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Oral Answers to Questions
(10 years, 7 months ago)
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Graham Stringer (Blackley and Broughton) (Lab)
1. What recent reports he has received on the situation in Ukraine.
Mr Simon Burns (Chelmsford) (Con)
8. What recent assessment he has made of the political situation in Ukraine.
Kevin Brennan (Cardiff West) (Lab)
12. What recent assessment he has made of threats to the territorial integrity of Ukraine.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
We are gravely concerned about the situation in Crimea and in the east of Ukraine, where armed groups have seized Government buildings in Donetsk, Kharkiv and Lugansk. There can be no justification for this action, which bears all the hallmarks of a Russian strategy to destabilise Ukraine. Russia should be clear that the deliberate escalation of this crisis will bring serious political and economic consequences.
Graham Stringer
In February, the Chancellor of the Exchequer offered financial assistance to Ukraine. At the start of this month, Gazprom put up the price of gas to Ukraine. What safeguards has the Foreign Secretary put in place to stop any aid we give to Ukraine going straight to Russia via increased gas prices?
Mr Hague
As the hon. Gentleman knows, the aid that he is speaking of is the International Monetary Fund programme, and work continues on that programme. The Ukrainian Government have been discussing the first stage of that with the IMF. To obtain that aid, Ukraine must meet the conditions set by the IMF, including on how that money is used. Of course Ukraine would enjoy a more successful and prosperous future if Russia were to join the rest of the international community in supporting the economic future of Ukraine.
Mr Burns
Following the praise of the UK Independence party on Russian-controlled television yesterday, will my right hon. Friend remind the House of the guiding principles of British foreign policy towards Ukraine, namely that Ukraine has a democratic right to self-determination and that sending in the tanks and holding a sham referendum in the Crimea under the shadow of the Kalashnikov is not only aggression but illegal in international law and a threat to the security of the world?
Mr Hague
My right hon. Friend makes an important point. The guiding principles for us are that the development of democratic institutions in Ukraine and a rules-based international system are in the national interest of the United Kingdom. For any parties or leaders in Britain to feed a Russian propaganda machine after the invasion of a neighbouring country is not a responsible position to take, particularly for anyone who professes to believe in the independence and sovereignty of nations.
Kevin Brennan
The authorisation that President Putin obtained in February to use troops in Ukraine did not specify that it applied to Crimea only. What is our policy in the event of such a Sudeten-like land grab in eastern Ukraine?
Mr Hague
The hon. Gentleman is quite right, and that was of course one of the most alarming aspects of the authority that President Putin asked for in February—that it covered the use of armed force in Ukraine in general. As he knows, the European Union and the United States have imposed certain sanctions, but the European Commission has been asked by the European Council to draw up further far-reaching measures and economic and other sanctions to be implemented in the event of a further escalation and intensification of the crisis by Russia. Any invasion of eastern Ukraine of course falls into that category.
Sir Menzies Campbell (North East Fife) (LD)
I appreciate that this is not in my right hon. Friend’s gift, but in the event of the situation deteriorating materially, will he at least support the notion that Parliament may have to be recalled? When talking to other Foreign Ministers in the European Union, has he emphasised the importance of a concerted and determined approach to these issues and that any sign of disunity or lack of commitment would undoubtedly be exploited by Moscow?
Mr Hague
Yes, absolutely. On the first point, Parliament must always be able to deliberate urgently, although I have always taken the view that before Parliament has gone into recess is too early to call for it to be recalled. However, I take my right hon. and learned Friend’s point about that. I absolutely agree with his second point. At the meeting of EU Foreign Ministers in Athens over the weekend, I emphasised that the strength and unity of the European Union on this issue will be a vital determinant of the ultimate outcome.
Mr Jack Straw (Blackburn) (Lab)
Although I fully support the Foreign Secretary’s strategy, does he accept that the more the Ukrainian Government can reach out to the Russian speakers in eastern Ukraine, the less of an excuse President Putin will have for taking provocative action there?
Mr Hague
Yes. I think that is an extremely important point and it is one that I have emphasised over the past couple of weeks to both Prime Minister Yatsenyuk of Ukraine and Foreign Minister Deshchytsia. We say constantly to the Ukrainian authorities that it is important that the Government in Kiev show that they represent all the regions of the country. It is of course important to discuss decentralisation in Ukraine without necessarily accepting an agenda of paralysis by federalism, as proposed by Russia.
Sir Peter Tapsell (Louth and Horncastle) (Con)
Although all historical analogies tend to be misleading, can it be borne in mind that if we are looking back to the 1930s, as we are fully entitled to do, the occupation of the Crimea and Sevastopol bears more resemblance to the Anschluss than to the invasion of Sudetenland? If the Russians were actually to invade Ukraine, that of course would be an act of naked aggression.
Mr Hague
I think there was a good deal of naked aggression in what happened in Crimea. Of course, my right hon. Friend is right about the great seriousness of any further encroachment into Ukraine. That is something we should bear in mind, as well as his point that historical analogies can always be misleading.
Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)
As the Foreign Secretary’s earlier answers show, the protests across the east of Ukraine, in cities including Donetsk, highlight the continued risk of violent escalation and further bloodshed in Ukraine. In his first answer, the Foreign Secretary spoke of recent events bearing all the hallmarks of Russian involvement. Would he be willing to set out for the House in a little more detail his judgment of the form that the involvement of Russia has taken in recent days?
Mr Hague
Well, I said that it had the hallmarks of a Russian strategy to destabilise Ukraine and that is something we must expect in the run-up to the Ukrainian presidential elections on 25 May. It would be consistent with Russia’s strategy and behaviour over recent weeks to try to damage the credibility of those elections, to take actions that would make it appear less credible to hold the elections in eastern parts of Ukraine and to make it more difficult for Ukraine to operate as a democratic state. Those hallmarks are all present in what has happened in recent days.
Mr Alexander
I note and welcome the Foreign Secretary’s answer. The Prime Minister said in his statement to this House on Ukraine:
“The international community remains ready to intensify sanctions if Russia continues to escalate this situation”.—[Official Report, 26 March 2014; Vol. 578, c. 350.]
In the light of the Foreign Secretary’s answer, and if reports of Russian involvement in eastern Ukraine prove correct, does he believe that that would constitute grounds for widening the economic and diplomatic pressure on President Putin?
Mr Hague
That will depend on the course of events over the coming days and on the evidence of Russia’s involvement. The latest this morning is that the authorities in Kiev say that the situation is dangerous, as we have said in this House, but under control. Indeed, the administrative buildings in Kharkiv appear to be back under the control of the Ukrainian authorities. I think we will have to assess the situation over the coming days, but I say again that a deliberate escalation of the situation by Russia will bring serious political and economic consequences.
Dr Julian Lewis (New Forest East) (Con)
To what extent has the ability of our European allies to wage effective economic sanctions against Russia been undermined by their dependence on Russian gas sources and do we have a strategy for trying to persuade our allies to diversify their energy sources so that that dependence will be lessened in the future?
Mr Hague
I think the answer is that that has not affected what we have done so far, but we have to be very conscious of that point and the effect it could have. We are very active—I at meetings of Foreign Ministers and the Prime Minister at the European Council—in saying that it will be necessary to accelerate measures that reduce Europe’s dependence on Russian gas. The G7 leaders discussed that at some length at the meeting in The Hague two weeks ago and my hon. Friend will be aware that we are convening a meeting of Energy Ministers in the G7 precisely to discuss that ahead of the G7 Heads of Government meeting.
Ian Lavery (Wansbeck) (Lab)
2. What recent progress has been made on the transatlantic trade and investment partnership.
The Minister for Europe (Mr David Lidington)
TTIP is our top trade policy priority, worth up to £10 billion a year for the UK. The EU-US summit two weeks ago re-emphasised political support for that agreement, and our ambition remains to conclude the deal next year, with the fifth negotiating round due to take place next month.
Ian Lavery
Will the Government use the options open to member states to exclude public services, most importantly the NHS, from the scope of the TTIP agreement?
Mr Lidington
The Prime Minister has already made it clear that part of our negotiating objective will be to make sure that, when it comes to health services, any provisions included in TTIP are broadly in line with our existing obligations under GATT. We do not envisage any significant change from the current position.
Sir Richard Ottaway (Croydon South) (Con)
Does the Minister agree that there is a read-across between Ukraine and TTIP, with some seeing TTIP as an economic NATO? Binding the EU and the US together is bound to have political and geostrategic implications, and TTIP can become a symbol of Atlantic solidarity that may well check Russian imperialism.
Mr Lidington
I agree with my right hon. Friend about the symbolic as well as practical economic importance of the proposed deal. In practice, a successful transatlantic trade negotiation would establish global regulatory standards for business and trade on a transatlantic basis instead of the transatlantic powers having to copy others.
Helen Goodman (Bishop Auckland) (Lab)
3. If he will make it his policy to publish a list of all meetings between Ministers of his Department and officials since May 2010.
The Minister for Europe (Mr David Lidington)
We publish details of ministerial meetings with external organisations on a quarterly basis, but in line with the practice of previous Governments, we do not intend to publish a list of meetings between Ministers and their departmental officials.
Helen Goodman
Will the Minister tell the House whether at the meeting that the Foreign Office had on 24 February with Dmitry Firtash the question of asset freezes or sanctions was discussed?
Mr Lidington
I am obviously not going to go into details of what may or may not have been discussed at a meeting, particularly one at which I was not present, but it remains the case that Foreign Office officials and Ministers speak to people of all types from many different parts of the world with a single objective in mind, which is how best to enhance the United Kingdom’s understanding of global events and strengthen its interest in world affairs.
Ian Paisley (North Antrim) (DUP)
Given today’s visit, can the Minister confirm whether he has had any meetings with the Republic of Ireland’s Foreign Minister about its entering the British Commonwealth?
Mr Lidington
Not to my knowledge. We take the view that this is a matter for the Government of Ireland. Clearly, there are strong bonds of friendship and history between the two countries, but it has to be a matter for the Irish people and the Irish Government to decide about any relationship with the Commonwealth.
Ian Murray (Edinburgh South) (Lab)
4. What recent discussions he has had with his ministerial colleagues on repatriation of powers from the EU.
The Minister for Europe (Mr David Lidington)
The Foreign Secretary and I regularly speak to our European counterparts about all aspects of EU reform, including the powers and competences of institutions.
Ian Murray
Given that Lord Heseltine has now admitted that the Prime Minister’s approach to Europe is based on narrow party interest rather than the British national interest, will the Minister at last—this is the third time I have asked him at the Dispatch Box—tell us what his top policy priority is for repatriation from Europe and whether that would mean that the Government would then campaign to stay in the EU?
Mr Lidington
Our top policy priorities in European reform are to make the European Union more democratically accountable, more globally competitive and more flexible than it is today, that arrangements should be fair to eurozone members and non-members and to ensure that power can flow in both directions between Brussels and member states. I would have hoped that those were objectives that the Labour party would share, but it seems that I am to be disappointed.
Mr David Nuttall (Bury North) (Con)
Does my right hon. Friend agree that we should seek to repatriate control over social and employment legislation, which was handed over to Brussels by the previous Labour Government when they gave up our opt-out from the social chapter?
Mr Lidington
There are aspects of social and economic policy, such as the working time directive, the application of which have harmed the interests of the United Kingdom, and we do indeed need to seek changes to those policies where we think they make not just the United Kingdom, but the whole of Europe less competitive than we need to be.
Keith Vaz (Leicester East) (Lab)
No Foreign Office Ministers were present during yesterday’s debate on European matters, so will the Minister for Europe comment on the presidency text, which suggested that we would have to make a decision by June of this year as to what parts of the justice and home affairs opt-out we will opt into?
Mr Lidington
I read the comments in yesterday’s debate by my right hon. Friend the Home Secretary. As she told the House then, she is engaged, with my right hon. Friend the Justice Secretary, in negotiations with other member states and with the European Commission. Those talks are moving forward constructively. We hope for agreement at the earliest possible date, but there is no artificial deadline, save the one in the treaties, which is 1 December this year.
Mrs Caroline Spelman (Meriden) (Con)
Does my right hon. Friend agree that the repatriation of powers under the common fisheries policy has enabled important localisation of benefits for British fishermen, and will he condemn UKIP, which voted against the iniquitous practice of fish discards?
Mr Lidington
The ban on the obscene practice of discarding and the shift of fisheries management back to local and regional level is a real achievement for United Kingdom MEPs working with colleagues from other countries and with the European Commissioner concerned. It is disappointing if some UK MEPs felt that there were more important calls on their time than to defend British fishing interests in the way that our MEPs did.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
The Prime Minister promised us all that EU treaty change would happen by 2017 and that a major repatriation of powers would follow. Given that the French, the Germans and the Italians now, have all confirmed that this is not their priority, could that be why the right hon. Member for Haltemprice and Howden (Mr Davis) thinks that the Prime Minister has made such a mess of winning back powers from the European Union?
Mr Lidington
Oh dear, dear, dear. I am heartened by the strong support in Denmark and the Netherlands for our ideas on strengthening the role of national Parliaments in the European Union, by the words in the German coalition agreement about the need for treaty changes in the future, and by the practical achievements in repatriation of powers, whether through fisheries or the arrangements for double voting on the single supervisory mechanism. What the British people are waiting to hear is whether the Opposition are prepared to trust the British people with the final decision on our membership of the European Union.
Rushanara Ali (Bethnal Green and Bow) (Lab)
5. What recent assessment he has made of respect for freedom of religion or belief worldwide and how it can be improved.
The Minister of State, Foreign and Commonwealth Office (Hugh Robertson)
The Foreign Office addresses freedom of religion or belief across the world through our bilateral relationships, through multilateral organisations, such as the United Nations, and through the Foreign Secretary’s human rights advisory group.
Rushanara Ali
Rohingya Muslims in Rakhine state face discrimination and a protracted humanitarian crisis, compounded by the failure of the Burmese Government to recognise their right to citizenship. What action is the Minister taking to prevent the Burmese Government from using their census, which receives some £10 million of UK assistance, to discriminate against Rohingya Muslims by refusing to recognise their religious and ethnic identity?
Hugh Robertson
The hon. Lady’s point is well made. The Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for East Devon (Mr Swire), expressed our strong concerns about conditions there during his visit to Burma in January. He called the Minister, Khin Yi, on 26 March, and summoned the Burmese ambassador only yesterday to make these representations.
Mr Peter Bone (Wellingborough) (Con)
In the middle east, with the exception of Israel where there is a lot of freedom of religion and the Christian community has increased by 1,000% since the state of Israel came into being, there is a lack of freedom of religion. What are the Government attempting to do to resolve that?
Hugh Robertson
Not least in response to concerns expressed across the House through the Foreign Office’s mail bag and at Question Time, we have made a priority of visiting religious leaders throughout the middle east during visits. Recently, I have seen the Copts in Egypt and the Catholic community in Jordan, and called in at the Holy See when I was in Rome for the Libya conference, to speak to them about their concerns.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
18. I am sure the Minister is aware that the erosion of freedom of religious practice is an issue in a number of Commonwealth countries, including Malaysia, where the Malay word for God has effectively been banned, making the Bible illegal, and Brunei, where the introduction of sharia law has caused huge anxiety among the sizeable Filipino Catholic community there. Will the Minister ensure that these issues are raised not only in the forums to which he referred but through the Commonwealth forums, to ensure that there is real freedom of religion in Commonwealth countries?
Hugh Robertson
I can give the hon. Gentleman that assurance. The Minister of State responsible for the Commonwealth, my right hon. Friend the Member for East Devon (Mr Swire), has got that message clearly. When I mentioned the multilateral institutions, I could not list them all, but clearly the Commonwealth is key among them.
Bob Blackman (Harrow East) (Con)
Over the past 50 years the Jewish population in Arab countries has shrunk by 836,000 people, who are all refugees. At the same time there are some 836,000 Palestinian refugees. What is my right hon. Friend’s reaction to the fact that more than $2 billion has been spent supporting the Palestinian refugees, but zero on Israeli refugees?
Hugh Robertson
Our allocations in this area are driven by need. I thank my hon. Friend for the various pieces of literature that he has provided to me, which I will follow up separately. There is a straightforward assessment of need. The situation of refugees, not only Jewish, not only Palestinian, across the middle east, particularly in Jordan and Lebanon—it is worth reminding the House that we have these questions at a time when the millionth Syrian refugee has arrived in Beirut—is a matter that we are addressing as a priority.
Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)
As we approach Easter, we know that millions of Christians across the world will be prevented from celebrating or will risk persecution for doing so. New research by the Pew research centre suggests that persecution of people who practise their religion increased in almost every major region of the world in recent years. In the light of such concerning reports, what specific steps are the UK Government taking as a member of the United Nations Human Rights Council to ensure that tackling the persecution of Christians and promoting freedom of religion is a key priority?
Hugh Robertson
That is a good question. As I said in my original answer, the Foreign Office picks up the issue through bilateral relationships with the countries concerned, through the multilateral institutions and through the Foreign Secretary’s human rights advisory group. This is an issue that we will concentrate on over the period. The reaction that we have had across the House and from those with whom we have had contact indicates that this is a serious issue and it is one that we will take seriously.
Mr Dominic Raab (Esher and Walton) (Con)
6. What steps he is taking to address human rights abuses in North Korea.
The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
The UN commission of inquiry report on human rights in the Democratic People’s Republic of Korea documented appalling human rights violations. The UK played a leading role in ensuring a strong UN Human Rights Council resolution on the issue, which made it clear that there can be no impunity for those responsible.
Mr Raab
The report documented a totalitarian state on a par with Nazi Germany, systematically starving, torturing and murdering its own people, and in reply North Korea, backed by China, told the international community to mind its own business. How do we tilt the balance of China’s perception of its national interest so that it stops protecting the war criminals in Pyongyang?
Mr Swire
My hon. Friend is right. The Human Rights Council resolution talked about state-sanctioned horrific violations, which it described as
“without parallel in the contemporary world”.
At the UK-China strategic dialogue my right hon. Friend the Foreign Secretary raised the commission of inquiry report with State Councillor Yang, and we continue to discuss human rights abuses in the DPRK with the Chinese and other parties.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
North Korea’s periodic review at the United Nations is due on 1 May. Will the Government take that chance to highlight the fact that 25% of Christians are incarcerated in North Korea, and to highlight the repatriation of people from China to North Korea, where they are treated very badly?
Mr Swire
It is right that in the run-up to Easter this House should be concerned about the freedom to practise Christianity. The stories included in the report of the persecution of Christians in the DPRK are truly shocking. Refoulement, which the hon. Gentleman referred to in the second part of his question, is something we have been discussing with the Chinese.
Jim Shannon (Strangford) (DUP)
The killing of parents in North Korea, many of whom are Christians, is leaving their children abandoned, confused, frightened, and left to starve to death. Has the Minister been able to have any discussions with the North Korean ambassador, or indeed with the Chinese authorities, who could add their influence, to see whether these people’s circumstances can be improved?
Mr Swire
The threat in North Korea is unfortunately not just to the Christian community but to the other people of that country; the threat comes from their own Government. As I said, we are extremely concerned about the persecution of Christians and other minorities. The world is watching DPRK. We need to assemble all the evidence, because I believe that one day this appalling regime will be held to account.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
7. What his priorities are for tackling discrimination on the grounds of sexual orientation or gender identity internationally; and what steps the Government are taking to promote the rights of lesbian, gay, bisexual and transgender people worldwide.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
The UK is committed to combating violence and discrimination wherever it occurs. FCO Ministers have recently raised LGBT issues with the Governments of Nigeria, Russia, India and Uganda. We used our 2013 chairmanship of the Council of Europe to reform legislation in Europe, and at the UN we have raised concerns about several other countries.
Mrs Hodgson
There is great concern across the House that the Government’s response to Uganda’s Anti-Homosexuality Act has been too weak. This dreadful violation of human rights needs a strong international response to send a clear message not only to Uganda but to other countries contemplating similar legislation. Does the Secretary of State accept that quiet diplomacy is not enough and that it is now time for targeted travel bans and meaningful sanctions as a real statement that the UK will not tolerate such abuse?
Mr Hague
I have spent a good deal of time studying this issue, which I regard as very important. First, it is important for us to encourage a long-term change in attitudes. In Uganda, we support training, advocacy and legal cases related to the protection of LGBT rights. We fund a project by the Kaleidoscope Trust. I myself met the leading Ugandan LGBT human rights activist, Dr Frank Mugisha, to illustrate the importance we attach to this. However, I judge that were we to implement sanctions or other measures, it would penalise poor people who benefit from our development aid or could produce a counter-productive response in other African countries. It is a difficult judgment, but the approach I have outlined is what I consider to be the right one.
Naomi Long (Belfast East) (Alliance)
There is anecdotal evidence that since the passing of the law there has been an increase in persecution of and attacks on Ugandans who are homosexual. Has the Secretary of State had any discussions with the Home Office on what approach it will take to those who seek refuge from persecution?
Mr Hague
Of course, the Home Office applies strictly and properly the criteria for accepting people who are vulnerable to persecution as asylum seekers into this country. That can include people persecuted or at risk of discrimination or violence on grounds of LGBT activism, so that is an important criterion.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
9. What recent discussions he has had with his counterpart in Brazil on closer economic and political co-operation between that country and the UK.
The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
My right hon. Friend the Chancellor, who is rapidly becoming one of the greatest Chancellors in modern times, is in Brazil this very week, as the fourteenth Government Minister to visit in the past 12 months. Yesterday he announced a further £4 million-worth of funding for UK Trade & Investment to support 3,000 exporters and to expand its operations to Latin America, as well as a special Bank of England facility to support lending.
Mr Sheerman
But we still lag behind Germany, France and Italy in terms of the strength of our trading partnership with Brazil. Although the Brazilian economy is going through a tough time, is there any update on the bilateral tax treaty that we were pursuing? Is that part of the discussions during the Chancellor’s visit? When will we redouble our efforts to export to this important destination?
Mr Swire
I am sure the Chancellor will be discussing all matters of interest to the UK economy and the City of London, double taxation being one of those. I have to say to the hon. Gentleman, who was part of a Government who, for 13 years, had responsibility for Britain’s exports and relations with Brazil, that in the past 13 months alone there have been 14 ministerial visits to Brazil. That level of commitment was not matched in virtually the entire period of Labour’s maladministration.
Mr Speaker
Let me say to the Minister of State that to be fair to the hon. Member for Huddersfield, he was not part of that Government but a proud Back-Bench supporter of them. That is an important distinction, as I think the Minister would readily concede.
Mr Philip Hollobone (Kettering) (Con)
Brazil is the leading economic and political power in south America. How successful are we being in persuading the Brazilians of the merits of the Falkland Islanders’ case that their sovereignty should be decided by the islanders themselves and not by their Argentine neighbours? [Interruption.]
Mr Swire
I hope that Opposition Members are laughing about something else—perhaps they are not—because this is a very serious matter. Whenever we go around Latin America and, indeed, central America, we are always absolutely certain to make the case that the Falkland Islanders had a referendum in which they expressed an overwhelming desire to maintain their current status. That should be recognised by countries right across the world, not just in Latin America, if they believe in self-determination and human rights. Unfortunately, one particular country in Latin America continues to bully and intimidate the Falkland Islands.
Damian Collins (Folkestone and Hythe) (Con)
10. What recent assessment he has made of the political and security situation in Bosnia and Herzegovina.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
Bosnians are deeply frustrated by the failure of political leaders to deliver on any of the issues that matter. During my visit to Bosnia 10 days ago, I urged Bosnia’s leaders to respond to protesters’ legitimate demands and to avoid ethnic and secessionist rhetoric. The redrawing of borders in the Balkans is finished.
Damian Collins
The challenge of Bosnia continues to be exacerbated by secessionist voices within the entity of Republika Srpska. Does the Foreign Secretary agree that Europe and the United States must address this threat to the stability of Bosnia and that the international community must be prepared to sanction those responsible for it?
Mr Hague
Certainly, the international community must address those issues. We will discuss them at the European Union Foreign Affairs Council in Luxembourg next Monday. It will be vital, after the elections take place in Bosnia and Herzegovina in October, for there to be a major international effort to ensure that a functioning state is created in Bosnia and Herzegovina. That is not happening at the moment.
Angus Robertson (Moray) (SNP)
This is the first opportunity I have had to put on the record my sadness at the passing of Margo MacDonald, the former SNP Member for Glasgow, Govan. I am sure that Members on both sides of the House would wish to pass on their condolences to Jim Sillars—himself a former Member for Glasgow, Govan—and the extended family.
On Bosnia, the Foreign Secretary is aware that Croatian Bosnians are able to access and have passports from the Republic of Croatia; that, soon, Bosnian Serbs will be able to have Serbian EU passports; and that the one group of citizens in Bosnia and Herzegovina who will not be able to have EU passports are the Bosniaks themselves. What can the Foreign Secretary do to ensure a European perspective for all citizens of Bosnia and Herzegovina?
Mr Hague
I join in the tribute to Margo MacDonald on her passing and to her strong record in this House in the past.
On the very important question of what happens to the whole population of Bosnia and Herzegovina, I spoke about it on Saturday with other EU Foreign Ministers, including those from EU candidate countries, and stressed the very point the hon. Gentleman has just made. An unstable Bosnia threatens the stability of the whole of the western Balkans. That is why we have to make sure there is a functioning state in that country in the coming years.
Ann McKechin (Glasgow North) (Lab)
11. What recent assessment he has made of progress in peace negotiations between Israel and Palestine.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
In the past few days, I have discussed progress with Secretary Kerry and President Abbas, and I will speak to my Israeli counterparts in the coming days. Secretary Kerry’s tireless efforts provide an unparalleled opportunity to achieve a two-state solution. I urge both parties to show the bold leadership needed to resolve this conflict once and for all.
Ann McKechin
I certainly welcome the information provided by the Foreign Secretary, but he will be aware of press stories that the latest report by the European heads of mission in East Jerusalem states that Israeli policies in Jerusalem are aimed at
“cementing its unilateral and illegal annexation of East Jerusalem”,
with an unprecedented surge in settlement activity. Does the Foreign Secretary concur with that view and, if so, what is he doing to ensure the future of Jerusalem as a shared capital as part of the negotiations?
Mr Hague
Jerusalem, as a shared capital, is part of what we believe is a characteristic of achieving a two-state solution, along with a solution based on 1967 borders, with agreed land swaps and with a just, fair and agreed settlement for refugees. It is vital that that possibility is kept open. That is why so many of us on all sides of the House have voiced such strong disapproval of settlements on occupied land, which are illegal. We make that point regularly to the Israelis—indeed, I will do so to an Israeli Minister this afternoon—and we urge them to take the opportunity of peace.
Dr Matthew Offord (Hendon) (Con)
Last December, the Foreign Secretary said that the British Government have been
“clear to the Palestinians that there is no alternative to negotiations”
and that “we oppose unilateral measures”. What representation has he made to the Palestinian Authority following its return to unilateral actions last week, in violation of its commitment to abstain for the duration of direct peace talks?
Mr Hague
I called President Abbas last Thursday to repeat our view that the only chance of achieving a viable and sovereign Palestinian state is through negotiations. President Abbas assured me that he remains committed to negotiations, so we will continue to encourage him and Israeli leaders to make a success—even at this stage—of this opportunity.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
It is essential that both sides return to negotiations and that they recognise that they will both have to make great compromises to secure a negotiated peace. Does the Foreign Secretary believe that the Palestinian leadership has been preparing the Palestinians for peace when terrorists freed by Israel have been welcomed in the Palestinian Authority as heroes? A broadcast by Palestinian Authority TV has honoured Dalal Mughrabi, who was responsible for a hijacking in which 37 Israeli citizens, including 12 children, were killed.
Mr Hague
Prisoner releases are always controversial in a peace process, as we know well in our own country, but I absolutely regard President Abbas, the leader of the Palestinians, as a man of peace, and I pay tribute to the bold leadership that he has shown on these issues in recent months. As the hon. Lady has just heard, I have urged him to continue with that, and we must focus on that point.
Ian Lucas (Wrexham) (Lab)
What is Government policy on Palestine applying as a state to be a member of international political or cultural organisations?
Mr Hague
Last week, President Abbas signed and submitted letters of accession to 15 conventions, including the fourth Geneva convention. No decision is imminent or necessary at the moment on these things, and given that our focus is on urging both Palestinians and Israelis to make a success of the negotiations, I do not believe that it would be wise for us or other countries to pass judgment on those applications now.
Mr Andrew Love (Edmonton) (Lab/Co-op)
13. What assessment he has made of the potential effect of the 25th session of the UN Human Rights Council on global efforts to uphold universal human rights.
The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
The 25th session of the UN Human Rights Council took strong action to combat impunity by voting through resolutions on Syria, the Democratic People’s Republic of Korea and Sri Lanka in response to UN reporting on allegations of serious human rights violations.
Mr Love
I will focus on the international inquiry into the conflict in Sri Lanka. Given the Rajapaksa Government’s hostility, what mechanisms are available to the inquiry to enable it to carry out its investigation on the island and what protections can it give to the witnesses that come before it, both of which are absolutely critical if we are to get to the bottom of the events in 2009?
Mr Swire
The hon. Gentleman is absolutely right. We got through the resolution that we wanted. The Prime Minister showed tremendous leadership on this. We were completely vindicated in our decision to go to the Commonwealth Heads of Government meeting—my right hon. Friend the Foreign Secretary included—because had we not gone there, we would not be in the position that we are today. Now that the international community has spoken through the United Nations Human Rights Council, it is important that the Government in Colombo listen to what has been said and what is asked of them, and that we can conduct an investigation through the Office of the High Commissioner for Human Rights to make that country a better place for all.
Tim Loughton (East Worthing and Shoreham) (Con)
Will the Minister also maintain the robust approach to human rights abuses in Tibet with the UK-China human rights dialogue coming up, and will he press the Chinese for a date for the visit to Tibet and China by the UN High Commissioner for Human Rights, Navi Pillay, to which China has agreed?
Mr Swire
We are of course looking forward to the human rights dialogue with the Chinese, for which a date will be forthcoming shortly. It is worth saying that the new configuration of the Human Rights Council means that it is less prepared to support country mandates, because re-elected along with the United Kingdom were Russia, China and Cuba.
Valerie Vaz (Walsall South) (Lab)
Despite the release of Sakineh Ashtiani, many other women in Iran face the death penalty, in breach of their human rights. Will the Minister raise their case and uphold their human rights?
David Mowat (Warrington South) (Con)
14. What discussions he has had with the Libyan Government on reparations for people killed in attacks made using Libyan Semtex.
The Minister of State, Foreign and Commonwealth Office (Hugh Robertson)
Successive UK Governments have not routinely negotiated with foreign Governments over private compensation claims. However, the UK has raised with the Libyan authorities on a number of occasions the importance of engaging with UK victims seeking redress, including those seeking compensation through private campaigns, and with their legal representatives.
David Mowat
The Minister will be aware that the American victims of Semtex bombings have received more than £1 billion of compensation, while the 200 UK victims have so far received nothing. Can he assure the House that no deal was done in 2008 as part of the normalisation of relations with Gaddafi, to the detriment of my constituents?
Hugh Robertson
Yes, I can. I should probably say to my hon. Friend that the situation here is very different from that in the United States, because we have victims who have suffered by a wide range of means, not merely Semtex. However, I can absolutely assure him that the claim that Government officials took any action in the 2008 bilateral agreement between the US and Libya that denied UK victims compensation is wrong.
Mr Speaker
Order. The hon. Gentleman has already had one go. His appetite ought to have been satisfied for now. He seems to be a hungry caterpillar, but he will have to wait. Never mind.
Fiona Bruce (Congleton) (Con)
15. What contribution the UK is making to international provision for displaced Syrians.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
The UK is leading international efforts to help the estimated 4.1 million Syrian refugees in the region and 6.5 million internally displaced people. So far we have provided £241 million in life-saving support to civilians caught up in the conflict and allocated £292 million to help refugees and host communities in neighbouring countries.
Fiona Bruce
Is my right hon. Friend concerned by reports from Open Doors that 3,000 Christians have fled their homes in Kessab, in northern Syria, in the past few days owing to fighters of the al-Nusra Front and ISIS entering north-west Syria from Turkey? Ethnic conflict is increasing there and aid cannot get through. Has he made representations to the relevant authorities about Turkey’s porous borders?
Mr Hague
We are very concerned about reports of violence and of people being displaced in Kessab. It is difficult to establish accurate numbers, but we are working closely with the Turkish Government to restrict the ability of foreign fighters to cross into Syria. I have discussed that recently with the Foreign Minister of Turkey.
Ann Clwyd (Cynon Valley) (Lab)
It has been promised many times, but what progress has been made on gaining unimpeded humanitarian access in Syria?
Mr Hague
Very little progress has been made, despite the successful passing of UN Security Council resolution 2139, which included the authorisation of cross-border access. The Security Council is due to review the position every 30 days, and at the coming review we will press strongly for full use to be made of what is authorised in that resolution.
Mr Robert Buckland (South Swindon) (Con)
T2. If he will make a statement on his departmental responsibilities.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
Yesterday I attended the commemoration in Rwanda on the 20th anniversary of the genocide, and today I will join in welcoming the President of the Irish Republic on his historic state visit.
Mr Buckland
Does my right hon. Friend welcome robust political engagement with European politicians such as Martin Schulz, the socialist President of the European Parliament, or will he be on his knees begging him not to come to the UK during the European parliamentary campaign, like the Labour party?
Kerry McCarthy (Bristol East) (Lab)
I welcome the UN Human Rights Council resolution on Sri Lanka, but given that President Rajapaksa has failed to comply with previous resolutions and with the very generous last-chance offer that the Prime Minister gave him at the Commonwealth Heads of Government meeting, and has now rejected the current resolution outright, does the Foreign Secretary still think it is appropriate for President Rajapaksa to continue as chair-in-office of the Commonwealth? If this is referred to the Commonwealth ministerial action group, what position will the UK take?
Mr Hague
The UK is not on the Commonwealth ministerial action group, as the hon. Lady knows, nor is it in our gift to determine the chair of the Commonwealth ourselves, but it was within our gift to decide to go to Sri Lanka and to raise these issues. As the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for East Devon (Mr Swire) has just made clear, there would have been no chance of succeeding in the Human Rights Council, as we recently did, had it not been for the Prime Minister’s leadership, our presence in Sri Lanka and our willingness to show how passionate we are about what happened in the north of Sri Lanka. The Opposition’s attitude of not going to Sri Lanka would have been a terrible misjudgement.
Dr Phillip Lee (Bracknell) (Con)
T3. I was pleased to read in a recent report by the Select Committee on Foreign Affairs that the Government have been developing a strategy towards the Gulf. In view of the obvious complexities of the middle east, does the Foreign Secretary agree that there is now a very good case for opening up that approach to a broader regional strategy?
The Minister of State, Foreign and Commonwealth Office (Hugh Robertson)
Absolutely. The Gulf strategy has been developed over a number of years and is already paying benefits not only diplomatically but economically and commercially across a wide range of areas. Indeed, the strategy has been such a success that many other people are looking to establish such a relationship with us.
Naomi Long (Belfast East) (Alliance)
T4. Has the Secretary of State received any recent reports on the condition of the seven Baha’i leaders who are now approaching the sixth anniversary of their incarceration in Iran? Will he take this opportunity to call again for their release?
Hugh Robertson
Yes, we will. As the hon. Lady is aware, there is a gradual and staged process of unfreezing relationships with the Iranian Government. We have not directly addressed that issue personally at ministerial level, but it is one of the issues that we will take up as we move the relationship forward.
Mr Peter Bone (Wellingborough) (Con)
What is the Foreign Secretary’s view of the bizarre situation in which this country pays overseas aid to the Palestinian Authority, which uses it to pay salaries to the families of convicted terrorists in Israel?
Hugh Robertson
As the Foreign Secretary has made clear, at the moment the entire and sole focus of our policy on Israel and the Occupied Palestinian Territories has to be to get behind the peace process led by John Kerry. Once that process has been concluded—I hope successfully—there will be an opportunity to look at all these issues afresh.
Ann McKechin (Glasgow North) (Lab)
T5. In a recent report on Colombia, the UN High Commissioner for Human Rights again emphasised her concerns about human rights. Will the Minister confirm what recent discussions he has had with the Colombian Government on protecting the safety of human rights defenders and trade unionists?
The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
Human rights continue to be a very important part of our relationship with Colombia. We discussed human rights with President Santos and Defence Minister Pinzon during the visit of my right hon. Friend the Foreign Secretary to Colombia in February. He also met a range of non-governmental organisations that work in the human rights field and hosted a high-profile event on sexual violence in conflict. The hon. Member for Glasgow North (Ann McKechin) will want to be aware that we are also publishing our annual human rights report on Thursday.
Paul Maynard (Blackpool North and Cleveleys) (Con)
Since independence in 1991, Ukraine has held a number of elections in which the results have been called into question by the various participants, and it is crucial that that does not reoccur. What help and support are the UK giving to the Government of Ukraine to ensure that the forthcoming elections are truly free and fair?
Mr Hague
I have made that very point strongly to Ukrainian leaders that it is important that the elections on 25 May are well observed internationally and are accepted as fully free and fair, which includes accepting the recommendations made by observers of previous elections. I believe the Ukrainians have the resources to do that, so our efforts will be focused on ensuring good observation and trying to ensure good procedures.
Stella Creasy (Walthamstow) (Lab/Co-op)
T6. The Foreign Secretary has talked proudly of his preventing sexual violence in conflict initiative and the summit in June. Given the concerns that many hon. Members have about what is happening in Sri Lanka, does he believe that the Sri Lankan Government will attend, and what action will he take if they do not?
Mr Hague
Of course, I am not able to compel any Government to attend. I have invited the 143 nations that so far have endorsed the declaration that I launched on ending sexual violence to attend the summit in June, but I cannot force any of them to do so. However, given events in Sri Lanka in recent decades, it would be highly appropriate for the Sri Lankan Government to be there and to present their plans. I have encouraged them to do so.
Martin Horwood (Cheltenham) (LD)
As a unique financial hub, we have the power to inflict more painful sanctions not only on Russians who are involved in assisting intervention in the Ukraine, but on the wealthy friends and backers of Vladimir Putin. We also have a unique responsibility as the European guarantor of the Budapest memorandum, which should have protected Ukraine from Russian aggression. If Russia further violates Ukrainian sovereignty, should we not use that power to uphold that responsibility?
Mr Hague
The Budapest memorandum of 1994 does not give us a specific power other than to call for consultations with the other signatories. Although we, Ukraine and the United States have done that, Russia has refused to join those consultations. However, the European Commission has been asked to prepare more far-reaching measures which, as the Prime Minister has said, cover economic, financial and trade areas. It is doing that work. We will be in favour of such far-reaching measures if Russia deliberately continues and deliberately escalates the situation in Ukraine.
Diana Johnson (Kingston upon Hull North) (Lab)
T8. Greenpeace campaigns against Procter & Gamble’s use of palm oil, which reports say is being sourced from companies contributing to the deforestation in Indonesia, endangering the habitats of Sumatran tigers, elephants and orangutans. Given that the Minister is the Government’s strategic relations manager for Procter & Gamble, what discussions has he had with the company on the matter, and can he say whether this would be endorsed under the Government’s action plan on business and human rights?
Miss Anne McIntosh (Thirsk and Malton) (Con)
Following the successful renegotiation of fisheries policy back to regional control, will the Government use their good offices to ensure that they decide which greening measures to use rather than them being dictated by the EU?
The Minister for Europe (Mr David Lidington)
My right hon. and hon. Friends in the Department for Environment, Food and Rural Affairs always have in mind in the application of European rules how they can secure the best possible opportunities for this country’s agriculture. They will continue to do so.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
T9. Will the Minister give us an update on the political situation in Venezuela, and tell us what prospects he sees for dialogue and an end to violence? What action are the UK Government taking in relation to that?
Mr Swire
We are extremely concerned about the situation in Venezuela. In my statement of 26 March, I urged all sides to take steps to avoid confrontation, reduce tensions and create the right conditions for genuine dialogue. A commission of Foreign Ministers from the Union of South American Nations group of countries is on its second visit to Venezuela as we speak. They will support and advise on dialogue between the parties. We hope that that will play a positive role in helping to avoid violence and in promoting reconciliation in Venezuela.
Charles Hendry (Wealden) (Con)
What discussions has the Foreign Secretary had about the situation in Ukraine with his counterparts in other countries in the former Soviet Union but outside the European Union, such as Azerbaijan and Kazakhstan, to understand their perspectives and concerns as he develops his thinking on that area?
Mr Hague
We have had many discussions at many different levels with those countries. I think it was significant that, when it came to the vote at the UN General Assembly on what has happened in Crimea, only 11 countries in the world supported the Russian position. Even many of the countries of the Commonwealth of Independent States were not willing to support the Russian position. That is an illustration of Russia’s diplomatic isolation on the issue.
Stephen Pound (Ealing North) (Lab)
The long-suffering Christian communities of Kessab were mentioned earlier. The Foreign Secretary will be aware that this community is predominantly of Armenian origin, facing the 100th anniversary of the last Armenian genocide. Many of my Armenian constituents are convinced that Turkey is facilitating, or at least not preventing, the cross-border attacks and atrocities. Will he undertake to raise this matter with his opposite numbers?
Mr Hague
As I said earlier to my hon. Friend the Member for Congleton (Fiona Bruce), we are very concerned about what has happened, particularly in recent days, in that part of Syria. We do, in any case, raise with Turkey the importance of doing everything possible to stop the flow of foreign fighters into Syria. Given the concern in this House, it is a point we will raise again with the Turkish Government.
Mark Reckless (Rochester and Strood) (Con)
Following the Minister for Europe’s visit to Georgia last week, does he now discern a pattern of prosecutorial intimidation of Opposition politicians, and does he share my extreme concern that the highly respected Giga Bokeria was hauled in by prosecutors on Friday?
Mr Lidington
In my conversations with the Prime Minister and other Ministers when I was in Georgia last week, I repeated very clearly that it is in Georgia’s interests, as well as the expectation of the United Kingdom and Georgia’s other friends, that while no one should be exempt from due process, we should avoid any appearance or risk of selective justice of the kind we saw under the previous regime in Ukraine.
Meg Munn (Sheffield, Heeley) (Lab/Co-op)
Once again there has been very little discussion today of the situation in Syria, yet the conflict continues. Thousands are being killed and millions are being displaced. What are the Government and the international community doing to stop this dreadful conflict?
Mr Hague
The hon. Lady is quite right. This remains the most serious crisis in international affairs, even by comparison with all the others we have discussed. The international community has so far failed to resolve this conflict. We remain in favour of a third round of the Geneva talks, but that requires greater flexibility on the part of the regime with regard to what it will negotiate. In the absence of such progress, our focus is on humanitarian assistance to the millions of people displaced. On that, the United Kingdom plays a leading role in the world.
Duncan Hames (Chippenham) (LD)
The Foreign Secretary will have heard the findings of the latest Intergovernmental Panel on Climate Change report on the impact of climate change. What diplomatic initiatives are his Department taking to broker international agreement to cut global carbon emissions?
Mr Hague
The United Kingdom is one of the most active countries in the world diplomatically in promoting global, binding agreement to address climate change. The IPCC report underlines the extreme urgency of this issue. I discuss regularly with Secretary Kerry what we can do with the US Administration to push forward international agreement. We will remain very active on this issue.
Huw Irranca-Davies (Ogmore) (Lab)
Fifteen thousand UK jobs rely on employment in the Ford plants at both Dagenham and Bridgend, which is close to my constituency. What does the Minister make of the comments by Steve Odell, the chief executive of Ford’s European operations, who said:
“I don’t want to threaten the British government”—
but, and it is a big but—
“I would strongly advise against leaving the EU for business purposes, and for employment purposes in the UK”?
Mr Lidington
Mr Odell, like many other business leaders in this country, has been very clear about the economic risks that would be taken were the United Kingdom to leave the European Union. That, no doubt, will be one of the chief arguments in the referendum debate that my right hon. Friend the Prime Minister has promised. At the end of the day, it should be for the people to decide, having taken into account all arguments, both for and against membership.
Parliamentary Standards
(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
John Mann (Bassetlaw) (Lab)
(Urgent Question): Will the Leader of the House make a statement outlining in greater detail the possible changes, suggested by the Prime Minister on television, to the role of two Committees in regulating complaints about fellow MPs?
The Leader of the House of Commons (Mr Andrew Lansley)
The House will be aware that complaints concerning the conduct of hon. Members, including that they have breached the Members code of conduct, are subject to investigation by the Parliamentary Commissioner for Standards and then considered by the Standards Committee. Additionally, since May 2010 issues relating to Members’ pay and expenses from that date onwards, including consideration of complaints, are undertaken by the Independent Parliamentary Standards Authority.
So two bodies are engaged with the issue of regulating the conduct of Members. As of now and for the future, in relation to expenses, IPSA is a wholly independent authority. Any issue would be considered by its compliance officer. The officer has powers to order repayment and to impose fines. Appeals may be made to a lower tier tribunal. Of course, IPSA is not responsible for considering issues relating to the expenses system prior to the last general election, nor other matters of conduct.
In January 2013, the Standards Committee was reconstituted following the decision of this House of 12 March 2012, reflected in Standing Order No. 149. This brought in three lay members. They participate in all the deliberations of the Committee. The Chair of the Standards Committee, by convention, seeks consensus amongst all the members of the Committee. The lay members, additionally, have a specific right to submit an opinion on any report to the House, and to have it published, under Standing Order No. 149. It is the job of this House, where necessary, to enforce the decisions of the Standards Committee.
The regulation of the conduct of Members is the responsibility of this House. For a wholly external body to consider complaints relating to the conduct of Members in this House, for example, on participation in debates and the registration of financial interests, risks undermining parliamentary privilege. That is why the reports of the Parliamentary Commissioner and the role of lay members are incorporated within the work of a Select Committee of this House.
We have a relatively new system in place for the regulation both of parliamentary expenses and for independent input to the Standards Committee. Both should give the public greater confidence in the system. We must, however, seek to make these regulatory processes more widely understood and more transparent. If we can strengthen the independent input whilst respecting the exclusive cognisance of Parliament, we should do so. As the Prime Minister said, whilst these are matters for the House and not for the Government alone, we are open and willing to consider approaches which would further strengthen our regulatory system.
John Mann
I suspect that the Leader of the House has not had the opportunity to spend time on the doorstep in recent days. If he had, he would have found that there is virtual unanimity out there among the British people that Members of Parliament should not sit in judgment on Members of Parliament and that there should be no self-regulation by MPs of MPs. There are other issues about which the public are angry, but on this issue the Leader of the House has the power to initiate and to do something. Why will he not come forward with proposals immediately to end self-regulation in this House and in doing so, in the interests of transparency, ensure that the recordings of the Committee are made public so that people can see on what basis the Committee overturns the views of the independent Commissioner for Standards?
Mr Lansley
The hon. Gentleman underestimates me. From my conversations with members of the public, it is very clear that many members of the public are not aware—even now—that, from May 2010 onwards and for the future, the expenses of Members of this House, including any complaints relating to expenses, are considered wholly independently by IPSA, which would, in the event of there being any overpayment or incorrect claim, have the power both to require repayment and to levy fines. That is wholly independent.
We must be aware—it is also clear—that were we to seek, for example, to make the Standards Committee or the Commissioner wholly independent, we would end up with the Parliamentary Commissioner for Standards no longer having access to parliamentary privilege in relation to her investigations, which presently she does by virtue of her investigation being part of the proceedings of the Standards Committee of the House. It would be much more difficult for her to fulfil her role in the way in which she currently fulfils it.
As for the relationship between the Commissioner and the Committee, in my experience the Committee is wholly transparent about its decision-making process—about the arguments that it has examined and the decisions that it has reached—but that is a matter for the Committee, not for me.
Sir Gerald Howarth (Aldershot) (Con)
I agree with my right hon. Friend that there should be some parliamentary input, for the reasons that he has set out so clearly. Surely this is not so much a failure of the system as a complete and abject failure of the media to report these matters objectively. As a result of that, as the hon. Member for Bassetlaw (John Mann) observed, many of our constituents have failed to understand exactly what was stated in a recent report. Is it not time that the media paid proper attention to parliamentary reports rather than seeking to engage in witch hunts?
Mr Lansley
I do not think that I am seeking particularly to ascribe blame anywhere. If—as may be the case—there is a misunderstanding about the nature and effectiveness of the regulatory system relating to complaints against Members, and if that is not well understood by our constituents, I think that we should take it on our own shoulders to do all that we can to make it clear that a robust system is in place.
Ms Angela Eagle (Wallasey) (Lab)
Over the last few days, we have seen a recalcitrant Cabinet Minister unwilling to show remorse for obstructing an inquiry by the Standards Commissioner, and a growing public perception that a Committee of MPs has let her get away with it. That has thrown doubt on her conduct, and also on the judgment of the Prime Minister, who seems unwilling to act.
Does the Leader of the House agree that the present system does not command public support, and that we urgently need reform to restore public trust? I accept that we need time to develop a more radical reform, but will he consider, as a matter of urgency, removing the Government majority on the Standards Committee, and creating a more prominent role for its lay members? Will he also tell us what sanctions he considers appropriate for a Member who has breached the parliamentary code of conduct through his or her attitude to an inquiry?
In the foreword to the Ministerial Code, the Prime Minister wrote:
“Though the British people have been disappointed in their politicians, they still expect the highest standards of conduct. We must not let them down.”
Is the Leader of the House satisfied that the Prime Minister has kept his promise?
Mr Lansley
I am surprised that the shadow Leader of the House should consider this an opportunity to express criticism of an individual Member. I did not understand that it was proper to do that, Mr Speaker, but I am in your hands.
The decisions made by the Standards Committee are a matter for the Standards Committee. Let me at this point speak entirely personally, and not on behalf of the Government. I read the report that was published last Thursday very carefully, and, having done so, I felt that I understood and, as it happens—again, I am speaking entirely personally—agreed with the way in which the Standards Committee had gone about its task.
I am very surprised that the shadow Leader of the House should seek to obtrude a partisan element. The Standards Committee has never operated on a partisan basis, and I have no reason to believe that the party affiliation of its members has had any direct bearing on their views of the cases that they consider. On the contrary, they consider cases on their merits, and seek to reach a consensus.
The fact that the Committee has lay members—[Interruption.] Perhaps the shadow Leader of the House will listen to my answer, rather than simply interrupting from a sedentary position. She asked about the position of lay members. Regardless of the position taken by MPs who are members of the Standards Committee, if the lay members had expressed a dissenting view, that would have been more powerful than their having votes. Indeed, given that the Committee did not take any votes, the question of votes was really neither here nor there. The point is that the lay members have what is effectively a casting vote at the end—do they agree or do they not? If the lay members did not agree with MPs on the Standards Committee about what was published in the report and published a dissenting opinion, it would be a very serious matter. I think that that suggests that the power of the lay members is stronger than it would be if they simply had a vote, and I think that we should understand that and reflect it in our discussions.
Mr Speaker
Order. Before we proceed further, I simply remind the House of what I stated yesterday, namely that page 396 of “Erskine May” makes it clear that there cannot be debate on the conduct of an individual hon. or right hon. Member other than on a substantive motion. There is not a substantive motion on the Order Paper today and therefore I invite hon. and right hon. Members to conduct themselves accordingly.
Sir Nick Harvey (North Devon) (LD)
I serve on the Standards Committee and had not realised until the controversy of the last few days that the lay members did not have a vote. The reason for that is simply, as the Leader of the House has just said, that it is not the practice of the Committee to take votes. We talk about things at length—sometimes at inordinate length—to achieve a consensus and the lay members participate very fully and vocally. They bring to bear a great deal of experience gained in other walks of life in regulating other professions and they are listened to with great interest by the Members of this House who serve on the Committee. They have been a very useful addition and, as the Leader of the House just said, they are given the opportunity, if they wish to, to issue a dissenting note at any point in time. They have not chosen to do that either in the matter that has just been published or in any other matter. I think the system is working well. They have brought a great deal of extra expertise and we should continue with this and see how it goes.
Mr Lansley
I am grateful to my hon. Friend, who expresses that point very straightforwardly and well. I think the House will know that if at any point the lay members of the Standards Committee were to present an opinion to the House which had the effect of dissenting from the decisions of the Committee as a whole, the House would take that very seriously indeed.
Kevin Barron (Rother Valley) (Lab)
The Select Committee on Standards adjudicates on individual cases but also has a duty under Standing Order No. 149 to consider any matters relating to the conduct of Members. On 22 March, before any of the current controversy arose, the Committee received a thoughtful paper from lay members on their impressions of their first year on the Committee from January 2013 to January 2014, which was also sent to you, Mr Speaker, and was placed in the Committee’s programme for future discussion. The Committee has already decided to examine the current system for consideration of complaints about Members of Parliament, to consider improvements as required. We will be drawing up detailed terms of reference over the next few weeks, drawing on the lay members’ reflections. The lay members will continue to play a leading role in this work.
The Committee has reported the lay members’ paper to the House and it is available on our website. As the lay members say, it is a matter of regret that the Committee on Standards and Privileges’ recommendations on standards issues have not yet come before the House but the Committee is determined to lead on these issues in the interests of maintaining the integrity of this House.
The Committee does not think it is appropriate to keep a running commentary on its decisions in individual cases, but at our meeting today the Committee authorised me to say that it continues to believe that its individual adjudications are impartial, fair and non-partisan. It is extremely important that those who express opinions on these cases both within the House and outside it should have read closely the careful reasons and evidence-based conclusions set out in each report. The Committee will continue to work closely and co-operatively with the commissioner to reach objective, fair and non-partisan adjudications.
Mr Lansley
I am grateful to the right hon. Gentleman, the Chair of the Standards Committee. What he illustrates is, as I said at the conclusion of my response to the urgent question, that this is a matter for this House, and the House does look to the Standards Committee, not least to advise the House on how our system of regulation of Members’ conduct can be as robust as possible. I hope that, in consultation with the Standards Committee and in discussion among the parties, we can ensure that any views that come forward, not least from the lay members, are reflected in changes if necessary.
Sir Peter Bottomley (Worthing West) (Con)
May I first pay tribute to Andrew McDonald, who is retiring as the chief executive of IPSA? I send him my best wishes. I resigned from the Standards Committee when the House authorities and at least one party trashed Elizabeth Filkin, when she was the Commissioner for Standards. According to paragraph 156 of the recent report, the present Commissioner said that the Committee might not agree with one of her conclusions. That should not be a big surprise to anyone. Also, I hope that those who comment on the way in which we run our affairs will recognise that an hon. Member has, in two days, raised questions about what fellow MPs have done while saying that we should not have a running commentary on what we are doing, which is an odd thing for that hon. Member to do. Finally, it would be worth while for the media to read paragraph 14 of the recent report, which contains the accusation, along with paragraphs 28, 29, 32, 39, 49, 56 and 61, so that their reports can reflect what the Committee did, what Members of Parliament did and what the Commissioner actually said. That would help all our discussions.
Mr Lansley
My hon. Friend is quite right to draw the House’s attention to paragraph 156, in which, contrary to the impression that might have been received, the Parliamentary Commissioner for Standards said that the Committee might not reach the same view as her on what she described as a “finely balanced” issue. I encourage Members, the press and others more widely to read the whole report. Only by reading the Commissioner’s report, the appendices and the Committee’s report does one gain a balanced view.
Mr Peter Hain (Neath) (Lab)
As a former Leader of the House of Commons, I yield to no one in wanting to protect parliamentary privilege and the independence of the House from external interference, but the truth is that the public think there is one rule for them and another for us. That is an intolerable position for us to find ourselves in, and we have to do something about it. There must be a solution that protects parliamentary privilege and the continuing integrity of the work of the Standards Committee while allowing external regulation of this sort of complaint. Otherwise, frankly, we are not going to be in a credible position.
Mr Lansley
The right hon. Gentleman will understand that, while it is clear from past court cases that the expenses system does not constitute parliamentary proceedings, and that parliamentary privilege does not extend to them, other aspects of the regulation of Members’ conduct clearly do. An important practical consideration is that, if the Parliamentary Commissioner for Standards did not report to the Standards Committee as a Select Committee of the House and was instead established as an entirely separate and independent entity, parliamentary privilege would not extend to her investigations. That would make it much more difficult to proceed with those investigations and to get them completed, because they would be subject to legal and procedural challenge. The Commissioner has the power to undertake all the investigations required.
Jacob Rees-Mogg (North East Somerset) (Con)
It is enormously important that the House should maintain its right to regulate itself, because we do so on behalf of the British people, to whom we are democratically accountable in a way in which no bureaucrat can be. It is therefore for the British people that we maintain our rights. May we therefore do one of two things? Either we should have a proper, direct system of recall to allow the electorate to determine these matters, or we should use our powers, as set out on Page 855 of “Erskine May”, that would allow the whole House to come to a decision by returning a decision of the Standards Committee to that Committee and making our own recommendations, which might be more robust.
Mr Lansley
My hon. Friend is right to make that point. In a debate on 12 March 2012, the shadow Leader of the House, the hon. Member for Wallasey (Ms Eagle), agreed with the proposal for the appointment of lay members to the Standards Committee, which was happily approved by consensus. She recognised that the Committee would
“be a Committee of the House, and the Members of Parliament who serve on it will be able to do so first and foremost because they successfully stood for election. Therefore, they are ultimately accountable to their constituents for their actions”.—[Official Report, 12 March 2012; Vol. 542, c. 79.]
Indeed, it is an important aspect of this House that we are accountable in that way. It is from that that our fundamental authority here is derived. My hon. Friend has also raised the point about recall. I cannot anticipate the contents of the Queen’s Speech and the future legislative programme, but the House will know that, as indicated in the coalition programme, the Government remain committed to the implementation of a system of recall, and we continue to look forward to introducing proposals in that respect.
Mr David Winnick (Walsall North) (Lab)
No one is going to buy the idea that this was all got up by the media. We must recognise the mistakes that have occurred and we must be less complacent. I have noticed that the House of Commons has been far too complacent on previous occasions before putting reforms in place. Does the Leader of the House accept that we need a system of examining our conduct that will satisfy not only ourselves but the public? As my right hon. Friend the Member for Neath (Mr Hain) has pointed out, the public are not satisfied at the moment. They believe that there are double standards, and we should take that fact on board as soon as possible.
Mr Lansley
I do not think that I am in any way complacent about this. It is important for us to be clear—and, as a consequence, for the public to be clear—that any expenses cases that have arisen since May 2010 are dealt with under a wholly independent system. That should be understood, because I fear that the current public debate is relating to the expenses system that existed before that date, rather than taking into account the creation of the independent system that has been in place since then. On the conduct of Members, the Standards Committee has to deal with complaints on a case-by-case basis, and we have to continue to make a judgment as to whether the investigations are robust and the recommended sanctions are proportionate to the nature of the offence. We in this House have a collective responsibility for that. When it comes to the exercise of those sanctions, I find it difficult to contemplate how suspension from the service of the House, for example, could be the responsibility of an external body. It should be the responsibility of the House to impose such sanctions.
Sir Andrew Stunell (Hazel Grove) (LD)
The current episode is a product of the old expenses system and would not arise now. Nevertheless, it has increased public concern and there is no doubt that the House needs to respond to that. Does the Leader of the House agree that getting the recall Bill into the Queen’s Speech and pushed forward rapidly will form an important component of the solution?
Mr Lansley
My right hon. Friend will understand that I cannot anticipate the contents of the Queen’s Speech at this stage. I simply repeat that we are committed to the introduction of proposals for a recall Bill.
Mr Ben Bradshaw (Exeter) (Lab)
I thought that we had got rid of self-regulation after the expenses scandal, and not before time. Given the doubts about the strength of the recall proposals and in the light of the current saga, what can the Leader of the House say to reassure the public that the reform process, which must be a process without a full stop, has not stalled under this Government?
Mr Lansley
I would reassure the public by saying that, yes, there is a small number of legacy cases, but we now have a fully independent system that has all the powers it needs to take the necessary steps when anything goes wrong, now and in the future. Echoing the comments made by my hon. Friend the Member for Worthing West (Sir Peter Bottomley) about the retiring chief executive of IPSA, Andrew McDonald, objectively speaking, IPSA has come a long way in creating a situation that should command greater confidence about expenses.
So far as the regulation of Members’ other conduct is concerned, the public have to look at individual cases—for example, those relating to the Register of Members’ Financial Interests and conflicts of interest, or to a Member behaving in a way that brings the House into disrepute—and decide whether the independent Commissioner for Standards has pursued the matter robustly. It is certainly her job to do so, and I hope that Members and the public will agree that she does. When we read the reports following her investigations, they are often very detailed and thorough. The public also have to decide whether the decisions are proportionate. That is a matter of judgment, but I believe that the Standards Committee has put in place robust sanctions in recent cases involving that kind of poor behaviour.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
Two years ago, the Government introduced a Green Paper on parliamentary privilege, which was considered at length. It led to the introduction of lay members, and a lengthy discussion on whether or not voting rights should be granted to them. The Leader of the House has already explained the situation in that regard, but will he also recognise that it was the Standards Committee that reopened the investigation into a former Member, which led to that Member eventually being charged and sent to jail, therefore showing that the Standards Committee will, without fear or favour, continue to try to uphold the integrity of this House?
Mr Lansley
Yes, my hon. Friend is right on that latter point. The issue relating to the question of whether lay members should have voting rights on a Select Committee was recently considered and reported on by the Joint Committee on Parliamentary Privilege. We agreed with it when it said that to do that
“could have unintended consequences: principally that, by explicitly confirming that privilege extends to the Committee on Standards, it could be interpreted to mean that the same extension did not necessarily apply to other committees that include lay members.”
There is a risk that including lay members with voting rights on Select Committees could be held in the courts to have removed from that Committee its access to the exclusive cognisance and parliamentary privilege. That is a risk we do not need to run. The lay members on the Standards Committee have the power they need, but if they have any doubt about that, they should tell us and we should consider and perhaps strengthen their power. If, by offering a dissenting opinion, they have the power to act effectively as a veto on decisions made by the Standards Committee, then they have the power they require.
Paul Flynn (Newport West) (Lab)
The great screaming nightmare of the expenses scandal has been churned up again. The public will not read the appendices. They have a powerful impression of sleaze in this House, which is damaging, and it will continue until we get rid of this very wasteful, cumbersome and bureaucratic system of expenses and replace it with a simplified system of allowances. That would save £10 million a year, be popular with Members, save a great deal of time and virtually eliminate the chances of fraud. Is it not the case that the time for IPSA has already gone?
Mr Lansley
I think the hon. Gentleman illustrates the nature of the misunderstanding. There is nothing in recent reported cases that implies directly a criticism of IPSA, as they do not relate to expenses since May 2010. If there are issues relating to IPSA, we should look at them in that context, and not judge IPSA by reference to cases that occurred before May 2010.
Sir Menzies Campbell (North East Fife) (LD)
In considering an alternative system, does my right hon. Friend agree that it is necessary to take proper account of what parliamentary privilege amounts to? Essentially, it is to the effect that nothing said or done in this House can be relied on in any court outside this House. A report by a commissioner to a Committee is part of the proceedings of the House and is therefore covered by privilege. If, on the other hand, it is decided to establish an alternative form, which involves a statute and the creation of a statutory body, that body would be susceptible to any legal action and probably—we can imagine that many cases would be—subject to judicial review, thereby bringing an issue of this kind not only into the public domain but into the responsibility of the civil courts of this country.
Mr Lansley
I am not a lawyer and I bow to the knowledge of my right hon. and learned Friend. I think he is absolutely right about that. From my point of view, it is a very practical question. Let me repeat: if we were in a position in which the commissioner, constituted not as part of the role of the Select Committee and under the Standing Orders of this House but separately, were trying to effect investigations in a similar way while being open to legal and procedural challenges, as described by my right hon. and learned Friend, his job would be made much harder.
Chris Bryant (Rhondda) (Lab)
I have complained many times about the media and the way in which it has operated over the years in relation to Parliament, but I say to Members that there is no point in railing against it on this particular issue. The truth is that the parliamentary system of self-regulation and semi-self-regulation has been on trial in the court of public opinion for a considerable period, and for most of our constituents it has been found wanting. I do not want us suddenly to change all the rules and chase popularity—that would be as foolish as staying put—but surely we must keep under review the operation of the system not only in this House but in the other House, because this is about the whole political system, and, frankly, there is as much dodginess down the other end of the corridor as there might be down this one.
Mr Lansley
I am not sure whether I should pursue questions relating to the other House. That is a matter for the Lords rather than for us. The hon. Gentleman makes a point. I do not think I was seeking to blame the media. I think I was saying quite openly that we take it on our own shoulders. If we cannot communicate the facts to our constituents through the media and otherwise, we should take it on our own shoulders that we have failed in that respect. What I do say is that we should be frank and honest with ourselves. We are in transition between scrutiny of expenses as occurred before May 2010, where there are continuing legacy cases, and the new system from May 2010 onwards. The sooner we can resolve any remaining legacy cases, of which I hope there are very few, and move to a system that is based on the legislation brought into effect in May 2010, the better it will be.
Mr Peter Bone (Wellingborough) (Con)
I went doorstep canvassing on Thursday night, Friday night, Saturday morning and Saturday afternoon, and I was telephone canvassing last night. There was one issue of huge concern, which was immigration from the European Union. What we are talking about now did not come up once. May I ask the Leader of the House to give his personal opinion on whether recall would in fact end the matter that we are talking about today? Ultimately, if recall were in place, the British people would decide, and could it be pure recall?
Mr Lansley
As I have said, these are issues that are debated by the public, and understandably so. In my experience, the public often want to have a conversation, not least when their Member of Parliament is available, to understand what is going on and why something is happening. We need to explain more effectively the transition through which we are going and the nature of the systems that should give the public greater confidence. As far as a recall Bill is concerned, I fear the House will have to await the publication of the Government’s proposals on that.
Sheila Gilmore (Edinburgh East) (Lab)
When I was a member of a local council, we were always told, when dealing with issues of standards, that it was not what we thought or how we perceived our actions, but how our actions would be perceived by others. In this situation, is there not a danger that all the good work that has been done, particularly on the expenses issue since May 2010, is at risk of being undermined? Is the Leader of the House really not prepared to investigate and look at a different way of doing things?
Mr Lansley
On the contrary, as I said in my first response and indeed in response to the shadow Leader of the House and the Chair of the Standards Committee, I am perfectly willing to look at proposals. We must be clear about what the facts are and the situation we are in. When the hon. Member for Edinburgh East (Sheila Gilmore) says that these things risk undermining the system, she should reflect that the decisions that the Standards Committee has been required to make relate to a legacy case from before May 2010. It should not be interpreted as something that can be used to undermine the system of expenses, scrutiny and regulation that has applied since May 2010. To throw that into the argument and say that things must change would be misplaced. That should be judged in its own terms. If there are other ways in which we can further improve the regulation of Members’ conduct more generally, then of course I am willing to discuss it with Members.
Dr Matthew Offord (Hendon) (Con)
I entered this House on a platform for change. No doubt I was assisted by my predecessor’s outrageous expenses. I know that that was under a different system, but knocking on doors in my constituency this weekend, people did raise the expenses issue with me, and they believe that nothing has changed. May I ask the Leader of the House to take the mood not only in this place but in the wider country to make the change that we need?
Mr Lansley
I understand what my hon. Friend is saying but we all—not least my hon. Friend and the other Members who came to this House in May 2010—have a responsibility to explain to the public that things have changed. The system is independently regulated, and under the expenses system that we have had for the past four years and will have in the future there is no sense in which Members of this House are directly engaged in the process of judging other Members. The process is independent. We do not have any say in it; IPSA does.
Mr Dennis Skinner (Bolsover) (Lab)
Do the Leader of the House and the Government not realise that we are living in an austerity-riddled Britain where there have been more than 40% cuts in local government and where more than 1 million people have lost their benefits in the last few years? That is the climate for the people outside and Governments of all kinds should realise that set against that backcloth they cannot keep saying from that Dispatch Box, “We’re going to carry on regardless.” Listen to the tune and the noise outside.
Mr Lansley
I and other members of the Government are clear about the nature of the austerity required in public expenditure and across the country because the income of this country reduced by more than 7%, equivalent to £3,000 per household, under the previous Government, so yes, everything has changed. In this Parliament, in relation to the expenses system for Members of Parliament, things have changed. It is more rigorous; it is controlled; it is controlled independently; any complaints or failures are investigated independently; and any enforcement is done independently. This is not about Members of this House or me being complacent because for now and for the future the system has changed.
Bob Blackman (Harrow East) (Con)
Will my right hon. Friend update the House on how many legacy cases from before 2010 remain? The system has changed—I was one of those elected to see fundamental change—but we want the House to be cleaned up and cleared up and to know that those cases are at an end.
Mr Lansley
I wish that I could say that they are, but I cannot. The answer may well not be “None” and that such legacy cases remain. I do not know; new issues may be raised, but I hope that they are relatively few. Following the Legg inquiry and others, they ought to have been thoroughly considered and the public should have confidence that the issues that were brought out have been dealt with. I hope that that is the case, but I cannot say that there are no such cases. I think that might be over-optimistic.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Can the Leader of the House explain why the Prime Minister still believes in self-regulation of politicians when he has ended self-regulation of the press?
Mr Lansley
The Prime Minister believes in effective regulation. I hope that I have explained to the House that the issues relating to self-regulation are very straightforward. In the debate on 12 March 2012, my predecessor as Leader of the House and the shadow Leader of the House argued by analogy that we were creating something like the General Medical Council or the Bar Council by involving lay members to try to ensure that we did not have self-regulation in the way we had it in the past. We must bear in mind specific issues about the relationship between the regulatory system and the exercise of parliamentary privilege and, in particular, the question of how sanctions that were to be applied in this House can be applied by anybody other than the House itself.
Kellingley and Thoresby Collieries
Nigel Adams (Selby and Ainsty) (Con)
I rise to propose that the House should debate a specific and important matter that should have urgent consideration, namely UK Coal’s proposed closure of Kellingley and Thoresby collieries.
The House will be aware that following statements from UK Coal last week and a written statement made earlier today by my right hon. Friend the Member for Sevenoaks (Michael Fallon), who is Minister of State at the Departments for Business, Innovation and Skills and of Energy and Climate Change, UK Coal is seeking investment from various parties to fund a managed run-down of its two remaining deep mines, Kellingley colliery in my constituency and Thoresby colliery in the constituency of my hon. Friend the Member for Sherwood (Mr Spencer).
UK Coal is seeking taxpayers’ money effectively to shut down two deep mines that have provided fuel to keep our lights on and jobs for thousands of people over several decades. In fact, I understand that today about 40% of our country’s electricity generation is still powered by coal. Given the perilous financial situation in which UK Coal finds itself, the House should be granted an urgent debate so that the whole House can consider the avenues that might be open for the industry. On the line are 1,300 jobs, 700 of them at Kellingley colliery. The pain would be felt not only in my constituency and that of my hon. Friend the Member for Sherwood. It would potentially also be felt in the constituency of my hon. Friend the Member for Worcester (Mr Walker), as a business in that area in the material handling industry is dependent on Kellingley.
My constituency has previously seen the closure of the Selby coalfield in 2004. The Selby super-pit, as it was, captivated all who had the slightest connection with the coal industry. It began mining in 1983 but was closed in 2004.
I should declare an interest as several members of my family have been involved in coal mining. In fact, some of them worked at Kellingley colliery itself between the ’70s and ’90s. Coal mining has being going on at Kellingley since 1965 and Thoresby since 1925.
I have met UK Coal, the National Union of Mineworkers and, most importantly, workers and family members who would be devastated if the mines were to close. I received an e-mail yesterday from my constituent Samantha Higgins from Selby, who wants me to ensure that their voices are heard and everything is done to protect their livelihoods. Mrs Higgins’s husband is a coal miner at Kellingley, as are her father-in-law and brother-in-law. In fact, her brother-in-law was only taken on at the pit earlier this year. Between them, they have three children under the age of six and three mortgages. The devastation that could befall that family should the pits close is not an isolated example.
I can also quote, Mr Speaker, from a letter I received from the Bishop of Wakefield, who is concerned not only about the severe problems that would be faced by the workers and their families but about the long-term security of our energy needs as a nation—
Mr Speaker
I note the observation of the hon. Gentleman.
I have listened carefully to what the hon. Member for Selby and Ainsty (Nigel Adams) has said and I must give my decision without stating any reasons. I am afraid that I do not consider the matter that the hon. Gentleman has raised as appropriate for discussion under Standing Order No. 24 and I therefore cannot submit the application to the House.
National Health Service (Right to Treatment)
Hugh Bayley (York Central) (Lab)
I beg to move,
That leave be given to bring in a Bill to ensure that medical treatment prescribed as necessary by a doctor or other medical professional must be provided unless the type of treatment is not approved by the Secretary of State or the National Institute for Health and Care Excellence; to establish a national register of cases where such prescribed treatment is refused; to introduce a mechanism for appeal against decisions about provision of medical treatments; and for connected purposes.
It is widely recognised that the national health service has become a lottery in which access to treatment no longer depends solely on a patient’s clinical needs but on where they live and on the state of the local NHS budget. That problem is made worse because Ministers, who decide how much money NHS England and the 211 clinical commissioning groups receive, deny all responsibility for how that money is spent, and because of the lack of transparency and accountability of the decision makers who control the postcode lottery and decide which patients will get treatment and which will not.
My Bill addresses the postcode lottery in three ways. First, it will require the Government to set up a public register of all individual funding requests—or IFRs— made to NHS England and CCGs, together with the decision on whether the NHS will pay for treatment. That will improve transparency by allowing patients and clinicians to see whether a treatment banned by the NHS in their locality is available on the NHS elsewhere. It will lead clinicians and the Government to make more consistent decisions in future. After all, we are all liable for the same taxes, wherever we live, so we should all get equal access to treatment from a tax-funded public health service. Indeed, on 26 March the Minister of State for care and support, in a letter to me about a constituent’s lack of access to treatment, said:
“We are aware of variation across the country in prosthetic services, and we will be working with NHS England to determine what needs to be done to address this, in line with the key objective in the NHS Mandate 2013-15 to expose variation and unacceptable practice to help people learn from best practice.”
I cannot see how the Government can possibly turn down my proposal.
Secondly, my Bill seeks to introduce a presumption in favour of treatment where a treatment is recommended by a qualified NHS clinician, unless the procedure or medicine is not approved by the National Institute for Health and Care Excellence or is designated in a statutory instrument proposed by the Government and approved by Parliament as a treatment no longer available on the NHS. We as politicians at national level determine how much money to make available to the NHS, so we ought to take responsibility for decisions on access to treatment within the budget that is available.
The NHS has always rationed treatment, through waiting times and other opaque devices, but now equity of access to treatment—one of the founding principles of the NHS—is so compromised by postcode rationing, we need an open and transparent system for reviewing decisions. Transparency is not enough. The people who control the NHS purse strings need to be accountable for their decisions.
Thirdly, I propose that patients whose treatment is supported by their doctor but turned down by the NHS should have a right of appeal to an independent tribunal. This would be consistent with the Human Rights Act 1998; it already applies to people whose benefits or immigration application is turned down. So surely there should be a similar right to challenge a public sector decision maker when someone’s health and well-being is at stake.
Let me mention briefly a few examples of my constituents who have had to fight for treatment. Zoe Bounds is a woman in her 30s with two children. She had ovarian cancer in her teens and recently developed breast cancer. Her consultant recommended a double mastectomy to reduce the risk of the cancer spreading. The care commissioning group agreed to pay for one breast to be removed, but NHS England, which is responsible for funding preventive surgery, refused to pay for the other half of the operation. On appeal, however, the CCG agreed to the double mastectomy.
Rebecca Beattie was badly beaten by a former partner and suffered multiple fractures to her face and nose. She needed surgery to enable her to breathe properly, but initially funding was refused. It was only after appeal and exposure in local and national newspapers including The Sun that funding was made available.
Emma Willets needs a permanent catheter to empty her bladder. A temporary operation at Pinderfields hospital to stimulate her sacral nerve greatly improved her condition. Her individual funding request for a permanent operation to stimulate the nerve has been turned down by the CCG. Her consultant points out rightly that the cost of permanent catheterisation—including the cost of hospital admissions each time she gets a urinary tract infection—will be much greater than the cost of the operation to improve her condition. These cases illustrate the need for accountable decision making and for a patient’s right of appeal.
Two and a half years ago, I introduced a similar Bill. I predicted that the Government’s NHS reforms and the squeeze on NHS funding would make the postcode lottery worse. NHS expenditure per person is down in real terms from £2,043 in 2009-10, to £1,999 this year and is due to fall again next year to £1,986, according to figures prepared for me by the statisticians in the House of Commons Library.
I asked parliamentary questions in 2012 and again this month about the number of individual funding requests. I was told:
“The data requested is not collected centrally.—[Official Report, 3 April 2014; Vol. 578, c. 793W.]
I have, however, conducted my own survey of primary care trusts, 109 of which replied—a 72% response rate. The number of IFR approvals in 2009-10 was 51,661. The number of approvals in 2011-12 had fallen almost by half to 26,076. There is enormous variation in approval rates. In 2011-12, 10 out of 109 PCTs approved 75% or more of IFRs; seven approved 25% or fewer. This is simply unacceptable. The postcode lottery is unfair. It contradicts the founding principles of the NHS. Each time the NHS says no to a patient a little more public confidence in the NHS drains away. This needs to change, and quickly. I commend my Bill to the House.
Question put and agreed to.
Ordered,
That Hugh Bayley, Frank Dobson, Kevin Barron, Ms Gisela Stuart, Sir Bob Russell, Barbara Keeley and Grahame M. Morris present the Bill.
Mr Hugh Bayley accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 6 June, and to be printed (Bill 199).
Finance (No.2) Bill
(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
15:27 - The House divided: - Ayes: 0 / Noes: 0 - Question accordingly negatived.
17:28 - The Committee divided: - Ayes: 231 / Noes: 295 - Question accordingly negatived.
17:42 - The Committee divided: - Ayes: 231 / Noes: 296 - Question accordingly negatived.
19:28 - The Committee divided: - Ayes: 226 / Noes: 286 - Question accordingly negatived.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
I beg to move amendment 2, page 3, line 28, at end insert—
‘( ) The Chancellor of the Exchequer shall undertake a review, within six months of the passing of this Act, on the impact of an additional cut of one per cent to the main rate of Corporation Tax for financial year 2015-16, with particular reference to—
(a) the impact on businesses with fewer than 50 employees;
(b) the impact on investment by businesses with fewer than 50 employees; and
(c) alternative tax measures, including non-domestic rates, which would have a greater benefit for businesses with fewer than 50 employees.
( ) The Chancellor of the Exchequer must publish the report of the review and lay the report before the House.’.
This amendment would require the Chancellor of the Exchequer to publish a report on the impact of a cut of one per cent to main rate Corporation Tax on businesses, including small and medium sized enterprises (SMEs).
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to consider:
Clauses 5 to 7 stand part.
That schedule 1 be the First schedule to the Bill.
Shabana Mahmood
Our amendment would require the Chancellor to publish a review of the impact of an additional cut of 1% to the main rate of corporation tax for 2015-16 with reference to the impact on businesses with fewer than 50 employees, their levels of investment and the impact of alternative tax measures such as a reduction in non-domestic rates—business rates—which we believe would have a greater impact on small and medium-sized enterprises, which tend to be businesses that have fewer employees and in the main occupy premises with a rateable value of less than £50,000.
Our amendment and our approach highlight the difference between us and the Government when it comes to business taxation. The Government have made a number of significant cuts to corporation tax. The main rate has been cut a number of times, and is due to be cut again from 21% to 20% next year. The main rate is paid by companies with profits of more than £1.5 million—about 40,000 or so businesses. The small profits rate is paid by companies with profits of under £300,000, and there is a marginal rate, which applies to companies with profits between £300,000 and £1.5 million.
The Government have announced cuts to the corporation tax rate in almost every fiscal event that we have had since 2010, with the rate falling from 28% in 2010 to 20% in 2015-16. This has brought the UK rate lower than most developed economies. As I said, the Government are planning another cut for April 2015 from 21% to 20%, at a cost of £400 million in 2015-16, rising to £785 million the following year, and £865 million the year after that. The cumulative corporation tax cut over this Parliament has been in the region of £10 billion. The Government’s central argument for cutting corporation tax is that a lower rate makes the UK more attractive as a destination for businesses to locate. They claim that a reduction in the main rate of corporation tax will reduce capital costs for businesses and promote higher levels of business investment.
Simon Kirby (Brighton, Kemptown) (Con)
Can the Opposition really be interested in business when not a single Back Bencher is present to listen to the hon. Lady speak to her amendment?
Shabana Mahmood
I assure the hon. Gentleman that Labour Members are passionate about business and our policy of a business rates cut for small and medium-sized businesses, which I will come to later.
The Government’s impact assessment says that the 1% cut in 2015 will lower the bills of 40,000 businesses that have profits of more than £1.5 million and pay the main rate of corporation tax. It will also benefit a further 41,000 businesses that have profits between £300,000 and £1.5 million and pay the main rate of corporation tax but receive marginal relief.
The Department for Business, Innovation and Skills estimates that the UK has 4.8 million private sector businesses, the majority of which, around 3.6 million, are sole proprietorships, and a further 1.02 million have fewer than 10 employees. That means that if 81,000 businesses benefit from cuts to the main rate of corporation tax, fewer than 2% of the total businesses in the UK are benefiting.
Mr John Redwood (Wokingham) (Con)
I would be grateful if the hon. Lady explained how the Treasury should go about making the calculations that she wants it to make. How would the Treasury know the consequence of that one particular tax change, and how would it know what it would be like without it?
Shabana Mahmood
I will come to the point about the different tax choices that we make and measuring their impact. Unlike the Minister, I do not have access to Treasury officials, so I am not versed in their methodology, but I do not deny that the Government’s corporation tax rate cuts in this Parliament, which we have supported, have benefited 2% of businesses. I will come later to the 98% of businesses that have not benefited from the cuts to the main rate of corporation tax, but which are struggling with the costs of running their business. The Opposition believe that the Government can and should go further in helping those businesses cope, in particular, with the business rates that they have seen increase.
Ian Swales (Redcar) (LD)
Will the hon. Lady acknowledge that the Government inherited plans to increase corporation tax for small businesses by 1%, but have cut it by 1%, so it is not true to say that the Government have done nothing for small businesses?
Shabana Mahmood
I will come to the Government’s record in helping small and medium-sized enterprises.
As I said, we have supported the reduction in the rate of corporation tax in this Parliament, except to raise concerns, which I am sure the Exchequer Secretary will remember, well before I was in my current post, about the financing of that change at the start of the Parliament by getting rid of investment allowances on which the Government have recently U-turned. But as the figures show, the change to the main rate of corporation tax, the central policy for business taxation, does not help 98% of business in this country. How are they faring under this Government?
Everyone agrees that SMEs are the engine of growth, a phrase that we hear regularly in the Chamber and the House, and it is also fair to say that they are part of our national life. High streets and corner shops are part of the very British way of life that we enjoy in this country. I have a personal affinity with these enterprises, as when I was younger, my parents had a corner shop. My first job was helping my parents by serving customers in our shop after school and at weekends, doing the stock-take and going with my dad to the cash-and-carry. Even if one did not grow up in such a business, they are easy to call to mind because there are so many of them. As I said, there are almost 5 million, and they are the heart and soul of our villages, towns and cities. They also provide about 47% of private sector jobs.
As for everyone—SMEs are no different—times have been tough, and SMEs have been struggling with a number of issues during this Parliament and I will come to the points raised by the hon. Gentleman. The first of those issues has been access to finance. Every time we discuss SMEs, access to finance is one of the key issues raised. It is fair to say that the Government have failed to get lending going to businesses. They are in their fourth year of office and their many schemes keep failing to have a significant and game-changing impact on the access to finance landscape. For example, business lending fell towards the end of last year as banks continued to squeeze funding for SMEs, despite attempts by the Bank of England to boost finance to the sector. Bank lending figures also show that businesses paid back £4.3 billion more than they had borrowed in the three months to the end of November. SMEs were the worst affected by that particular brake on lending, and that is despite the tweaks to the funding for lending scheme announced by the Bank that were designed to try to ensure that loans to smaller businesses would be favoured.
Although larger businesses can access the growing market for debt financing in the bond market, there is a problem for small businesses that are reliant on high street banks and specialist finance and lending businesses, which have become much more conservative in their lending practices since the global financial crash of 2008. SMEs have consistently reported that credit is either refused or offered at very high prices by the major lenders, as Members on both sides of the House must regularly hear from businesses in their constituencies. There has been much talk in this Parliament about the problems of access to finance for SMEs, but despite several different schemes being announced, the change in practices that is required if SMEs are to have the finance they need has not been seen.
That issue has also been considered by the Public Accounts Committee, which made a number of worrying findings in relation to the landscape for SMEs. It said:
“The departments’ schemes are managed as a series of ad hoc initiatives that are launched to address particular weaknesses in the market, rather than to act as a coherent programme.”
That is a real problem. The lack of a coherent programme from the Government, despite what I am sure are the best efforts of the Business Secretary and the Chancellor, has led to piecemeal action—a little bit here and a little bit there, but no overall drive to action, only some good rhetoric for set-piece debates in the Chamber, leading to not very much at all.
Steve Baker (Wycombe) (Con)
The hon. Lady seems to be arguing that banks should be less conservative, which implies a greater degree of risk, and says that she wants a more coherent, less piecemeal programme. I infer from that that she wants the banks to take a greater degree of risk, and the taxpayer to pick that up. Is that what she is saying?
Shabana Mahmood
As I set out, the issue is not just the risk taken by the banks, which have been very conservative in providing SMEs with access to finance. Members in all parts of the House accept that good businesses that have the capacity to grow, create more jobs and be successful are failing to get the finance they need. In my constituency, a number of successful, viable businesses are still failing to get finance from the banks. That is not a result of banks being a little bit conservative in their risk taking; they have significantly curtailed their lending, which is having a negative impact on SMEs and their capacity to grow and increase jobs.
The Public Accounts Committee also found that investment overall had declined and that Government Departments could not demonstrate whether their schemes had addressed the market failures that they had been set up to correct. There was no mechanism, the Committee said, for evaluation of the various schemes and no obvious goals were set for the schemes, making it easier for the Government to hide any failures. Goal setting of the kind envisaged by the Public Accounts Committee would make the failure of such schemes much starker, but would also lead to greater and quicker action to correct them and ensure that desperately needed finance reached SMEs.
An additional problem in the Government’s approach, according to the Public Accounts Committee—I think we can all agree on this—is the difficulty of raising awareness of the schemes available for SMEs, which are often small operations, one-man or one-woman bands. It is difficult to balance all the responsibilities of running a business, and often people do not have the time to engage with Government policy and how it affects them. They may hear about schemes randomly and it is not always easy to learn from Government websites what is available for small businesses. The Public Accounts Committee felt strongly that the Government lacked a clear strategy to ensure that SMEs were aware of the funding options available to them.
I noted at the weekend that the employment allowance introduced by the Government has been rolled out. Millions of letters have been written to businesses to make them aware of the £2,000 allowance that has come into effect. That goes to show the extent of the awareness raising that is required. I am sure that there was also a political advantage and motive to the writing of those letters. Writing to businesses telling them what change has occurred and how they might benefit is a good thing, but it shows the effort required to get the message out. Such effort was not necessarily apparent in the case of other Government schemes relating to access to finance.
Nick de Bois (Enfield North) (Con)
Perhaps the hon. Lady will understand my confusion and clarify this point for me. She has spent much of her speech suggesting that the Government were doing nothing for small business. Then, when they contact businesses and tell them how they can benefit from the Government’s policies, she seems a bit disappointed. Can she explain the contradiction?
Shabana Mahmood
I assure the hon. Gentleman that it is not a matter of my personal disappointment. The Government have announced a number of schemes, which everyone agrees have failed to get lending to the rate that is necessary to have a game-changing effect on the landscape for small and medium-sized enterprises. The employment allowance, which we supported—the hon. Gentleman served on the relevant Bill Committee—came after the national insurance contributions regional holiday, a scheme that was in place for three years and almost from day one failed to meet the ambitious targets that the Government set for themselves. Throughout the life of that scheme, we called on the Government to change course, which they did not do until the scheme came to the end of its three years, at which point they introduced the employment allowance.
Ian Swales
Will the shadow Minister enlighten us on how the calculation of a £5,000 saving is made, and on what she predicts about prices before and after such a freeze?
Shabana Mahmood
The hon. Gentleman is welcome to see our detailed calculations, which I can provide to him and are a matter of public record. If he really wants auditing of manifesto commitments, he should support our call for the Office for Budget Responsibility to be allowed to audit parties’ manifestos. We have nothing to hide on the policies that we have announced and the numbers behind them. We are very happy for the OBR to look at all that and to prepare a report for the benefit of the public so that they can see that what we are saying is based on good numbers and is deliverable. If the Government—both parts of the Government—have nothing to hide, they should fully support our proposal on the OBR audit, which is a good one. I am glad that the hon. Gentleman has given me a chance to remind the House that it is not Labour Members who are scared to have their numbers looked at.
Shabana Mahmood
I will not give way; I am going to make a little more progress.
As hon. Members will know, the level of business rates is set by the Treasury, although the revenues are collected locally. Business rates increase with inflation, and the rate of increase each April is set according to the rate of retail prices index inflation in the previous September. In September 2013, RPI was 3.2%, so business rates were due to rise by 3.2% this year. Of course, that was before the Government made their autumn statement announcement, which capped that increase at 2%. Business rates have risen rapidly during this Parliament because of high inflation. More than one in 10 small businesses now say that they spend the same or more on business rates as on rent. This April, businesses have been hit by a rise of £270, on average, at a total cost to business of £45 million.
Nick de Bois
The hon. Lady spoke very passionately, and rightly so, about her parents’ corner shop business, which she is right to be proud of. In citing these numbers, however, she overlooks the fact that because of the Government’s extension of small business rate relief, anyone with a rateable value of less than £6,000 is not paying anything at all, as I found out when I went down my local high street and heard how grateful people are for this support. We need to keep some context when talking about these numbers.
Shabana Mahmood
I hear the hon. Gentleman’s point, which I will come to later in my remarks. On the action that the Government have taken in the round, he will not be surprised to hear that my criticism is that it does not go far enough. By comparison, our alternative proposal, which is a Labour manifesto commitment, goes much further and would result in a cut in business rates and a freeze the following year.
The only choice for many shops, workshops, start-up businesses and others who pay business rates is to pass the increases on to their customers, primarily through higher prices, which of course makes things difficult for those customers. They also face a continuing squeeze, which many of them complain means that they can no longer afford to stay in business. This is having a real impact, as I know from my casework in my constituency surgery. I have met many constituents with family-owned businesses whose stories are not dissimilar to the story of my own family, whose elder relatives came to this country in the ’60s and ’70s and set up businesses that they have passed on to their children and, in some cases, grandchildren. They are now terrified that the squeeze from the exponential growth in business rates might put their family-owned businesses out of business. I have seen constituents break down because every time the business rates bill comes they fear that many years of hard work, which is tied absolutely to their conception of what it is to be British and to enjoy the freedoms offered by this country, might be going down the drain.
Given how much businesses are struggling and given the collection of issues that SMEs are facing, we have said that the next Labour Government would cut business rates in 2015 and then freeze them in 2016. In 2015, we would cut business rates on properties with an annual rental value of less than £50,000, taking the rates back to the level of the previous year, and then freeze them for such properties in 2016. As we have said, we would pay for that by reversing the additional cut in the main rate of corporation tax due to go ahead next year, when it will fall from 21% to 20%. The main rate is paid by companies with profits of over £1.5 million, while companies with profits between £300,000 and £1.5 million pay the rate on a sliding scale, and companies with profits of less than £300,000, which pay the lower rate, will be unaffected by the cut.
All the money raised from the corporation tax increase that we envisage—that is, a rise from 20% back up to 21%—would be spent solely and exclusively on paying for our policy on business rates. That is an important point given some of the debate that has taken place in the House in the past week or two, when we have been speaking about the Budget and attitudes towards business taxation. Even at 21%, our corporation tax rate would remain competitive, being second lowest in the G8 and second lowest in the G20. Government Members often say that any corporation tax rise will have a negative impact on our country’s capacity to do business, but I disagree, because, as I said, even at 21% it will be the second lowest in the G8 and the G20. The headline rate of corporation tax is not the sole reason that businesses choose to come to this country to invest and create jobs. It is an important factor—no one can deny that—but it is part of a picture of support for business that those wishing to come to this country look at, or are advised on, before they make their decisions. I do not believe that putting corporation tax back up from 20% to 21% would have too great an impact on our capacity to attract businesses to this country.
Simon Kirby
Is not the problem that a proposed tax increase sends a message that it is the thin end of the wedge—the tip of the iceberg—and that under a Labour Government, God forbid, we might see considerably more tax rises?
Shabana Mahmood
I do not think it does send that message. Business people are much more sophisticated than that: they do not simply look at announcements about the headline rate. They will receive advice from their advisers—their accountants and lawyers—when they are making their decisions about where to base themselves and where to go to invest and grow their companies. It will be explained to them, and known to them, that this policy is designed to support a different type of business that benefits all of us who are interested in the business landscape.
We have been very clear that this is the only change to corporation tax that we envisage during the next Parliament and that we are doing this not because we want to put people off coming to this country, or prevent them from doing so, but because we want to use all the money to pay for a cut and then a freeze in business rates. We have also said very clearly that any choices we make that differ from what the Government are doing will be fully costed and fully funded. As I said, we are happy for the OBR to look at our figures and audit our manifesto, and to do so for all political parties ahead of the next general election to make sure that the public are as well informed as possible about the different choices being made by parties that want to be in government.
Nick de Bois
Given the extreme volatility of corporation tax collections for decades, how would the hon. Lady deal with the unpredictable nature of the amounts collected? Will whatever is collected one year be applied as a discount on business rates the following year? If the revenues were below the expected amount, would the hon. Lady go back to businesses to ask for more in business rates? She should consider the unfortunate, difficult and unpredictable nature of the issue. Business needs certainty.
Shabana Mahmood
I agree that business needs certainty. All our figures are based on analysis from the House of Commons Library. That is the best we have to go on and it is, of course, a respected source for making projections on the likely cost of cutting the rate and how much will remain for business rates. As I have said, all the money raised will go towards our business rate policy, which applies to 2015-16 and 2016-17. We will, of course, consider the circumstances in the early part of the next Parliament when deciding what to do about business rates.
During the Budget debates, Government Members tried to argue that our proposal to increase corporation tax back up to 21% meant that Labour was all about increasing business taxes. It is interesting that that argument has not been repeated since those debates. It quickly fell apart when it was pointed out to Government Members that, given that all the revenue from our corporation tax policy would be spent on cutting and then freezing business rates for small businesses, their argument did not seem to consider small businesses to be real businesses. I am glad that Government Members appear to have dropped that particular line of attack and I would warn them against trying to run it again, because it was insulting to small and medium-sized enterprises.
James Morris (Halesowen and Rowley Regis) (Con)
Under this Government, local authorities will be able to retain an uplift in business rates as part of local government funding. Has the hon. Lady considered the impact of a business rate freeze on the ability of local governments to benefit from an uptake in business rates, and on local government finance in general?
Shabana Mahmood
Our policy is fully costed. We do not envisage any loss of revenue for local government. Our key priority is to give practical assistance to businesses as soon as possible, so that people such as those who visit my constituency surgery to say that they are fearful that they will have to close their business get some relief from what is becoming a very real business burden.
Last week the Secretary of State for Education suggested to the British Chambers of Commerce that our policy on corporation tax and business rates pits businesses against each other, which is complete nonsense. The idea is not to tell one business that it is going to suffer while another business does really well; it is to get a better balance with regard to the landscape of business taxation.
As I have set out in detail, corporation tax cuts over the life of this Parliament amount to some £10 billion and 2% of businesses in this country have done very well with their tax bill. It is fair and right to consider what is happening to the other 98%, understand the struggles they face and make choices that the 2% might not like, but that will offer support to smaller businesses and that will go some way to ensuring that they can remain in business and continue to grow and do good for the economy.
Even if the headline rate of corporation tax increases from 20% to 21%, it is important to remember that it will remain competitive. I do not believe that the change would be destructive or damaging to UK plc. In fact, I think that it and the moneys that will go to businesses as a result of a cut and then a freeze in business rates could do real good, not just for SMEs but for the economy as a whole.
Simon Kirby
It is all very well for Labour to bash big businesses, but does the hon. Lady not understand that many of their customers and suppliers are small businesses? The issue is not quite as simple as she would have us believe.
Shabana Mahmood
I am really disappointed that the hon. Gentleman has not been listening to my speech. At what point did I bash big businesses? It was not something I said, and nor was it suggested by my tone. I have made it very clear that we supported the cuts to corporation tax in this Parliament. We are simply suggesting a switch spend—it will be in our manifesto for the next general election—which amounts to making a different choice on corporation tax in order to get practical and immediate help to smaller businesses that will make a real difference to them.
Given that the 2% of businesses that are larger have benefited by about £10 billion over the life of this Parliament as a result of a number of changes to their taxation, it is fair to switch our attention to a part of the business market that has been rather ignored. Although the Government have a number of schemes to help smaller businesses, those schemes are not going far enough or achieving the Government’s aims.
Our suggested switch spend is fair. It is not about pitting one business against another or valuing one above another. It is a simple recognition of the fact that 98% of businesses in this country have not received the practical help they need. They are desperate for change on their business rates and we will deliver it. The policy will be in our next manifesto.
The Exchequer Secretary to the Treasury (Mr David Gauke)
On support for small businesses, does the hon. Lady regret the fact that when her party was in office, it planned to increase the corporation tax rate for small businesses from 21% to 22%? Does she also regret the previous Government’s plans to increase employers’ national insurance contributions and fuel duty, which would have affected small businesses?
Shabana Mahmood
What I primarily regret is that, as a result of the choices they made, this Government choked off the economic recovery that was under way when they came to office. That is the most regrettable thing: it led to three damaging years of flatlining, and it is ordinary people who are paying the price.
Following a vocal campaign by a number of business groups, ahead of the autumn statement the Government decided not to go ahead with the planned 3.2% increase in business rates and decided instead to cap them at 2%. The Government also announced in the autumn statement that they would provide additional help to retailers. That was action—it was relatively late in the day but it was action—but it does not go far enough, and the Government’s policy does not compare favourably with ours ahead of the next general election.
Ultimately, business rates are still set to rise this month by an average of £270. The Government’s autumn statement offer of £1,000 business rate relief was welcome for retailers, but it excluded workshops and offices used by high-tech start-ups. I particularly have in mind small jewellery makers in my constituency, which is famous for the jewellery quarter at its heart. Such businesses will not benefit from the Government’s announcements in the autumn statement and, as I have said, a significant rise in business rates is still envisaged for small businesses.
Our proposal for a switch spend from corporation tax to business rates is a much more comprehensive measure that would offer genuine and more far-reaching support to small and medium-sized enterprises. Given the scale of the problem, our policy seeks to offer practical help that would truly make a difference on the Witton road, the Coventry road and the Soho road in my constituency. The Exchequer Secretary will be pleased to know that it would also make a difference in his constituency. The Office for National Statistics report “UK business: Activity, Size and Location 2013”—a great read—tells us that more than 80% of the 5,750 VAT or PAYE-based enterprises in South West Hertfordshire employ no more than four people, while almost 75% of them have a turnover of less than £250,000. They are therefore not affected by the changes to the main rate of corporation tax, which he himself oversees; they are more likely to be in properties with a rental value of £50,000, and are therefore more likely to benefit from Labour’s proposal to cut and then freeze business rates in 2015-16.
In conclusion, we believe that our policy is the right one for helping small businesses. It meets the scale of the challenge that they face on business rates, and it makes the right choice about how to pay for the policy. We will want to vote on our amendment later this afternoon to highlight the impact of this Government’s decisions and the imbalances in their approach.
Mr Redwood
I remind the House that I offer advice for an industrial company and an investment company, although not on these subjects.
I thought that the hon. Member for Birmingham, Ladywood (Shabana Mahmood) started her speech very promisingly. I admire her background, and I can think of a former great Member of Parliament who came from a very similar background and who deduced some very sound principles about how economies and shops work. I thought that the hon. Lady was going to develop in that style. I was delighted when she said that she is now a convert to tax reduction. She said that she and the Labour party now think that taking corporation tax down from 28% to 21% was right. It is wonderful news that we seem to have cross-party accord on the fact that lower tax rates can bring businesses to Britain, keep more profit in Britain and, if we let such policies fructify for long enough, even lead to more revenues and help to promote the economic growth that we all want.
The hon. Lady went even further and thought up another tax reduction that she wants. I am not normally one to let a tax reduction opportunity go by, and she said that a reduction in business rates would be a very good idea. She said that it would be good to find a way to make a further reduction in business rates, because that would be very welcome after years of increases.
I was then disappointed, however, because the hon. Lady said, “Oh, you can’t have too much of a good thing. It might start to work. You’ve got to have a tax rise, as well as a tax reduction.” She did set one part of the business community against another, although she claims that she did not do so. I find that rather curious, because we are meant to be debating the Opposition’s amendment 2, which does not propose a reduction in business rates or an increase in the corporation tax rate, although she says that that is their policy. The amendment allows us to talk about that because it is very wide ranging. We can talk about any kind of tax because it invites us to look at alternatives to corporation tax in ways that she spoke about.
We have a contradiction: the Opposition say that they have a settled policy to put up the corporation tax rate for larger companies and to cut and then freeze business rates. However, we are asked to vote on a much weaker amendment, which just says that the Chancellor of the Exchequer should conduct a review of the impact of cutting the corporation tax rate from 21% to 20%, as well as of other options, presumably including the one that the hon. Lady has already adopted.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Does the right hon. Gentleman accept that the primary cause of that increase in revenue is income shifting from one year to the next? Many individuals held back income in the year when the rate was 50%, and brought it forward when the rate was reduced to 45%.
Mr Redwood
I do not accept that at all, because the revenue in the previous year was very similar to the figure for the year before that, which was before people knew that there might be a cut in the tax rate. I suspect that next year will also see good levels of revenue. I do not expect a sudden reduction of £9 billion in revenue in the financial year we are just starting. As always, the hon. Gentleman is peddling misery for no good reason. Labour Members should rejoice and accept the fact that if we cut a rate, we sometimes get more money. They always want to spend other people’s money, so surely they should listen to how we can maximise the amount we get out of people.
Sheila Gilmore (Edinburgh East) (Lab)
Will the right hon. Gentleman explain where, following the rate change, this money has suddenly come from if it is not re-phased income? Is he suggesting that people have somehow avoided tax or that people have suddenly come into this country to pay it? He must have some reason for the increase, if he does not accept the one given by my hon. Friend the Member for Edmonton (Mr Love).
Mr Redwood
We are talking about people who are a serious amount richer than any of us on MPs’ salaries, and if the hon. Lady meets such people occasionally she will discover that they have many more freedoms than other people on when and where they earn income, what they invest in and where they organise their affairs. Some of them were not in this country before and came here when the rate was lowered. Some have some money in one country and some in another, and they can quite legally shift their money around and decide where they are going to earn more income. That is what companies do, as she has discovered and sometimes complained about. Rich people have a lot of flexibility, which means that a country that sets sensible tax rates attracts and keeps more of them and gets them to do more things.
There is also a disincentive effect, because someone who is legally here and keeps all their money here might not do extra work—why should they, when they are going to be taxed at too high a rate? Or they might not take an extra risk with their investments—why should they? If it works they will get taxed, and if it does not work they will take 100% of the loss. We can therefore change the climate by setting a competitive rate to encourage more confidence and action.
Mr Love
I do, because I want to explore the Arthur Laffer effect. The right hon. Gentleman seems to be saying that if we reduce income tax, we increase the amount of money we take. How far would he take that? Would he make income tax 40p in the pound, or 35p? Would he abolish income tax entirely and raise even more money?
Mr Redwood
The hon. Gentleman is now being completely stupid, is he not? There are two rates of tax that will raise no money—0% and 100%—and there is a curve between the two, which, as he rightly said, was first drawn by Mr Laffer, I believe on a napkin. Most people, including the Treasury, accept that there is a Laffer curve, and that it is a question of judgment where the rate is that maximises revenue. It is quite clear from the evidence in this year’s Revenue and Customs figures that 50% was too high a rate to maximise revenue, and that 45% gets us more revenue than 50%. I believe that 40% would get us more revenue than 45%. I am pleased to hear today that a Liberal Democrat, of all people, is writing a book on the subject. I welcome that and look forward to more progress in coalition talks about the maximising rate of income tax. If it were taken down to 20%, we would clearly lose a lot of money, so somewhere between there and where we are now is the maximising rate, and getting it right is partly science and partly trial and error. We can be sure that we are now moving in the right direction, having gone in the wrong one previously.
It is interesting that the previous Prime Minister, during all his time as Chancellor of the Exchequer, never took the top rate above 40%. I do not think that was because he liked rich people or wanted to be unkind to the left wing of the Labour party. I believe it was his judgment that anything over 40% would have cost him revenue. As a modest man, I therefore accept that there was something about which he was absolutely right—he was correct in not raising the top rate of tax above 40%.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
The right hon. Gentleman has made a case about corporation tax and about the top rate of income tax being reduced from 50p to 45p. Would he apply the same logic of Laffer to indirect taxation? It would be interesting to hear his comments about the raising of VAT to 20%.
Mr Redwood
It is clear from the figures that the raising of the rate to 20% increased revenue. Yes, there is a Laffer effect in VAT, and 20% is clearly below the optimising point if our only interest is in increasing revenue. Going from 17.5% to 20% has not got us to the point where it costs us revenue. If it had, I would have been the first to tell Ministers that it was a ridiculous idea. I understand their need for more revenue, because they inherited such a huge deficit.
Tom Blenkinsop
Of course, companies often pay VAT before they even make a profit.
Mr Redwood
Indeed, there are timing issues with VAT, as the hon. Gentleman says, but I do not really see how that affects the argument about whether putting the rate up brings in more money. That is in the figures.
I fear that we are drifting a bit far even from the wide subject of the amendment, but I suppose the alternative options to help business could include cutting VAT. However, it is clear that if we cut the rate of VAT again, there would be a substantial loss of revenue, whereas we have just cut the income tax rate and there has been a colossal revenue gain. We should learn from those points.
I think the shadow Minister suggested that there would be no loss of revenue to local government from cutting and then freezing business rates. I do not know whether she wants to intervene, but that was my understanding of what she said. I think the Labour party has been converted to the Laffer effect. It now asserts—I do not know on what evidence—that if we cut and then froze business rates, we would collect the same amount of revenue. I would need persuading about that, because I am not sure that business rates are at that point yet, but if they were, it would be a sensible proposal for the coalition Government to take up. It would make it an even bigger pity that Labour has not bothered to table a proposal along those lines for us to vote on today, which might even have drawn me into the Lobby against my own party’s Front Benchers if the case had been well made and I felt that the Laffer effect of lower business rates was well established. I have profoundly shocked my Front-Bench colleagues now, having earned myself a brownie point through my earlier remarks. As they are well aware, they are quite safe, because there is no proposal on the amendment paper to cut business rates. [Interruption.] The Whip has just found that out—she needs to do a little more homework before coming to these debates. [Interruption.] Now she is complaining that she did not say that. As she will be in the record as having said nothing, who am I to disagree?
Before I get into any more trouble, I will conclude my remarks by saying that I will not support the amendment. I do not believe that a review would help, and I do not understand how it would be judged. Nor does it seem that it would have any impact on Labour policy. I am perplexed by the fact that when Labour has a clear policy for once, it has not tabled a proposal so that we can debate it fully and vote on it. I strongly support lower corporation tax rates, which will be very helpful.
Kelvin Hopkins (Luton North) (Lab)
It is a great pleasure to speak briefly in this debate. There is everything to be said for reviewing the effects of changes in tax rates, but to do that one must eliminate all other factors. A great surge in demand over a certain period, with unemployment going down and output going up, and all sorts of other factors can affect tax revenues. It is not just tax rates. As my hon. Friend the Member for Edmonton (Mr Love) said, if there was a direct relationship between lower tax rates and increased revenues, a zero tax rate would mean big revenues and a higher tax rate would mean lower revenues. It is just not like that.
I also suggest that marginal changes to tax rates will not make much difference. Everybody in business likes lower taxes, and no doubt most citizens do. It is in the nature of things, because they have more money in their pocket. At the same time, in a civilised society—I like to think that we still have some remnants of a civilised society—taxation is vital to pay for the things that make it civilised. I would personally like higher revenues, so that we could spend more on the things that make our society worth living in. Over the past few decades, there have been some regrettable cuts in tax revenues. Perhaps we should not go back to the 98% top rate of the 1970s, but when Nigel Lawson got rid of the 60% rate and brought in the 40% rate, it led to substantial income for better-off people.
Mr Redwood
Would the hon. Gentleman not accept that cutting the top rate from 83% to 40%, or from 98% to 40% for so-called investment income, meant a huge surge in revenue? Rich people not only paid more in cash terms and real terms but paid a bigger proportion of total income tax. What’s not to like?
Kelvin Hopkins
We can argue about particular cases, but when we measure the impact of tax changes, we have to ensure that we are not measuring other factors. I met some people in the City just after Nigel Lawson cut the tax rate, and a lot of them were aghast at the Budget, saying, “Why has he cut the taxes? We don’t need the money.” They were clearly not of the same mind as the right hon. Gentleman, but they were civilised, decent people who thought that good tax revenues and higher taxes were a good thing.
Mr Redwood
As they were civilised people who did not need the money, all they had to do was give it away. They could have given the money to the state or to charity.
Kelvin Hopkins
The problem with charity is that only nice people give to it. The great thing about tax is that it applies to everyone equally, which is the way things should be.
Simon Kirby
The hon. Gentleman’s argument, interesting though at first it may appear, is totally busted when we look at France. Hordes of rich French people are coming to pay tax in this country rather than in France. The net effect is worse than if the taxes had been lower in the first place.
Kelvin Hopkins
I am one of those who would like to see a little more insulation between countries on financial matters, rather than a free flow of finances across borders, but I am a traditional leftist and Keynesian. I am not of the same mind as those who believe in breaking barriers and people having complete freedom to do exactly what they like with their money anywhere in the world. I hope that one day we will return to a more sensible approach.
The problem with tax is not the tax rates but the collection. For a long time we have seen vast amounts of tax not just avoided but evaded. The thick end of avoidance is the thin end of evasion. The precise line between avoidance and evasion is ill-defined, and I would like stricter rules so that a lot of what is now called tax avoidance is defined as tax evasion. If we sent one or two of the big tax avoiders and tax evaders to prison, it might concentrate a few minds and bring in more tax. The research on behalf of the TUC by Richard Murphy shows that, in his view, the tax gap is in the order of £120 billion a year. If we collected a fraction of that sum, we could solve all our problems, including the famous deficit. I am very much in favour of reviewing the effect of tax changes.
Kelvin Hopkins
My hon. Friend is absolutely right. I have called many times in this Chamber, including in the past week or two, for more tax officers to be employed. Every tax officer collects many times their own salary. A VAT officer told me that, even for VAT on small businesses, tax officers collect some five times their own salary. When it comes to the big corporates, if we had a good chief tax officer, Vodafone might have paid a few more billions, as it should have done. We could then start to solve our problems. We have to focus on the big corporates, which are getting away with murder.
Ian Swales
I have a lot of sympathy with the hon. Gentleman’s comments on HMRC staff, which I raise frequently on the Public Accounts Committee, but surely he must regret the cut in 10,000 compliance staff when his party was in government and welcome the addition of 2,500 compliance staff under this Government.
Kelvin Hopkins
I made exactly the same speeches when my party was in government. I demanded that the previous Government employ many more tax officers. There has been a conspiracy between Front-Bench Members for some decades to get away from being too unpleasant to the corporates and to let them have their way. Well, I do not want to let them have their way; I want them to pay their taxes so that we can pay for the things that ordinary people need, particularly those who are less well off and those who are more vulnerable.
Kelvin Hopkins
That is very welcome, but I do not believe in the immutability of a certain level of tax revenue and that, whatever we do, we cannot change that level because somehow the world will not produce more than 38% of GDP in tax. It is just a question of collecting that tax and enforcing the tax rates to ensure that the big international corporates, in particular, pay their taxes. When we do that, we will see a substantial increase in revenue. Of course there are countries where overall tax revenues are substantially higher than ours, and they are not necessarily countries that are doing badly economically; they are countries that are doing well, but a higher proportion of their economy is in the public sector. Those countries have higher taxes and higher public spending, and they are civilised societies, too. The countries with the lowest levels of tax and public spending are often some of the poorest, where the gulf between rich and poor is much greater and, generally speaking, life is less pleasant, particularly for the poor and the less well off.
I look forward to more enforcement and a higher tax take by enforcing the existing tax rates and ensuring that people, particularly the corporates, pay their taxes. When it comes to taxation, the behaviour of the economy is crucial.
Mr Jim Cunningham (Coventry South) (Lab)
My hon. Friend has said that we should look at tax avoidance. There are negotiations between the Inland Revenue and multinational companies in which the Inland Revenue estimates what it thinks the tax should be, rather than collecting the real tax.
Kelvin Hopkins
My hon. Friend is absolutely right. The recent head of HMRC is now a tax adviser to corporate companies, but when he worked for HMRC he seemed to have had a cosy relationship with some of the biggest corporate companies and was doing deals over lunch on what those companies should pay. That was wholly inappropriate. He should have said, “You have to pay your taxes, and we are going to chase you until you do.” That is what I want to see—HMRC staff at the highest level who view their job first as being a public servant who collects taxes for the state, the public and the ordinary citizen, rather than letting the international corporates, and indeed the domestic corporates, get away with what is effectively appalling tax fiddling. I applaud my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) for saying that we should have a review of the effect of tax rates from time to time.
Steve Baker
This is not the first time that I have agreed with the hon. Gentleman. It is important that taxes are collected according to the law, not an individual’s opinion of what the figure ought to be, but does he concede that the situation is as it is because the tax code is far too complex?
Kelvin Hopkins
I am not an expert on tax codes, but taxation is too complex and could be made much simpler, although I think tax should remain progressive. The idea of a flat tax, which the UK Independence party is talking about, is complete nonsense. I fundamentally oppose UKIP not because of its views on the European Union, on which I might have some sympathy, but because of its views on everything else. UKIP is extremely right wing. It wants to get rid of rights at work, privatise the health service and introduce a flat tax. Frankly, UKIP is barking and I will oppose it at every turn.
My hon. Friend the Member for Birmingham, Ladywood talked about a review of the impact of tax changes, which is absolutely right and I support her.
Priti Patel (Witham) (Con)
I have thoroughly enjoyed the debate so far. I am astonished by the ground that we have covered, because we are solely here to address corporation tax, which has not been explored anywhere near enough in the light of the Labour party’s amendment.
As my hon. Friend the Member for Enfield North (Nick de Bois) said, the amendment would create uncertainty and put jobs and future investment at risk—there is no doubt about that. The Labour party wants to reverse the Government’s low business tax approach by putting up corporation tax, which would send out all the wrong messages to the business community. It is farcical that Labour Members are dressing up their so-called policy as a way to help small businesses with business rates. They are cynically trying to pitch big business against small business. The Government have clearly shown that we can help all businesses, both large and small, by cutting corporation tax and, importantly, easing the burden of business rates, which the Minister and the Chancellor of the Exchequer have done.
Angie Bray (Ealing Central and Acton) (Con)
Does my hon. Friend agree that it is often not an either/or situation? Small businesses often depend on larger businesses for work.
Priti Patel
My hon. Friend is absolutely right. She gets to the heart of the debate and shows why Labour has no credibility. Labour Members cannot claim to want to help small businesses when, as the Minister pointed out, at the last general election, when they were in government, they proposed to increase the small profits rate of corporation tax from 21% to 22%. We have also heard about the Labour party’s so-called interest in small business, but in government it presided over the closure of 6,000 small post offices. There is fuel duty and energy costs for small businesses, too. On many issues, Labour lacks credibility. We should put things into context and beyond doubt.
Priti Patel
No. We heard from the hon. Gentleman earlier.
The last Labour Government ignored the benefit of expanding trade. Exports came up in the discussion. This Government have gone out of their way to expand overseas trade. The Chancellor is in Brazil this week at the beginning of export week. We are doing everything right to sell Britain overseas, and to encourage overseas companies to come here and benefit from the low rate of corporation tax, which Labour wants to destroy.
Putting up corporation tax does nothing to help small business, contrary to what Labour says in its shallow and feeble amendment. That only goes to demonstrate that the Opposition have no plan to expand our economy or create more jobs, growth and prosperity—creating those things is exactly the right approach that the Government are taking.
Amendment 2, which I obviously do not support, is completely irrelevant to the wider national debate currently, which is about sustaining growth in our economy, and expanding our economy with jobs, growth, prosperity, inward investment and exports. On that point, I heard a terrible diatribe earlier—an hon. Member said we are not exporting enough. In my county of Essex, the Essex chamber of commerce has helped more than 1,000 local firms, including many small and medium-sized businesses, in processing export documents and giving practical assistance. The value of those exports is well over £300 million. That is the message we want to send out to business of all sizes in the UK. I have no intention of supporting the amendment and support what the Government are doing.
Mike Kane (Wythenshawe and Sale East) (Lab)
It is an honour to follow the hon. Member for Witham (Priti Patel). I concur that it is great news that the Chancellor is drumming up business for Britain in Brazil, but I wonder what first attracted him to the Copacabana beach.
I know debates in the House can sound like statistical conventions, but we have only to look at the statistics to realise that the debate is important. Some 99.9% of all private sector business in the UK is in SMEs, which also account for 59% of private sector employment and 48% of private sector turnover. As my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) said, SMEs account for 47% of all private sector employment. Labour Members will know that growing private sector trade unions such as the Union of Shop, Distributive and Allied Workers and Community the union are picking up on that growth.
I was intrigued by my hon. Friend’s story about starting out in a corner shop. I want to tell a story about a firm in my constituency. In 1985, a young woman—a housewife called Kamal Basran—was bringing up a young family and preparing food for them in her kitchen. She was fed up that she could not buy quality Indian cuisine from any of the major supermarkets. She took out a £5,000 bank loan and started supplying food to local restaurants and businesses. In the past nearly 30 years, she has grown that business and hopes to post a £50 million profit this year. It has grown year on year despite the recession. She now has 220 employees. As a new MP, I had the great honour of visiting that business in my constituency just a couple of weeks ago. The package I got as I left was superb. I do not declare an interest—I distributed the goods to parliamentary staff and constituents afterwards.
That success story is an example of why SMEs matter so much. In polling up to the last general election, people said that their work prospects were the most important things to them after health and crime—work prospects were always No. 3 or No. 4 on the list. That is why the debate is important.
Tom Blenkinsop
Does my hon. Friend agree that a review would be important? A corporation tax cut would be welcomed by the business community, but it is not the priority in certain sectors. For example, energy-intensive industries are more concerned about capital allowances—the Government have had to U-turn on getting rid of them—and the carbon price floor, which affects the chemical and steel industries.
Mike Kane
I agree with my hon. Friend. Government Members have said that amendment 2 would create uncertainty, but if the Committee agreed to it and to a review, businesses would welcome it, because a review would be part of the ongoing debate.
The amendment would require the Government to publish a report on the impact of the planned cut in corporation tax in the 2015-16 financial year from 21p to 20p. The amendment calls for the assessment of the impact specifically on SMEs.
Ian Swales
I welcome the hon. Gentleman to the Chamber—this is the first time I have heard him speak. The amendment mentions “fewer than 50 employees”. Can he help me to make sense of that? Mainstream corporation tax would apply only to firms making more than £1.5 million profit. Is he suggesting that the amendment includes small companies that make more than £1.5 million profit? That is how it reads to me.
Mike Kane
I thank the hon. Gentleman for his welcome. Most SMEs have fewer than 50 people working for them, and a medium-sized enterprise is usually defined as one with fewer than 250 employees.
I welcome the fact that Labour Members want to cut business rates on properties with an annual rental value of less than £50,000 back to the level of the previous year. We would then freeze business rates for those properties in 2016. That can be paid for by reversing the additional cut in the main rate of corporation tax from 21% to 20% in 2015.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to speak in the debate. If there is one attraction to the amendment, it is that it allows a broad-ranging debate on any tax measure one can think of. Perhaps I could talk about the impact that a carrier bag tax would have on small businesses, especially a tax on bags that would allow the biodegradable element to get into the recycling stream, which damages recycling businesses in the plastics industry. That would perhaps stretch the debate a little too far away from the main rate of corporation tax, even though hon. Members might agree on such a measure.
We are going in exactly the right direction in trying to get the main rate of corporation tax down to 20%. That has been the direction of travel for this Parliament and it is the right place to be. I suspect that, if we get it to 20%, that will be the end of the journey, for the very good reason that having a corporation tax rate lower than the basic rate of income tax creates lots of interesting tax planning opportunities, as the previous Government found out when they had a small companies rate of 10%. Lots of strange people incorporated themselves as businesses—they looked a lot like one-man bands who ought to have been self-employed and made interesting tax deferrals or savings when pretending to be companies.
If we get to 20%, that is the end. I suspect that that is why we can no longer have a small companies rate of corporation tax that is lower than the large companies rate. If we lower one rate, we encourage behaviour that we do not want to encourage. It is right that we get both rates down to 20% and to have one rate of corporation tax. We can then scrap the hugely complex marginal relief calculation and everyone will know what rate of tax they pay on their profits. That has to be the right situation. A small growing business, whose profit increases during the year and suddenly hits more than a quarter of a million pounds, will wonder what tax rate it will pay in that year, so losing that whole calculation completely is a huge advantage.
Mr Redwood
Does my hon. Friend agree that the review could very usefully come up with a 20% capital gains tax rate, too? I would settle for 20% capital gains tax, 20% corporation tax and 20% income tax. There would then be fewer tricks.
Nigel Mills
A symmetry of tax rates would make perfect sense. Whatever form of income one had, one would know what rate one was paying.
James Morris
One of the issues in Britain is that not enough companies are starting up and then growing. One of the reasons for that is that we do not have enough symmetry and the tax system is too complicated. Does my hon. Friend therefore think it would be a good idea to get some simplicity into the system?
Nigel Mills
My hon. Friend is exactly right. I think many Members, not least the Minister, know of my commitment to tax simplification. I was tempted, knowing that we were debating corporation tax, to table my amendment yet again on rewriting the whole corporation tax code to one that is more understandable and less complex.
Mr Love
The hon. Gentleman seems to be arguing that we might need a different policy mix for small businesses and for larger businesses. May I therefore invite him to reject the idea that the amendment somehow splits off small businesses from large businesses? We need a different policy mix.
Nigel Mills
I agree with the hon. Gentleman. There is eminent sense in having a lighter-touch tax regime for small businesses, with perhaps lower taxes in some areas for small business. We clearly do that: there is a separate regime for filing accounts. There is less expectation on small businesses, and, if only in the business rates field, there are exemptions for the very smallest businesses. I think we actually have that graduated system.
Mr Love
Notwithstanding small business rates relief, does the hon. Gentleman accept that for a significant minority of small businesses, business rates are now greater than the rental payments they have to meet, and that therefore there is some merit to the proposal being put forward?
Nigel Mills
I might be tempted to agree that there is some merit in looking at the level of business rate cost, but I am not sure there is much merit in the proposal we are debating here this afternoon for yet another review. I welcome the measures the Government have taken to reduce business rates, or least reducing the increase through the 2% cap and discount for high street businesses. I think we are all very keen to see how we can help our high streets grow. That reduction has to be the right way forward.
Returning to the earliest of the series of interventions, on a 20% capital gains tax rate, companies that realise a capital gain will be paying at 20%. It is only individuals who will end up paying the higher rate. There is sense in having symmetry restored to that situation. I wholeheartedly support getting the corporation tax rate down to 20%. We could trumpet it around the world that we have one of the lowest rates in the G8. That long-term direction of travel has to be one of the most powerful ways to encourage investment in this country by the large corporations we want to see operating here. It would perhaps stop them setting up their headquarters in Switzerland, Ireland or elsewhere. This is now a trend we can see: large corporations choosing to bring more jobs to, and paying tax in, the UK.
Ian Swales
My hon. Friend is making a very good speech, as he always does on these matters. Will he join me in welcoming the fact that Hitachi has decided to relocate its rail headquarters to the UK, in the north-east?
Nigel Mills
I am always a little nervous talking about Hitachi and rail, as I am from Derbyshire. I support Bombardier and want it to get rail contracts. I am sure that it is great news for the country and the north-east that Hitachi has chosen to do that. However, I clearly say that Bombardier is a far better make of trains and that it fully deserves the Crossrail contract it got in recent weeks. I look forward to healthy competition between the two. It would be great to have two well-regarded, highly skilled train makers in this country. Just to be clear: Bombardier clearly has the trump card on that.
It would be a terrible message to send out to the rest of the world, having seen us go so far in the right direction by reducing the rate of corporation tax from 28% down to the planned 20%, to suddenly start reversing that journey and saying, “Perhaps we’re not quite so sure that that was the right thing to do. Let’s have that extra revenue back and not support those businesses.” That would be the wrong thing to do.
Nick de Bois
Some people may be seduced by the idea that it is only 1%, going from 20% to 21%, but for corporations coming into a tax level of 20%, the Opposition are effectively saying that they would increase corporation tax by 5%. Let us make that clear.
Nigel Mills
I am sure my hon. Friend’s maths are absolutely right.
If we are to review taxes and rates, I am intrigued by the idea of having, as my right hon. Friend the Member for Wokingham (Mr Redwood) said, a wide-ranging dynamic assessment of tax rates. Let us have a look and work out exactly the right rates for various taxes. Are we in the right place, or are we throwing away revenue and destroying business activity by having certain rates in the wrong place? I would like to understand the impact on small businesses of the jobs tax or employees’ national insurance. I would be keen to know the impact of fuel duty rates and of the tax on energy bills. I suspect those measures are doing far more damage to our small businesses, and the number of jobs they can support, than other things. A wide-ranging study of the impact of tax on small business could be an interesting exercise and could direct the way forward for policy. I suspect that it would not go in the area the Opposition want. They seem to want an expensive hike in the indirect taxes on manufacturing that do so much damage.
We ought to welcome people moving in the right direction. In 13 years in government, Labour favoured property taxes via the council tax. They hiked it up thinking that people would not notice. It is intriguing that they have now realised that it is extremely unpopular for those taxes to get too high, and that perhaps it is easier to try to focus on direct tax rates.
In conclusion, the Opposition amendment is in many ways a complete waste of our time. It is absolutely right to get the corporation tax rate down to 20%. I suspect that that is the end of that journey and then we can look at various other measures to support small businesses. Reducing the main rate down to 20% will not stop our support for small businesses. Let us get on and do it: it is the right thing to do.
Sheila Gilmore
For those who have already made the decision that they want to reduce corporation tax in this way, it is easy to characterise the debate as one group of businesses being pitted against another. The debate has to be taken in context. On the basis of that argument, it would be very difficult to suggest any changes, because somebody would always be able to say, “Ah, but you are pitting one group against another.”
We hear a lot of warm words about small businesses in this House. We are told frequently that they will be the driver of the economy and that the economic recovery depends on them. It is therefore disappointing for this proposal to be so quickly dismissed as irrelevant or inappropriate. If the amendment asked for it to happen without further review, Government Members would no doubt be telling us that we should not make such suggestions without looking at the impact. If we ask for a review to look at the impact they will tell us, “Well, that’s no good; you should just be doing it if you really believe in it,” rather than engaging with the issue.
Small businesses find that business rates are a large element of their costs, particularly when setting up and trying to get their businesses off the ground. A constituent of mine, with a friend, was setting up a fitness business—a very competitive market—from scratch, with a particular appeal to women. They called themselves “Fitness Chicks”. I thought that that might perhaps put off older women, but nevertheless they had a real ambition to get the business off the ground. They said that rates were the biggest thing holding them back as they were setting the business up.
Charlie Elphicke (Dover) (Con)
Small businesses do not tend to pay so much in corporation tax. That is not the main burden they suffer—that is the burden of business rates and payroll taxes. Will the hon. Lady therefore join me in welcoming the action that the Government have taken on business rates and payroll taxes, which will really help small businesses?
Sheila Gilmore
I am glad that the hon. Gentleman is interested in business rates, the subject we are discussing. Our suggestion is that in order to make a real difference to those businesses, we can go far further in the way we deal with business rates.
Rather dramatic statements are made that a suggested change of 1% in the rate of corporation tax will result in companies—on the basis of that alone—changing their plans, leaving the country or not coming here. These statements are made but it is not clear whether there is evidence for them. The impact of the 21% to 20% change in corporation tax is not—or so it would appear in the initial period at least, according to the OBR report—to increase take from corporation tax, but to decrease it.
Angie Bray
Does the hon. Lady agree that there is some certainty on business rates because we have the cap of 2% and a reduction in costs for those with rateable values under £50,000? That is something of which businesses can be certain. In the meantime, we need to make sure that larger companies can be certain of the tax regime in this country. Having a review will only create uncertainty, which is the one thing that businesses looking to invest really do not like.
Sheila Gilmore
We must review constantly what we do to get it right. The suggestion is that a review in itself causes uncertainty, but there are many uncertainties in business. The constant discussion about the EU, Britain’s place in it and whether there should or should not be a referendum is an uncertainty. I am sure that many people who feel strongly about that nevertheless feel it is so important that they are willing to risk that level of uncertainty.
Mr Redwood
The Labour Front-Bench team made a great deal of the need for banks to lend more money to small businesses being crucial to their future. How would an increase in the corporation tax rate and a special bank levy on payroll help? Would not that mean that the banks had less money to lend?
Sheila Gilmore
We still see high levels of remuneration and bonuses at banks while small businesses are told that there is no money to lend. Sometimes, of course, we are told the opposite is the case: banks allege that it is not a lack of money, but that businesses are not coming forward and do not want to expand. For a lot of small businesses who want to borrow, it is galling to find that banks are still seemingly able—despite all the difficulties they allege they have—to pay out so much in bonus payments.
To review these matters and to make a genuine attempt to provide additional help for the small businesses we all say we want to help would be useful. The terms of the amendment would enable us to get details of the impact of the cut in corporation tax to see exactly what the impact has been and what the impact of the suggested minor and very small increase might be before a decision is made.
Tom Blenkinsop
Does my hon. Friend agree that it is interesting that Conservative Members are talking about a 20% rate of corporation tax, which is a direct tax on profit, but have no qualms about how a review might interplay with things such as value added tax, which many, if not all, small businesses pay and is paid prior to profit?
Sheila Gilmore
Value added tax has been a difficulty for a lot of individuals and for small businesses. The amendment is an opportunity for us to review these matters. If Conservative Members are right that such a change would be harmful, a review would show that. It has to be demonstrated to the small businesses of this country why a proposal of this kind is thought to be harmful to our economy.
Mr Gauke
It is a great pleasure to serve under your chairmanship, Ms Clark, and to respond to the first of what will no doubt be many detailed debates over the course of this year’s Finance Bill. It may be helpful if I set out a little context as to what the Government have done in terms of corporation tax.
When we came to office in 2010, the main rate of corporation tax was 28%, and the small profits rate was 21% but was due to rise, under the plans of the previous Government, to 22%. In 2010, we set out the corporate tax road map. We set out our ambition to give the UK the most competitive tax regime in the G20. We wanted a corporation tax system that would support, not hinder, growth and would boost investment to support the economic recovery, so we reversed the previous Government's planned increase in the small profits rate and cut it to 20%, and embarked on the biggest reduction in the main rate of corporation tax since the 1980s. Last week, the rate was cut to 21%. Next year it will fall to 20%— the joint lowest rate in the G20.
Mr Gauke
The cuts in corporation tax were a central plank of the Government's economic strategy, a strategy that is working. Jobs are up and business confidence is increasing.
It may be helpful if I inform the House of the news that we have heard from the IMF this afternoon. The IMF has revised the UK’s growth forecast for 2014 and 2015 to 2.9% and 2.5% respectively, an upward revision of 0.4 percentage points in 2014 and 0.3 percentage points in 2015. Those are the largest increases for both years among major advanced economies and among the BRIC countries—Brazil, Russia, India and China—for both years. The UK is also forecast to be the fastest-growing major advanced economy in 2014. I make the point to the hon. Gentleman that the plan is working. Business investment has grown for four consecutive quarters for the first time since 2007. The OBR has forecast that investment will grow very strongly over the next two years—by 8% in 2014 and 9.2% in 2015.
More and more businesses are moving operations here, a point made by my hon. Friend the Member for Amber Valley (Nigel Mills). Just in the past two weeks, we have seen Hitachi Rail—referred to by my hon. Friend the Member for Redcar (Ian Swales)—and Brit Insurance announcing moves to the UK. Siemens has announced a £160 million investment in the Humber. Business surveys reflect the positive impact of the corporation tax reforms. For the past two years, the UK has ranked highest in the KPMG survey of international tax competitiveness, with business leaders putting us ahead of countries such as the USA, the Netherlands and Switzerland.
Ian Swales
As a champion of manufacturing, I would like to see more capital investment, but does the Minister accept that investment in people has clearly been going on during this period?
Mr Gauke
Indeed it has. I will say more about some of the other measures we are taking to make our tax system more competitive, but overall it is clear that our tax system—in terms of being open for business—has moved in the right direction over the last four years. It is important that we maintain that momentum and do not put it at risk by trying to reverse some of the progress we have made.
Charlie Elphicke
According to a report in City A.M. this morning, the British Chambers of Commerce has said that we are seeing the strongest investment and export growth for nearly a century. Did my hon. Friend see that report?
Mr Gauke
Indeed I did, and I heard the head of the BCC make the same point in a radio interview this morning. We are moving in the right direction, and this afternoon’s figures from the IMF are extremely significant. I hope that Members in all parts of the House welcome the news that the United Kingdom is the fastest-growing major advanced economy this year.
Mr Love
The Office for Budget Responsibility has forecast that there will be no net increase in net trade, so the export-led recovery simply will not happen. It has also said that the recovery is too dependent on consumer expenditure, and that as long as real wages do not increase—and it predicts that they will not increase very fast—that simply cannot continue.
Mr Gauke
Again, we are seeing movement in the right direction. In the Budget, the Chancellor announced additional support for exports through the expansion of the direct lending scheme. Moreover, in 2012-13 British business received £4.3 billion of support from UK Export Finance, which was a 12-year high.
Tom Blenkinsop
I think I am right in saying that the UK current account deficit has not been as bad as it is now since 1955, when records began. The Minister may wish to correct me, but I am certain that that is the case.
Mr Gauke
The Government are taking steps to ensure that we can export more. We recognise that we need to export more, and that we need more business investment. However, the way in which to ensure that that happens is not to try to avoid a competitive tax system, or to turn our back on the progress that we have made. All that would put the recovery at risk, and I fear that it is what we would get from Labour.
Sheila Gilmore
I do not think that the Minister has yet addressed the lack of balance in the growth that is being shown, and the concern that has been expressed about that by the IMF and others. If policies such as the reduction in corporation tax were intended to boost manufacturing and exports, I should like to know why that still does not appear to be happening to the degree that would convince people that this is a balanced recovery.
Mr Gauke
As a result of our corporation tax reforms, businesses are moving their headquarters here. The north-east of England, for instance, has benefited from Hitachi’s investment. However, if the hon. Lady’s point is that the job has not yet been done and that further steps are needed to make our economy more productive and competitive, I entirely agree with her. That is why we must stick to the long-term economic plan.
Mr Redwood
Does the Minister agree that increases in investment require consumption growth? Does he agree that the whole point of investment is to satisfy future consumption increases, and that we need both for a balanced recovery?
Mr Gauke
Indeed I do. As ever, my right hon. Friend brings great expertise to the debate.
Clauses 5 to 7 provide further evidence that we are continuing to make progress towards the delivery of a simpler and more competitive tax regime. They charge corporation tax for the financial year 2015. They set the small profits rate and the ring-fence small profits rate for 2014 at 20% and 19% respectively. They fix the ring-fence rates so that we need not reconfirm them every year in the Finance Bill. That is consistent with the way in which we handle the supplementary charge, the 32% tax levied on profits from oil and gas production. They set the fractions that will be used for businesses to calculate their marginal relief: the standard fraction is set at one four-hundredth, and the ring-fence fraction at eleven four-hundredths.
Shabana Mahmood
The Exchequer Secretary speaks about a positive business environment. Business rates have increased by £1,500 on average since his Government have been in power. Does he think that that has led to a positive business environment for those businesses affected?
Mr Gauke
It is worth pointing out that business rates have increased in line with RPI, which is exactly what the previous Government planned to do, and, indeed, exactly what the previous Government did when they were in office. What we have done, however, is double small business rate relief for every year of this Parliament, saving small businesses over £1.5 billion on their business rates bills to date. In the autumn statement we introduced the biggest business rates cut in over 20 years. This package of measures was larger than that proposed by the Opposition. Their proposal would have been worth significantly less than the £1 billion our package cost. Of that £1 billion, over 90% is going to businesses occupying small premises and targeted support is going to help the retail sector on the high street and bring empty shops back into use. The combined effect of the measures is to freeze, or even reduce, business rates bills for 35% of the smallest rate payers. This Government’s business rates measures are both more generous and better targeted than those proposed by the Opposition and benefit all businesses.
Amendment 2, tabled by the shadow Chancellor and his colleagues, proposes a review of the impact of the additional cut in corporation tax with particular reference to businesses with fewer than 50 employees. I understand from the comments made by the shadow Chief Secretary in last week’s debate that what is driving this amendment is a concern about the business environment for small businesses. The Government have done far more for small businesses than the Opposition would have done, including making it easier for small businesses to create new jobs by introducing the £2,000 employment allowance, which will benefit up to 1.25 million businesses and charities in the UK. We are lifting 450,000 small businesses out of employer national insurance contributions altogether. We have made it easier for small firms to invest and grow. We have doubled the annual investment allowance to £500,000 per year so that 99.8% of businesses will receive relief on 100% of their investment in the first year, and we have increased the small business research and development tax credit to the maximum level available under EU law. We have cut costs for small businesses by delivering the longest fuel duty freeze for 20 years and through the £7.1 billion package announced in the Budget to reduce energy costs for businesses and households.
It is worth pointing out that the rate reduction for corporation tax will lead to large firms investing more, with huge benefits for SMEs in their supply chains. Economic modelling by HMRC has shown that the corporation tax cuts introduced in this Parliament will increase long-run business investment by 2.5% to 4.5%. In today’s prices that is an extra £3.6 billion to £6 billion every year, a boost for the whole business community. As John Longworth, director general of the British Chambers of Commerce, said last year:
“All companies will cheer the news that Corporation Tax will fall to 20% by 2015.”
This is just one element of what we have done. If Members look at what we have done on business rates, the employment allowance and energy costs, it is clear that this is a Government who are supporting business. I am afraid, however, that, as always, what we hear from the Opposition is policies that are anti-business and that will drive away investment and growth, and no realisation of how the world has changed. The UK needs to compete for jobs and investment. The best way of doing that is through a competitive tax system. I am afraid that the biggest risk to our achieving a competitive tax system and economic growth is the Labour party.
These clauses see us continue to make progress towards delivering a simpler and more competitive tax regime that supports investment, productivity and growth. I urge the House to support the clauses and to reject the Opposition amendment.
Shabana Mahmood
We have had a very good and interesting debate. I was a little horrified when the right hon. Member for Wokingham (Mr Redwood) began his remarks by making what sounded almost like positive comments about me, but he very quickly moved on to comments that better reflected both his politics and mine. He raised a point that I did not hear clearly, but I am sure it was a withering put-down about me not doing my homework. On his criticisms of both the amendment and what it seeks to achieve, I say to him as gently as possible that if he had done his homework, he would know that the Opposition are somewhat constrained in the amendments we can table to Finance Bills and the impact they could have on the Exchequer, so often the best way for us to get a good debate on what we seek to achieve is through asking for a review. I hope that that settles his mind as to the nature of our amendment.
There has been a great deal of discussion today about our proposals to increase the headline rate of corporation tax from 20% to 21%. We would use every penny of the revenue from that tax increase to cut business rates for small businesses in 2015 and to freeze them the year after. Nothing that Government Members have said today has shown that they understand the true impact that business rates are having on small businesses up and down the country. The Government are not prepared to make choices or spending switches to support those small businesses, but that is what the next Labour Government will do in 2015. We intend to press our amendment to a vote.
Question put, That the amendment be made.
The House divided: Ayes 219, Noes 289.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I beg to move, That the clause be read a Second time.
The Temporary Chair (Katy Clark)
With this it will be convenient to discuss:
Amendment 4, in clause 1, page 2, line 11, at end insert—
‘( ) The Chancellor of the Exchequer shall, within three months of the passing of this Act, publish a report on the impact of setting the additional rate of income tax at 50 per cent.
( ) The report must estimate the impact of setting the additional rate for 2014-15 at 45 per cent and at 50 per cent on the amount of income tax currently paid by someone with a taxable income of—
(a) £150,000 per year; and
(b) £1,000,000 per year.’.
Clause 1 stand part.
I should inform the House that due to an administrative error some names in support of new clause 4 were omitted from the amendment paper. A revised version is available from the Vote Office with all names correctly reproduced.
Jonathan Edwards
I am grateful to you for that clarification, Ms Clark.
New clause 4, tabled in my name and those of my right hon. and hon. Friends in Plaid Cymru and the Scottish National party, would have the effect of requesting the Treasury to commission a report into reinstating the 50p tax rate for earnings above £150,000 a year, or £3,000 a week, as I prefer to explain the policy to my constituents. I look forward to pressing the new clause to a vote at the appropriate time.
This is an example of bad timing, as I understand that the President of the Republic of Ireland is about to address Members of the Commons and the Lords in the other place. I am disappointed to be missing that. However, there is little doubt that the decision in the 2012 Budget to scrap the 50p top rate and reduce it to 45p is the signature fiscal policy of the current Administration. However, I recognise that the 50p rate existed only for the dying weeks of the previous Labour UK Government, even though they were in power for more than 13 years with a top rate of only 40p. That of course leaves the impression that it was merely an election gimmick for the 2010 general election rather than a matter of deep principle.
Labour’s 13 years of the 40p rate reflected what Lord Mandelson said on behalf of the Blair Government about being
“intensely relaxed about people getting filthy rich”.
None the less, it was expected that the 50p rate, which existed for the first half of this coalition Government, would be set in stone while the UK Government maintained their plan A fiscal strategy of cutting the deficit. Despite disagreeing with the UK Government’s fiscal strategy since entering the House, I accept that the “We’re all in it together” slogan coined by the Chancellor was politically very successful. It was based on the notion that all parts of society were equal partners in a moral crusade to reduce the annual fiscal deficit of the state; that rich and poor, young and old would have to feel the pain as the only remedy for the excesses of the past—or so the story went.
The decision to cut the 50p rate was therefore a political miscalculation in my mind because, whatever way it is dressed up, the Chancellor offered a tax cut for those earning more than £3,000 a week. The notion of “We’re all in it together” was blown apart with one act. How can the Chancellor and the Treasury expect the most disadvantaged in society to stomach reductions in their social security support while the richest get a tax cut? It was an act that confirmed that we are not all in it together.
Let us not forget that in the 2012 Budget a further cut of £10 billion in the social protection budget was announced from 2013 onwards, on top of those announced in the 2010 emergency Budget. Those are the cuts that we are living with today, leaving the clear impression that the tax cut from 2013-14 onwards for the highest earners in society was being paid for by cuts in welfare provision for the poorest.
Jenny Chapman (Darlington) (Lab)
Does the hon. Gentleman agree that it is the scale of the tax cut that is most galling for our constituents, when on average it will be a £100,000 a year tax cut, which is something beyond the imaginations of most of our constituents?
Jonathan Edwards
I can certainly assure the hon. Lady that not many people in Carmarthen East and Dinefwr are enjoying that tax cut. That is why I am speaking in such fervent opposition to it.
Hywel Williams (Arfon) (PC)
It is not only the fact that income tax has been cut but that further cuts to social provision are envisaged. So into the future, people at the bottom of the pile and who face disability and sickness will be seeing cuts to their benefits while the very rich will be seeing cuts to their tax.
Jonathan Edwards
I am sure that my hon. Friend’s surgeries, like mine, are filled weekly with individuals who face problems with reductions in the support that they receive. With all that in mind, it is difficult to look them in the eye and support a tax cut for those on the highest incomes. It undermines the case for the moral crusade I alluded to earlier and public support for the fiscal policy of the current UK Government.
Huw Irranca-Davies (Ogmore) (Lab)
The hon. Gentleman is making some good points. Does he agree that, while there are technical issues in determining the exact point at which the Government will gain more or less from a tax, there is a significant signal from the 50p tax rate, which is that we are, at least to some extent, all in it together? His constituents are not far from mine, and the average median wage in the Ogmore valley is less than £21,000.
Jonathan Edwards
The hon. Gentleman always makes very intelligent points. I believe that he is talking about the Laffer curve. I will discuss the optimal rate of taxation later, but I agree wholeheartedly with his comments.
A report for the Office for National Statistics entitled “The Effects of Taxes and Benefits on Household Income, 2011/12”, which was released in July 2013, showed clearly that, while income tax is progressive, as it should be, the effect of indirect taxes such as VAT means that the bottom fifth of the income groups pay the most out as a percentage of their gross income at 36.6% in taxes, while the top fifth pay 35.5%. The overall tax system is therefore still heavily weighted in favour of the highest earners. Plaid Cymru believes in progressive taxation irrespective of the timing and state of the wider economy. We believe that those with the broadest shoulders should bear the burden of taxation. A Scandinavian model of progressive taxation is part of our DNA.
The House has voted on this measure only once, during the resolution votes following the 2012 Budget debate. I am delighted that it was Plaid Cymru and Scottish National party Members who called that vote. The shadow Chancellor must have been having an off-day, because the entire parliamentary Labour party abstained, apart from two honourable exceptions, the hon. Members for Bolsover (Mr Skinner) and for Newport West (Paul Flynn), if my memory serves me correctly. Although Labour Members voted against the Government’s 2012 Budget, which reduced the 50% rate to 45%, they missed the only vote that we have been able to have directly on the reduction of the top rate.
Pete Wishart (Perth and North Perthshire) (SNP)
I am sure my hon. Friend will agree that what happened to the Labour party that evening was cataclysmic. Does he have any explanation as to why the Labour party missed that vote that evening? Something from the Whips Office suggested headless chickens, but that would be showing disrespect to headless chickens. Does he have any idea why Labour abstained on what was one of the key policies at that point?
Jonathan Edwards
Unfortunately, I cannot enlighten my hon. Friend, other than to say that the Western Mail informed me that senior Labour staff described it as a “balls-up”.
To be slightly more serious, I was happy that, in response to an intervention from me last week on Second Reading, the shadow Chief Secretary, who is in his place, said that should Labour form the next UK Government, it would restore the 50p top rate for the duration of the next Parliament. I would certainly support that, and I look forward to doing so if there is a Labour Government. My understanding before his answer was that Labour was proposing a temporary increase in the top rate, so I welcome that development. I hope that during today’s debate, the Labour Front-Bench spokesman will confirm that that will be its policy at the next election and beyond.
Owing to the manner in which Finance Bills are processed, it is impossible to press to a vote amendments to alter tax band rates, which is why both new clause 4 and Labour’s amendment 4 call for a review from the Treasury of the impact of re-introducing the 50p rate. The 2011 Budget included the provision of a review to reduce the 50p rate. As I said, nobody foresaw the Treasury introducing such a policy within a year. In other words, the 2011 Budget provisions were a sop to Tory donors that their party was minded to reduce the top rate at some point in the future. The following Budget then introduced the policy.
Proponents argue that the reduction in the additional rate to 45p has led to a windfall for the Treasury because of reduced avoidance and evasion. I noticed in the lead-up to the Budget last month that some Tory Back Benchers were making the case for a reduction to 40p for this Budget based on higher than expected tax receipts—some £9 billion—following the top rate changes. In the newspapers this morning the hon. Member for Taunton Deane (Mr Browne) was making a similar call for his party to adopt the 40p top rate come the general election. He is not in his seat, so perhaps he has been told to go somewhere else. I find that argument difficult to swallow as individuals seeking to avoid tax at a 50p rate would surely be minded to do so with a 45p rate. The higher than forecasted tax receipts used to justify a further cut in the top rate was surely as a result of higher than projected economic performance, and therefore a 50p rate would have brought in even more receipts for the Treasury.
Hywel Williams
What credence does my hon. Friend give to the analysis that some high earners deferred declaring their income with a view to declaring it once the 45p rate was introduced, and that that led to higher receipts?
Jonathan Edwards
That is an important point about forestalling, which I will talk about in more detail later.
I note that the Office for Budget Responsibility’s March 2012 “Economic and fiscal outlook” states on page 110 that
“the revenue-maximising additional tax rate is around 48%.”
Again, that blows a hole in the Government’s argument that their reduction of the additional rate was based on sound economic and revenue-raising evidence. That is why they should now commit to carrying out a full report, as the new clause would compel them to do. I would argue that 48 is slightly closer to 50 than to 45.
The Chancellor told the House in 2012:
“The increase from 40p to 50p raised just a third of the £3 billion that we were told it would raise.”—[Official Report, 21 March 2012; Vol. 542, c. 805.]
I know my A-level maths is a little shaky, but that still makes £1 billion, a significant sum to the good people of Carmarthenshire and the good people of Wales and the rest of the UK. The Chancellor’s justification for the tax cut for the super-wealthy was that they would avoid the tax, they might leave the UK, it raised only £1 billion, and the reduction would lose the Government only £100 million. Having brought forward their income to avoid the 50p rate in the first year, the rich delayed it in the final year to benefit from the reduction to 45p. That forestalling and deferment will have cost the Treasury billions that could have been used to avoid some of the worst cuts to those on low incomes, such as those resulting from the bedroom tax.
Recent claims by some on the Government Benches that the tax cut for the richest has yielded more revenue conveniently gloss over the increased likelihood of those with an accountant being able to move their income into the following year, given the Government’s indication a year ahead of time that they were enacting the tax cut. My advice to the Government would be to enact the proper closing of loopholes to ensure that the super-wealthy pay their fair share, instead of the fig leaves of action that the Government have offered previously. They have still not introduced proper measures to make up the HMRC estimate of £35 billion lost each year through avoidance and evasion. Other estimates put the figure much higher. Claims that the rich were fleeing because of the 50% rate are also not very well grounded. Research by the TUC, using HMRC figures, indicated that 59% of those paying the 50% additional rate were employees, most working in banking and therefore unable to leave.
Huw Irranca-Davies
Does the hon. Gentleman understand the disconnect between those who are super-wealthy and the argument that he is making, when I, my constituents and my family, who rely on public services, the national health service and so on, see the sense in paying progressively higher rates of tax, myself included, to make sure that those services are available? Why is it that the super-wealthy do not see the sense in providing for public services? Is it, perhaps, because they do not rely on them?
Jonathan Edwards
That is certainly one argument, and I shall talk about how, with such an attitude, the super-wealthy are cutting off their own noses, and how a progressive taxation system would benefit them as well as people like the hon. Gentleman and me, who earn far less than those who get hit by the top rate.
As the 2012 HMRC paper that examined the effect of the 50% additional rate of income tax noted,
“there was a considerable behavioural response to the rate change, including a substantial amount of forestalling: around £16 billion to £18 billion of income is estimated to have been brought forward to 2009-10 to avoid the introduction of the additional rate of tax.”
This is a massive sum which would arguably have been included in taxation had the measure been announced with immediate effect.
The most recent figures from HMRC revised liabilities up by £2.8 billion in 2010-11, £3.3 billion in 2011-12 and £3.5 billion in 2012-13. This means that HMRC says it earned a total of £9.6 billion more than previously thought from the 50p tax rate. These are of course projections of taxable income, but that makes the case for the new clause which I am pushing.
Ian Swales
The hon. Gentleman makes the point about the £9.6 billion. Is he aware that HMRC says that the main part of that is due to higher income levels, not to changes in tax levels?
Jonathan Edwards
That is a fair point. We are making the case for a review. Let us have the figures divulged further. As I say, they are projections.
Sir James Paice (South East Cambridgeshire) (Con)
Does the hon. Gentleman want a review or does he want a higher tax rate? What would he do if that review demonstrated that 45p, 47p or 48p—anything less than 50p—was the point at which the Laffer curve tipped over? Is he interested in maximum receipts to the Treasury or in some sort of moral argument about equalising the distribution of income?
Jonathan Edwards
That is a very valid intervention. My political position would be to support a 50p rate, but let us have the evidence to make the decision. As I am outlining, the evidence suggests to me that 50p would be a better top rate than 45p, and certainly better than 40p.
Kelvin Hopkins
I agree with everything that the hon. Gentleman has said. If it were shown that an increased tax rate at that level brought in lower revenues, would not that simply be evidence of more tax evasion and insufficient enforcement?
Jonathan Edwards
That is the key point. If we have effective anti-evasion and avoidance measures, an increased rate of tax will inevitably lead to a higher yield.
We are living in very worrying times where wealth inequalities at geographical and individual levels are unprecedented. Parts of London have gross value added 12 times higher than parts of Wales. While London has the highest GVA per head of any area in the European Union, west Wales and the valleys has one of the lowest. The contemporary history of geographical and individual disparities has been truly depressing in this regard. Successive Governments do not have a good story to tell, with rebalancing promised but never delivered.
At the heart of the argument for a reduced top rate of tax is the trickle-down theory that underpins much of the now-discredited neo-liberal economics that the Thatcher and Reagan era ushered in. It was always sold to us that the newly re-empowered financial elites would spend their money and it would trickle down, and the people at the bottom would become wealthier as a result of this benevolent spending. But what has happened over the past 30 years? Inequality has, in fact, grown massively. Instead of the wealth of the super-rich flowing down, the rich, especially the super-rich, have got steadily even richer and hoarded their money. That money is not simply made out of the sweat and toil of their own good fortune, skill and brilliance, but often on the backs of those who work hard on the bottom rung but gain little financial reward for the true value of their efforts.
We often hear the super-rich whine that they have made their money, so why should they pay a lot of awful tax on it? Well, that tax goes towards paying for important services such as schools, to educate the work force of the next generation, and hospitals, to maintain the work force in good health. It also pays for a police force that keeps our communities safe, and a legal system that ensures that the law operates smoothly and in a trusted way to allow for a broadly prosperous economy and a society free from corruption. We erode these provisions at our peril. Taxes do not exist in a vacuum; they provide the services that create the whole that enables individuals to go on to enjoy the freedom of being able to make money and enjoy relative prosperity. That is what the proponents of the trickle-down effect have forgotten and wilfully ignored over the past 30 years, as the hon. Member for Ogmore (Huw Irranca-Davies) said.
My new clause would pave the way for the additional rate to be raised to 50%—a small rise of 5%—primarily because that would be symbolic of a move towards a more equal and just society. Only last month, the International Monetary Fund released a report that concluded that the more equal societies stand a better chance of long-term sustainable economic growth. Of course, the IMF is the high priest of austerity which, throughout the 1980s and ’90s, forced developing-world Governments to privatise their publicly owned industries wholesale and enact wildly free-market policies in exchange for international loans. The result was the plundering of those countries’ natural resources by global multinationals, with little benefit being felt by the poor local populations and the elites doing handsomely. It is therefore quite a turnaround for the IMF to conclude that income inequality impedes growth and that efforts to redistribute are positive.
This is the real political challenge that will face us over the next generation. That is why we should be ensuring that those with the broadest shoulders bear the burden in what will continue to be very hard times for those at the bottom of the income scale, given the massive cuts that this Government are still intent on inflicting. Let us remember that a vast tract of the austerity programme has yet to feed into the system. An additional rate of 50% would help to ensure that the super-wealthy bear the burden and pay their fair share. I urge the House to support the new clause.
Ian Swales
It is a privilege to serve under your chairmanship, Ms Clark.
I represent areas that, I am sure, are not dissimilar to those of Members who have already spoken and intervened and where there is a great deal of deprivation. Anybody who wants to learn about my constituency can look at the long article about it in the business section of last weekend’s edition of The Sunday Times.
The amendments tabled by Opposition Members forget some important things. The Labour party kept the top rate at 40% throughout its time in office, until its very last day in power. The only day the rate was 50% was 6 April 2010—the day Parliament was dissolved for the general election.
The right hon. Member for Wokingham (Mr Redwood) and the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) have both questioned how principled the former Prime Minister and the former Chancellor, the right hon. Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling), were in their commitment to raising the rate to 50%. One thing is for sure: a general election was approaching and they probably knew that the increase would be the gift that kept on giving in terms of headlines. They had levied taxes in any way they could and they knew that going up from 40% was a dubious move in terms of raising revenue; otherwise, they would have done it earlier. What it did do was lead to more headlines.
Millionaires are paying £381,000 more in income tax in this Parliament than they did in the previous Parliament. Having said that, cutting the rate was not the top priority for me or my party. Our priority was to cut taxes for ordinary working people and we are very proud of the large moves we have made in that direction.
We should also remember that taxing the rich is not only about the headline rate of income tax. Let us consider some of the other measures this Government have already taken. Withdrawal of the personal allowance on incomes of more than £100,000 means that there is already a 60% tax rate on incomes between £100,000 and £120,000. On capital gains tax, anybody lucky enough to make a capital gain of £1 million will pay £100,000 more tax under this Government than they did under the previous Government. The 18% rate of capital gains tax under Labour meant that City operators who made capital gains paid less tax on them than their office cleaners paid on their income, which was truly outrageous. People with a pension contribution of £250,000 are now paying £94,000 more tax on it. If anyone is lucky enough to have £1 million to spend after all those taxes, they will pay £25,000 more in VAT, if they spend it on standard rate items. Tax avoidance has also gone down; Her Majesty’s Revenue and Customs, with its extra resources, is clamping down on it. The idea that this Government are sitting around allowing the rich to do whatever they want is absolute nonsense.
Labour’s proposal to put the rate back up to 50% has already been thrown into doubt by the Institute for Fiscal Studies. I am the first to admit that £100 million is a lot of money, but that is all that would come out of it and the IFS has said that it is not a good way to narrow the deficit. HMRC has already said that what the rise to 50% would actually achieve is doubtful. If hon. Members want to review it, we already have real experience of rates of 40%, 50% and now 45%. The Treasury and HMRC conduct regular reviews and a similar review could be conducted on real, existing data. There was a 50% rate for a period, so a real review could be conducted. It is also worth remembering that national insurance is currently 2%, so the marginal rates that people are paying to the Government are not 45%, but 47%.
We have to be careful. The experience in France is fascinating. There has been a wholesale exodus, with the actor Gérard Depardieu taking the extreme step of moving to Russia to avoid what he regards as extreme tax rates. There is no doubt that people with such incomes and that kind of money can, largely, live wherever they like these days. We need to bear it in mind that the population is more fluid than it used to be.
The Red Book makes it very clear that the top decile pays far more tax than it did. That is right because, as the hon. Member for Carmarthen East and Dinefwr said, people with the broadest shoulders should bear the biggest burden; and they are doing so, because of all the changes that have been made. Despite the fact that the amendment suggests otherwise,
“income inequality is at its lowest level since 1986”,
as the Red Book states. I find the idea that income inequality widened under a Labour Government abhorrent, because such Governments should have narrowing it in their DNA. My four grandparents, who all helped to launch the Labour party, must have been spinning in their graves during the 13 years of the previous Government. I am deeply cynical about Labour’s commitment: they cut taxes for millionaires every year that they were in government.
I look forward to discussing this further in Committee. I do not have a particular argument with reviews, but they do not need to be specified in Bills.
Sheila Gilmore
We touched on this issue in the earlier debate. The right hon. Member for Wokingham (Mr Redwood), who is no longer in his place, told me that I probably did not mix with many very rich people, which I suspect is probably true. My whole life and the constituency I represent have not been chock-full of people living in millionaires’ row and having lots of money in their pockets. However, his points, which other hon. Members have mentioned, about whether the recent rate changes—from 40% to 50% and back to 45%—are a good test do not bear much weight. It is quite clear, in such a short space of time that people, could rearrange their affairs in various ways first to forestall the income and then to ensure that the tax due in previous years was paid last year.
The Office for Budget Responsibility has said the same—that there has been an increase in payments, but that it was largely due to the fact that people could arrange their income in such a way as also to arrange their tax. When my hon. Friend the Member for Edmonton (Mr Love) intervened on the right hon. Member for Wokingham to suggest that people had rearranged their finances to suit the current tax regime, he was told that that was not the case. However, the right hon. Gentleman then talked about how those with high incomes—the rich, in his words—have plenty of ability to rearrange their affairs, so he in fact made precisely our case.
The argument that because something was not done during a certain period, it is not a good idea does not bear scrutiny either. Such a line does not relate to the financial situation in which we found ourselves. We hear a lot about the need for deficit reduction, as we have throughout this Parliament, and we know that the rate of deficit reduction has been far lower than was originally promised and planned for. Many of the changes—to tax credits, to benefits, to local government funding—were justified as absolutely essential for reducing the deficit. Under the previous Government, the reason for introducing the 50p rate was largely about that as well. It was and it remains our belief that we need a better balance when we are trying to reduce the deficit.
We all accept that there is no great virtue in running a long-term deficit. The debate has been about not whether to do something about it but the pace and efficacy with which we do something about it. Within that, there are choices to be made. There is a balance to be struck between taxes and spending cuts, and the Government have chosen to place a lot of emphasis on spending cuts and far less on tax. The 50p tax rate could have been sustained throughout this Parliament as part of the process.
Ian Swales
I am following the hon. Lady’s argument about the tax changes, and I have two questions. First, does she object to the raising of the threshold to £10,000? Secondly, will she oppose her party’s policy of adding a 10p rate? She seems to feel that such things do not help the people she wants to help.
Sheila Gilmore
We have to be honest about the tax threshold. The primary driver behind the change is constantly presented as being concern for the low paid, but the major part of the benefit has accrued to those who are better off. The change also has a substantial cost, at a time when we are told that money is tight. It is worth considering what would help the less well-off in a more concrete way. When the threshold was raised, tax credit rules were changed, tax credit rates were lowered and child care help for people on tax credits was slashed. At some undefined point in the future, the threshold will again be increased, but that is not a lot of help for those who, for the past four years and for however long it takes to establish universal credit, have had their help with child care cut.
The threshold is not what it seems, and we have to be clear about that. If we genuinely want to help the low-paid, we have to consider the model that we use. Many commentators have suggested that, for example, we should consider child care costs and work allowances within universal credit. One change that the Government have made to universal credit since it was first proposed—not that many people are on universal credit yet—is to reduce the work allowances, which means that people lose universal credit faster as their earnings rise, so the low-paid will again suffer. It now turns out that the introduction of assistance covering 85% of child care costs for those on universal credit will have to be paid for from another part of universal credit, so people who, by definition, are not very well off will be paying for that child care assistance. That is rather strange because I do not believe that the tax relief for child care will necessarily be funded in quite the same way. If we really want to help the low-paid, it is worth considering other proposals and no longer simply arguing that raising the tax threshold is helping the lowest paid and will always be the best way to do so.
On the 50p tax rate, I contend that there has been a series of decisions that have heavily affected those who earn the least and are struggling the most, and no number of graphs showing that people at the high end are now paying more tax, or that the proportion of tax changes that affect their income is at least as high as the proportion affecting the low-paid, can show otherwise. The reality is that five percentage points off the tax rate for those on very high incomes is very different from five percentage points off the tax rate for those on very low incomes; it is the difference between parents being able to pay for their children to go on a school trip or being able to think about taking the bus into town because those things cost. A five percentage point difference for someone on a very high income might be the same numerically, but it does not have the same consequences for people’s lives.
Ian Swales
I am following the hon. Lady’s argument carefully, and she is straying from tax into welfare, which I understand is a real concern for her. She makes a good point on the effect of proportionate tax rates. The cut in tax through raising the threshold has actually reduced the tax and national insurance bills of people on the minimum wage by some 70%. If we are talking percentages, does she welcome that figure? Does she also accept that anyone working 30 hours a week or more on the minimum wage is earning £10,000? Finally, will she answer the question about the 10p tax rate? Will she oppose that policy?
Sheila Gilmore
The hon. Gentleman suggests that it is irrelevant to link welfare and tax, but I do not agree. Welfare and tax are intimately linked in a very practical way for someone who may have seen their tax bill go down but who has also seen their benefits go down substantially and so are either no better off or are actually worse off. That is a very real link, because raising the tax threshold has a substantial cost; it is not a pain-free, non-costed policy. At £10 billion, the policy costs a considerable amount of money that could have been spent in some other way. I am not convinced that the net effect for the lowest paid is such that they benefit. Given that so much of the benefit goes to people who are better off, I would have thought he would want to question that policy.
Mrs Mary Glindon (North Tyneside) (Lab)
My hon. Friend makes a good argument. How much more does the increase in VAT affect people on low pay than the very rich? An average family loses £1,350 a year because of the increase in VAT. How can they be helped by the Government’s measures given all the other cuts they have imposed?
Sheila Gilmore
VAT, like a lot of indirect taxation, is extremely regressive. Before 2010, the hon. Member for Redcar (Ian Swales) campaigned vigorously against an increase in VAT, calling it a tax bombshell. He thought that at one point and might continue to think it.
Those policies have an impact, one on the other. Tax is not isolated from spend. As I said at the beginning of my speech, in decisions on dealing with the deficit, we must look at both. The balance we strike is extremely important. Increasingly, the burden is falling on spending cuts, which include cuts on various benefits and tax credits. The cuts to local authorities have been extremely important for many people who rely on the services that councils provide. They have found either that services are withdrawn or that the charges levied for them—for example, charges for social care, whether for people at home or in residential care are rising—are a big burden, as they are for a lot of families. We cannot look at those things in isolation. The Opposition have made proposals, as the hon. Gentleman knows, but at this stage, new clause 4 proposes having a proper look at the 50p tax rate. Labour has made its position clear: we would reinstate the 50p rate.
The Temporary Chair (Katy Clark)
Order. I remind hon. Members that we are debating a possible 50p income tax rate. Could they try to focus their arguments and interventions on that?
Sammy Wilson (East Antrim) (DUP)
I will do my best to abide by your ruling, Ms Clark—you probably want me to do more than my best.
Reference has been made to the fact that an historic event is taking place elsewhere in Parliament. I am sure that my colleagues will represent the Democratic Unionist party very well, but I have to attend this important debate. As a Unionist, I would have loved to see the President of the Irish Republic giving a speech to both Houses of Parliament with King Billy looking over his shoulder—I understand that King Billy is somewhere behind him while he gives his speech. Even better, tomorrow a republican will sit down to dinner with the Queen.
Things have changed in Northern Ireland, but the debate on the 50p rate has not changed. It is again a political football between Labour and the Conservatives. I want to make something clear at the outset. I do not wish to engage in a debate with some kind of class motive, or from the point of view of bashing the rich by imposing taxation on them. My party and I believe in lower taxation. Our record in Northern Ireland, where we have very limited power over taxes, has been one of keeping tax low. My basic philosophy, which may differ from that of some on the Opposition Benches, is that we should allow people to keep as much of their income as possible and to spend it as they see fit. That is the first point I want to make.
Huw Irranca-Davies
I apologise for having left the Chamber. I had to address some young constituents.
The hon. Gentleman has made a number of good points. May I now ask him a question that I asked earlier? Why is there such a disconnect in the moral compass of the super-wealthy that they feel they would rather flee the country than pay a couple of extra pennies in income tax? Why do they imagine that they live in a different world, and that they do not need to sustain the public services on which everyone else relies?
Sammy Wilson
That is a very good question, but the fact is that we do not even know whether that is the way in which people behave. As has already been pointed out, many of those who pay the top rates of tax are employees, and many have their roots here. Their children are at schools here, they are involved in their communities here, and they have their families—their grannies, their mummies, their uncles and so forth. The assumption that people will suddenly cut all those ties when the marginal rate of tax is raised is extremely tenuous. I have not so far seen any figures that suggest that that happens. I can understand that if the marginal rate were raised from 45% to 90%, there might well be some incentive for people to leave, but when it is raised by only a few percentage points, is there really an incentive for people to avoid taxation by becoming exiles, given all the disruption that that may cause?
Ministers frequently refer to tax take predictions based on economic models, but it should be borne in mind that such predictions cannot specify the exact impact of tax changes with rapier-like incision. Their other argument is that, if the theory and the models cannot provide an exact picture, we should look at what has happened to tax revenue in practice over the past few years, because the proof of the pudding is in the eating. No doubt the Minister will give figures showing an increase in tax revenue from this particular income group, in which case we must ask whether it is possible to separate the various elements that have led to that increase.
I believe that the Government made a rather cynical attempt to ensure that they would achieve the result that they wanted by announcing the tax reduction a year in advance, knowing that that would give people an opportunity to defer the tax that they pay, thus enabling the Government to point to an increase in tax revenue in the first year of the new rate. Of course, if people are given advance notification and a chance to delay their payments, we will see the predicted outcome. I suppose it would be best to see whether the trend continues over a longer period, because we do not have any figures yet.
We know that while the incomes of certain groups have been frozen, incomes have been much more fluid at the top end of the income scale than at the bottom end, where there has been a blanket 1% increase. Indeed, there have been wage decreases in some parts of the private sector, especially at the lower end of the scale. How much of the increase is attributable to the fact not that there is more tax take from the same level of income, but that there is more tax take from increased incomes because there has been greater fluidity at that end of the income scale? Even after consideration, it cannot be said with absolute certainty that the reduction in the level of income tax has led to the increase in revenue.
The Temporary Chair (Katy Clark)
Order. I remind the hon. Gentleman that we are debating the 50p tax rate. A number of Members still wish to speak so perhaps he would address himself to the amendment before us.
Sammy Wilson
The point I was trying to make, perhaps at too great a length, was that the important thing was the headline rate when people were looking at places to locate their businesses. It is the same with income tax. While there may have been other tax changes that have affected the rich, when people make a judgment on the Government’s sincerity about austerity, they will look at the headline rate, and what they see when they look at the headline rate for those on middle incomes, for those on lower incomes—not in terms of the headline rate of income tax, but in terms of what has happened to their income—and for the most well-off in society is that there is a disparity, and that breeds cynicism. I believe an amendment such as this one will at least help to restore some confidence that when this House looks at what lies ahead, it is genuinely trying to make sure the burden is shared equally.
Huw Irranca-Davies
I apologise to the Committee for being absent earlier; I was with a group of young people from my constituency who are interested in politics and in what is being debated in the Chamber today. I am glad to have a few minutes now to say a few words.
The new clause and the amendment are innocuous and harmless proposals. They simply ask the Government to be transparent and to produce a review within a few months to show the effect of a 50p tax rate on those whose taxable income is between £150,000 and £1 million a year. I have struggled to find many such people in my constituency. I have tweeted about this on social media, asking people whether they think our amendment would be a bad idea, but, unsurprisingly, no one has come forward to say that they earn that much.
It is in the Government’s interest, as well as ours, to have this transparency. It is also in all our interests to tell people that we get the message about proportionality and contributing to public services. There is an emerging trend among the Conservatives to describe themselves as being the party of the working class and of working families. If that is the case they should support our proposals, because they would create full transparency and allow a debate to take place on whether we should set a tax rate of 50%, 49% or whatever. The proposals would also allow them to explain to working people—not the ones who earn between £150,000 and £1 million a year, but those who earn about £20,998, the median wage in Ogmore Vale—and to Conservative supporters why they think it is not a good idea to say to people, “Pay your share. We are genuinely all in this together.”
The hon. Members for Carmarthen East and Dinefwr (Jonathan Edwards) and for East Antrim (Sammy Wilson) have made good contributions to the debate, and I made a couple of mischievous interventions on them earlier. I have faith in the wealthy and the super-wealthy in this country. We will not have many Gérard Depardieus fleeing the country and heading off to Russia, or wherever the British, Welsh or Scottish equivalent might be. They will say, “We have respect for the communities that we work and employ people in, and it will not bankrupt us to stay here. We are not going to flee overnight to another country like some carpetbagger. We are not going to up sticks and relocate our premises.” That is not going to happen; it did not happen before, even when taxes were at much higher levels. It is a discredit to those people to suggest that it would happen.
In preparation for the debate, I looked into a few examples of people who had said that a return to the 50p tax rate would be a disaster. I was about to say that it would be wrong to name them, but one of them, the chief executive of Kingfisher, has been very outspoken in saying what a terrible detrimental effect such a measure would have. He has said that it would be a disaster for the country, and that entrepreneurs and businesses would flee. Well, okay, it might be just a coincidence that Ian Cheshire is an adviser to the Prime Minister as well as being the chief executive of Kingfisher. It might also be just a coincidence that he was knighted in the new year’s honours list. I am sure that that is pure coincidence. However, he clearly has a direct influence on the Government. When he says, “This is not good”, things happen. It is not only him, however.
It was fascinating to note the reaction of one other person, when this debate was raging about 18 months ago. I will not name this individual, but people can look him up in the Daily Mail. It is pretty obvious who I am talking about. He had said that he objected to a 50p tax rate on the basis that people like him would no longer be inspired to go out and earn money. He was reported in the Daily Mail as being about to sell his £3 million mock-Tudor home. He was explaining that he was now in a great place but when he had previously had trouble expanding the property, he had solved the problem by snapping up the property of his next-door neighbour. This was in an area inhabited by rock stars, football players and other highly paid celebrities. He had snapped up the house next door so that he could put in a swimming pool, a games room and a garage block for his Bentleys. We do not have many garage blocks in Ogmore. The properties were in a patrolled, gated community with private security.
My constituents who are on less than £21,000 a year think that that is another world. They think, “Why doesn’t that guy think he should be paying a couple of pennies more to keep the national health service going, because I can’t afford to have private health care or to send my children off to private school? I need what the state provides.” I know that this is like an old comedy sketch—“I look up to him because he is better than me.” But, that is not the case. The person I am talking about was one of those hardworking Tory supporters who some Government Members would like to appeal to now as the working Tory voter. Let us have a reality check. To those who say, “We feel really unhappy about this change, and it will drive us off”, I say, “Go.” They should subscribe to the values and ethos of this country—from each according to his ability to each according to his need. If they do not, they are not living in the country in which I was brought up. They should think twice about saying that they will go. Most people will sensibly recognise the skills and the quality of the work force, the good environment here for building up companies and our position in the European Union, and they will stay in the country and continue to work. All this amendment asks is that at a certain point in time, not too long in the future, we should be told what the impact is on those who are earning £150,000 or £1 million. Be transparent and tell us.
Ian Swales
I represent a constituency with similar income levels to that of the hon. Gentleman. However, does he regret the fact that a senior member of the Government he was in described himself as being “intensely relaxed” about the situation that he has just described?
Huw Irranca-Davies
I would never use that same phrase. I do not find myself intensely relaxed about this. Sorry, what I mean is that someone playing for the Ospreys rugby team might not earn as much as a premiership footballer, but good luck to them. Let them make a lot of money. Let them do well for their families. Let someone travel to France and play for Perpignan and earn four times the money. Good luck to them, but I want them paying their taxes. When they are back here, I want them to contribute the right amount. I want to encourage the people in my constituency, and say, “If you have the abilities and the skills, and if you are willing to put in the effort, don’t accept that job that you are doing now. Work your way up and do what you can do. The sky is your limit.” But I want them also to contribute. I do not want this ludicrous situation in which people can say, “I tell you what, at a certain point I will leave the country.” I do not believe that they will leave the country. It will not happen. I have much more faith in them than that.
One of the major hedge fund operators, again a Conservative donor, told the Financial Times:
“There probably aren’t many votes in cutting the 50p top rate of tax, but among those that give significant amounts to the party, it’s a big issue, and that’s probably why it’s a big issue for the party too.”
Four months after he said that to the Financial Times, the Budget happened and we had the cut in the tax rate. It is probably just a coincidence again.
Let us look at the impact of this policy and the Government’s current policies on the wider population—beyond the wealthy and the super-wealthy. The Institute for Fiscal Studies’ figures on net income changes by 2014-15 show that overall, households are £974 worse off; a working lone parent is £1,335 worse off; a working couple with no children is £438 worse off; a working couple with children is £2,073 worse off. What about the millionaires? They get this enormous tax cut so that they can go out and buy a couple more Porsches. The Minister might say, “No, it is so that they can reinvest it in this, that and the other.” What about reinvesting in public services? Why does the Minister think that they want to escape from that obligation that we all have to each other to contribute? It may be 47p, 48p or 49p, but there is a message—there is clarity—about us all being in it together that comes with saying that it is 50p. If that 2p seriously makes a wealthy individual say, “We are leaving this country because it is a disgrace that any Government should come after me”, I would say that it is a disgrace that they are even thinking in that way. I have more faith in those people who have made wealth in this country. I believe that they will want to stay here and genuinely help us climb out of this economic morass. They will want to build jobs, grow the economy, skill the economy and lift up the wages of some of my constituents.
Shabana Mahmood
I rise to support amendment 4, which stands in my name and those of my right hon. and hon. Friends. Our amendment seeks to require the Chancellor to publish a report on the impact of setting the additional rate—the top rate—of income tax at 50%, but unlike new clause 4, our amendment requires that the report must also estimate the impact of the top rate in 2014-15 if it is set at 45% and at 50% on the amount of income tax currently paid by someone with a taxable income of £150,000 a year and of £1 million a year. Our amendment therefore seeks to prescribe somewhat more than new clause 4 what the report that must be prepared by the Chancellor of the Exchequer should include. We intend to press our amendment to a vote at the end of the debate.
The Labour Government introduced the 50p rate, which came into effect in 2010-11. We have had a number of debates on the top rate of tax ever since, particularly since this Chancellor’s decision to reduce the top rate from 50p to 45p. That decision is an important indicator of both the Chancellor’s and his Government’s priorities. While ordinary people have been struggling with the cost of living crisis—based just on a measure of wages, they are £1,600 a year worse off, or, taking into account tax and benefits changes, they are £974 a year worse off—the Chancellor has seen fit to give a tax cut worth an average £100,000 to millionaires in our country.
When the Government came to power, they did not say anything in the coalition agreement about abolishing the 50p rate. In 2011, the Chancellor said that he was going to ask HMRC to look at the yields from the 50p rate. In 2012, with HMRC’s report, “The Exchequer effect of the 50% additional rate of income tax”, to back him up, he abolished the rate. The Chancellor knew that he needed cover for that deeply ideological decision and so was desperate, in my view, to claim that the 50p rate raised as little money as possible. Of course, if he could say that, he could justify with more of a straight face giving a tax cut to the richest in our country at the same time as knowing that on his watch ordinary people, those on middle and low incomes, have paid the price for his economic plan, which is failing on the terms he set himself when he came to power in 2010. This was a highly political decision driven by a desire to give a tax cut to the richest people in our country.
Reports at the time suggested that the Chancellor wanted to go further and cut the top rate back down to 40p, but was blocked from doing so by his coalition colleagues. As a compromise, 45p was settled on. Of course, we know that the Conservative party is chomping at the bit to see the rate lowered from 45p to 40p and it is a shame that the right hon. Member for Wokingham (Mr Redwood) has not been in the Chamber for this part of the debate, although we did cover some of his views in this regard in the earlier debate on corporation tax and business rates. As a result of his comments and use of figures, we have in the past week seen efforts to try to bolster the case for reducing the rate back to 40p. I note that the Government have not explicitly ruled out such a change.
We know from the Government’s own assessment that the cost of cutting the rate from 50p to 45p was more than £3 billion, excluding all behavioural changes. Given that the sum is so large, how does one justify the tax cut? The Government say that most of that potential £3 billion revenue would effectively be lost as a result of tax avoidance. Once they have assessed revenue lost as a result of tax avoidance and other behavioural change, the Government go on to say that the cost to the Exchequer is only £100 million. That implies that this is a neat and exact science, but nothing could be further from the truth.
Kelvin Hopkins
I think that my hon. Friend is suggesting that the Government have been soft on tax avoidance and tax evasion simply to make their figures work.
Shabana Mahmood
I will come on to the point about tax avoidance. One option open to the Government to protect revenue from the 50p rate was to do more on tax avoidance. This is a Government who like to trumpet their record on tax avoidance, but they certainly ducked the opportunity when it came to dealing with potential avoidance in relation to the 50p rate.
Shabana Mahmood
I will not, because of a lack of time.
The HMRC report says that all the analysis and estimation is highly uncertain, as does the Institute for Fiscal Studies. The scale of behavioural change is ultimately decided by Ministers, and it is primarily based on an assessment of taxable income elasticity—TIE. The IFS says that there is a huge margin for error. Staying within that margin, one could easily say that, depending on the TIE, cutting the rate could cost £700 million or could raise £600 million. That gives us an idea of the range of figures that we are talking about and how uncertain the projections are.
It might have fitted the Government narrative for them to imply that they knew for certain that the 50p rate would raise only £100 million, but even on their figures and HMRC’s report, there is a huge margin for error and this is all very uncertain. That is not the only thing that was wrong with the analysis. The HMRC report was based on only one year’s worth of data—the data related to 2010-11—which is a weakness in itself. It came too early. Given the history of the introduction of the rate and the Government’s decision to cut it, the reliance on year one is a further weakness in the Government’s argument, because we know that incomes were taken earlier to avoid the 50p rate and as a result incomes in 2010 and 2011 were artificially lower, suggesting a lower yield. Hence our request for a review.
The original HMRC analysis does not give a true picture, was done too soon after the rate had been introduced and was based on only one year’s worth of data. Income figures for that year were lower than otherwise might have been the case because people brought their income forward to 2009-10 before the rate came into effect. No one has redone the analysis so we are still going on the figures from the 2012 Budget. The Government should, at the very least, update the analysis based on the more recent data and prepare the report that our amendment and new clause 4 call for. A comparison of 45p and 50p rates for those on incomes over £150,000 and £1 million would be instructive to the public debate about the top rate, especially as some Members on the Government Back Benches want to reduce the rate to 40p.
Mr Gauke
The hon. Lady is generous in giving way. When her party announced that it would reintroduce the 50p rate in the next Parliament, she wrote in the New Statesman:
“latest figures from the HMRC show that people earning more than £150,000 a year paid almost £10 billion more in tax”
than was taken into account in the assessment that HMRC made. Is she happy to put on record the fact that the HMRC assessment took into account the numbers that she was talking about, and that the claims that she and her colleagues made at the time of the announcement of the 50p policy were in fact wrong about that?
Shabana Mahmood
Our analysis was based on projections that were available to us at that time, and on those projections that analysis was correct. The truth is that everyone accepts that all analysis in relation to the 50p rate—HMRC’s analysis and everyone else’s—is uncertain because we did not have the rate in place for long enough to make a full and thorough assessment. Now HMRC has available to it records for the following two years when the 50p rate was in place and it could update the report that was used for Budget 2012. That would give a much clearer picture to all of us who are relying on other figures and forecasts.
Just as people shifted income into 2009 and 2010 to avoid the 50p rate when it was introduced, once the Chancellor had said in his 2012 Budget that he would abolish it the following year in 2013, unsurprisingly people effectively decided to delay their bonuses and income until the new tax year 2013-14 began so that they could avoid paying 50p and pay 45p instead. That is what accounts for the revenue from 45p being higher, which in our earlier debates Government Members sought to rely on in support of cutting the rate further to 40p. The Government clearly reward tax avoidance at 50p with a tax cut to 45p, and their Back Benchers are now calling for 40p on the basis of revenue that they know is inflated owing to income shifting, which may well have cost the Treasury millions in lost revenue—warped priorities if ever there was a case of them.
The Chancellor is on record as saying that he considers tax avoidance to be “morally repugnant”, but as I have just said, he has rewarded a particular form of tax avoidance with a tax cut. I wonder if that has ever happened for people on middle and lower incomes. I think not. This is a Government who always tell us how proud they are of their record on tax avoidance, but I wonder how much effort they put into thinking of ways in which they could protect revenue from the 50p rate. The Government have introduced the general anti-abuse rule, the GAAR, which may have helped. They could have thought about a targeted rule. They could have looked to HMRC to do more. I understand that no specific measures are taken within HMRC to protect revenue from the 50p rate. Before rushing to abolish the rate, the Government could and should have looked at protecting revenue first. The truth is that there was no justification for giving a huge tax cut to the richest in our country. Bonuses, we now know, are up by 83% for those in the financial sector, while ordinary people are worse off now and will be worse off in 2015 compared with 2012. That certainly makes a mockery of the now not very often repeated phrase, “We are all in it together.”
I think the Government have been hoping that if they keep going on about the increase in the personal allowance, people will forget that they have made a political decision, a political choice and a political priority to cut taxes for the richest in our country. The truth is that the Government have given with one hand and taken away much more with the other. As I said, if one looks at wages, ordinary people are £1,600 a year worse off, and the combined effect of tax and benefit changes means that households will, on average, be £970 a year worse off.
This cut to the 50p rate cannot be justified at a time when the deficit is high and will not be eliminated towards the end of the next Parliament. Labour in government will increase the rate back to 50p to help us to get the deficit down in a fairer way. Just as we have said that we want the OBR to have powers to audit manifestos ahead of the next general election, because we believe that scrutiny will add to public understanding about the choices that are being made, so too we think that a review as envisaged in our amendment would help the public to understand the impact of the top rate of tax so that they can make up their own minds about who is standing up for them and other working people like them. Therefore, we will press amendment 4 to a vote.
Mr Gauke
It is a great pleasure, Mr Amess, to serve under your chairmanship. Before I deal with our annual debate at this stage in the Finance Bill on the 50p rate, I want to say a word or two about clause 1, which is included within the group, which ensures that income tax will be collected in 2014-15. Income tax is the Government’s biggest revenue source and the annual charge legislated in the Finance Bill is essential for its continued collection. There will be around 30 million income tax payers in the UK in 2014-15, and clause 1 states that these taxpayers will pay income tax this year at the same rates as in 2013-14. The basic and higher tax rates remain at 20% and 40% respectively, and the additional rate is 45%.
Clause 1 also means that the Government are meeting their commitment of raising the personal allowance to £10,000 one year ahead of schedule. The increase of the personal allowance to £10,000 reduces the income tax bills of another 255,000 low earners to zero and gives 25 million taxpayers an average gain of £50 in real terms. In other words, increasing the personal allowance by £560 will put an extra £112 of cash in the pockets of typical basic rate taxpayers in 2014-15.
Allow me to explain how these changes will help the Government to meet their objectives. When this Government came to office, the personal allowance was only £6,475. In 2010, everyone, including those working on the national minimum wage, had to pay income tax at the basic rate on incomes above this low threshold. Let me give an example of what this meant in practice. Someone working full-time on the October 2010 national minimum wage would have had to pay over £860 in income tax in 2010-11 alone. Thanks to this Government’s increases to the personal allowance, this year someone working full-time on the higher October 2014 national minimum wage will pay nearly £500 less than that.
Kelvin Hopkins
Ministers have talked a lot about low incomes, and that is all very well, but is not the reality that the better off people are and the higher the rate of tax they are on, the more they benefit, so in fact higher-rate taxpayers benefit more than lower-rate taxpayers?
Mr Gauke
That is not correct, because of the way we have done this. I will not spend a lot of time on the matter, but I can tell the hon. Gentleman that in preparation for this speech I have seen various responses from those raising concerns about higher-rate taxpayers not benefiting from the increases in the personal allowance in the way that basic-rate taxpayers have. Indeed, those earning more than £100,000 a year do not benefit from increases in the personal allowance because it starts to be taken away.
The reality is that basic-rate taxpayers have benefited most from the measures that we have taken in increasing the personal allowance. More than 26 million taxpayers will be up to £570 better off in real terms in 2015-16 as a result of this Government’s changes. In 2014-15, basic-rate taxpayers already pay up to £700 less income tax than they would have done four years ago. By 2015-16, the Government will have cut their income tax bills by over £800 per year. Together, all the personal allowance increases since 2010 mean that this Government have cut the number of income tax payers more in five years than any Government in a similar period since records began.
Huw Irranca-Davies
Will the Minister correct what may be a misunderstanding? Is it correct that 13,000 people who earned more than £1 million a year would have benefited to the tune of £100,000, on average, from the reduction in the top rate of tax?
Mr Gauke
Amendment 4 and new clause 4, tabled by Opposition parties, deal with familiar matters that we debate every year. They propose, once again, that within three months of passing the Finance Act, the Chancellor should publish a report reviewing the impact of setting the additional rate at 50%. In addition, amendment 4 asks for an assessment of the impact of setting the additional rate for 2014-15 at 45% and at 50% on the amount of income tax currently paid by those with taxable incomes of over £150,000 and over £1 million per year. Needless to say, such an analysis, in order to be credible, would need to take behavioural impacts into account, as did the HMRC report on the additional rate published at Budget 2012. When increasing taxes, it is not enough merely to look at theoretical income tax liabilities. Let me assure hon. Members, once more, that this Government already consider the impact of any policy decisions taken. The HMRC report on the additional rate concluded that the underlying yield from the introduction of the 50p rate was much lower than originally forecast due to large behavioural effects. It even said that it is possible that the 50p rate could have reduced income tax revenue instead of increasing it. It would be illogical and unfair to reintroduce a tax rate that is ineffective at raising revenue from high earners and that would end up making ordinary taxpayers pay more and risk damaging growth.
Huw Irranca-Davies
I genuinely thank the Minister for trying to explain that to me, but he has just described the top-end tax cut as a theoretical tax cut when my understanding is that it is a very real tax cut whereby 13,000 people who are millionaires or richer have each saved more than £100,000 per year. At this very moment, my constituency is digging deep as a result of cuts to school transport. Will the Minister confirm that the tax cut is not theoretical, but real, and that 13,000 people who are millionaires or richer have each saved to the tune of £100,000 as a result of it, when the median wage in my constituency is sub-£21,000?
Mr Gauke
Let me see if I can find a point of consensus with the hon. Gentleman. We want—and I suspect he wants—to ensure that the wealthiest make a fair contribution towards reducing the deficit, and the challenge for any Government is to work out the best way of doing that. Let us look at this Government’s record on raising money from the wealthiest. Budget 2010 increased the higher rate of capital gains tax and Budget 2011 tackled avoidance through disguised remuneration—a policy that was opposed by the Labour party, even though it addressed avoidance by high earners. Budget 2012 raised stamp duty on high-value homes and autumn statement 2012 took action to reduce the cost of pensions tax relief, while Budget 2013 and autumn statement 2013 announced further measures to tackle offshore evasion by high earners. In 2013-14, the richest 1% of taxpayers contributed a larger share of income tax receipts than in any other year, including every year under the Labour Government.
The point is how we raise money from the wealthiest. The 50p rate is not the most effective way of doing that, because the behavioural effects are so strong that it fails to raise money. Now that growth is finally picking up, the Government will not consider any actions that might put the UK’s recovery at risk. Despite reducing the additional rate, the richest now pay more income tax than they did in any year under Labour.
Chris Leslie (Nottingham East) (Lab/Co-op)
The Minister was generously trying to find a point of consensus and I want to build on that, following the question asked by my hon. Friend the Member for Ogmore (Huw Irranca-Davies). The Minister talked about what might be raised by closing avoidance loopholes for the very richest, but what about the 13,000 honest millionaires who my hon. Friend says have benefited from a tax cut of £100,000 each? Will the Minister address that specific point and confirm that those honest millionaires—this is not about avoidance and loopholes—will each benefit from a tax cut of £100,000?
Mr Gauke
I suppose we are talking about the people who for almost the entire time the Labour party was in power were paying a lower rate of income tax, a lower rate of capital gains tax and a lower rate of stamp duty. I hear the Labour party’s position. [Interruption.] If we are trying to build consensus, let us look at what some Labour politicians have said. The noble Lord Myners, a former Treasury Minister, has said:
“The economic logic behind Ed Balls’s thinking would not get him a pass at GCSE economics,”
and that
“Ed Balls takes us back to old Labour and the politics of envy.”
Lord Jones, the former trade Minister in a Labour Government, described the policy as “lousy economics”.
Huw Irranca-Davies
The hon. Gentleman gives us examples of people arguing that the policy is economically illiterate, but we are politicians, not economists. I will try to reach consensus with him by saying, although perhaps I should not, that the policy is in his party’s interests. The biggest segment of those who donate to the Conservative party—providing more than half its donations—are from financial services. To say to them, “We are all in it together. You will have to accept a little bit more pain”, would be a good political signal, let alone an economic one.
Mr Gauke
I am always grateful to the hon. Gentleman for his political advice. I cannot but notice that he talked about wanting to uphold the values of the British people and then quoted Karl Marx—but there we go. My point is that the wealthiest are making a bigger contribution in income tax, capital gains tax and stamp duty, and that this Government are taking further action to deal with avoidance and evasion more effectively than any previous Government have done.
Ian Swales
It is not for me to disagree with the mathematics of the hon. Member for Ogmore (Huw Irranca-Davies), but assuming that he is right, does his point not prove that 13,000 people were paying £100,000 less tax in the year up to April 2010?
Mr Gauke
I suspect that my hon. Friend may well be right, so I am grateful to him on that point.
Clause 1 will help the Government to achieve our aim of a tax system that is fair for everyone, while rewarding those who want to work hard and progress. We will achieve those goals by cutting income tax for the vast majority of income tax payers, including those in greatest need of support, while making sure that the tax system remains easy to understand. I again stress that the reports proposed in amendment 4 and new clause 4 are entirely unnecessary. The impact of reducing the additional rate of income tax has been examined in great detail. The 50p rate was ineffective and meant risking the recovery for which everyone in this country is working hard. I therefore commend clause 1 and urge the House to reject the amendment and the new clause.
Jonathan Edwards
We have had a very interesting debate. We heard excellent speeches from the hon. Members for Redcar (Ian Swales), for Edinburgh East (Sheila Gilmore) and for Ogmore (Huw Irranca-Davies), and my good friend the hon. Member for East Antrim (Sammy Wilson), as well as from both Front Benchers.
My new clause 4 is rather harmless, if I may say so. It calls for a review that might make the case for the Government’s policy—they might want the evidence to back it up—or the case for my party’s policy of a 50p top rate. With all three Westminster parties signed up to continuing austerity, whoever wins the next Westminster election, we need transparency to ensure that the wider public are confident that everybody is paying their fair share. I regret that because the Government have not accepted my new clause, I will have to divide the House.
Question put, That the clause be read a Second time.
The Temporary Chair (Mr David Amess)
I have to report to the Committee that the tellers for the Noes in the Division on amendment 2 have reported to the Chair that they wrongly reported the number as 289 and not 288. I will call for the record to be corrected accordingly, showing 288 Noes.
New Clause 1
Childcare provision
‘(1) The Chancellor of the Exchequer must undertake a review of ways in which changes to the tax and childcare systems could be used to increase the affordability of childcare before April 2015, with particular reference to—
(a) the cost of childcare for parents in work; and
(b) the cost of childcare, including the impact of changes in the tax and benefits system during this Parliament.
The Chancellor must publish the report of the review within six months of the passing of this Act and lay the report before the House.’.—(Catherine McKinnell.)
Brought up, and read the First time.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
I beg to move, That the clause be now read a Second time.
It is a pleasure to serve under your chairmanship, Mr Amess. New clause 1 draws attention to the rising costs of child care for working parents since 2010, and seeks to commit the Government to addressing their failure in that regard. It also seeks to establish ways in which the tax and benefit systems could be used to make child care more affordable before April 2015, so that hard-working families experiencing a cost of living crisis can have the help that they need now, especially in the light of the challenges that they face as a result of changes made by this coalition Government.
The new clause gives us a welcome opportunity to explore one of the most pressing issues that face millions of parents throughout the country, and to address the fact that millions of families are facing a child care crunch. It is important to set the issue in context by revealing just what has happened to child care costs on this Government’s watch. The average bill for a part-time nursery place providing 25 hours a week has risen to £107, the highest level in history. The cost of nursery places has risen by 30% since 2010, five times faster than pay, and the average weekly cost of a full-time place has risen to £200 or more. That means that parents working part time on average wages would have to work from Monday until Thursday before they had even paid their weekly child care costs.
Mr David Burrowes (Enfield, Southgate) (Con)
The hon. Lady has given statistics showing what has happened since 2010. Did child care costs increase before 2010, and if so, what did the last Government do about it?
Catherine McKinnell
The point of putting the issue in context is that the rise in child care costs since 2010 is astonishing, and has made child care unaffordable for many parents. I shall say more later about the number of parents, particularly mums, who feel that the cost of child care prohibits them from going to work. I think that rather than questioning the statistics, Government Members should get real and do something about that. Waiting until 2015 to make a promise for tomorrow is just not good enough, which is why we tabled our new clause.
According to alarming new research from the Family and Childcare Trust, families are paying more on average for part-time child care than they are spending on their mortgages. They are handing over a staggering £7,500 a year or more for child care for two children, which is about 4.7% more than the average mortgage bill. Rising prices have been matched by the fall in the number of child care places. The number of places provided by nurseries and childminders has fallen by more than 35,000 since 2010, at a time when the number of four-year-olds has actually increased. Most worrying of all, there are 576 fewer Sure Start children’s centres than there were in 2010, which means that an average of three are being lost each week. At least, that was what we were seeing before the Government took their database down.
Andrea Leadsom (South Northamptonshire) (Con)
The point about children’s centres is really important. Many of those centres have simply reorganised the way in which they work, and now have operational entities in different places and a single administrative centre. That is why the headline figure suggests that children’s centres are closing. In fact, very few have closed, and those closures have been due to rationalisation rather than cuts. I find it very upsetting that Labour Members insist on making an assertion that is not correct.
Catherine McKinnell
The figure that I gave is correct. It is from the Government’s own database, before they took it down. Goodness knows what the number is now, but we know from our local communities that even the Sure Starts that remain open are offering reduced services, and that a huge number of Sure Starts are under threat as local authorities struggle to meet their current budget requirements.
Barbara Keeley (Worsley and Eccles South) (Lab)
Government Members might like to know that Salford city council, owing to the budget cuts amounting to £100 million that have been forced on it, will have to cut eight Sure Start centres this year, leaving us with only four. Government Members must stop being in denial about this issue.
Catherine McKinnell
Yes, I agree that it is important that Government Members stop being in denial, because it will be a dreadful indictment of their being out of touch with reality if they fail to address this issue and instead stand by and watch our network of Sure Start centres disappear.
Jim Shannon (Strangford) (DUP)
Does the hon. Lady agree that for many people with children if they did not have their grandparents or their aunties, the cost of child care would be too great for them to return to work? Does she feel that while the Government have made some concessions on child care, they have not given enough of an incentive for those people not to need to depend on their grandparents and aunts in order to be able to continue to work?
Catherine McKinnell
The hon. Gentleman raises an important point. There is a heroic army of grandparents out there providing that much-needed support within families to ensure that those really struggling with the cost of living crisis can still be in work, but unfortunately some people do not have that luxury. There are an awful lot of people who cannot rely on that support and who find the current cost of child care too prohibitive to go to work or find that, despite working all hours, they cannot put food on the table.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
While it is right to recognise that families will decide on the best ways of making arrangements and that grandparents and other family carers have an important role, do not children from the most disadvantaged backgrounds benefit the most from having access to formal child care, whether in a nursery or with a childminder? That gives them the best start in life and we need to do more to target families from the most disadvantaged backgrounds so that they can access child care.
Catherine McKinnell
My hon. Friend raises an important point. There is a multitude of reasons why we should support parents and enable those who want to work to do so, one of which is the benefits for children of being in that child care setting. That is why Labour has made one of our key pledges—and we call on the Government to take it up in this Budget—to extend the free child care that is available for three to four-year-olds. We call on the Government not to wait until 2015, but to do it now and to pay for it through the increase in the bank levy that we have suggested and which the Government should take up—or at least they should certainly undertake the review we are calling for today to look at the viability of that in this year’s Budget.
Andrea Leadsom
Does the hon. Lady genuinely think it is realistic and practical to implement that policy right now bearing in mind that the Government are already rolling out their offer for two-year-olds and nurseries are already under pressure from the implications of the influx of two-year-olds?
Catherine McKinnell
The amendment is perfectly reasonable. I know the hon. Lady cares about this issue and I am sure she would want to see her Government doing everything they can to provide support and to help parents up and down the country who we know are struggling with this important issue. That is why the amendment we have tabled today calls on the Government to
“undertake a review of ways in which changes to the tax and childcare systems could be used to increase the affordability of childcare before April 2015”.
It is a perfectly reasonable amendment and I see no reason why Members on both sides of this House would not support it if it could bring about the changes that parents need today, not in 2015.
Returning to the issue of maternal employment rates, for mothers whose youngest child is aged between three and five that rate is currently 64% across the developed world, yet the rate in Britain is six percentage points lower at 58%, which is the equivalent of about 150,000 mothers not being employed. The rate in Sweden is 80%.
As the interventions today have demonstrated, it seems that Government Members prefer to gloss over the uncomfortable facts and figures that do not fit with their messages when they boast about the record numbers of people in employment, much as they do when they ignore the fact that almost 1 million 16 to 24-year-olds are out of work, a quarter of them for 12 months or more.
The child care crunch, like youth unemployment, is bad not only for families but for the country and the economy. Parents who want to work should be able, and supported, to do so. There have been consultations and numerous announcements—and, indeed, re-announcements —about the Government’s new flagship child care scheme, but we see absolutely nothing in the Finance Bill that will address the spiralling costs that families face now, rather than in 18 months’ time.
Lorely Burt (Solihull) (LD)
Does the hon. Lady acknowledge that the Government announced in the Budget that the tax-free child care cost cap will be raised to £10,000, which will be worth up to £2,000 per child? I know that 6,000 families in Solihull will be grateful for that.
Catherine McKinnell
I appreciate the hon. Lady’s point, but that help for families will not arrive until 2015 and beyond, after the next election. Many families could do with some support over the next 18 months, not just beyond 2015. There are also serious concerns about whether parents will actually be better off when the Government’s policy is introduced. I will say more about that later.
I shall turn now to the second part of new clause 1, which focuses on the impact of the tax and benefit changes introduced in this Parliament. Just last week, the Opposition published an analysis of figures produced by the independent Institute for Fiscal Studies, along with analysis by the House of Commons Library, which showed that working families with children, and one-earner families in particular, had been the hardest hit by the changes introduced since 2010. Those changes, which were voted through by Government Members, mean that on average, households will be a staggering £974 a year worse off by the next general election. It is worth listing what those tax and benefit changes will mean for families with children. The constituents of Government Members will no doubt be paying close attention to their household budgets when it comes to casting their vote in May 2015.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
Will the hon. Lady tell us whether that analysis includes fuel duty? Does she agree that if this Government had kept the Labour fuel duty escalator going, petrol would cost 90p a gallon more today, the equivalent of £450 a year for the average family?
Catherine McKinnell
On average, by the time of the next general election, a family in which both parents are working will be £2,073 a year worse off. A family in which one parent works will be a staggering £3,720 a year worse off, and a family in which no parents work will be £2,114 a year worse off. A lone parent in work will be £1,335 a year worse off, and a lone parent who is not working will be £1,901 a year worse off. These changes are in addition to the impact of wages falling in real terms, which has left working people an average of £1,600 a year worse off since 2010. Households have faced 24 Tory tax rises over the same period. However, while millions of families have seen their real household incomes go down since 2010, millionaires have been given a huge tax cut by this Government. The top 1% of earners—85% of whom just happen to be men, by the way—have been given a £3 billion tax cut worth an average of £100,000 for those earning more than £1 million a year.
Catherine McKinnell
I will give way to the hon. Lady, who I am sure is as disappointed as I am by that policy.
Andrea Leadsom
Will the hon. Lady confirm what the top rate of tax was during the last 10 years of the Labour Government? Will she also confirm that it changed only a couple of days before the last general election?
Catherine McKinnell
The hon. Lady is well aware that we have a budget deficit that needs to be addressed. This Government promised to balance the books by 2015, but look set to be way off that target. Of course the increase to the 50p rate was part of a balanced deficit reduction programme that Labour would have put in place. Instead, this Government came in and made cuts that slowed growth and resulted in three years of a flatlining economy. The only people who seem to have benefited are the top-rate earners who have been given a tax cut by this Government.
Going back to the subject under debate, the same tax cut came from a Conservative-led Government who, in their 2010 manifesto, promised to make Britain
“the most family-friendly country in Europe.”
They claimed:
“We will help families with all the pressures they face: the lack of time, money worries, the impact of work, concerns about schools and crime, preventing unhealthy influences, poor housing.”
Of course—[Interruption.] The hon. Member for Solihull (Lorely Burt) groans from the Liberal Democrat Front Bench. The Liberal Democrats claimed in their party’s 2010 manifesto:
“Liberal Democrats believe every family should get the support it needs to thrive, from help with childcare through to better support for carers and elderly parents. Liberal Democrats will improve life for your family.”
Oh, how they disappointed!
Andrea Leadsom
The hon. Lady is being very generous in giving way. Will she welcome the fact that one of the major newspapers today reports that wages are growing faster now than they have been in the past seven years, and that there are 1.6 million workers in private sector employment since 2010, which means that many more families are now able to afford their weekly household bill?
Catherine McKinnell
Any good news on the economy will always be welcomed, not just by Members of this House but by those out there who are struggling with the cost of living. No matter what good news we see in the coming months, it will not outweigh the fact that we have had three years of a flatlining economy in which wages have been squeezed and prices have risen much faster than wages, particularly in this area of child care costs. People will be worse off in 2015 than they were in 2010. We know that a family in which both parents work will be £2,073 worse off by the next election. Perhaps the electorate will just have to add that to the ever-increasing list of Liberal Democrat broken promises.
The Prime Minister is currently touring the country, boasting about the rise in the personal allowance—I am surprised that Government Members have not raised that yet. Incidentally, the Deputy Prime Minister claims that the Conservatives were dragged kicking and screaming to every meeting on the personal allowance. The simple truth is that working families are thousands of pounds worse off now than they were in 2010 thanks to tax and benefit changes, falling living standards and rising child care costs, all of which this out-of-touch Government have continually failed to get a grip of, and all of which contribute to the fact that child poverty is set to increase rapidly under this Government. After an unprecedented reduction in child poverty under Labour, the IFS now predicts that an extra 400,000 children will be in relative poverty by the end of this Parliament and it is clear why that is. It says:
“Tax and benefit reforms introduced since April 2010 can account for almost all of the increase in child poverty projected over the next few years.”
As we know that families will be significantly worse off by the next general election, let me turn to the Government’s proposals for tax-free child care, which were lauded in the Budget but which are missing from this year’s Finance Bill. Parents would be forgiven for thinking that they are in for a £2,000 subsidy of their child care costs, based on what Ministers have been claiming in interviews and articles in recent weeks. Let us be absolutely clear about this. Although any new money to help families facing soaring child care costs is undoubtedly welcome, this coalition will not fool mums and dads. When we scratch beneath the surface and go beyond the headline figures of £2,000 and 1.9 million families, we find that the facts very quickly come to light.
Only one in five families will receive help through tax-free child care, yet that one family in five would have to incur child care costs of £10,000 per child to get the maximum £2,000 that Government Members have been boasting about. Ten thousands pounds per child per year! How many families in Britain could possibly afford to spend the £8,000 required to receive the maximum support from the Government? Well, the latest annual child care costs survey by the Family and Childcare Trust suggests that over a year a British family spends an average of £5,487 for a nursery place for a child of two and above, which, incidentally, is £1,298 more than it cost in 2010, so in reality most families will receive at best just half the support being parroted by Government Members—[Interruption.] I am pleased that the hon. Member for Nuneaton (Mr Jones) has been enlightened by that, as he was so horrified when I enlightened him about the reality of this Government’s policy.
Lorely Burt
On the one hand, the hon. Lady seems to be bemoaning the soaring costs of child care, but on the other she is bemoaning the fact that parents do not have to pay the full £10,000 to get the maximum child care support.
Catherine McKinnell
A family’s child care requirements are a family’s child care requirements. If somebody has to go to work and they need child care, they need to invest in child care for however many hours they need it for. The Government’s child care proposal does nothing to address the supply side issues, which is why Labour proposes to increase the number of free hours available for three to four-year-olds to help increase the supply of child care, which we have seen diminish under this Government.
Dr Thérèse Coffey
We have had this debate before in Westminster Hall. Does the hon. Lady not recognise that the number of childminders fell under the previous Government? I realise that the point about quality has been made before; nevertheless, there were fewer childminders at the end of that Labour Government than at the start.
Catherine McKinnell
There are 3,000 fewer childminder places under this Government so I caution Government Members about trumpeting their success in this area, because it is far from a success for mums and dads who are struggling with soaring costs.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
The hon. Member for Suffolk Coastal (Dr Coffey) is right: we have discussed these matters at length before. Quality is important, and although the number of childminders has fallen in the past, if we want children to be properly looked after in a child care setting, we must ensure that setting is of the highest possible quality. Unfortunately, some childminders were not able to provide that high-quality care and did not want to continue. We are talking about the most vulnerable children who need high-quality care. Childminders who felt that they were not able to offer that any more and did not want to go through the Ofsted registration process might have been one reason behind that fall in numbers.
Catherine McKinnell
My hon. Friend makes a powerful and heartfelt point and she touches on an important issue. We are talking about the quantity of child care that is available and the cost of that child care, but we must always factor in quality too.
Andrea Leadsom
I know that this is not an issue of party politics but a straightforward issue of quality, but I want to point out that over-regulation led many childminders to want to pull out of providing that care. I have spoken to many childminders who pulled out because of the complex box-ticking—the questions about what sort of doors they had, or what sort of facilities. The important thing for our society is that very young children should be cared for by people who genuinely love them and who will take good care of them. We risk the perfect being the enemy of the good if we go down the avenue of over-regulation.
Catherine McKinnell
I think we risk going down the road of debating the quality of child care and issues to do with Ofsted registration, but I would question some of the hon. Lady’s assertions about the requirements for regulation and the absolutely fundamental importance of ensuring the quality of all child care places, including those with childminders.
Let me return to the issue of child care costs, which is what our new clause 1 seeks to get the Government to address. Gavin Kelly, chief executive of the Resolution Foundation, has pointed out in relation to the Government’s recent increase in the cap from £6,000 to £10,000 for tax free child care:
“About 80 per cent. of the gains from this will flow upwards to those in the top half of the income distribution. It’s also the case that it’s low- and middle- income parents who find the costs of childcare the biggest obstacle to taking on more work—so targeting support at them would make sense.”
I should be interested to hear the Minister explain how effective the scheme will be in supporting the very parents who need help the most. I should also be grateful if she could clarify the Treasury sums on tax-free child care because, welcome though any extra support is for families struggling with child care costs, it is curious that the Government have managed to tweak their sums so that an almost doubling of Government support per child has not cost even a penny extra.
I am sure that the IFS would also be interested to hear the Minister’s answer to that question, as it has queried the matter. It said:
“Surprisingly, today’s announcements come with no new money. Extending the new Tax Free Childcare scheme to all children under 12 within its first year will cost money compared with a world where it was limited to children under 5, but the Treasury can make this announcement without altering its public spending plans because it has significantly revised down its estimate of how many families are likely to be eligible for the scheme (from 2.5 million to 1.9 million).”
It is not clear what has led to this dramatic change, so we cannot judge whether the new estimates are any more plausible than the initial ones, but the fact that the change is so large suggests that the Treasury would benefit from being more open about the way it costs new policies. Perhaps the Minister will elaborate on these figures and how her Department arrived at them.
Ultimately, the simple truth is that, even if people spend enough to receive the full support, this help will not come until after the general election. That means no help with child care in five years from the Conservatives or the Liberal Democrats. Instead, Ministers have presided over soaring costs and cuts to tax credits for thousands of families, meaning that, even when this help comes, most families will still be worse off than in 2010.
Dr Thérèse Coffey
I recognise the hon. Lady’s genuine concern about working parents and her ambition that the Government get on with increasing child care, but she must recognise that the number of hours of child care has increased under this Government. She should be gracious enough to accept that.
Catherine McKinnell
It is interesting that the hon. Lady mentions that, because I will quote directly on this issue a little further on in my submission.
We know that the Government are good at con tricks, giving with one hand but taking much, much more with the other. For example, they made a U-turn last month when they decided to support 85% of child care costs for all universal credit claimants. That was a welcome reversal after the coalition decided in 2011 to cut the support for child care through the working tax credit from 80% to 70%—a decision that led to an average loss of £570 a year for low-paid working parents. It is just another example of this Government taking with one hand and giving with the other.
As Alan Milburn, chairman of the Social Mobility and Child Poverty Commission, has said, low-income families will still lose out, despite this increase in support for those most in need. He told The Independent on Sunday:
“The Government has taken half a step forward. The announcement that 85% of childcare costs will be met under universal credit from 2016 will help work pay for low-income families. This is very welcome. The sting in the tail is that this £200 million expansion in childcare support will come from within the universal credit programme…That risks robbing Peter to pay Paul.”
Perhaps the Minister could also give a bit more detail on how she intends to pay for the increase in support. While she is at it, perhaps she could provide some clarity on when low-income families eligible for universal credit can expect to receive this support with their child care costs.
Under the original plans of the Secretary of State for Work and Pensions, most would have expected to receive the increased support when the tax free child care is introduced in 2015, but clearly that is not going to happen. Will the Minister clarify when the Government expect to introduce this support and whether it will be in the near future? Ultimately, as Opposition Members have made absolutely clear, parents facing a cost of living crisis will see through any child care con, because it does not make up for how much the families are now paying for child care under this coalition Government.
I come now to the first part of new clause 1 and the Opposition’s proposals for improving child care support, which we know will make a real difference to working parents. New clause 1 proposes that the Chancellor should undertake a review of the ways in which child care could be made more affordable before April 2015. We have done much of the work for him with our clear suggestions for supporting families on this pressing issue. We want to extend free child care for three to four-year-olds from 15 to 25 hours a week for working parents, which can be fully funded by increasing the bank levy. As with the 15-hour early-years entitlement, the new 25 hours would be for 38 weeks of the year, which would mean more than £1,500 of extra support per child each year. Perhaps most important, Labour’s plans will not demand that working parents spend £10,000 on child care in order to get the maximum promised help.
We also know that for school-age children, child care can become a logistical nightmare, with many parents increasingly struggling to find before and after-school child care, while the Government stick their fingers in their ears and hum. On the Government’s own record, 62% of parents of school-age children say that they need some form of before and after-school or holiday care in order to combine family life with work, but of those nearly three in 10 are unable to find it. To give parents of primary-age children peace of mind, the Opposition would set in law the guarantee that they could access wraparound child care from 8 am to 6 pm through their local school if they wanted it. This primary child care guarantee will benefit parents of primary-age children most, because those parents most need support. Of course, these plans will be in addition to all the support that parents will already receive, and they will not be contingent on spending thousands of pounds on child care in order to qualify.
At Prime Minister’s questions recently, following a Budget empty of any measures to address the problem now, I asked the Prime Minister to explain why his Government had failed to take the action to help parents with child care costs before the next general election. He answered:
“We are helping families with child care, not least by giving 15 hours…That is happening before the election; it has happened under this Government in this Parliament—15 hours of free nursery care for three-year-olds and four-year-olds…Opposition Members say it is not enough; it is more than Labour ever provided.”—[Official Report, 26 March 2014; Vol. 578, c. 344.]
That was not only a very complacent response but, unintentionally I am sure, misleading, and goes to show just how out of touch this Government are on this issue of child care.
The previous Labour Government introduced 12.5 hours of free nursery education for three to four-year-olds a decade ago, back in 2004, with the clear intention that that would be extended to 15 hours by 2010. Far from this being a coalition policy, the plan was inherited by the coalition from the previous Labour Government. As I set out, the future Labour Government will continue to build on this legacy, extend it to 25 hours a week for working parents, funded by an increase in the bank levy, and guarantee wraparound child care.
This was the Chancellor’s final opportunity to introduce policies that will really benefit parents before the general election, to give much needed support to working parents now, not in 18 months’ time. Parents have already seen their child care costs rise five times faster than their pay. They are already spending more on child care than on their mortgage. They have already seen the number of nursery places fall by thousands. They have already seen hundreds of Sure Start centres close, despite the Prime Minister’s promises to the contrary. Of course, most stay-at-home mums, as well as working parents, already see child care costs as one of the biggest barriers to their going back to work or increasing their working hours. A review of the issue is both due and urgent, and I commend new clause 1 to the Committee.
Mr Burrowes
It is a pleasure to take part in this debate. It is always interesting to hear the hon. Member for Newcastle upon Tyne North (Catherine McKinnell). Essentially, she seeks to press a reset button in relation to a new Labour history—is it new Labour any more?—of child care. It seems that for Labour life started—or, it might say, ended—in 2010.
We did get to an element of truth at the end of the hon. Lady’s remarks when we heard reference to the previous Labour Government’s policies. When I came into Parliament in 2005, the Labour Government announced a new tax relief for child care benefits, which, as we heard, then went through various stages. In September 2009, the then Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), fronted the extension of free child care for two-year-olds. We inherited those two policies. In the coalition Government’s first Budget, we confirmed that the previous Government’s measures were being taken forward. Therefore, any reference to the costs in 2010 must be a reference to the legacy of the previous Labour Government. By any logic, this coalition Government merely extended the previous Government’s policy on tax relief and free child care for two-year-olds. It is inappropriate, and a partial view of history, not to refer to the legacy inherited from the previous Government.
Bridget Phillipson
I should point out to the hon. Gentleman that it would be wrong not to acknowledge the great strides forward that were made in child care in the 13 years of the Labour Government. For the first time, child care was taken seriously as a matter for Government. In the past, it had been regarded as a private family matter, but it is not; it allows women to play a full role in the economy. Perhaps he could acknowledge that in those 13 years many good things happened that supported women back into work and allowed children to take up these places.
Mr Burrowes
I am a generous person, I hope, and I recognise that there were benefits, but we have to look at the history. Let us go back to 1990, when the then Chancellor, John Major, introduced the policy that meant employees would not be taxed on the benefits they received from using a nursery or play scheme provided by an employer. Perhaps the hon. Lady would like to intervene to recognise the benefits of his proposal. He set in train a process to allow more affordable child care by ensuring that the tax system recognised the need to give benefits, in particular, to women who need to be out and working and to have affordable, accessible child care.
Andrea Leadsom
I certainly recall the efforts of Labour Members to try to sort out child care. I had two young boys at the time. I put my two little boys into a nursery and claimed the child tax credit vouchers, but then needed to get a nanny for them because my hours changed and the situation became impossible. It is rather like so many of the Opposition’s ideas: they might be all right in principle, but in practice they are absolute rubbish and do not meet the needs of our society.
Mr Burrowes
I am grateful for that robust intervention. There is obviously cross-party support for recognising that child care is a central and significant issue in dealing with parents’ ability to manage their budgets and go out to work.
The lack of affordable child care is one of the reasons for the increasing numbers of relatives looking after children, especially grandparents. Two thirds of grandparents—well over 5 million—regularly look after their grandchildren. It is important to recognise the wide variety of child care. As we properly extend formal child care, I encourage the Committee, and the Minister, to recognise the role and value of informal child care for the millions of parents and grandparents who are out there saving a lot of money—thousands of pounds a year—for working families. Yes, the cost of child care is one of the reasons for the increasing number of grandparents taking on this role, and it is an important factor in parents’ decisions, but the significance of grandparental child care cuts across many areas. One in three families relies on it; one in two single-parent families particularly relies on it. It is relied on especially by families with disabled children. Often they may be living nearby, perhaps on the margins of poverty. Grandparents play a very significant role in providing emotional, financial and practical support, often through short-term care in times of crisis which then extends into long-term care.
Black and minority ethnic households are more likely than other households to have a grandparent living under the same roof as the parents and the child, taking on caring responsibilities. As we extend formal child care, it is important to acknowledge the calls from vulnerable families in particular for more flexibility in terms of tax-free relief and, as has been said in other debates, unpaid leave for grandparents who are in work.
It is important to talk not just about pounds and pence, but about child care and development. A review on child development conducted by the Institute for Fiscal Studies and the Nuffield Foundation asked parents to rank the factors that motivated them to ask grandparents to care for their children. The top-ranking factor was trust and just below it was love. We have to recognise that. Yes, more affordable child care is needed to relieve the strain on grandparents and other family members, but at the same time what parents want is for the person looking after their child, particularly in their early years, to have a trusting, loving relationship with them. The report was published in 2012, but it still holds good. It provided evidence that care from grandparents often results in high vocabulary and socio-emotional development.
It is obvious to parents and, indeed, those relatives and friends who know their children best, that the love and general interest shown by grandparent carers is invaluable. It is hard to quantify in financial terms, but it is certainly valuable. Relatives put themselves out on a personal level and that is what we want for all our children. We want them to have that type of care, whether it be in a nursery, from a childminder or, more often than not, from a grandparent or relative. We want them to receive that extra support on a personal level, which is of immense value to the child’s development and care.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I am not knocking grandparents, who obviously play a valuable role in many cases, but there are studies that clearly show that grandparent care does not necessarily mean a higher level of early-years education for children, and that care in a formalised or trained setting can be better for child development.
Mr Burrowes
I appreciate that and I have looked at various parts of that evidence, but it is important to recognise that the Nuffield Foundation and IFS report noted that, while being in formal child care appeared to make children initially more school ready,
“being cared for by grandparents did not significantly put children at a disadvantage in school readiness compared to children not in formal childcare”.
Andrea Leadsom
I challenge the concept suggested by Opposition Members with regard to formal versus informal child care. It is incontrovertible neuroscience that a baby’s brain develops through being stimulated by the love of an adult carer, and that is what gives a baby its lifelong potential. Of course early-years education has its place, but in those very early, vulnerable periods in the first couple of years of a baby’s life, there is no doubt that the love of an adult carer—a primary or secondary attachment figure—is far more important than whether they are in a formal or informal child-care setting.
Mr Burrowes
I pay tribute to my hon. Friend for her work on “The 1001 Critical Days”, which highlights the importance of attachment, care and attention. Parents seek to find such care in a formal as well as informal child-care setting, but the reality is that families, particularly disadvantaged families, rely on the help of grandparents and relatives who are close at hand.
Undoubtedly, the Government are right to take important steps to make child care affordable, because obviously one of the key routes out of poverty is work, which we all support, but we should also support quality child care in all its forms.
There is also a need for flexibility. I have been seeking to make the point that we must have a wider understanding of child care. It involves more than grandparents, because at least 300,000 children are cared for full time by relatives, friends or other people. That often starts in a crisis or an emergency, when friends and family members step in, particularly those in the extended family—perhaps an older sibling, an uncle or aunt. Those people may have their own challenges. They may be in work, but have to stop work to care for a friend’s or relative’s child. They may be on a pension giving a fixed income, and there may be a significant impact on them. We must therefore recognise that there is a considerable impact on carers. A significant number of children are cared for by that group of people.
It is therefore right for the Government to focus on encouraging more people into work and to ensure that it does pay to work. We must recognise the impact on families on different earnings. Reference has been made to poverty. Statistics from the Joseph Rowntree Foundation show that 52% of children living in poverty are in single-earner families. One answer to that is the straightforward one of providing the single earner’s spouse, through the opportunity of affordable child care, with the choice of going into work.
We must recognise the Government’s statistics. The “Childcare and early years survey of parents 2012-2013”, which was released this January, had some interesting findings on parents. It is important to recognise that 71% of parents at home were there by choice, while only 13% of them cited cost as a problem. [Interruption.] The hon. Member for Manchester Central (Lucy Powell) speaks from a sedentary position. If she wants to intervene, she may do so. I am simply citing a Department for Education survey from January 2014. Some 37% of working mothers said that they would prefer to stay at home and look after the children if they could afford it, while 57% said that they would like to work fewer hours and spend more time looking after their children if they could afford it.
According to the Netmums survey on “The Great Work Debate”, which had some 4,000 respondents, 33% of part-time working mums said that they would prefer to be at home. I am not here simply to bang the drum, but it is interesting that when one raises the issue of stay-at-home mums, there is immediately an artificial dividing line between yummy mummies exercising a lifestyle choice and those unfortunate mothers and others who want to work. I know that hon. Members will not want to make such a distinction, but it does happen and it can be paraded in that way in the media.
As a Conservative, I believe in freedom and aspiration. Freedom must include freedom of choice. People should be free to work, and we must ensure that affordable child care is available for them. However, we must also recognise that a considerable number of parents want to be able to choose to be at home. That involves income strands, and income is particularly relevant, as I have highlighted. Households on lower income levels, which are on the margins of poverty or indeed in poverty, often want to call on relatives and friends or their own family structures to support them. It is important to allow them the choice and flexibility to do that, and to recognise the impact on such family members in the tax system.
We can all agree that we must support aspiration as well as freedom. Aspiration includes the aspiration to work, and the aspiration of mothers or indeed fathers who want to give up their career or take a cut in their income to care for their family at home. The question is about how we can provide support. We will have a similar debate tomorrow on the transferable married couple’s allowance, which would provide some recognition of that.
We can also all agree that raising children needs time. It needs time to cultivate relationships, and that can happen in a variety of forms. Such time is what many parents are striving for. Many parents look back on the fact that, because of all their other commitments, they did not have enough time to spend with their children. As Members of Parliament, we are probably the last people who should talk about that. We have our own concerns about that, and we can certainly declare an interest about our lack of time. I have six children, so I can understand that.
We also have to recognise that many parents—from looking at some surveys I would say most parents—want more choice and more opportunities to have time with their children. They also want to be sure that if they do not have the opportunity to care for their children at home because of the choices that they have to make, or if they prefer not to, there is a guarantee that they will be able to entrust their children’s care to others who will be able to give them the time and commitment that they need.
I welcome the Bill’s provisions, which will make massive strides in providing support for affordable child care. However, let us ensure that we do not lose sight of the need for greater flexibility, freedom and aspirations for families, so that we can support good-quality child care whether it takes place in a formal setting or through grandparents, parents or other relatives.
Meg Hillier
This is such an important issue that I hope we do not end up with a false party political divide. The new clause is a sensible and proportionate measure that we should all support, because it would not tie anyone to anything much. It simply suggests that we should assess the impact of changes to the tax and tax credits system, to ensure that we all work together to make the system fairer, simpler and more cost-effective for parents and better for children.
The issue of child care is about both supporting supply and ensuring that it is affordable for the user, and both parts of that need to be simple. We have seen problems in the system, because without subsidy at the supply end there is a disincentive to provide supply. I have suggestions about how we might address that through the tax system, which I will come on to later.
Governments of all parties often talk about the difference between child care and early years education, and we have heard a little of that divide in this debate. However, I am sure that all of us who have had experience of the matter would like to see the two combined in most cases. When Governments talk about early years education, which is inevitably expensive, they mean providing 15 or 25 hours a week, not the number of hours that would be needed for somebody to work full time. I recognise that that is unaffordable at the moment, although I have ambitions on the matter—I do not speak for my Front-Bench colleagues, but I have aspirations for what they will achieve in time.
Child care needs to be different for different children. I will come to the issue of older children, but whether it is after-school care or pre-school care, flexibility is the key. I concur with the hon. Member for South Northamptonshire (Andrea Leadsom), although not completely—she decided to rubbish the Labour Government’s achievements, and I will make no apology for what Labour achieved through Sure Start, with a massive increase in the quality and availability of child care and reductions in cost in many places. As she, I and other Members recognise, flexibility is vital, because people, particularly in London, do not work nine-to-five as much as is often believed.
Andrea Leadsom
I am moved to intervene as the chair of the all-party group on Sure Start children’s centres. I once wore a hat in the Chamber so that I could take my hat off to the Opposition for having created Sure Start. However, I hold to the fact that, brilliant as the idea was, there is still a huge amount to be improved on. I urge the hon. Lady to agree that we do not do nearly enough to focus on the developmental needs of the very young.
Meg Hillier
There is cross-party support for all of that, because I agree that Sure Start was a revolution in early years support. I felt that it should continue so that there was Sure Start at the ages of five and 11. We would stray off the debate if I got into that territory, but my constituency still has 37% of children living in poverty and it is a young constituency. Families of all backgrounds have used Sure Start, learned from each other and got support. Whatever their background, people have challenges with their children at an early stage, and children really have got a sure start. Titles of Government initiatives often become glib, but Sure Start meant something to me and to many of my constituents.
The London assembly Labour group carried out a study on the London cost of living, and it found that flexibility in child care was particularly important in London, where there are long commute times and variable hours. One of the benefits of the child care voucher system, which is not universal, is that where it has been taken up it has provided a good deal of flexibility for parents to buy into properly qualified, registered child care. Again, the study proposed by the new clause could investigate how to support quality through a tax voucher system. Of course, we have seen a reduction in tax credits, although I welcome and support what my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said about the U-turn on universal credit paying 85% of child care costs. The key point is that we can have Government initiative after Government initiative, but parents want the system to be kept simple. They want to know what money they have to play with and where they can spend it, which means that both the supplier and the purchaser of a service, in this case the parent, can understand the system.
We need cross-party agreement so that we have a system that sticks and is not tinkered with time after time so that people do not have to work out, “Does that apply to me? My child is going to be that age on that date, so does it apply to them? Oh, they have missed that cut off by one day, so that whole term will be more expensive than it will be for the neighbouring child, who got in by one day.” There are all sorts of silly little bits of the system that make it complicated for people to understand. Such things can be disincentives for accessing child care and ensuring that people get the right support, particularly mothers who are going back to work.
I am a London Member, and the new clause would particularly benefit people in London, because child care costs in London are inevitably higher. The costs of premises are higher. Although there is a minimum wage, child carers are rightly paid more, and in London their wages will be higher than in other parts of the country. Research by child care site Findababysitter.com found that a quarter of parents in London who were not in work were prevented from getting a job because of high child care costs. The Resolution Foundation found that one in five mothers who were already employed would like to take on an extra 10 hours’ work a week on average but could not do so because they would need the commensurate extra child care—not just 10 hours extra but enough child care to allow them to travel to and from work.
A parent in London buying 50 hours of child care a week for a child under two would face an average annual bill of nearly £14,000, if they can find a child care setting that opens during the hours that they need to work. In the current climate, in which people are expected to work longer and harder for their money, 50 hours of child care is the bare minimum. Anyone who is not working regular hours, as the hon. Member for South Northamptonshire said, would need the flexibility of having someone come to their home, or a very flexible childminder. That might be manageable for a child under two, but things get much more complicated with children above that age who are looked after outside the home.
Just over a year ago, I called for child care to become a top priority, and it is heartening that we are having more debates on the issue, but talking about it does not mean that the Government are getting it right with the offer of so-called tax-free child care. I will not repeat the arguments made by my hon. Friend the Member for Newcastle upon Tyne North, but the Government’s offer depends on how much people spend, and it is complicated for people to understand. I know a number of people on low incomes who have a simple approach to the tax system and who will find the proposal complicated. They will not benefit to the same extent because of the amount of child care that many of them will access because of their working hours.
I represent one of the youngest parliamentary seats in the UK. More than a fifth of residents are under 16 and more than a third, about 34%, are under 24, so child care is a big concern. I am stopped on the streets of Hackney South and Shoreditch by mums, childminders and others who want to raise that concern. When I ask any working parent what the toughest part is, they say that it is sorting out the child care, which is a logistical challenge as well as a financial challenge. I know that, because I am a working mother of three, and I am lucky to be well paid enough to buy in that flexibility. For anyone who does not have a salary as generous as mine, buying in that flexibility is very difficult.
Nationally, we know that 70% of working parents do not work nine-to-five Monday to Friday, and in London, because of the journey times, doing a full day’s work means long and expensive child care, if parents can get it. We have the most expensive system in the world. The review proposed in new clause 1 could consider examples from around the world. In Denmark, a day care Act means that local councils provide child care for all between 8 am to 5 pm, with parents and the Government—this is where new clause 1 would come in—contributing to the cost. Child care is free for families on the lowest incomes. The subsidy is tapered, depending on the family income—in this country, it would need to be done sensibly through the tax and tax credit systems—which means that three quarters, 76%, of Danish women are working. That is a huge improvement on the number of women working in the UK. I will touch on the points made by the hon. Member for Enfield, Southgate (Mr Burrowes) on women wanting to stay at home, but we need women to be economically active. This is not just about child care, but about giving women their rightful place in the work force. Hearteningly, women outnumber men in the Chamber at the moment. I applaud my male colleagues of all parties for being here, because this is not just a women’s issue. Women who play their equal role in society and in the work force are more satisfied, better role models and better parents as a result, if we make things as stress free as possible, which is about providing flexibility.
Andrea Leadsom
That is such a sweeping statement. It completely undermines those women who choose to do the utterly groundbreaking and profoundly valuable job of staying home to raise their children. The hon. Lady is not being fair to those people.
Meg Hillier
I will come to that point in a moment. I am saying not that women who want to stay at home and who can afford to do so should not make that choice, but that it is important that women have the choice to work and to be economically active and play their full role in society in that way. Even women who stay at home to look after their children for a period of their child’s early years may well need or want to work at a later stage. That choice is therefore important whatever stage we are talking about. We should not conflate being at home with a very young child under five with being at home all the time. Under the hon. Lady’s Government’s benefits system, parents have to work or they will seriously lose money, and their children will be pushed into greater poverty.
In Hackney South and Shoreditch, women’s average earnings are higher than men’s, which shows what could be achieved if that was applied across the workplace. A decent universal system of child care will pay for itself in the long run. More parents working and paying taxes, and not claiming tax credits and benefits, more than pay for the state’s investment. I do not speak for my party on this, but I hope that those who do take that mantle and look towards the overall goal of a universal free child care system that will pay for itself. That is an aim we need to work towards. If the Government agree to new clause 1, we will be set on a cross-party basis along that route. It would not solve the problem overnight or mean that things will be easy, but it would mean that we can look closely at the options.
As I have said, child care costs in London are higher than in the rest of the country. I will not go into the details but, for instance, a nursery place for an under two is £140 a week typically in London compared with a UK average of £109. I know many people who pay a lot more than that. There is an idea that people have choice, but it is not often the case. Many parents take the option of what is available at the time, which is why we need to provide incentives at the supply end.
I have a couple of suggestions that the study proposed in new clause 1 could consider. It could examine the idea of a London weighting in universal credit for the provision of child care. It could also consider more family-friendly approaches by employers. Practices such as working from home arrangements and on-site nurseries could be fuelled by tax breaks. Speaking as a member of the Public Accounts Committee, we would clearly need to monitor that to ensure that it was not abused, but the brilliant brains in the Treasury, including the Minister’s, could probably work through such a system.
We need to push private and public sector providers to extend the hours available to parents, particularly late in the evening and weekends. That could happen through a tax incentive or a tax break system. There are an awful lot of opportunities. The Minister is nodding. I am sure that she, as a working mum, will recognise the challenges and needs.
I commend to colleagues the London cost of living report by the London assembly Labour group. Although it is a Labour report, it can be read by other parties. I read it as a cross-party report. The Institute for Public Policy Research has done a big bit of work on child care. It has found that directly funding child care facilities, which happens in other European countries, can function better for parents and be more cost-effective, because there is a guarantee of a place. We have to monitor and ensure that the money is not wasted, but it would mean certainty for the supplier, which means certainty for the parent trying to buy.
I want to pick up on some of the comments made by other hon. Members. The hon. Member for Enfield, Southgate talked about the importance of informal child care and I think we would all agree with that. Any parent will use informal child care at some point, whether for an evening out or as part of a longer-term arrangement with grandparents. Let us be honest, though. Not every grandparent wants to take on child care. I meet grandparents, and those whose own parents are caring for their children, who say that they do not necessarily want to take on child care but feel they should to support their child. Many of those grandparents are young and give up work to look after their grandchildren. That is fine if it is a matter of choice, but it is a real issue if they feel they have to step in because of the lack of availability and options. There is a danger of creating generational issues. For every individual who wants to work but cannot, we reduce the tax take. We need to bear that in mind.
Andrea Leadsom
It is a great pleasure to follow the hon. Member for Hackney South and Shoreditch (Meg Hillier), with whom I agree on many aspects of early years.
The first thing I want to say is that children are everything to those of us who have them, and to those of us who have young nieces, nephews and grandchildren. Children are at the centre and heart of our world. They make incredibly selfish human beings become extraordinarily unselfish. It is when a child is about to get run over that a parent gets superhuman strength to push them out of the way. People are capable of the most enormous sacrifices for the sake of their children. It is clear to us all that top quality child care is vital.
In my case, with three kids of my own—aged 18, almost 16 and 10—I have had just about every form of child care that can be imagined. I was fortunate to start off with my stepfather acting as my nanny until my second son was five years old. Therefore, I thoroughly recommend informal child care. There are not many childminders who will take two little boys out—one in a backpack, one in a frontpack—and explain to them for hours what a worm cast is, build little toy forts and play with toy cars. Even today, I cannot get to Parliament until I have dropped one off at a friend’s, sorted out another with some A-level revision and got the third out of his bed, basically. For us, particularly mums, our children and the child care at whatever age they are—I talk to people with older children who are still looking for food, money or a taxi service—are at the centre of our lives. We all spend a lot of time thinking about the safe and happy lives of our children. Child care is a vital part of whatever we can offer to support those at work in our society.
We also need to support thoroughly the choices that families want to make. They may want an au pair and to deal with someone who is living in and who, perhaps, does not speak very good English. I asked one au pair I had to make a salad. She peeled some parsnips and gave us the peel, nicely dressed, as a salad. That was an interesting one. There are also childminders although, sadly, not nearly enough of them. There is also the formal child care setting; some truly superb, others truly awful. Unfortunately it was the formal child care setting—the nurseries—that led to the old joke about “hair or care”; in other words, someone not smart enough to be a hairdresser could try to become a nursery nurse. That was the reality 10 years ago where some young girls—themselves barely out of their teens—would become the carers looking after our very young children in nurseries. Care for our children comes in all shapes and sizes.
I also want to say a word on behalf of those heroic mums—I would have loved to have been one—who have stayed home and looked after their children themselves, giving up potentially lucrative, satisfying and successful careers. They might feel very depressed about their lack of self-worth, certainly in the eyes of too many politicians. I want to pay tribute to those women who decide to stay home and raise their own children.
Meg Hillier
I just want to go back to the point about au pairs and others. Will the hon. Lady acknowledge that with the cost of housing and the overcrowding in many cases in London, the idea of someone living in your home is not an option, which is why the formal setting is particularly important in a city such as London?
Andrea Leadsom
Yes of course I agree. My point was merely that child care comes in all shapes and sizes. My real point is that we should support the choices that families want to make, which are the best choices for them. That is particularly why I am so delighted that the Government have introduced shared parental leave. What more choice could there be for a woman who perhaps is earning more than her husband than to be able to decide to go back to work in the knowledge that he will be doing that critical early part of the child care? That is a huge tribute to the Government and many families will be delighted. It will be life changing for them.
Another area for which the Government deserve a lot of credit is the introduction of the early years professional status, particularly to deal with the quality of child care. I have been told by the Under-Secretary of State for Education, my hon. Friend the Member for Crewe and Nantwich (Mr Timpson)—who is Minister for children—that early years professional status will require a great deal of training. It will involve learning about the importance of secure attachment, about how the brain of a baby develops, and about how vital it is for the baby to receive loving, attentive care, whether that care is provided by parents or in a formal setting. As the hon. Member for Hackney South and Shoreditch (Meg Hillier) pointed out, when life at home is devastatingly awful because of domestic violence, bereavement or drug or alcohol misuse, the attachment needs of a baby may be far better met in a formal child care setting than at home. What is really important is choice and good quality.
Another enormous tribute should be paid to the Government for the creation of childminder agencies. I know that that has been a contentious issue, but I believe that children’s centres that adopt childminder agency status can serve as signposts for all families who seek child care. They can provide ongoing professional development for childminders, many of whom have felt unloved and uncared-for over the last few decades—which, along with over-regulation, has been their reason for leaving the business. The agencies can help childminders to understand regulation, to become established, and to provide the top-quality care that they so want to provide.
Meg Hillier
I thank the hon. Lady for being so generous with her time. Childminders have told me that their main fear is that childminder agencies could replicate the private sector company model for older people’s domiciliary care, creaming off a profit from childminders’ salaries and not delivering a good service. The hon. Lady has described an entirely different model. Does she have any inside information about what will be announced?
Andrea Leadsom
I do not, but I can tell the hon. Lady that I have been lobbying the Minister, and telling him that children’s centres could play a fantastic and very appropriate role if they became childminder agencies. I think that the support, encouragement, training and quality control that they could offer would be good for childminders, and it would certainly be good for families.
What else have the Government done for families? They have done an enormous amount. Child care tax credit has been given a huge boost: a contribution of up to £2,000 per child will greatly help families to make the right child care choices. Even more significant is the increase in the tax-free personal allowance, which has put an enormous amount of money back into the hands of taxpayers, and which will benefit working families of all shapes and sizes. As was pointed out by my hon. Friend the Member for Suffolk Coastal (Dr Coffey), the fuel duty freeze has made the cost of living for families lower than it would have been under the Opposition.
But what have we really, fundamentally done for our children—the children who are at the heart of everything that we do? We have paid down the deficit by a third, which is no inconsiderable feat. Why is that so important? As a result of the financial crisis and the Labour Government’s overspending, we put ourselves in a position in which we stole not just from our children, but from our grandchildren. We mortgaged their future. This Government have paid down the deficit significantly, with the intention of clearing it altogether so that we can start to reduce the debts that our children and grandchildren would otherwise be paying. We have been able to keep the cost of borrowing down, because we had a credible plan for returning strength to our economy. That has enabled all families with mortgages to keep down their borrowing costs, and has been a huge boost to families that is never talked about.
What is the payback? Our economy is the fastest-growing in the developed world. Wages are rising faster than they have done for seven years—that was announced today—and the private sector has created 1.6 million new jobs. That means that well over 1.5 million new families are finding work, and are able to meet the needs of their household budgets.
Bridget Phillipson
I will make a brief contribution and put on record just how much progress was made under the previous Labour Government. Child care was previously regarded as something for families to deal with on their own. When Labour came to power in 1997, there was no guarantee that children had access to a nursery place. In many areas, nursery school provision was such that there simply were not the places available even when children wanted them. We should also remember the Sure Start children centres and all the work that went into them. It is important to acknowledge that a major transition was made. The fact that we are debating child care here today shows just how much progress we have made.
I recognise that Government Members want to deal with this issue. It is just unfortunate that the measures they are talking about will not come into force until after the general election, if they were to be re-elected. That is disappointing because families in my constituency need help now.
Families across the country are facing a reduction in the number of places at the same time as costs are rising. Those of us with children know just how difficult it can be to find child care that meets the needs of families now. As has been pointed out, we in this House are very fortunate in having the luxury of being in well-paid jobs that allow us to make choices, but for many of my constituents who work shifts or who are on zero-hours contracts or have insecure employment those choices simply are not available.
We have had an interesting discussion about the role of informal child care, with some useful points being made on both sides. Many families, mine included, rely on grandparents and other friends and family to help out, and they provide invaluable support and play a very useful role. I do not in any way denigrate that support, but children from the most disadvantaged backgrounds benefit the most from having access to high-quality formal child care.
When I visit nurseries and primary schools in my constituency, it becomes clear just how important for their development it is that children are given the best start in life and have access to early years child care. That enables their vocabulary to develop and gives them access to a whole range of different experiences that sometimes are not available in the home for one reason or another, whether it be poverty, domestic violence or mental health.
We have a long way to go on this issue. Labour’s policies are on the right lines. This is a sensible new clause, and I hope the Government will take action now to help families, rather than waiting until later. Families need action now.
The Economic Secretary to the Treasury (Nicky Morgan)
It is a pleasure to serve under your chairmanship, Mr Amess, and I thank all Members who have spoken in this debate. After a rather partisan opening speech, the debate improved and we had a genuine discussion of views, which will no doubt carry on throughout the Committee stage of the Finance Bill. We will also be able to discuss child care measures in greater detail later in the year.
I take on board the comment of the hon. Member for Hackney South and Shoreditch (Meg Hillier) that there is a certain irony in the fact that all of us in the Chamber debating this matter today have children yet we are discussing this rather than spending time with them. If my son were here at the Dispatch Box, he would be very opinionated and have plenty to say on the subject of what I get up to, and I suspect that applies to the children of other Members.
New clause 1 asks the Government to conduct a review of the affordability of child care, but while Opposition Members are proposing yet another review, this Government are taking action, and have taken action, to address the rising costs of child care faced by families.
Before I address the Opposition new clause, let me briefly set out this Government’s approach to supporting parents with their child care costs. As the hon. Member for Hackney South and Shoreditch said, we on this side of the House believe in the importance of flexibility. We do not want to prescribe any further the number of hours that families should have. We want there to be full flexibility, and that is one of the advantages of the tax-free child care provisions this Government are suggesting. Parents and families will be able to build up credits in accounts and will then be able to spend them in the way that suits them best.
Meg Hillier
The flexibility of provision is as important as the flexibility of payment. It is no good talking about flexibility if the child care provider does not provide it or does not provide the number of hours and length of day needed, whether long or short. What are the Government planning to do about that?
Nicky Morgan
I take that point on board. I shall come on to talk about the number of child care places, but the hon. Lady is right: flexibility in all sorts of different ways is what is important. Having the money in an account that the family can decide how to spend is an important part of the policies we have introduced.
My hon. Friend the Member for Enfield, Southgate (Mr Burrowes) was absolutely right to say that this was all about choice. The hon. Member for Houghton and Sunderland South (Bridget Phillipson) talked about maternal employment. That is a debate that we need to have in this country. We know from various surveys conducted by the Department for Education that some mothers want to work, and some need to work. Many of those who need to work find child care costs a barrier to going to work. That is why it is so important to have this discussion.
Child care costs are a major part of most working families’ budgets. Figures from the Family and Childcare Trust show that, between 2002 and 2010, child care costs increased by around 50%. The Government have therefore taken action to tackle those rising costs. We have funded 15 hours a week of free child care for all three and four-year-olds, and extended that offer to the 20% most disadvantaged two-year-olds. We are now extending it further so that, from September 2014, about 40% of two-year-olds will be eligible. As my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) pointed out, the Government have also increased child tax credit to £3,265 a year, which is £420 a year more than it was at the last election, representing a rise significantly above inflation. We have also introduced shared parental leave.
The Government are also taking action to drive up the supply of high-quality child care provision—for example, by legislating for childminder agencies, which will make it easier to set up a childminding business; making it easier for schools to change their school day and encouraging primary schools to open for longer; and reducing bureaucracy and red tape for providers. Encouragingly, the most recent information shows that costs in England have stabilised. The National Day Nurseries Association has reported that the average fee increase across all nurseries was 1.5%, which was well below inflation. The latest survey from the Family and Childcare Trust shows that the cost of after-school clubs in 2013 was £49.71 per week, and that in 2014 it is £48.40. Also, the cost of childminders’ after-school pick-up was £72.79 in 2013 and it is now £64.75—a 12.8% reduction in real terms. Opposition Members have talked about the availability of child care places, but it is worth noting that the number of child care settings rose from 87,900 in 2010 to 90,000 in 2011. This equates to 2 million early-years places, or a 5% increase on 2009.
My hon. Friend the Member for Enfield, Southgate talked about informal child care, and he was right to suggest that that is an important subject. A number of families rely on grandparents and other family members to provide child care, and it is important that we recognise that. However, I also have sympathy with the view that formal child care settings are important. We need to know that our young children are ready and able to go to school. I am not saying that that cannot happen in an informal child care setting, however. As I have said, it is a question of choice and flexibility.
Let me now turn to new clause 1, which asks the Chancellor to publish a review of the affordability of child care costs. We believe that such a review is unnecessary, because in addition to the actions I have already outlined, the Government announced a new scheme in Budget 2013 to help working parents with their child care costs. I do not know whether the hon. Member for Hackney South and Shoreditch really meant it, but she said that the review would “not tie anyone to anything much”. Actually, that is part of the problem with the proposal. We want to get on and bring in our provisions as soon as possible.
Meg Hillier
What I meant was that the review would not require the Government to act on its findings. However, it would give us all a basis on which to argue about what was best for local people and, I hope, reach consensus. It would not stop the Government doing what they were already doing, but it could open up other opportunities.
Nicky Morgan
I believe that some of those policy issues will come out in the debates that we are going to have on tax-free child care. Rather than postponing our activities while we have yet another review, I want to get on and make progress. I want families to know that we are serious about listening and helping them with child care costs and the availability of places.
We have consulted widely on the detail of the scheme. More than 35,000 responses were received to last year’s consultation, and we have listened to that feedback. On 18 March this year, we published our response to the consultation on tax-free child care. This was welcomed by families and child care providers around the country, and as a result of the consultation, we are rolling out tax-free child care more quickly than had previously been announced. It will be launched in autumn 2015 and rolled out to all eligible families with children under 12 within the first year of the scheme’s operation. That is significantly faster than previously announced, as children under 12 would have gradually qualified for the scheme over a seven-year period.
The Government will also now provide 20% support on child care costs up to £10,000 per year for each child via a new simple online system. The cap had previously been set at £6,000. That means that families could receive up to £2,000 child care support per child—two-thirds more than originally planned.
We expect that tax-free child care will be open to at least twice as many families as the current employer-supported child care scheme. At the same time, we announced that all families eligible for universal credit will benefit from additional support at 85%, rather than just taxpayers as previously consulted on. We have also announced £50 million for an early-years pupil premium to help improve outcomes for the most disadvantaged three and four-year-olds in Government-funded early education. Taken together, the Government’s child care offer will provide flexible support for all eligible working families while maintaining free, universal early education support.
The Government are also taking wider steps to support hard-working families. The income tax personal allowance will rise to £10,000 in 2014-15, and in the Budget we announced a further increase to £10,500 in 2015-16. That is a tax cut for 25 million people. Since 2010, this Government will have taken 3.2 million people on low incomes out of paying income tax altogether. It is worth noting that of that 3.2 million, 56% are women, which is something to be recognised and welcomed.
The Government have also helped local authorities freeze council tax in every year of this Parliament, and we have taken action on fuel duty, saving a typical motorist £680 by 2015-16. The shadow Chief Secretary to the Treasury talked about the fuel duty cut being a theoretical cut. Perhaps he would like to chat to the shadow Economic Secretary who quoted from the Asda Index, which showed that families now have slightly more discretionary income to spend per week, and it attributed that to a fall in motoring costs—[Interruption.] I suggest that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) read the press release, as it made encouraging reading.
The changes suggested in new clause 1 are unnecessary and would not help hard-working families with the cost of child care. The Government have already reviewed how best to improve child care through the Childcare Commission, which was launched in June 2012. We do not need another review. We need to take action now to support hard-working families, which is why we are supporting parents through tax-free child care and universal credit. More people than ever before will be eligible for that support. We have consulted widely on these changes, and our proposals have been welcomed by families and providers around the country. I therefore request that new clause 1, which was tabled by Opposition Members, be withdrawn.
Catherine McKinnell
This has been a well-considered and well-argued debate, but the essential facts remain. This Government have presided over soaring child care costs and have cut tax credits for thousands of families, meaning that even when their proposed long-grass support is eventually introduced, most families will still be worse off than they were in 2010. Parents and working families need help now, not in 18 months’ time, so I urge hon. Members on both sides of the Committee to back new clause 1, which would secure a review of action that the Government can take to provide the support that hard-pressed families up and down the country so desperately need today.
Question put, That the clause be read a Second time.
Charlotte Leslie (Bristol North West) (Con)
On a point of order, Madam Deputy Speaker. I would like to apologise for failing to inform the Register of Members’ Financial Interests of financial donations to my local Conservative party in a timely fashion. I discovered this in August last year, and immediately acted to register these donations, which were already registered with the Electoral Commission. I have today been alerted to the fact that because of this I have asked three written questions, made my maiden speech and one intervention and asked a Select Committee witness a question, all without declaring a potentially relevant interest. I can confirm, however, that I have in no way personally financially benefited.
Although I am registered dyslexic and sought to put in place additional administrative support as a result, I take complete responsibility for this. I am unspeakably sorry that despite all the efforts that I made as a new MP to get things right, I have nevertheless made this very serious error, and I want to reiterate my heartfelt apologies to the House and have sought the earliest possible opportunity to do so.
Madam Deputy Speaker (Dawn Primarolo)
I thank the hon. Lady for that point of order. It is not a matter for the Chair, but I am sure that the House has heard, and the record will show her comments.
Business without Debate
Madam Deputy Speaker (Dawn Primarolo)
With the leave of the House, we shall take motions 3 to 7 together.
Motion made, and Question put forthwith (Standing Order No. 118 (6)),
Dangerous Drugs
That the draft Misuse of Drugs Act 1971 (Ketamine etc.) (Amendment) Order 2014, which was laid before this House on 5 March, be approved.
County Court
That the draft County Court Remedies Regulations 2014, which were laid before this House on 10 March, be approved.
Local Government
That the draft Durham, Gateshead, Newcastle upon Tyne, North Tyneside, Northumberland, South Tyneside and Sunderland Combined Authority Order 2014, which was laid before this House on 13 March, be approved.
Financial Assistance to Industry
Motion made, and Question put forthwith (Standing Order No. 118 (6), and Order, 31 March),
That this House authorises the Secretary of State to undertake to pay, and to pay by way of financial assistance under section 8 of the Industrial Development Act 1982, in respect of certain British Business Bank programmes, sums exceeding £10 million and up to a cumulative total of £100 million in respect of the Business Angel Co-investment Fund; and sums exceeding £10 million and up to a cumulative £380 million in respect of the Start-Up Loans programme.
Energy
Motion made, and Question put forthwith (Standing Order No. 118 (6)),
That the draft Domestic Renewable Heat Incentive Scheme Regulations 2014, which were laid before this House on 10 March, be approved.—(Mark Lancaster.)
Question agreed to.
European Union Documents
Transparency and Public Trust in Business
(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lisa Nandy (Wigan) (Lab)
Six years after the peak of the global financial crisis there should surely no longer be disagreement among any of us that businesses are bound by the same ethical and social responsibilities that bind us all. As the financial crash showed, business transparency is absolutely essential to society. The lack of it in the financial sector in recent years continues to have huge repercussions for people in my town of Wigan, in the UK, and across the world.
We saw in the recent horsemeat scandal that lack of transparency can have major implications for consumers in the UK, but it can have even greater implications for the lives of people across the world, as in the horrific loss of life in Bangladesh with the collapse of the Rana Plaza complex. As business has become increasingly complex, it is very hard for consumers to know, first, whether they can trust the product they are buying, and secondly, whether the business they are supporting is operating ethically. Little wonder, then, that there is increasing public appetite for action. I was surprised to hear recently that the Edelman Trust Barometer found that the public want greater regulation of business by a margin of 4:1.
But it is not just the public who want action; companies and business leaders are also behind the call for higher business standards. The Minister will be aware of the B Team, an alliance of thinkers and business leaders, including Richard Branson and Paul Polman, the chief executive of Unilever, who are calling for a plan B that, in their words, puts
“people and planet alongside profit”.
At the World Economic Forum in Davos, they called for companies to implement the highest standards in their core operations and across their supply chains, including greater transparency as a matter of course and as good business practice.
There is good reason for this. Business needs to command the support of the public, of investors and of shareholders in order to survive and to grow. However, public trust is low. Last year, an Ipsos MORI poll found that only 34% of the people questioned trusted business leaders to tell the truth. We need to see this in context; I would hate to think what they had to say about politicians. Research by Goldman Sachs and KPMG has shown that companies that have implemented responsible business practices such as transparency throughout their operations often lead on stock market performance and attract a wider and more loyal investor base from investors who are increasingly looking at these issues and want to invest in companies that have a long-term, not a short-term, outlook.
There are many examples of business leading the way in this field. As chairperson of the all-party parliamentary group on corporate responsibility, I have been pleased to meet and work with many such business leaders over the past four years. However, the Government need to play their part too, because, as many of these business leaders have told me, operating transparently is not always easy. They do so in the glare of public attention, they sometimes get it wrong, and it is incredibly complicated. Companies are often involved in extremely complex supply chains. That was brought home to me and to the wider public after the Rana Plaza disaster, where some of the multinational companies involved did not even realise at first that they had been contracting from suppliers who were based in the complex. It was only after campaigners and the media got involved that they realised they had been doing so.
Some companies are making efforts to operate to the highest ethical standards in terms of human rights and the environment—and to be open about it—but their problem is that they are in competition with businesses that do not do that. Many such businesses are based in the UK and listed on the London stock exchange, but they face no penalties whatsoever for breaching the standards the Government say they want them to meet. Like so many others, I believe it is time that the playing field was tilted in favour of those that are operating to high ethical standards, not against them.
Jim Shannon (Strangford) (DUP)
I asked the hon. Lady beforehand for permission to intervene on her. Does she agree that greater transparency of who owns and controls companies is necessary and that, in addition to addressing the issues she has mentioned, any new measures must address tax evasion, money laundering and the financing of terror?
Lisa Nandy
That is absolutely right. This goes to the heart of public trust in business, which is about transparency and a commitment to tackling such issues.
The business and human rights action plan was published jointly last September by the Foreign Office and the Department for Business, Innovation and Skills. The UK was one of the first countries to breathe life into the United Nations’ guiding principles on business and human rights. I am proud of that and congratulate Ministers for taking a lead on it. “Good Business” sets out the standards it expects companies to uphold, but so far it does nothing to demand those standards of them. We have had a decade of voluntary corporate social responsibility. Given the experience of the past year and previously—when John Ruggie set out the guiding principles, which were unanimously endorsed by the UN—it is time for the Government to take a more proactive approach.
First, I have been deeply concerned by reports from non-governmental organisations and others that companies have been given conflicting messages by different parts of Government. Although the Foreign Office has consistently warned about the dangers for UK-based companies in knowingly or unknowingly breaching human rights overseas, it appears from anecdotal evidence that BIS has been acting in direct conflict with the commitments made in the action plan.
I want to draw the Minister’s attention to one concrete example where there is evidence of that happening. The Kiobel case was brought by a group of Nigerian activists who claimed that Shell had helped the Nigerian military to systematically torture and kill environmentalists in the 1990s. The cases against Shell were filed under the US alien tort statute, which applies extraterritorially, so it enables non-US plaintiffs to bring claims against foreign companies in the US courts for acts that occur in a third country. Shell challenged that use of the alien tort statute and the UK Government intervened to support the company’s position. The court then ruled in Shell’s favour, which limits the ability of communities in developing countries to challenge corporate malpractice in the US courts in future. The Government’s intervention ran contrary to the commitment made by the Prime Minister to implement the UN guiding principles on business and human rights, which were unanimously endorsed by Governments in 2011.
Will the Minister give an assurance that her Department is completely committed to upholding the principles in the action plan, without qualification, and that it will commit to the same openness in its dealings with business as the Government say they want to see from business itself? In particular, will she ensure that businesses receiving export credit support or development partnership funding have to show that they are meeting the standards of the UN guiding principles?
Secondly, the entire action plan is predicated on the principle of transparency—none of it can be monitored or enforced without it. Nowhere is that more true than in one of the central pillars of John Ruggie’s principles, namely the access to remedy. Without transparency, people whose lives and communities have been destroyed have no effective way of getting justice. As we saw with the South African miners who took a case against Cape plc, companies will often seek to cover the impact of their actions, creating enormous difficulties for communities and their lawyers in gaining the evidence they need to put before the courts.
I must tell the Minister that without transparency requirements, there is no way to prevent such injustices. I recently met representatives of the Afro-Colombian Community Council of Opoca in Colombia. After an 11-year struggle to acquire a collective land title, it was finally granted the right to 73,000 hectares of collective land titles in September 2011, which affected about 17,500 people. They had an 11-year struggle only to discover that a mining concession, covering approximately 55,000 hectares of their ancestral territory, had been granted to AngloGold Ashanti, which is a company registered on the British stock exchange. A proactive duty on companies to disclose information would prevent such harm, while a greater commitment to transparency and—crucially—penalties for those who do not comply is the only way to enable people to access justice.
Finally, I want to tell the Minister:
“To no one will we sell, to no one deny or delay right or justice.”
That principle in Magna Carta has formed the basis of law, liberty and rights in this country for centuries. In this area at least, we are falling well short. Will the Minister commit to improving transparency and access to justice for communities harmed by the actions of British businesses abroad? At present, I and many other hon. Members in the Chamber are approached by so many people who have such a different story to tell. This is an issue of morality, good business and consumer confidence, but above all of national reputation. We should promote not the worst but the best of British business to the world. I look forward to the Minister’s response.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott)
I congratulate the hon. Member for Wigan (Lisa Nandy) on securing this very important debate. I completely agree with her about the importance of getting this issue right. As she said, it has very wide repercussions not just in the UK, but in communities across the world. British companies work in so many countries. It is critical to get it right here, because it may have such broad repercussions on thousands, ten of thousands or hundreds of thousands of people. This important subject is not debated enough in the House, so I congratulate her on securing the debate today.
Business should be, and often is, a force for good in society. However, as the hon. Lady highlighted, the financial crisis a few years ago revealed severe shortcomings in corporate governance and caused widespread and understandable loss of trust for many people in relation to not only the financial sector, but business more generally, and we need to tackle that. At the same time, there was a realisation that companies had grown so powerful that their activities could have an impact on even the largest economies. The development of such a situation was a real wake-up call to many Governments.
Among the lessons that we have learned from the financial crisis, I want to highlight three areas on which the Government are taking action, and which relate to the points emphasised by the hon. Lady—greater transparency, accountability to both shareholders and wider society, and businesses and shareholders taking responsibility for the impact of their actions.
Mandatory reporting requirements are the key lever that the Government use to increase transparency. At its best, the narrative section of a company’s annual report allows investors to make informed choices through a proper understanding of the company’s strategy, the risks that it faces and its long-term sustainability. There is also the wider public interest to consider. As I have said, companies can have a significant impact on communities and the natural environment in which they operate. Requiring businesses to report fully and openly is therefore the first essential step towards social responsibility and accountability.
As the hon. Lady highlighted, shareholders have responsibilities as well as rights. As owners of a company, they have a duty to understand its operations and hold the board accountable, which is a very important role for them to play in our economy. That is especially the case for investment companies that place funds on behalf of savers and pensioners who are not in a position to exercise their ownership rights directly. They can be incredibly powerful in their role in influencing the direction of the company and how it operates.
The Government are not just talking about transparency but have taken action to ensure that we see greater transparency. Last October, the Government’s new reporting reforms came into force, increasing the transparency and quality of disclosure by both listed and private companies. The new reporting framework requires companies to set out clearly in their new strategic report how they operate, where they are heading and how they are managing risk.
In addition, we introduced important new reporting requirements in three areas related to the issues that the hon. Lady highlighted. On the environment, companies are now required to report on their greenhouse gas emissions and other environmental impacts. On gender balance, they now need to state the number of men and women on their board, in their senior management team and in the work force as a whole. I know that she has an interest in that issue. Finally, they need to report on human rights issues, which were at the heart of some of the examples that she gave.
Martin Horwood (Cheltenham) (LD)
I commend my hon. Friend on the work that she and her team are doing in the Department. One point that the hon. Member for Wigan (Lisa Nandy) rightly made was that there are still voluntary arrangements in place on human rights and the environment in the supply chain. As the hon. Lady said, the risk of voluntary arrangements is that the best companies comply but those that we want to do better are allowed to get away with competing unfairly with those pursuing best practice.
Jenny Willott
I reassure my hon. Friend that the UK’s requirements already go beyond a lot of the voluntary principles that have been in place. We have agreed in the EU stronger mandatory reporting requirements for large companies to disclose their policies in a number of areas, including in their supply chain, which my hon. Friend highlighted and in which I know the hon. Member for Wigan is interested. That is a huge step in enhancing transparency, and for many member states of the EU it is the first time that they have had such broad requirements. The UK has traditionally been further ahead in mandatory requirements on businesses. I personally feel strongly about the issue, and it was one of the first that I raised in the Department when I took on my role. I will come in a minute, if my hon. Friend the Member for Cheltenham (Martin Horwood) will bear with me, to some of the reasons why I believe there is a driver in the UK economy for businesses to act voluntarily.
The requirement to report on human rights issues is in line with the Government’s implementation of the UN guiding principles on business and human rights, which the hon. Lady highlighted. The first annual reports under the new requirements are just being published, and early signs are encouraging. I am proud that, as I have just said, the UK is leading the way in high-quality company reporting, which will really make a difference. For example, the clothes retailer H&M now not only publishes a list of all its suppliers but sets out the standards and codes of practice that it expects them to meet. Marks and Spencer uses a social enterprise technology provider, Good World Solutions, to gather feedback directly from 22,500 workers in its clothing supply chain in India, Sri Lanka and Bangladesh, ensuring that they can raise concerns without fear of reprisals or discrimination. There are companies in the UK that are doing a significant amount to tackle some of the problems that exist.
As I highlighted to my hon. Friend, we have been negotiating with our EU partners on a related proposal to improve companies’ reporting in general. The EU non-financial reporting proposals have now largely been negotiated and broadly mirror our own regulations, and I hope that they will be adopted before the European parliamentary elections in May. They will start to drive behaviour change in the EU more generally, which will provide more of a common platform for companies operating in the EU. British domestic regulations led the way and have given our companies and shareholders a head start.
Lisa Nandy
As the hon. Member for Cheltenham (Martin Horwood) said, the problem is that although some companies are leading the way, there are also companies that, frankly, are not paying this the blindest bit of notice. Will the Department commit to monitoring the impact of those tougher regulations to see whether they produce the results that we seek, not for those companies that are already doing it but for those that are not?
Jenny Willott
Absolutely. We have the firm basis of mandatory requirements because it is important that companies provide such information. I have mentioned the measures that impose compulsory requirements and, as the hon. Lady said, it is extremely important that those measures are enforced and monitored. However, we cannot change business culture through legislation alone, which is one reason why I actively encourage businesses to go beyond the regulatory requirements and consider what more they can and should be doing.
The hon. Lady highlighted that there is real consumer demand for this approach. There is increasing awareness of the power of the money that we spend in shops and on services, and of the broader impact that that spending can have across the world. Consumers have the power to influence company behaviour. People choose not to purchase clothes that they believe to have been made in a sweatshop and instead spend a bit more money somewhere else, which drives company behaviour too.
The voluntary approach is also important. Last year, we carried out a consultation to assess what Government, business and others should and could do to realise the full benefits of good corporate responsibility. One of the key findings from that consultation was that businesses increasingly see corporate responsibility as a source of competitive advantage because consumers are driving that behaviour. Businesses see corporate responsibility as essential to managing long-term success, which is positive.
Initial reporting of performance was limited, being produced by just a few pioneering companies, but that has now been replaced by more substantial reports with clearer business relevance. There has been huge growth in the number of organisations that are reporting and taking responsibility for the impact of their activities. There is a balance to be struck between ensuring that we have a solid baseline of mandatory reporting with which all companies must comply and encouraging businesses that want to go further. It is good that businesses see reporting as a competitive advantage and that there is a strong business case for reporting because it encourages more businesses to act in that way. Progress has also been driven by the work of international organisations such as the OECD and its guidance for multinational enterprises.
The hon. Lady talked about the business and human rights action plan, and the importance of business impacts on human rights is increasingly recognised, not least through the action plan. As she said, the UK is the first country to publish an implementation plan for the UN guiding principles in this area. The Foreign and Commonwealth Office and the Department for Business, Innovation and Skills are working together to deliver that implementation plan, and I reassure her that BIS is completely committed to the plan and is working closely with the FCO to ensure that we deliver. The implementation plan is important to me and to the Department, and in it we encourage UK companies to adopt due diligence policies to identify, prevent and mitigate risks to human rights, to understand the full extent of their supply chains in the UK and overseas, and to emphasise to businesses the importance of behaviour in their supply chains that is in line with the guiding principles to ensure that we see progress throughout the supply chain.
Supply chain relationships are just one example of where businesses can take positive action that will have a greater impact than UK or even EU regulations. The hon. Lady highlighted how badly things can go wrong with the absolutely shocking example of the Rana Plaza fire. The British public’s awareness of the importance of such action has increased. The business and human rights action plan provides a framework for businesses to engage with their supply chains overseas, and it equips UK companies to give their suppliers both the information they need and the commercial incentive to act in accordance with UN guiding principles, which is important for driving behaviour.
I am proud of the Government’s record on transparency. The UK company reporting framework is proving to be an example to others. When the EU non-financial reporting proposal is finally adopted, we will implement it to improve company reporting still further. Those reforms will need time to prove their worth. We will continue to engage with businesses and civil society in the debate on transparency and reporting, so that we continue to anticipate events rather than react to them. At the same time, we will continue to work with businesses that choose to go beyond regulatory requirements in taking responsibility for the wider impact of their actions, including the activities of their supply chains.
Lisa Nandy
Before the Minister finishes, will she commit to look at export credits? If she cannot answer now, I will be more than happy if she writes to me later.
Jenny Willott
I am happy to write to the hon. Lady on export credits.
I agree with the hon. Lady on access to justice. That is a key plank of the Foreign and Commonwealth Office and Department for Business, Innovation and Skills action plan on human rights. We support access to an effective remedy for victims of human rights abuses involving business enterprises within UK jurisdiction—that is the wording. We are working with the FCO and will report on progress by the autumn. That is an important element of the action plan.
I have asked businesses, business organisations such as the CBI and the British Retail Consortium, and Which?, Business in the Community and other non-governmental organisations and consumer groups to work with BIS to make it easier for businesses to do more and go further, as the hon. Lady highlighted. Together, we will consider what further steps will enable UK businesses to engage with their global supply chains, act on human rights issues and report on the action they are taking to make it more transparent.
The Government remain fully engaged—I hope the hon. Lady is reassured by my commitments this evening—and will continue to take action. I look forward to updating the House on progress later this year.
Question put and agreed to.