the Member for Redditch (Rachel Maclean). It is a good record, and I am proud of it. I look forward to supporting the Bill.
Stella Creasy
I rise to support the amendments tabled by the Opposition and to speak to my amendments 1 to 4.
I was into PFI before all the cool kids were. These amendments speak to a long-held concern of mine, which is that it is not enough for us as politicians to identify when something has gone wrong and to shrug our shoulders and say, “It’s complicated.” The consequences for the communities we represent and for this country’s public finances are so toxic that it is vital we act.
George Bernard Shaw said:
“Political necessities sometimes turn out to be political mistakes.”
Let me be clear that I am not seeking to blame anyone. Governments of all colours used PFI. It started in 1992 and has gone on to the present day. Absolutely, the last Labour Government used PFI to fund things, and it was not an ideological decision; it was a very simple one about keeping borrowing off the books.
However, we know now just how costly these decisions have been for this country. Every single school, hospital, street lighting system and motorway built was needed, but we know now that the consequence of these costs is that we may not be able to build such things in the future. I am in the Chamber today to propose a way in which Parliament can now act to get money back for our public services, because everyone of us has one of these projects in our constituencies.
We can talk about the numbers involved: £60 billion of capital building, on which we will pay back £200 billion. These companies are truly the legal loan sharks of the public sector, charging an excessive rate of interest in comparison with public sector borrowing for building and running services for us. Conservative Members may say that the cost I am talking about includes services, so it is worth breaking down the charges. Last year alone, this country paid out £10 billion in PFI repayments, over half of which was for interest and charges. The money we are paying for PFI is not paying for schools and hospitals to be run; it is paying the profits of the companies we borrowed from to be able to build them in the first place.
The National Audit Office has done absolutely sterling work uncovering just how bad a value-for-money calculation it was to go for PFI. On average, these projects are 2% to 4% more expensive than Government borrowing at the time. In total, with charges and fees included, they are now, on average, 40% more expensive than having worked with the public sector.
The interest rate matters because the costs are not necessarily about the management of a project; they are about the profits being made. Every single MP who is being lobbied about their schools and hospitals needs to recognise that 20% of the extra money the Government say they are giving to schools and hospitals will not touch the sides of emergency wards or go into the budgets of teachers to pay for the books and classes our schoolchildren need. It will go straight out of our public sector into pure profit for these companies.
The Centre for Health and the Public Interest has gone through the accounts of the few hundred companies running schools and hospitals to identify just how much money is involved. It found that they will get £1 billion in the form of pre-tax profit from NHS deals alone, which total just 125 of the 700 PFI projects. For example, the company holding the contract for University College London has, alone, made £190 million in the past decade out of the £725 million the NHS has paid out. In short, it has made enough in profits to build and run an entire hospital.
We have to talk about the human cost. I became interested in PFI when I saw the damage it was doing to my local hospital, Whipps Cross in Walthamstow, and to schools such as Frederick Bremer School in Walthamstow. Its headteacher is now desperately struggling to balance her budget in the face of this Government’s swingeing cuts to the schools budget, but the one repayment she cannot cut is the PFI one. Barts, the biggest PFI in our NHS—with a £1 billion capital build, and £7 billion repaid—is paying £150 million a year, of which £74 million is interest alone. It is no wonder that the hospital is in such persistent financial difficulty.
Wes Streeting
My hon. Friend is making a powerful case. Whipps Cross University Hospital also serves my constituents. To the east, the cost of PFI at Queen’s Hospital in Romford is such that it is creating enormous financial pressures on the Barking, Havering and Redbridge University Hospitals NHS Trust. Does she agree with me that that underpins the urgency of the need to tackle this issue? We should not stick to the ideological dogma of the past, but look at what has really happened and claw back some of that excessive greed to better fund our public services.
Stella Creasy
My hon. Friend—my next-door neighbour MP—pre-empts my argument. My amendments relate specifically to the 700 existing contracts, because I believe—I am glad my Front Benchers support this—that we can and must do something urgently about the damage these 700 contracts are doing every single day in schools where headteachers are having to consider sacking people but cannot cut the repayments, and in hospitals that are having to cancel operations but cannot reduce the repayments to their lenders.
There is a sixth-form college in Haywards Heath with no sixth form, because nobody will take on the school’s PFI debt. We keep talking about Northamptonshire Council, which is selling its own buildings because it is going bankrupt. It will owe £240 million to just five PFI deals in the next two to five years, of which £77 million is interest payment. Surrey Council is also in financial difficulties. It has £386 million of PFI commitments that it will not be able to reduce, of which £51 million alone is interest.
Stephen McPartland
I will keep my comments focused on the bank levy, PFI and tax evasion. Results speak far more than rhetoric, and it is important to put on the record that in 2016-17, the banking sector paid £27.3 billion in taxes, which was up 58% from the £17.3 billion that it paid in 2009-10. I understand that under the current proposals, the bank surcharge is expected to raise an additional £1.8 billion for the Exchequer.
I would like to talk briefly about PFI. I have a lot of sympathy for the comments made by the hon. Member for Walthamstow (Stella Creasy), but a one-size-fits-all approach is not appropriate. I have a lot of experience of PFI. In 2012, I launched a campaign because the last Labour Health Secretary signed a PFI deal for the Surgicentre in Stevenage to be built and operated by Carillion. As a result of the deal, when the centre was fully operational, 8,500 records were lost, leading to damaged eyesight for a large number of patients, and three people died. It was a complete nightmare.
As a result, I ran a long, hard campaign and persuaded the Health Secretary in 2013 to nationalise the facility and return it to my local hospital trust. A Conservative Member of Parliament therefore had a piece of the NHS nationalised that had been privatised by the last Labour Health Secretary, so if there is a specific issue, local Members of Parliament can go in there and create a change. I took Carillion on in 2012 and I won. As a result, I then worked with the GMB union. We launched a campaign to stop blacklisting among construction workers and we won again. It is important that individual Members of Parliament identify problems with PFI in their areas, so we can then work on and tackle those problems as individuals.
Turning to tax evasion, it is very important for people to look at what they can do as individuals. Again, back in 2012—I was obviously incredibly active at the time—I launched a campaign on tax transparency, before it was fashionable. In association with Christian Aid, I wrote to all FTSE 100 chief executives to ask whether they would commit to greater tax transparency and help developing countries around the world. In the drive towards globalisation, the situation is incredibly difficult—it is almost a race to the bottom in some areas—with regard to what each country will offer to allow large multinationals to move around.
I published all those results in The Daily Telegraph and on a website. This was all before tax evasion and tax transparency became far more fashionable. The Government got involved and I am very pleased that as a result, £160 billion has been raised since 2010 in additional tax revenue, tackling avoidance, evasion and non-compliance. For me, that is an additional £160 billion that has been invested in my local and national health service, and in my hospital that has been rebuilt and paid for by the Government, not by outside organisations or PFI. That money is being invested in children’s futures in my constituency. Individual Members of Parliament have a great opportunity to go out and create change in their areas, if there are specific issues that they can tackle, and it is possible to win on those issues.
Kirsty Blackman
I think that I was as surprised as you were, Madam Deputy Speaker, by the brevity of the speech by the hon. Member for Stevenage (Stephen McPartland). I very much appreciate it—it is great. I was willing the hon. Member for Croydon South (Chris Philp) to keep going for an extra 30 seconds to hit the half-hour mark. He was close, but did not quite get there.
I want to talk specifically about the bank levy, tax avoidance and evasion, and, briefly, PFI. We will support the amendments tabled by the hon. Member for Walthamstow (Stella Creasy). I will not expand on that because she covered the issue broadly. On the bank levy, the position in our 2017 manifesto was that we did not support the reductions in the bank levy; we supported the reversal of those reductions. What the Labour party has proposed is a good way to tackle this, given, as has been said in exchanges across the House, that there is not an amendment of the law resolution, nor are we able to move some of the more exciting, more interesting things that we would have liked to move. I hope that the next time there is a Finance Bill, the Government choose to do that, and if we end up with the Labour party in charge, I hope that it will make that change and ensure that an amendment of the law resolution comes through in any Budget process and Finance Bill. That is the only way in which we can have a reasonable level of discussion on this issue.
Rachel Maclean
It is a pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman) and the other contributors.
I will keep my remarks short as many of my points I wish to make have already been made by colleagues. I want to bust the myth that we on the Conservative Benches are friends of nefarious bankers and bad people trying to swindle money out of the honest taxpayer. Nothing could be further from the truth. We on these Benches want a healthy financial system underpinned by banks, and we want those banks to contribute fairly, as they can and must, and as they have been doing under this Government. The facts speak for themselves, as my hon. Friend the Member for Croydon South (Chris Philp) set out.
We have set out a plan to raise an additional £9 billion by 2022—a significant contribution to the Exchequer that will help to fund the public services on which people rely. The banks are making money out of businesses in this country. They need to make a return—they need to contribute fairly—and the Bill will ensure that that happens.
When Labour Members start to attack us and our policies, they need to look at themselves in the mirror. They need to bear in mind the number of times they voted against the introduction of corporation tax and bank levy measures which, as we have seen, have raised money from the banks. Theirs was the party that allowed the Mayfair loophole to develop, so that hedge fund managers were getting away with not paying tax while their cleaners were paying it. I remind the House that it was this Chancellor, in this Budget, who imposed a tax on private jets. Could any measure indicate more strongly that the Conservatives believe in fairness and taxing the proceeds of profit in the right way to fund our public services?
The hon. Member for Bootle (Peter Dowd) said that the banks were not making a fair contribution. I completely disagree with that narrative and that agenda. The banks are making a fair contribution.
Peter Dowd
When I have made statements and I have been wrong, I do not mind people bringing that to my attention, but I did not say that the banks were not making a fair contribution. We were talking about a fairer contribution in the context of the Government’s own definition of what they should be doing. That is the point. The hon. Lady should have a look at the work. She should have a look at the book. She should do her research, and then make an accusation.
Rachel Maclean
I am not making an accusation at all. I apologise if I have misrepresented the hon. Gentleman. I merely wish to make the point that I believe that banks must make a fair contribution, and that the Bill will enable them to do so. Through measures that we have introduced since we have been in government, £160 billion has been raised for the Exchequer.
Nigel Huddleston (Mid Worcestershire) (Con)
My hon. Friend is making an important point. Conservative Members do not just obsess about some punitive rate for party-political purposes. The key is to grow the economy and maximise the tax take, so that we can then spend our money on public services. It is important to recognise the increased revenues from tax overall, rather than being obsessed with a particular rate.
Rachel Maclean
My hon. Friend is right. The spectre of the Laffer curve raises its head yet again, but it is a fact that lowering the tax rate increases the tax take. That is a fact that we have observed time and time again, and it has benefited our economy.
Rachel Maclean
I am sorry, but I cannot take any more interventions, because time is short.
I hope that, when he winds up the debate, the Minister will touch on the important issues of cryptocurrencies and bitcoin which, I believe, are not currently covered by regulation. I think we would all like to be assured that the Treasury is ensuring that no loopholes can develop that might allow tax evasion and avoidance. There are some alarming reports of people being arrested for money-laundering billions of pounds by that means.
The hon. Member for Walthamstow (Stella Creasy) is very well informed. I recognise the hard work that she has done, and I share a number of her concerns about the private finance initiative. A hospital in Worcester serves my constituents in Redditch. It is in special measures, and it has a financial issue. All of us in Redditch are very worried about that. I do not think that the new clause is the right way of dealing with the situation, but I should like to know what action the Minister will take to reassure my constituents that no one is reaping profits that they should not be reaping.
May I ask the hon. Member for Walthamstow to clarify the position of Labour Front Benchers? Do they not intend to take all the PFI contracts back into public ownership? She said that it would cost £220 billion, but I believe that that is the official position of the Labour party. It is a little confusing. It is difficult to know what the Labour party supports—whether it is the proposals of the hon. Lady or those of the Leader of the Opposition—so some clarity would be welcome.
Coming to my final point, Brexit was mentioned earlier, and we heard remarks about Brexit and the Labour party’s position, with claims that somehow Brexit is damaging our economy. [Interruption.] Well, Brexit was mentioned in a sedentary intervention. In my experience, businesses fear the spectre of a Labour Government more than Brexit, as a Labour Government would damage jobs and business investment. That is what businesses are worried about.
Jonathan Reynolds
There must be an objective assessment, given the strength of the economic risk that we face from Brexit. In terms of financial services, Brexit could diminish market access; it could take it away and make a situation where there is not a legal right to do the kind of business that currently takes place within the United Kingdom. There is no comparison between that and differences of political opinion over policies, and the Government and Conservative Back Benchers must take the economic risks of Brexit seriously.
Rachel Maclean
I can see that Madam Deputy Speaker is quite cross that we have moved off the point, so I return to the point that I do not support the new clause because I believe what the Government have put forward is already tackling the issues of tax avoidance and evasion, and those measures will ultimately benefit our economy and our constituents.
Christine Jardine (Edinburgh West) (LD)
It is an honour to follow the hon. Member for Redditch (Rachel Maclean), and I shall speak in support of amendments 1, 2, 3 and 4.
The PFI system is, as admirably demonstrated by the hon. Member for Walthamstow (Stella Creasy), not working and we need to change it. It is not right that half of the cost for PFI schemes are interest repayments and charges for local services, which are under desperate pressure at the moment
In April 2016, 17 schools across Edinburgh were closed due to fears that the buildings were structurally unsafe. They included three primary and secondary schools in my constituency. All 17 schools were constructed under PPP and PFI initiatives. In Edinburgh West, Craigroyston Primary School, Craigmount High School and Royal High School all closed. Parents were left worried and frustrated. It is clear to me from what I have heard today and witnessed myself that there is now compelling evidence that the payday loan approach to building is costing us all dearly.
For years, councils in Scotland and across the UK had no choice but to use PPP or PFI agreements to fund capital projects. They now find themselves in the position that interest repayments and charges are detracting from service provision when they are already strapped for cash. This morning at an all-party group meeting I heard evidence of how palliative and end-of-life care for children is being affected by the lack of council funding, and how the integration of health and social care is being restricted. That is outrageous.
In Scotland, PPP and PFI contracts are largely the responsibility of the Scottish Government under devolved competences, but I cannot agree with the hon. Member for Aberdeen North (Kirsty Blackman) that if the Scottish Government took over it would automatically be better; the evidence we have in Scotland counters that argument.
While it would be illegitimate to forcibly take contracts back in-house, it is important that we redress the windfall profits handed to these companies by Tory corporation tax cuts. It is both legitimate and fair for a windfall tax to be imposed on those profits, because, as we have heard, that would hit these corporations where it would get their attention—in their profits.
I ask all Members to put the benefits that we need, and the cash injection we need for our local services across the UK, first on the list of priorities, and find whatever way possible either to get money back or impose a windfall tax on these corporations.
Peter Dowd
Very little that I have heard from the other side in this debate has convinced me that we should withdraw our new clause—
Madam Deputy Speaker
Order. I beg the hon. Gentleman’s pardon. I have made a mistake, in that I thought the Minister had already addressed the House on this group. I also beg the Minister’s pardon.
Mel Stride
There was a ripple of dissatisfaction when you failed to call me to speak, Madam Deputy Speaker, but it was almost imperceptible. Thank you for correcting your error.
In this debate we have heard about a range of issues, including the changes the Finance Bill makes to the bank levy, the taxation of private finance initiatives, and tax avoidance and evasion. I will respond to each in turn, starting with the bank levy. Opposition Members have raised a number of objections to the changes to the levy made by the Finance Bill and to the Government’s broader approach to bank taxation. These are unjustified. This Government remain committed to ensuring that banks make an appropriate additional tax contribution, beyond that paid by other businesses, that reflects the unique risks they pose to the UK financial system and to the wider economy.
I shall address some of the arguments put forward by the shadow Chief Secretary to the Treasury, the hon. Member for Bootle (Peter Dowd), which I felt focused far too much on the bank levy. It is indeed declining, but there is good reason for that. In 2015, when we took the relevant decisions on this, we recognised that the risks presented by our banks had eased quite considerably. Indeed, the Bank of England has recently carried out rigorous stress testing on the banks, and that was the first occasion on which not a single bank failed its stress test. That is indicative of the fact that one of the raisons d’être for the bank levy has started to recede. That is to say that the banks are less of a risk than they were before, and the charges on the assets and liabilities that they hold are therefore becoming less relevant. The hon. Gentleman did not focus so much on the surcharge to the banking tax, which came in from 1 January 2016 and which represents an additional 8% on the profitability of banks at the present time. Whereas corporations are paying 19%, we are now looking at a total rate of around 27% for banks.
Anneliese Dodds
I am grateful to the Minister for that explanation, but as we have said before, when we take both those measures together, we see that the reduction in the levy along with the surcharge results in a lower overall contribution over time. We have spelled out clearly in our previous debates that the overall amount coming from the banks is receding over time, even with the surcharge.
Mel Stride
That is not the case. I will explain some of the figures in a moment, but there are other elements that are not being taken into account. One is that the banks are not permitted to offset against their profits the PPI compensation payments. Also, they are now working to a more restrictive corporate interest restriction regime, under which they are allowed to roll forward only 25% of their interest chargeable to offset against profits. Taking all those measures together, we have raised some £44 billion more from the banks since 2010 than we would have done if we had treated them simply as any other corporate business.
Opposition Members have cited changes in revenue from the bank levy. They argue that this is declining, but it is misleading to consider bank levy changes in isolation when they form part of a set of wider changes to bank taxes announced in 2015 and 2016, including introducing the 8% surcharge. Overall, rather than reducing revenue, these tax changes are expected to raise £4.6 billion over the current forecast period. I think that the hon. Lady will be interested to hear that figure.
Anneliese Dodds
We have just looked at the projections up to 2022-23. For the current year, we see £3 billion coming in from the levy and £1.6 billion coming in from the surcharge. The projection for 2022-23 is £1.3 billion from the levy and £1.1 billion from the surcharge. That appears to be a significant reduction; in fact, it is almost half.
Mel Stride
Taking into account the respective changes, we will raise £4.6 billion over the forecast period as a consequence. My point is that it is simply not right to focus only on the declining part of the equation—the reduction in the banking levy charge—and not on the fact that we are raising more as a consequence of the 8% surcharge and the increased profitability of banks on our watch.
Mel Stride
Perhaps we can get into the nitty-gritty of this offline.
The average revenue from the bank levy between its introduction in 2011 and 2015-16 was around £2.6 billion. As a result of this package, however, yield from the surcharge and the levy in 2022-23 is forecast to be £3.2 billion. By 2023, as I have said, we will have raised around £44 billion in additional bank taxes since the 2010 election.
Opposition Members have also suggested that our bank levy is set at a low level compared with other countries. In fact, not all financial centres have a bank levy. The USA, for example, chose not to introduce one at all, and while several EU countries introduced bank levies following the financial crisis, it is not possible to make direct comparisons between these levies as the rules for each are different.
We have heard the argument this afternoon that we should reintroduce a tax on bankers’ pay. One of the aims of the changes to bank taxation announced in 2015 and 2016 is to ensure a sustainable long-term basis for taxing banks, based on taxing bank profits and the bank levy. By contrast, the bank payroll tax referred to in new clause 3 was always intended as a one-off tax. Reintroducing it would be ineffective and unsustainable compared with the package of banking tax measures that we have introduced. Even the last Labour Chancellor pointed out that it could not be repeated without significant tax avoidance.
Opposition Members also propose that HMRC should publish a register of tax paid by individual banks under the levy. Taxpayer confidentiality is rightly a core principle for trust in our tax system and HMRC does not publish details of the amount of tax paid by any individual business. While the Government continue to consider measures to support transparency over businesses’ tax affairs, we must balance that with maintaining taxpayer confidentiality in order to maintain public confidence in our tax system.
Matt Western (Warwick and Leamington) (Lab)
Does the Minister accept that the transparency that is being sought is down to the public, demanding it? After all these years of difficulty, and at a time when so many communities face council tax increases of 5%, there seems to be an inherent unfairness in the tax system.
Mel Stride
I just do not accept that. This goes back to my point about the balance of measures that we are taking. The Opposition are understandably focusing on the bank levy, which is indeed declining over time, but I point to the additional 8% surcharge, which is 8% more on corporation tax than other non-banking businesses are expected to pay. As I have said, the banks are also not permitted to carry forward interest rate charges to the same degree as other businesses, and they are not allowed to offset against tax the compensation payments that they have been making. All those things add up to additional tax and by 2023 will have raised an extra £44 billion since 2010 compared with what would have been raised from non-banking businesses.
Matt Western
At the same time as corporation tax is being reduced overall—I accept the point about the bank surcharge—does the Minister not accept that we are seeing a significant increase in council tax for the public?
Mel Stride
As my hon. Friend the Member for Croydon South (Chris Philp) pointed out, as we have reduced the overall level of corporation tax from 28% to 19%—corporation tax, of course, applies to banks as it does to non-banking businesses—we have seen the tax take increase by some 50%. We have actually been raising more revenue as a consequence of those changes.
Finally, new clause 5 would require the Government to publish further analysis of the impact of the Bill’s bank levy re-scope. The Government have already published a detailed tax information and impact note on the proposed changes, and we have published information, certified by the OBR, on the overall Exchequer impact of the 2015 package of measures for banks. It is important to legislate for such changes now in order to give UK banks certainty on their tax position so that they can plan effectively for the future.
The changes in clause 33 and schedule 9 complete a package of measures that raises additional revenue from banks in a way that delivers a tax regime that is more sustainable, more aligned with regulation and more supportive of the competitiveness of UK financial services. We should pass them without amendment.
In her amendments, the hon. Member for Walthamstow (Stella Creasy) calls for a windfall tax on private finance initiative companies. I pay tribute to my hon. Friend the Member for Stevenage (Stephen McPartland), who outlined his vigorous work in this area in support of his constituents.
There are approximately 700 operational projects that originated under the initial PFI, representing £60 billion in capital investment. The vast majority of those projects were signed between 1997 and the 2010—620, or 86%, of all PFI projects in the UK were signed under the last Labour Government.
This Government have taken action to ensure that PFI contracts deliver better value for money for the taxpayer. That is why in 2011 we introduced the operational public-private partnership efficiency programme, which has reported £2 billion of savings. Even where it is not possible to find savings in a project, we are working with Departments and procuring authorities to improve day-to-day effectiveness and management of contracts. We have also made improvements through PF2 to offer taxpayers better value for money on new projects.
The hon. Member for Walthamstow argues that a windfall tax on what she sees as the excess profits of PFI companies would help to fund public services; I am clear that it would not. A retrospective windfall tax would instead do damage to any private investment in public services and would tax local authorities and NHS trusts rather than the providers it is intended to target. Even aside from those flaws, her amendments would not work as she intends, and I will set out why in more detail.
First, a windfall tax would cost this and future Governments who try to sign contracts with businesses, whether in PFI or in another area. This country has a hard-won reputation for tax certainty, and that important principle would be undermined by a retrospective tax targeting businesses that have legitimately entered into a contract with the Government. There would be extra cost for the taxpayer whenever the Government next needed to engage the private sector.
Secondly, as the hon. Lady knows, PFI contracts—she said that she has read many—are long-term agreements that typically include anti-discriminatory clauses. This means that when legislation is passed that targets PFI companies without applying to similar projects undertaken by other companies, the tax owed can be recovered from the procuring authorities. A windfall tax would therefore only be a tax on local authorities, NHS trusts and Government Departments that hold such contracts, which I am sure is not the outcome she seeks.
Amendments 1 and 2 propose that the bank levy could be extended to PFI groups, but PFI groups are not banks. Instead, they borrow money to finance projects and earn a return on them, in exactly the same way that many other businesses do. It is simply not possible to bring PFI groups within the scope of the bank levy. Most of the design of the tax could not be applied to such groups.
The changes proposed by amendments 3 and 4 also would not work as a windfall tax. The last Finance Act introduced corporate interest restriction rules to limit the amount of interest expense that a corporate group can deduct against its taxable profits. The amendments propose modifying those rules by limiting the ability of corporate groups to carry forward and offset their unused interest allowance against future profits. The limitation would apply only where the group contains a PFI company that has previously made profits that are deemed to be “excessive,” by reference to a statutory test. The changes proposed in the amendments are convoluted. As I have said, it would fall to the public bodies holding the PFI contracts to pay the extra tax resulting from these changes. But even if one could impose additional tax liabilities on PFI providers, this would not be a sensible way to proceed. It would be unlikely to change the tax paid by the PFI company, but would instead sometimes penalise other companies in the same corporate group. More likely, groups would simply restructure to avoid the tax.
Peter Dowd
That response from the Minister had complacency running through it like a line through a stick of rock. It contained self-congratulation and a rejection of any suggestion of a review, in any area. Not only have the Government not allowed us to make any significant changes, but they are not even prepared to listen to our asking for reviews, such as that requested by my hon. Friend the Member for Walthamstow (Stella Creasy). It is unacceptable if the Government are not prepared even to go that far, having shackled us this much. That is disgraceful. The Government, in this Parliament, should be ashamed of themselves for shackling the Opposition to this degree. We will push the new clause to a vote.
Question put, That the clause be read a Second time.
Madam Deputy Speaker (Mrs Eleanor Laing)
With this it will be convenient to discuss the following:
New clause 8—Annual report on relief for first-time buyers—
“(1) The Chancellor of the Exchequer must prepare and lay before the House of Commons a report for each relevant period on the operation of the relief for first-time buyers introduced in Schedule 6ZA to FA 2003 not less than three months after the end of the relevant period.
(2) The report shall include, in particular, information in respect of the relevant period on—
(a) the number of first-time buyers benefiting from the relief,
(b) the number of purchases benefiting from the relief,
(c) the average age of first-time buyers benefiting from the relief,
(d) the effects on the operation of the private rented sector,
(e) the effects on council housing and other social housing,
(f) the effects on the supply of affordable housing, and
(g) the effects on the operation of collective investment schemes under Part 17 of the Financial Services and Markets Act 2000.
(3) For the purposes of this section, ‘relevant period’ means—
(a) the period from 22 November 2017 to 5 April 2018,
(b) each period of 12 months beginning on 6 April during which the relief is in effect, and
(c) the period beginning on 6 April and ending with the day on which the relief ceases to have effect.”
This new clause requires an annual report on the operation of the relief for first-time buyers, including information on the beneficiaries and effects on different aspects of housing supply.
New clause 2—Review of income tax revenue—
“(1) The Office for Budget Responsibility must review the revenue raised by the rates of income tax within six months of the passing of this Act.
(2) A review under this section must consider revenue raised by the rates of income tax specified in sections 3 and 4.
(3) A review under this section must also consider the effect on revenue of raising each of the rates of income tax specified in sections 3 and 4 by one percentage point.
(4) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.”
This new clause provides for a review of the revenue raised at the rates of income tax specified by Clauses 3 and 4 of the Bill and the effect on revenue of raising each of those rates by one percentage point.
New clause 10—Review of retrospective VAT refunds for the Scottish Fire and Rescue Service and the Scottish Police Authority—
“(1) Within one month of this Act receiving Royal Assent, the Chancellor of the Exchequer shall commission a review of the potential consequences of allowing the Scottish Fire and Rescue Service and the Scottish Police Authority to claim VAT refunds under section 33 of VATA 1994 retrospective to the date of their establishment.
(2) The review shall consider—
(a) the administrative consequences of allowing retrospective claims, and
(b) the impact on revenue of allowing retrospective claims.
(3) The Chancellor of the Exchequer shall lay the report of this review before the House of Commons within six months of this Act receiving Royal Assent.”
This new clause would require the Chancellor of the Exchequer to commission a review into what the potential consequences of allowing the Scottish Fire and Rescue Service and the Scottish Police Authority to make retrospective claims for VAT refunds would be.
New clause 11—Analysis of effect of income tax rates on incentives into employment—
“(1) The Office for Budget Responsibility must review the impact of the rates of income tax specified in sections 3 and 4 in accordance with this section within six months of the passing of this Act.
(2) A review under this section must consider the impact of the rates of income tax specified in sections 3 and 4 on the incentives for individuals to seek employment, including—
(a) whether those rates create, or detract from, an incentive for those not employed to enter into employment,
(b) whether those rates create, or detract from, an incentive for those currently in employment entering into new employment at a different level of income, and
(c) to what degree those rates create, or detract from, any such incentive.
(3) A review under this section must also consider those rates in the context of—
(a) National Insurance contributions,
(b) tax credits, and
(c) social security benefits.
(4) A review under this section must give separate analyses in relation to the impact of the rates of income tax specified in sections 3 and 4 in different parts of the United Kingdom.
(5) In this section—
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland.
(6) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.”
Government amendments 6 to 8.
Amendment 10, in clause 44, page 38, line 30, at end insert—
“(4A) In paragraph 1GE (higher rates of duty) after paragraph (3)(c) insert—
‘(d) the vehicle is not a taxi.
(3A) For the purposes of this paragraph, ‘taxi’ has the same meaning as in section 64 of the Transport Act 1980.’”
Amendment 11, page 39, line 1, after “section”, insert
“(other than those made by subsection (4A)”.
Amendment 12, page 39, line 2, at end insert—
“(8) The amendments made by subsection (4A) have effect in relation to licences taken out on or after the day on which this Act is passed.”
Amendment 13, in schedule 3, page 65, line 32, leave out from “and” to “or” in line 36 and insert
“each of the conditions in subsection (1A) is met”.
This amendment, together with Amendment 14, provides that a pension scheme cannot be de-registered on grounds of the dormancy of a single company within the scheme, but only if conditions are met in relation to the date of first registration and the trading status of participating companies.
Amendment 14, page 65, line 37, at end insert—
“(4A) In section 158 (grounds for de-registration), after subsection (1), insert—
(1A) The conditions in this subsection are that—
(a) the scheme was registered in the current tax year or in the six preceding tax years,
(b) no sponsoring employer in relation to the scheme is a body corporate that is actively trading at the time that withdrawal is being considered, and
(c) no sponsoring employer in relation to the scheme is a body corporate that was actively trading for a period of at least twenty four months.”
See explanatory statement for Amendment 13.
Government amendment 9.
Anneliese Dodds
With permission, Madam Deputy Speaker, I will speak briefly to the SNP’s new clause 10 and to amendment 12, which was tabled by my hon. Friend the Member for Ilford North (Wes Streeting), both of which the Opposition support. I will then speak in more detail about our new clauses 7 and 8.
On new clause 10, Labour Members welcome the Government’s decision to allow the Scottish Fire and Rescue Service and the Scottish Police Authority to claim retrospective VAT refunds. The measures in the new clause follow the Scottish Government’s decision in 2012 to establish a nationwide fire and rescue service for Scotland. The then Treasury Minister, who is now the Justice Secretary, wrote:
“Based on the information currently available it seems that, following the Scottish government’s planned reforms, neither the new police authority nor the fire and rescue service will be eligible for VAT refunds under Section 33 of the VAT Act 1994.”
As colleagues will know, that Government decision meant that the Scottish police and fire services lost out on VAT refunds worth more than £30 million, with the Scottish police losing out on about £26 million. To some extent, I would argue it was a sign of recklessness that, at a time of austerity, the Government effectively left Scottish firefighters and police officers to fend for themselves. While Labour Members welcome the Government’s change of heart, we recognise the need for a proper process covering retrospective claims for VAT refunds.
The review proposed by the hon. Member for Aberdeen North (Kirsty Blackman) would ensure that the process for VAT refunds was transparent, and that the VAT claims of the Scottish Fire and Rescue Service and the Scottish Police Authority were properly refunded by the Government. The review would also ensure that such an ill-informed decision, backed up by insubstantial reasoning, would not be allowed to happen again. That is why we support the new clause.
Amendment 12 focuses on an issue that I raised in Committee: the fact that taxi drivers with a zero-emission capable vehicle will not be exempt from vehicle excise duty until next year. As we discussed in Committee—I am sure that the Minister remembers this—taxi drivers need to purchase their car over a long period due to its relatively high cost. In many areas of the country, taxi drivers are shifting to lower or zero-emission capable taxis. I asked the Minister whether further changes were needed to the Bill so that the take-up of zero-emission capable taxis would not be choked off. I was grateful to the Minister for stating that there would be a consultation on the new measures in the spring, but I do not know whether that consultation has yet begun, so perhaps the Minister will enlighten us on that point. In the meantime, it seems sensible, as my hon. Friend the Member for Ilford North proposes, to prevent taxi drivers from taking a hit when they have taken an environmentally friendly choice, which has considerable financial consequences for them because the vehicles are more expensive than standard taxis.
I now come on to Labour’s new clauses 7 and 8, which would require a review of the proposed relief on stamp duty for first-time buyers, followed by an annual report on the policy’s effectiveness. The review and the report would consider the impact of the new measure on house prices and housing supply, and cover who benefits from the policy. The need for such reviews is very clear. The Office for Budget Responsibility’s assessment of the measure is set out in black and white: it is likely to increase prices by 0.3% and benefit a very small number of people. In its words, the main gainers from the new stamp duty policy are people who already own property, not first-time buyers. It added that some potential first-time buyers with smaller deposits might now be able to borrow a little more, therefore allowing them to buy properties that they otherwise could not afford, but that the process would be more expensive. That is in the context in which the average price of a home in England for first-time buyers has gone up by almost £40,000 since 2010. In fact, only about 3,500 additional homes are predicted to be sold as a result of the new incentive.
Sir Desmond Swayne (New Forest West) (Con)
Has the hon. Lady spotted that house prices are now falling, notwithstanding the change?
Anneliese Dodds
I do not believe that that is uniform across the country. Of course there would be implications if there were very rapid changes. That would concern many people, but we feel that in this area, when it comes to the cost for first-time buyers, there has not been a significant change. If the right hon. Gentleman has evidence that there has been a change for first-time buyers, I would certainly like to see it. There might have been a change across the whole piece, but it certainly has not had an impact on first-time buyers who are trying to buy the lowest cost houses, as many are struggling more than ever before.
Labour Members say that the situation might be different if the measure was accompanied by others that promoted the production of genuinely affordable homes. As it stands, however, any additional homes—at least those promoted by any Government policy—will not be in place before the stamp duty cut takes place. The funding allocated in this regard is woefully inadequate. Our most recent debate about this matter in this Chamber revealed that the Government’s new housing infrastructure fund moneys, such as they are, will not start to come forward until 2019-20, which means that the £585 million cost of stamp duty cuts in 2018-19 will not be accompanied by housing infrastructure measures, and the same will be the case the following year. It is only two years later that extra money for the infrastructure fund will be forthcoming. In any case, that will amount to less than half of what the public purse will have renounced that year because of the cut in stamp duty. It is extremely disturbing that the Government have chosen to plough ahead with this approach in the absence of measures to significantly boost supply.
I repeat the calls we made in previous debates on the Bill for the Government to come clean on the advice they received about this measure. What do the economists in the Treasury say about this approach in the absence of measures to substantially increase supply? Ministers can claim—we have heard this from the Chancellor—that the OBR has not taken the small clutch of housing measures in the Budget into account in its analysis, but most experts who have taken those very small changes into account concur with the OBR’s original assessment. Was that also the case with Treasury officials? We in this House deserve to know, as do our constituents, particularly if they are faced with any rise in house prices for first-time buyers, as anticipated by the OBR. I point out that the Government’s own assessment of a previous stamp duty cut, again in the absence of measures to boost substantially the supply of affordable housing, indicated that
“the tax relief has not had a significant impact on improving affordability for first-time buyers.”
We also need to know the regional impact of the measure. As colleagues mentioned in our previous debate on this matter, the upper limit of £500,000 in high-cost areas and £300,000 elsewhere means that the change will not have a positive impact in huge swathes of the country, aside from reducing the revenue pot overall, with the result that other taxes on individuals and companies have to take up the slack, unless public services are to be cut further. For many people, home ownership is a distant dream when there is no way they can afford the necessary deposit. Today’s figures showing that real wages have fallen for the seventh month in a row should give us all pause for thought about whether the proposed measure is appropriate.
Helen Whately
It is difficult for first-time buyers in my area to afford a deposit and they welcome the help the Government are giving to increase their opportunities when they are competing against people who are selling properties and are therefore more able to afford a deposit. This sort of policy is therefore very welcome, and it goes hand in hand with measures to increase housing supply. We are seeing significant—and not necessarily popular—increases in the housing targets for areas such as my constituency, coupled with work to make sure that houses are built when planning permission has been granted. I therefore contest the hon. Lady’s remarks on that point.
Anneliese Dodds
In practice, most of the commentary that I have seen from experts and those working in the housing sector suggests that in areas where there is extreme competition between different types of buyer—for example, first-time buyers, those buying additional properties, investors, and those moving to a second or third property—such a measure may help initially, but the overall cost increase will also affect first-time buyers. They will therefore be buying at a higher price, so most of the impact of the measure—as with previous stamp duty changes without a boost in supply—will help sellers, not buyers. That was the Conservative Government’s own assessment of the impact of their previous cut to stamp duty in the absence of additional measures to boost supply.
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
The hon. Lady gave us a tour de force in the Public Bill Committee, but on the narrow point about the proposed changes’ impact on prices, the director of the Institute for Fiscal Studies, Paul Johnson, said that although there may be an increase in the price faced by first-time buyers,
“this does not mean first-time buyers are worse off as a result. They are in general better off. Instead of paying, say, £100,000 for £98,000 worth of house plus £2,000 of tax they might be paying £102,000 for £102,000 worth of house.”
What is her response to that point?
Anneliese Dodds
I am aware of what Mr Johnson said, but I think he has fallen into the trap of looking only at the impact of the change on an individual buyer and forgetting that it will have an impact on the housing market, particularly in areas where there is strong supply and strong demand, and where such a change is likely to push up prices. I agree with Mr Johnson on many things, but in this case, unfortunately, the context has been missed, and it is important that we bear it in mind.
Michelle Donelan (Chippenham) (Con)
The evidence suggests that house prices are not increasing—in fact, the Royal Institution of Chartered Surveyors has echoed the point, saying that although there was scaremongering, the evidence suggests that prices are not rising.
Anneliese Dodds
I am sure the hon. Lady is well versed in the subject, but when it comes to the cost for first-time buyers, there has been an increase. That assertion is supported by the evidence, and that is exactly what we are concerned about. We need to take action. The Government often say they want to help first-time buyers, and I think it is important that we take them at their word. We should also look at what the OBR said in its assessment of the policy. Again, I go back to whether the Government received any advice about the likely impact of their policy. It is disappointing that we have not had any clarity on that matter.
Sir Desmond Swayne
I am struggling with the concept that a price that is available to a first-time buyer differs from the prices paid by anyone else. I can accept that there are segmented markets in which there might be a difference, but if prices are falling marginally, that will be to the benefit of all buyers, whether it is the first or the seventh time that they have bought a property.
Anneliese Dodds
I am always delighted to hear from the right hon. Gentleman. It might be instructive for us to look at the shape of the market, and at which elements may be reducing in price and which may not. I have seen media coverage suggesting that any reduction seems to have been reversed recently. In any case, it appears that there might have been a price reduction in the highest-cost areas with the most expensive properties, but are those the properties that first-time buyers are likely to be considering unless they are incredibly well off? Some may well be, but most first-time buyers in this country are not looking to move into properties worth multiples of a million pounds. They are looking to move into properties that are much more affordable, so the lack of Government action to help them is enormously disturbing. That is why we do not support this measure; others would have been more effective. In particular, we do not support the measure in the absence of action to boost the supply of affordable housing.
I should mention that the Government’s definition of affordable housing enables a home worth £400,000 to be classified as affordable. I am sure that Members on both sides of the House would not appreciate that definition of affordability.
Mr Mark Francois (Rayleigh and Wickford) (Con)
My hon. Friend the Member for Faversham and Mid Kent (Helen Whately) talked about constraints on supply, and she specifically mentioned dealing with land banking by property developers. They are often given planning permission but, because of their financial models, choose not to build for long periods of time. As the hon. Member for Oxford East (Anneliese Dodds) will know, we have proposals to punish developers that continue to work in such a way. What is Labour’s view about them?
Anneliese Dodds
I am grateful to the right hon. Gentleman for mentioning that. For some time, Labour has proposed changes in this area, but they were dismissed as “Venezuelan-style socialism,” which I think was the phrase that we heard from Government Members. We are concerned about this issue, but we are also concerned about matters in the planning system that the Government have not touched, such as the fact that the rules on viability put all the cards in the developers’ pockets. That means that, if someone wants to develop any social supply, there are pressures on the affordability of the rest of that development. We are very aware of that and have worked on it consistently. Sadly, we have not always been supported in that, but I am happy that the right hon. Gentleman has come on board with Labour policy, and that the Government have as well.
There is a general lack of measures and lack of action on other elements of the housing crisis, which is so problematic—the stamp duty change seems to be the only real, significant change in relation to housing policy. Sadly, all of us as Members are seeing the impact of the housing crisis in our postbag, in our surgeries and, very sadly, on many of our streets. Rough sleeping has more than doubled under the Conservatives. It is the No. 1 issue that is mentioned to me on the doorstep in my constituency. I am sure that is the case for many other urban MPs. Even those who do not see it in their constituency probably see it, sadly, when they come to work here. Of course, we had a terrible tragedy in that regard recently.
Mr Simon Clarke
Housing stress is a major driver of homelessness, the causes of which are very complex. Does the hon. Lady accept that the Homelessness Reduction Act 2017 is major step in unlocking the resource that is required and in getting people to focus, crucially, on getting into a home, as the first step towards making a more lasting move forward in their lives?
Anneliese Dodds
I am grateful to the hon. Gentleman for that intervention. I will come later to some of the other contributors to this problem, which are not dealt with in the Bill or the rest of the Budget. I would just say that, although we supported many of the principles in the Homelessness Reduction Act 2017, again the problem is that, while we can place new requirements and duties on local authorities, if we do not fund them or provide the supply of accommodation to discharge them, local authorities will end up having to make invidious choices between individuals, as my own local authority has discovered. There is support for the principle of the Act, but without the means to deliver it there is considerable concern.
I am grateful to the hon. Gentleman, however, for focusing on that issue. His focus is not reflected, sadly, in the Budget or the Bill. We have only had mention of three small-scale pilots to help to deal with rough sleeping, which is woefully inadequate and no match for Labour’s commitment to a proper rough-sleeping strategy. Under Labour Governments, we had one of those and we got rough sleeping down and virtually eliminated it in many areas. We have also said that we would reserve 8,000 units for people with a history of rough sleeping.
The Government have a commitment to halving rough sleeping by 2022, but to do this they have to change their policies. There is huge uncertainty about the funding of supported housing, which has led to a reduction in investment in that area—unnecessarily—particularly following the negative lessons of the Supporting People funding: there was initially a ring fence, but then it was taken away. We hope that that will not happen with supported housing. We have also seen swingeing cuts to council budgets in this area, which has meant that the county council in my area and many others will not be supporting any homelessness places, at least initially. Coupled with reductions in social security and mental health support, this has led to burgeoning numbers of people sleeping on our streets.
This is not just about rough sleeping, of course; it is also about homelessness generally. On housing provision, recent research from the Institute for Fiscal Studies has shown that the Government are still failing to tackle the fundamental problems in our broken housing market, and it does not conclude that the stamp duty change will deal with those fundamental problems. For example, the Government promised to build 200,000 new cut-price starter homes in 2015. Three years on, not a single one has been built. Before Christmas Ministers said they would be working out the definition of “starter home”, so they do not even know what their policy is going to deliver. They have not even decided on their definitions, let alone delivered those starter homes. In contrast, Labour would commit to building 100,000 social and affordable homes a year, focus Help to Buy funding on first-time buyers on ordinary incomes and build 100,000 discounted first-buy homes.
Overall, the Government’s own figures speak for themselves. The number of home-owning households rose by 1 million under the last Labour Government but has fallen under the Conservatives.
Neil O'Brien (Harborough) (Con)
Will the hon. Lady acknowledge that the fall in home ownership began under Labour in 2003?
Anneliese Dodds
I would accept that there have been changes from year to year in the overall level of home ownership, but the cumulative reduction in home ownership under Conservative Governments has been far more substantial. Across the piece, we saw that increase of 1 million—
Anneliese Dodds
No, I will not give way, because I think I have answered the point. As I say, it is very clear; the figures speak for themselves, very obviously, on this point. The point is particularly and disturbingly clear in relation to home ownership among under-45 households—so for younger people—where the number of homeowners has fallen by 1 million since 2010.
We had a debate earlier about home ownership, and the hon. Member for Faversham and Mid Kent (Helen Whately) stated, “It’s not just about home ownership. We need to think about other areas as well”. That is absolutely right. We have 1.3 million additional private renters in this country. Many on the Opposition Benches would not necessarily see that as a terrific thing; we would see it as lots of people stuck in private rented accommodation who do not want to be there, and we do not see measures in the Budget or Bill to deal with that problem.
Madam Deputy Speaker
Ah, I was about to draw to the hon. Lady’s attention the fact that we only have an hour for this debate, but she has already counted that.
Anneliese Dodds
Thank you, Madam Deputy Speaker. I do beg your pardon.
Let me end by quoting, very briefly, what I think was a devastating assessment of this policy by my hon. Friend the Member for Wirral South (Alison McGovern), because not every Member who is present now was present then. She said:
“what is really unpopular in our country is having to step over rough sleepers while walking home. What is really unpopular in our country is having to watch other parents taking paper into schools because our schools cannot even afford the basic necessities. And what is deeply unpopular in our country is watching the number of food banks grow because jobs do not pay enough.
People will remember that while all that was going on, the Tories were busy cutting stamp duty for people who could afford to buy houses. I do not think they will ever forget that.”—[Official Report, 18 December 2017; Vol. 633, c. 867.]
Colin Clark (Gordon) (Con)
The autumn Budget was a triumph for Scotland, and a vindication of the constructive approach of the Scottish Conservatives. I hope that members of the Scottish National party, and other Scottish MPs, will feel able to welcome and embrace it. Unfortunately, however, SNP Members appear to have learnt little. They created the mess over VAT for the police and fire services, and this Conservative Government have had to clear it up. New clause 10 seeks to point the finger, but the mess in the first place was of the SNP’s own creation. That is disappointing.
The SNP Scottish Government messed up. They knew that they were messing up even as they did so, not least because they had been warned. Indeed, when they were estimating the budgetary effects of these centralisation plans, they specifically factored in the great multi-million-pound VAT giveaway. They pressed on regardless. It is extraordinary that Labour Front Benchers are supporting new clause 10.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Whatever argument the hon. Gentleman may present about what happened in the past, is he saying that he does not believe that more money should be given to the Scottish police and fire services?
Colin Clark
That is exactly what we are doing, and, as the hon. Gentleman well knows, that is exactly what the Scottish Conservative MPs pressed for from the Treasury.
Alan Brown
If this was all the work of the Scottish Tory MPs, why is it that, when I have asked parliamentary questions to the Chancellor of the Exchequer, the Treasury has been unable to confirm that any meetings have taken place with any of the hon. Gentleman’s colleagues to formally discuss the VAT measure?
Colin Clark
I am afraid that there is photographic evidence, which my good friends Twittered at the time—not that I do Twitter—[Hon. Members: “Tweet!”] I mean tweet. There is photographic evidence that we most certainly did meet the Chancellor to discuss the measure.
Colin Clark
No. The hon. Gentleman has had his go.
The nationalists made a conscious decision. They were not short-changed, they were not unaware, and the money was not “stolen”. They must accept that culpability for the lost millions lies squarely with them. If they want to raise the money, they should take the responsibility and raise it themselves. I only hope that they do not do so by inflicting further punishment on Scottish taxpayers.
The poorly judged centralisation of Police Scotland is never far from the headlines, but the resignation of the chief constable and the delay in the pointless merger with the British Transport Police have brought it under a fresh spotlight in recent weeks. Surely now is the time for SNP Members, both here and in Holyrood, to stop manufacturing grievances from their own mistakes and join us in working constructively to make Scotland a better place. And they should start that process with a review of the structure of Police Scotland.
Wes Streeting
Amendments 10, 11 and 12 stand in my name and those of a number of Members on both sides of the House. They deal with the vehicle excise duty supplement, and, in particular, with how it applies to the new electric zero-emission taxis. I should probably declare an interest, as chair of the all-party parliamentary group on taxis. I am delighted that the amendment carries not only cross-party support but support throughout the country: in inner and outer London, Brighton, Sheffield, Bradford, Exeter, Huddersfield, Cambridge, Stoke-on-Trent, Bedford, Cardiff, Chesterfield, Sunderland, Leeds and Rotherham. Sterling work has also been done by my hon. Friend the Member for Oxford East (Anneliese Dodds), not just in Committee but in presenting the same powerful case this afternoon. I hope that this is an issue on which we can find common cause with those on the Treasury Bench.
During the debate on the Budget and subsequently the Finance Bill, I welcomed the Chancellor’s announcement in the Budget to exempt zero emission-capable taxis from the vehicle excise duty supplement, but I also cautioned that that exemption would not kick in until mid-2019. Zero emission-capable taxis are already available for sale and have already hit the streets of this city and others. This new generation of the iconic black taxi not only provides passengers with a new degree of comfort and great surroundings, including the ability to see the sights of London through the roof while driving around but, most significantly and pertinently for the purposes of this debate, it is environmentally friendly. Members on both sides of the House are increasingly aware of how difficult taxi drivers in this city and across the country are finding their trade in the face of aggressive, and in many cases unfair, competitive practices. The Government need to do all they can to stop that great iconic taxi being driven off the streets of this city and others.
Several hon. Members rose—
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. Can I just try to be helpful? I want to get as many speakers in as possible, and I also need to hear from the Scottish National party spokesperson, so I ask Members to try to keep it short, as at least six more people want to speak.
Neil O’Brien
I am pleased to speak in favour of the reforms to stamp duty for first-time buyers and to speak against the Opposition’s new clause. The changes to stamp duty mean that 95% of first-time buyers will pay less tax; in fact, 80% will pay no tax at all. First-time buyers will be getting a tax reduction of up to £5,000, which will be hugely welcomed by younger people in my constituency.
I support this reform for three reasons. The first is that it is part of a wider rebalancing of the tax system towards younger people and people who do not own a home of their own. In that context, it is worth thinking about these measures alongside the measures that we took in 2015 to reform the tax treatment of buy-to-let and second homes. Those reforms increased stamp duty on the purchase of additional properties. So we have this reform, which supports first-time buyers, and we also have a set of reforms that improve fairness and reduce the demand for housing as an investment asset. Together, these reforms tilt the balance of the system towards younger people and first-time buyers. Dare I say that they are redistributive measures, and I am surprised that the Opposition are opposing them? Given that younger people are the most affected by our failure over a generation to build enough houses in this country, it is right that we should tilt the tax system towards them.
Earlier in this debate, my hon. Friend the Member for Croydon South (Chris Philp) offered the Minister a suggestion for a revenue raiser, and I wonder whether I could do the same thing. Perhaps we should go even further in rebalancing the tax system towards young people and consider further reform of the private residence relief. The Minister will recall that, in 2013, we changed the way in which the exemption worked to make the system fairer and to end some of the abuses that happened under Labour, and I encourage him to look again at this issue, particularly given that a number of other countries have tighter restrictions on that important exemption. Such a move would complement the 75 anti-tax avoidance measures that we have already taken, which have raised £160 billion for public services.
The second reason why I support these measures is that, as the Mirrlees review and many other economists have pointed out, stamp duty is fundamentally a bad tax that reduces mobility. Obviously, the Chancellor is unable to abolish it at this stage, given that we are still in the process of cleaning up the biggest deficit in this country’s entire peacetime history and the situation in which, disgracefully, the Government were borrowing a quarter of all the money being spent. None the less, we are making important progress on ending this bad tax. These changes follow the ending of the absurd slab system that Gordon Brown had built up and the £300 million tax cut that accompanied that. This further reduction in stamp duty land tax, this time for younger people, is hugely welcome, and I hope that the Treasury will continue to chop away at this bad tax.
The third reason why I support the measures is that, even as we bring about longer-term reforms to increase supply, they can provide immediate support for younger people and those who do not own their own property. I agree with the hon. Member for Oxford East (Anneliese Dodds) that we must have higher supply. France has been building roughly twice as many houses as this country since 1970, so its house prices have gone up half as fast.
Dr David Drew (Stroud) (Lab/Co-op)
I am pleased to hear what the hon. Gentleman says, but why are so many of the housing measures, including support for local authorities, being delayed for a year before being properly implemented?
Neil O’Brien
I am afraid that I am not entirely sure what the hon. Gentleman is driving at, and I am conscious of the time.
I support the measures before us because they will provide immediate benefit, and they form part of a wider strategy to support first-time buyers, including Help to Buy, which has helped 230,000 people to get a home of their own, the lifetime ISA, which gives people a 25% bonus as they save for a deposit, the huge support for shared ownership and new supply measures, such as the housing infrastructure fund and the huge increase in funding for affordable housing in the 2015 spending review. My younger constituents will warmly welcome the end of stamp duty for first-time buyers, as will many older constituents—parents and grandparents.
The hon. Member for Oxford East rather made the case against her own measures by drawing on the huge amount of published detail about and analysis of our proposals. I have in my hand the OBR’s estimate of residential SDLT elasticities, and it notes the significant degrees of uncertainty. The creation of the OBR was a welcome reform, because it makes things more transparent, and it is right that the OBR is cautious in its forecasts. We created the OBR because Gordon Brown fiddled the figures and changed the economic cycle and led us to disaster by doing so. It is also right to stress the uncertainty around such measures, because it is fundamentally difficult to model things in the housing market.
When we introduced the annual tax on unoccupied dwellings, which I am sure the hon. Lady supports, we raised four times more money than predicted, so things are difficult to predict. However, my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) has already made the important point that even if we believe that the £5,000 would be entirely capitalised into the price of a house, my young constituents would be £5,000 better off as a result. In Harborough, Oadby and Wigston, that is still a significant sum of money, so I am hugely glad to be able to support these important reforms today and to oppose the Opposition’s amendments.
Kirsty Blackman
I rise to discuss new clause 10, tabled in my name and those of my SNP colleagues. Given that we are tight for time, I was tempted to make an incredibly short speech and just say, “Can you give us our money back, please? Thanks,” and then sit down, but I will expand on that a little.
Christine Jardine
Like other parties, the Liberal Democrats supported the SNP’s call for an exemption from VAT for emergency services. However, the SNP Scottish Government was warned that this would happen and chose to go ahead anyway, and we now have a police force that the public, many politicians and many members of the police are unhappy with. Would it not be better for the hon. Lady to plead with her colleagues in Holyrood to fix the problem, rather than try to divert attention on to something—
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. Time is short, and Members should not be taking advantage. I want to get the leader of the hon. Lady’s party in, but I will not be able to if we have interventions that are speeches.
Kirsty Blackman
I am actually going to talk about why we should be given the rebate and why what happened makes sense.
Scotland’s police and fire departments have been paying an annual charge of about £35 million a year in VAT, and we have repeatedly asked for those services to be excluded. The SNP has asked for it 140 times, and several other people have asked for it, too, and we have been given so many excuses why it could not be done. Murdo Fraser said that there was
“no justification for a VAT refund.”—[Scottish Parliament Official Report, 31 October 2017; c. 77.]
The Chancellor himself said that they would not be able to recover the VAT under EU law. However, the fair thing for the Government to do has always been to give police and fire services access to the VAT rebate. Highways England and the London Legacy Development Corporation have access to the rebate, and both are national organisations. Now, suddenly, the welcome decision has been taken to give us the rebate, but nothing has changed to cause that to happen. The situation is no different from what it was three years ago. The police and fire services are structured exactly the same as they were three years ago, yet somehow the Government have decided that we are now eligible for the rebate when previously we were not.
Gillian Keegan (Chichester) (Con)
I rise to speak to new clause 7. There has been a failure of successive Governments to tackle the issues with our housing stock. Since the 1970s we have, on average, built 160,000 new homes a year in England, and the consensus is that we need to build between 225,000 and 275,000 homes a year to keep up with population growth, to keep up with an ageing population and to tackle years of under-supply. That is why I am pleased the Government are taking steps to address the situation through accelerated house building, resulting in an increase in supply of 217,000 houses in the past year.
Increased demand and an historic lack of supply have inevitably pushed prices up. On average, house prices have risen by 7% a year since 1980, but the rise is not uniform. Areas such as the south-east have suffered more than others, with a 369% increase in prices since 2005. I see that in my own family, with many of my young cousins in Knowsley buying a home in their 20s on average salaries, as their parents did before them, but that is not the case in the south-east and other parts of the country.
Large price hikes obviously affect young people more, as they are typically on lower incomes and struggle to raise the capital needed to save for a deposit. When I bought my first home in the mid-1990s, around 65% of my friends were doing the same, and we just earned average incomes. Now, less than 27% of 25 to 34-year-olds are home owners, and I would be willing to bet that not many of them are in Chichester, where the average house price is more than £365,000 and the average salary is just £25,000.
The point was highlighted to me by a young couple living in my constituency, whose high rental costs mean they are unable to make any substantial savings towards a deposit. They are grateful for the schemes introduced by the Government to help them save for a deposit. Changes to stamp duty will also help first-time buyers such as my constituents to reduce the savings needed to cover the cost of purchasing a home. They will no longer pay stamp duty on properties up to the threshold of £300,000, and only 5% of the cost over £300,000 on properties up to £500,000, so 80% of first-time buyers should pay no stamp duty at all. This policy removes one of the barriers to the housing market, and it will help to give people the opportunity to reach a dream that many of us achieved in our 20s and 30s.
Sir Vince Cable (Twickenham) (LD)
I rise to speak to new clause 2 in my name and in the name of my right hon. Friend the Member for North Norfolk (Norman Lamb), and I will say a few words about amendments 13 and 14 to schedule 3 that address a technical point of some importance raised by my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), who regrets that he cannot be here to speak to the amendments himself.
New clause 2 would ask the Office for Budget Responsibility to produce an independent, verifiable, non-political estimate of the yield that could be obtained by adding 1p in the £1—a 1% increase—to the standard, higher and additional rates of income tax. We are doing this not to give the Treasury computer some exercise—I am sure that it gets plenty—but to produce an estimate that we can all subscribe to of the revenue base that would exist for an earmarked tax to finance the NHS. This Report stage is clearly not the place to debate the NHS, but I want to raise the basic principle of how the Treasury might finance it.
In the middle of last year, the chief executive of NHS England produced an estimate that about £6 billion was required to keep the NHS on a sustainable footing and to avoid a serious winter crisis—this was about £4 billion for the NHS itself and £2 billion for social care through local councils. In the event, the Treasury, in its November Budget came up with about £2 billion—we can argue about how much of that was real, but let us say it was £2 billion—but we had the winter crisis in any case, and it has been discussed here on many occasions. We have heard about the long trolley waits, the elderly people waiting in hospital for placements and the stress on staff. We hope the winter is now over, although we cannot be absolutely certain of that. The issue I want to raise is how we prevent this situation from happening in the next financial year.
The proposal that we have an earmarked allocation of revenue from a small increase in income tax comes from a commission that my party set up, consisting of not just supporters but a lot of independent people with authority in the NHS. It includes the former chief executives of NHS England, of the Patients Association and of the Royal College of Nursing, and the former chair of the Royal College of General Practitioners, among others of similar status. They argue that the only sensible, practical way now to prevent this endlessly recurring financial and then real crisis in the health service is to have a dedicated source of tax revenue.
There have traditionally been two objections to such a proposal, one of which was public opinion—the public do not like higher taxes—but the survey evidence from a big Sky poll some months ago suggested that if people were absolutely confident that the money would be allocated to the health service, about 70% of them would support such an income tax increase; other polls have suggested the same.
The second objection was a traditional Treasury one, which was that such an approach makes public spending and taxation more difficult to manage. I would cite as a counter to that the recent comments of the former head of the Treasury, Lord Macpherson, who presided over it in the five years when I was in the coalition Government. He is a massively impressive man. I confess that we did not always agree—he tended to regard public spending as some kind of disease—but none the less, he is a very authoritative source, and he appears to have been converted to the idea that such a measure is the only way in which the NHS can be put on a properly sustainable footing.
Looking ahead to the next financial year, which is what we are asking the Government to do, the question is: how are we going to avoid the kind of problems we have had this year? The first way is by the Government simply muddling through on their current spending assumptions, and probably in the next Budget, in the autumn, the Chancellor will come up with another rabbit out of the hat, which will be inadequate and too late.
The other alternative is to hope that there is some kind of advance payment of the “Brexit dividend”. I think that we are all familiar with these arguments about the £300 million a week that was supposed to come back—I think we have been promised £18 billion a year. We now know that this is almost entirely phoney and cannot be relied upon. Of course it was a gross, not a net, estimate, and we now know that we are going to pay out at least £40 billion. There will be continued annual payments through the transition period and possibly additional ad hoc payments on top of that.
Even on a fairly charitable view, we would be talking about five to six years before there is any dividend, and even that depends on a continued constant rate of growth. If growth slows down, as it almost certainly will post Brexit, this dividend may never appear. So if we cannot rely on a Brexit dividend and we are going to get past ad hoc financing, some new mechanism needs to be found, and the purpose of our new clause is to open up that discussion. I do not propose to press the new clause to a Division, but I am interested to hear how the Treasury currently regards earmarked taxation and whether its thinking has advanced in any way.
Finally, I wish to say a few words in support of the amendments tabled by my right hon. Friend the Member for Orkney and Shetland, one of whose constituents has raised a substantial point about an HMRC proposal in the Bill that relates to dormant companies and their pension funds. The proposal is that such schemes should be de-registered when the companies have become dormant. The reasoning behind it is perfectly sensible: some such funds have been used for scams, to the cost of the public and HMRC, so HMRC proposes to de-register them when such things happen.
My right hon. Friend the Member for Orkney and Shetland’s constituent has pointed out some unintended consequences of this apparently sensible proposal, one of which is that there are quite a lot of cases in which the pension funds of dormant companies have been taken over by other companies. There are other cases in which a sponsoring company may be dormant but the trustees have kept it going on a pay-in basis, and it is perfectly sustainable.
The other aspect of the proposal that potentially causes a problem is that de-registration could happen after a closure of one month. A good recent example would be Monarch airlines. As we all know, it takes a lot more than a month to wind up a pension scheme, so it is a bit pre-emptory. I do recognise, as does my right hon. Friend the Member for Orkney and Shetland’s constituent, that the power for HMRC would be discretionary. The Minister may say that we should trust HMRC always to get these things right, but it may be more sensible, as amendments 13 and 14 suggest, to have a carve-out to deal with cases that clearly do not fall within its remit.
The purpose of the amendments is to suggest that the de-registration activities should be restricted to the most recent six years, because that is when the scams have occurred and we do not need to go back into history. There should be a specific carve-out for cases in which there may well have been a pension fund succession. The provision would be that there should be at least one dormant employer and that a two-year period should be allowed for pension funds that have been maintained for a substantial time and are therefore clearly viable. Neither I nor my right hon. Friend the Member for Orkney and Shetland would pretend that those are necessarily the perfect solutions to the problem, but I hope the Minister will acknowledge that there is an issue and get the Treasury to reflect on it and perhaps come up with a superior solution.
Mel Stride
Given the limited time remaining, I intend to focus most of my remarks on the amendments and new clauses that have been spoken to in this debate.
I shall begin with new clauses 7 and 8, which seek reviews of the operation of the SDLT exemption for first-time buyers. As we know, housing is one of the great challenges of our age. We all recognise—we certainly have done in this debate—the importance of the supply side, which is why my right hon. Friend the Chancellor, whom I am delighted to see on the Treasury Bench, made such important announcements about funding for more housing. We can now look at hitting 300,000 new build homes in the next decade. The point was made that the OBR suggested that prices may increase by 0.3% as a result of our SDLT measure, but that observation is based on that measure alone and does not take into account the supply-side measures we are introducing.
Amendments 10, 11 and 12 relate to taxis and the vehicle excise duty supplement.
Julia Lopez (Hornchurch and Upminster) (Con)
I wonder whether I might make a suggestion on the amendments to which my right hon. Friend just referred. Cabbies in my constituency have raised legitimate concerns about vehicle excise duty. If I have read them correctly, it seems that the amendments that have been tabled to clause 44 would make all taxis exempt from certain vehicle excise duty rates this year, rather than just the new, electric-capable vehicles. As my right hon. Friend knows from our discussions about taxis, I and other London Conservative MPs have serious concerns about air quality in the capital, so I would appreciate his view on whether it would instead be better if we brought forward by a year—
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. Sit, please. In fairness to the Minister, he has a very short time in which to speak. By all means make an intervention to get on the record, but please do not try to make a speech on an intervention.
Mark Pawsey
On behalf of 1,000 skilled workers at the London Electric Vehicle plant in my constituency, will my right hon. Friend look very carefully at the proposals to bring forward the exemption on electric vehicles?
Mel Stride
If we look at bringing forward this exemption, the important thing is that we should look solely at that element that relates to low-emission vehicles, rather than applying it to all taxis, as indeed amendments 10, 11 and 12 do, as tabled by the hon. Member for Ilford North (Wes Streeting). However, having listened to the representations from my hon. Friends the Members for Hornchurch and Upminster (Julia Lopez) and for Rugby (Mark Pawsey) and indeed from the hon. Gentleman who has tabled the amendments, we are minded to look sympathetically at bringing forward the exemption by a year for those taxis that have low emissions, albeit that they cost £40,000 or more. I know that my hon. Friend the Exchequer Secretary will shortly be meeting representatives from the London Taxi Company and that he will be furthering those discussions with them.
In the one minute remaining, perhaps I could turn to new clause 10, which calls for a review of the consequences of not backdating the refund of VAT in respect of the Scottish Fire and Rescue Service. The Chancellor made it clear in the Budget that, after lobbying from our Conservative colleagues in particular, we would allow such refunds going forward. In 2012, when the Scottish Government entered into those arrangements, they did so knowing what the VAT consequences would be, but we are taking action going forward.
Finally, I understand the desire of the right hon. Member for Twickenham (Sir Vince Cable) to have information on the effects of increases of income tax by 1%. However, there is no need for that now, as information is available on that. Time does not allow me to explain what that is, but I will speak to him after this debate, and on that basis, I hope that he will not press his amendment. I also take on board his comments about dormant companies and pension fund arrangements, but we do have to look to HMRC to make those judgments so that we ensure that these scams are prevented.
Anneliese Dodds
We have no time left, so I will press new clause 7 to a Division.
Question put, That the clause be read a Second time.
Mr Deputy Speaker (Sir Lindsay Hoyle)
Consideration being completed, I will now suspend the House briefly in order to make a decision about certification. The Division bells will be rung for two minutes before the House resumes.
Mr Deputy Speaker (Sir Lindsay Hoyle)
I can now inform the House that I have completed certification of the Bill, as required by the Standing Order. I have confirmed the view expressed in the Speaker’s provisional certificate issued on 20 February. Copies of my final certificate will be made available in the Vote Office and on the parliamentary website.
Under Standing Order No. 83M, a consent motion is therefore required for the Bill to proceed. Copies of the motion are now available.
Does a Minister intend to move the consent motion?
The Vice-Chamberlain of Her Majesty's Household (Chris Heaton-Harris)
indicated assent.
The House forthwith resolved itself into the Legislative Grand Committee (England, Wales and Northern Ireland) (Standing Order No. 83M).
The Chairman of Ways and Means (Sir Lindsay Hoyle)
I remind Members that if there is a Division, only Members representing constituencies in England, Wales and Northern Ireland may vote. As the knife has fallen, there can be no debate.
Motion made, and Question put forthwith (Standing Order No. 83M(5)),
That the Committee consents to the following certified clauses of, and schedules to, the Finance (No. 2) Bill:
Clauses and Schedules certified under Standing Order No. 83L(2) (as modified in its application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland and being within devolved legislative competence
Clauses 3, 40 and 41 of, and Schedule 11 to, the Bill as amended in Public Bill Committee (Bill 151).—(Mel Stride.)
Question agreed to.
The occupant of the Chair left the Chair to report the decision of the Committee (Standing Order No. 83M(6)).
The Deputy Speaker resumed the Chair; decision reported.
Third Reading
Mel Stride
I beg to move, That the Bill be now read the Third time.
The Bill makes a number of vital changes to our tax system, helping people to buy their first homes, working towards improving productivity in our country, and making our tax system fairer and more sustainable. This Government believe in
“a nation-wide property-owning democracy.”
That conviction is as strong now as it was when Anthony Eden first said those words in 1946, but it is obvious to all of us in the House that the ideal has been eroded, and that the next generation of potential homeowners are being shut out. In London, prices are nearly 13 times the average wage, and in the rest of England they are eight times the average wage. Home ownership has decreased by 20 percentage points among young people in just the last 15 years. This Government know that the most sustainable way to improve affordability is by increasing supply. That is why at the autumn Budget we took steps to address this. We announced the Letwin review to look at why planning permissions are not turning into homes, and we increased Government funding for new housing to £44 billion over the next five years.
But there are also things we can do in the short term to help young people in particular to get a foot on to the ladder, so this Bill provides for a stamp duty cut for first-time buyers. First-time buyers tend to be more cash-constrained than others, with stamp duty representing a key financial obstacle, on top of a deposit and conveyancing fees for purchases over £125,000. This Bill will help more people to negotiate these challenges and exempts first-time buyers from stamp duty for houses worth up to £300,000, and it provides discounts for houses worth up to £500,000. This will save homebuyers up to £5,000 and will mean 80% of first-time buyers will not pay any stamp duty.
This Government have presided over 20 successive quarters of economic growth, record levels of employment and a significant decrease in the Budget deficit, as well as among the lowest levels of unemployment in over 40 years. This has been achieved only because of fair and sustainable fiscal and economic policy, but Britain’s productivity growth is subdued and has been since 2008, and I hardly need to tell the House why this should concern us, for productivity is intimately linked to real incomes and to living standards. That is why in this Bill we are increasing the research and development expenditure credit from 11% to 12%, thereby increasing incentives to businesses to invest in R&D. We also need to encourage our entrepreneurs and help their bright ideas to become productive business, but, as Sir Damon Buffini pointed out in the “Patient Capital Review”, it is often those companies at the forefront of technological and knowledge-based development with the most productive potential that struggle for necessary capital. In this Bill we are therefore increasing the lifetime investment limit for knowledge-intensive companies through our venture capital schemes from £5 million to £10 million, and we are doubling the yearly amount an investor can put into these schemes to £2 million, provided that everything over £1 million is invested in knowledge-intensive businesses. Building an economy fit for the future relies on our harnessing technology, new ideas, and the expertise we already have; these changes will help to make that happen.
The Government will continue to work relentlessly to make our tax system fairer and more sustainable, and this Bill continues the Government’s work on tax avoidance and evasion, making sure that people pay their fair share. Since 2010 the Government have introduced over 100 avoidance and evasion measures, which have helped to secure and protect over £175 billion of additional tax revenues to go towards our vital public services. But the work is not done, and this Bill furthers that agenda, cracking down on online VAT evasion, making online marketplaces joint and severally liable for the unpaid VAT of their sellers, and preventing companies from claiming unfair tax relief on their intellectual property. Taken together, the measures in the Bill to tackle avoidance and evasion raise further vital funds for our public services.
I thank Members for the quality of the debate during the passage of this Bill, and I thank in particular the Bill Committee and those on the Opposition Front Benches, both Labour and Scottish National parties, for their professional scrutiny and the fair and effective way in which they conducted themselves.
This Bill is one of which this Government can be proud. It gives first-time buyers renewed hope of a place on the housing ladder, puts measures in place to boost productivity, and takes another step along the path towards an equitable and sustainable tax system. I commend the Bill to the House.
Peter Dowd
The only thing I agree with the Minister about is that I too thank everyone who has taken part in the proceedings. The Bill is not up to the challenge. It contains nothing of substance on public services, on the productive investment that we need, on housing, on tax avoidance or on the scandal of private finance investments. It is an insubstantial Bill from an insubstantial Government, with more tax cuts for the richest. I shall sum up by saying that the Tory party is financially bankrupt in Northamptonshire and morally bankrupt in Westminster. That sums up this Bill, and we will vote against it.
Question put, That the Bill be now read the Third time.
Finance (No. 2) Bill
Thursday 22nd February 2018
(6 years, 8 months ago)
Lords ChamberRead Full debate Finance Act 2018 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 21 February 2018 - (21 Feb 2018)
Finance (No. 2) Bill
Thursday 8th March 2018
(6 years, 8 months ago)
Lords ChamberRead Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 21 February 2018 - (21 Feb 2018)
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, the Bill before the House today is a mere 187 pages long, which compares favourably to the more than 600 pages of the previous Finance Bill. In part, this reflects the Government’s move to a single, annual fiscal event but it also represents the fact that in December the Government published a document setting out how future Finance Bills will interact with the new tax policy-making timetable. The new cycle carves out more time for consultations and commits the Government to publishing as much of the Bill as possible in draft. Even so, in this Bill some 111 of the 187 pages were published in draft form last September. The Economic Affairs Finance Bill Sub-Committee takes an understandably close interest in the process by which tax legislation is developed. I hope that it will find very much to welcome in this new approach.
Before I turn to the important tax changes enacted in the Bill, I shall set out the broader economic and fiscal context in which we find ourselves and which this Government have helped to create. The UK economy has now grown for 20 consecutive quarters: that is five years of continuous growth. Manufacturing grew by 1.3% in the fourth quarter of last year and has grown for the longest consecutive period in 30 years, with high-tech sectors such as cars and aerospace growing particularly strongly since 2010. Total exports of goods and services grew by 5% in 2017, up on the previous year, and manufacturers remain optimistic as surveys show high export orders. Employment has continued to rise—by 3 million since 2010. Crucially, these figures do not reflect prosperity just in London and the south-east: since 2010 all nations and regions of the United Kingdom, up and down and across the country, have experienced higher employment and lower unemployment.
At the autumn Budget, the Chancellor reported that the deficit has been reduced from 9.9% of GDP in 2009-10 to 2.3% of GDP in 2016-17. Borrowing is set to fall even further in the coming years, reaching 1.1% of GDP in 2022-23, the lowest level since 2001-02. The plan to get back to living within our means is on track. The Government’s fiscal rules take a balanced approach and the OBR forecasts that the Government are going to hit our fiscal targets. Our debt will start falling from next year. The Budget stayed true to our commitment to fiscal responsibility to improve the health of our public finances. However, at 86.5% of GDP, we recognise that public debt is still far too high. Although productivity growth has shown signs of improvement lately, we want to foster the environment to allow it to accelerate. The tax policies in this Finance Bill support that strategy.
The Bill is an important lever in this Government’s legislative programme. A focus on helping young people get on to the property ladder, improving productivity and business investment and continuing our robust efforts to prevent tax avoidance and evasion is at its heart.
Home ownership is a near universal aspiration. However, it is a dream that is increasingly difficult to realise for many of our young people. Affordability is the underlying problem. Consequently, at the Budget, the Chancellor announced a housing package designed to boost supply to put the housing market on a more equitable footing in the longer term. On Monday, the Prime Minister reiterated her commitment to meeting the housing challenge and announced an overhaul of the planning system to deliver more homes in the right places.
However, the Government also want to act in the short term. That is why the Finance Bill permanently scraps stamp duty for first-time buyers purchasing properties worth up to £300,000. On average, first-time property buyers will save nearly £1,700. This means that 80% of first-time buyers will not pay stamp duty at all, and 95% of all first-time buyers who pay stamp duty will benefit from the changes. Over the next five years, this relief will help over 1 million first-time buyers.
Last year, productivity grew by 0.7%, as measured by output per hour. At the autumn Budget, following weaker than expected growth, the OBR downgraded its estimates for the trend of productivity growth to 1.2% per year. Productivity is the best way to sustainably raise and maintain higher living standards and grow GDP. Since 2010, the Government have introduced a set of reforms intended to bolster the dynamism required from our modern and international economy. This includes unlocking over £0.5 trillion in capital investment—funding the biggest rail modernisation programme since Victorian times and major infrastructure projects such as Crossrail and the Merseyside Bridge, supporting businesses by cutting corporation tax to 17% in 2020, increasing access to finance through the British Business Bank, and improving skills through investment in apprenticeships and the introduction of T-levels.
However, we must go further. The Finance Bill does precisely that, encouraging additional business investment by supporting the UK’s dynamic, risk-taking businesses. The Government are a committed partner of the business community. We are, and will continue to be, a world-leading place to start a business. However, due to the lack of finance, some of the UK’s potentially most innovative new businesses are struggling to scale up. That is why we conducted the patient capital review, which reported on these barriers to growth. It concluded that knowledge-intensive companies, which are particularly R&D intensive, often require considerable upfront capital. In response, the Government set out a £20 billion investment and tax incentive action plan. As part of the plan, the Finance Bill works to make more investment available to higher-risk, innovative businesses by doubling the annual limit on how much investment these knowledge-intensive companies can receive through the enterprise investment scheme and venture capital trusts scheme to £10 million, and doubling the limit on how much investors can invest through the EIS to £2 million, providing that anything above £1 million is invested in knowledge-intensive companies.
Within a decade, these changes will produce £7 billion of new and redirected investment into growing companies. On top of this, the Government are stimulating productivity growth by increasing funding in research and development. At the Budget, we extended the National Productivity Investment Fund to £31 billion, and increased the R&D investment element of that by a further £2.3 billion. To complement these and other efforts, the Bill will also increase the rate of the R&D expenditure credit from 11% to 12%.
To achieve a balance in the tax system, the Bill narrows the scope of the bank levy, so that, from 2021, UK and foreign head-quartered banks will only be taxed on their UK operations. Crucially, this provision works in conjunction with the broader package of reforms to bank-specific taxes announced between 2015 and 2016, which includes an 8% surcharge on bank profits over £25 million. The package is forecast to raise an additional £4.6 billion from banks over the current forecast period.
Finally, the Bill continues and strengthens the Government’s work clamping down on tax avoidance and evasion. Since 2010, the Government have introduced more than 100 avoidance and evasion measures. We have secured and protected over £175 billon of extra tax revenue that would otherwise have gone unpaid. As a consequence, the UK’s tax gap stands at just 6%—one of the lowest in the world.
At the Budget, the Chancellor announced a further package of measures expected to raise £4.8 billion by 2022-23. The measures in this Bill constitute part of that Budget package and include provisions to make online marketplaces more responsible for the unpaid VAT of their sellers, close loopholes to ensure individuals with offshore trusts cannot avoid paying UK tax on payments or benefits taken from that trust, extend disguised remuneration rules to include close companies, and clamp down on waste crime by bringing illegal waste sites into scope of the landfill tax. These measures and others like them demonstrate the Government’s enduring commitment to ensuring that taxes are paid.
Although relatively short, this Bill is significant in both ambition and substance. It supports young people buying their first homes, drives productivity by encouraging business investment and ensures tax is paid where it should be—all of this without stifling competition, encumbering the market or hindering growth. This is a Government committed to prosperity and committed to the future. I commend the Bill to the House and beg to move.
Baroness Kramer (LD)
My Lords, I suspect that nearly everybody sitting in this House will struggle to recognise the extraordinarily rosy picture of the economy that the Minister just described. Just about every single one of the markets to which we export and to which our economy is usually tied are absolutely going gangbusters, with extraordinary levels of growth. Normally, even by doing nothing, we would be pulled forward into high growth numbers by that alone. Instead, we are struggling at around 1.7% to 1.8% growth, and if the Government are not worried by and anxious about that, then frankly I wonder where the captain has gone—he is certainly not on the deck.
Investment numbers in this country have fallen off a cliff. Obviously a large part of that is driven by Brexit uncertainty. We get the occasional investment that hits the headlines, but overall the numbers are down very significantly, and if the Government are not worried about that, I am even more concerned.
The OBR has readjusted its trend forecast for productivity down to 1.2%. That is extraordinarily bad news and reflects a set of very fundamental problems, which this finance Bill does not begin to tackle. I accept that it is an extremely deep-seated problem, but if the Government do not recognise the consequences of that for our economy at large, again I am very concerned. If the Minister thinks of this in terms of ordinary people and talks to them about the squeeze on their wages, which have remained stagnant as they see prices consistently increasingly, he will begin to understand that this is not an economy firing on all cylinders and racing ahead. In fact, it is almost inexplicably behind where anyone would have expected it to be in general global circumstances.
Obviously, a good part of this is about the ticking time bomb of potential Brexit. I also fully understand that, because of that, the Chancellor did not use this finance Bill to take major steps forward: it is not a visionary finance Bill but very much a tinkering at the edges finance Bill, because he knows he is sitting with an unexploded bomb and has absolutely no idea of when it might go off, how it might go off and which part of the economy it might hit first or second, and is therefore trying to give himself as much flexibility as possible to react spontaneously as all of those things begin to hit. I suspect that we will have much more extensive discussion of this next week in the debate on the Spring Statement, when we will also have some new figures from the OBR to underpin that discussion.
I will address just two things today, both very briefly. One is the absolutely core issue of funding for the NHS. The Minister will remember that, prior to last November’s Budget, the NHS basically came forward and said that it needed an additional £6 billion a year just to be able to sustain the system—£4 billion for the NHS and £2 billion for social services. Whichever way you add it up, the Government came forward with only £2 billion out of that needed £6 billion.
An amendment to this finance Bill proposed by my right honourable friend Sir Vince Cable asked the Government to task the OBR with looking at a hypothecated, dedicated tax to support the NHS—particularly around the issue of 1p in the pound on income tax that we, as a party, have proposed—to see what the yield would be. There is also a much more fundamental issue. We are running into a long-term crisis and this bullet cannot be dodged unless the Government are willing to take action. Will the Minister take on board and pursue this absolutely vital issue?
The second area is tax evasion. Yes, the Government have made some improvements and I am always pleased to hear that. But frankly, until the coach and horses of an absence of public registers of beneficial interests in our overseas territories is taken care of, we are allowing an avenue that constantly provides the transit route to money laundering in this country and therefore to tax evasion and all the other kinds of evils that go along with it. They are moving to central registers, but those are not going to be public. I hope that the Government will one day realise that they must bite the bullet on this issue, rather than looking the other way. I understand that they feel that there are constitutional problems in dealing with the overseas territories, but the consequence of that is that all the other measures are basically piffling by comparison.
This was a tinkering at the edges Budget. I know that the Government talked about significant changes to housing, but they are going to be very much at the margin and the edges. We know from previous stamp duty holidays that they do not change the pattern of buying in any way whatever. They may be popular but they do not change either supply or demand. In none of their programmes are the Government tackling the fundamental issue of the lack of affordable housing. If they do not allow local authorities to go ahead—whether alone or in partnership—and build the new, needed, affordable houses where they are required, we will not begin to see an end to this particular set of problems.
I look forward to the Spring Statement next week to see whether it makes some radical change that enables us to move forward significantly. This is a small Bill, making small, fringe changes in a set of circumstances where new vision and radical action are required.
Lord Davies of Oldham (Lab)
My Lords, Lloyd George should be living at this hour. Here we have a Finance Bill introduced by the Minister where the only contributors are the Opposition Front Bench spokesmen. This is an indication of how limited the House’s role is in relation to Finance Bills, and justifiably so. As the noble Baroness, Lady Kramer, pointed out, we will have the opportunity to have a serious debate about the economy next week, when I anticipate there will be greater participation from all parts of the House.
The Minister put an extraordinarily optimistic gloss on the state of the economy at the present time, as the noble Baroness, Lady Kramer, also pointed out. In circumstances where so many countries are showing real and rapid growth and the world economy is benefiting from that, this Government are still watching their levels of economic growth bounce along at the bottom of the OECD countries. What this low level of economic growth indicates is that there are limited resources for the wider society and also for the Government to meet their obligations.
In the other place, Ministers were so concerned about the possibility of penetrating opposition amendments to this Bill that they introduced a procedural Motion restricting opportunities for critical amendments—a procedure which we have normally only seen either in the exciting times immediately before a general election when the decks are cleared or when warfare is approaching. What is the crisis on this limited and pathetic little Bill that causes Ministers to run for cover under a procedural Motion? The only crisis is the obvious one that this Government lack confidence in handling the other place.
The Government’s lack of confidence, of course, derives from their exiguous majority, which is dependent on another small party. That underpins so many of the Government’s actions. It certainly underpins their whole approach to Brexit, and that is why we fear that the negotiations will not produce the effective Brexit that we all want. The Government are in hock partly to the fact that they do not have a majority in the House of Commons and partly to the fact that a determined section on the right wing of the party do not really care about the terms of Brexit—in fact, they seem to exalt in the possibility of our having the hardest of hard Brexits, and the economy is meant to cope with that. We shall see.
Let me be absolutely clear about this Bill: it does not in any way, shape or form measure up to the significant needs of the economy or do anything to repair the damage done to the economy by the actions of previous Conservative-led Governments. As we all know, their record on economic growth is poor and their record on productivity is almost negligible. I have seen the noble Lord join the considerable list of Treasury Ministers since 2010 who have taken up their post expressing considerable optimism about the role that they can play in this regard. Yet even the noble Lord, Lord O’Neill, who we all know has vast experience of productivity issues, was still trapped by the fact that productivity under this Government is showing no significant improvement at all. What the Minister referred to as an encouraging development is just a marginal movement which we can scarcely credit.
We also recognise, of course, that the Minister slides very carefully past the targets which the preceding Chancellor used to have for clearing the deficit in 2015. That has long since been buried as a potential successful objective, and we are now in a miasma of somewhat changed definitions of the deficit we are tackling. We all know that the Government, because of their limited progress on the economy, are struggling to meet targets on reducing the deficit.
The Bill’s failure to address any real issues relating to the economy and society means that crucial issues remain completely unaddressed. How can the Minister talk optimistically about a society in which the average basic pay is below the level it was in 2010? That means there has been no pay rise for large numbers of working people since 2010, and yet the Government have the arrogance to suggest that things are showing considerable improvement. It is quite clear that we have had decades of lost earnings growth. We have not had an issue with regard to wages for 200 years that matches the record of this Government in that respect over the last few years.
That is how serious the situation is, but you would not have detected that from the Minister’s gloss on what this Bill is meant to represent. As the noble Baroness, Lady Kramer, mentioned earlier, no attempt has been made to address—what everybody recognises in our society—the crisis facing the National Health Service. Look at the limited amount that the Government set free for the health service when informed opinion was quite clear just what was necessary. The Government did not meet even half that.
Related to the National Health Service is the great problem of social care for the elderly. We all recognise that the changing demographic of our society is putting greater weight on the health service and on care for the elderly. Yet the Government seem quite incapable of addressing these issues. What greatly upset my colleagues in the other place was that, when a clause was tabled there for the Bill to contain an equality impact assessment, because the Government need to carry out a thorough analysis of the nature of the challenges faced by so many people in our society, the Government made sure that that was not passed. Therefore, an essential building block for the analysis of the problems in our society was not even contained in this Bill. At least if that assessment of the nature of the problem had been there, it would have been something to save the Minister’s face in introducing such a forlorn exercise. But it was turned down and rejected in the other place.
When it comes to productivity, I recognise certain aspects of where the Government are making some progress. We recognise the value of developing apprenticeships, although it is quite clear that we have got to be very encouraging towards that development. It is still the case that the vast majority of young people in education who are aspiring and have good results think overwhelmingly of university and in academic terms rather than of the needs of our economy for skilled manpower.
Alongside that, the Government have produced a devastating onslaught on the further education colleges that provide training. In addition, opportunities for part-time education have fallen almost completely by the wayside. One thinks back to the days when institutions such as the Open University were at their prime. Part-time education is now unsupported by public resources and, consequently, the opportunities have declined. A vigorous economy would keep open opportunities for people as they mature, irrespective of their achievements at any one level. People can change both in their aspirations and their abilities, and it is important to have systems that are open and flexible. With regard to education, I am afraid the Government have done exactly the opposite.
We may not have had the full equality impact assessment, but we all know the nature of our society. Even the Government are beginning to recognise that women come out of this Finance Bill more poorly than men. It is part of the pattern of our society. We have had a great deal of publicity about the issues of discrimination against women by the BBC, and we all recognise the challenge with institutions like that, but the whole question of equality for women needs to be addressed at a much more basic level. On this International Women’s Day, it is only right that we should have a debate—as will take place after this one—on the issues confronting women. It is important that the Government recognise that so much needs to be done to change the levels of discrimination that are plain at the present time.
It is not just about women: young people also feel heavily discriminated against. You cannot talk to those between the ages of 18 and 25 without recognising that the possibilities for them in our society are, in so many respects, inferior to those which their parents faced. If ever there was one clear objective that the vast majority of parents have always had, it is to try to make sure that their children have greater opportunities than they had—to improve society and the economy in such a way that their children’s opportunities are greater. We are now facing a situation where exactly the opposite is occurring. That is why this Bill should have paid some attention to tackling that crisis.
I welcome the fact that on Thursday next week we will have an opportunity to debate the economy and our society, and I am sure there will be a large number of participants. This miserable little Bill scarcely gives us any opportunity for that, but what it did do was crush opportunities that could have been taken under a more confident Government with clear objectives in pursuing their policies in the country. This Bill does not look like that to the average citizen or to the vast majority of our people. That is why the Government need to address themselves more satisfactorily to the economic situation than they do in this rather miserable little Bill.
Lord Bates
My Lords, I may have overshot the mark in my opening speech by being a little optimistic. I congratulate the noble Baroness, Lady Kramer, and the noble Lord, Lord Davies, on having well and truly rebalanced that perception. There are two potential reasons why there was not a long list of speakers for the debate. One could be a lack of interest, but the other reason could be that there is broad support across the House for the measures in the Bill before us —the House itself can judge whether or not that is true.
Lord Brooke of Alverthorpe (Lab)
My Lords, could it be perhaps that noble Lords wish to speak in the next debate, which they see as more important?
Lord Bates
That is one possible explanation, but your Lordships have always been assiduous in their attention to matters such as the Finance (No. 2) Bill before us.
Let me try to address some of the points that were raised. The first point was on the argument about growth. We were the joint fastest-growing major economy just as recently as 2016. Of course, there has been a level of uncertainty as a result of the British people’s decision to exit the European Union; that is understandable and most people would recognise it. However, I do not see 1.7% as being a miserable or pathetic rate of growth, or that other OECD competitors with rates of 1.9%, 2% and 2.9% are experiencing extraordinary rates of growth. We entered into this cycle of growth out of the recession of 2008-09, much earlier than others. Therefore, we are at a different stage of growth. But to be able to say that we have grown for 20 consecutive quarters—five years of growth—and that manufacturing has grown for eight consecutive months, which is the longest continuous streak for 30 years, is surely reason for a degree of optimism.
The noble Baroness, Lady Kramer, asked about NHS funding. The Budget provided an extra £6.3 billion of new funding for the NHS, and we are committed to increasing the NHS budget by a minimum of £8 billon in real terms over the next five years. This is a significant first step towards that. The NHS is seeing over 2.9 million more A&E patients every year compared to 2010 and treating 57,000 more people every year for cancer, giving the UK its highest ever cancer survival rate. The noble Baroness asked whether we would have a hypothecated tax for health. Of course, we have such a tax in the sense that 20% of NIC receipts go directly towards the National Health Service.
On the point about housing provisions not bringing about changes, if the measure on stamp duty were taken alone, that might well be true, but it will help a million first-time buyers. Surely that has to be welcomed. In the wider context, the fact that employment is at almost record levels, with 3 million more people earning a salary than in 2010, must also be helpful for the housing market, because it means they have a salary with which potentially to buy. But that is not enough, and it is why we said that stamp duty was one element of that. Another element was to go towards our aspiration of building 300,000 new homes each year.
Let me turn to investment—I think the noble Baroness said that business investment had “fallen off a cliff”. Again, that might be overstating it a little. Business investment contracted by 2.6% in the year to the EU referendum, but grew by 2.5% in the year since. The OBR forecast is for business investment to grow by 2.5% in 2017 and 2.3% in 2018-19, which is a different approach. A key element of that was extra funding of £31 million for the productivity investment fund. That will make a significant contribution, as will businesses investing in themselves, which is the most successful form of business investment. The corporation tax rate has fallen from 28% to 19%, which means that small, medium-sized and large businesses have more money to invest in their own businesses and their own futures.
The noble Lord, Lord Davies, referred to the equality briefing. It was under this Government that we became one the first countries to introduce gender pay gap reporting. The gender pay gap for full-time employees is at a record low. Building on this, the Budget announced steps to boost female enterprise and innovative trials to support women returning to work. The number of women in work is at a record high of 15 million, an increase of 1.4 million since 2010, of which 80% were full-time. The gender pay gap for full-time employees is at a record low of 9.1%.
There are reasons to recognise that we need to be prepared to strengthen the economy to make more it competitive internationally so that we make a success of Brexit for Britain. The people who do that will be the workers and businesses of this country. This Bill strengthens measures to help them by reducing their taxes, increasing incentives to invest—especially in knowledge-intensive industries—and helping young people to achieve their aspiration of getting on to the housing ladder. These are all reasons why I am happy to commend this Bill to the House.
Royal Assent
Thursday 15th March 2018
(6 years, 7 months ago)
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