House of Commons

Wednesday 2nd July 2014 Commons Chamber

Wednesday 2 July 2014

The House met at half-past Eleven o’clock

Prayers

Wednesday 2nd July 2014 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 2nd July 2014 Commons Chamber

The Secretary of State was asked—

[Mike Freer (Finchley and Golders Green) (Con)]

1. What assessment he has made of the potential for international inward investment in Scotland after 2014.

[The Secretary of State for Scotland (Mr Alistair Carmichael)]

As part of the United Kingdom, Scotland has an impressive track record of attracting international inward investment, which recent figures have put at its highest level for 16 years. Scotland has strong potential to build on that record as part of the UK, the No. 1 location for Europe-bound foreign investment.

[Mike Freer]

Does my right hon. Friend agree that inward investment is boosted by Scotland being part of a single market and having a single currency?

[Mr Carmichael]

Indeed; I do agree with my hon. Friend. The people of Scotland very much understand that access to the pound sterling as our currency and access to that larger UK market benefit them, and they value them, especially the business community. We know that, because that is why the nationalists are constantly telling us that even in independence we would still be able to keep those things. They are wrong; it is cynical; and as we saw from yesterday’s poll, nobody is really being fooled by it.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

11. However, it is the case that inward investment is faltering. I have had experience after experience of talking to foreigners who are not investing in Scotland as a result of the uncertainties and the possible likely divorce. Are we not by far better off as a united kingdom than we would be with a separate Scotland?

[Mr Carmichael]

We are very much better off as a result of being part of the United Kingdom, and I long for the day when again Ministers here and in Edinburgh can all concentrate on doing their day job of working together to get the maximum benefit to Scotland and Scotland’s economy, and jobs for the people of Scotland that come from inward investment—instead of a referendum distraction.

[John Thurso (Caithness, Sutherland and Easter Ross) (LD)]

My right hon. Friend will be well aware that marine renewable energy presents a considerable opportunity for inward international investment as well as for export, based on the knowledge we have acquired. In that regard, it is vital that MeyGen’s project goes ahead. What discussions has he had with either the Department of Energy and Climate Change or the Crown Estate to enable that to happen?

[Mr Carmichael]

I have had a number of discussions, as I think my hon. Friend is aware, involving my colleagues in DECC and in the Crown Estate. I am very keen to ensure that no procedural difficulties will stand in the way of the development from MeyGen, which, as he and I both know, is a very exciting and potentially lucrative development for his area.

[Angus Robertson (Moray) (SNP)]

Inward investment into Scotland is at a 16-year high under a Scottish National party Government and in the run-up to an independence referendum. That contrasts with all the claims of doom and gloom from the Chancellor of the Exchequer. Given that the UK Government were spectacularly wrong in their claims on inward investment, why should anybody trust the myriad Westminster scare stories?

[Mr Carmichael]

I am delighted that the hon. Gentleman gives me the opportunity to remind the House that of the 111 inward investment projects that were successful in 2012-13, 84 were supported by UK Trade & Investment. That is the sort of heft that is given to Scottish business by being part of the United Kingdom; that is what he wants us to walk away from.

[Angus Robertson]

The UK Government have launched a confrontational approach to the European Union. The Prime Minister went to Brussels last week and was outvoted 26 to 2. If smaller countries have no say in the European Union, why is it that a Luxembourger is the new President of the European Commission—from a country smaller than the city of Glasgow?

[Mr Carmichael]

I will take absolutely no lectures from the Scottish nationalists on the subject of confrontational approaches. It really is a mark of the desperation of the position in which they find themselves that that is the best they can come up with.

[Mrs Anne McGuire (Stirling) (Lab)]

The Secretary of State commented on the Ernst and Young report, and it also identified that although investment was increasing, the number of jobs related to that inward investment was decreasing. I wonder what action the Minister can take, hopefully in co-operation with the Scottish Government, to ensure that there is greater correlation between investment and jobs created in Scotland.

[Mr Carmichael]

The right hon. Lady points to a direction in which sensible politics ought to go, and I would love to be working in that way with the Scottish Government. Unfortunately, however, it takes two to tango.

[Ann McKechin (Glasgow North) (Lab)]

2. What steps he is taking to incentivise employers in Scotland to pay the living wage.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

The Government support businesses that choose to pay the living wage, where it is affordable and does not cost jobs.

[Ann McKechin]

The Minister will be aware that many people in Scotland have started the holiday season and packed their bags, and many will be visiting the beautiful islands of Scotland, but last week the National Union of Rail, Maritime and Transport Workers reported that foreign-resident seafarers who are working on the ferries are being paid as little as £2.35 an hour. That is a disgrace to Scotland, and I urge the Minister to use his offices to work with the Scottish Government to persuade the ferry companies to pay not only the minimum wage but a living wage to every single one of their workers.

[David Mundell]

I most certainly take on board what the hon. Lady says and I will make representations in that regard. I am sure she welcomes the fact that earlier this month the UK Government published a list of employers who had not paid the minimum wage. Unfortunately, two of them were in Scotland.

[Mike Crockart (Edinburgh West) (LD)]

Mr Speaker, I know that you will be happy to hear that in May I employed an apprentice in business administration in my office and committed to paying her the living wage. Does the Minister agree with me that all MPs’ offices and Government Departments should set an example and move as quickly as possible to being accredited living wage employers?

[David Mundell]

The hon. Gentleman sets a good example, and certainly in apprenticeship schemes offered by Members of Parliament, I support the action he has taken.

[Mr William Bain (Glasgow North East) (Lab)]

14. Seven out of 10 young people in Scotland who are unemployed are applying for benefit for the second time. Is that not testament to the fact that there are simply not enough secure jobs for them that pay the living wage? Why will this Government and their equally bad counterparts in Edinburgh not use the public procurement powers available to them to ensure that every Scottish young person gets the living wage?

[David Mundell]

I would have thought that the hon. Gentleman would welcome the fact that the number of those in the 16 to 19-year-old category in Scotland who are out of work has fallen by 4,000. Work is the way out of poverty, and that is what this Government are encouraging.

[Robert Halfon (Harlow) (Con)]

Does my hon. Friend not agree that the best way to achieve the living wage in Scotland and elsewhere in the country is by continuing to take millions of low earners out of paying income tax altogether?

[David Mundell]

I absolutely agree. Tens of thousands of Scots have benefited from the fact that we have raised the personal allowance. Roughly two thirds of those on the minimum wage are now paying significantly less tax than they were when this Government came to power.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I know the Minister recognises that payment of the living wage will ease the pressures of the cost of living that many households experience, but in view of his recent admission to the Scottish Parliament’s Welfare Reform Committee that his Government’s benefits sanctions and welfare reforms have contributed to the increase in the number of food bank users, will he now apologise?

[David Mundell]

What I think politicians should apologise for is making the poor and most vulnerable into political footballs. Poverty is a scourge in our country, not an opportunity for a press release.

[Mr Speaker]

Order. In case the House is not aware, I can inform colleagues that the House of Commons has received its accreditation from the Living Wage Foundation.

[Pete Wishart (Perth and North Perthshire) (SNP)]

3. What steps he is taking to inform the public about the Scottish independence referendum.

[The Secretary of State for Scotland (Mr Alistair Carmichael)]

To inform the debate, a variety of information, including a range of detailed analysis papers and a booklet for each household in Scotland, has been published. I have also participated in public debates and will continue to do so to set out the benefits of Scotland’s remaining in the United Kingdom.

[Pete Wishart]

For which we are eternally grateful, but is not the best way to inform people to debate? Instead, we have the leader of the no campaign, his right hon. Friend the Prime Minister, running a mile, feart to do just that? What about the substitute-designate? It will be a slaughter worse than the Bannockburn re-enactment if they put up the angry, agitated Alistair to debate with the First Minister. The Secretary of State himself could do it; he is good at this stuff—he could even take Rhona with him. But what we really need is the organ grinder, not one of the Alistair monkeys to debate with the First Minister.

[Mr Carmichael]

That was pitiful. I cannot believe it sounded good even when the hon. Gentleman rehearsed it in the mirror this morning. It is typical, though, of what we hear from the Scottish nationalists. They are desperate always to talk about how we will debate. They do that only because they want to avoid the actual debate, because they know that the force of argument is on the side of those of us who want to remain in the United Kingdom.

[Iain Stewart (Milton Keynes South) (Con)]

15. Will my right hon. Friend make sure that before 18 September the public have full information at their disposal about the significant extra powers for the Scottish Parliament for which this Parliament has already legislated? It is perfectly possible for Scotland to have more autonomy without ripping up our country.

[Mr Carmichael]

That is exactly the position. As of next year, as a result of the Scotland Act 2012, the Scottish Parliament will have control over stamp duty land tax and the landfill tax, it will have a borrowing power and, come 2016, it will have the power to set a Scottish rate of income tax. Those are significant tax-raising powers. I want to see us go further on that. Of course, that will require Scotland to decide to remain part of the United Kingdom.

[Graeme Morrice (Livingston) (Lab)]

Does the Secretary of State agree that third parties such as businesses and trade unions need to be able to make their voices heard in the referendum debate? Will he join me in condemning those people who continue to intimidate those who speak out against independence?

[Mr Carmichael]

I absolutely 100% and without any reservation condemn any intimidation, wherever it may appear. This is by a country mile the single most important issue that we, the people of Scotland, will ever have to resolve for ourselves. Nobody should feel that they are constrained in having their say or asking questions about what it would mean for them, their family or their business. Anybody who tries to silence people on the other side of the debate should be no part of it.

[Sir Menzies Campbell (North East Fife) (LD)]

Is not the role of our Government to provide answers to the questions that those arguing for independence refuse to provide—either because they do not know the answer or because they do not want us to know the answer?

[Mr Carmichael]

Indeed, that is the case. It has been remarkable that on every occasion when we could have been given hard facts and information by the Scottish Government throughout this exceptionally long campaign, we have instead been given opinion and assertion. People are not stupid, though. They draw their own conclusions from that, as was apparent from yesterday’s YouGov poll in The Times.

[Margaret Curran (Glasgow East) (Lab)]

This is the last Scottish questions before the referendum. People across Scotland know the magnitude of this decision and that if there is a yes vote, it is irreversible. That is why people need as much information as possible. Does the Secretary of State agree that when presented with the facts, most Scots do not want to turn their backs on the United Kingdom, and that a message of a strong Scotland with a strengthened Scottish Parliament is gaining support in every part of Scotland?

[Mr Carmichael]

The most important message that the people of Scotland have to get from any source is that the decision we make on 18 September is a decision from which there will be no going back. This has to be a once and for all decision. From that point of view I agree completely with the hon. Lady. Over the past 300 years, as part of the family of nations that is the United Kingdom, we have achieved a great deal of which we should be proud, and I and the people of Scotland do not want to walk away from that.

[Margaret Curran]

I thank the Secretary of State for that answer, which is particularly important this week, as we celebrate the naming of HMS Queen Elizabeth. Will he ensure that people across Scotland are informed about the value of such UK contracts to the shipbuilding industry in particular? Does he agree with the shop stewards at Rosyth and on the Clyde that the best way to protect the shipbuilding industry in Scotland is to say no thanks in September?

[Mr Carmichael]

I absolutely agree with the hon. Lady and with the shop stewards at Rosyth and on the Clyde, all of whom I have met on a number of occasions in recent weeks. They are clear and unambiguous about the message that the hon. Lady has just articulated. The House should remember that that is not the view of a politician; that is the view of trade unionists—people who are charged with protecting the best interests and the jobs of their members. If they thought for a second that independence would be good for their members and that it would help to protect their jobs, I have no doubt that the trade unions on the Clyde and at Rosyth would be supporting it. The fact that they are not tells us all we need to know.

[Sir Gerald Howarth (Aldershot) (Con)]

Will the Secretary of State ensure that Scottish voters understand that if they vote for Scotland to become a foreign country, they will lose the pound and all the stability and economic advantage that goes with it? Will he also make it clear that many of us in England—indeed, the vast majority—want Scotland to remain a vital and important part of our United Kingdom so that we can jointly share in our future prosperity?

[Mr Carmichael]

I agree with my hon. Friend that that is the view of most people in England, and in Wales and Northern Ireland. I look at how we have tackled the challenges we have faced over the past 300 years, and I see that over that time we have identified the problems and reached out from Scotland, to communities such as Liverpool, Newcastle, Manchester, Cardiff and Belfast, and tackled them by making common cause. That has worked for us, and I believe that it will continue to work for us.

[Jim McGovern (Dundee West) (Lab)]

4. What assessment his Department has made of the effect of the regional air connectivity fund on Scotland.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

The regional air connectivity fund was announced by the Chief Secretary to the Treasury last year and was doubled to £20 million in the Budget. It has already been successful in securing the air link between Dundee and London, a vital support for economic growth in the hon. Gentleman’s great city.

[Jim McGovern]

I thank the Minister for that answer. Some £2.8 million came from the UK Government to retain the air link between London and Dundee. Is that not just one more example, albeit a crucial one for Dundee, of why Scotland is stronger as part of the UK?

[David Mundell]

I absolutely agree. The air connectivity fund is a good example of the UK Government working to support economic development across all the nations and regions of our United Kingdom.

[Mr Charles Kennedy (Ross, Skye and Lochaber) (LD)]

May I ask the Minister, on behalf of my hon. Friend the Member for Argyll and Bute (Mr Reid) and myself—this is not just a parliamentary pincer movement; it is close to the Secretary of State’s heart, and I am assured that he does have a heart, at least on Wednesdays—about Islay airport and Broadford airport on the Isle of Skye? They could both benefit if that excellent scheme were extended in conjunction with the Scottish Government: in the case of Islay, because it lacks a public service obligation and wants more commercialism; and in the case of Broadford, by re-establishing passenger links. Will he give that his full support?

[David Mundell]

I will most certainly take on board what the right hon. Gentleman says on his behalf and that of his colleagues. I am sure that everybody would welcome the opportunity to fly over the sea to Skye.

[Mr Ian Davidson (Glasgow South West) (Lab/Co-op)]

Does the Minister agree that those who are using that fund to fly from London to Dundee later this week in order to see the launch of the aircraft carrier will be able in two different ways to see the strength of the United Kingdom?

[David Mundell]

Absolutely. The hon. Gentleman will have heard the Secretary of State highlight the importance of the flotation of the aircraft carrier on Friday, which will be a very important moment not only for Scotland, but for our whole United Kingdom.

[David Mowat (Warrington South) (Con)]

5. What assessment he has made of the potential effect of Scottish independence on energy flows between Scotland and the rest of the UK.

[The Secretary of State for Scotland (Mr Alistair Carmichael)]

Scotland has a thriving energy sector which benefits from unrestricted access to the integrated Great Britain energy market. That supports jobs, keeps bills lower and spreads the substantial costs over 30 million households and businesses.

[David Mowat]

The Scottish Government have now decided to generate 100% of electricity from renewables by 2020. The implied subsidy for that is £4 billion a year, or £1,000 per voter a year. Has the Secretary of State had any discussions with the Scottish Government about who would pay for that in the event of independence?

[Mr Carmichael]

What I can tell my hon. Friend is that at the moment the cost of the subsidy required for the development of renewables is spread across the whole United Kingdom market. In an independent Scotland, that cost would have to be met by households in Scotland, which would mean a difference of between £38 and £189 in Scottish energy bills. We do exceptionally well from the subsidies that come to Scotland as part of the United Kingdom.

[Fiona O'Donnell (East Lothian) (Lab)]

Does the Secretary of State think there would be a market in the rest of the UK for expensive renewable energy from an independent Scotland, or is a single regulated energy market best for Scotland and best for the UK?

[Mr Carmichael]

The benefits and opportunities that come to generators of renewable energy in Scotland from being part of that single integrated market speak for themselves. The fact that we are being asked to leave that should be of concern to them.

[Sheila Gilmore (Edinburgh East) (Lab)]

6. What discussions he has had with his ministerial colleagues on the transition costs of an independent Scotland.

[The Secretary of State for Scotland (Mr Alistair Carmichael)]

I have regular discussions with ministerial colleagues, to ensure that people in Scotland have the full facts about the economic consequences of independence. The Scottish Government have repeatedly refused to publish their own workings. I call on them today to publish the work they have carried out.

[Sheila Gilmore]

I thank the Secretary of State for that reply. The Scottish Government’s own Finance Secretary calculated, in an internal memo, that the cost of setting up a new tax authority alone would be some £650 million. Is it not right that the Scottish Government should give that and other, similar information they have to the Scottish people before asking them to vote for a pig in a poke?

[Mr Carmichael]

It is worth reflecting that that figure is in the public domain only because the document was leaked. The truth of the matter is that, whenever there is any difficult news to be had, the Scottish Government will go to any lengths to suppress it, because, frankly, they are prepared to tell us anything that they think will make us more likely to vote for independence.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

13. With the renovation costs of the Westminster Parliament expected to be £400 million a year every year for 10 long years, Professor Patrick Dunleavy said yesterday at the London School of Economics that the set-up costs for an independent Scotland would be £200 million and not the £1.5 billion that is on the Treasury website. Will the Secretary of State see to it that that figure is corrected and that the Westminster Government apologises both to Professor Dunleavy, an expert in this area for 30 years, and to the people of Scotland for that error and misinformation? [Interruption.]

[Mr Speaker]

Order. The hon. Gentleman is talking out his colleagues.

[Mr Carmichael]

The hon. Gentleman is out of date. I can tell him exactly what Professor Dunleavy said yesterday:

“Scotland’s voters can be relatively sure that total transition costs over a decade will lie in a restricted range, from 0.4 of one per cent of GDP (£600 million), up to a maximum of 1.1 per cent (£1,500 million). This is a step forward in debate”.

He was agreeing with Professor Iain McLean and said:

“I am grateful to Iain for helping to bring it out.”

The hon. Gentleman should also be grateful.

[Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)]

7. What assessment he has made of the effects of the distribution of housing benefit in Scotland.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

In recent months, I have met every local authority in Scotland to discuss a wide range of issues, including housing benefit.

[Mr McCann]

A report by my trade union, the GMB, shows that huge sums of housing benefit are paid to company landlords in Scotland. Bearing in mind the Secretary of State’s earlier answer, will the Minister meet me to discuss how we can bring together the UK, Scottish and local governments to ensure that we get best value for housing benefit and that we can create new houses and new jobs, rather than fill the pockets of company landlords?

[David Mundell]

I would certainly be happy to meet the hon. Gentleman, with a view to convening such a meeting.

[Mr Alan Reid (Argyll and Bute) (LD)]

I want to thank the Government for recognising the extra costs of living in remote rural areas and giving councils such as Argyll and Bute extra money to give discretionary housing payments to their tenants. I hope the Government will continue to give extra money to such councils in future years.

[David Mundell]

The hon. Gentleman will know that I wrote to the Deputy First Minister of Scotland with an offer to executively devolve the power to Scottish Ministers to set the statutory cap on discretionary housing payments in Scotland. That offer has been accepted and we are working constructively with the Scottish Government to take it forward in relation not just to rural areas, but to all councils in Scotland.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Will the Minister intervene with the Department for Work and Pensions so that we can have a system where someone who is sanctioned and taken off benefits when they have an appeal does not lose their housing benefit until the appeal is heard? Once the appeal is heard, they get their money back, but they then have the problem of finding that they are in debt to the local council. Can we not have a system that is sensible and fair to people who are sanctioned by the DWP?

[David Mundell]

I certainly take note of what the hon. Gentleman says, and I would be happy to meet him to discuss it further.

The Prime Minister was asked—

[Charlotte Leslie (Bristol North West) (Con)]

Q1. If he will list his official engagements for Wednesday 2 July.

[The Prime Minister (Mr David Cameron)]

This morning, I had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall have further such meetings later today.

[Charlotte Leslie]

A key driver of our welcome economic growth has been investment in new commercial enterprises. Does my right hon. Friend agree that the speedy completion of the Sainsbury’s and Bristol Rovers deal is a key part of Britain’s fight back to prosperity not only in achieving a new stadium for the south-west, but in unleashing hundreds of jobs, affordable housing, business growth and rail infrastructure plans? Will he do all he can to hasten the completion of this Sainsbury’s deal, which is so vital for our economy?

[The Prime Minister]

Having visited my hon. Friend’s constituency recently, I know how passionately she feels about this important development. I know that she will be delighted that the judge in question has dismissed the judicial review. We can now hope that this paves the way for the supermarket and the stadium to be built, and I hope that Sainsbury’s will press ahead with that. Not only will this mean a new home for Bristol Rovers, but it will mean more jobs, more growth and better infrastructure for Bristol.

[Edward Miliband (Doncaster North) (Lab)]

It is four years since the Prime Minister announced his top-down NHS reorganisation. Can he tell us whether, since then, the number of people having to wait more than the guaranteed two months for cancer treatment has got better or worse?

[The Prime Minister]

The number of people being treated for cancer has gone up by 15%, and we are meeting the key waiting time targets, particularly the waiting time target for accident and emergency, which we met for April, even though the right hon. Gentleman had once again predicted a crisis.

[Edward Miliband]

That was a very specific question about cancer treatment: I asked whether things had got better or worse. After all, the Prime Minister did this big reorganisation and said things would get better. Macmillan Cancer Support warns that more lives are being put at risk. Cancer Research UK says,

“This isn’t just a missed target—some patients are being failed”.

The NHS has missed the target on access to cancer treatment for the first time ever. Is he really telling two of the most respected cancer charities that they are wrong about the target and that things are getting better, not worse?

[The Prime Minister]

What I am saying is that we introduced for the first time ever a cancer drugs fund, which is treating 50,000 people. That is what is happening. The number of people being treated for cancer is up 15%. This is all in stark contrast to Wales, where Labour is in charge—[Interruption.] Labour Members all shake their heads, but the fact is that Labour is in charge of the NHS in Wales, and it has not met a cancer target there since 2009.

[Edward Miliband]

Actually, the Prime Minister is wrong about that. In Wales, more patients start cancer treatment within 62 days than in England. We know why he wants to talk about Wales—because he cannot defend his record in England. Was it not interesting that, on the cancer treatment target, he could not pretend things were getting better, but he could not admit things are getting worse? Let us try him on another one: in the four years since his reorganisation, has the number of people waiting more than the guaranteed four hours in A and E got better or worse?

[The Prime Minister]

We have met our waiting time target for accident and emergency. Let me tell the right hon. Gentleman exactly how long people are waiting. When the shadow Secretary of State was Secretary of State for Health, the average waiting time was 77 minutes; under this Government, it is 30 minutes. That is what is happening under this Government.

Let me admit to a mistake, Mr Speaker. I have just said that Labour has not met a cancer treatment target in Wales since 2009. I am afraid I was wrong: it has not met a cancer treatment target in Wales since 2008. Of course, in Wales there is no cancer drugs fund; there has been an 8% cut to the budget; people are dying on waiting lists—and Labour is responsible.

The right hon. Gentleman asked me to defend my record over the past four years; I will. There are 7,000 more doctors, 4,000 more nurses, over 1,000 more midwives, and we are treating over 1 million more patients a year. Whereas the NHS under Labour had the disgrace of Mid Staffs, we can now see the NHS being properly invested in and properly improving.

[Edward Miliband]

I will tell the Prime Minister about our record on the NHS: the shortest waiting times ever, more doctors and nurses than ever before and the highest patient satisfaction ever. That is Labour’s record on the NHS. Now, it was a long time ago, but he did not answer the question. It was on a target that he set, on four-hour waits in A and E. Let me give him the figures for his target: before his reorganisation, the number of people waiting more than four hours was 353,000. After his reorganisation, that has risen to 939,000, an increase of 300%. Is that better or worse?

[The Prime Minister]

The average waiting time is down by more than half. That is better. But the right hon. Gentleman does not have to listen to me—he can listen to the shadow Health Secretary, who said that this is

“the best health service in the world.”

That is what he said. He was quoting the report from the Commonwealth Fund, which is an independent organisation. It ranked the United Kingdom—for the first time, and under this Government—as having the best health service anywhere in the world. It is better than in America, better than in Germany, better than in France, better than in Australia. [Interruption.] He says that is his record, but it has happened only under this Government, and I can tell him why. Mixed-sex wards have been virtually abolished. Infection rates have been halved. A million more patients have been treated. There is a cancer drugs fund for the first time ever. There are more doctors, more nurses, more midwives, more people being treated, and it is official: the best NHS in the world.

[Edward Miliband]

It is this party that created the NHS, and every time we have to save it from that lot opposite. Once again, the Prime Minister did not answer the question. More people are waiting more than four hours in A and E. What about those people whose condition is so serious that they need a bed in hospital? Can he tell us, since his reorganisation has the number of people waiting more than four hours on trolleys—something he said he would get rid of—got better or worse?

[The Prime Minister]

People are waiting less time to get into accident and emergency than they were under the last Labour Government. We remember what that Government gave us: the disgrace of Mid Staffordshire, for which they have never properly apologised. As for what they said about our plans, we have put £12.7 billion extra into the NHS and their view was that that was irresponsible. They oppose reform of the NHS, and we can see the effect in Wales: no reform, no money, longer waiting lists, no targets met and people dying on waiting lists. That is under a Labour Government.

[Edward Miliband]

The Prime Minister cannot answer any of the basic questions about his own targets in the NHS. I can tell him that the number of people waiting on trolleys for more than four hours has gone up from 61,000 to 167,000 on his watch. He promised that the reorganisation of the NHS would make things better, but it has made them worse: worse on access to cancer treatment, worse on A and E waits, worse on GP access. The NHS is getting worse on his watch, and there is only one person to blame: him.

[The Prime Minister]

If the right hon. Gentleman cannot do better than that, even on the NHS, he really is in trouble. Under this Government, millions more patients have been treated. There is a cancer drugs fund for the first time ever. Our health service is ranked officially the best in the world. We know what he would do, because we have heard from the director of policy, who said that no interesting ideas will emerge from Labour’s policy review—that is official—and his guru, Lord Glasman, has come out and said that he has “no vision.” Yesterday he misquoted statistics and got them completely wrong, and the managing director of the factory he was speaking in said that Labour’s policy would be a “bureaucratic nightmare”. I say to the people looking glum behind him, cheer up, folks—it’s only Wednesday.

[Jake Berry (Rossendale and Darwen) (Con)]

It is good to be back, Mr Speaker.

Cherylee Shennan, a 40-year-old mother, was murdered in Rossendale on 17 March by Paul O’Hara, who was out on licence after having murdered his former partner in 1998. The introduction of Clare’s law or the right to know whether one’s partner has a history of violence—Cherylee did know of her partner’s history of violence—must be backed up by support from the police and the probation service, so that people in such situations know of the dangers that they face and so that we do not see another tragedy like the death of Cherylee.

[The Prime Minister]

It is good to see my hon. Friend back in his place. He makes an important point. The introduction of Clare’s law has made a difference because it gives people the right to any information about the potential dangers from a partner. I am pleased that that has been rolled out across the country. He is absolutely right that we need to do more with the police, the probation service and the Prison Service to ensure that more warnings are given in more cases.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

Q2. The Prime Minister will be aware of the housing crisis in London, but is he aware of the distinctive contribution of his colleague, the hon. Member for Newbury (Richard Benyon)? Through his £110 million family firm, he has bought up the New Era estate in Hackney. The firm intends to drive up—[Interruption.]

[Mr Speaker]

Order. The question will be heard. What people think of it is neither here nor there. This is supposed to be a bastion of free speech and the hon. Lady will be heard, however long it takes.

[Ms Abbott]

Families in Hackney face seeing their rents driven up, eviction and being put on the street. Are the activities of the firm of the hon. Member for Newbury the Prime Minister’s idea of compassionate conservatism?

[The Prime Minister]

What I would say to the hon. Lady is that we all know that we need to see more houses being built. We have seen 41,000 affordable starts over the last year and more than a fifth of those have been in London. We need more house building and more houses being provided. We will then see more affordable rents in the social sector and in the private sector.

[Mr John Baron (Basildon and Billericay) (Con)]

Q3. One in three of our nuclear test veterans’ descendants has been born with a serious medical condition. Given that our cross-party campaign seeks recognition and not compensation, including an ex gratia payment by the Government into a charitable fund to help those in need, will the Prime Minister, following our last meeting in April, clear the logjam, recognise the veterans and finally resolve this shameful chapter in our nuclear history?

[The Prime Minister]

First, I pay tribute to my hon. Friend, who has campaigned consistently on this issue in the House and outside it. He and I have discussed the matter. I am happy to tell the House that the Government recognise and are extremely grateful to all the service personnel who participated in the nuclear testing programme. We should be in no doubt that their selfless contribution helped to equip the UK with the deterrent that it needs. Following our meeting, I asked my officials to look again at the specific points and arguments that he made. I will come back to him as soon as possible.

[Andy McDonald (Middlesbrough) (Lab)]

Last Saturday, I spoke to my 93-year-old constituent, Keith Ludrecius, who served as a merchant seaman throughout the second world war. He told me that he never thought he would live to see the day in this country when people who are in work still do not have enough money to live on. What does the Prime Minister have to say to Keith? Is it simply that this Tory Government make the rich richer and everyone else poorer, or is it just the inevitable consequence of his long-term economic con?

[The Prime Minister]

First, I am very proud to lead a Government who have increased the basic state pension by £15 a week, which will have helped his constituent. On how we help people in work, what we need to do is to create more jobs. We have seen 2 million more private sector jobs under this Government. The second thing that we need to do is to cut people’s taxes. Under this Government, people can earn more than £10,000 before they pay any income tax. That is at the heart of our long-term economic plan and it is working for Britain.

[Robert Halfon (Harlow) (Con)]

Q4. The world has seen the tragic and brutal murders of three Israeli youngsters, most probably by Hamas. Will my right hon. Friend give the Israeli Government every possible support at this time? Does he agree that, far from showing restraint, Israel must do everything possible to take out Hamas terrorist networks, and will he give the Israeli Government support in that?

[The Prime Minister]

What I say to my hon. Friend, who I know is passionate about these issues, and to everyone in the House, is that this was an absolutely appalling and inexcusable act of terror, and one can only imagine the effect on the families and friends of those poor teenagers, and what happened to them. It is very important that Britain will stand with Israel as it seeks to bring to justice those who are responsible. We also welcome the fact that President Abbas has firmly condemned the abduction and tried to help find those people. As my hon. Friend said, it is important that all security operations are conducted with care so that further escalation is avoided. The people responsible for this should be found and brought to justice.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Q5. In 2011, the Prime Minister said that waiting lists “really matter”. Why, then, are nearly 3 million people on ever-lengthening waiting lists—the highest number for six years? What does he have to say to Katherine Sinclair, a constituent of mine, who has been waiting in pain for 33 weeks for a hip operation? Does not she “really matter”?

[The Prime Minister]

I say to the hon. Gentleman that he needs to look at the figures. The figures show that the numbers of people waiting longer than 18 weeks, 26 weeks and 52 weeks to start treatment—[Interruption.] The shadow Chancellor says they are getting worse, but they are lower today than they ever were when he was sitting in government—lower than at any time. We have the record from yesterday of the Leader of the Opposition using dodgy statistics. Yesterday he claimed that three quarters of the jobs in our country were created in London. That is totally wrong. Have we heard an apology? Have we heard a correction? Does he want to correct the record? He will do anything to talk down the British economy.

[Andrew George (St Ives) (LD)]

The Prime Minister is aware—I have raised this issue with him before—of my long-standing campaign for serious investment in rail services from Penzance, of the independent and Liberal Democrat Cornwall council proposal for a train upgrade and train care centre at Long Rock, and of my 3,000-name petition, which I recently delivered to this House in support of that campaign. Will he visit my constituency with his cheque book and a favourable announcement?

[The Prime Minister]

I intend to spend a lot of time in my hon. Friend’s constituency between now and the next election, and I believe I will be bringing all sorts of good news for the people of St Ives.

[Ian Austin (Dudley North) (Lab)]

Q6. Germany has three times as many apprentices as the UK, and the number of young apprentices has fallen. Long-term youth unemployment in Dudley is twice the national average, and we will attract secure and better-paid jobs only if we make education and skills our No. 1 priority. Will the Prime Minister make a start by ensuring that every public sector procurement contract provides apprenticeship places?

[The Prime Minister]

If the hon. Gentleman looks at the figures for Dudley North, he will find that the claimant count is down by 20% in the last year. He will find that the youth claimant count is down by 21%, and the long-term youth claimant count down by 28% in the last year. The fact is that in the west midlands things are getting better, with more people in work and more jobs being created. He should be celebrating Dudley rather than running it down.

[Anne Marie Morris (Newton Abbot) (Con)]

The Prime Minister will be aware of the tragic death of my three-year-old constituent Sam Morrish from sepsis while under NHS care. Sam was failed by his GPs, out-of-hours services, the hospital, the primary care trust and the ombudsman. This must not happen again. Will the Prime Minister ensure that the ombudsman’s recommendations are implemented in full and that the systems of review within the NHS, and by the ombudsman, are radically overhauled to deliver proper transparency and accountability in a timely way? That family waited two years for justice.

[The Prime Minister]

My hon. Friend is absolutely right to raise that tragic case, and all our thoughts should be with Sam’s parents, who I know have had a meeting with the Health Secretary. It is shocking and saddening, as she says, to see how a whole succession of health services failed that family, and anyone who has lost a child, and lost a child that young, knows how harrowing and how dreadful that experience is. She is absolutely right: we must learn the lessons from that case, and make sure they are acted on and that they cannot happen again. Last week we launched a major safety campaign to prevent those sorts of tragic and—sadly—avoidable deaths.

[Kerry McCarthy (Bristol East) (Lab)]

Q7. At the Tory billionaires’ summer ball, the Defence Secretary was sat with the lobbyist for the Government of Bahrain. Can the Prime Minister tell us whether they discussed the fact that Bahrain is still not regarded by the Foreign Office as a human rights country of concern?

[The Prime Minister]

What I think will be discussed is the fact that the Labour party just has to get one trade union to write one cheque for £14 million. When you look at the Labour party candidates and take out of the mix the fact that they have got son of Blair, son of Straw, son of Prescott, son of Dromey—when you take out the red princes—you will find that 80% of the candidates are union-sponsored. They have bought the candidates, they have bought the policy, they have bought the leader. We must never let them near the country.

[Mr Brian Binley (Northampton South) (Con)]

The number of NEETs in Northamptonshire has fallen from 4,580 in March 2012 to 2,645 now thanks to a joint project set up by the local enterprise partnership and the Northampton Alive organisation. Will the Prime Minister congratulate those responsible for that success, and urge more MPs to get involved with their local LEPs, thus recognising their great value if constituted correctly, led imaginatively and targeted wisely?

[The Prime Minister]

My hon. Friend is absolutely right. There is interest in this right across the House. All parties are now committed to making local enterprise partnerships work and to not going back to the old regional development agencies. It is important that LEPs are business-led and it is important they are strong in every part of the country. Members of Parliament can play a real role in encouraging prominent businessmen and businesswomen to get involved with LEPs and in making sure they deliver for local areas.

[Jeremy Corbyn (Islington North) (Lab)]

Q8. May I take the Prime Minister back to the question of the private rented sector in Britain? Across London, there are thousands and thousands of families—people in work and on benefits—who are frightened of rent increases, frightened of short-term tenancies and frightened of the consequences, for themselves and their children, of being evicted or forced to move out of the area in which they live. What is happening in central London is social cleansing, and it is coming to the rest of the country. Will he give me an assurance that, in addition to any regulation of the agencies, serious consideration will be given to the need to bring back rent control to protect people and ensure they have somewhere secure and decent to live?

[The Prime Minister]

Where I would agree with the hon. Gentleman is on the need for greater transparency in the work of letting agents in terms of fees. There is a need for alternative options, which we have put forward, for longer-term tenancies, but in the end we must allow customers to choose what they want. Where I part company with him is on the idea of introducing full-on rent controls. Every time they have been tried, wherever they have been tried in the world, they have failed. That is not just my view; it is also the view of Labour’s own shadow housing Minister, who is on the record as saying that she does not think rent controls will work in practice. Perhaps he might want to have a word with her before coming to me.

[Sir Tony Baldry (Banbury) (Con)]

Q9. In the ’83 general election, a 13-year-old boy delivered leaflets around my constituency pledging that Michael Foot would take Labour out of the European Union. Does my right hon. Friend find it strange that that same boy, now leader of the Labour party, is not willing either to support the renegotiation of Britain’s terms of membership of the European Union or to pledge to trust the people of Britain in a referendum on our membership of the European Union?

[The Prime Minister]

I have always thought it terribly unfair to hold against people things they might have done in their youth. If that was the right hon. Gentleman’s idea of fun as a 14-year-old, then, obviously, we have to make room for everybody. The point is this: it is in the interests of the British people to have a renegotiation. [Interruption.] What is my idea of fun? It is not hanging out with the shadow Chancellor—that is no idea of fun. I feel sorry for the Leader of the Opposition, because he has to hang out with him all the time. What a miserable existence it must be to have sitting next to you the person who wrecked the British economy, and to have to listen to him, day after day, as he says to the British people, “We’re the people who crashed the car, give us the keys back.”

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

The uncertainty surrounding the future of Scotland and indeed the UK has resulted in many among the business community in Scotland withholding significant investments in that country. Does the Prime Minister therefore agree with me that there is a moral responsibility on employers to inform their employees about the consequences, if any, of the separation of Scotland from the UK so that they can make an informed choice prior to the referendum?

[The Prime Minister]

The hon. Gentleman makes a very important point—that a huge amount of pressure is being put on businesses by the Scottish Government with all sorts of threats and warnings against speaking out and saying what they believe is the truth. I come across business leader after business leader—large and small in Scotland—who wants to keep our United Kingdom together and thinks it would be crazy to have border controls, different currencies and split up our successful United Kingdom. Together with the hon. Gentleman, I urge them to speak out, talk with their work forces about the strength of our United Kingdom and then vote to keep it together.

[Greg Mulholland (Leeds North West) (LD)]

Q10. This weekend, the cities, towns and villages of Yorkshire will be alive to cries of “Allez, allez” as the world’s greatest annual sporting event passes through our county. Will the Prime Minister join in people’s enthusiasm for le grand départ this weekend, and does he agree that this is a wonderful way to build a legacy for cycling and encourage more people to “get on their bikes”?

[The Prime Minister]

I absolutely agree with my hon. Friend. It is brilliant that the Tour de France is starting in Yorkshire, and I think it will be a fantastic event for our country while also providing a great advertisement for Yorkshire and all that the county has to offer. I am greatly looking forward to going and seeing some of the race and some of the preparations. It is going to be a magnificent event, and I will do everything I can to promote it—apart from wearing lycra.

[Susan Elan Jones (Clwyd South) (Lab)]

Q11. Will the Prime Minister make it illegal for recruitment agencies to advertise overseas for jobs in this country, unless they advertise them locally, too—yes or no?

[The Prime Minister]

The short answer is yes. That is exactly what we are doing—saying that employment agencies cannot do that; they cannot purely advertise jobs abroad, and we are doing everything we can to stop that.

[Mr Adrian Sanders (Torbay) (LD)]

We have a £12 billion tourism deficit in this country—the deficit generated between people going overseas and people coming here. One reason for that is believed to be our high VAT rates on accommodation and attractions. Will the Prime Minister look at that and ensure that that is not what is driving up that deficit?

[The Prime Minister]

My hon. Friend is absolutely right to promote the south-west as a holiday destination. We should do everything we can to help. Obviously, the restoration of the transport links has been vital. It is difficult to have differential rates of VAT on some of these things, but everything we can do to promote the UK as a holiday destination—including, for instance, the brilliant fact that the Tour de France is coming here this weekend—we should do.

[Jim Shannon (Strangford) (DUP)]

Q12. Cancer Research UK has just launched its new strategy—a focus on tailoring treatment to individuals, which should prove more effective in combating cancer. How will the Prime Minister ensure that the NHS is in a position to enable access to radiotherapy and ensure that cancer drugs are available for all regions of the United Kingdom of Great Britain and Northern Ireland.

[The Prime Minister]

The cancer drugs fund has been a huge breakthrough not just in making available drugs but some important treatments, too. I hope that other parts of the United Kingdom will take up what we are doing with the cancer drugs fund. Another thing we can do is to make sure, by working with Genomics England, that we are sequencing genomes as fast as we can so that we can carry out the research necessary to see which cancer drugs will be effective on which patients in accordance with their DNA. This will be the modern way to do tailored medicine, and I am very pleased to say that Britain is well ahead of the pack when it comes to investing in our universities and science base as well as in our NHS.

[Mark Pawsey (Rugby) (Con)]

Q13. Jack Gayton and Hannah Fountaine are two young constituents who now own one of the 108 properties in Rugby bought as a result of this Government’s Help to Buy scheme. Does the Prime Minister agree that the fact that Jack and Hannah now enjoy their own home and have made a start on the housing ladder demonstrates this Government’s support for those who want to work hard and get on?

[The Prime Minister]

I join my hon. Friend in congratulating his constituents. The Help to Buy scheme is working to get people on to the housing ladder. It is enabling people who do not have rich parents, and who cannot afford a big deposit but can afford a mortgage, to go out and buy the flat or house that they want. We have seen 30,000 people taking advantage of the scheme already, and it has also helped to kick-start investment in housing and raise the level of housing starts in our country.

[Mr Dennis Skinner (Bolsover) (Lab)]

Q15. Is the Prime Minister aware that, as an out-patient, I have to visit a hospital on a regular basis, and hear from the front line about the problems in the health service? The nurses have lost a considerable amount of their real pay, and A and E services are bursting at the seams. Then there is the fact that nearly every hospital in Britain is running into financial difficulties. As a member of the Bullingdon club, is the Prime Minister proud to be surrounded by this wreckage? Remember, it is his legacy, not ours. Stop blaming the Opposition. Get it done, or get out.

[The Prime Minister]

I think the picture that the hon. Gentleman paints is completely wrong. Of course more people are going to A and E departments in our country—over a million more people—but we are meeting our targets, and waiting times are down by a half. The hon. Gentleman talks about nurses. There are 4,000 more nurses in our NHS than there were when I first stood at this Dispatch Box, and there are 7,000 more doctors.

What the hon. Gentleman ought to know is that we have cut the number of administrative staff, the bureaucrats with whom we were left by the Labour party. There are 19,000 fewer of those, which is why we are able to treat more patients with more clinical staff. That is a record of which we can all be proud.

[Michael Ellis (Northampton North) (Con)]

Q14. It is thanks to our long-term economic plan that £200 million has been allocated to fighting potholes, including £3.3 million for Northamptonshire, much of which will be used in my constituency. Does not that infrastructure investment show that it is only the Conservatives who have a plan that puts Britain on the road to recovery, whereas the Labour party would drive the country’s economy off a cliff?

[The Prime Minister]

I think my hon. Friend is fully justified in taking a lot of credit for the work that has been done on potholes. He has raised the issue in every forum, including the House, over and over again, which is partly why Northamptonshire received £3.3 million specifically to spend on repairing roads. He will be pleased to know that that is enough to fill in a staggering 62,000 potholes. This is important, because potholes damage people’s cars, motorbikes and cycles when they are on their way to work, and mending them is good for hard-working families.

[Chris Ruane (Vale of Clwyd) (Lab)]

Arthur Jones, a 73-year-old Army veteran from Denbigh in my constituency, went hill-walking in Crete. He has not been seen since 19 June, and his family are frantic with worry. Will the Prime Minister ensure that the Foreign and Commonwealth Office continues its excellent work, and co-operates with the Greek Government to ensure that Arthur is found?

[The Prime Minister]

I will certainly do everything I can to help the hon. Gentleman with his constituent. I will have discussions with the Foreign Office about all the consular assistance that is being given, and about anything else that it can do.

Bus Services for Beacon Heights (Walsall)

Wednesday 2nd July 2014 Commons Chamber

Valerie Vaz (Walsall South) (Lab)

- Hansard - - Excerpts

The petition is from the residents of Beacon Heights park homes. A petition in similar terms has been signed by 65 people.

The petition states:

The Petition of a resident of Beacon Heights Park Homes Park,

Declares that following the removal of the 934 and 936 bus services from Beacon Road, Walsall after 7pm and on Sundays many elderly people who do not drive cannot access public transport at those times and further that the Petitioner calls for a bus service or minibus to be introduced to replace the 934 and 936 bus service.

The Petitioner therefore requests that the House of Commons urges the Government to take all possible steps to encourage Walsall Metropolitan Borough Council to consider the objections of the local residents.

And the Petitioners remain, etc.

[P001363]

Mr Speaker

- Hansard - - Excerpts

It is a splendid thing when somebody who introduces a petition has a brother behind her in support.

NHS Service Provision in Middlesbrough South and East Cleveland

Wednesday 2nd July 2014 Commons Chamber

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)

- Hansard - - Excerpts

The petition states:

The Petition of residents of the United Kingdom,

Declares that the Petitioners object to the closure of the Park End Clinic, Skelton Medical Centre, and Skelton NHS walk-in centre; further that the Petitioners object to the proposed closure of minor injuries units at East Cleveland and Guisborough Hospitals; further that the Petitioners are concerned these reductions in provision of primary care services will increase demand on the Accident and Emergency Department at James Cook University Hospital; further that the Petitioners believe that Ministers in the Department of Health should meet with the honourable Member for Middlesbrough South and East Cleveland to discuss these closures, and regret that Ministers have not committed to such a meeting.

The Petitioners therefore request that the House of Commons urges Ministers to meet with the honourable Member for Middlesbrough South and East Cleveland to discuss these changes in service provision, and encourages NHS England and the South Tees NHS Clinical Commissioning Group to abandon these closures.

And the Petitioners remain, etc.

[P001364]

Points of Order

Wednesday 2nd July 2014 Commons Chamber

12:33

[Andy Burnham (Leigh) (Lab)]

On a point of order, Mr Speaker. Just now, during Prime Minister’s Question Time, the Prime Minister appeared to suggest that the number of people waiting longer than 18 weeks for an operation had gone down since his reorganisation. I have the figures here. In April 2010, 20,662 people waited longer than 18 weeks. In April 2014, the figure was 29,417. The number has gone up. Do you not think, Mr Speaker, that the Prime Minister might correct the record before he leaves the Chamber?

[The Prime Minister (Mr David Cameron)]

Further to that point of order, Mr Speaker. I can tell the House and the right hon. Gentleman that the numbers waiting longer than 18, 26 and 52 weeks to start treatment are lower than they were at any time under the last Government. Those are the facts. The Opposition were caught out with dodgy statistics yesterday, and I think that they have just done it again.

[Mr Speaker]

We will leave that exchange there.

[Ian Swales (Redcar) (LD)]

On a point of order, Mr Speaker. In yesterday’s Finance Bill debate, the hon. Member for Birmingham, Ladywood (Shabana Mahmood) said that the tax gap was £32 billion when the previous Government left office and that it has now gone up to £35 billion. Official Her Majesty’s Revenue and Customs figures show the tax gap was actually £42 billion when Labour left office, so there has been a fall of £7 billion under this Government. I know the Opposition are keen to regain some financial credibility, so I hope the hon. Lady will correct the record and also find time to congratulate this Government on their progress in—

[Mr Speaker]

Order. May I just say to the hon. Gentleman—and I say it in a cordial spirit—that that was another action replay? We have now had two action replays today, and I must strongly counsel colleagues against raising as attempted, but actually bogus, points of order what are really political points. Otherwise this phenomenon will multiply over the next nine months or so, which is undesirable. The hon. Gentleman has made his point and it is on the record, and we will leave it there—and I am grateful for his nod of assent to my ruling.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

Further to that point of order, Mr Speaker—

[Mr Speaker]

There is no further to it, because the point has been made and I have left it there.

[Angus Robertson (Moray) (SNP)]

On a point of order, Mr Speaker. Tomorrow is the second anniversary of the tragic Tornado collision when two Tornadoes collided over the Moray firth and three service personnel lost their lives. Yesterday the Ministry of Defence accepted liability for the collision, but it has not updated the House or appropriate parliamentarians on the MOD’s responsibility or answered questions on the service inquiry report, which was published on Monday. The whole situation is frankly disgraceful. What is the best route to ensure that the MOD answers to the House, to explain its responsibilities and clarify its liability, and to say when a warning system will be installed in both Tornado and Typhoon aircraft?

[Mr Speaker]

The response to the hon. Gentleman is twofold. [Interruption.] Order. If a Minister wishes to catch my eye, he or she is perfectly entitled to do so, but the hon. Gentleman raised his point of order, at least ostensibly, with the Chair and therefore perhaps he will rest content with my answer, and the answer is, as I said, twofold. First, it is up to Ministers to decide whether they think an oral statement is required. Secondly, in the absence of an oral statement, it is perfectly open to the hon. Gentleman to seek a debate in this House on the Adjournment. To the best of my knowledge, the hon. Gentleman has not thus far done so, but he might find that he is successful if he does. We will leave that matter there for today.

[Toby Perkins (Chesterfield) (Lab)]

On a point of order, Mr Speaker. I have notified the Justice Secretary of my intention to raise this point of order. Yesterday in Justice questions he claimed that my allegations about the selection process for the south Yorkshire probation service were nonsense and that there was a carefully constructed process of selection and a proper appeal mechanism for those who were not selected. I have here a letter from Angela Tinker, the human resources systems manager at South Yorkshire Probation Trust, to my constituent, Gwen MacDonald, in which she says:

“There was a random selection process and employee numbers were used to select between NPS”—

national probation service—“and CRC”, or community rehabilitation companies. It continues:

“Employee numbers were drawn out of a hat”,

which confirms exactly the allegations I was making, and also that yesterday the Justice Secretary inadvertently misled the House. Can you, Mr Speaker, let us know how he might have the opportunity to set the record straight?

[Mr Speaker]

There are two points here. First, everybody takes responsibility for his or her utterances in this House. There is a formal means by which a Minister can correct the record, if he or she judges it necessary to do so, and that is through a statement to colleagues. Secondly—and I say this in all politeness to the hon. Gentleman, as I did to another Member—Members should not use the point of order procedure to continue debate. Although I am greatly flattered by the extent of the powers that hon. and right hon. Members think I enjoy, they sometimes have a somewhat exaggerated notion of what, in practice, I can be expected to achieve. The hon. Gentleman is, I am sure, now an increasingly experienced and discerning fellow. Judging by the broad smile on his face, he knows that he has had a go and he has got it on the record, and he can now go and enjoy his lunch, resting content. We will leave it there.

[Conor Burns (Bournemouth West) (Con)]

On a point of order, Mr Speaker.

[Mr Speaker]

I hope it is a genuine one. I have known the hon. Gentleman for 25 years and I hope he is not going to let me down.

[Conor Burns]

We have indeed known one another for 25 years, Mr Speaker. As we were previously involved in politics together, we had a great reverence for this Chamber of Parliament and for hon. Members on all sides telling the truth to it on all occasions. You have correctly identified the mechanism that Ministers who have misled Parliament can use to rectify that. May I ask you what the correct mechanism is for other hon. Members who inadvertently, or deliberately, mislead Parliament?

[Mr Speaker]

The answer is that a Member can take the opportunity through an intervention or a speech, or through a personal statement, to correct the record if that Member judges it necessary to do so. But we have, in essence, a self-regulating procedure in the House, and the hon. Gentleman, as a keen student of procedure, will recognise the truth of what I have just said. We will leave it there for now, and I am grateful to the hon. Gentleman for not denting my confidence in his tendency to behave properly.

Bills Presented

Affordable Homes Bill

Presentation and First Reading (Standing Order N0. 57)

Andrew George, supported by Mr Nick Raynsford, Mr Charles Kennedy, Jeremy Lefroy, Caroline Lucas, Mr Clive Betts, Stephen Gilbert, Mr Mark Williams, Alison Seabeck, Mr Adrian Sanders, Valerie Vaz and Mr Grahame M. Morris, presented a Bill to make provision about the availability of affordable homes; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 5 September, and to be printed (Bill 13).

International Development (Official Development Assistance Target) Bill

Presentation and First Reading (Standing Order N0. 57)

Michael Moore, supported by Mr Andrew Mitchell, Annette Brooke, Mrs Anne McGuire, Alistair Burt, John Thurso, Mr Tom Clarke, Fiona Bruce, Roger Williams, Hugh Bayley, Jeremy Lefroy and Dr Julian Huppert, presented a Bill to make provision about the meeting by the United Kingdom of the target for official development assistance (ODA) to constitute 0.7 per cent of gross national income; to make provision for independent verification that ODA is spent efficiently and effectively; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 12 September, and to be printed (Bill 14 ).

European Union (Referendum) Bill

Presentation and First Reading (Standing Order N0. 57)

Robert Neill, supported by Sir Tony Baldry, Guto Bebb, Mr Graham Brady, Sir William Cash, Mr Nigel Dodds, Mr Stephen Dorrell, Jackie Doyle-Price, Dr Liam Fox, Zac Goldsmith, Sir Gerald Howarth and Sheryll Murray, presented a Bill to make provision for the holding of a referendum in the United Kingdom and Gibraltar on the United Kingdom’s membership of the European Union.

Bill read the First time; to be read a Second time on Friday 17 October, and to be printed (Bill 15).

Self-Build and Custom Housebuilding Bill

Presentation and First Reading (Standing Order N0. 57)

Jeremy Lefroy, on behalf of Mr Richard Bacon, supported by Nick Herbert, John Mann, John Pugh, Mr Angus Brendan MacNeil, Mr Nigel Evans, Sir Edward Leigh, Jim Fitzpatrick, David Morris, George Freeman, Mr Philip Hollobone and Mr Graham Allen, presented a Bill to place a duty on local authorities to keep a register of individuals and community groups who have expressed an interest in acquiring land to bring forward self-build and custom-build projects and to take account of and make provision for the interests of those on such registers in developing their housing initiatives and their local plans; to allow volume house builders to include self-build and custom-build projects as contributing towards their affordable housing obligations, when in partnership for this purpose with a Registered Social Landlord; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 24 October, and to be printed (Bill 16).

Health and Social Care (Safety and Quality) Bill

Presentation and First Reading (Standing Order N0. 57)

Jeremy Lefroy, supported by George Freeman, Sir William Cash, Ann Clwyd, Margot James, Sir Tony Cunningham, Dr Phillip Lee, Sir Malcolm Bruce, Fiona Bruce, Charlotte Leslie, Julian Sturdy and Andrew George, presented a Bill to make provision about the safety of health and social care services in England; to make provision about the integration of information relating to users of health and social care services in England; to make provision about the sharing of information relating to an individual for the purposes of providing that individual with health or social care services in England; to make provision for removing individuals convicted of certain offences from the registers kept by the regulatory bodies for health and social care professions; to make provision about the objectives of the regulatory bodies for health and social care professions and the Professional Standards Authority for Health and Social Care; to make provision about the disposal of cases concerning a person’s fitness to practise a health or social care profession; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 7 November, and to be printed (Bill 17) with explanatory notes (Bill 17-EN).

[Mr Speaker]

Gosh, the hon. Member for Stafford (Jeremy Lefroy) is a busy bee.

National Health Service (Amended Duties and Powers) Bill

Presentation and First Reading (Standing Order N0. 57)

Clive Efford, supported by Frank Dobson, Ms Karen Buck, Mr Andy Slaughter, Grahame M. Morris, Diana Johnson, Alison Seabeck, Shabana Mahmood, Steve Rotheram, John Healey, Mr Dennis Skinner and Angela Smith, presented a Bill to re-establish the Secretary of State’s legal duty to provide national health services in England; to amend the provisions of the Health and Social Care Act 2012 relating to Monitor; to repeal the regulations made under section 75 of that Act; to make other amendments to the provisions in that Act relating to competition and provision of private health services; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 21 November, and to be printed (Bill 18).

Tenancies (Reform) Bill

Presentation and First Reading (Standing Order N0. 57)

Sarah Teather, supported by Tessa Munt, Tim Farron, Sir Peter Bottomley, Bob Blackman, Mr Andrew Smith, Sir Andrew Stunell, John Healey, Jeremy Lefroy, Mr Philip Hollobone, Nicola Blackwood and Fiona Mactaggart, presented a Bill to protect tenants against retaliatory eviction; to amend the law on notices requiring possession relating to assured shorthold tenancies; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 28 November, and to be printed (Bill 19).

Control of Horses Bill

Presentation and First Reading (Standing Order N0. 57)

Julian Sturdy, supported by James Wharton, Mr Philip Hollobone, Mrs Cheryl Gillan, Neil Parish, Jeremy Lefroy, Andrew Percy, Mr Graham Stuart, Ian Swales, David Morris and Caroline Nokes, presented a Bill to make provision for the taking of action in relation to horses which are in public places; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 24 October, and to be printed (Bill 20).

[Mr Speaker]

Never was there a more appropriate linkage between name and title.

Local Government (Review of Decisions) Bill

Presentation and First Reading (Standing Order N0. 57)

Mr Mark Spencer, supported by Chris Heaton-Harris, Simon Kirby, Karl MᶜCartney, Stephen McPartland, Caroline Nokes, Heather Wheeler, John Stevenson and Jackie Doyle-Price, presented a Bill to make provision about the procedure for conducting investigations under Part 3 of the Local Government Act 1974; and to make provision for cases where an authority to which that Part applies takes a decision that affects the holding of an event for a reason relating to health or safety.

Bill read the First time; to be read a Second time on Friday 24 October, and to be printed (Bill 21) with explanatory notes (Bill 21-EN).

Off-Patent Drugs Bill

Presentation and First Reading (Standing Order N0. 57)

Robert Neill, on behalf of Jonathan Evans, supported by Annette Brooke, Sir Alan Meale, Dame Angela Watkinson, Dr Liam Fox, Robert Neill, John Healey, Glyn Davies, Dr Phillip Lee, Mr Elfyn Llwyd, Mr David Nuttall and Dr Sarah Wollaston, presented a Bill to require the Secretary of State to take steps to secure licences for off-patent drugs in new indications; to require the National Institute for Health and Care Excellence to conduct technology appraisals for off-patent drugs in new indications; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 7 November, and to be printed (Bill 22).

Zero Hours Contracts Bill

Presentation and First Reading (Standing Order N0. 57)

Ian Mearns, supported by Grahame M. Morris, Ian Lavery, Pat Glass, Steve Rotheram, Mrs Emma Lewell-Buck, Andy McDonald, Kelvin Hopkins, Katy Clark, John Cryer, Jim Sheridan, Mr Dennis Skinner and Mr Ronnie Campbell, presented a Bill to limit the use of zero-hours contracts; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 21 November, and to be printed (Bill 23).

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

It’s a good Bill.

[Mr Speaker]

We are grateful to you, Mr Campbell, for your sedentary interjection.

Low Pay Commission (National Minimum Wage) Bill

Presentation and First Reading (Standing Order N0. 57)

Dan Jarvis, supported by Margaret Beckett, Stephen Doughty, Jack Dromey, Julie Elliott, Lilian Greenwood, Mike Kane, Mrs Emma Lewell-Buck, Alison McGovern, Mr Jamie Reed, Mr Steve Reed and Alison Seabeck, presented a Bill to require the Secretary of State to set a target for the Low Pay Commission to increase the minimum wage during the term of a Parliament; to require the Low Pay Commission to write to the Secretary of State if this target cannot be met; to require the Secretary of State to ensure that the Low Pay Commission has the power to set up taskforces in certain sectors; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 28 November, and to be printed (Bill 24).

Local Government (Religious etc Observances) Bill

Presentation and First Reading (Standing Order N0. 57)

Jake Berry, supported by Mr Stewart Jackson, Mr Ben Wallace and Fiona Bruce, presented a Bill to make provision about the inclusion at local authority meetings of observances that are, and about powers of local authorities in relation to events that to any extent are, religious or related to a religious or philosophical belief.

Bill read the First time; to be read a Second time on Friday 21 November, and to be printed (Bill 25).

Household Safety (Carbon Monoxide Detectors) Bill

Presentation and First Reading (Standing Order N0. 57)

Andrew Bingham, supported by Tracey Crouch, Dr Philip Lee, Justin Tomlinson, Heather Wheeler, Stephen Phillips, Nick de Bois, Simon Hart, Pauline Latham, Caroline Nokes, Chris Heaton-Harris and Craig Whittaker, presented a Bill to introduce a requirement that a functioning carbon monoxide detector must be installed in all newly built and all rented residential properties; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 12 September, and to be printed (Bill 26).

Under-occupancy Penalty (Exemptions) Bill

Presentation and First Reading (Standing Order N0. 57)

Yvonne Fovargue, supported by Paul Blomfield, Nic Dakin, Steve Rotheram, Sheila Gilmore, Dan Jarvis, Jenny Chapman, Mrs Mary Glindon, Graham Jones, Rosie Cooper, John Healey and Mike Kane, presented a Bill to exempt social housing tenants who claim Disability Living Allowance or who have occupied a property for at least six months or who have not been offered alternative accommodation from the size criteria provisions of the Housing Benefit Regulations 2006, the Housing Benefit (Persons who have attained the qualifying age for state pension credit) Regulations 2006 and the Universal Credit Regulations 2013; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 28 November, and to be printed (Bill 27).

Transparency and Accountability Bill

Presentation and First Reading (Standing Order N0. 57)

John Hemming presented a Bill to make provision regarding arrangements for children involved in court proceedings; to make provision about the transparency, administration and accountability of courts and case conferences; to require the Secretary of State to report to Parliament annually on the number of prisoners who have exceeded their tariff and have not been released because they do not admit guilt; to extend the Criminal Cases Review Commission’s powers to obtain information; to make provision about consumer complaints in markets for public services; to amend certain sections of the Freedom of Information Act 2000 relating to contracts; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 17 October, and to be printed (Bill 28) with explanatory notes (Bill 28-EN).

Control of Offshore Wind Turbines Bill

Presentation and First Reading (Standing Order N0. 57)

Mr Christopher Chope, supported by Conor Burns, Richard Drax, Mr Tobias Ellwood, Dr Julian Lewis, Mr Robert Syms, Mr Peter Bone, Sir Greg Knight and Mr Nigel Evans, presented a Bill to restrict the height, number, location and operation of wind turbines situated off shore within twenty miles of the coast; to restrict subsidies available for such turbines; to make provision regulating the length, location and environmental impact of cables connecting such turbines to the national grid; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 16 January 2015, and to be printed (Bill 29).

Responsible Parking (Scotland) Bill

Presentation and First Reading (Standing Order N0. 57)

Mark Lazarowicz, supported by Sheila Gilmore, Mike Crockart, Katy Clark, Dame Anne Begg and Dan Jarvis, presented a Bill to amend Schedule 5 to the Scotland Act 1998 to exclude from the reservations certain provisions relating to parking; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 5 September, and to be printed (Bill 30).

Health Service Commissioner for England (Complaint Handling) Bill

Presentation and First Reading (Standing Order N0. 57)

Mr David Davis, supported by Mr Dominic Raab, Dr Sarah Wollaston and Alan Johnson, presented a Bill to make provision about the handling of complaints by the Health Service Commissioner for England; to require the Commissioner to notify a complainant of the reason for the delay if the investigation of the complaint is not concluded within a 12 month period; to require the Commissioner to lay before Parliament an annual report giving details of how long investigations of complaints have taken to be concluded and progress towards meeting a target of concluding investigations within a 12 month period; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 5 September, and to be printed (Bill 31).

Pavement Parking Bill

Presentation and First Reading (Standing Order N0. 57)

Martin Horwood, supported by Mr Jim Cunningham, Tracey Crouch, Kate Green, Mr Elfyn Llwyd, Caroline Lucas, Roger Williams, Lisa Nandy, Richard Fuller, Mike Thornton, Henry Smith and Greg Mulholland, presented a Bill to make provision for the safety, convenience and free movement on pavements of disabled people, older people, people accompanying young children, and other pavement users; to clarify, strengthen and simplify the law relating to parking on pavements in England and Wales; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 12 September, and to be printed (Bill 32).

Finance Bill

Wednesday 2nd July 2014 Commons Chamber

[2nd Allocated Day]

Further consideration of Bill, as amended in the Public Bill Committee

New Clause 13

Pension flexibility: further amendments

‘Schedule (Pension flexibility: further amendments) makes further provision in connection with pension flexibility.’—(Mr Gauke.)

Brought up, and read the First time.

12:47

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 9—Pension flexibility: Treasury analysis—

‘(1) The Chancellor of the Exchequer shall, within six months of this Act receiving Royal Assent, publish and lay before the House of Commons any analysis prepared by the Treasury prior to the publication of Budget 2014 relating to the impact of changes made by sections 39 to 43 of this Act to schedules 28 and 29 to the Finance Act 2004.

(2) The information published under subsection (1) must include—

(a) any assessment made of the impact of the provision for independent face to face guidance on the 2004 Act;

(b) the distributional impact, by income decile of the population, of changes made by sections 39 to 43 of this Act;

(c) a behavioural analysis; and

(d) the financial risk assessment.”

Government new schedule 5—Pension flexibility: further amendments.

[Mr Gauke]

New clause 13 and new schedule 5 make provision to ensure that individuals who wish to make use of the new pension flexibilities announced by the Government do not face detrimental tax consequences if they take their tax-free lump sum and then defer a decision on how to access the remainder of their pension savings.

On Budget day, the Government announced radical reforms that will enable people with defined contribution pension savings to have more choice and control over their pension wealth from next April. The greater choice and flexibility that these reforms will give pension savers have been widely welcomed. There has been broad consensus that individuals who have been responsible and saved for their future should be trusted to access their pension savings in the way that most suits them.

We announced a consultation on the detail of these longer-term proposals, which has now closed. We will publish a response in the near future, and legislation will be brought forward later this year to implement the necessary changes, but the Government wanted to make sure that people who are approaching retirement now would not miss out. As a first step, we introduced clauses 39 and 40 to ensure that individuals nearing retirement this year can benefit from a wider range of options before next April. We expect that this will enable around an extra 85,000 people to access their pension wealth as a lump sum this tax year. In addition, 400,000 people will have the option of receiving significantly greater withdrawals from their pension savings, but we did not want to stop there.

Usually people lose the advantages of a tax-free lump sum if they do not decide what to do with the rest of their pension savings within six months of taking the lump sum. On 27 March, the Government announced that those who had already taken a tax-free lump sum from their defined contribution pension savings, but had not yet secured their pension, would be given more time to decide what they wished to do with the rest of their retirement savings. We also did not think it would be fair to prevent people from taking their tax-free lump sum now simply because they wished to wait to access their pension savings more flexibly from next April, so the Government promised to introduce new provisions in the Bill to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next.

The provisions are technically quite detailed, but their purpose is not. Full pension flexibility for defined contribution savings will be introduced in April 2015, and until that happens we want people to be able to take their tax-free lump sum and to have until October 2015 to make their pension choices without tax consequences. The changes made in new clause 13 and new schedule 5 will enable people to take a tax-free lump sum and to wait until April 2015 to decide how they want to access their pension savings: by transferring the rest of their pension savings to another pension provider to enable them to access them more flexibly; by repaying the lump sum when the scheme that paid it will accept it in order to access the whole of their savings more flexibly; or by receiving the rest of the pension savings as a lump sum under the higher limits that clause 40 provides. Those changes also ensure that people who have the right to receive a tax-free lump sum at an earlier age, or of a larger amount than is normally allowed, can use the new flexibility and keep those rights.

New clause 13 and new schedule 5 help people who have worked hard to save into a pension, enabling them to take some of those savings tax-free now, and to take advantage of the new flexibilities for the rest of their pension savings.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I understand that the Minister is trying to introduce an element of fairness into the new arrangements while avoiding unintended consequences. Can he give us some assurances about the time scale for the rules being brought in, and tell us whether he has done additional work to ensure that there are no unintended consequences?

[Mr Gauke]

We have been engaged in a consultation process, which closed recently, and have engaged fully with all interested parties more generally on this policy. I will address some of these points when I respond to new clause 9, but we will respond shortly to the consultation, setting out the details of how the policy will be taken forward. This is an important matter, and it is important that we get things right. There are a number of aspects to it, and new clause 9 takes us into some of those aspects that, although perhaps not relevant to the Finance Bill, are of significance none the less. I can assure the House that there will be plenty of opportunities to debate the details, given that legislation on the subject will be introduced, as the hon. Lady knows full well.

[Ian Swales (Redcar) (LD)]

The Minister rightly says that on such policy matters, assessments are a normal part of Government practice. Will he confirm that the reviews will take account of any potential future cost to the public purse? For example, what if people have inadequate funds to cover their future care costs, as they have already spent their accumulated pensions, or if they have other recourse to the state because they have inadequate resources later in life?

[Mr Gauke]

During the assessment of the policy announced in the Budget, we considered all the various issues, including the consequences for the Exchequer in both the short and long term. We will say more about the specific interaction with social care and so on in the near future. I would make the point that the very people restricted by the old regime were the people who, over the course of their working lives, saved responsibly and ended up with a pension sum that demonstrated their prudent approach to saving. It is not unreasonable to believe that the vast majority of those people will continue to act prudently when given greater flexibility. As a matter of philosophy, both parties in the coalition Government share the view that when we can give more power and responsibility to people, we should do so.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The Minister referred to the Budget and the documents published about this policy, but what was published was merely the estimated tax take for the Treasury. Nothing was published about the behavioural impact, the prospect of mis-selling or the interaction with social care. When I asked the Government via a freedom of information request to reveal the basis on which the policy was made, they refused to do so. Will we get more information as quickly possible about the basis on which the Government reached this policy position? The Minister is right, of course, that annuities need to be reformed, but the question is about the basis on which the policy was made.

[Mr Gauke]

On the question of social care, let me repeat the point that I just made: we will respond to the consultation in due course and set out our thinking on that point. As for the issue of mis-selling, we made it very clear on Budget day that it was important to have a guidance guarantee in place. We will set out details of how that will work in the near future, as the consultation period closed only relatively recently. It is important that we get that guidance guarantee right. That brings me to new clause 9.

New clause 9 would require the Chancellor to publish any analysis of the impact of changes made by clauses 39 to 43 of the Bill to schedules 28 and 29 of the Finance Act 2004. However, as I said in Committee, only clauses 39 and 40, which increase the amount that can be taken as a tax-free lump sum as a draw-down pension from 27 March 2014, make changes to schedules 28 and 29 of the 2004 Act.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Before the Minister fully leaves the point about how people might spend the lump sums, one concern that I have had is that people might be tempted to invest in property, for example, which could have the unintended consequence of boosting an already overheating housing market for the next generation. That is still prudent spending from those people’s point of view, but there could be unintended consequences for everyone else. I wonder to what extent that consideration featured in the Government’s thinking.

[Mr Gauke]

There are two points to make. First, we believe that individuals should be able to make their own choices. Of course, they should be provided with guidance, but essentially a system that relies on the state telling people precisely what their investment portfolio, as it were, should be is too restrictive, and does not perform the role that we should be performing. As for the systemic effect on the housing market, which was, I think, the hon. Lady’s central point, I do not think that our changes will have any such effect. Both the Governor of the Bank of England and the Chancellor of the Exchequer have made it clear that we need to ensure that we do not return to the bad old days and to the unsustainable housing market boom we saw some years ago. There are measures in place to reflect that, and we have the institutions in place to ensure that if there are problems they can be addressed quickly.

[Gregg McClymont]

I thank the Minister for giving way once again. Opposition Members become concerned—well, I certainly do—when Ministers refer to the state telling people what kind of investment portfolio to have. Most people have never invested in the way that that comment suggests. He is a well-intentioned and good Minister, but I become concerned when we think about investment for the majority of people in those terms. The fact is that on the day of the Budget the Chancellor said that there would be guaranteed advice, but that turned out not to be the case. It is now guidance, which is a very different thing. Unless we get that guidance absolutely right, there is a danger of the kind of mis-selling that Members on both sides will remember from the 1980s. It is crucial that we understand the way in which people tend to make decisions about these kinds of issues.

[Mr Gauke]

I agree that it is vital that we get the guidance right. I am sure the hon. Gentleman will understand that now is not the occasion for the Government to set out the details of how this will operate, but there will come a point when we will do that. There will be plenty of opportunity for the House to debate those matters. I have no doubt that he is looking forward to that opportunity and will scrutinise our policies on this matter with his customary vigour—[Interruption]—as indeed will the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). While it is very important to get the guidance right, we instinctively support giving people greater flexibility and freedom. Given the tone of the hon. Gentleman’s intervention, I am not sure that he is entirely comfortable with that.

13:00

[Cathy Jamieson]

I understand the point about the timing of the guidance, and I will discuss that in my speech. The Pensions Minister has said:

“Face-to-face, the Chancellor used that phrase, and we will honour that, of course. But if face-to-face means individuals sitting down for an hour with someone every-where in the country, that would be very, very expensive. Face-to-face could involve groups, for example; a lot of the conversation’s generic.”

Some people may have concerns about what is being referred to in terms of guidance. Will the Minister give us some further information at this stage?

[Mr Gauke]

The hon. Lady, perfectly understandably, is seeking more information at this point. I do not think I am being in any way unreasonable in saying that we will set out the details of this in the near future. We are working very closely with interested parties, whether the industry or consumer groups, to ensure that we get this right. We have set out the broad principles behind our guidance guarantee, and we believe that we can deliver something that provides the protection that all Members want.

[James Duddridge (Rochford and Southend East) (Con)]

I understand the need for a professional to offer guidance face to face and on a quality end-product. However, may I urge my hon. Friend to consider the use of the internet and technology to collect the basic information? It makes no sense for a qualified financial consultant to take one and a half to two hours to do a basic fact-find that is actually about data collection. It is much more efficient to do that on the internet and use the time spent face to face for guidance right at the end of the process.

[Mr Gauke]

I am grateful for my hon. Friend’s observation. Without getting too much into the details of what we will announce in due course, it is important to point out that there are various means and methods of delivering guidance and that different people will want different things. We have made it clear that face-to-face guidance will be available for those who want it.

[Stewart Hosie (Dundee East) (SNP)]

The Minister said that he is discussing this with the industry and other interested parties. I welcome that because, as he will be aware, on the announcement of this plan, the share price of many businesses in the life and pensions field dipped quite sharply with the market discounting what might happen in future. Will he confirm that he is paying attention to ensuring that the life and pensions sector is protected while offering flexibility to people who have saved?

[Mr Gauke]

The purpose of the reforms is to ensure that there is a savings and pensions environment that is good for those saving for their pension and those claiming on their pension. We believe that the reforms that we have set out will result in greater innovation in this area. We do not think that the purpose of the rules is to protect particular businesses. Nevertheless, the industry has responded well to our proposals. Many see this as an opportunity to improve the culture of saving and have engaged very constructively with the Government. I hope that that addresses the hon. Gentleman’s concerns.

[Ian Swales]

I recently met representatives of a major financial institution who rightly see the potential for new products following these changes. I am sure that innovative companies will come up with products that meet people’s needs. On advice, will the Minister assure us that the system will be transparent as regards how advisers are rewarded and that we will not get into a situation where overt or covert kick-backs from product providers are the main source of income for those providing the advice?

[Mr Gauke]

My hon. Friend is trying to draw me into the details of what we will say about how the guidance will operate. It is important that we have a system that is transparent and maintains the confidence of the general public, and that is at the heart of what we are trying to do.

[Gregg McClymont]

I will not try to draw the Minister into the details. He rightly refers to the instinct to give people more control over their own lives, and that is something we would all agree with. However, I urge him to read the debates involving a Tory Minister in his position in the 1980s who talked about the revolution in personal pensions using language very similar to that used by the Minister and, more exuberantly, by his colleagues about these reforms. He should compare that with what was said in the 1980s, which led to the mis-selling scandals and some of the loss of confidence in pensions. Greater control, yes, but let us also be aware of the lessons of history.

[Mr Gauke]

I take that point in the spirit in which it was offered. I maintain that it is right that we give people greater control and flexibility. This is about ensuring that individuals are in the best position to make the best decisions for them. Guidance is an important part of that, and, from day one, the Government have been very clear that that was the approach we wanted to take. I suspect that there is, at least at some level, a philosophical difference between Members on either side of the Chamber on this point. I do not think that a Labour Government would have brought forward these reforms, but I welcome any extent to which we can have a consensus.

[Mr Gregory Campbell (East Londonderry) (DUP)]

rose—

[Mr Gauke]

I will give way once more and then I should return to my speech.

[Mr Campbell]

The Minister will be aware that many people are glad that this Government have introduced greater control and flexibility, particularly in pensions. Given that the new individual savings account regime came into force yesterday, will he consider, at a very early stage, introducing flexibility to give people who are saving for their long-term future into retirement—whether through the new ISA or a pension—greater control, particularly as regards spouse-to-spouse transfers?

[Mr Gauke]

The hon. Gentleman raises an interesting point. Indeed, I have just signed off a parliamentary answer to one of his questions about this. If I recall correctly, I said that these regimes, in essence, work on an individual basis but matters can be kept under review. I will certainly take his comments as a representation for future reform in this area.

The clauses I have been talking about increase the amount that can be taken as a tax-free lump sum and as a drawdown pension from 27 March 2014. In addition, the Government’s new clauses and new schedule make changes to schedule 29. As I have explained before, on Budget day the Government published a tax information impact note entitled “Increasing pension flexibility”, which covered the impact of the changes set out in clauses 39 and 40. That impact note has been updated to reflect the changes made by new clause 13 and new schedule 5.

As I have previously said, the changes made by clauses 39 and 40 are likely to be of particular benefit to individuals with smaller pension wealth, including women. The same applies to the changes that would be made by new clause 13 and new schedule 5. That is set out in the tax information impact note that was published on 27 June.

I have already mentioned that the Government published a consultation, “Freedom and choice in pensions”, on the broader measures announced in the Budget. That document set out the rationale and the relevant analysis behind the Government’s proposals and invited comments on the expected impacts. The consultation will inform the final shape of the Government’s proposals, including the guidance guarantee. The Government will set out further details in their response to this consultation, which will be published shortly.

[James Duddridge]

I always find terms like “shortly” confusing. Is “shortly” in the next few weeks, in the next the few months or before the next general election? Perhaps, while not giving an exact date, my hon. Friend might hone it down a little finer than the very broad term “shortly.”

[Mr Gauke]

I used the word “shortly;” I could have said “in due course,” but I hope that my hon. Friend is more encouraged by “shortly.” He will just have to be a little more patient, but I can assure him that it will not be very long before he will be satisfied on those details.

Let me say a brief word about guidance, which I have touched on already. The Government believe that, as people have greater choice over retirement, they will need the right support and guidance to make the choice that is right for them, so we are working to ensure that everyone approaching retirement with a defined-contribution pension can receive impartial, face-to-face guidance on the choices available to them. However, the guidance guarantee is not a tax rule, so I hope that hon. Members will understand that although it is a very important part of the radical reforms that we are introducing from April 2015, it does not form part of the changes being discussed today.

The Government have already published information on the impact of clauses 39 and 40, as well as on new clause 13 and new schedule 5, and have consulted further on their broader proposals. New clause 9 is therefore unnecessary. Whether that is enough to persuade the hon. Member for Kilmarnock and Loudoun not to press her case, I somewhat doubt, and no doubt she will put it very reasonably, but I hope that she considers my response reasonable as well. Whether she considers it reasonable or not, that is my response.

The overall purpose of the changes that the Government are making today is to enable people who had recently taken the tax-free lump sum from their defined-contribution pension savings to use the new flexibility, while remaining in broadly the same tax position. I therefore hope that new clause 13 and new schedule 5 will be added to the Bill, and I request that new clause 9 is not pressed to a vote.

[Cathy Jamieson]

I want first to put something on the record. Earlier, the hon. Member for Redcar (Ian Swales) suggested that when the Labour Government left office the tax gap was £42 billion, but the most recent HMRC figures show that in 2009-10 it was £32 billion. I think that addresses the point that he raised yesterday with my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood).

To return to issues from today’s debate, as I observed in Committee, the amendment that we moved then and the discussion on it addressed some of the most important clauses in the Bill. The Minister suggested yesterday that I could make the most unreasonable things sound reasonable. I think that today he has done a reasonably good job of putting across the Government’s view. However, I would have to say at the outset that he has not said enough to convince me not to press our amendment—he still has time to say something during the debate—and I will explain why.

As I have said, the reforms provided for in these clauses are very important. Our primary concern in tabling new clause 9 and in pressing it is to ensure that those affected have the information that they need to make an informed choice, because that is very important indeed.

13:15

It is also relevant to recap on what the measures in the Bill would do. First, they will increase the amount that savers can access through trivial commutation, capped draw-down and flexible draw-down. Secondly, those in defined contribution pension schemes can now withdraw more money from their pensions annually, and the threshold at which wealthier savers can have unlimited access to their pension pots has been reduced. Thirdly, for schemes that allow members to take their pension via a draw-down, the capped draw-down limit has been increased from 120% of the amount of an equivalent annuity to 150%. Fourthly, the amount of guaranteed annual income that savers must have to draw down their pensions flexibly has been reduced from the current minimum of £20,000 to £12,000. So, in essence, the rules for accessing pensions have been greatly liberalised with the aim of affording savers increased choice and flexibility.

In principle, and as my hon. Friend the Member for Birmingham, Ladywood has already said, we do not have a problem with supporting greater choice and flexibility, but we want to ensure that savers are not exploited in any way. That has been a very important principle for us from the outset. Indeed, over the past three years we have consistently advocated reform of the annuities market, and we have called for a cap on pension fund charges. Of course, it would be our view that the Government have delayed the introduction of the charge cap, and this extra year of excess charges will cost a saver with £100,000 up to £750 this year.

However, to return to the present, our primary concern now is to ensure that savers have access to the information that they need to exercise their new rights judiciously.

[Gregg McClymont]

On that point, my hon. Friend, as usual, is making an eloquent, precise case. There is an issue not just around informed choice, but around our ability to predict our own longevity; there are substantial issues. The evidence is that it is very difficult for us to predict our own longevity, both for obvious reasons and in terms of biases inherent in our human nature. Therefore, this is not just about choice—although we think that is important—but about how one makes such decisions on one’s own.

[Cathy Jamieson]

My hon. Friend makes an extremely important point. My understanding of the research is that, when asked to predict their longevity, people significantly underestimate it and do not always predict long enough into the future, particularly when anticipating their potential care needs or support needs. For understandable reasons, people do not want to think of those things during their earlier years, but increasingly they will have to do so.

I heard the Minister say that some of the issues that have to be dealt with, such as guidance and so on, do not form part of tax law. Of course he is correct on that, but there is an issue about a joined-up approach to government. Already we have concerns—I shall say more if time allows—about how all the Government’s policies on social care and some of the other economic issues that people have to think about will come together. It is important to ensure at every stage that there are no unintended consequences.

As the Minister accepted, we tabled our new clause, as always, in a spirit of being reasonable and sensible. Indeed, I was a wee bit excited when he seemed to suggest that some of the things we might be saying were worthy of further consideration. Of course, my excitement was short-lived, as he then said that he would not accept our new clause.

Quite simply, new clause 9 would require the Treasury, within six months of Royal Assent, to publish and lay before the House any analysis it prepared before the publication of Budget 2014 relating to the impact of the changes made in clauses 39 to 43 and the relevant schedules, and that the information published include any assessment made of the impact of the provisions for independent face-to-face guidance on the Finance Act 2004. That is important, because without it, as my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said in an attempt to elicit information, which has not so far been possible, it will be difficult to scrutinise provisions in a Bill that is to come in due course, shortly, when time permits—whichever one of the time scales so beloved of Ministers is utilised. The new clause also asks that we be provided with information on the distributional impact of the changes by income decile, a behavioural analysis and the financial risk assessment. As our new clause and the points I have made show, our concern about some of the reforms extends to the face-to-face guidance that the Government have committed to providing.

We discussed this issue extensively in Committee. I think Labour Members made a number of valid and reasonable points on the potential pitfalls for savers who have money at their disposal—those who, perhaps for the first time in their life, have a significant pot of money and have to make a decision. Lest anyone suggest that our concern is patronising or that we are somehow not trusting people to decide what to do with, essentially, their own money, let me say that it is important to understand that for many people, having significant pots of money at their disposal will be an entirely new experience at a time in their life when, as we have heard, they may not properly have predicted what resources they are going to need or their own longevity. It is therefore a bit disappointing that the Government have not been able to answer our questions. Looking back over the Hansard report of the Committee stage, I was struck by the amount of time we spent dealing with some of these questions and, unfortunately, not getting the answers from the Government. Some of the responses we got from Government Members were, I would say, misunderstandings if not misrepresentations of our own position, which led us to believe that the Government might simply not want to engage with those issues.

To ensure that the Government are held to account, we have set three tests for the pension reforms. The first is the advice test—ensuring that there is robust advice for people who are providing for their retirement and that measures are in place to deal with mis-selling. In Committee, I and others quoted a number of cases brought to us by financial advisers in our local areas and by constituents in which people had been given so-called advice—often, information provided by unregulated people—and had therefore made wrong choices, which cost them significant sums. We do not want that to happen again.

[Gregg McClymont]

On the question of guidance, the Pensions Minister’s comments about Lamborghinis were particularly unfortunate. Does my hon. Friend agree that the biggest danger is not that hard-working, sensible people will blow their own money, but that they will take it as cash and not invest it because they have no confidence in the financial services industry, so their money will not be working for them? Is not that as big a danger, if not a greater danger, than the Lamborghini sort of stuff the Pensions Minister raised?

[Cathy Jamieson]

If I did not know better, I would suspect my hon. Friend of having read my speech. I was just about to come to that very point. The infamous Lamborghini comment might have been made in jest, but that sort of joke is entirely lost on those who have already lost their savings because of poor or insufficient advice. My hon. Friend makes a very valid point indeed about people’s confidence in what they can do with their own resources. To an extent, the Government may have begun to acknowledge the need to expand the range of choices available and ensure that consumers have help to navigate those choices—I think that was the phrase used. That sounds pretty sensible and commendable, but we need to make sure that it actually happens.

The second test we have set is the fairness test—the new system has to be fair to those on low and middle incomes, which means they still should be able to access products that give them the certainty in retirement they want, and the billions we spend in pensions tax relief must not benefit only those at the very top. That is why we have called for restrictions on pensions tax relief for those earning more than £150,000 a year. The third test is the cost test: the Government have to ensure that the policy does not result in extra cost to the state. That point was made earlier, and I think the Minister, to his credit, understands that there is an issue with social care and pensioners having to fall back on means-tested benefits—housing benefit, for example—later in their life if they do not properly or sensibly manage their resources. As yet, however, the Government have not explained how all that will be joined up in policy terms. In our view, if the Government’s pensions reforms fail any of those tests, the negative impact on savers could be considerable.

In Committee, my hon. Friend the Member for Islwyn (Chris Evans) talked about protecting people from the “sharks in the market”. That brings us to the vexed question of guidance. Going back to the Chancellor’s no doubt innocent slip, there is a serious point to be made about definitions. When pressed subsequently, the Chancellor said:

“There is a technical distinction between advice and guidance. The budget document exists, I don’t get up and read it out because it contains all the technical details of the Budget and we publish it at the same moment. The speech needs to also communicate in English so people watching it can understand what is meant.”

I understand that, but as I emphasised strongly in Committee, there is a world of difference between advice and guidance in technical terms and in terms of legality. The Government need to deal with that.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

I am listening carefully and trying to understand. Is the hon. Lady suggesting that the Government should be people’s financial adviser? I am not sure that is what the role of Government should be. I thought the reform was about opening up choices and making sure that people realise what steps they can take, not telling them what direction they should go in.

[Cathy Jamieson]

It is important that Government use language consistently and do not inadvertently mislead people about what they are going to get, whether it is guidance, advice or information, given face-to-face, over a telephone or through the internet.

The Red Book states:

“from April 2015, all individuals with defined contribution pension pots are offered free and impartial face-to-face guidance at the point of retirement”.

One might consider that a good and positive measure, but it raises some questions—questions that largely accord with the three tests we have set. First, there is a question about cost: the budget for guidance of just £20 million—£10 million each for 2015-16 and 2016-17—gives rise to some concern, as does its including no provision for this year. According to the tax impact and information note, the measures in the Bill will enable up to 400,000 people to draw down their pensions. I note that the Minister referred earlier to an updated tax impact and information note. Perhaps he can tell us whether he has revised any of those sets of numbers. We need to understand why nothing has been put aside for that free and impartial guidance in this financial year.

13:30

My hon. Friends spoke about what people need at the point they make a decision, which was also raised in Committee. People need access to information and guidance in advance of drawdown, so we need to consider whether the point of retirement is the sensible time for financial planning.

Hon. Members will have noted the Government’s proposed allocation of £20 million over the two-year period, but it is questionable whether that will meet the need and the demand. Again, the matter was discussed extensively in Committee, but we did not get the required answers. For example, we are told that the sum is based on an expected cost of £70 to £100 per individual, yet the Association of British Insurers has estimated that 500,000 members of defined contribution pension schemes retire each year. If we take the lower end of the Government’s estimate and multiply it by 500,000, we get a total of £35 million, so there is a question whether the Government’s current budget for guidance would even be sufficient to meet the potential demand at a cost of £70 per head.

One industry insider, I understand, commented that

“the £20 million the Government is putting forward is a drop in the ocean”,

and, of course, the money is available only for the next two years, raising questions about what is supposed to happen after that. A further question is what savers can expect from guidance that costs between £70 and £100 per person. The Association of Professional Financial Advisers, for example, estimates that the average flat fee charged by an adviser for annuities advice—I say advice—is £681. We know that guidance carries none of the legal protections attached to advice, which is regulated. That no doubt accounts in part for the significant difference in cost between the two.

It is important to note the comments made by the Pensions Minister when he appeared before the Work and Pensions Committee on 29 April. He said that the Government’s plan was for 15 minutes worth of guidance per person. In Committee, my hon. Friend the Member for Islwyn, who had significant experience in the financial services sector prior to entering the House, observed that when giving someone independent financial advice, it is not just their pension that has to be looked at, but their investments if they have any, their income, and the right product for them overall. He estimated that that could not be done effectively in less than two hours.

Advice and guidance are very different, and guidance begins to look less than adequate to meet some people’s requirements. Much confusion arises from the Chancellor’s comments in the Budget speech, which I accept were an innocent slip of the tongue, leading to a number of unintended consequences. We need clarity, not confusion, for people who are making major financial decisions. The pensions Minister told the Select Committee that guidance would

“lead more people to take formal advice”.

That has been endorsed by the Royal London insurance company, which said that guidance

“should be a rich source of referrals to financial advisers.”

Royal London has illustrated a number of issues in relation to what guidance ought to be and what would be a good practice model. For example, it says that there is a real prospect that many people who receive guidance will find that their needs are more complex than they originally thought, or that they do not know which of the retirement options would best suit their circumstances. There will be people in that category who would not normally consider using a financial adviser but who would benefit from advice at that point. That raises the prospect of people being referred on.

Royal London considered the impact of guidance on debt levels. People approaching retirement who have debt to pay off may need information and support in deciding whether to use some of their pension funds to pay off the debt, and some would require debt counselling. Royal London highlighted the fact that guidance should encourage people to shop around for the best deal, and suggested that after providing advice, providers should not be allowed to approach customers to try to sell their own products for three months. Interestingly, the insurance company suggested that, rather than the issue becoming a political football, guidance would best be provided by a not-for-profit organisation with a single focus. I look forward to hearing the Minister’s comments on those points.

If guidance is a stepping stone to advice, does that leave the consumer with a considerable additional expense, which could run into hundreds of pounds? If it becomes routine to lead people from free guidance to paid-for advice, what is the point? Another question that we raised in Committee was whether guidance would be available to everyone, regardless of where they live. The Minister acknowledged today that some of the guidance may be made available through the internet, which will not be suitable for everyone and will not be face to face. We need more explanation of the comments of the Pensions Minister when he suggested that group sessions were an option worth exploring. Are we to conclude that the Government’s position has moved from face-to-face advice or guidance to face-to-faces advice? I am not sure that many people would want to sit with others to discuss their private circumstances. I hope the Minister will deal with the point about face-to-face guidance, as it is important that people understand what is being offered.

[Gregg McClymont]

Before my hon. Friend moves off the important topic of guidance, I am sure she will agree that the context to this is that the median pension pot is much smaller than many hon. Members imagine: it is well below £30,000 a year. Moving from guidance to advice potentially means that a significant proportion of a person’s pension pot is eaten up by the cost of advice. We should all bear that in mind during the debate.

[Cathy Jamieson]

Once again, my hon. Friend makes an important point and anticipates some of the things I want to mention before bringing my remarks to a close. I understand that in some instances pension pots are relatively small, and we do not want a scenario in which people find that a fairly high percentage of their pension pot must be spent on taking the advice to which he refers.

In that context, I would be particularly interested to know whether the Government have conducted any serious work on how and when savers will invest the money taken out of their pension pots, particularly when those pots are relatively small. Industry analysis from Australia, which has total flexibility at the de-accumulation stage, has found that over half of pension lump sums are spent on homes and cars.

Again, before people get excited and claim that I am somehow suggesting that people should not be in charge of their own money, let me make it clear that there is not necessarily anything wrong with that. For many people it might seem to be the reasonable thing to do. They might wish to pay off a mortgage or debt, buy the car they had not previously been able to afford, or make improvements to their home. Of course they ought to be able to make that choice, but they ought to be able to do so in the knowledge of what they might face in later years.

The potential impact of that change on the wider economy has already been mentioned, particularly in relation to the housing market. For example, what are the implications of people with substantial pension pots deciding to invest in property, particularly in the buy-to-let market? I also think that the Government must look at the impact on household savings ratios, given that the OBR has projected that they will fall from 5% in 2013 to just under 3% at the end of the forecast period. In the midst of any economic recovery that has been driven by consumer savings, any change in the way people choose to invest their savings and the consequent impact on the household savings ratio should be looked at very carefully.

In conclusion, I think that this is a crucial issue for thousands of people across the country. Many people do not think about pensions and long-term savings, and not because they have no interest in them or do not want to save, but because they are trying to manage their expenditure week by week and do not have the opportunity to look at the longer term. Everything we can do to encourage good-quality financial education is important, which is why we must get the guidance and advice absolutely correct. People also need to be confident that the information they get from the industry itself will be tailored and suitable for them.

[Gregg McClymont]

Perhaps this time I am not anticipating what my hon. Friend is about to say, as I think she is bringing her remarks to a close. It strikes me, having listened to the Government on this issue, that the employer is never mentioned. One arm of the Government is promoting workplace employer pensions, but what is the employer’s role in relation to greater flexibility and choice?

[Cathy Jamieson]

Once again, my hon. Friend makes a valid and important point. He is correct that I was about to conclude my remarks, so I will resist the temptation to go into great detail on that issue, other than to say—we raised this in Committee—that in some ways there seems to be no joined-up government here, with pensions sometimes seeming to be at odds with other aspects. Rather than all pulling together in the interests of the consumer, there could be tensions, which I think the Government should address.

As I have said, this is a crucial issue for thousands of people. We need to get it right. I am of course aware that there is further legislation coming down the line. However, given that the Minister indicated that at least some of our requests for information are reasonable and relevant to the matter being discussed, I hope that even at this late stage he will agree to our new clause, which we will want to press when the time comes.

13:45

[James Duddridge]

I find this issue rather exciting, although clearly the House does not, given how empty the Chamber is. The pension changes that the Government are bringing forward are absolutely essential and, I think, will transform the marketplace in the long term. However, I am concerned that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), having suffered the Finance Bill in Committee, seems to have spent the intervening time reading the Hansard reports of what we all said. Really, it is too much of a punishment to do that and then have to come back yesterday and today. Thankfully we will have Third Reading later this evening, if all goes well.

On new clause 13, my hon. Friend the Exchequer Secretary talked entirely about defined contribution schemes. When he winds up, perhaps he will update the House on what is happening with defined benefit schemes, or perhaps there are no transitional issues for defined benefit schemes in the new clause. I think it is entirely right to give people plenty of time to look at these issues, because a number of people were not expecting these changes and would not have predicted them, so they will need longer to consider their personal positions. As time goes on, I think that there will be less need for guidance and advice, whether provided by the state or privately, because people now going into defined contribution schemes will know what the options are likely to be when they come out. Indeed, five years from now it will be slightly more predictable. People should look at that years, rather than just a few months, before they retire. Of course, that is not possible immediately, given that these changes have only just come in.

[Gregg McClymont]

The hon. Gentleman will be aware that the other arm of the Government on this, the Pensions Minister, has developed a whole pensions policy based on the notion that inertia has to be harnessed for the public good, meaning that, as a rule, people are not aware of the complexities of pensions and there therefore needs to be a system in place so that those who do not exercise a choice still get a good outcome. Is the hon. Gentleman really that confident that we will very quickly reach a situation in which there will be informed consumers across the board who can make the kinds of investment decisions to which he is referring?

[James Duddridge]

I think that the default position will be that an annuity is purchased, rather than a lump sum being withdrawn. I think the hon. Gentleman is saying that that is the more cautious route, but I am concerned that it is not the right route for some people. Taking out a lump sum might make a lot more sense for them. However, it is an additional option. The guidance that the Government are offering is not perfect. In fact, perfect advice, if it is taken forward to a recommendation, is incredibly expensive.

[Gregg McClymont]

I thank the hon. Gentleman for that thoughtful response. I am not sure that the default position will be that someone is defaulted into an annuity. We need clarity on that as we discuss these clauses. I think that a choice will have to be exercised one way or another, but I might be wrong. Perhaps the Minister will provide clarity on that.

[James Duddridge]

The Minister, as ever, will provide clarity, and I will ensure that he has plenty of time to do so.

We need to look at these changes in the round and consider other changes being made, particularly the individual savings account legislation that is going through. In the longer term, I think that ISAs and pensions will be linked and that we will move towards the individual retirement accounts we see in America, but working more from the base of an ISA up to a pension, rather than a merging of the two or a dumbing down of pensions.

An earlier intervention referred to spouse-to-spouse transfers on ISAs, which I think are particularly relevant in relation to new clause 13 and defined contribution pensions, because some people will be taking larger sums of money out and investing them directly into an ISA with little awareness that it cannot then be transferred to their spouse. The earlier the Government look at making spouse-to-spouse transfers exempt for inheritance tax, the better, particularly during this early transition period. The Sunday Times and a number of other financial services campaigners are urging the Government to look at the issue of spouse-to-spouse transfer, but I have not heard it mentioned with regard to the release of lump sums and defined contribution lump sums. Through new clause 13 the Government are recognising that there are transitional issues, but the additional transitional issue relating to ISAs has not necessarily been covered.

I welcome the reduction from £20,000 to £12,000, which entrusts individuals to make decisions. Changes to trivial contributions are also very welcome, particularly as people move from employer to employer, building up large numbers of very small pots. It may not make financial sense to merge them, so it may be better to take them out of a pension tax wrapper and independently move them to an ISA.

On the issue of guidance, we should be open and honest that the Government cannot afford to provide full-blown advice and recommendation. It is very good of the Government to allocate a significant sum of money to pointing people in the right direction. If the average pot is £30,000, as we have heard, the thousands of pounds that full-blown advice and recommendation may cost would be totally disproportionate to the potential benefit.

It is good to get guidance, but I would exercise caution about what is best: face-to-face guidance is not always the best option. If I wanted to transfer money or enact a financial transaction, I would not want to sit down face to face with my bank manager. I would much prefer the tried and tested method of interacting with and getting advice and guidance through the internet, at least at an early stage. I would not want the Government spending all the money on face-to-face guidance. Guidance on the internet may well be better for an increasing number of people, including a mini fact find into which they put their basic information.

The change may be from face-to-face to face-to-faces. Financial services presentations can work face to face, but they can also work over the internet. Once people have completed an initial fact find or an overview of their financial position—they may want to use their lump sum to repay debt, for instance—they could be diverted to an individual webcast with the relevant financial guidance.

[Gregg McClymont]

I thank the hon. Gentleman, who is speaking from his experience of the sector, for giving way again. Would he care to comment on why the existing annuities market was not working? My understanding of the analysis is that the default position of individuals was simply to accept what they were offered and not to get involved in the type of process to which he refers. If that means that the annuities market was a failure because people were not getting value for money as a result of not shopping around, what confidence does he have that there will be an overnight revolution in people’s engagement with the type of guidance he suggests?

[James Duddridge]

The annuities market was not working effectively in a number of ways, but, in relation to the lump sum, it did not work for a lot of our constituents if they rationally expected a very low life expectancy. If they had been diagnosed with a particular illness, the question of what would happen to their money would cause them great stress. It is important, therefore, to enable them to release some of that pension money and put it into another instrument so that their family can share it or, indeed, so that they can enjoy it themselves in their final years. I understand there is a risk of people under-predicting their longevity, but the large number of people with a diagnosed illness would like to access that pot. That is a slightly extreme position, but it is at the other end of the scale.

[Dr Whiteford]

The hon. Gentleman is making a very good point about encouraging people to shop around, but is he aware that many parts of these islands do not have very good internet access, so putting all the eggs in that basket will not help many people who want pensions advice?

[James Duddridge]

I agree that we should not put all the eggs in one basket, but we certainly should not put none in the internet basket. It is a very useful provision and, as public and domestic access to broadband improves throughout the islands, I think that use of the internet will speed things up.

I find it odd that so much of our discussion about this Finance Bill, which is a Treasury matter, has been about pensions Bills. The hon. Member for Kilmarnock and Loudoun has prayed in aid the Pensions Minister’s submission to the Department for Work and Pensions. I wonder whether we conduct our debates on Finance Bills in the right way, structurally speaking, and whether other departmental Ministers should be involved, where relevant, alongside Treasury Ministers. Fundamentally, the report supported by Opposition Members almost amounts to a fundamental review of a number of issues in the pensions industry, which is clearly in the remit of the DWP, not the Treasury. I am not arguing that it is wrong or right; it is just that not all the key players are involved.

[Dame Anne Begg (Aberdeen South) (Lab)]

I have some sympathy with what the hon. Gentleman is saying about the fact that these pensions provisions are being handled by the Treasury. Does he agree that the two pensions Bills announced in the Queen’s speech appear to pull in different directions? One is about giving people more control over their money, while the other is about collective direct contribution schemes, which are the opposite of that. That could lead to a conflict, because two Departments are involved in developing the policy.

[James Duddridge]

I do not believe they are contradictory, because some people want to hand over that level of responsibility.

I know that other Members want to speak. I wanted to make a number of other points, but I will sit down and leave it at that in order to give the Minister a chance to respond.

[Mr Gauke]

Let me quickly try to address some of the points that have been raised, many of which related to guidance. As I said earlier, the issue features in Labour’s new clause 9, but it is not directly related to the Finance Bill. I will be as helpful as I can. On the question of whether guidance will only be face to face, the face-to-face offer will be available to those who need and want it. However, that is not to say that it will be the exclusive delivery channel. Not everyone will want face-to-face guidance, as my hon. Friend the Member for Rochford and Southend East (James Duddridge) has made clear. For many people, both now and in the future, other channels will better suit their needs. We are currently considering the appropriate range of options for delivery channels, to ensure that consumer needs are properly understood and met, building on the views and evidence received during the consultation. We have asked the Financial Conduct Authority, working closely with the Pensions Regulator, the Pensions Advisory Service, the Money Advice Service and consumer groups, to co-ordinate a set of clear and robust standards that the guidance will have to meet.

The point was made about costs and, in particular, the £20 million funding. It is important to realise that that is a development fund for the purpose of getting the initiative up and running; it is not to pay for the ongoing costs of the scheme. We will talk more about that later.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does not that illustrate the need for gathering and publishing the information, as proposed by our new clause 9? We are constantly hearing new things, such as, “There will be more costs for guidance, but we don’t know what they are or what will happen.” If the information is going to be gathered anyway, as the Exchequer Secretary constantly assures us, why not publish it to make sure we get this right?

[Mr Gauke]

I do not know whether the hon. Lady was present earlier—[Interruption.] I am pleased that she was. She will have heard me say that we have consulted on this matter and will respond shortly. If I may provide a little more clarity, that will happen before the summer recess, so it is at that point that we will set out our proposals and, obviously, there will be an opportunity over the months ahead for the House to give them considerable scrutiny.

To address the particular point made by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) about whether the numbers in the tax information and impact note have been changed, the answer is no. The TIIN has been amended to take account of the Government new clause and new schedule, but the impacts remain the same, so there is no fiscal cost. I hope that that clarification is helpful.

Lastly, to be clear about the guidance—we will get the full details on it—as we have said throughout, it will be impartial and will not include recommendations for specific products or providers. It will not be a sales process; it is important that the sales process is separate.

I hope that that information is helpful to the House. I hope that new clause 13 can be added to the Bill, and I advise my hon. Friends to oppose the Opposition’s new clause 9.

Question put and agreed to.

New clause 13 accordingly read a Second time, and added to the Bill.

14:00

Proceedings interrupted (Programme Order, 1 July).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

New Clause 9

Pension flexibility: Treasury analysis

‘(1) The Chancellor of the Exchequer shall, within six months of this Act receiving Royal Assent, publish and lay before the House of Commons any analysis prepared by the Treasury prior to the publication of Budget 2014 relating to the impact of changes made by sections 39 to 43 of this Act to schedules 28 and 29 to the Finance Act 2004.

(2) The information published under subsection (1) must include—

(a) any assessment made of the impact of the provision for independent face to face guidance on the 2004 Act;

(b) the distributional impact, by income decile of the population, of changes made by sections 39 to 43 of this Act;

(c) a behavioural analysis; and

(d) the financial risk assessment.”—(Cathy Jamieson.)

Brought up.

Question put, That the clause be added to the Bill.

14:00

Division 29

Ayes: 241

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Labour: 223
Democratic Unionist Party: 6
Scottish National Party: 6
Social Democratic & Labour Party: 2
Plaid Cymru: 2
Independent: 1
Alliance: 1
Green Party: 1

Noes: 295

---

Conservative: 250
Liberal Democrat: 44

New Schedule 5

Pension flexibility: further amendments

Temporary extension of period by which commencement lump sum may precede pension

1 In Schedule 29 to FA 2004 (authorised lump sums under registered pension schemes) after paragraph 1 (conditions for a lump sum to be a pension commencement lump sum) insert—

“1A (1) Paragraph 1(1)(c) is to be omitted when deciding whether a lump sum to which this paragraph applies is a pension commencement lump sum.

(2) This paragraph applies to a lump sum if—

(a) the sum is paid in respect of a money purchase arrangement,

(b) the sum is paid before the member becomes entitled to the sum,

(c) either—

(i) the sum is paid on or after 19 September 2013 but before 6 April 2015, or

(ii) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled, and

(d) the member becomes entitled to the sum before 6 October 2015.

(3) Where—

(a) a lump sum to which this paragraph applies is a pension commencement lump sum but would not be a pension commencement lump sum if sub-paragraph (1) were omitted, and

(b) the lump sum is paid to the member in connection with a pension under the scheme to which it is expected that the member will become entitled (“the expected pension”), no lump sum paid to the member out of the expected-pension fund is a pension commencement lump sum; and here “the expected-pension fund” means the sums and assets that from time to time represent the sums and assets that, when the lump sum mentioned in paragraph (a) was paid, were held for the purpose of providing the expected pension.

(4) For the purposes of sub-paragraph (2), if the circumstances are as described in sub-paragraph (2)(c)(ii), the member is treated as not having become entitled to the arranged pension as a result of the cancelled contract having been entered into; and here “the arranged pension” means the pension that would have been provided by that contract had it not been cancelled.”

Temporary relaxation to allow transfer of pension rights after lump sum paid

2 (1) In Schedule 29 to FA 2004 after paragraph 1A insert—

“1B (1) When deciding whether a lump sum to which this paragraph applies is a pension commencement lump sum—

(a) paragraph 1(1)(aa) and (c) and (3) are to be omitted,

(b) paragraph 1(4) is to be treated as referring to the actual pension (see sub-paragraph (2)(h) of this paragraph), and

(c) paragraph 2(2) is to be treated as referring to the arrangement under which the member was expected to become entitled to the expected pension (see sub-paragraph (2)(b) of this paragraph).

(2) This paragraph applies to a lump sum if—

(a) the sum is paid in respect of a money purchase arrangement,

(b) the sum is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”),

(c) the expected pension is income withdrawal, a lifetime annuity or a scheme pension,

(d) the sum is paid before the member becomes entitled to the expected pension,

(e) either—

(i) the sum is paid on or after 19 September 2013 but before 6 April 2015, or

(ii) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,

(f) the sum is not repaid at any time before 6 October 2015,

(g) before the member becomes entitled to the expected pension, there is a recognised transfer of the sums and assets that immediately before the transfer represent the sums and assets that when the sum was paid were held for the purpose of providing the expected pension,

(h) the member becomes entitled before 6 October 2015 to a pension under the scheme to which the recognised transfer is made (“the actual pension”),

(i) the actual pension is income withdrawal, a lifetime annuity or a scheme pension, or some combination of them, and

(j) all of the sums and assets that represent the sums and assets transferred by the recognised transfer are used to provide the actual pension.

(3) If a lump sum to which this paragraph applies is a pension commencement lump sum, any lump sum paid—

(a) to the member,

(b) by the scheme to which the recognised transfer mentioned in sub-paragraph (2)(g) is made or by any other registered pension scheme (including the scheme from which the transfer was made), and

(c) in connection with the member’s becoming entitled to the actual pension,

is not a pension commencement lump sum.

(4) For the purposes of sub-paragraph (2), if the circumstances are as described in sub-paragraph (2)(e)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.”

(2) In section 166(2) of FA 2004 (time at which a person becomes entitled to a lump sum)—

(a) before paragraph (a) insert—

“(za) in the case of a pension commencement lump sum to which paragraph 1B of Schedule 29 applies (certain sums paid before 6 April 2015), immediately before the person becomes entitled to the actual pension (see paragraph 1B(2)(h) of that Schedule),”, and

(b) in paragraph (a) for “of a” substitute “of any other”.

Temporary relaxation to allow lump sum to be repaid to pension scheme that paid it

3 In Chapter 3 of Part 4 of FA 2004 (payments by registered pension schemes) after section 185I insert—

“Repayments of lump sums

185J Effect of repayment of certain pre-6 April 2015 lump sums

‘(1) For the purposes of this Part—

(a) a lump sum to which this section applies is treated as never having been paid, and

(b) the payment by which it is repaid is treated as not being a payment.

(2) This section applies to a lump sum if—

(a) the sum is paid by a registered pension scheme to a member of the scheme in respect of a money purchase arrangement,

(b) the sum is paid to the member in connection with a pension under the scheme to which it is expected that the member will become entitled (“the expected pension”),

(c) the expected pension is income withdrawal, a lifetime annuity or a scheme pension,

(d) the sum is paid before the member becomes entitled to the expected pension,

(e) either—

(i) the sum is paid on or after 19 September 2013 but before 6 April 2015, or

(ii) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,

(f) before the member becomes entitled to the expected pension, the member repays the sum to the pension scheme that paid it, and

(g) the repayment is made before 6 October 2015.

(3) For the purposes of subsection (2), if the circumstances are as described in subsection (2)(e)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.”

Calculation of “applicable amount” in certain cases

4 In paragraph 3 of Schedule 29 to FA 2004 (pension commencement lump sums: applicable amount) after sub-paragraph (8) insert—

“(8A) Sub-paragraphs (1) to (8) have effect subject to the following—

(a) if—

(i) paragraph 1A or 1B applies to the lump sum,

(ii) the lump sum is paid more than 6 months before the day on which the member becomes entitled to it,

(iii) a contract for a lifetime annuity is entered into to provide the pension in connection with which the lump sum is paid, and

(iv) on or after 19 March 2014 the contract is cancelled,

the applicable amount is one third of the annuity purchase price that would have been given by sub-paragraphs (4) to (5) in the case of that annuity had the contract not been cancelled, and

(b) if—

(i) paragraph 1A or 1B applies to the lump sum,

(ii) the lump sum is paid more than 6 months before the day on which the member becomes entitled to it, and

(iii) paragraph (a) does not apply,

the applicable amount is one third of the sums, plus one third of the then market value of the assets, held at the time the lump sum is paid for the purpose of providing the pension at that time expected to be the pension in connection with which the lump sum is paid.

(8B) For the purposes of sub-paragraph (8A)(a)(ii), the member is treated as not having become entitled to a pension as a result of the cancelled contract having been entered into.”

Expected pension commencement lump sums treated as trivial commutation lump sums

5 (1) In section 166(1) of FA 2004, in the lump sum rule, omit the “or” after paragraph (f), and after paragraph (g) insert “, or

(h) a transitional 2013/14 lump sum.”

(2) In Schedule 29 to FA 2004, after paragraph 11 insert—

“Transitional 2013/14 lump sum, and its related trivial commutation lump sum

11A (1) A lump sum is a transitional 2013/14 lump sum for the purposes of this Part if—

(a) the sum (“the earlier sum”) is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”),

(b) the earlier sum is paid before the member becomes entitled to the expected pension,

(c) either—

(i) the earlier sum is paid on or after 19 September 2013 but before 27 March 2014, or

(ii) the earlier sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,

(d) all of the sums and assets for the time being representing the sums and assets that when the earlier sum was paid were held for the purpose of providing the expected pension are, before the member becomes entitled to the expected pension, used in paying a further lump sum to the member (“the further sum”),

(e) the further sum is paid on or after 6 July 2014 but before 6 April 2015, and

(f) the further sum is a trivial commutation lump sum (see sub-paragraph (2)).

(2) Sub-paragraph (4) applies when deciding under paragraph 7 whether the further sum is a trivial commutation lump sum in a case where the earlier sum is paid before the nominated date (see paragraph 7(3) for the meaning of “the nominated date”).

(3) If the earlier sum is a transitional 2013/14 lump sum, and the earlier sum and the further sum are not the only lump sums paid under registered pension schemes to the member, sub-paragraph (4) applies when deciding under paragraph 7 whether any other lump sum paid under a registered pension scheme to the member is a trivial commutation lump sum.

(4) If this sub-paragraph applies, the payment of the earlier sum is to be treated for the purposes of paragraph 8(1)(b) as a benefit crystallisation event—

(a) which occurs when the earlier sum is paid, and

(b) on which the amount crystallised is the amount of the earlier sum.

(5) If the earlier sum is a transitional 2013/14 lump sum, and only the sums and assets mentioned in sub-paragraph (1)(d) are used in paying the further sum, section 636B of ITEPA 2003 applies in relation to the further sum with the omission of its subsection (3).

(6) If the earlier sum is a transitional 2013/14 lump sum, and the sums and assets mentioned in sub-paragraph (1)(d) are used together with other sums and assets in paying the further sum—

(a) section 636B of ITEPA 2003 applies in relation to the further sum as if instead of the further sum there were two separate trivial commutation lump sums as follows—

(i) one (“the first part of the further sum”) consisting of so much of the further sum as is attributable to the sums and assets mentioned in sub-paragraph (1)(d), and

(ii) another consisting of the remainder of the further sum,

(b) the first part of the further sum is to be treated for the purposes of section 636B of ITEPA 2003 as having been paid immediately before the remainder of the further sum,

(c) section 636B of ITEPA 2003 applies in relation to the first part of the further sum with the omission of its subsection (3), and

(d) for the purposes of applying section 636B(3) of ITEPA 2003 in relation to the remainder of the further sum, the rights to which the first part of the further sum relates are to be treated as rights that are not uncrystallised rights immediately before the remainder of the further sum is paid.

(7) For the purposes of sub-paragraph (1), if the circumstances are as described in sub-paragraph (1)(c)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.”

(3) In section 636A of ITEPA 2003 (income tax exemption for certain lump sums)—

(a) in subsection (1) after paragraph (c) insert—

“(ca) a transitional 2013/14 lump sum,”, and

“transitional 2013/14 lump sum”,”.

(4) In section 280(2) of FA 2004 (index of expressions) at the appropriate place insert—

“transitional 2013/14 lump sum

paragraph 11A of Schedule 29”.

Small pot lump sums

6 (1) In the Registered Pension Schemes (Authorised Payments) Regulations 2009 (S.I. 2009/1171) after regulation 3 insert—

“3A (1) This regulation applies to a lump sum if—

(a) the sum (“the earlier sum”) is paid under a registered pension scheme to a member of the scheme,

(b) the earlier sum is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”),

(c) the earlier sum is paid before the member becomes entitled to the expected pension,

(d) either—

(i) the earlier sum is paid on or after 19 September 2013 but before 27 March 2014, or

(ii) the earlier sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,

(e) all of the sums and assets for the time being representing the sums and assets that when the earlier sum was paid were held for the purpose of providing the expected pension are, before the member becomes entitled to the expected pension, used in paying a further lump sum to the member (“the further sum”),

(f) the further sum is paid on or after 6 July 2014 but before 6 April 2015, and

(g) either—

(i) the payment of the further sum is a payment described in regulation 11, 11A or 12, or

(ii) the further sum is a trivial commutation lump sum within paragraph 7A of Schedule 29 and the earlier sum is the pension commencement lump sum in connection with which the further sum is paid.

(2) If this regulation applies to the earlier sum, and the payment of the further sum is a payment described in regulation 11, 11A or 12—

(a) the payment of the earlier sum is a payment of a prescribed description for the purposes of section 164(1)(f), and

(b) section 636A of ITEPA 2003 (exemption from income tax for certain lump sums) applies in relation to the earlier sum as if the earlier sum were a pension commencement lump sum.

(3) When deciding for the purposes of this regulation whether the further sum is a trivial commutation lump sum within paragraph 7A of Schedule 29, sub-paragraph (2)(c) of that paragraph is to be omitted.

(4) If this regulation applies to the earlier sum, and only the sums and assets mentioned in paragraph (1)(e) are used in paying the further sum, section 636B of ITEPA 2003 applies in relation to the further sum with the omission of its subsection (3).

(5) If this regulation applies to the earlier sum, and the sums and assets mentioned in paragraph (1)(e) are used together with other sums and assets in paying the further sum—

(a) section 636B of ITEPA 2003 applies in relation to the further sum as if instead of the further sum there were two separate trivial commutation lump sums as follows—

(i) one (“the first part of the further sum”) consisting of so much of the further sum as is attributable to the sums and assets mentioned in paragraph (1)(e), and

(ii) another consisting of the remainder of the further sum,

(b) the first part of the further sum is to be treated for the purposes of section 636B of ITEPA 2003 as having been paid immediately before the remainder of the further sum,

(c) section 636B of ITEPA 2003 applies in relation to the first part of the further sum with the omission of its subsection (3), and

(d) for the purposes of applying section 636B(3) of ITEPA 2003 in relation to the remainder of the further sum, the rights to which the first part of the further sum relates are to be treated as rights that are not uncrystallised rights immediately before the remainder of the further sum is paid.

(6) For the purposes of paragraph (1), if the circumstances are as described in paragraph (1)(d)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.”

(2) The amendment made by sub-paragraph (1) is to be treated as having been made by the Commissioners for Her Majesty’s Revenue and Customs under the powers to make regulations conferred by section 164(1)(f) and (2) of FA 2004.

Preservation of protected pension age following certain transfers of pension rights

7 (1) In paragraph 22 of Schedule 36 to FA 2004 (protection of rights to take benefit before normal minimum pension age) after sub-paragraph (6) insert—

“(6A) A transfer is also a block transfer if—

(a) it involves the transfer in a single transaction of all the sums and assets held for the purposes of, or representing accrued rights under, the arrangements under the pension scheme from which the transfer is made which relate to the member,

(b) the transfer takes place—

(i) on or after 19 March 2014, and

(ii) before 6 April 2015, and

(c) the date mentioned in sub-paragraph (7)(a) is before 6 October 2015.”

(2) In paragraph 23(6) of Schedule 36 to FA 2004 (meaning of “block transfer”) after “22(6)” insert “and (6A), but for this purpose paragraph 22(6A)(c) is to be read as if its reference to paragraph 22(7)(a) were a reference to sub-paragraph (7) of this paragraph”.

Operation of enhanced protection of pre-6 April 2006 rights to take lump sums

8 In paragraph 29 of Schedule 36 to FA 2004 (modifications of paragraph 3 of Schedule 29 to FA 2004 for cases where there is enhanced protection) after sub-paragraph (3) insert—

“(4) Paragraph 3 applies as if in sub-paragraph (8A)(a) for “is one third of” there were substituted “is—

where VULSR, VUR and LS have the same meaning as in sub-paragraph (1), and CAPP is”.

(5) Paragraph 3 applies as if in sub-paragraph (8A)(b) for “is one third of the sums, plus one third of” there were substituted “is—

where VULSR, VUR and LS have the same meaning as in sub-paragraph (1), and EP is the total of the sums, and”.”

Protected lump sum entitlement following certain transfers of pension rights

9 In paragraph 31(8) of Schedule 36 to FA 2004 (“block transfer” has meaning given by paragraph 22(6) of Schedule 36 to FA 2004)—

(a) after “22(6)” insert “and (6A)”, and

(b) at the end insert “, and reading paragraph 22(6A)(c) as if its reference to paragraph 22(7)(a) were a reference to sub-paragraph (3) of this paragraph.”

10 (1) In paragraph 34(2) of Schedule 36 to FA 2004 (modifications required by paragraph 31 in cases involving protected entitlements to lump sums) the sub-paragraphs treated as substituted in paragraph 2 of Schedule 29 to FA 2004 are amended as follows.

(2) In the substituted sub-paragraph (7A), in the definition of AC, for “(7AA) and (7B))” substitute “(7AA) to (7B))”.

(3) After the substituted sub-paragraph (7AA) insert—

“(7AB) Where paragraph 1A applies to the lump sum, AC is the total of—

(a) the sums held, at the time the lump sum is paid, for the purpose of providing the pension at that time expected to be the pension in connection with which the lump sum is paid, and

(b) the market value at that time of the assets held at that time for that purpose.

(7AC) Where paragraph 1B applies to the lump sum, AC is the total of—

(a) the sums held, at the time the lump sum is paid, for the purpose of providing the expected pension (see paragraph 1B(2)(b)), and

(b) the market value at that time of the assets held at that time for that purpose.”

Reporting obligations

11 (1) In the Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567) after regulation 18 insert—

“Modified operation of these Regulations in the case of certain pre-6 April 2015 lump sums

19 Lump sums to which paragraph 1B of Schedule 29 applies

‘(1) Regulations 3 to 18 have effect subject to the following provisions of this regulation.

(2) Paragraphs (3) to (8) apply if—

(a) a lump sum is paid by a registered pension scheme (“the paying scheme”) to a member of the scheme,

(b) paragraph 1B of Schedule 29 applies to the lump sum, and

(c) the member’s becoming entitled to the actual pension mentioned in paragraph 1B(2)(h) of Schedule 29 has the effect that—

(i) the member also becomes entitled to the lump sum, and

(ii) the member’s becoming entitled to the lump sum is a benefit crystallisation event.

(3) For the purposes of—

(a) reportable event 6,

(b) regulation 3 so far as applying by virtue of that event, and

(c) obligations under regulation 14(1),

the benefit crystallisation event mentioned in paragraph (2)(c)(ii) is treated as occurring—

(i) in respect of the scheme to which the transfer mentioned in paragraph 1B(2)(g) of Schedule 29 was made (“the receiving scheme”) and not in respect of the paying scheme, and

(ii) when the member becomes entitled to the actual pension or, if later, on 5 August 2014.

(4) For the purposes of regulations 15(2)(a) and 17(5)(a)(i) and (7)(a)(i), that benefit crystallisation event is treated as occurring in respect of the receiving scheme and not in respect of the paying scheme.

(5) For the purposes of—

(a) reportable event 7 (but not its definition of “the entitlement amount”),

(b) reportable event 8, and

(c) regulation 3 so far as applying by virtue of either of those events,

the lump sum is treated as having been paid—

(i) by the receiving scheme and not by the paying scheme, and

(ii) when the member becomes entitled to the actual pension or, if later, on 5 August 2014.

(6) For the purposes of reportable event 7 “the entitlement amount” is the total of—

(a) the sums held, at the time the lump sum is actually paid, for the purpose of providing the expected pension mentioned in paragraph 1B(2)(b) of Schedule 29, and

(b) the market value at that time of the assets held at that time for that purpose.

(7) The scheme administrator of the paying scheme is to provide the scheme administrator of the receiving scheme with the following information—

(a) the date the lump sum was paid,

(b) the amount of the lump sum,

(c) the total of—

(i) the sums held, at the time lump sum is paid, for the purpose of providing the expected pension mentioned in paragraph 1B(2)(b) of Schedule 29, and

(ii) the market value at that time of the assets held at that time for that purpose, and

(d) a statement that no further pension commencement lump sum may be paid in connection with that expected pension.

(8) The scheme administrator of the paying scheme is to comply with its obligations under paragraph (7) before—

(a) the end of 30 days beginning with the date of the transfer mentioned in paragraph 1B(2)(g) of Schedule 29, or

(b) if later, the end of 3 September 2014.

20 Lump sums to which paragraph 1B of Schedule 29 fails to apply

‘(1) Regulations 3 to 18 have effect subject to the following provisions of this regulation.

(2) Paragraph (3) applies if—

(a) a lump sum is paid by a registered pension scheme (“the paying scheme”) to a member of the scheme,

(b) paragraph 1B of Schedule 29 does not apply to the lump sum, but the conditions in paragraph 1B(2)(a) to (g) are met in the case of the lump sum, and

(c) as at the end of 5 October 2015 it is the case that the lump sum is to be taken as having been an unauthorised member payment.

(3) For the purposes of reportable event 1, and regulation 3 so far as applying by virtue of that event, the lump sum is treated as having been paid—

(a) by the receiving scheme and not by the paying scheme, and

(b) on 6 October 2015.”

(2) The amendment made by sub-paragraph (1) is to be treated as having been made by the Commissioners for Her Majesty’s Revenue and Customs under such of the powers cited in the instrument containing the Regulations as are applicable.

Scheme sanction charges

12 (1) In section 239(3) of FA 2004 (cases where person other than scheme administrator is liable for a scheme sanction charge)—

(a) after “But” insert “—

(a) ”, and

(b) at the end insert “, and

(b) in the case of a payment of a lump sum to a member where the conditions in paragraphs 1(1)(b) and (d) and 1B(2)(a) to (g) of Schedule 29 are met, the person liable to the scheme sanction charge so far as relating to any part of the lump sum within the permitted maximum is the scheme administrator of the registered pension scheme to which the transfer mentioned in paragraph 1B(2)(g) of Schedule 29 is made.”

(2) In section 239 of FA 2004 (scheme sanction charges) after subsection (3) insert—

“(3A) For the purposes of subsection (3)(b) “the permitted maximum”, in the case of a lump sum paid to an individual, is the amount that in accordance with paragraph 2 of Schedule 29 would be the permitted maximum for that lump sum if the individual became entitled at the time the lump sum is paid to the pension at that time expected to be the pension in connection with which the lump sum is paid.”

(3) In section 268 of FA 2004 (discharge of liability to scheme sanction charges etc) after subsection (7) insert—

“(7A) Subsection (7) applies with the omission of its paragraph (a) if the scheme chargeable payment is a payment of a lump sum where the conditions in paragraph 1B(2)(a) to (g) of Schedule 29 are met.”

(4) In the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572) in article 18 (which provides for paragraph 1(1)(b) of Schedule 29 to FA 2004 to be omitted in certain cases) at the end insert “, and section 239 has effect in the case of a lump sum paid to that individual as if its subsection (3)(b) did not include a reference to paragraph 1(1)(b) of Schedule 29”.

(5) The amendment made by sub-paragraph (4) is to be treated as made by the Treasury under the powers to make orders conferred by section 283(2) of FA 2004.

Power to make further adjustments

13 In section 166 of FA 2004 (payments by registered pension schemes: the lump sum rule) after subsection (4) insert—

“(5) The Commissioners for Her Majesty’s Revenue and Customs may by regulations amend Part 1 of Schedule 29, or Part 3 of Schedule 36, in connection with cases involving a lump sum within subsection (6).

(6) A lump sum is within this subsection if—

(a) the sum is paid on or after 19 September 2013 and before 6 April 2015, or

(b) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled.

(7) The provision that may be made under subsection (5) includes provision altering the effect of amendments made by the Finance Act 2014.”

14 In section 282(1) and (2) of FA 2004 (making of regulations and orders) for “Board of Inland Revenue” substitute “Commissioners for Her Majesty’s Revenue and Customs”.

Commencement

15 The amendments made by paragraphs 1 to 5, 6(1), 7 to 10, 11(1) and 12(1) to (4) of this Schedule are to be treated as having come into force on 19 March 2014.”—(Mr Gauke.)

Brought up, and added to the Bill.

New Clause 10

Review of reform to the annual investment allowance

“(1) The Chancellor of the Exchequer shall, within three months of the passing of this Act, undertake a review of the impact on business investment of changes to section 51A of the Capital Allowances Act 2001 made by Finance Act 2011.

(2) The Chancellor of the Exchequer must publish the report of the review and lay the report before the House.”—(Catherine McKinnell.)

Brought up, and read the First time.

14:15

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I beg to move, That the clause be read a Second time.

New clause 10 takes us back to 2010 and the heady first few months of this Government. It takes us back to a time when the coalition, having inherited a growing economy from the Labour Government, choked that recovery off by adopting an anti-growth, short-termist, short-sighted approach to supporting business and jobs. As hon. Members will be aware, one of the Chancellor’s first moves in government was to announce in the June 2010 Budget that he was cutting Labour’s annual investment allowance. The new clause asks the Government to undertake a proper review of the impact on business investment of that terrible decision. We need to learn the lessons from that dreadful mistake.

Before we consider the new clause in more detail I want to remind hon. Members of the background to this important issue. The annual investment allowance was announced as part of the 2007 Budget by the former Chancellor of the Exchequer, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown). It was introduced as part of a package of reforms to enhance Britain’s international competitiveness, encourage investment and promote innovation and growth. The new allowance replaced first-year capital allowances and meant that from April 2008, under the Labour Government, businesses were able to offset up to 100% of expenditure on general plant and machinery in any given year against taxable profits, up to a limit of £50,000.

We recognised the value of this important allowance to companies up and down the country in supporting them to invest for the long term, and in helping them to create and safeguard jobs. That is why Labour took the decision to double it as part of a series of measures announced in the March 2010 Budget—in order to

“support start-ups and small and medium sized enterprises…to position the UK as a leading centre for research and innovation, and to ensure that the UK is equipped with skills for growth and the infrastructure it needs to be successful in a low-carbon economy.”

The March 2010 Red Book stated:

“In order to provide further cash flow support and an incentive to increase business investment, the Government will increase the threshold of the AIA to £100,000 for expenditure incurred from April 2010.”

That announcement was hugely welcome to businesses up and down the country.

[Charlie Elphicke (Dover) (Con)]

Will the hon. Lady say what the allowance is today—is it £100,000 or has it gone up?

[Catherine McKinnell]

We are still at 2010; we will get to the present day in due course, but the hon. Gentleman seems to miss the point somewhat. Obviously, the Conservative party would like to airbrush out the unpleasant blip in 2010, when it almost abolished the investment allowance, and all the impacts that flowed from that, which were evident from the fall in business investment. That is the point that our new clause reinforces. The decision taken at that time was terrible. I do not know what the thinking was behind it—whether it had been planned for a long time by the Conservatives while they were in opposition, or whether it was simply a case of spitefully thinking, “It’s a Labour policy, so we will reverse it”—but it had catastrophic implications. As the hon. Gentleman’s question indicates, they had to think again.

[Sheila Gilmore]

I am sure that my hon. Friend, like me, welcomes the Government’s conversion and the way in which they have changed their policy. However, it is reasonable for us to question why the original decision was taken.

[Catherine McKinnell]

We can only speculate on what on earth was going through the Chancellor’s mind when he slashed an incentive that was clearly supporting those businesses in the very manufacturing industries that he claims to champion in making long-term investments, and creating and safeguarding the jobs that we need so desperately.

[Mr Gauke]

This policy was part of a package that included a significant reduction in corporation tax rates, which more than offset any impact on investment from the changes to the annual investment allowance. The Labour party has made it clear that it would increase corporation tax. This week, it has set out its test, which is to have the lowest corporation tax rate in the G7. That would enable a future Labour Government to increase corporation tax to 26%. Will she rule out a Labour Government increasing corporation tax to 26%?

[Catherine McKinnell]

Once again, Conservative Members, and indeed the Minister, want to brush over this inconvenient part of their so-called plan. They clearly made a bad decision in 2010. The purpose of the new clause is to show that. If the reduction in the annual investment allowance was offset by the reduction in corporation tax, as the Minister argues, why did they revisit the decision and increase the allowance again? That would not have been necessary if their only plan for supporting business up and down the country, which was to reduce corporation tax, had been successful. We supported that plan, but it was not enough on its own to offset the damaging uncertainty created by slashing the annual investment allowance from £100,000 to £25,000 in one fell swoop.

[Charlie Elphicke]

Will the hon. Lady rule out an increase in corporation tax under the next Labour Government, should one ever be elected—yes or no?

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

We are not discussing that.

[Catherine McKinnell]

My hon. Friend makes a fair point: that is not what we are discussing. However, I am interested to know whether the hon. Gentleman will rule out slashing the annual investment allowance with no notice if the Conservatives are re-elected in 2015. Will he confirm that—yes or no?

[Charlie Elphicke]

I hate to disappoint the hon. Lady, but I am not part of the Government. It is not for me, a Back Bencher, to rule anything in or out. I am proud that the Government have set the annual investment allowance at £250,000 and have massively reduced corporation tax. That is really great for business.

[Catherine McKinnell]

The hon. Gentleman is obviously not able to rule in or rule out any slashing of the annual investment allowance, but we have had so much chopping and changing that there is major uncertainty over whether the Chancellor and other Conservative Ministers have a sensible approach to investment. It is as though they do not understand that chopping and changing—slashing the annual investment allowance from £100,000 to £25,000 and then increasing it again—is the worst approach if we are trying to encourage business investment in this country. That is the kind of uncertainty that we have seen under this Government. Although the hon. Gentleman cannot rule anything in or out, I am interested to hear whether the Minister will rule out any further chopping or changing on this policy.

[Gordon Birtwistle (Burnley) (LD)]

I am in favour of capital allowances. I had an engineering company, and we believed that the Government should support successful engineering and manufacturing companies. Does the hon. Lady accept that a capital allowance of £50,000 on its own is not enough to encourage growth in the economy? Under the Labour Government, from 2007 onwards, GDP went down by 7% in the manufacturing sector, and probably by even more in some manufacturing sectors. I accept that we should have capital allowances, but they should be linked to other things. Does she agree with that?

[Catherine McKinnell]

That is very much the point that I was making and that we have made all along. We had a financial crisis in 2008, and the Labour Government did everything that could be done in those difficult times to support businesses in order to maintain investment levels, safeguard jobs and lay the foundations for the jobs of the future. That is why Labour decided to bring in the investment allowance, and then to double it in the Budget in March 2010. We knew that businesses needed certainty at that difficult time in the economic cycle to make investment decisions. That proved successful.

The U-turn by this Government was not quick enough. We called for it in every Finance Bill. Their eventual U-turn proved that the annual investment allowance was a successful policy, because they recognised that it needed to be reinstated. We have had these debates many times. We have supported the reductions in the corporation tax rate as part of a package of measures to support investment, jobs and growth. Unfortunately, the Government thought that corporation tax rates would do the job on their own. That is why they decided to slash the investment allowance, and to put all their eggs in one basket—the corporation tax basket. We have made it clear that we support a competitive rate within the G7 and the current rate, in order to provide the competitiveness that will create jobs and growth. The hon. Member for Burnley (Gordon Birtwistle) is right that that has to be part of a package of measures.

One key issue that businesses always raise is certainty. In chopping and changing this policy, the Government have undermined the certainty that is needed to give businesses the confidence to invest for the future.

[Mr Gauke]

Will the hon. Lady give way?

[Catherine McKinnell]

I will give way again, but I hope that it is in order for the Minister to confirm that the Tory party will rule out any further chopping and changing on the annual investment allowance.

[Mr Gauke]

Our plans on the annual investment allowance are clear: this is a temporary increase until December 2015. If the hon. Lady disagrees with that and has a different policy, I would be grateful to hear what it is. She talks about certainty. She has repeated the position that her party has taken this week, which is that this country should have the lowest corporation tax rate in the G7. The second lowest corporation tax rate in the G7 is 26.5% in Canada. That would allow a future Labour Government to increase corporation tax not just from 20% to 21%, but up to 26%. Is that the policy of the Labour party?

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. As interesting as some Members might find the debate on corporation tax and the future policy, that is not the subject of the new clause that we are discussing. Although the subject is linked to the question of allowances, it is not the substantive point. I would be grateful if Members addressed their remarks mainly to the new clause. They may use supporting arguments, but they must not allow those supporting arguments to become the only things that are debated.

[Catherine McKinnell]

Thank you, Madam Deputy Speaker, for your sage guidance. I agree that the Minister appears to be diverting the discussion away from the issue of concern: the Government’s approach to the annual investment allowance, which is the subject of the new clause. It calls for a review of the impact of the Government’s decisions on the allowance. He seems very reluctant to address that issue.

[Mr Robinson]

Strictly on the annual investment allowance, is my hon. Friend not absolutely on the button when she says that the question under discussion is not corporation tax or anything of the kind, but rather the AIA and the strictly temporary nature of the Government’s increase and extension of it? Will the Government commit to extending the AIA beyond the election, or is this just another election ploy?

14:30

[Catherine McKinnell]

My hon. Friend raises an important point, and that is the first time we have heard a Government Minister confirm that this is a temporary measure. I think that reinforces the argument in the new clause, which is that we should analyse the impact of the various changes to the AIA, year on year—it has gone up, down and all around—on businesses and their investment decisions. Hopefully, that will inform any decisions on the allowance, whether by a future Conservative Government or, as is more likely, a future Labour Government.

[Charlie Elphicke]

The temporary nature of the investment allowance is clearly set out in a press release issued on 1 January 2013, and I am staggered that the hon. Lady says this is the first time she knew about it. The Labour party ought to brief itself better than that.

[Catherine McKinnell]

Well, it simply reinforces the impression—in fact, the reality—that the Government are perfectly well disposed to chopping and changing their policy and approach to the annual investment allowance. That is the point we are trying to make, and the point behind the new clause. The Government should stop and take a look. I have heard from businesses that they would rather have no investment allowance than have chopping and changing of the AIA, because that can be destabilising for investment decisions. They would rather have a more stable approach to policy making than that being displayed by the Government.

Returning to the history of the investment allowance, the previous Labour Government doubled it, recognising its importance to giving businesses confidence to invest for the future, and to be supported within the tax system to make such decisions. What happened after it was doubled? We know that, in his infinite wisdom, the Chancellor decided as part of his emergency Budget—or so he called it—in June 2010, to announce to great fanfare that the annual investment allowance would be cut. However, it would not just be cut. At a time when the economy was growing after the financial crisis, the Chancellor decided that the best way to secure the recovery and back British businesses and jobs was to slash the annual investment allowance to just £25,000 from April 2012, as in the Finance Act 2011. He sought to reassure us that the impact of that reduction from £100,000 to £25,000 would be limited because:

“Over 95% of businesses will continue to have all their qualifying plant and machinery expenditure fully covered by this relief.”—[Official Report, 22 June 2010; Vol. 512, c. 175.]

In other words, the Chancellor believed in June 2010 that only 5% of firms were receiving any benefit from the annual investment allowance. HMRC’s tax information note at the time stated:

“Over 95 per cent of businesses are expected to be unaffected as any qualifying capital expenditure will be fully covered by the new level of AIA (£25,000).”

It went on to clarify that

“between 100,000 and 200,000 businesses will have annual capital expenditure of over £25,000”.

Therefore, in the Chancellor’s terms, only 5% of businesses would have been affected by his decision to slash the allowance. In anyone else’s terms, however, that is somewhere between 100,000 and 200,000 firms. That is a significant number of businesses that are employing—or potentially employing—a significant number of people, while also indirectly supporting employment through their supply chains. That seems to ring true of the Government’s approach because when they speak about being pro-business, they seem to forget the many businesses out there that do not fit the Tory vision of what businesses are, and it seems that those 100,000 or 200,000 firms did not feature on the Chancellor’s radar.

Let us remind ourselves briefly of some of the views expressed at the time about the decision the Chancellor took. The independent Institute for Fiscal Studies commented that losers from the cut

“would be those firms with capital intensive operations—with long lasting equipment and machinery—that currently benefit most from the capital allowances. While this is likely to apply to more firms in the manufacturing and transport sectors, it may also be true for some capital intensive service sector firms.”

A senior economist at the manufacturers association, the Engineering Employers Federation, said that financing cuts to corporation tax by

“cuts to investment allowances will be a heavy price to pay, especially for smaller companies. It might be a positive signal for large companies, but not for their suppliers.”

In evidence to the Treasury Committee on the June 2010 Budget, John Whiting, then tax policy director at the Chartered Institute of Taxation and now director of the Office of Tax Simplification, expressed his concern that the measure would particularly hit medium-sized firms.

The June 2010 Budget cut the annual investment allowance to £25,000 from April 2012 on the grounds that, in the Chancellor’s view, only 5% of firms would be affected. We then had two autumn statements and two Budgets, at which we put these arguments to the Government, before the Chancellor announced in the autumn statement 2012, again to great fanfare, that he would “temporarily” increase the AIA—the one he had just cut to £25,000—to £250,000 from January 2013.

What happened to business investment between the June 2010 Budget and the 2012 autumn statement that drove the Chancellor to move from feeling perfectly comfortable in slashing the annual investment allowance, because more than 95% of businesses would be unaffected, to announcing in 2012 a significant increase in the AIA to £250,000? Let us cast our minds back to what the Chancellor said when he announced that decision in autumn 2012. He said he was increasing the annual investment allowance because:

“It is a huge boost to all those who run a business and who aspire to grow, expand and create jobs.”—[Official Report, 5 December 2012; Vol. 554, c. 881.]

What exactly does that say about the Chancellor’s cavalier approach back in 2010? Surely the complete opposite—[Interruption.] I see Government Members rolling their eyes, but unfortunately they need to face the truth.

[Dr Thérèse Coffey]

The hon. Lady is right—I should not roll my eyes; I should get up and engage in debate. We know about the note left by the right hon. Member for Birmingham, Hodge Hill (Mr Byrne): “There is no money left”. Since then, the Office for National Statistics has confirmed that the recession was even deeper than expected. The Government made choices at the time, and there was a clear intention to start to reduce the rate of corporation tax in the grand fiscal regime. Nevertheless, there has certainly been a successful demonstration of industrial strategy, and many more millions of jobs are now being created. It is right that we put our backing behind reinvestment in capital allowances.

[Catherine McKinnell]

It is a little desperate to try to justify what is proven to have been a flawed decision-making process back in 2010. By the Chancellor’s own accounts, the measure was a huge blow to all those businesses that aspire to grow, invest for the long term and create jobs.

[Sheila Gilmore]

Does my hon. Friend agree that it seems odd to suggest that the chopping and changing was due to a sudden discovery that the economy was improving? The decision, in effect, to reintroduce the allowance was taken in 2012, when growth was extremely low. It would appear from these plans that, having declared an intention to increase the allowance briefly to £500,000 for one year only, it could drop down to £25,000 in January 2016. What kind of investment planning are companies able to do on that basis?

[Catherine McKinnell]

As ever, my hon. Friend makes an insightful intervention and raises the key question. The Government need to take a step back and look at the impact their decision-making is having on businesses and their ability to make the long-term decisions necessary to secure the jobs, economic growth and the rebalancing of the economy that we all wish to see.

The Chancellor and his Treasury Ministers cannot have it both ways: either the annual investment allowance supports growth and the creation of jobs or it does not. Labour welcomed the decision to increase the allowance from January 2013 to £250,000, because we know it is important to support business growth and to foster long-term investment. However, we are concerned—this is why we have tabled new clause 10—about the Chancellor’s erratic and, frankly, bizarre approach to this important issue. Slashing the allowance from £100,000 to £25,000 and then announcing that they would temporarily increase it to £250,000, all in the space of just two and a half years, does not, and did not, inspire confidence in the Government’s long-term approach and strategy for supporting growth and investment.

[Gordon Birtwistle]

As I said, I fully support any funding that goes into capital allowances, but we have to remember that in 2010 companies were not making much profit. They were mainly on their knees from the recession that had been created previously. Companies can only set their allowance against profit, so if they are not making a profit there is no allowance to claim. The Inland Revenue was probably right to say that only 5% of companies were taking it up, because we were coming out of recession. A lot more companies are now busy working hard and making a profit, so the capital allowance is more beneficial to them as they are getting it back against the tax that they are paying now that they were not paying in 2010.

[Catherine McKinnell]

I know the hon. Gentleman’s interest in this issue is sincere. The Treasury may or may not have been right in its assessment that only 5% of businesses would be affected, but that is still 100,000 to 200,000 businesses—not to mention the supply chain. The new clause seeks an assessment of the impact of the decision taken at the time. How much of an impact did it have?

The hon. Gentleman says that, as we come out of recession, some businesses will be making more profit and will therefore be able to make more use of the annual investment allowance. That was exactly the point of bringing in the allowance in 2010. We had been through a global financial crisis and we knew that many businesses would be very uneasy about making the sort of long-term financial investments, on which they would not see a return immediately, that are necessary to create jobs. The intention of introducing and doubling the allowance in 2010 was to give businesses the confidence to invest. We know that it was welcomed by business at the time and we know that this Government’s decision to slash it to £25,000 was abhorrent to many businesses, particularly in the manufacturing sector. They needed the support and confidence to make the investments that we need to start seeing the benefits of now.

14:45

[Gordon Birtwistle]

The hon. Lady is being very generous. Does she accept that if a company is not making a profit, it will not have the capital resources to purchase the assets against which they can get the capital allowance? What is the point of the Chancellor making it available if companies, which are coming out of recession and really struggling with cash flow, will not be able to find the cash to buy the assets to claim the allowance against? Surely it is better saving it until companies are beginning to make cash profits. They can then buy the assets to improve the profitability of the company and claim the asset back.

[Catherine McKinnell]

I think the hon. Gentleman is rather confused. The purpose of the allowance is to enable companies to invest and to take advantage of tax support. If they are not able to take advantage of the annual investment allowance, there is no cost to the taxpayer, so why chop and change the regime and create uncertainty? Businesses need, from one year to the next, to be able to project and say, “This year we cannot afford to make an investment, but next year we can afford to invest so much in plant and machinery and we will be able to offset so much of that against tax.” The Government, however, have been chopping and changing the allowance. Companies cannot make long-term investment decisions from one year to the next without knowing exactly what their tax position will be.

The hon. Gentleman is actually making a very good argument for new clause 10 and I will be very surprised if he does not support us in the Lobby this afternoon. He speculates on companies that may or may not be able to invest and take advantage of the annual investment allowance. Our new clause asks the Government to undertake a proper review of the impact of slashing the annual investment allowance and then increasing it on a temporary basis. Many businesses have said to me—I am sure they have said it to the hon. Gentleman—that it is that uncertainty that creates the difficult environment for businesses to invest. They do not know, from one year to the next, what any tax allowance might be. We want to get to the bottom of that, so the mistakes the Chancellor made in 2010 will not be repeated.

Andrew Gotch of the Chartered Institute of Taxation commented on the increase announced at the 2012 autumn statement:

“This is a very generous increase that will be warmly welcomed by many small businesses...However, we note that it is only a temporary increase. Business would really welcome some stability in this area. In recent years, the allowance has fallen from £100,000 to £25,000. Now it will rise to £250,000 before, apparently, coming back to £25,000. Businesses like certainty above everything and the chopping and changing of the AIA has been a problem”.

Hon. Members do not need to take it from me, but from a whole range of sources who have raised this as a concern. The Institute of Chartered Accountants in England and Wales welcomed the increase to the allowance, but said:

“We are less enthusiastic about the frequency of the change to this amount.”

Let me be clear, the Opposition welcomed the 2013 increase in the annual investment allowance to £250,000, but we share the very serious concerns about the extremely complex manner in which that was implemented. As hon. Members may be aware, many organisations and individual businesses raised concerns that the increase to £250,000 would run from January 2013 to January 2015, rather than over companies’ usual accounting periods, making it problematic for firms, particularly small ones, to administer. Indeed, as the Association of Taxation Technicians neatly put it at the time,

“the chopping and changing of capital allowances will lead to error, confusion and higher professional costs for small businesses.”

The Opposition also welcomed the Chancellor’s announcement in Budget 2014 to extend the period of the temporary increase to 31 December 2015, with the allowance being temporarily increased again to £500,000 from April 2014. The straight fact, however, is that the Chancellor and his Government have tied themselves in knots over this vital issue. Just last year, when we considered in Committee what is now the Finance Act 2013, the then Economic Secretary to the Treasury, the Secretary of State for Culture, Media and Sport, the right hon. Member for Bromsgrove (Sajid Javid), explained why the increase in the allowance to £250,000 from January 2013 would be a temporary measure only. He said:

“We recognise that the change follows quite soon after the decrease in the annual investment allowance to £25,000 that was announced in the June 2010 Budget and implemented in the Finance Act 2011, which took effect from April 2012. The Government’s central position has not changed and remains that, in general, a lower corporation tax rate with fewer reliefs and fewer allowances will provide the best incentives for business investment, with the fewest possible distortions. That is why we have announced a further reduction in the main rate of corporation tax, as we discussed earlier, from April 2015 and is also why the current 10-fold increase in the maximum annual investment allowance is time limited rather than permanent.”––[Official Report, Finance Public Bill Committee, 16 May 2013; c. 145.]

A matter of months later, at Budget 2014, the Chancellor decided to about-turn once again, and extended and temporarily increased the annual investment allowance further—before, presumably, he intended it to return to £25,000 from 1 January 2016. As the Chartered Institute of Taxation put it so well, the one thing businesses need most, particularly in challenging economic times, is certainty. They need long-term stability and predictability to give them the confidence to invest, to make plans for the future and to take on more staff. What they have got from this Government, however, is a continual chopping and changing, with U-turn after U-turn and what seems to be a complete lack of strategic thinking.

What we need to hear from the Minister today is confirmation that the Treasury and his Government have taken seriously the impact of their decisions on business confidence, investment and jobs. We need to know that they have learned from the Chancellor’s mistake back in 2010, and that they will properly review its impact to ensure that the same mistake is not made again.

What assessment has the Minister made of the number of businesses that were not able to grow after the annual investment allowance was slashed? How many jobs could have been created during the last three years of flatlining growth while we have undergone the slowest recovery for 100 years? How many households could have been better off as a consequence, but will find themselves worse off in 2015 than they were back in 2010? Let us not forget that in 2010, back when the Chancellor was slashing the annual investment allowance, he said that the economy would have grown by 9.25% by now. Instead, it has grown by just 4.6%—far slower than in the United States or Germany. Indeed, GDP growth this year is still expected to be lower than the Office for Budget Responsibility forecast in 2010.

On Monday, my right hon. Friend the shadow Chancellor made an important speech about Labour’s approach to developing a business tax system that promotes long-term investment, supports enterprise and innovation and, most importantly, provides a stable and predictable policy framework for business, which is founded on fairness. Yesterday, my right hon. Friend, the Leader of the Opposition set out how a future Labour Government will mend Britain’s fractured economy and develop a genuinely long-term approach to backing growth in every part of this country to ensure rising prosperity for all.

It is this long-term approach to growth and backing Britain’s business and jobs that has been so lacking from this Government, and nothing illustrates it better than their shambolic and chaotic approach to the annual investment allowance since 2010. For that reason, I urge hon. and right hon. Members to back new clause 10 this afternoon, to ensure that the Government understand the impact of the Chancellor’s dreadful decision making back in 2010, and that they do not make the same mistakes ever again.

[Charlie Elphicke]

This new clause highlights two problems relating to its proposers and their party. The first is that they are stuck in the past. They have talked about the past and completely failed to set out their case for the future and the kind of Britain they would like to create. They just want to talk about something that happened previously. This is another one of the instrumentalised nuggets of attack, policy and press strategies referred to by Labour’s head of policy.

[Catherine McKinnell]

Let me correct the hon. Gentleman. He seems not to have been paying attention to my final comments, which were very much about Labour’s strategy for boosting economic growth and sustaining long-term economic stability for the future. The purpose of new clause 10 is to reflect back on past mistakes, of which we believe the Government need to take account.

[Charlie Elphicke]

Let us be clear what we are talking about. Labour and the hon. Lady want to spend two hours of the time available to debate this Bill talking about a period of nine months that happened nearly two years ago. In 2008, Labour introduced the annual investment allowance—an interesting point to which I shall return. It was set first at £50,000; then raised to £100,000; in April 2012, it was reduced to £25,000, which lasted nine months until January 2013, when it went up to £250,000—a far greater amount than under the legacy left by Labour.

[Catherine McKinnell]

rose—

[Charlie Elphicke]

Let me develop my point, and I shall give way again in a few moments.

It is important and instructive that this Government have incentivised investment. What the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) did not develop during the debate is what underpins the whole issue of investment allowances and capital allowances. Why we need capital allowances takes us to the whole issue of business investment. The challenge we all face, and have done for a very long time, is the rising corporate cash balances—about £750 billion—and the desire of us all to see that money spent.

Let us look at the Government’s policy in this area. They initially announced a reduction to £25,000 from April 2012. The hon. Lady’s first argument was that that created some form of uncertainty. The traditional argument goes, “We need to give businesses time to plan ahead; otherwise, we create uncertainty.” Well, the reduction was part of the June 2010 Budget, and it was about two years after the policy was announced before it came into effect, so I do not think that the certainty argument succeeds. The Government increased the amount substantially after only a short period of time, highlighting their concern to ensure investment.

The second problem I have with the hon. Lady’s case is that it is high risk to consider a policy on setting an investment allowance or a capital allowance on its own, as the Minister argued in an intervention. It is instructive that when Labour introduced the investment allowance, they funded the initial £50,000 by reducing general capital allowances from 25% to 20%. All policies need to be seen in a package taken together; they cannot properly be considered and debated unless the other pieces in the jigsaw are taken into account.

[Stewart Hosie]

That argument is fine as far as it goes, but in the space of seven years, we went from the abolition of the industrial buildings allowance to having an annual investment allowance of £100,000, which was then reduced to £25,000 followed by the very welcome increase to £250,000 for two years—and then there was another change. Of course making that many changes in such a short period of time is going to have an impact on planning for investment. Surely the hon. Gentleman can understand that.

[Charlie Elphicke]

The hon. Gentleman reinforces my point, which is that under Labour there were substantial reductions and changes to capital allowances that were part of the 2008 package. As I said, the main rate of capital allowances was reduced from 25% to 20%, followed by the creation of what was effectively the old first-year allowance—initially at £50,000. A number of other changes went on in parallel, including the phased withdrawal of the industrial and agricultural buildings allowances—IBA and ABA. We need to look at all policies in context and think about what else was going on, and that includes the changes that the Government announced in the Budget of June 2010. No policy can be viewed in a vacuum.

15:00

The decision to cut the annual investment allowance from £100,000 to £25,000 from 2012 was made as part of a general, much wider reform of corporation tax, which was set out capably at the time by Stuart Adam of the Institute for Fiscal Studies in his slides presentation “Business and capital taxes”. Writing about corporation tax reform, he said that the headline rate should be cut from 28% to 24% over four years, and that the small companies rate, the allowance for plant and machinery, and the annual investment allowance should all be reduced. It was clear that a reduction in corporation tax was being funded by a reduction in capital allowances. Less tax, less reliefs: that was a very classic, sensible, free-market, pro-growth, pro-business approach. Lowering the headline rate reduced the complexity of the tax system.

I do not think that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is right to look back into the past; I think that she would do better to look into the future. Rather than viewing one small nugget of Government policy in isolation, whether instrumentalised or not, we should look across the piece to establish what was really going on. I hope that, as recovery builds, we shall see more business investment, and that the £750 billion on which companies are currently sitting will go into the economy to drive our growth agenda.

[Mr Robinson]

I am very pleased to be able to contribute to a debate whose purpose we seem to lose sight of from time to time. The purpose of the new clause is to review the reforms of the annual investment allowance that have taken place since the Government came to power, and to see what lessons—in very simple terms—can be learnt from them. I do not see why the hon. Member for Redcar (Ian Swales) should not see fit to join us in the Lobby when we vote on the new clause, as I understand we shall do in due course.

No doubt the Exchequer Secretary will recall our Committee discussions in 2010, which were mentioned by the hon. Member for Dover (Charlie Elphicke). In 2010 we were discussing measures to be introduced in 2012, and while we considered that to be an appropriate period in which the Government could introduce the changes that they wanted to make, we strongly opposed those changes. I think that we were sensible to do so, and I think that we have been proved right.

It has proved to be a long road to Damascus for the Government. Many arguments can be made for a broadly neutral approach to taxation matters, and I believe that that is a long-standing aim of the Treasury. Indeed, we were very much on that tack ourselves when we came to office. However, the realities of government, and the realities of the Government’s own Budget of 2010, should have informed them that they could not be so purist in their theory as to ignore the fact that, during the five or so years to which the Budget looked ahead, they would require a massive increase in investment in order to sustain the increased levels of growth that they wanted and the whole country needed, and that to secure that increased investment it would be necessary, in turn, to generate a massive, unprecedented level of exports. We made that case ourselves, but it did not carry the day.

I believe that it was the then Exchequer Secretary who said, “We do not really see what is wrong with companies just investing their depreciation levels.” I pointed out to him that that would barely replace the assets in real terms, and that it was not the way in which to generate an increase in growth, far less the increase in productivity on which the exports could be based. Heaven knows, we need the productivity now more than ever, given that sterling is relatively high. In certain markets we are up against considerable competitive pressures, which we can only fight with real productivity, which is dependent on investment.

We made the case for some element of discrimination in relation to investment, and that remains the Labour party’s preference. While, as the hon. Member for Dover said, there may have been—and may still be, for all we know—massive cash hoards among the bigger companies in the economy, much of the investment that we need must come from the small and medium-sized enterprises, which I do not think are so rich in cash, especially the small-company element. Although the relatively small sum of £100,000 was not to be sneezed at, we welcome the Government’s conversion to £500,000. Why that is to last only until the election I cannot imagine, unless it is due to some very short-term electoral consideration on the Government’s part, which I do not think is realistic even in my wildest dreams. I am slightly reminded—although I must not digress—of our recent debate on the Office for Budget Responsibility, when, for purely party-political reasons, the Government refused to extend the OBR’s remit to an audit.

Be that as it may, we are discussing something else now, namely the fact that the Government will not tell us whether they will maintain the same level of AIA beyond the election—which ought to be possible—and for how long it could be maintained beyond the election. After all, the Government have plans. They have a forward look, and in that forward look must feature the proposed level of AIA. They might have to disentangle it from the accounts in due course, but a simple statement from the Exchequer Secretary would set a lot of minds at rest, and provide the element of forward certainty that is so important to small and medium-sized companies, whose investment programmes often run over several years. Smaller companies in particular may not be able to afford a massive investment all at once. As I am sure we shall hear later from the hon. Member for Dundee East (Stewart Hosie), one advantage of the annual investment allowance relates to the setting off of past losses against future profits, and there are other instances in which they can be most helpful. I will not go into them, however, because I know that the hon. Gentleman wants to do so.

Let me return to the question of why the Government’s approach is still so short-term. I must tell my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) that my only reservation about the review is that the Government have chopped and changed so much, so quickly and, in fact, so excessively over the past four years that I wonder whether anyone would get any meaningful information out of it. I fear not. However, we should be happy about the Government’s apparent damascene conversion. At least they have come round to the idea of annual investment allowances in principle, particularly for smaller companies.

[Ian Swales]

Will the hon. Gentleman give way?

[Mr Robinson]

I will in a moment.

We may well see some element of discrimination in favour of smaller companies in the pattern. We do not want too much discrimination, because it could lead to complication, but I nevertheless feel that the Government should be thinking along those lines, which they probably are. No doubt the Exchequer Secretary will tell us when he winds up the debate. However, at present we have a short-term view of what is essentially a long-term problem. It is not that the level of investment has fallen under this Government or the last Government, or that manufacturing has declined under this Government as a proportion of GDP—which it probably has not, because GDP has still not reached the level at which it stood back in 2007. Generally speaking, however, manufacturing has been on a long-term slide, arguably since 1870 and certainly from the 1960s onwards, irrespective of which party has been in power.

[Ian Swales]

Will the hon. Gentleman give way?

[Mr Robinson]

I will come to the hon. Gentleman, if he will just be patient.

Inherent in the problem is the disinclination of the British economy as a whole to invest. Germany can be taken as a paragon of virtue in this respect. The Germans save more than us, and they generally invest more. They have better plant and equipment and higher productivity. They invest more in plant and equipment, but also in industrial relations. Their industrial work force is better equipped technically, from the top to the bottom, and better equipped physically with modern plant and machinery and computers.

Why is that? No one knows. There is a deep-lying cultural factor. However, it seems to me that if we are to offset it, the more we can afford to encourage investment the better, as long as that is intelligently done. I think that the dangers of misapplication can be much exaggerated, and that the loss of potential output through increased productivity can be underestimated.

If the hon. Member for Redcar still wants me to give way to him, I will do so.

[Ian Swales]

I have enormous respect for the hon. Gentleman’s experience in this regard. He has spoken of the importance of long-term certainty. I struggled in vain to find in the major speech made by his leader yesterday any mention of this issue, or indeed any mention of manufacturing. I wonder what he is saying to businesses that may be concerned about the potential for a future Labour Government.

[Mr Robinson]

I wish I had not given way, because when I do we always get into this tiresome point. The Government seek to find refuge by going back nearly five years. The Minister has been at the Treasury for four and a half years now, and his party has been in government for that long. They own the situation now, although I know they do not want to, as all they want to do is airbrush the last four and a half years out of existence—they did that again today—and concentrate on where they are now as if they took power just six months ago. When we are having a narrow debate on the question of our having a review of a particular failed policy of the Government that is relevant to this issue, the hon. Gentleman wants to bring in the whole of Labour party policy. That is tiresome and irrelevant and a waste of this House’s time. I am sure that when the Minister replies to the debate, he will not get into that.

We are discussing a very important point. If there is genuine change introducing some element of discrimination in favour of investment for the reasons I have given, we will welcome that. Indeed, we welcome the commitment on £250,000 and £500,000. We will welcome it doubly if the Minister will extend that commitment beyond the election, to put it bluntly to him. I do not know what our policy on that will be—or whether we will go into such detail in the manifesto—but I will certainly support such a proposal, both in principle now and as party policy if it finds such favour. The Government, however, can do something about this now. Will the Minister tell us whether there is a change of policy and a change of principle on their part? If so, why will they not maintain the amount of the allowance and achieve the levels of investment, productivity and exports on which our future depends?

[Gordon Birtwistle]

As a business man, I had an engineering company that required a lot of investment. We had to invest heavily to ensure that we were competitive in the markets of the late 1990s and early 2000s. To me, the most important things for investment are confidence and cash. If companies have the confidence to invest, and the cash to invest from the profits they are making, they will invest. The capital allowances that the Government allow them to have against their profits is very helpful and it does persuade—it persuaded me on a number of occasions to buy some very expensive computer-controlled engineering machines. But when there is no confidence and when there is very little cash around, not many companies think about how much capital allowance they will get if they invest.

The country was in a mess in 2007. There was a reduction of over 7% in GDP in 2007-08, so nobody was confident enough to take the step to invest. The confidence had to be put back into the industries to persuade managing directors to invest. We know that billions of pounds were stored in banks waiting to be invested, but the confidence was not there to invest.

If Members look at Hansard, they will see that the Chancellor complimented me for putting pressure on him to bring back capital allowances, and my hon. Friend the Minister will remember the meetings I had when I was the Parliamentary Private Secretary to the Chief Secretary to the Treasury. At every meeting we had I was constantly on to him about the need to try to give confidence to companies, to persuade them to invest in the future of manufacturing in the UK. The answer came back, “There is no confidence at the moment, but we hope there will be soon, but we have all this money stashed away in banks, which is moderately safe.” It was not totally safe, because the banks were not out of the mess they were in, but companies felt it was safer there, rather than invested in capital plant in manufacturing industry.

15:15

[Chris Williamson (Derby North) (Lab)]

Will the hon. Gentleman touch on why he objects to the proposal of my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell)? I have not heard any criticism or, indeed, any reference to it so far.

[Gordon Birtwistle]

As I said to the shadow Minister, capital allowances are very close to my heart. I believe they are the way to go, but they have to be linked to other financial policies, which the Government have to put in place to work with them. Capital allowances on their own are no good. We must have other structures within the Government’s scheme of things to ensure companies have confidence. It is no good saying, “You can have a capital allowance against a new machine that you want to buy, but we are not prepared to give you the confidence to do that because we are going to increase our taxes so you aren’t going to make any money—so why would you really want to invest in the UK?” We need to create an environment whereby companies will say, “We’ll invest in the UK because the tax regime in the UK is good. We’ll invest in the UK because we feel that the training programmes in the UK will train our young people to do the jobs. We’ll invest in the UK because of the apprenticeship programme that is going ahead, and because we know we will have the future work force to deliver products that we will be able to sell around the world.”

[Dr Whiteford]

The hon. Gentleman is right to say people will make investment decisions on a range of issues, but does he agree that stability is a very important component of that?

[Gordon Birtwistle]

Absolutely: stability, confidence, cash, training programmes, and an economic strategy for the future are vital for companies to decide to invest.

I agree with, and certainly do not have any real objections to, the Opposition proposal, but it is not linked to anything. If the Labour party wants to put forward a new economic or industrial strategy that links to this, I would be the first to support it, but this is just one element of a major programme that needs to be put in place.

[Ian Swales]

I pay tribute to my hon. Friend’s experience on this issue, and his campaigning, which lay at the heart of the increase to £250,000. Does he agree that tax allowances alone do not prevent investment, and in fact capital allowances are a time-shift—in other words, one still gets the tax allowance, but one just gets it later?

[Gordon Birtwistle]

My hon. Friend is right. We must remember that claiming a capital allowance on a profit is time-lagged, because companies will have worked for a full year and will have produced products at, it is to be hoped, a profit, and it then takes a full year for the accountants to go through the profits, so that is two years from the start, and at the end of the second year the company knows from its audited accounts how much profit it has made and how much it can invest. This does not all happen on day one or even at the end of the trading year, because they do not know just how much can be offset against tax in respect of purchases using capital allowances.

My constituency has a high proportion of manufacturing, and unemployment has gone down from more than 10% to 4.7%. That is because we are manufacturers. We make things. We create the wealth for the country. One company in my constituency, Lupton and Place, was contemplating buying a new injection moulding machine—it makes aluminium castings for the automotive industry—and it thought about that for quite a long time. I had meetings with it to discuss various schemes that might assist it to do that, but no such scheme was available. However, as soon as we announced the new capital allowances, it immediately ordered the machine. It cost €400,000. It did not get the capital allowance against the whole lot, but it did get the capital allowance against £250,000, as the sum was at the time. Although there was some money that it did not get a capital allowance against, under our strategy it was able to write the rest of it off against depreciation of the machine over the next few years.

I accept the need for capital allowances, therefore, and I hope the Minister takes that back to the Chancellor, as I have done on many occasions, to ensure that companies keep investing in this country. However, the main factor before people invest in anything is confidence—confidence that the country is going forward, and that there is growth and companies can see profits coming. People are not going to invest anything in anything unless they get a return. Returns are important for shareholders, business owners and partners in business, and if there is not going to be a return on the investment, they are not going to invest. If the confidence to invest is there and the cash is there to support the purchase, either from their own resources or from banks to ensure that the investment is made, capital allowances will be a major player in the investments that take place. On their own, they are not enough; they need to go with an overall industrial strategy. I am pleased to say that I believe that is happening.

[Mr Gauke]

It is a pleasure to respond to this debate, and in particular to follow my hon. Friend the Member for Burnley (Gordon Birtwistle), who has been a great advocate for manufacturing industry over the years he has been in Parliament. He has provided a strong voice on the issue of capital allowances.

Labour’s new clause asks that the Chancellor review the impact on business investment of changes to the Capital Allowances Act 2001 made by the Finance Act 2011. The new clause is identical to the new clause 5 we opposed in Committee and we will be opposing this new clause for the same reasons. As set out in our corporate tax reform road map, the Government’s central objective is to secure a low corporation tax rate, with fewer reliefs and allowances. We remain of the view that that strategy provides the best incentives for business investment. As part of that approach we reduced the annual investment allowance to £25,000 a year in the Finance Act 2011, at the same time as we were setting out our plans to reduce corporation tax—we have extended those plans and as of next April our corporation tax rate will be 20%, the lowest in the G20.

[Chris Williamson]

The Minister is trying to set out the Government’s position, which he would assert is one of success. If their policies are really so effective, how does he explain the fact that we are living through the slowest economic recovery for more than 100 years?

[Mr Gauke]

If the hon. Gentleman wants to debate that, I am happy to do so. We faced a crisis in the eurozone and we had to deal with the impact of the financial crisis that occurred on the last Government’s watch. Clearly that had a considerable impact on the growth of the UK economy and the economies of other developed countries, but the reality is that our economy is now growing strongly, and we need to ensure that that continues to be the case. There are risks to a recovery, but if we are to compete and succeed, we need to ensure that we have a competitive tax system, the conditions for growth and credible fiscal plans, all of which this Government are delivering as part of our long-term economic plan.

[Chris Williamson]

The Minister has just asserted that the economy is growing strongly, but I am surprised by that. Will he help the House by comparing that “strong growth” with the growth that took place in the 1950s, 1960s, 1970s and even in the 1980s, at a time, before the regrettable election of Margaret Thatcher, when regulation was significantly greater than it is today and when trade unions were more numerous than they are now? How does this “strong growth” compare with what happened in the period I have just outlined?

[Mr Gauke]

It is a little difficult to compare a period in the 1980s before the election of Margaret Thatcher, given that she was elected in 1979. What I say to the hon. Gentleman is that we are forecast to have the fastest growth in the G7 this year. Clearly, Members on both sides of the House should welcome that, but we must not be complacent because we have further to go and we need to ensure that we stick to the plan to deliver that growth on a sustainable basis.

[Stewart Hosie]

The Minister has said he has plans for low corporation tax, and fewer reliefs and allowances—I understand the strategy. He will be aware that the argument is that it helps to establish profitable businesses but is less helpful to growing, investing businesses. Even if he was right, that would rather argue against the Government increasing the annual investment allowance to £250,000. Therefore, is the report envisaged in the new clause not precisely what is required to identify whether that allowance is at the correct level?

[Mr Gauke]

I am grateful to the hon. Gentleman for returning me to the subject matter before us, and no doubt you are, too, Madam Deputy Speaker.

The Office for Budget Responsibility forecast in the June 2010 Budget stated that the cuts in the corporation tax rate would more than offset the reduction in investment allowances such that the

“cost of capital for new investment is lower for all non-financial companies, and the rate of return from the existing capital stock is higher”.

That very important point could easily be missed from this debate. However, we also recognise that in the current economic climate, businesses face particular challenges. Having got the corporation tax rate down significantly, making a temporary boost to support and encourage increased investment was both appropriate and desirable. That is why we introduced a temporary generous increase in the annual investment allowance at the 2013 Budget, and we have gone on to double its generosity a year later.

[Bob Stewart (Beckenham) (Con)]

Would the Minister like corporation tax to come down below 20%, if possible? Is that ever envisaged?

[Mr Gauke]

My hon. Friend raises an interesting point, which I could spend some time discussing. Some challenges are involved in reducing corporation tax below 20% in terms of ensuring that such a tax cut is well focused in encouraging increased investment. He will be aware of some of the difficulties that occurred when the previous Government temporarily introduced a 0% corporation tax rate for smaller businesses; that resulted in quite a lot of tax-motivated incorporation. I will not detain the House for long on this point, so I will just say that some issues would need to be addressed in respect of that.

What would certainly be damaging would be to reverse the considerable progress we have made on reducing corporation tax. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) placed great emphasis on providing certainty for businesses, and I would agree on that, but what we have done in reducing the corporation tax rate from 28% to 21%, and then to 20% as of next April, has undoubtedly helped the UK’s competitiveness position. One could quote survey after survey demonstrating that the UK is now viewed much more favourably as a place in which to do business because of our corporate tax regime, and it would be damaging were we to reverse this. Labour is on the record as wanting to put corporation tax back up to 21%. That would be the first increase, as a revenue raiser, in corporation tax since the 1960s, and we have heard a significant hint this week that Labour may even increase it to 26%.

[Catherine McKinnell]

rose—

[Mr Gauke]

I hope that is not the case and I am delighted to give Labour’s Front Bencher an opportunity to put an end to such suggestions.

[Catherine McKinnell]

Once again, the Minister is trying to change the subject from the annual investment allowance to corporation tax. Given that he acknowledges the importance of certainty in this area and that a reduction of the AIA back down to £25,000 is already on the horizon, does he accept that it would be beneficial for the Government, for Members of this House and for members of the public to have an assessment of the impact of that slashing to £25,000 in 2010, in order to inform the Government’s decision making in the future?

[Mr Gauke]

That is the fourth opportunity the hon. Lady has had to provide some reassurance to businesses and investors looking to the UK as a place in which to do business that a future Labour Government, should that misfortune occur, would not increase corporation tax to 26%. That is the fourth time she has ducked that opportunity. Corporation tax is linked very heavily with the annual investment allowance; they are not separate issues. If our debate is about ensuring that we have certainty for investment in the UK, it is a very salient point.

15:30

[Chris Williamson]

I am interested in the Minister’s comments. Will he comment on the fact that corporation tax in the United States is up to 35%? Furthermore, does he believe that businesses have a responsibility to contribute to public services and infrastructure investment in our country? If we enter into this arms race and continue to reduce corporation tax, we end up in a situation where we either put the burden of funding our public services and infrastructure investment on ordinary taxpayers, or are forced to make even deeper cuts than we have seen under this Government over the past four years.

[Mr Gauke]

As always, the hon. Gentleman’s questions are interesting and could take me in a number of directions. Let me just say this: it is important that the United Kingdom has a competitive tax system. It is the case that corporation tax will continue to play an important part in our tax system, and it is important that it is properly enforced. Indeed, the UK is leading the way on international reform to ensure that we have an international tax system that takes a contribution from companies. In the end, however, it is always individuals who pay tax—whether it is the shareholder, consumer or employee. All tax is paid by people even if the cheque is written by the company.

Let me return to the measures that we have set out. The Office for Budget Responsibility has said that the measure to extend the AIA is expected to bring forward another £1 billion of business investment in the short and medium term. Although the Government rightly keep all tax policy under review, there is limited merit in conducting an evaluation in the way that the amendment suggests, and there are also a number of obstacles that make it impossible. Her Majesty’s Revenue and Customs will not have the relevant data to conduct such an evaluation for another year, and as the hon. Member for Coventry North West (Mr Robinson) said, it would be extremely difficult to isolate the impact of this change from the other factors influencing business investment, and from subsequent changes, in the ex-post data.

An important point was made by my hon. Friend the Member for Burnley (Gordon Birtwistle), who said that a number of factors are involved in business investment, not least confidence. As my hon. Friend the Member for Dover (Charlie Elphicke) pointed out, the AIA has been set at various levels over this period; identifying a direct link between the level of AIA and business investment is extremely difficult.

[Dr Whiteford]

The Minister is quite right to point out that there have been dramatic fluctuations in these types of allowances over a long period, but surely that emphasises the point about trying to get better at assessing their impact. If these allowances are a good thing at the moment, the Government might be well advised to consider bringing some stability to the system and committing to them over a slightly longer period.

[Mr Gauke]

The point I was making is that it was this Government who introduced a corporate tax road map in 2010. That road map has provided a great deal of certainty to businesses and set out our plans for corporation tax. Given that we have been able to make progress with corporation tax rates in the current circumstances, although businesses feel uncertain about the challenges that lie ahead, including the referendum in Scotland and the possibility that an anti-business Government might be elected at the next general election, it would be helpful to have an annual investment allowance in place.

[Catherine McKinnell]

The Minister seems to be completely obsessed with corporation tax. Whatever question is put to him about annual investment allowances, he responds with an answer on corporation tax. I wonder whether that reinforces our call for the Government to be forced to look at the issue of annual investment allowances—the chopping and changing of them, and the lack of certainty—so that they address AIA as a serious issue that concerns businesses up and down the country.

[Mr Gauke]

The hon. Lady does not seem to recognise that there is a link between the annual investment allowance and corporation tax; it is an allowance set off against corporation tax. The two are not separate subjects. Of course, if we are discussing certainty within our tax system, one has to look at the bigger picture, and this Government, through the corporate tax road map, have provided much greater certainty for businesses in this country. The biggest threat to the certainty of our tax system at the moment appears to be a Labour party that is at least considering increasing corporation tax to 26%, which would be a huge increase and deeply damaging for the UK’s competitiveness.

[Chris Williamson]

Let me return the Minister to the historical context. He keeps implying that a Labour Government would be anti-business, but I challenge him to compare the economic growth record of previous Labour Governments with that of this Conservative Government. I think he will find that the Labour record compares extremely favourably. The truth is that Labour Governments have invested in our economy; what we should be concerned with in this place is improving the living standards for the British people, and they have always achieved that.

[Mr Gauke]

We saw the economy shrink by 7% in a year or so under the Labour Government. That is not a record of which to be proud.

[Chris Williamson]

rose—

[Mr Gauke]

I will give way one last time.

[Chris Williamson]

The Minister seems to imply that the worldwide downturn—the economic recession that was a consequence of the banking crash—was the responsibility of the previous Labour Government. It is a ludicrous assertion. Surely he will accept that there was an international banking crash that led to the economic difficulties with which the Labour Government were faced in 2007.

[Mr Gauke]

Let me summarise the hon. Gentleman’s position: when the economy grows under a Labour Government, the Labour Government get the credit, but when it shrinks under a Labour Government, that is to do with international factors. At least we know where he stands.

We have heard a lot of criticism of the reduction in the annual investment allowance, and I have attempted to try to put that in the context of what we have generally done within our tax system. The impression given by the hon. Member for Newcastle upon Tyne North at all times was that it was a disastrous decision that resulted in business investment being slashed. I do not accept that position at all, and I have made it clear, by putting this in the context of what we are doing with corporation tax, that we are encouraging investment.

Just this week, the Labour party set out its plans for business tax. As far as I am aware, nothing was said in those plans about the annual investment allowance, or about extending the increase to £500,000 beyond December 2015. We heard a lot about an allowance for corporate equity, but I do not think that I heard anything at all from the Opposition on this subject. If it is so important to them, why do they not have a policy in this area? Indeed, at one point, it seemed to come as a surprise to the hon. Member for Newcastle upon Tyne North that this was a temporary measure, although subsequently in her speech it became clear that she was aware of that. What is Labour’s position? If Labour Members feel so strongly about this issue and it is a priority for them, why have they said nothing on the subject? On that point, I urge the House to reject new clause 10 if it is put to a vote.

[Catherine McKinnell]

It is absolutely clear that the Government have tied themselves in knots over the annual investment allowance. They have tried at every turn during this debate to change the subject, and not to deal with the catastrophic decision taken in Budget 2010 to slash the investment allowance from £100,000 to £25,000. That was followed by a welcome U-turn that moved it back up to £250,000, and now they have promised to double it to £500,000. I accept that it is a temporary measure, but the point that I was trying to make, which the Minister seems to have missed, is that the very fact that it is a temporary measure perpetuates the uncertainty, and we know, because businesses have told us, that that uncertainty undermines their confidence to invest.

The hon. Member for Burnley (Gordon Birtwistle) made a speech that I know was sincere, as he is aware of the importance of the manufacturing industry and of certainty in the tax landscape, particularly regarding the annual investment allowance, in enabling businesses to make investment decisions, to invest in plant and machinery, and to expand to create jobs for the future. However, I might also say that he made a typical Liberal Democrat speech, in that he sat on the fence and would not acknowledge that the Government need to take stock of the impact on investment decisions of chopping and changing this policy.

[Ian Swales]

rose—

[Catherine McKinnell]

I give way to another fence-sitting Liberal Democrat.

[Ian Swales]

I thank the hon. Lady for giving way, and she will be pleased to know that I will not sit on the fence on this issue. Investment decisions about plant and machinery are one-off decisions, and the annual investment allowance is only needed once for each investment decision. What we need is certainty around a specific decision, not long-term certainty.

[Catherine McKinnell]

That flies in the face of the advice given by the EEF, the Chartered Institute of Taxation and the Institute of Chartered Accountants in England and Wales, which all feel that the Government’s chopping and changing on this policy has been damaging to investment. Someone might want to make a decision to invest this year, next year, or the year after, but obviously if they do not know what the Government’s policy will be in 12 or 24 months’ time, they might well not have that confidence and not take that decision. The hon. Member for Burnley acknowledged that, but the hon. Member for Redcar (Ian Swales) seems to be completely at odds with what industry has been saying.

[Mr Gauke]

The hon. Lady says that her concern is that business will not know where it stands on the annual investment allowance when making decisions, but, much more importantly, if a business does not know whether the corporation tax rate will be 20%, 21% or 26%, that will surely have a much bigger effect on investment in this country. Can she provide some clarity on that?

[Catherine McKinnell]

I agree that business needs certainty about taxation to make investment decisions, and that is why we have committed to maintaining one of the most competitive tax rates in the G7, but today’s theme seems to be that the Government wish to talk only about corporation tax, and to airbrush out their catastrophic mistakes with the annual investment allowance. The hon. Member for Dover (Charlie Elphicke) made a valiant speech, but I felt it was dreadfully misguided. He was in quite a bit of trouble trying to defend the Government’s record in this respect, but frankly the decision making has been erratic and completely indefensible.

I pay tribute to my hon. Friend the Member for Coventry North West (Mr Robinson), who made a very thoughtful and considered speech in which he set in the historical pre-2010 context some of the rationale behind the Government’s decision making in this regard, but he also highlighted the irrational aspects.

15:45

We take very seriously the need to ensure that businesses have the right environment, the confidence and the certainty that they need to make investment decisions for the future. We are concerned about the Government’s erratic approach to the annual investment allowance. We think that a proper report needs to be produced to ascertain exactly what the impacts of chopping and changing this policy have been. That would ensure that this Government do not make these mistakes in future, that any future Government can learn from the mistakes of this Government, and that we have a proper annual investment allowance strategy for the future that supports the jobs and growth that this economy so desperately needs.

[Sheila Gilmore]

Does my hon. Friend want to reflect on the suggestion made earlier that it did not really matter to people whether the investment allowance was clear? Surely, when putting forward a formal business plan, people are not necessarily just working on a year-to-year basis; they want to know what, if things go on as they are, they could do in a year’s time, two years’ time, or three years’ time.

[Catherine McKinnell]

My hon. Friend makes an absolutely valid point. Businesses do not work in electoral cycles or annual tax return cycles; they plan for the future. Businesses have told us how unhappy they have been with the chopping and changing of this policy.

I am very surprised that the hon. Member for Redcar takes such a strong stance in supporting what has clearly been a disastrous Government policy. I would have thought he would have liked to distance himself from it, but he has obviously tied himself to this mast, and I am disappointed that he will not come through the Lobby with us. We will push our new clause to a vote, because we believe that the Government need to take stock and learn from their mistakes, and that this has been an absolute disaster of a policy, in terms of the Chancellor’s indecision.

Question put, That the clause be read a Second time.

15:47

Division 30

Ayes: 247

---

Labour: 231
Scottish National Party: 6
Democratic Unionist Party: 4
Social Democratic & Labour Party: 2
Plaid Cymru: 2
Independent: 1
Alliance: 1
Green Party: 1

Noes: 306

---

Conservative: 258
Liberal Democrat: 46
Democratic Unionist Party: 1

[The Minister for Skills and Enterprise (Matthew Hancock)]

On a point of order, Madam Deputy Speaker. Given that the Office for National Statistics has confirmed this afternoon that four fifths of new jobs have been created outside London, and given that the Leader of the Opposition may inadvertently have misled the House by saying that the number of people waiting more than four hours in A and E has risen by over 300% when this is not accurate, may I take your advice on how the Leader of the Opposition may be brought before the House to retract these inaccuracies and apologise?

[Madam Deputy Speaker (Mrs Eleanor Laing)]

No, the hon. Gentleman may not take my advice. It is not the position of the Chair to advise hon. Members, far less the Leader of the Opposition, on the content of their speeches, but the hon. Gentleman has put his facts on the record, and I am sure that they have been noted on both Front Benches.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Further to that point of order, Madam Deputy Speaker. Is there anything that you can do to stop these eager Front Benchers seeking Cabinet preferment in the forthcoming reshuffle from making spurious points of order, when what they should do with statistics is allow the Office for Budget Responsibility to audit these—

[Madam Deputy Speaker]

Order. The hon. Gentleman knows that that is not a point of order, nor could it be further to a point of order, as there was no point of order.

[Ian Swales]

On a point of order, Madam Deputy Speaker. I made a point of order earlier today regarding a figure used yesterday by the hon. Member for Birmingham, Ladywood (Shabana Mahmood). The 2010 figure that I gave was correct, but I am now aware that the hon. Lady was using a figure derived on a new basis, so the comparison that I drew was incorrect. I felt that that should be put on the record.

[Madam Deputy Speaker]

I am grateful to the hon. Gentleman—[Interruption.] Order. I am grateful to the hon. Gentleman. That is a point of order. He has put the record straight, and the House is grateful to him.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

On a point of order, Madam Deputy Speaker. Could you advise me, please, with reference to the inaccurate information that was given by the Prime Minister about waiting lists for A and E, and the fact that in 48 out of the past 52 weeks, A and E targets have been missed by this Government—

[Madam Deputy Speaker]

Order. I have already reminded the House that the content of Ministers’ speeches is not a matter for the Chair, and that is not a point of order.

New Clause 1

Oil contractor activities: ring-fence trade etc

‘Schedule (Oil contractors: ring-fence trade etc) contains provision about the corporation tax treatment of oil contractor activities.’—(Mr Gauke.)

Brought up, and read the First time.

[Mr Gauke]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

With this it will be convenient to discuss the following:

Government new clause 2—Determination of beneficial entitlement for purposes of group relief.

Government new clause 3—General Block Exemption Regulation.

Government new clause 4—Co-operative societies etc.

Government new clause 5—Tax relief for theatrical production.

Government new clause 6—Exclusion of incentivised electricity or heat generation activities.

Government new schedule 1—Oil contractors: ring-fence trade etc.

Government new schedule 2—General Block Exemption Regulation.

Government new schedule 3—Taxation of co-operative societies etc.

Government new schedule 4—Tax relief for theatrical production.

Government amendments 42, 43, 5, 6, 1, 2, 4, 11 to 14, 7 to 10, 15 to 41, 3 and 44 to 66.

[Mr Gauke]

I will attempt to speak briefly to this long list of Government new clauses, new schedules and amendments, although I will respond later in the debate if any questions are raised.

New clause 1 and new schedule 1 make changes to provide a fair amount of taxation for activities carried out on the UK continental shelf in connection with the UK’s oil and gas resources. The Government are committed to maximising the benefits that the North sea can bring to the UK economy while ensuring that all companies benefiting from the UK’s natural resources, either directly or indirectly, pay their fair share of tax.

The UK is not currently receiving a fair amount of tax from companies that provide drilling rigs and accommodation vessels to the oil and gas industry. Many of those companies own their assets in lower tax jurisdictions overseas. Those assets are then leased to associated entities operating on the UK continental shelf through specialised leasing arrangements known as bareboat charters, giving rise to a large deductible leasing expense in the UK. That results in up to 90% of operating profit made in the UK being moved overseas.

This measure will cap the amount the UK base contractor can claim as a deductible expense for those leasing payments. It will ensure that companies pay a fair amount of tax for the activities they carry out in connection with the UK’s valuable natural resources.

New clause 2 makes changes to corporation tax group relief rules to remove an unintended restriction that has been identified in current anti-avoidance legislation. That legislation is well targeted and limits the opportunities for avoidance, for example through artificial groupings. However, the rules are triggered in limited circumstances where conditions are agreed or imposed on a group by the Government or a statutory body. That is clearly unintended.

The clause proposes a restricted amendment to section 169(2) of the Corporation Tax Act 2010 to exclude from the definition of “arrangements” situations where conditions are agreed or imposed by the Government. That will ensure that the anti-avoidance rules are more effectively targeted for the future and that companies involved in these specific commercial arrangements will have improved access to group relief. The amended rules will continue to ensure that they prevent manipulation of company control and group status and will continue to restrict access to group relief where appropriate. That will maintain the fairness and consistency of the tax system.

Government new clause 3 and amendments 42 and 43 make a number of changes to three capital allowances: enhanced capital allowances for zero-emission goods vehicles; enhanced capital allowances for enterprise zones; and business premises renovation allowances. All are state aids designed to comply with the general block exemption regulation. The existing regulation ended on 30 June and a new one took effect from 1 July. Although it is similar to its predecessor, the new regulation contains a number of differences that need to be reflected in those reliefs. The new clause and the amendments do that. Broadly, they ensure that various definitions found in those reliefs refer to the new general block exemption regulation.

In the case of enterprise zone allowances, it also excludes expenditure on energy generation, distribution or infrastructure, and broadband networks; restricts qualifying expenditure incurred by large companies in certain enterprise zones to new economic activities; and requires companies that make a production process more efficient to ensure that the qualifying expenditure exceeds by value at least three years’ depreciation of the machines being replaced.

New clause 4 and new schedule 3 make technical changes to the tax legislation applying to co-operative and community benefit societies, industrial and provident societies, European co-operative societies and credit unions to ensure that the definitions used in the legislation are clear, up to date and work as intended. There has been no policy change on the taxation of the various societies or the reliefs available to them, or indeed their members. There will be no effect on their tax position, but the changes we are making will ensure that the legislation is accurate and fully in accordance with the policy intention.

New clause 5 will introduce an additional corporate tax deduction and payable tax credit for theatre production costs. Production companies will be eligible for a payable tax credit worth up to 25% of qualifying expenditure for touring productions and 20% for all other productions. These provisions will be available from September for producers of a wide range of theatre and performance, supporting plays, musicals, dance, ballet, opera and circus.

[Andrew Bingham (High Peak) (Con)]

I welcome this particular measure, because the very well known Buxton opera house is in my constituency of High Peak and it hosts lots of touring theatrical companies. Offering different types of performances to the area engages people in going to the theatre and promotes the local economy, so the measure’s benefits will be broader than we may have thought at first.

[Mr Gauke]

I am delighted to hear of the benefits that my hon. Friend’s constituency and the Buxton opera house will experience.

[Sir Peter Luff (Mid Worcestershire) (Con)]

Circus is a performing art invented in the United Kingdom and it provides many children with their introduction to the performing arts and leads them to a love of theatre. May I therefore welcome my hon. Friend’s decision to include circuses in those areas covered by the tax relief in new clause 5? The travelling circus industry welcomes that decision, which is already leading directly to new investment in travelling circuses.

[Mr Gauke]

Again, I am delighted to hear that. My hon. Friend lobbied us and made representations on behalf of his constituents for the inclusion of circuses. As a consequence of the consultation process and listening to the points raised by my hon. Friend and others, I am delighted that circuses will benefit from this tax relief.

[Debbie Abrahams]

It is important to support this area, but would the Exchequer Secretary like to comment on the National Audit Office and Public Accounts Committee’s recent reports criticising the Government and Her Majesty’s Revenue and Customs for not properly monitoring the tax reliefs in this area?

[Mr Gauke]

The Government will respond formally to that, but I believe that well-designed, well-focused and targeted tax relief, which is what we have, can help the economy grow and help particular sectors. Indeed, I am delighted that two examples have just been provided to us. This Government have successfully lowered rates, including corporation tax, which we have debated this afternoon, and, if particular sectors can be supported by a well-targeted tax relief, we should do that. We believe that, overall, our tax system is working to enhance the UK’s competitiveness. This Government have a good record in the creative sector in particular, and I am delighted that, through new clause 5 and new schedule 4, that will continue.

New clause 6 amends the list of excluded activities in the tax-advantaged venture capital schemes—the seed enterprise investment scheme, the enterprise investment scheme and venture capital trust schemes—so that a company whose trade consists substantially of the generation of electricity or heat that attracts renewable obligation certificates or payments under the renewable heat incentive will no longer qualify for investment under those schemes, with limited exceptions.

As in the case with the feed-in-tariff exclusion, community interest companies, community benefit societies, co-operative societies and Northern Irish industrial and provident societies will not be affected by the restrictions. The exceptions for co-ops will also apply to European co-operative societies, in line with the changes being introduced as part of the “taxation of co-operative societies” amendment, which aims to align and update all references to industrial and provident societies across the Taxes Acts. The restriction will also not apply where the electricity is generated by anaerobic digestion or by hydropower, nor where heat is generated, or gas or fuel produced, by anaerobic digestion. The measure will apply in respect of both UK ROC and RHI schemes and overseas equivalents. It will make the tax-advantaged venture capital scheme better targeted and effective in supporting small and growing, higher-risk businesses.

Amendments 5 and 6 make technical changes to clause 73, which will restore sense and fairness to air passenger duty by reforming the destination banding and introducing a simple to understand two-band system. As the House will know, we have devolved the power to set rates on direct long-haul flights from Northern Ireland to the Northern Ireland Assembly, which set the rates at £0 in the Air Passenger Duty (Setting of Rate) Act (Northern Ireland) 2012. As the structure of the tax, including the number and composition of the destination bands, remains a matter for the UK—the Northern Ireland legislation refers to the UK legislation—the Northern Ireland Executive have asked us to make the consequential amendments needed to their legislation so that it aligns with the UK legislation.

16:15

We had an extensive debate in Committee on clauses 192 to 211, which introduce follower notices designed to tackle would-be tax avoiders who attempt to frustrate efforts to resolve their cases. At the time, I emphasised that taxpayers have full rights of appeal to the tribunal against any penalty charged under the rules, and I mentioned a particular ground for making an appeal. We have continued to receive suggestions for clarifying the legislation, particularly on how it could be improved by more clearly spelling out the grounds for making an appeal against the follower notice penalty.

I am grateful to those who made such points. Having considered them further, I concluded that it would be helpful to table amendments 1 to 3. Amendment 1 specifically sets out the grounds for making an appeal against any penalty charged under the rules. I emphasise that the taxpayer is not obliged to settle their dispute in response to a follower notice. The amendment makes it clear that if the taxpayer has reasonable grounds to continue their dispute, it is open to them to appeal against the penalty and for the tribunal to discharge the penalty on that basis. Amendment 2 makes it clear that that does not mean that the original follower notice and any associated accelerated payment notice were issued incorrectly. Finally, amendment 3 amends schedule 27 to apply those clarifications to partnerships.

I will take the opportunity briefly to clarify some points made when clauses 192 to 211 were debated in Committee. I mentioned then that 22 responses had been received to the January consultation on the draft legislation. Some commentators have subsequently questioned whether the number was not in fact higher. The draft legislation on follower notices was issued in two separate documents in January, one of which was on tackling marketed tax avoidance. Although we received a total of more than 800 responses, the vast majority related to accelerated payments, and only 22 specifically related to the draft legislation on follower notices that was published at the same time. I hope that that provides clarification.

In Committee, I was asked whether the accelerated payments regime would

“reach back to disputed tax liabilities relating to periods prior to the introduction of the DOTAS reporting?”––[Official Report, Finance Public Bill Committee, 17 June 2014; c. 507.]

I said that it would not. I want to clarify that an accelerated payment notice may not be issued to a taxpayer with a pre-DOTAS tax dispute where DOTAS—disclosure of tax avoidance schemes—is the only criterion available. Even though a scheme may have come into DOTAS after its introduction, anyone using it before DOTAS will not be subject to accelerated payment on DOTAS alone. However, accelerated payment based on a follower notice can apply to pre-DOTAS cases because the notice does not depend on the DOTAS disclosure. I am grateful for the opportunity to provide clarification.

The Government have tabled amendment 4 so that clause 291 more clearly reflects the Supreme Court’s decision on the limitation period where direct tax has been charged contrary to EU law. The amendment recognises that the ruling of the Supreme Court in the franked investment income group litigation is not confined to claims based on free movement, but applies to all cases in which tax has been charged contrary to EU law.

Schedule 6, introduced by clause 48, gives effect to recommendations from the Office of Tax Simplification to replace HMRC approval of tax advantaged employee share schemes with a new self-certification arrangement for businesses setting up such schemes. Amendments 11 to 14 make final consequential amendments to remove references to approval of schemes in tax legislation.

Schedule 7, introduced by clause 49, implements several OTS recommendations, including provisions to simplify the tax treatment of employment-related securities awarded to internationally mobile employees. Under the schedule, a small number of internationally mobile employees who receive share awards overseas and later come to the UK could be placed in a worse tax position than their UK resident colleagues, possibly suffering double taxation. Amendment 7 corrects that, and, with amendments 8 to 10, ensures that certain income received overseas is treated in the same way as similar UK income.

Amendments 15 to 41 amend schedules 9 and 10 to extend the new tax relief for social investment, the SITR, to investment in social impact bonds, which are payment-by-results contracts between public sector bodies and service providers, and are an innovative way of financing better delivery of public services. The providers are often charities or social enterprises. The measures will support further increases in the number of social impact bonds by providing incentives to private individuals who invest in them. Tax relief will be available only where a company has been accredited by the Cabinet Office and secondary legislation providing details of the accreditation process will be laid in September.

Amendments 44 to 66 will protect a new capital gains tax relief from abuse. Schedule 33, introduced by clause 283, encourages the creation and maintenance of employee-ownership trusts, under which all employees of a business can have a stake in its value, growth and success. One way it does so is by allowing full relief from capital gains tax to people who transfer their shares in the company carrying on the business to an employee-ownership trust. There are rules to ensure that the trust is for the benefit of all employees and that control of the business passes to the trustees before the relief is available.

Clearly it would not be an effective use of public money to give the relief if a trust broke the rules soon after it was created, denying the employees, the business and the economy the long-term benefits of employee ownership. Amendments 44 to 66 therefore ensure that if the employee-ownership structure fails or does not abide by the rules for relief at any time during either the tax year in which the shares are disposed of or the following tax year, relief may not be claimed, and any relief which has been given will be withdrawn and the capital gains tax position will be restored to what it would have been if no claim had been made.

I urge the House to support the amendments, new clauses and new schedules.

[Catherine McKinnell]

I thank the Minister for introducing the 60 or so proposals that the Government have tabled for consideration at the end of proceedings on the Finance Bill. [Interruption.] I hear some tutting behind me. The House will be relieved to hear that although I have a number of questions they relate mainly to new clauses 1, 5 and 6, new schedule 4 and amendment 2.

I will start with new clause 1. It is important to take the opportunity to scrutinise what are fairly significant changes. They have been introduced by the Government at a fairly late stage in the Bill’s progress. Will the Minister comment on why that is the case? The measures were first announced in the autumn statement but the Government were still consulting on them some five months later while we were scrutinising the Bill clause by clause in Committee.

Perhaps the most controversial of the Government’s announcements on North sea oil and gas over the past year is contained in new clause 1 and new schedule 1, which make changes to the UK continental shelf oil and gas fiscal regime. As the Minister set out, they relate specifically to leasing arrangements between oil and gas contractors and oil and gas licence holders on the UK continental shelf—arrangements that are commonly known as bareboat chartering. Oil and gas service companies often lease drilling rigs, vessels and other equipment from overseas related parties on a bareboat basis—that is, without operating personnel—and the associated rental costs are claimed as a deduction against the UK profits of the service company when it uses the equipment to provide services to oil and gas licence holders on the UK continental shelf.

As the Red Book sets out,

“the government is concerned about the use of”

such leasing arrangements

“to move significant taxable profit outside the UK tax net”.

I would be interested to hear from the Minister what estimate his Department has made of the total taxable profit that has been moved outside the UK tax net as a result of these leasing arrangements. More importantly, what evidence does HMRC have that such profit shifting or transfer pricing is avoidance activity, as the Government seem to suggest?

[Sir Malcolm Bruce (Gordon) (LD)]

When the Minister is answering those questions, I wonder whether he will also say what impact the measures will have on drilling activity in the UK.

[Catherine McKinnell]

The right hon. Gentleman raises an important question. I hope that the Minister addresses it in his response. I will come on to that issue.

In May, a Reuters report on these measures suggested that HMRC had

“allowed an industry with annual revenues of 2 billion pounds to pay almost no corporation tax for two decades”.

It also suggested that such arrangements have allowed drilling operators in the North sea

“to operate almost tax free for 20 years or more”.

It would be useful to know why the Government are acting now on those arrangements. I hope that the Minister will elaborate on that.

The Chancellor made an announcement in last year’s autumn statement that appears to have come as a surprise to many. He proposed the introduction of a cap on the deduction that is available to UK service companies on bareboat charters from connected companies. He also announced plans to ring-fence profits from other business activities so that the taxable profit could not be reduced by other tax losses. It appears that, because of the considerable lack of consultation before those announcements were made, the Government have significantly altered the plans to take account of the views of the industry.

The final proposals that are before us today will introduce a cap on the amount that service companies can deduct from their taxable profits through such leasing arrangements. The leasing deduction will be limited broadly by reference to a cap of 7.5% on the original cost of the asset or equipment. The cap was originally set at 6.5% but has been changed following the extensive consultation with the industry. Again as a result of the consultation, the cap will apply only to drilling rigs and accommodation vessels, which are otherwise known as “flotels”.

[Mr Mike Weir (Angus) (SNP)]

I am listening carefully to what the hon. Lady is saying. Does she agree that, although the cap applies only to drilling rigs and accommodation vessels, drilling rigs are the crucial matter? There is a worldwide shortage of drilling rigs, so the cap might mean that they are used elsewhere, rather than in the North sea.

[Catherine McKinnell]

The hon. Gentleman raises an important point. Again, it would be helpful if the Minister addressed that concern in his response. I will come on to that matter a little later.

New schedule 1 introduces a new form of ring fence that is similar to that imposed in respect of ring fence corporation tax for companies that operate on the continental shelf. The ring fence will be applicable to the composite activity that is the subject of this measure. That means that, although profits within the ring fence will only be taxed at the standard corporation tax rates and not the higher rates that apply to oil and gas producers, it will no longer be possible to reduce those profits through other tax reliefs that are derived from activity outside the UK continental shelf.

16:30

To summarise, lease rental payments will be capped at 7.5% of the original cost of the asset being rented, and even those capped rental costs may be offset only against profits that arise from activities outside the ring fence. The tax information impact note suggests that those changes will yield £135 million to the Exchequer this financial year, with similar revenue yields—slowly declining—forecast for the next four years.

I understand that the measures have changed substantially from those originally set out in December, following what was—quite rightly—an extensive consultation with the industry. Although the Opposition support any attempt to clamp down on tax avoidance, there still seem to be substantial concerns about those measures from within the industry, particularly regarding how the Government have approached the changes, as well as what impact they will have on an industry that makes a vital contribution to the public purse and, of course, the UK’s energy security.

On the Government’s approach, I remind the House of the last time the Chancellor made significant changes to the UK continental shelf fiscal regime, which was described by the Financial Times as “clumsy”, and

“handled in the least helpful way possible.”

In Budget 2011, the Chancellor announced an increase in the supplementary charge—an additional tax on ring-fenced profits from oil and gas extraction—from 20%, which was the rate set by the last Labour Government, to 32%—a 12 percentage point increase. He argued that any tax increase was in the interests of fairness and cited rising oil prices, but in reality the Chancellor needed to raise revenue to pay for the delays in planned fuel duty rises, and scrapping the fuel duty escalator.

In the autumn statement last year, the Chancellor announced major changes to the oil and gas fiscal regime—effectively tax increases on both occasions—without any prior discussion with the industry. As my hon. Friend the Member for Bristol East (Kerry McCarthy) pointed out at the time, the charge was

“poorly targeted, has potentially serious unintended consequences for the industry, and is certainly not a policy that they got “right first time”, and all because the Government did not consult on their decision.”—[Official Report, 3 May 2011; Vol. 527, c. 600.]

In 2011, HMRC conceded that the increase in the supplementary charge would risk the economic viability of some marginal oil fields. We therefore tabled an amendment to last year’s Finance Bill, calling on the Government to conduct a proper review of the impact of the tax increase. The tax information impact note for those measures states:

“The measure could increase the day rates by up to 10% on new contracts for drilling rigs and accommodation vessels”,

yet goes on to suggest that such increases will be “insignificant” to companies—those on the UK continental shelf may disagree. The final sentence of the tax information impact note states that the Government will review the impact of those measures in a year’s time—perhaps a tacit acknowledgement that they could be more detrimental than the Government’s optimistic assessment seems to suggest.

Considering the many similar concerns about the impact that the changes will have on certain fields and their economic viability—including from within the Treasury—I would be grateful if the Minister informed the House how many fields, already marginal, his Department has estimated will become uneconomically unviable as a result? Considering that such assessments were carried out in 2011, presumably they have also been made on this occasion.

When the Government increased the supplementary charge in the 2011 Budget, The Times reported that big oil firms such as Statoil and Centrica were freezing their investment decisions—reportedly worth more than £6 billion—or temporarily closing fields as a result. Again, there are concerns in the industry that if the additional tax costs are passed on in higher day rates—and many, including the Government, expect that they will be—that will lead to higher exploration costs in the sector as a result of the increased cost of renting drilling rigs.

As Oil & Gas UK has pointed out, driving drilling rigs out of the UK continental shelf may only compound the problem of low levels of exploration and production. As the Wood review recently identified, exploration is now at a critically low level. Even more worryingly, production fell by 38% between 2010 and 2013.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

The hon. Lady is making an important point: maximising exploration is crucial to future revenues. Unless oil is produced out of the ground, we will not see any tax revenue.

[Catherine McKinnell]

That is an ambition that I believe the Chancellor has expressed himself. It is vital the Government get this right and that is why we are asking these questions today. I hope we will receive reassurance from the Minister.

Production fell by 38% between 2010 and 2013, which is the equivalent of 500 million fewer barrels of oil being produced. Critically low exploration has meant that 150 million fewer barrels of oil equivalent have been discovered in the past two years.

This clearly has wider implications for the UK’s oil and gas sector. As the hon. Gentleman points out, it also has serious implications for the Exchequer. Just yesterday, there was a report in the Financial Times highlighting the fact that North sea oil and gas tax receipts decreased by 60% in the past two years alone, and are now at their lowest level since 2004. Some of that can be accounted for by significant investment in the past few years—the fiscal regime was designed in such a way, under the previous Labour Government, to encourage such activity and therefore be less liable to tax—but these figures are still reflective of the wider issues facing our North sea oil and gas sector, as I outlined previously.

I want to draw the attention of the House to concerns, expressed by numerous tax specialists, that these measures represent the Government abandoning the application of the arm’s length principle in determining transfer pricing in the oil and gas sector. Just to explain the background, OECD member countries have agreed that to achieve a fair division of taxing profits, and to address international double taxation, transactions between connected parties—for example, intra-group companies—should be treated for tax purposes by reference to the amount of profit that would have arisen had the same transaction been executed by unconnected or independent parties. The arm’s length principle is enshrined in article 9 of the OECD model, treaty or convention.

The Government apparently support the arm’s length principle, but the Chartered Institute of Taxation has expressed concern that imposing such a cap, as new schedule 1 would provide for, calculated through a formula based on the original cost of the asset, effectively imposes a legislatively fixed benchmark price that overrides the arm’s length principle. An article for Tax Journal in February highlighted this issue and concluded:

“these measures are reflective of the Treasury’s willingness to introduce special measures where it perceives that the application of the arm’s length principle fails to determine an appropriate allocation of profits in cross-border transactions.”

Will the Minister say whether this reflects the Treasury’s willingness to intervene and override the arm’s length principle, where it deems the application of such to be inadequate? The main reason why the Government’s abandonment of the arm’s length principle is of such concern is the possibility that other countries may follow suit and introduce their own special measures; something that the OECD and its members, through the arm’s length principle, are at pains to prevent. It would be useful to hear from the Minister whether the Government have taken account of international reactions to these measures and their potential detrimental impact.

As the Minister well knows, and as we have put on the record in this House on countless occasions, the Opposition support the Government on any steps they take to tackle tax avoidance. However, a number of concerns remain as to how the Government have approached implementing these measures. We welcome the Government’s consultations with the industry, belated though they are, but I would be interested to hear from the Minister whether he and his officials believe that they have, in the final version of the Bill, fully addressed the concerns of industry. The feedback I have received from the industry suggests otherwise.

After the debacle of the autumn statement last year with regard to this unexpected announcement, it is important that Ministers finally, three years after they made the same mistake, learn the lessons of turning to the North sea oil and gas industry to plug holes in their books, and coming up with policy on the hoof. In 2011, we saw the detrimental impact such unilateral action can have, particularly in an increasingly marginal industry—that was, perhaps, reflected in the Financial Times report yesterday. We can only hope that the Government have fully considered the impact of the latest changes and properly accounted for them. Finally, the measures seem to diverge from the Government’s general approach to transfer pricing and the arm’s length principle, but I hope the Minister can provide clarification on that.

New clause 5 and new schedule 4 provide for further tax relief for the creative sector—based, of course, on the last Labour Government’s highly successful film tax relief. They introduce a tax relief for theatrical productions, and the relief will operate in almost exactly the same way as it does for high-end television and animation productions, but with one small difference. It allows qualifying companies engaged in theatrical productions to claim an additional deduction in computing their taxable profits. Where that additional deduction results in a loss, they have to surrender it for a payable tax credit. Both the additional deduction and payable credit are calculated on the basis of UK core expenditure capped at 80% of total core expenditure by the qualifying company.

The Minister set out the provisions in some detail, and they received some welcoming comments, particularly from Government Back Benchers, but I have a few queries about the new relief; I hope the Minister will be able to resolve any outstanding ones. The first relates to measures contained in new schedule 4, and it is important to ensure that the measure is not open to abuse. Such reliefs as these—or tax expenditures, to use Treasury-speak—well-intentioned though they are, have increasingly come in for criticism from the Public Accounts Committee and the National Audit Office. We have already discussed the number of both known and potentially unknown tax avoidance schemes generated around the reliefs and the subsequent criticism of them. I do not think it would be helpful to hold this discussion again here on the Floor of the House; Members will be able to read Hansard to see the extensive debates and discussions we had in the Public Bill Committee.

Following the consultation process, the Government appear to have taken on board the views of the Chartered Institute of Taxation, which suggested in its consultation submission that any evidence of abuse should be promptly identified and acted on by using the general anti-abuse rule. New schedule 4 provides for a general anti-abuse rule based on the GAAR, but the Chartered Institute of Taxation suggested that this tax relief should be properly monitored and reviewed by the Government. The Government’s consultation response suggests HMRC will “continue to monitor” for abuse, but can the Minister give a specific commitment in this respect?

[Ian Swales]

Does the hon. Lady join me in welcoming the fact that the arrangements in HMRC are to give specific permission on a production-by-production basis? I hope that HMRC will be staffed up accordingly, but that should avoid some of the abuses that took place under the previous film arrangements.

[Catherine McKinnell]

I hope that will happen and that HMRC will have the resources available to it, as we know that it has faced significant reductions in staffing. That does not necessarily mean that it will not be able to undertake the sort of monitoring we would like to see under the scheme, but it would be useful to hear from the Minister that HMRC has the resource, capacity and systems to ensure that this does not become just another vehicle for tax abuse.

[Helen Goodman (Bishop Auckland) (Lab)]

In the case of the film tax credits, the British Film Institute has a role in assessing whether the criteria are met, and it obviously has great expertise in that area. It would be helpful to know whether this work is going to be contracted out in any way or whether any particular expertise is needed by Revenue officials in doing this job.

[Catherine McKinnell]

My hon. Friend raises a very important point. I have not specifically considered it, but it fits well with some of the additional concerns put to me, which I am now putting to the Minister, about defining who should qualify for the relief and how it should be assessed by HMRC. It would be interesting to hear whether consideration has been given to using the expertise of outside bodies to ensure that HMRC gets its assessments right first time in administering this tax relief.

In the light of the National Audit Office’s recent report that HMRC monitors just 10% of its “tax expenditures”—there are more than 1,000—it would be reassuring if the Government committed themselves to reviewing the operation and take-up of this tax relief each year to ensure that HMRC is fully aware of how it is being used, and, more important, whether it is being abused.

16:45

My second query relates to the interaction of not-for-profit productions, which are often registered as charities, and this tax relief. In its press release on the publication of the consultation document in March, Arts Council England pointed out that the majority of theatre productions which receive funds from it are registered as charities, not companies, and are therefore not liable for corporation tax. It seems that such concerns were also raised throughout the consultation, with many wondering how the numerous not-for-profit productions to which this tax relief would be hugely valuable would still be able to benefit. The press release suggested that such registered charities would have to set up a trading subsidiary in order to benefit from the tax relief.

The Government’s response to the consultation, which I believe was published last week, noted those concerns and suggested that the Government had worked closely with stakeholders to ensure that such charities could benefit without incurring significant additional administrative costs. However, it remains unclear whether Arts Council England’s suggestion about the setting up of trading subsidiaries is the Government’s favoured approach. The document merely states that HMRC intends to publish “comprehensive guidance”. Clearly, in the light of recent reports from the Public Accounts Committee and the National Audit Office, the right balance must be struck between making this welcome relief available to those at whom it is aimed, and ensuring that such well-intentioned reliefs are not open to widespread abuse. I hope that the Minister will be able to provide some clarity and reassurance.

Let me now say something about the definition of “touring productions” for the purposes of a payable tax credit. As the Minister helpfully explained, two levels of tax credit are available to touring productions that surrender their losses—if they have losses, of course—in order to give further incentives to the bringing of productions to areas that are, as the response puts it, “under utilised”. If a production does tour, an enhanced rate of tax credit is available, amounting to 25% of losses surrendered. For all other productions—those that do not tour—the payable tax credit is 20%.

The Government’s consultation response indicates that they have changed the definition of “touring production” following suggestions that many smaller productions do not present as many as 14 performances in a single venue, or perform the same show in 12 different venues, which were the previous criteria. The Government have now decided that productions are defined as “touring” if they meet one of two criteria: they must either perform in at least six separate premises or present at least 14 performances in at least two different premises.

It is the second criterion that has caused concern, because it remains unchanged even following the consultation. I should be interested to hear the Minister’s justification for that. The Government have clearly responded to concern about the number of different venues on a tour, but perhaps he can explain the thinking behind the classing of a production as being “on tour” if it performs in just two different venues. Even if it puts on a number of shows at those two venues, I wonder if that really could be classed as a tour. What is to prevent a production from moving from one side of the road to the other, for example, in order to benefit from an enhanced tax credit?

Concerns have also been raised by the National Centre for Circus Arts, which is worried about the definition of “theatre”. Although the word “circus” is specifically mentioned, the centre thinks that the definition is still too narrow to reflect the nature of many contemporary performances, not least those in circuses. It would welcome confirmation that all circus performances will qualify for the tax relief. It feels that the new clause refers to a dramatic production in which

“the performers are to give their performances wholly or mainly through the playing of roles”.

That wording could exclude a great many excellent shows which the centre feels that the Minister would want to encourage and which, in the nature of circus, showcase superb skills of dexterity and athleticism, but may not involve a narrative or character acting as we might understand it to be, in the context of a traditional play. Is the Minister prepared to provide some clarity and reassurance, or alternatively to meet the National Centre for Circus Arts to discuss how HMRC can best evolve the guidance that is supposed to flow from this Bill, and which people are still awaiting, to ensure that as wide a range of circuses that do not involve the use of wild animals are eligible for the relief? As has been said, circus originated in this country, and this new tax relief could help it grow internationally also.

As the Labour party introduced this tax relief for the creative industry, we fully support another tax relief of a similar nature. However, there has been only a short time to reflect on the issue, and there are some outstanding queries, on which I hope the Minister will be able to give some reassurance.

New clause 6 is on the exclusion of incentivised electricity and heat generation activities. It removes more renewables activities from being eligible for the enterprise investment scheme—although it still allows anaerobic digestion and hydro-power—unless carried out by a community company. This was announced a little while ago. It is worth reiterating some of the points we made on clause 53. We have a particular concern regarding the impact on investment in the renewable energy sector. New section 257MS explicitly rules out enterprises that benefit from Government renewables subsidies, including feed-in tariffs, renewable obligation certificates and the heat incentive scheme. Given the well-publicised need for alternative sources of energy, it seems very strange that the Government are content to disincentivise this activity, because it could result in a big slow down in investment in the renewable energy sector in Britain, and potentially jeopardise our chances of meeting European renewable energy targets and climate change targets. It could also limit the ability of communities to invest in localised renewable energy schemes.

In addition, funds already invested in renewable energy projects may have to be returned. It has been estimated that, for anaerobic digestion alone, the sum is over £130 million. Considerable anxiety has been expressed over the past four years about this Government’s slightly erratic approach to renewable energy and renewable energy generation, so it would be helpful if the Minister could provide some reassurance in that regard.

[David Mowat]

Does the hon. Lady not think it right that we incentivise these renewables projects through contracts for difference and all the mechanisms the Department of Energy and Climate Change has brought forward rather than these sorts of EIS schemes? Therefore, it is rational to do what the Government have done, and that of itself should not make any difference to the propensity to go ahead with these things.

[Catherine McKinnell]

We would always hope that the Government would behave rationally in respect of these matters. I am pleased that the hon. Gentleman has absolute confidence in that, but I would be grateful if the Minister could provide some reassurance because the Government’s record on these issues has not always been entirely rational and I do not share the confidence of the hon. Member for Warrington South (David Mowat) in this regard.

On follower notices and accelerated payments, amendment 2 inserts subsection (8A), which provides that if a tribunal finds that a penalty should not have been charged because it was reasonable for the taxpayer to continue his dispute, the follower notice on which it was based remains valid, as does any accelerated payment notice or partner payment notice related to it. Concerns have been raised that if a penalty is cancelled on the grounds specified in clause 207, the validity of the follower notice—or related accelerated payment notice or partner payment notice—is not affected by the cancellation of the penalty. HMRC has confirmed that the intention is that if the penalty is cancelled on other grounds specified in subsection (2A), the follower notice, and any related accelerated payment notice or partner payment notice, would be cancelled. That is clearly the logical result of a successful appeal against the penalty. However, a few questions have been raised about this, so will the Minister say in what circumstances the grounds of appeal in clause 207(2A)(d) might be used, and why if successful, the FN and related APN or PPN would not be cancelled? When will guidance be published on this and the rest of the legislation on FNs and APNs, bearing in mind how important the guidance will be in helping taxpayers and their advisers to understand how this legislation is intended to operate? When will HMRC be publishing a list of the disclosure of tax avoidance schemes that will be issued with an APN, as we know that there is a lot of concern about the implementation of some of the Government’s proposed changes? On that very technical note, I conclude my queries to the Minister and I look forward to receiving reassurances from him in his response.

[Christopher Pincher (Tamworth) (Con)]

I welcome the chance to make a brief contribution to the debate on this group of amendments. It was a pleasure to serve on the Public Bill Committee with the Exchequer Secretary; it was certainly an educational experience for me. It was also a pleasure to serve with the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), although her professed determination to scrutinise the legislation line by line did at times make it feel as though she was scrutinising it word by word.

I should like to speak briefly to Government amendments 1 and 2, which affect clause 207, encompassing clauses 192 to 212. As the Minister and the shadow Minister have said, those provisions deal with follower notices and the accelerated payments regime. I was heartened to hear that the Minister is spelling out the ground rules for appeal in respect of follower notices, but he will know that there remains some residual concern, to say the least, about the retrospective nature of accelerated payment notices.

A number of people and their advisers have made what they believe to be a proper disclosure, particularly after the increase in the fine for non-disclosure from £5,000 to £1 million, erring on the side of caution and over-disclosing. They are concerned that they will now be caught up by that disclosure and will find themselves with retrospective tax liabilities, perhaps dating back to 2004. The Minister was good in Committee in making it clear that he would continue to consult the industry and taxpayers, because the original consultation was brief. I hope that he will do that, and will continue the dialogue with the industry and with taxpayers to ensure that nobody is caught up unfairly, having tried to do the right thing, by these proposals. I look forward to hearing him make the position clear in his remarks .

[Stewart Hosie]

I rise to speak against new clause 1 and the introduction of the bareboat chartering regime. I heard the Minister’s comment that this is about trying to get a fair tax return from this small but important sector. It tells us that at the moment it is paying about £200 million a year in tax and national insurance. At a yield of about £100 million, the tax return from this small sector will be increased by about 50%—that seems a substantial increase in a short period.

I would like to say that this bareboat chartering regime was a one-off stand-alone bad measure, but it does not stand in isolation. It is part of a pattern of ill-judged, disjointed and sclerotic decisions that this Government have taken, and it typifies their attitude to the North sea. Some years ago, we had the massive hike in North sea corporation tax supplementary charge, which absolutely stifled investment and brought it to a grinding halt. That led the Government, in panic, to make some kind of correction through the introduction of a large series of complicated new and enhanced field allowances.

17:00

[Mr Weir]

My hon. Friend makes a very good point. Given that the Government have so recently and so enthusiastically embraced the Wood review, does he not think that it is an odd measure to introduce, as it will hit the maximisation of the recovery of our oil and gas reserves?

[Stewart Hosie]

That is an extremely good point. It is not just the International Association of Drilling Contractors that has welcomed the Government’s approach to accepting the full recommendations of the Wood review, but the overall trade body, Oil and Gas UK. Indeed, the Scottish National party thinks that it is a good thing, too. Both the industry and the SNP have also welcomed some of the field allowances that the Government were forced to introduce, particularly the ultra-high-temperature, high-pressure field allowance for mixed gas and oil fields. That kind of measure is incredibly sensible, but as my hon. Friend says, and as Oil and Gas UK points out, there is huge disappointment that the Government are continuing with the bareboat charter measure. They believe that it is ill-conceived and should have been dropped in its entirety. The backdrop to its introduction is a period in which operating costs have increased sharply. Last year’s cost increases of more than 15% led to an all-time record high of almost £9 billion in costs. I understand that new developments in the North sea are facing similar cost pressures, so it is illogical to introduce this measure at this point, especially as drilling rigs and accommodation vessels alone are included in the scope of the legislation.

We are looking at a part of the sector where the return on capital is only 8% or 9%, and the cash break-even on a drilling rig or an accommodation platform is typically 15 years. These are large investments, with investors taking substantial long-term risks, and we cannot understand why the Government want to put that at risk at this particular point.

[Mr Weir]

My hon. Friend makes a very good point. Does he also recognise that there is a shortage of rigs? By applying this measure specifically to drilling rigs, we are adding another disincentive for investment in the North sea that would maximise our oil and gas recovery.

[Stewart Hosie]

Indeed; I recognise all those points, and the pressures that are being applied to finite and very mobile resources, such as rigs and accommodation vessels, but I will come back to some of that later.

This measure not only penalises the drilling and accommodation vessel sector, but potentially impacts on the entire £35 billion upstream oil and gas supply chain. Derek Henderson from Deloitte UK said:

“While it doesn’t affect operators directly, many expect that the costs will be passed on to them and could discourage drilling.”

That would impact on the entire support and supply chain that is dependent on drilling activities.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

On the point about making other jurisdictions more attractive, are the Government not actually helping Scotland’s competitors by ensuring that rigs, of which there is a shortage, go to more sympathetic jurisdictions?

[Stewart Hosie]

Indeed, and Malcolm Webb from Oil and Gas UK made a near-identical point when he said:

“It is perplexing…that the Government has chosen to proceed with the bareboat measure. This can only increase costs on the”

UK continental shelf. He also said:

“we fear that this move will drive drilling rigs, already in short supply, out of the UKCS.”

That would be a ridiculous thing to do.

What makes this measure all the more peculiar is that the bareboat charter arrangements are commercial arrangements that are widely used across a range of industries, and not just in the oil and gas sector. The arrangements we are talking about are used internationally, and have formed a consistent part of the UK continental shelf operation for 40 years. So why pick now to take an extra £500 million or £600 million out of the North sea over the next five years? The Treasury’s decision in the Budget to apply this measure only to the oil and gas industry, and only now, to a few specific vessel types, is utterly illogical.

I do not want to detain the House too long, so I think that the key thing to do is to consider the points that the International Association of Drilling Contractors makes about the measure. This is not a gentle criticism of a mildly inconvenient tax; it is an excoriating critique of what the UK Government have done. The association says:

“The measure is unfair and a unilateral deviation from international best practice…with no ability for contractors to reset prices,”

it

“amounts to retrospective and double taxation”,

and in a real and practical sense, it does. It says:

“The measure will depress economic activity. The…changes affect the cost base of the drilling industry”,

with all the impact that might have. It goes on:

“The measure targets a single, specialist sector for additional rent…Specialist international companies that have relocated”

to the UK “will be particularly hit”, when they and their investment should be welcomed instead.

The association argues:

“The government has manipulated the introduction of the measure to avoid proper scrutiny.”

In a particular criticism, it goes on to say:

“It is not appropriate for legislation as complex as this to be published in initial draft form”

on the day it was due to come into effect. That is a preposterous way for the UK Government to behave. The association continues:

“The consequences of the measure have not been properly assessed by HRMC”,

and it says that there are reports that up to £2 billion could be lost from the continental shelf. It also says:

“The measure is deliberately discriminatory...all vessels bar drilling rigs and accommodation units have been exempted for reasons that are far from clear.”

To put that another way, only two sorts of vessels remain included in the scope of the measure, which appears to be the usual sort of smash-and-grab cash raid that this Government make on the North sea.

There appear to be a great many reasons why the bareboat chartering regime is wrong. There appears to be an illogicality about the way it is being introduced, as well as a complete lack of transparency and time properly to assess the long-term impact, not just on drilling rigs and accommodation vessels, but on the entire supply chain. Little concern appears to have been felt about the consequential impact on growth and jobs in the sector and in the economy in general. That is quite a scathing set of criticisms to make of this Government, although it is not unique and could apply to any number of other things that they have done.

I look forward to hearing what the Minister has to say, but unless there is a very credible explanation of the amount of tax that he believes is lost, and of how the proposals will help, rather than having the consequences that I have described, I fear that we might divide on new clause 1.

[Helen Goodman]

I should like to speak to new clause 5 and new schedule 4 on the theatre tax relief and to set this in the context of the current state of British theatre.

The Government’s own documents point out that the film tax credit introduced by the previous Labour Government has been a significant success. In answer to written questions from my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), the Government have told us that the film tax credit has supported 1,200 films, provides 46,000 jobs, and has brought in £1 billion of investment. Obviously, therefore, a theatre tax relief is a good idea in principle, but it is worth considering whether the drafting of the new clause will achieve all the desired objectives. If it is not drafted sufficiently generously, the positive benefits to the theatre industry and to the British economy will not be achieved, but if it is drafted too loosely, it can become open to abuse. In either of those instances, we will have to come back and revisit the drafting, and the industry will face an unstable regime that is not helpful to its planning. In one respect, the drafting is a bit too loose and in another respect it might be a little too tight.

[Sir Nick Harvey (North Devon) (LD)]

I strongly support the hon. Lady’s thesis that it is essential to get the wording right. At the moment, there seems to be a practice on the part of HMRC investigators to assume that any investment—certainly by private individuals taking advantage of this facility—is, by definition, improper. There is far too much of an assumption that people are on the fiddle. I share her view that it is an entirely valid form of tax allowance and that it is important to get the definitions absolutely bang on the nail.

[Helen Goodman]

I am grateful to the hon. Gentleman. It is slightly unfortunate that the Government have brought the new clause and new schedule to the House now, because this is the only opportunity we are going to get to scrutinise this.

The object is obviously to support the development of British theatre and, in particular, to support touring. We have some of the best theatre in the world; we all know that. It all began with having the best playwright in the world. We have built on that over time, and our theatre is one of the major attractions for inward visitors and a major export industry. I point out to the Minister that we can draw a distinction—it is a little crude—between two parts of the current theatre industry. The commercial part is a series of chains of theatres producing successful, profitable plays that are often sold to New York and have very long runs, particularly in the west end of London.

If the sole benefit of the tax relief was to make those companies more profitable, that would be very nice for them, but it would not achieve what the Minister is aiming for—namely, to support the development of the industry. We therefore need to look at whether the relief supports the part of the theatre that is not always profitable and is supported by the public purse. That is why the question that my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) asked about whether the allowance will be claimable by companies that are charities is very pertinent. Large parts of the subsidised theatre sector, the Minister hopes, will be getting a tax subsidy instead of a public spending subsidy; I appreciate that that is his aim. However, that will not happen if their legal structure is not in line with what the Bill provides for. It is rather disappointing that we are being asked to agree this primary legislation when the guidelines on the definitions have not yet been published and so it has not yet been possible for them to be scrutinised by people in the industry who understand this very well.

17:15

To take a concrete example, the National Theatre is a publicly supported theatre, and the publicly supported theatre, by and large, is more innovative, more adventurous, puts on more new productions and, as some might say, is more interesting. That theatre has a wider portfolio of riskier and more different productions, and sometimes, some of them turn out to be extremely popular and can transfer into the commercial sector. The most obvious recent example is “War Horse”, which has done very well indeed. It started at the National, it went to the west end and now it has been on in New York as well. We obviously want more of that.

The Minister must tell us more about who can claim the relief if he is to convince us of its effectiveness. He also needs to understand that we will not accept that it completely cancels out the effect of the public spending cuts that the present Government have imposed on the theatre. Yesterday, Arts Council England announced its new set of national portfolio organisations; it has had to cut the number because the Department for Culture, Media and Sport has taken a £70 million cut.

[Jenny Chapman (Darlington) (Lab)]

My hon. Friend has spoken about how the changes might apply to the National Theatre. Is she intending to move on to talk about regional theatre and how those changes may or may not benefit somewhere such as the Darlington Civic Theatre?

[Helen Goodman]

I am, because I know that my hon. Friend has a keen interest in that, as do people up and down this country.

So we have had big cuts to the Arts Council. The Government have also imposed big cuts on local government, and from answers that I have received to freedom of information requests, we now know that on average local authorities are cutting their arts provision by even more—some 14%. So, given the estimates in the Red Book of the value of this tax relief rising from £5 million to £20 million per year, we can immediately see that it does not compensate for the reductions that have been experienced in public support.

My hon. Friend is right: there is a big issue about what is going on in the regions. The “Rebalancing our Cultural Capital” report suggested that the Government were supporting cultural institutions to the tune of 14 times as much per person in London as elsewhere, and that is not conscionable in the long term for this country. It is clearly because of that concern about regional imbalance that the Minister has decided to provide a slightly more generous relief for touring.

[Simon Kirby (Brighton, Kemptown) (Con)]

Will the hon. Lady be very clear: is she opposed to the cuts in the DCMS, and if so, would Labour reverse them?

[Helen Goodman]

I think it must be a matter of regret to everybody in the House that DCMS has taken 36% cuts. Of course, the question whether they can be restored is, as the hon. Gentleman knows, a completely separate one. I am just pointing out that the tax relief, if the legislation is properly drafted, will not cancel out the effect of those cuts. I am hoping that no one on the Government side is trying, through some sleight of hand, to give such an impression.

To return to the point that my hon. Friend the Member for Darlington (Jenny Chapman) raised, it is my understanding that in Darlington, the theatre is what is called a receiving house. That means that new plays are not being made in Darlington. Companies come on tour to Darlington and their productions are shown for several days. There are many very good producing houses in the regions as well; one good example would be the Nottingham Playhouse, where they make plays and tour them, and sometimes they tour them to London—they have just had something on at the Almeida.

A receiving house will not get the benefit of this tax relief; it is the producing company that gets the benefit. Of course, it may be that if they get the tax relief or the tax credit, they could offer the production to the receiving house for slightly less money, which might ease the situation in a place like Darlington, but there will not be a direct benefit, as I understand it.

My next question is whether the definition of touring is the right one and whether the measure will address the regional imbalance. As my hon. Friend the Member for Newcastle upon Tyne North pointed out, it is completely sensible to say that the extra relief is given if the play is taken to more than six places, but we must question whether 14 productions in two places is an appropriate definition of touring. Some of those who responded to the Government’s consultation said it would be a good idea to have a geographical definition of touring, and I do not understand why the Minister has not done that. I think he is risking some revenue leakage on this point. To give a concrete example, a play could be on on one side of Shaftesbury avenue for 14 nights, then move to the other side of Shaftesbury avenue for 15 or 25 nights and it would benefit, but the Government would not have achieved their policy objective of ensuring that the theatrical experience took in a new, wider audience.

I think there is a problem and I am disappointed by the way the Minister has drafted the provision; it is a weak spot. On the other hand, he might be being too restrictive in the number of production companies that can benefit, although we do not yet know how the guidelines will operate. In principle, of course it is a good idea to support British theatre. It is a great industry, we are very good at it and we have some of the best actors and theatre companies in the world, so in principle, it is a good idea to have a theatre tax relief, but I do have those two questions about those two parts of the new clause and the schedule.

[Mr Aidan Burley (Cannock Chase) (Con)]

I have a couple of questions for the Minister about the accelerated payment of tax and avoidance cases. I have written to him about this and received a letter from him, and also met him subsequently. Others have mentioned this issue, which has caused a lot of concern, especially within the accounting community. Many of my constituents who are accountants and who run businesses have written to me and met me to voice their concern about what they believe is retrospective legislation, with no right of independent appeal. I hope the Minister will be able to reassure my constituents and those of other Members.

The first question is about the oft-quoted 80% success rate in tax avoidance cases tried at court. The Minister has quoted that statistic, and HMRC has quoted similar figures, but we have yet to discover the source of that statistic, nor do we have a list of the cases on which it is based. Many of those who have contacted me feel that the figure is unsubstantiated. Will the Minister tell us the source of that 80% success rate statistic?

Secondly, there is a strong view that this law is being implemented retrospectively, with no right of independent appeal. I know the Minister has said it is not retrospective legislation, but he knows that that opinion is not shared by the accountancy profession, the legal profession, the CBI or even the Treasury Select Committee. Will he comment on that?

It is predicted that the legislation will result in some 150,000 redundancies, and the loss of future tax revenues from companies going to the wall, including some in my constituency, is estimated to be £50 billion, all to collect a mere £4 billion in unpaid revenues over the next five years. That seems to me to be a very bad bang for your buck. Does the Minister believe it is worth such loss and unemployment?

[Mr Gauke]

We have had, unsurprisingly, a wide ranging debate. I shall try to respond to the points raised by hon. Members in our debate, starting with those relating to new clause 1 and new schedule 1 on oil and gas. I outlined the measure in my opening remarks, and a number of questions have been raised. The question that gets to the heart of the matter concerns the impact on drilling activity and how that affects the UK’s competitiveness.

The Government’s support for the sector over the past few years through field allowances and decommissioning relief certainly has helped to encourage record levels of investment—£14.4 billion in 2013 alone—and supported the market for rigs in the UK continental shelf, where rates are driven by demand. Rig rates in the UK are among the highest globally, so we are not convinced that this measure will drive rigs from the UK continental shelf. In fact, recent press coverage indicates that rigs continue to be attracted to the UK continental shelf after the measure’s introduction.

In addition, the Government do not accept that they should seek to address the issue of rising costs by accepting an unfair tax system where a small group of companies are able to pay almost no UK tax. The new oil and gas authority which the Government announced as part of their implementation of Sir Ian Wood’s recommendations will aim to identify ways to ensure that Government and industry can work together to address cost escalation.

[Stewart Hosie]

That is a valid point to make, but having had the chartering regime in place in the North sea for 40 years, why introduce change now and why restrict it to rigs and accommodation vessels, affecting only one industry?

[Mr Gauke]

On the question why now, it is worth pointing out that following a refocusing of the UK corporation tax regime to a more territorial basis over recent years, and in view of increasing recognition, through the base erosion and profit shifting OECD initiative, that transfer pricing and other international rules do not always provide a fair or consistent outcome, the Government have decided that the need to protect the tax take from those who benefit indirectly from the exploitation of the UK’s natural resources requires domestic action now.

In addition, recent Government incentives have resulted in record investment in the UK continental shelf. It is right that action is taken to ensure a fair amount of tax from activities carried out in connection with the exploitation of the UK’s natural resources, and HMRC ensures that all businesses pay the tax due in accordance with the tax law.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I have a constituent who is on a ship that serves the North sea. He is the only member of the crew who has had his national insurance contributions changed in the last round. He is an electrical engineer. The mechanical engineer, the captain and the bosun are still on the old rate, but the electrical engineer is not. Can the Minister explain to me why an electrical engineer is being discriminated against on a North sea supply vessel?

[Mr Gauke]

The hon. Gentleman raises a somewhat different point from the one that I am addressing, but if he writes to me in respect of the individual case—[Interruption.] If he has already written to me, I am delighted to hear that. HMRC may be better placed to respond to the particular case, but we are taking action in respect of intermediaries to ensure that the national insurance contribution system works fairly. This is another area where we are making sure that businesses that benefit from our natural resources make a fair contribution in tax.

17:30

With regard to whether evidence of profit shifting constitutes tax avoidance, this measure is designed to provide a fair amount of taxation for activities carried out in connection with the UK’s valuable natural resources. The current arrangements result in significant profits from activity on the UK continental shelf moving out of the UK tax net. This measure is designed to prevent that. As for the argument that it could result in a loss of tax revenue, we expect it to raise £535 million over the scorecard period, on revenues of £1.75 billion, and that has been certified by the independent Office for Budget Responsibility.

We do not expect this measure to result in a decline in activity. The Government are fully committed to supporting investment in oil and gas. The work that we are doing with the industry, for example by introducing new allowances and providing certainty on decommissioning relief, as I mentioned earlier, has helped unlock billions of pounds worth of investment in the UK. That is the right way to support investment. I do not think that the right way would be to accept an unfair tax system that allows some highly profitable companies to pay almost no tax in the UK; there are better ways to ensure that we are competitive in this area.

With regard to the concern that this measure is somehow being rushed through, the Government have consulted widely with industry. Unlike many measures aimed at correcting unfairness, this one was not introduced with immediate effect in the autumn statement. We welcomed the industry’s responses to the consultation, which resulted in a number of changes to the approach adopted. As a result of the evidence received, the scope of the measure has been limited to drilling rigs and accommodation vessels and we have increased the deduction cap. We have also announced that we will review the measure in a year.

With regard to the concerns over fiscal stability, the tax rules that apply to contractors have been in place since 1973, and I think that we must look at this in that context. I think that it is right that we correct an unfairness. The Government are aware of the concerns about exploration, which is why the Chancellor announced in the Budget that one of the new oil and gas authority’s first tasks will be to report on how we can encourage exploration. The new allowance for ultra-high pressure, high temperature clusters, which was also announced in the Budget, is being designed specifically to incentivise exploration activity around new developments.

I do not accept that an unfair tax system that allows some highly profitable companies to pay almost no corporation tax in the UK is necessary to boost exploration. We are seeing no evidence of projects being cancelled. We are aware that there are marginal projects on the UK continental shelf, but that is why we have introduced the field allowances. That is the correct way to maximise economic recovery.

The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) asked about setting aside the arm’s length principle for transfer pricing. The UK remains committed to the arm’s length principle. At the heart of transfer pricing is the requirement to find the price that would arise at arm’s length. However, very few transactions of the type targeted by this measure take place between unconnected parties. That gives rise to uncertainty over the allocation to specific jurisdictions of the overall global profits made by the contractor. I hope that those points of clarification on the matter are helpful.

A number of questions were asked about theatre tax relief. Let me seek to answer them. Members raised concerns that the relief could be abused and asked whether we will review the measure in future. We consider that effective anti-avoidance rules are critical to the long-term success and stability of theatre tax relief, a view that I think has been expressed on both sides of the House. The Government will include rules similar to those applied under film tax relief to prevent artificial inflation of claims. In addition, there will be a general anti-avoidance rule, based on the general anti-abuse rule, denying relief where there are tax-avoidance arrangements relating to the production. Of course, HMRC will monitor for abuse once the regime has been introduced.

[Simon Kirby]

Is the Exchequer Secretary any clearer than I am about whether the Labour party will reverse the cuts to the Department for Media, Culture and Sport, because I am still not sure whether it intends to or not?

[Mr Gauke]

I am grateful to my hon. Friend for another example of Labour opposing yet another measure that this Government have taken to try to reduce the deficit. At least Labour Members did not make another spending pledge on this occasion, but we will, of course, continue to monitor their remarks very closely because they frequently do make spending pledges. [Interruption.] Perhaps the presence of the shadow Chief Secretary, the hon. Member for Nottingham East (Chris Leslie), has instilled some uncharacteristic discipline in Labour Front Benchers.

Let me turn to the question of why some circuses are excluded and some points of definition. With the exception of the named exclusions, other types of performing arts can benefit, provided that those giving the performance can demonstrate that they are wholly or mainly playing a role and that each performance is live and that the presentation of live performance is the main object, or one of the main objects, of the theatre production company’s activities. The Government believe that using that definition, which considers the nature of the performance, is more appropriate than listing types of performing arts. In cases where further clarity may be required, companies should seek professional advice or contact HMRC. On the subject of HMRC, I was asked about its resources. The House may be pleased to know that a specialist unit has been provided to assist businesses with making claims under this relief.

The definition of “touring” has been raised and whether more should be done in terms of relating it to geographical location. A production can qualify as “touring” if there is an intention to perform at six or more separate premises or to present 14 performances in two or more premises. The hon. Member for Bishop Auckland (Helen Goodman) is right to say that we considered alternative definitions of “touring,” including the use of geographical restrictions, but we believe that our definition provides a simple and effective way to support the range of types and sizes of tours that take place. That is why we have gone with that definition.

On the question whether this will cause a significant administrative burden for charities or not-for-profit theatre companies, minimising complexity and ensuring straightforward compliance was one of the central considerations in designing the relief. That is why we are basing it on the film tax relief model, which is also used successfully for other creative industry tax reliefs. We have worked closely with industry in determining the design of the relief, to ensure that it works for the industry, particularly the not-for-profit sector. Officials continue to engage with industry, including by attending events to help and advise in the run-up to companies starting to make claims in September. Ultimately, detailed guidance will be published on the HMRC website to ensure that companies and charities get the support they need.

[Mark Field (Cities of London and Westminster) (Con)]

Is it the Treasury’s intention, for the sake of simplicity and certainty, to ensure that the definition of “touring” is a nationwide one? In central London, which has a lot of theatres, it would be very easy to suggest that performing in only two or three theatres would not be a tour.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. It is not good for Members just to walk in and intervene, in fairness to those who have been here throughout. I know that the hon. Gentleman has a great interest in this issue, but may I ask Members to please not just walk in and intervene? I am sure, however, that the Exchequer Secretary would like to take the question on board, because it is such a good intervention.

[Mr Gauke]

I will do so, Mr Deputy Speaker, because my hon. Friend makes an interesting point. I have set out the definition of touring. We think that the right approach is to use that definition, for the sake of simplicity, rather than to try to come up with something more complicated.

A question was asked about how a business not subject to corporation tax can qualify for relief. The new relief is available only to companies subject to corporation tax: it is a corporation tax relief. As I have said, it is modelled on the successful reliefs that already exist for the creative sector, and it is designed to give the relief to producers while minimising the scope for abuse. The Government recognise that not-for-profit companies make up a valuable and substantial part of the theatre industry, and we are confident that the sector will be able to access the relief without significant additional administrative burdens. A concern was expressed about whether setting up a trading subsidiary is complicated for charities. As I have said, we have tried to minimise complexity, and we have based the relief on what is already in place. We believe that charities will get the support they need.

[David Mowat]

Will the Minister give way?

[Mr Deputy Speaker]

A man who has been here all the time.

[David Mowat]

I have, indeed, been here all the time, Mr Deputy Speaker.

The hon. Member for Bishop Auckland (Helen Goodman) asked whether the relief will apply to blockbuster successes, such as “Les Misérables”, on which massive amounts of money are made. Indeed, the return on capital for such ventures is far higher than that for contractors in the North sea. Can the Minister give us any assurance that the relief will not be disproportionately skewed towards such companies?

[Mr Gauke]

The point is that the relief is designed to support the range of theatre productions across the UK, in both the subsidised and commercial sectors. We worked closely with the subsidised sector when developing the policy, and we are confident that it will benefit from the relief.

Let me turn to the points made about measures to deal with tax avoidance schemes, including the accelerated payments regime and follower notices. My hon. Friend the Member for Tamworth (Christopher Pincher) asked whether taxpayers who have not used a true tax avoidance scheme will be caught, perhaps with a precautionary notification having been made under the DOTAS regime. Any unintended consequences for compliant taxpayers will be minimal. Where the taxpayer has used a relief correctly, but a DOTAS disclosure has been triggered, there would not normally be any tax in dispute, and there will therefore be no accelerated payment. If a taxpayer has used a relief largely as intended, but some elements are disputed, then an accelerated payment—if one is required—would be confined to the disputed elements. Let me be clear that the accelerated payment is the amount of tax that the taxpayer can expect to pay if their avoidance fails, taking account of their overall tax position. It is not some arbitrary amount, as has been alleged by those who have tried to discredit the measure.

My hon. Friend asked whether the measure will be retrospective in effect, as did my hon. Friend the Member for Cannock Chase (Mr Burley). We had an extensive debate on that point in Committee, and the Committee reached a sensible conclusion, but let me set out the issue again. The measure is not retrospective. The rules about whether the taxpayer’s scheme does or does not work and about the amount of any tax liability will not be changed. The taxpayer would have already paid the money had they not entered an avoidance scheme. The taxpayer can continue to dispute the case, and will be paid back with interest should they win. We are not restricting people’s rights. Prudent taxpayers should recognise that tax avoidance carries a significant risk of not working and that the tax might become payable, so they should make plans for such an outcome.

[Christopher Pincher]

My hon. Friend is being very generous with his time. I am pleased that he has made the position clear. Will he also make it clear that he will continue the dialogue with the tax advice industry and with taxpayers who are concerned about the issue? The Treasury Committee has described the measure as a retrospective piece of legislation. I know that he has received representations from the noble Lord Flight, and I trust that he will also take those on board.

[Mr Gauke]

I have received a number of representations on the matter, but I have been clear as to why the Government do not consider the measure to be retrospective. It is right that in these circumstances the disputed tax should be held by the Revenue.

The hon. Member for Newcastle upon Tyne North asked about the grounds for a penalty appeal. We have introduced amendments to provide extra clarity on that. They separate cases in which the penalty is cancelled because the notice should not have been issued from those cases in which the notice was appropriate but the taxpayer has reasonable grounds to continue the dispute—for example, because they could reasonably argue that different grounds are relevant. Then it will be for the tribunal to decide. HMRC is on course to publish the guidance and the DOTAS list in time for Royal Assent.

To answer the question from my hon. Friend the Member for Cannock Chase about the follower notices, there is no appeal against the requirement to pay the accelerated payment. That would simply substitute one dispute over the substance of the scheme for another. HMRC is not making a decision about whether the avoidance scheme works, which would have full rights of appeal, and the rules do not change that situation; rather, the requirement imposed on the taxpayer relates solely to the timing of the payment. If payment of the tax is a problem because the taxpayer cannot afford the full amount immediately, HMRC will use its normal approaches, including appropriate payment arrangements.

The source for the HMRC success rate of 80% is the list of tribunal and court decisions. Those decisions are all published and people can read for themselves HMRC’s continued success in these cases.

The hon. Member for Newcastle upon Tyne North asked whether we are withdrawing support for investment in renewables. The change we are making is not an attack on renewables. It will simply end double subsidy of companies that are at lower risk because they will benefit from Department of Energy and Climate Change support, and will ensure that the venture capital schemes remain well targeted and operate in a fair and sustainable way. The Government continue to support the renewables sector more generally and have set out the amount of support we will allocate to low-carbon generation up to 2020-21, when it will reach £7.6 billion. The Government continue to offer generous incentives to the sector.

The hon. Lady asked whether funds already invested in renewable energy schemes will have to be returned to investors. I can reassure her that new clause 6 will have effect only for shares issued by companies on or after Royal Assent to the Bill. Existing schemes and investors will not be affected by the changes.

With those points of clarification, I hope the House will support the proposals.

Question put, That the clause be read a Second time.

17:48

Division 31

Ayes: 301

---

Conservative: 250
Liberal Democrat: 45
Democratic Unionist Party: 2
Social Democratic & Labour Party: 1
Alliance: 1
Green Party: 1

Noes: 7

---

Scottish National Party: 5
Liberal Democrat: 2

New clause 1 read a Second time, and added to the Bill.

18:01

Proceedings interrupted (Programme Order, 1 July).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

New Clause 2

Determination of beneficial entitlement for purposes of group relief

‘(1) CTA 2010 is amended as follows.

(2) In section 169 (interpretation of provisions to determine proportion of beneficial entitlement)—

(a) in subsection (2), for the definition of “arrangements” substitute—

““arrangements”—

(a) means arrangements of any kind (whether or not in writing), but

(b) does not include a condition or requirement imposed by, or agreed with, a Minister of the Crown, the Scottish Ministers, a Northern Ireland department or a statutory body,”, and

(b) after that subsection insert—

“(3) In subsection (2) “statutory body” means a body (other than a company as defined by section 1(1) of the Companies Act 2006) established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision, except that the Treasury may, by order, specify that a body is or is not to be a statutory body for this purpose.”

(3) In section 188 (other definitions for Part 5), in subsection (1), in the definition of “company” for “section 156(2A)” substitute “sections 156(2A) and 169(3)”.

(4) The amendments made by this section have effect in relation to accounting periods ending on or after 1 January 2015.”—(Mr Gauke.)

Brought up, and added to the Bill.

New Clause 3

General Block Exemption Regulation

Schedule (General Block Exemption Regulation) makes provision in relation to Commission Regulation (EU) No 651/2014 (General block exemption Regulation).”—(Mr Gauke.)

Brought up, and added to the Bill.

New Clause 4

Co-operative societies etc

Schedule (Taxation of co-operative societies etc) makes provision about the tax treatment of co-operative, community benefit and industrial and provident societies and credit unions.”—(Mr Gauke.)

Brought up, and added to the Bill.

New Clause 5

Tax relief for theatrical production

Schedule (Tax relief for theatrical production) contains provision about relief in respect of theatrical productions.”—(Mr Gauke.)

Brought up, and added to the Bill.

New Clause 6

Exclusion of incentivised electricity or heat generation activities

‘(1) ITA 2007 is amended as follows.

(2) In section 192 (EIS: meaning of “excluded activities”)—

(a) in subsection (1), omit the “and” at the end of paragraph (ka) and after that paragraph insert—

“(kb) the subsidised generation of heat or subsidised production of gas or fuel, and”, and

(b) in subsection (2), omit the “and” at the end of paragraph (f) and after paragraph (g) insert “, and

(h) section 198B (subsidised generation of heat and subsidised production of gas or fuel).”

(3) In section 198A (excluded activities: subsidised generation or export of electricity)—

(a) for subsection (3) substitute—

“(3) The generation of electricity is “subsidised” if—

(a) a person receives a FIT subsidy in respect of the electricity generated,

(b) a renewables obligation certificate is issued in connection with the generation of the electricity, or

(c) a scheme established in a territory outside the United Kingdom, and corresponding to that set out in a renewables obligation order under section 32 of the Electricity Act 1989, operates to incentivise the generation of the electricity.”,

(b) in subsection (6), omit the “or” after paragraph (c) and after paragraph (d) insert “, or

(e) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.”, and

(c) in subsection (9), at the end insert—

““renewables obligation certificate” means a certificate issued under section 32B of the Electricity Act 1989 or Article 54 of the Energy (Northern Ireland) Order 2003.”

(4) After that section insert—

“198B Excluded activities: subsidised generation of heat and subsidised production of gas or fuel

(1) This section supplements section 192(1)(kb).

(2) The generation of heat, or production of gas or fuel, is “subsidised” if a payment is made, or another incentive is given, under—

(a) a scheme established by regulations under section 100 of the Energy Act 2008 or section 113 of the Energy Act 2011 (renewable heat incentives), or

(b) a similar scheme established in a territory outside the United Kingdom,

in respect of the heat generated, or gas or fuel produced.

(3) But the generation of heat, or production of gas or fuel, is not to be taken to fall within section 192(1)(kb) if Condition A or B is met.

(4) Condition A is that the generation or production is carried on by—

(a) a community interest company,

(b) a co-operative society,

(c) a community benefit society,

(d) a NI industrial and provident society, or

(e) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.

(5) Condition B is that the plant used for the generation of the heat, or production of the gas or fuel, relies wholly or mainly on anaerobic digestion.

(6) Section 198A(9) (definitions) applies for the purposes of this section as for the purposes of section 198A.”

(5) In section 303 (VCTs: meaning of “excluded activities”)—

(a) in subsection (1), omit the “and” at the end of paragraph (ka) and after that paragraph insert—

“(kb) the subsidised generation of heat or subsidised production of gas or fuel, and”, and

(b) in subsection (2), omit the “and” at the end of paragraph (f) and after paragraph (g) insert “, and

(h) section 309B (subsidised generation of heat and subsidised production of gas and fuel).”

(6) In section 309A (excluded activities: subsidised generation or export of electricity)—

(a) for subsection (3) substitute—

“(3) The generation of electricity is “subsidised” if—

(a) a person receives a FIT subsidy in respect of the electricity generated,

(b) a renewables obligation certificate is issued in connection with the generation of the electricity, or

(c) a scheme established in a territory outside the United Kingdom, and corresponding to that set out in a renewables obligation order under section 32 of the Electricity Act 1989, operates to incentivise the generation of the electricity.”,

(b) in subsection (6), omit the “or” after paragraph (c) and after paragraph (d) insert “, or

(e) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.”, and

(c) in subsection (9), at the end insert—

““renewables obligation certificate” means a certificate issued under section 32B of the Electricity Act 1989 or Article 54 of the Energy (Northern Ireland) Order 2003.”

(7) After that section insert—

“309B Excluded activities: subsidised generation of heat and subsidised production of gas or fuel

(1) This section supplements section 303(1)(kb).

(2) The generation of heat, or production of gas or fuel, is “subsidised” if a payment is made, or another incentive is given, under—

(a) a scheme established by regulations under section 100 of the Energy Act 2008 or section 113 of the Energy Act 2011 (renewable heat incentives), or

(b) a similar scheme established in a territory outside the United Kingdom,

in respect of the heat generated or gas or fuel produced.

(3) But the generation of heat, or production of gas or fuel, is not to be taken to fall within section 303(1)(kb) if Condition A or B is met.

(4) Condition A is that the generation or production is carried on by—

(a) a community interest company,

(b) a co-operative society,

(c) a community benefit society,

(d) a NI industrial and provident society, or

(e) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.

(5) Condition B is that the plant used for the generation of the heat, or production of the gas or fuel, relies wholly or mainly on anaerobic digestion.

(6) Section 309A(9) (definitions) applies for the purposes of this section as for the purposes of section 309A.”

(8) The amendments made by subsections (2) to (4) have effect in relation to shares issued on or after the day on which this Act is passed.

(9) The amendments made by subsections (5) to (7) have effect in relation to a relevant holding issued on or after the day on which this Act is passed.”—(Mr Gauke.)

Brought up, and added to the Bill.

New Schedule 1

“Oil contractors: ring-fence trade etc

CTA 2010

1 CTA 2010 is amended as follows.

2 In section 1 (overview of Act), in subsection (3), after paragraph (a) insert—

“(aa) oil contractor activities (see Part 8ZA),

(ab) profits arising from the exploitation of patents etc (see Part 8A),”.

3 In Chapter 4 of Part 8 (oil activities: calculation of profits), after section 285 insert—

“Hire of relevant assets

285A Restriction on hire etc of relevant assets to be brought into account

‘(1) This section applies if—

(a) oil contractor activities are, or are to be, carried out, and

(b) a company that carries on a ring fence trade makes, or is to make, one or more payments under a lease of a relevant asset, or part of a relevant asset, which is, or is to be, provided, operated or used in the relevant offshore service in question.

(2) The total amount that may be brought into account in respect of the payments for the purposes of calculating the company’s ring fence profits in an accounting period is limited to the hire cap.

(3) The “hire cap” is an amount equal to the relevant percentage of TC for the accounting period, subject to subsection (4).

(4) If payments in relation to which subsection (2) or section 356N(2) (restriction on hire for oil contractors under Part 8ZA) applies are also made, or to be made, by one or more other companies in respect of the relevant asset or part, the “hire cap” is to be such proportion of the amount mentioned in subsection (3) as is just and reasonable, having regard (in particular) to the amounts of the payments made, or to be made, by each company.

(5) The “relevant percentage” and TC are to be determined in accordance with section 356N(5) to (16).

(6) To the extent that, by virtue of this section, payments within subsection (1)(b) cannot be brought into account for the purposes of calculating the company’s ring fence profits in an accounting period, the payments may be—

(a) allowed as a deduction from the company’s total profits for the accounting period, or

(b) treated as a surrenderable amount of the company for the accounting period for the purposes of Part 5 (group relief) (see section 99(7)) as if they were a trading loss,

but this is subject to subsection (7).

(7) No deduction may be made by virtue of subsection (6) from total profits so far as they are ring fence profits or contractor’s ring fence profits.

(8) If the company or an associated person enters into arrangements the main purpose or one of the main purposes of which is to secure that subsection (2) does not apply in relation to one or more payments to any extent, that subsection applies in relation to the payments to the extent that it would not otherwise do so.

(9) In subsection (8) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(10) In this section—

“associated person” has the meaning given by section 356LB;

“contractor’s ring fence profits” has the meaning given by section 356LD;

“oil contractor activities” and “relevant offshore service” have the meaning given by section 356L;

“relevant asset” has the meaning given by section 356LA;

“lease” has the meaning given by section 868.”

4 After Part 8 (oil activities) insert—

“Part 8ZA

Oil contractors

Chapter 1

Introduction

365K Overview of Part

(1) This Part is about the corporation tax treatment of oil contractor activities.

(2) Chapter 2 contains basic definitions used in this Part.

(3) Chapter 3 treats oil contractor activities as a separate trade.

(4) Chapter 4 makes provision about the calculation of profits from oil contractor activities.

(5) For the meaning of oil contractor activities, see section 356L.

Chapter 2

Basic definitions

356L “Oil contractor activities” etc

(1) The definitions in this section have effect for the purposes of this Part.

(2) “Oil contractor activities” means activities carried on by a company (“the contractor”), which are not oil-related activities (within the meaning of section 274), but are—

(a) exploration or exploitation activities in, or in connection with, which the contractor provides, operates or uses a relevant asset (see section 356LA) in a relevant offshore service, or

(b) otherwise carried on in, or in connection with, the provision by the contractor of a relevant offshore service.

(3) The contractor provides a “relevant offshore service” if the contractor provides, operates or uses a relevant asset in, or in connection with, the carrying on of exploration or exploitation activities in a relevant offshore area by the contractor or any other associated person.

(4) “Exploration or exploitation activities” means activities carried on in connection with the exploration or exploitation of the seabed and subsoil and their natural resources.

(5) “Relevant offshore area” means—

(a) the territorial sea of the United Kingdom;

(b) the areas designated by Order in Council under section 1(7) of the Continental Shelf Act 1964.

356LA “Relevant asset”

(1) In this Part “relevant asset” means an asset within subsection (2) in respect of which conditions A and B are met.

(2) An asset is within this subsection if it is a structure that—

(a) can be moved from place to place (whether or not under its own power) without major dismantling or modification, and

(b) can be used to—

(i) drill for the purposes of searching for, or extracting, oil, or

(ii) provide accommodation for individuals who work on or from another structure used in a relevant offshore area for, or in connection with, exploration or exploitation activities (“offshore workers”).

(3) But an asset is not within subsection (2)(b)(ii) if it is reasonable to suppose that its use to provide accommodation for offshore workers is unlikely to be more than incidental to another use, or other uses, to which the asset is likely to be put.

(4) In subsection (2)—

“oil” means any substance capable of being won under the authority of a licence granted under Part 1 of the Petroleum Act 1998 or the Petroleum (Production) Act (Northern Ireland) 1964;

“structure” includes a ship or other vessel.

(5) Condition A is that the asset, or any part of the asset, is leased (whether by the contractor or not) from an associated person other than the contractor.

(6) Condition B is that the asset is of the requisite value.

(7) The asset is of the “requisite value” if its market value is £2,000,000 or more.

(8) The Treasury may by regulations modify the meaning of “requisite value”.

(9) Regulations under subsection (8) may—

(a) amend this section,

(b) make different provision for different cases or different purposes, and

(c) make incidental, consequential, supplementary or transitional provision or savings.

356LB “Associated person”

(1) For the purposes of this Part each of the following is an “associated person”—

(a) the contractor,

(b) any person who is, or has been, connected with the contractor,

(c) any person who has acted, acts or is to act, together with the contractor to provide a service, and

(d) any person who is connected with a person falling within paragraph (b) or (c).

(2) A person does not act together with the contractor to provide a service by reason only of leasing an asset, to any person, which is provided, operated or used in the service.

356LC “Lease”

In this Part “lease” has the meaning given by section 868 and “leased” and “leasing” are to be construed accordingly.

356LD “Contractor’s ring fence profits”

In this Part the “contractor’s ring fence profits”, in relation to an accounting period, means the contractor’s income arising from oil contractor activities for that period.

Chapter 3

Deemed separate trade

356M Oil contractor activities treated as separate trade

If the contractor carries on oil contractor activities as part of a trade, those activities are treated for the purposes of the charge to corporation tax on income as a separate trade, distinct from all other activities carried on by the contractor as part of the trade.

Chapter 4

Calculation of profits

Hire of relevant assets

356N Restriction on hire etc of relevant assets to be brought into account

(1) This section applies if the contractor makes, or is to make, one or more payments under a lease of—

(a) a relevant asset, or

(b) part of a relevant asset.

(2) The total amount that may be brought into account in respect of the payments for the purposes of calculating the contractor’s ring fence profits in an accounting period is limited to the hire cap.

(3) The “hire cap” is an amount equal to the relevant percentage of TC for the accounting period, subject to subsection (4).

(4) If payments in relation to which subsection (2) or section 285A(2) (restriction on hire for company carrying on a ring fence trade under Part 8) applies are also made, or to be made, by one or more other companies in respect of the relevant asset or part, the “hire cap” is to be such proportion of the amount mentioned in subsection (3) as is just and reasonable, having regard (in particular) to the amounts of the payments made, or to be made, by the contractor and each other company.

(5) Subject to subsection (7), the “relevant percentage” is—

where—

UROS is the number of days in the accounting period that the relevant asset is provided, operated or used in a relevant offshore service, and

TU is the number of days in the accounting period that the relevant asset is provided, operated or used (whether or not in a relevant offshore service).

(6) Accordingly, the relevant percentage is zero if the relevant asset is not provided, operated or used in the accounting period.

(7) If the accounting period is less than 12 months, the relevant percentage is to be proportionally reduced.

(8) TC is—

OC + CE

(9) Unless subsection (11) applies, OC is the sum of—

(a) any consideration given for the acquisition of the relevant asset or part when it was first acquired by an associated person, and

(b) any expenses incurred by an associated person in connection with that acquisition (other than the costs of financing the acquisition).

This is subject to subsections (12) and (13).

(10) Subsection (11) applies if the relevant asset or part—

(a) is leased by an associated person from a person who is not an associated person, and

(b) has never been owned by an associated person.

(11) OC is the sum of—

(a) the consideration that it is reasonable to suppose would have been given for the acquisition of the relevant asset or part, if it had been acquired by an associated person by way of a bargain at arm’s length at the time it was first leased as mentioned in subsection (10)(a), and

(b) the expenses (other than the costs of financing the acquisition) that it is reasonable to suppose would have been incurred by an associated person in connection with such an acquisition.

This is subject to subsections (12) and (13).

(12) If the relevant asset or part was first acquired by an associated person, or (as the case may be) first leased as mentioned in subsection (10)(a), before the beginning of the accounting period, OC does not include any part of the consideration mentioned in subsection (9)(a) or (as the case may be) (11)(a) that it is reasonable to attribute to anything that no longer forms part of the relevant asset or part at the beginning of the accounting period.

(13) If the relevant asset or part was first acquired by an associated person, or (as the case may be) first leased as mentioned in subsection (10)(a), in the accounting period, OC for the accounting period is—

where—

D is the total number of days in the accounting period,

DBA is the number of days in the accounting period before the day on which the relevant asset or part was first acquired or first leased, and

OC is the amount given by subsection (9) or (as the case may be) (11).

(14) CE is capital expenditure on the relevant asset or part (other than capital expenditure in respect of its acquisition or the acquisition of a lease of it) incurred by an associated person—

(a) after it was first acquired by an associated person or (as the case may be) was first leased as mentioned in subsection (10)(a), and

(b) before the end of the accounting period.

This is subject to subsections (15) and (16).

(15) CE does not include any capital expenditure mentioned in subsection (14) that is—

(a) incurred before the beginning of the accounting period, and

(b) not reflected in the state or nature of the relevant asset or part at the beginning of the accounting period.

(16) If any capital expenditure mentioned in subsection (14) is incurred on a day in the accounting period, the amount of CE for the accounting period in respect of that capital expenditure is—

where—

D is the total number of days in the accounting period,

DBI is the number of days in the accounting period before the day on which that capital expenditure is incurred, and

CEA is the amount of that capital expenditure.

356NA Restriction on hire: further provision

(1) The Treasury may by regulations modify the “relevant percentage” for the purposes of section 356N or 285A.

(2) Regulations under subsection (1) may—

(a) amend section 356N or section 285A,

(b) make different provision for different cases or different purposes, and

(c) make incidental, consequential, supplementary or transitional provision or savings.

(3) To the extent that, by virtue of section 356N, payments within subsection (1) of that section cannot be brought into account for the purposes of calculating the contractor’s ring fence profits in an accounting period, the payments may be—

(a) allowed as a deduction from the contractor’s total profits for the accounting period, or

(b) treated as a surrenderable amount of the contractor for the accounting period for the purposes of Part 5 (group relief) (see section 99(7)) as if they were a trading loss,

subject to subsection (4).

(4) No deduction may be made by virtue of subsection (3) from total profits so far as they are contractor’s ring fence profits or ring fence profits for the purposes of Part 8.

(5) If an associated person enters into arrangements the main purpose or one of the main purposes of which is to secure that section 356N(2) does not apply in relation to one or more payments to any extent, that provision applies in relation to the payments to the extent it would not otherwise do so.

(6) In subsection (5) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

Loan relationships

356NB Restriction on debits to be brought into account

(1) Debits may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of the contractor’s loan relationships in any way that results in a reduction of what would otherwise be the contractor’s ring fence profits, but this is subject to subsections (2) to (4).

(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the contractor which has been—

(a) used to meet expenditure incurred by the contractor in carrying on oil contractor activities, or

(b) appropriated to meeting expenditure to be so incurred by the contractor.

(3) Subsection (1) does not apply, in the case of debits falling to be brought into account as a result of section 329 of CTA 2009 (pre-loan relationship and abortive expenses) in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).

(4) Subsection (1) does not apply, in the case of debits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—

(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or

(b) the exchange loss arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.

(5) If a debit—

(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of a loan relationship of the contractor, but

(b) as a result of this section cannot be brought into account in a way that results in any reduction of what would otherwise be the contractor’s ring fence profits,

the debit is to be brought into account for those purposes as a non-trading debit despite anything in section 297 of that Act.

(6) References in this section to a loan relationship, in relation to the borrowing of money, do not include a relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies.

356NC Restriction on credits to be brought into account

(1) Credits in respect of exchange gains from the contractor’s loan relationships may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in any way that results in an increase of what would otherwise be the contractor’s ring fence profits, but this is subject to subsections (2) to (4).

(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the contractor which has been—

(a) used to meet expenditure incurred by the contractor in carrying on oil contractor activities, or

(b) appropriated to meeting expenditure to be so incurred by the contractor.

(3) Subsection (1) does not apply, in the case of credits falling to be brought into account as a result of section 329 of CTA 2009 (pre-loan relationship and abortive expenses) in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).

(4) Subsection (1) does not apply, in the case of credits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—

(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or

(b) the exchange gain arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.

(5) If a credit—

(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of a loan relationship of the contractor, but

(b) as a result of this section cannot be brought into account in a way that results in any increase of what would otherwise be the contractor’s ring fence profits,

the credit is to be brought into account for those purposes as a non-trading credit despite anything in section 297 of that Act.

(6) Section 356NB(6) applies for the purposes of this section.

Relief

356ND Management expenses

No deduction under section 1219 of CTA 2009 (expenses of management of a company’s investment business) is to be allowed from the contractor’s ring fence profits.

356NE Losses

Relief in respect of a loss incurred by the contractor may not be given under section 37 (relief for trade losses against total profits) against the contractor’s ring fence profits except so far as the loss arises from oil contractor activities.

356NF Group relief

(1) On a claim for group relief made by a claimant company in relation to a surrendering company, group relief may not be allowed against the claimant company’s contractor’s ring fence profits except so far as the claim relates to losses incurred by the surrendering company that arose from oil contractor activities.

(2) In section 105 (restriction on surrender of losses etc within section 99(1)(d) to (g)) the references to the surrendering company’s gross profits of the surrender period do not include the company’s relevant contractor’s ring fence profits for that period.

(3) The company’s “relevant contractor’s ring fence profits” for that period are—

(a) if for that period there are no qualifying charitable donations made by the company that are allowable under Part 6 (charitable donations relief), the company’s contractor’s ring fence profits for that period, or

(b) otherwise, so much of the contractor’s ring fence profits of the company for that period as exceeds the amount of the qualifying charitable donations made by the company that are allowable under section 189 for that period.

(4) In this section “claimant company” and “surrendering company” are to be read in accordance with Part 5 (group relief) (see section 188).

356NG Capital allowances

A capital allowance may not to any extent be given effect under section 259 or 260 of CAA 2001 (special leasing) by deduction from the contractor’s ring fence profits.”

5 In Schedule 4 (index of defined expressions), insert the following entries at the appropriate places—

“associated person (in Part 8ZA)	section 356LB”
“contractor (in Part 8ZA)	section 356L(2)”
“contractor’s ring fence profits (in Part 8ZA)	section 356LD”
“exploration or exploitation activities (in Part 8ZA)	section 356L(4)”
“lease (in Part 8ZA)	section 356LC”
“oil contractor activities (in Part 8ZA)	section 356L(2)”
“relevant asset (in Part 8ZA)	section 356LA”
“relevant offshore area (in Part 8ZA)	section 356L(5)”
“relevant offshore service (in Part 8ZA)	section 356L(3)”

Commencement etc

6 This Schedule is to be treated as having come into force on 1 April 2014 (“the commencement date”).

7 Section 356L of CTA 2010 has effect in relation to activities carried out on or after the commencement date.

8 (1) If, on the commencement date, a company was carrying on a trade that consisted of, or included, carrying out oil contractor activities, an accounting period ends (if it would not otherwise do so) with 31 March 2014.

(2) Sub-paragraph (3) applies if—

(a) but for sub-paragraph (1), a company would have had an accounting period that began before the commencement date and ended on or after that date (“the split accounting period”), and

(b) the company’s accounting period beginning with 1 April 2014 ends when the split accounting period would have ended but for that sub-paragraph.

(3) For the purposes of Chapter 4 of Part 22 of CTA 2010 (surrender of tax refund within group)—

(a) the company is to be treated as having the split accounting period,

(b) any tax refund due to the company for—

(i) the accounting period ending with 31 March 2014, or

(ii) the accounting period beginning with 1 April 2014,

is to be treated as if it were a tax refund due to the company for the split accounting period, and

(c) if the company surrenders a tax refund that is so treated (or part of such a refund), the references in section 964(6) of CTA 2010 to the date on which corporation tax became due and payable are to be treated as references to the date on which corporation tax would have become due and payable had the company had the split accounting period.

9 (1) A company may be given relief under section 45 of CTA 2010 (carry forward of trade loss against subsequent trade profits) for a loss made in an accounting period ending before the commencement date against profits of a ring fence trade so far as (and only so far as) the loss would have been a loss of the ring fence trade had section 356L of that Act had effect in relation to activities carried out before the commencement date and Part 8ZA therefore applied.

(2) In sub-paragraph (1) “ring fence trade” means oil contractor activities that constitute a separate trade (whether by virtue of section 356M of that Act or otherwise).”—(Mr Gauke.)

Brought up, and added to the Bill.

New Schedule 2

“General Block Exemption Regulation

1 CAA 2001 is amended as follows.

2 (1) Section 45DB (exclusions from allowances under section 45DA) is amended as follows.

(2) In subsection (3)(a), for “a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02)” substitute “an undertaking in difficulty for the purposes of the General Block Exemption Regulation”.

(3) In subsection (4)(a), for “Council Regulation (EC) No 104/2000” substitute “Regulation (EU) No 1379/2013 of the European Parliament and of the Council”.

(4) In subsection (11), in the definition of “General Block Exemption Regulation”, for “(EC) No 800/2008” substitute “(EU) No 651/2014”.

(5) In subsection (12), for paragraph (c) substitute—

“(c) Regulation (EU) No 1379/2013 of the European Parliament and of the Council,”.

3 In section 45K (expenditure on plant and machinery for use in designated assisted areas), after subsection (8) insert—

“(8A) Condition C is met by virtue of subsection (8)(c) only if the amount of the expenditure exceeds the amount by which the relevant plant or machinery is depreciated in the period of 3 years ending immediately before the beginning of the chargeable period in which the expenditure is incurred.

(8B) “Relevant plant or machinery” means the plant or machinery being used at the end of the period of 3 years mentioned in subsection (8A) for the purposes of the product, process or service mentioned in subsection (8)(c).”

4 (1) Section 45M (exemptions from allowances under section 45K) is amended as follows.

(2) In subsection (1), for “(6) or (7)” substitute “(7) or (7A)”.

(3) In subsection (3)(a), for “a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02)” substitute “an undertaking in difficulty for the purposes of the General Block Exemption Regulation”.

(4) In subsection (4)—

(a) in paragraph (a), for “Council Regulation (EC) No 104/2000” substitute “Regulation (EU) No 1379/2013 of the European Parliament and of the Council”, and

(b) after paragraph (b) insert—

“(ba) in the transport sector or related infrastructure,

(bb) relating to energy generation, distribution or infrastructure,

(bc) relating to the development of broadband networks,”.

(5) After that subsection insert—

“(4A) Expressions used in subsection (4)(b), (ba), (bb) or (bc) and in the General Block Exemption Regulation have the same meaning as in that Regulation.”

(6) Omit subsection (6).

(7) After subsection (7) insert—

“(7A) Expenditure is within this subsection if—

(a) the area by reference to which the condition in section 45K(1)(a) is met is not an area which falls within Article 107(3)(a) of the Treaty on the Functioning of the European Union,

(b) the condition in section 45K(8)(a) is not met in relation to the expenditure, and

(c) at the time the expenditure is incurred the company is not an SME for the purposes of the General Block Exemption Regulation.”

(8) In subsection (12)—

(a) in the first definition, for the words from ““coal” to “have” substitute “has”, and

(b) in the definition of “General Block Exemption Regulation”, for “(EC) No 800/2008” substitute “(EU) No 651/2014”.

(9) In subsection (15), for paragraph (c) substitute—

“(c) Regulation (EU) No 1379/2013 of the European Parliament and of the Council,”.

5 (1) Section 45N (effect of plant or machinery subsequently being primarily for use outside designated assisted areas) is amended as follows.

(2) In subsection (1)—

(a) for “designated assisted area within the meaning of section 45K” substitute “relevant area”, and

(b) for “such a designated assisted” substitute “a relevant”.

(3) After subsection (3) insert—

“(3A) “Relevant area” means—

(a) in relation to expenditure which would be within subsection (7A) of section 45M if paragraph (a) of that subsection were omitted, a designated assisted area within the meaning of section 45K which falls within Article 107(3)(a) of the Treaty on the Functioning of the European Union, and

(b) in relation to any other expenditure, a designated assisted area within the meaning of section 45K.”

6 In section 212T(6) (cap on first-year allowances: zero-emission goods vehicles), in the definition of “undertaking”, for “(EC) No 800/2008” substitute “(EU) No 651/2014”.

7 In section 212U(5) (cap on first-year allowances: expenditure on plant and machinery for use in designated assisted areas), in the definition of “single investment project”, for “(EC) No 800/2008” substitute “(EU) No 651/2014”.”

8 The amendments made by this Schedule have effect in relation to expenditure incurred on or after the day on which this Act is passed.”—(Mr Gauke.)

Brought up, and added to the Bill.

New Schedule 3

Taxation of co-operative societies etc

Taxation of Chargeable Gains Act 1992 (c. 12)

1 In section 217D of TCGA 1992 (disposal of assets on union, amalgamation or transfer of engagements), in subsection (3), after paragraph (a) insert—

“(aa) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)),”.

Co-operative and Community Benefit Societies Act 2014 (c. 14)

2 Schedule 4 to the Co-operative and Community Benefit Societies Act 2014 (consequential amendments) is amended as follows.

3 In paragraph 47 (which amends section 140E of TCGA 1992)—

(a) in sub-paragraph (2), after “Co-operative and Community Benefit Societies Act 2014” insert “or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969”, and

(b) in sub-paragraph (3), after “Co-operative and Community Benefit Societies Act 2014” insert “, a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969”.

4 In paragraph 48 (which amends section 140F of TCGA 1992) after “Co-operative and Community Benefit Societies Act 2014” insert “or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969”.

5 In paragraph 49 (which amends section 140G of TCGA 1992) after “Co-operative and Community Benefit Societies Act 2014” insert “or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969”.

6 In paragraph 50 (which amends section 170 of TCGA 1992)—

(a) in sub-paragraph (2), for “within the meaning of the Co-operative and Community Benefits Societies Act 2014” substitute “(see section 1119 of that Act)”, and

(b) in sub-paragraph (3), for “within the meaning of the Co-operative and Community Benefits Societies Act 2014” substitute “(see section 1119 of CTA 2010)”.

7 In paragraph 53 (which amends Schedule 7AC of TCGA 1992) for “within the meaning of the Co-operative and Community Benefits Societies Act 2014” substitute “(see section 1119 of that Act)”.

8 In paragraph 82 (which amends paragraph 28 of Schedule 2 to ITEPA 2003), in the sub-paragraph (5) substituted by sub-paragraph (3)—

(a) omit the “or” following paragraph (b), and

(b) at the end of paragraph (c) insert “, or

(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.”.

9 In paragraph 94 (which amends section 379 of ITTOIA 2005), in the definition of “registered society” inserted by sub-paragraph (4)—

(a) omit the “or” following paragraph (a), and

(b) after paragraph (b) insert—

“(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or

“(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,”.

10 In paragraph 105 (which amends section 151 of ITA 2007), in the definition of “registered society” inserted by sub-paragraph (3)—

(a) omit the “or” following paragraph (a), and

(b) at the end of paragraph (b) insert “or

(c) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,”.

11 In paragraph 110 (which amends section 887 of ITA 2007), in the subsection (5) substituted by sub-paragraph (5)—

(a) omit the “or” following paragraph (a), and

(b) after paragraph (b) insert—

“(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or

“(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.”.

12 In paragraph 158 (which amends section 90 of CTA 2010), in the definition of “registered society” inserted by sub-paragraph (3)—

(a) omit the “or” following paragraph (a), and

(b) at the end of paragraph (b) insert “or

(c) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,”.

13 In paragraph 168 (which amends section 1119 of CTA 2010), in the definition of “registered society” inserted by sub-paragraph (3), for paragraph (c) and the “or” before it substitute—

“(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or

(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,”.

14 In paragraph 171 (which amends section 118 of TIOPA 2010)—

(a) in sub-paragraph (2), after “Co-operative and Community Benefit Societies Act 2014” insert “or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969”, and

(b) in sub-paragraph (3), after “Co-operative and Community Benefit Societies Act 2014” insert “, a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969”.

Commencement

The amendments made by this Schedule come into force on 1 August 2014.”—(Mr Gauke.)

Brought up, and added to the Bill.

New Schedule 4

Tax relief for theatrical production

Part 1

Amendments of CTA 2009

1 Before Part 16 of CTA 2009 insert—

Part 15C

theatrical productions

Introduction

1217F  Overview

‘(1) This Part contains provision about tax relief for production companies in respect of their theatrical productions.

(2) Sections 1217FA to 1217FC define “production company” and “theatrical production”.

(3) Section 1217G sets out the conditions a production company must meet to qualify for relief in relation to its theatrical production.

(4) Section 1217H provides for relief by way of additional deductions in respect of certain expenditure (and section 1217J is about the amount of the additional deduction).

(5) This Part also contains provision—

(a) for a company that claims relief to be treated as carrying on a separate trade relating to the theatrical production (see section 1217H(3)), and

(b) about the calculation of the profits and losses of that trade (see sections 1217I to 1217IF).

(6) Sections 1217K to 1217KC—

(a) provide for relief by way of payments (called “theatre tax credits”) to be made on the company’s surrender of certain losses of that trade, and

(b) set out an upper limit on relief, in connection with State aid legislation.

(7) Sections 1217LA and 1217LB are about certain cases involving tax avoidance arrangements or arrangements entered into otherwise than for genuine commercial reasons.

(8) Sections 1217M to 1217MC contain provision about the use of losses of the separate trade (including provision about relief for terminal losses).

(9) Sections 1217N and 1217NA are concerned with the provisional nature of relief given for periods preceding the period in which the company ceases to carry on the separate theatrical trade.

1217FA  “Theatrical production”

‘(1) In this Part “theatrical production” means a dramatic production or a ballet (and any ballet is therefore a theatrical production, whether or not it is also a dramatic production).

But see section 1217FB.

(2) “Dramatic production” means a production of a play, opera, musical, or other dramatic piece (whether or not involving improvisation) in relation to which the following conditions are met—

(a) the actors, singers, dancers or other performers are to give their performances wholly or mainly through the playing of roles,

(b) each performance in the proposed run of performances is to be live, and

(c) the presentation of live performances is the main object, or one of the main objects, of the company’s activities in relation to the production.

(3) “Dramatic piece” may also include, for example, a show that is to be performed by a circus.

(4) For the purposes of this section a performance is “live” if it is to an audience before whom the performers are actually present.

1217FB  Productions not regarded as theatrical

‘(1) A dramatic production or ballet is not regarded as a theatrical production if—

(a) the main purpose, or one of the main purposes, for which it is made is to advertise or promote any goods or services,

(b) the performances are to consist of or include a competition or contest,

(c) a wild animal is to be used in any performance,

(d) the production is of a sexual nature (see subsection (3)), or

(e) the making of a relevant recording is the main object, or one of the main objects, of the company’s activities in relation to the production.

(2) For the purposes of subsection (1)(c) an animal is used in a performance if the animal performs, or is shown, in the course of the performance.

(3) A production is of a sexual nature for the purposes of subsection (1)(d) if the performances are to include any content the nature of which is such that, ignoring financial gain, it would be reasonable to assume the content to be included solely or principally for the purpose of sexually stimulating any member of the audience (whether by verbal or other means).

(4) “Relevant recording” means a recording of a performance—

(a) as a film (or part of a film) for exhibition to the paying general public at the commercial cinema, or

(b) for broadcast to the general public.

(5) In this section—

“broadcast” means broadcast by any means (including television, radio or the internet);

“film” has the same meaning as in Part 15 (see section 1181);

“wild animal” means an animal of a kind which is not commonly domesticated in the British Islands (and in this definition “animal” has the meaning given by section 1(1) of the Animal Welfare Act 2006).

1217FC  “Production company”

‘(1) A company is the production company in relation to a theatrical production if the company (acting otherwise than in partnership)—

(a) is responsible for producing, running and closing the theatrical production,

(b) is actively engaged in decision-making during the production, running and closing phases,

(c) makes an effective creative, technical and artistic contribution to the production, and

(d) directly negotiates for, contracts for and pays for rights, goods and services in relation to the production.

(2) No more than one company can be the production company in relation to a theatrical production.

(3) If more than one company meets the conditions in subsection (1) in relation to a theatrical production, the company that is most directly engaged in the activities mentioned in subsection (1) is the production company.

(4) If there is no company meeting the conditions in subsection (1), there is no production company in relation to the production.

Companies qualifying for relief

1217G  How a company qualifies for relief

‘(1) A company qualifies for relief in relation to a theatrical production if—

(a) it is the production company in relation to the production, and

(b) the commercial purpose condition (see section 1217GA) and the EEA expenditure condition (see section 1217GB) are met.

(2) There is further provision relating to subsection (1) in section 1217LA (tax avoidance arrangements).

1217GA  The commercial purpose condition

‘(1) The “commercial purpose condition” is that at the beginning of the production phase the company intends that all, or a high proportion of, the live performances that it proposes to run will be—

(a) to paying members of the general public, or

(b) provided for educational purposes.

(2) The reference in subsection (1) to “live performances” is to be read in accordance with section 1217FA(4).

(3) A performance is not regarded as provided for educational purposes if the production company is, or is associated with, a person who—

(a) has responsibility for the beneficiaries, or

(b) is otherwise connected with the beneficiaries (for instance, by being their employer).

(4) For the purposes of subsection (3), a production company is associated with a person (“P”) if—

(a) P controls the production company, or

(b) P is a company which is controlled by the production company or by a person who also controls the production company.

(5) In this section—

“the beneficiaries” means persons for whose benefit the performance will or may be provided;

“control” has the same meaning as in Part 10 of CTA 2010 (see section 450 of that Act).

1217GB  The EEA expenditure condition

‘(1) The “EEA expenditure condition” is that at least 25% of the core expenditure on the theatrical production incurred by the company is EEA expenditure.

(2) In this Part “EEA expenditure” means expenditure on goods or services that are provided from within the European Economic Area.

(3) Any apportionment of expenditure as between EEA and non-EEA expenditure for the purposes of this Part is to be made on a just and reasonable basis.

(4) The Treasury may by regulations—

(a) amend the percentage specified in subsection (1);

(b) amend subsection (2).

(5) See also sections 1217N and 1217NA (which are about the giving of relief provisionally on the basis that the EEA expenditure condition will be met).

1217GC  “Core expenditure”

‘(1) In this Part “core expenditure”, in relation to a theatrical production, means expenditure on the activities involved in—

(a) producing the production, and

(b) closing the production.

(2) The reference in subsection (1)(a) to “expenditure on the activities involved in producing the production”—

(a) does not include expenditure on any matters not directly involved in producing the production (for instance, financing, marketing, legal services or storage);

(b) does not include expenditure on the ordinary running of the production; but expenditure incurred on or after the date of the first performance of the production to the paying general public may fall within subsection (1)(a) (for instance, if it is incurred in connection with a substantial recasting or a substantial redesign of the set).

Claim for additional deduction

1217H  Claim for additional deduction

‘(1) A company which qualifies for relief in relation to a theatrical production may claim an additional deduction in relation to the production.

(2) A claim under subsection (1) is made with respect to an accounting period.

(See Schedule 18 to FA 1998, and in particular, Part 9D, for provision about the procedure for making claims.)

(3) Where a company has made a claim under subsection (1)—

(a) the company’s activities in relation to the theatrical production are treated for corporation tax purposes as a trade separate from any other activities of the company (including activities in relation to any other theatrical production), and

(b) the company is entitled to make an additional deduction, in accordance with section 1217J, in calculating the profit or loss of the separate trade for the accounting period concerned.

(4) The company is treated as beginning to carry on the separate trade—

(a) when the production phase begins, or

(b) if earlier, at the time of the first receipt by the company of any income from the theatrical production.

(5) Where the company tax return in which a claim under subsection (1) is made is for an accounting period later than that in which the company begins to carry on the separate trade, the company must make any amendments of company tax returns for earlier periods that may be necessary.

(6) Any amendment or assessment necessary to give effect to subsection (5) may be made despite any limitation on the time within which an amendment or assessment may normally be made.

(7) If the company ceases at any time to meet the conditions in section 1217FC(1) (meaning of “production company”) in relation to the production, it is treated as ceasing to carry on the separate trade at that time.

The separate theatrical trade

1217I  Introduction to sections 1217IA to 1217IF

‘(none) Where a company is treated under section 1217H(3)(a) as carrying on a separate trade (“the separate theatrical trade”), the profits or losses of the trade are calculated for corporation tax purposes in accordance with sections 1217IA to 1217IF.

1217IA  Calculation of profits or losses of separate theatrical trade

‘(1) For the first period of account during which the separate theatrical trade is carried on, the following are brought into account—

(a) as a debit, the costs of the theatrical production incurred (and represented in work done) to date;

(b) as a credit, the proportion of the estimated total income from the production treated as earned at the end of that period.

(2) For subsequent periods of account the following are brought into account—

(a) as a debit, the difference between the amount (“C”) of the costs of the theatrical production incurred (and represented in work done) to date and the amount corresponding to C for the previous period, and

(b) as a credit, the difference between the proportion (“PI”) of the estimated total income from the production treated as earned at the end of that period and the amount corresponding to PI for the previous period.

(3) The proportion of the estimated total income treated as earned at the end of a period of account is—

where—

C is the total to date of costs incurred (and represented in work done);

T is the estimated total cost of the theatrical production;

I is the estimated total income from the theatrical production.

1217IB  Income from the production

‘(1) References in this Part to income from a theatrical production are to any receipts by the company in connection with the making or exploitation of the production.

(2) This includes—

(a) receipts from the sale of tickets or of rights in the theatrical production;

(b) royalties or other payments for use of aspects of the theatrical production (for example, characters or music);

(c) payments for rights to produce merchandise;

(d) receipts by the company by way of a profit share agreement.

(3) Receipts that (apart from this subsection) would be regarded as being of a capital nature are treated as being of a revenue nature.

1217IC  Costs of the production

‘(1) References in this Part to the costs of a theatrical production are to expenditure incurred by the company on—

(a) the activities involved in developing, producing, running and closing the production, or

(b) activities with a view to exploiting the production.

(2) This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade.

(3) Expenditure which, apart from this subsection, would be regarded as being of a capital nature only because it is incurred on the creation of an asset (i.e. the theatrical production) is treated as being of a revenue nature.

1217ID  When costs are taken to be incurred

‘(1) For the purposes of this Part, the costs that have been incurred on a theatrical production at a given time—

(a) are those costs of the production that are represented in the state of completion of the work in progress, but

(b) do not include any amount that has not been paid unless it is the subject of an unconditional obligation to pay.

(2) In accordance with subsection (1)(a)—

(a) payments in advance of work to be done are ignored until the work has been carried out;

(b) deferred payments are recognised to the extent that the goods or services in question are represented in the state of completion of the work in progress (but this is subject to subsection (1)(b)).

(3) Where an obligation to pay an account is linked to income being earned from the theatrical production, the obligation is not treated as having become unconditional unless an appropriate amount of income is or has been brought into account under section 1217IA.

(4) In determining for the purposes of this Part the amount of costs incurred on a theatrical production at the end of a period of account, any amount that has not been paid 4 months after the end of that period is to be ignored.

1217IE  Pre-trading expenditure

‘(1) This section applies if, before the company begins to carry on the separate theatrical trade, it incurs expenditure on activities falling within section 1217IC(1)(a).

(2) The expenditure may be treated as expenditure of the separate theatrical trade and as if incurred immediately after the company begins to carry on that trade.

(3) If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly.

(4) Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made.

1217IF  Estimates

Estimates for the purposes of section 12171A must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.

Amount of additional deduction

1217J  Amount of additional deduction

‘(1) The amount of an additional deduction to which a company is entitled as a result of a claim under section 1217H is calculated as follows.

(2) For the first period of account during which the separate theatrical trade is carried on, the amount of the additional deduction is E, where—

E is—

(a) so much of the qualifying expenditure incurred to date as is EEA expenditure, or

(b) if less, 80% of the total amount of qualifying expenditure incurred to date.

(3) For any period of account after the first, the amount of the additional deduction is—

E – P

where—

E is—

(a) so much of the qualifying expenditure incurred to date as is EEA expenditure, or

(b) if less, 80% of the total amount of qualifying expenditure incurred to date, and

P is the total amount of the additional deductions given for previous periods.

(4) The Treasury may by regulations amend the percentage specified in subsection (2) or (3).

1217JA  “Qualifying expenditure”

‘(1) In this Part “qualifying expenditure”, in relation to a theatrical production, means core expenditure (see section 1217GC) on the theatrical production that—

(a) falls to be taken into account under sections 1217IA to 1217IF in calculating the profit or loss of the separate theatrical trade for tax purposes, and

(b) is not excluded by subsection (2).

(2) The following expenditure is excluded—

(a) expenditure in respect of which the company is entitled to an R&D expenditure credit under Chapter 6A of Part 3;

(b) expenditure in respect of which the company has obtained relief under Part 13 (additional relief for expenditure on research and development).

Theatre tax credits

1217K Theatre tax credit claimable if company has surrenderable loss

‘(1) A company which—

(a) is treated under section 1217H(3) as carrying on a separate trade during the whole or part of an accounting period, and

(b) has a surrenderable loss in that period,

may claim a theatre tax credit for that accounting period.

(2) Section 1217KA sets out how to calculate the amount of any surrenderable loss that the company has in the accounting period.

(3) A company making a claim may surrender the whole or part of its surrenderable loss in the accounting period.

(4) The amount of the theatre tax credit to which a company making a claim is entitled for the accounting period is—

(a) 25% of the amount of the loss surrendered if the theatrical production is a touring production, or

(b) 20% of the amount of the loss surrendered if the theatrical production is not a touring production.

(5) The company’s available loss for the accounting period (see section 1217KA(2)) is reduced by the amount surrendered.

(6) A theatrical production is a “touring production” only if the company intends at the beginning of the production phase—

(a) that it will present performances of the production in 6 or more separate premises, or

(b) that it will present performances of the production in at least two separate premises and that the number of performances will be at least 14.

(7) See Schedule 18 to FA 1998 (in particular, Part 9D) for provision about the procedure for making claims under subsection (1).

1217KA Amount of surrenderable loss

‘(1) The company’s surrenderable loss in the accounting period is—

(a) the company’s available loss for the period in the separate theatrical trade (see subsections (2) and (3)), or

(b) if less, the available qualifying expenditure for the period (see subsections (4) and (5)).

(2) The company’s available loss for an accounting period is—

where—

L is the amount of the company’s loss for the period in the separate theatrical trade, and

RUL is the amount of any relevant unused loss of the company (see subsection (3)).

(3) The “relevant unused loss” of a company is so much of any available loss of the company for the previous accounting period as has not been—

(a) surrendered under section 1217K, or

(b) carried forward under section 45 of CTA 2010 and set against profits of the separate theatrical trade.

(4) For the first period of account during which the separate theatrical trade is carried on, the available qualifying expenditure is the amount that is E for that period for the purposes of section 1217J(2).

(5) For any period of account after the first, the available qualifying expenditure is—

E – S

where—

E is the amount that is E for that period for the purposes of section 1217J(3), and

S is the total amount previously surrendered under section 1217K.

(6) If a period of account of the separate theatrical trade does not coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned.

1217KB Payment in respect of theatre tax credit

‘(1) If a company—

(a) is entitled to a theatre tax credit for an accounting period, and

(b) makes a claim,

the Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) must pay the amount of the credit to the company.

(2) An amount payable in respect of—

(a) a theatre tax credit, or

(b) interest on a theatre tax credit under section 826 of ICTA,

may be applied in discharging any liability of the company to pay corporation tax.

To the extent that it is so applied the Commissioners’ liability under subsection (1) is discharged.

(3) If the company’s company tax return for the accounting period is enquired into by the Commissioners, no payment in respect of a theatre tax credit for that period need be made before the Commissioners’ enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998).

In those circumstances the Commissioners may make a payment on a provisional basis of such amount as they consider appropriate.

(4) No payment need be made in respect of a theatre tax credit for an accounting period before the company has paid to the Commissioners any amount that it is required to pay for payment periods ending in that accounting period—

(a) under PAYE regulations,

(b) under section 966 of ITA 2007 (visiting performers), or

(c) in respect of Class 1 national insurance contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

(5) A payment in respect of a theatre tax credit is not income of the company for any tax purpose.

1217KC Limit on State aid

‘(1) The total amount of any theatre tax credits payable under section 1217KB in the case of any undertaking is not to exceed 50 million euros per year.

(2) In this section “undertaking” has the same meaning as in the General Block Exemption Regulation.

(3) In this section “the General Block Exemption Regulation” means any regulation that—

(a) is for the time being in force under Article 1 of Council Regulation (EC) No 994/98, and

(b) makes, in relation to aid in favour of culture and heritage conservation, the declaration provided for by that Article.

Anti-avoidance etc

1217LA Tax avoidance arrangements

‘(1) A company does not qualify for relief in relation to a theatrical production if there are any tax avoidance arrangements relating to the production.

(2) Arrangements are “tax avoidance arrangements” if their main purpose, or one of their main purposes, is the obtaining of a tax advantage.

(3) In this section—

“arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable;

“tax advantage” has the meaning given by section 1139 of CTA 2010.

1217LB Transactions not entered into for genuine commercial reasons

‘(1) A transaction is to be ignored for the purpose of determining a relief mentioned in subsection (2) so far as the transaction is attributable to arrangements (other than tax avoidance arrangements) entered into otherwise than for genuine commercial reasons.

(2) The reliefs mentioned in subsection (1) are—

(a) any additional deduction which a company may make under this Part, and

(b) any theatre tax credit to be given to a company.

(3) In this section “arrangements” and “tax avoidance arrangements” have the same meaning as in section 1217LA.

Use of losses

1217M  Application of sections 1217MA to 1217MC

‘(1) Sections 1217MA to 1217MC apply to a company that is treated under section 1217H(3) as carrying on a separate trade in relation to a theatrical production.

(2) In those sections—

“the completion period” means the accounting period in which the company ceases to carry on the separate theatrical trade;

“loss relief” includes any means by which a loss might be used to reduce the amount in respect of which a company, or any other person, is chargeable to tax.

1217MA  Restriction on use of losses before completion period

‘(1) Subsection (2) applies if a loss is made by the company in the separate theatrical trade in an accounting period preceding the completion period.

(2) The loss is not available for loss relief, except to the extent that the loss may be carried forward under section 45 of CTA 2010 to be set against profits of the separate theatrical trade in a subsequent period.

1217MB  Use of losses in the completion period

‘(1) Subsection (2) applies if a loss made in the separate theatrical trade is carried forward under section 45 of CTA 2010 to the completion period.

(2) So much (if any) of the loss as is not attributable to relief under section 1217H (see subsection (4)) may be treated for the purposes of loss relief as if it were a loss made in the completion period.

(3) If a loss is made in the separate theatrical trade in the completion period, the amount of the loss that may be—

(a) deducted from total profits of the same or an earlier period under section 37 of CTA 2010, or

(b) surrendered as group relief under Part 5 of that Act,

is restricted to the amount (if any) that is not attributable to relief under section 1217H.

(4) The amount of a loss in any period that is attributable to relief under section 1217H is found by—

(a) calculating what the amount of the loss would have been if there had been no additional deduction under that section in that or any earlier period, and

(b) deducting that amount from the total amount of the loss.

(5) This section does not apply to loss surrendered, or treated as carried forward, under section 1217MC (terminal losses).

1217MC  Terminal losses

‘(1) This section applies if—

(a) the company ceases to carry on the separate theatrical trade, and

(b) if the company had not ceased to carry on the separate theatrical trade, it could have carried forward an amount under section 45 of CTA 2010 to be set against profits of that trade in a later period (“the terminal loss”).

Below in this section the company is referred to as “company A” and the separate theatrical trade is referred to as “trade 1”.

(2) If company A—

(a) is treated under section 1217H(3) as carrying on a separate theatrical trade in relation to another theatrical production (“trade 2”), and

(b) is carrying on trade 2 when it ceases to carry on trade 1,

company A may (on making a claim) elect to transfer the terminal loss (or a part of it) to trade 2.

(3) If company A makes an election under subsection (2), the terminal loss (or part of the loss) is treated as if it were a loss brought forward under section 45 of CTA 2010 to be set against the profits of trade 2 of the first accounting period beginning after the cessation and so on.

(4) Subsection (5) applies if—

(a) another company (“company B”) is treated under section 1217H(3) as carrying on a separate theatrical trade (“company B’s trade”) in relation to another theatrical production,

(b) company B is carrying on that trade when company A ceases to carry on trade 1, and

(c) company B is in the same group as company A for the purposes of Part 5 of CTA 2010 (group relief).

(5) Company A may surrender the loss (or part of it) to company B.

(6) On the making of a claim by company B the amount surrendered is treated as if it were a loss brought forward by company B under section 45 of CTA 2010 to be set against the profits of company B’s trade of the first accounting period beginning after the cessation and so on.

(7) The Treasury may by regulations make administrative provision in relation to the surrender of a loss under subsection (5) and the resulting claim under subsection (6).

(8) “Administrative provision” means provision corresponding, subject to such adaptations or other modifications as appear to the Treasury to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for group relief).

Provisional entitlement to relief

1217N  Provisional entitlement to relief

‘(1) In relation to a company that has made a claim under section 1217H in relation to a theatrical production, “interim accounting period” means any accounting period that—

(a) is one in which the company carries on the separate theatrical trade, and

(b) precedes the accounting period in which it ceases to do so.

(2) A company is not entitled to relief under any of the relieving provisions for an interim accounting period unless—

(a) its company tax return for the period states the amount of planned core expenditure on the theatrical production that is EEA expenditure, and

(b) that amount is such as to indicate that the EEA expenditure condition (see section 1217GB) will be met in relation to the production.

If those requirements are met, the company is provisionally treated in relation to that period as if the EEA expenditure condition were met.

(3) In this section “the relieving provisions” means—

(a) section 1217H (additional deduction),

(b) section 1217K (theatre tax credits), and

(c) section 1217MC (terminal losses).

1217NA  Clawback of provisional relief

‘(1) If a statement is made under section 1217N(2) but it subsequently appears that the EEA expenditure condition will not be met on the company’s ceasing to carry on the separate theatrical trade, the company—

(a) is not entitled to relief under any of the relieving provisions for any period for which its entitlement depended on such a statement, and

(b) must amend its company tax return for any such period accordingly.

(2) When a company which has made a claim under section 1217H ceases to carry on the separate theatrical trade, the company’s company tax return for the period in which that cessation occurs must—

(a) state that the company has ceased to carry on the separate theatrical trade, and

(b) be accompanied by a final statement of the amount of the core expenditure on the theatrical production that is EEA expenditure.

(3) If that statement shows that the EEA expenditure condition is not met—

(a) the company is not entitled to relief under any of the relieving provisions for any period,

(b) the company is treated for corporation tax purposes as if section 1217H(3)(a) (treatment as a separate trade) did not apply in relation to the theatrical production for any period, and

(c) accordingly, sections 1217MA and 1217MB (provisions about use of losses) do not apply in relation to the theatrical production for any period.

(4) Where subsection (3) applies, the company must amend its company tax return for any period in which (or in any part of which) it was treated as carrying on a separate trade relating to the theatrical production.

(5) Any amendment or assessment necessary to give effect to this section may be made despite any limitation on the time within which an amendment or assessment may normally be made.

(6) In this section “the relieving provisions” has the same meaning as in section 1217N.

Interpretation

1217O  Activities involved in developing, producing, running or closing a production

‘(none) The Treasury may by regulations amend section 1217GC (core expenditure) or 1217IC (costs of production) for the purpose of providing that activities of a specified description are, or are not, to be regarded as activities involved in developing or (as the case may be) producing, running or closing—

(a) a theatrical production, or

(b) a theatrical production of a specified description.

1217OA  “Company tax return”

‘(none) In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1) of that Schedule).

1217OB  Index

‘(none) In this Part—

“commercial purpose condition” has the meaning given by section 1217GA;

“company tax return” has the meaning given by section 1217OA;

“core expenditure” has the meaning given by section 1217GC;

“costs”, in relation to a theatrical production, has the meaning given by section 1217IC;

“EEA expenditure” has the meaning given by section 1217GB;

“EEA expenditure condition” has the meaning given by section 1217GB;

references to “income from a theatrical production” are to be read in accordance with section 1217IB;

“production company” has the meaning given by section 1217FC;

“qualifying expenditure” has the meaning given by section 1217JA;

references to the “separate theatrical trade” are to be read in accordance with section 1217I;

“theatrical production” has the meaning given by section 1217FA (read with section 1217FB).”

Part 2

Consequential amendments

ICTA

2 (1) Section 826 of ICTA (interest on tax overpaid) is amended as follows.

(2) In subsection (1), after paragraph (fb) insert—

“(fc) a payment of theatre tax credit falls to be made to a company; or”.

(3) In subsection (3C), for “or video game tax credit” substitute “, video game tax credit or theatre tax credit”.

(4) In subsection (8A)—

(a) in paragraph (a) for “or (f)” substitute “(f), (fa), (fb) or (fc)”, and

(b) in paragraph (b)(ii), after “video game tax credit” insert “or theatre tax credit”.

(5) In subsection (8BA), after “video game tax credit” (in both places) insert “or theatre tax credit”.

FA 1998

3 Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.

4 In paragraph 10 (other claims and elections to be included in return), in sub-paragraph (4)—

(a) before “claims” insert “certain”;

(b) for “or 15B” substitute “, 15B or 15C”.

5 (1) Paragraph 52 (recovery of excessive overpayments etc) is amended as follows.

(2) In sub-paragraph (2), after paragraph (bf) insert—

(bg) theatre tax credit under Part 15C of that Act,”.

(3) In sub-paragraph (5)—

(a) after paragraph (ah) insert—

(ai) an amount of theatre tax credit paid to a company for an accounting period,”;

(b) in the words after paragraph (b), after “(ah)” insert “, (ai)”.

6 (1) Part 9D (certain claims for tax relief) is amended as follows.

(2) In paragraph 83S (introduction), after paragraph (c) insert—

(d) an additional deduction under Part 15C of CTA 2009,

(b) a theatre tax credit under that Part of that Act.”

(3) The heading of that Part becomes “”.

CAA 2001

7 In Schedule A1 to CAA 2001 (first-year tax credits), in paragraph 11(4), omit the “and” at the end of paragraph (d) and after paragraph (e) insert “, and

(f) section 1217K of that Act (theatre tax credits).”

FA 2007

8 In Schedule 24 to FA 2007 (penalties for errors), in paragraph 28(fa) (meaning of “corporation tax credit”), omit the “or” at the end of sub-paragraph (ivb) and after that sub-paragraph insert—a theatre tax credit under section 1217K of that Act, or”.

(ivc) a theatre tax credit under section 1217K of that Act, or”.

CTA 2009

9 In section 104BA of CTA 2009 (R&D expenditure credits: restrictions on claiming other tax reliefs), after subsection (3) insert—

“(4) For provision prohibiting an R&D expenditure credit being given under this Chapter and relief being given under section 1217H or 1217K (theatrical productions: additional deduction or theatre tax credit), see section 1217JA(2).”

10 In Part 8 of CTA 2009 (intangible fixed assets), in Chapter 10 (excluded assets), before section 809 insert—

“808C Assets representing expenditure incurred in course of separate theatrical trade

(1) This Part does not apply to an intangible fixed asset held by a theatrical production company so far as the asset represents expenditure on a theatrical production that is treated under Part 15C as expenditure of a separate trade (see particularly sections 1217H and 1217IE).

(2) In this section—

“theatrical production” has the same meaning as in Part 15C (see section 1217FA);

“theatrical production company” means a company which, for the purposes of that Part, is the production company in relation to a theatrical production (see section 1217FC).”

11 In section 1040ZA of CTA 2009 (additional relief for expenditure on research and development), after subsection (3) insert—

“(4) For provision prohibiting relief being given under this Part and under section 1217H or 1217K (theatrical productions: additional deduction or theatre tax credit), see section 1217JA(2).”

12 In section 1310 of CTA 2009 (orders and regulations), in subsection (4), after paragraph (ej) insert—

“(ek) section 1217GB(4) (EEA expenditure condition),

(el) section 1217J(4) (amount of additional deduction),

(em) section 1217O (activities involved in developing, producing, running or closing a production),”.

13 In Schedule 4 to CTA 2009 (index of defined expressions) at the appropriate place insert—

“commercial purpose condition (in Part 15C)	section 1217OB”;
“company tax return (in Part 15C)	section 1217OA”;
“core expenditure (in Part 15C)	section 1217GC”;
“costs of a theatrical production (in Part 15C)	section 1217IC”;
“EEA expenditure (in Part 15C)	section 1217GB”;
“EEA expenditure condition (in Part 15C)	section 1217OB”;
“income from a theatrical production (in Part 15C)	section 1217IC”;
“production company (in Part 15C)	section 1217FC”;
“qualifying expenditure (in Part 15C)	section 1217JA”;
“the separate theatrical trade (in Part 15C)	section 1217OB”;
“theatrical production (in Part 15C)	section 1217FA”.

FA 2009

14 In Schedule 54A to FA 2009 (which is prospectively inserted by F(No. 3)A 2010 and contains provision about the recovery of certain amounts of interest paid by HMRC), in paragraph 2—

(a) in sub-paragraph (2), omit the “or” at the end of paragraph (f) and after paragraph (g) insert “, or

(h) a payment of theatre tax credit under section 1217K of CTA 2009 for an accounting period.”;

(b) in sub-paragraph (4), for “(e)” substitute “(h)”.

CTA 2010

15 (1) Section 357CG of CTA 2010 (profits arising from the exploitation of patents etc: adjustments in calculating profits of trade) is amended as follows.

(2) In subsection (3), omit the “and” at the end of paragraph (c) and after paragraph (d) insert “, and

(e) the amount of any additional deduction for the accounting period obtained by the company under Part 15C of CTA 2009 in respect of qualifying expenditure on a theatrical production.”

(3) In subsection (6)—

(a) in the definition of “qualifying expenditure”, omit the “and” at the end of paragraph (a) and after paragraph (b) insert “, and

(i) in relation to a company that is the production company (as defined in section 1217FC of that Act) in relation to a theatrical production, has the same meaning as in Part 15C of that Act,”;

(b) omit the “and” at the end of the definition of “television production company” and after that definition insert—

““theatrical production” has the same meaning as in Part 15C of CTA 2009 (see section 1217FA of that Act), and”.

Part 3

Commencement

16 (1) Any power to make regulations conferred on the Treasury by virtue of this Schedule comes into force on the day on which this Act is passed.

(2) So far as not already brought into force by sub-paragraph (1), the amendments made by this Schedule come into force in accordance with provision contained in an order made by the Treasury.

(3) An order under sub-paragraph (2) may make different provision for different purposes.

17 (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 September 2014.

(2) Sub-paragraph (3) applies where a company has an accounting period beginning before 1 September 2014 and ending on or after that date (“the straddling period”).

(3) For the purposes of Part 15C of CTA 2009—

(a) so much of the straddling period as falls before 1 September 2014, and so much of that period as falls on or after that date, are treated as separate accounting periods, and

(b) any amounts brought into account for the purposes of calculating for corporation tax purposes the profits of a trade for the straddling period are apportioned to the two separate accounting periods on such basis as is just and reasonable.”—(Mr Gauke.)

Brought up, and added to the Bill.

Clause 207

Appeal against a section 201 penalty

Amendments made: 1, page 138, line 23, at end insert—

‘(2A) The grounds on which an appeal under subsection (1) may be made include in particular—

(a) that Condition A, B or D in section197was not met in relation to the follower notice,

(b) that the judicial ruling specified in the notice is not one which is relevant to the chosen arrangements,

(c) that the notice was not given within the period specified in subsection (6) of that section, or

(d) that it was reasonable in all the circumstances for P not to have taken the necessary corrective action (see section201(4)) in respect of the denied advantage.”

Amendment 2, page 138, line 43, at end insert—

‘(8A) The cancellation under subsection (7) of HMRC’s decision on the ground specified in subsection (2A)(d) does not affect the validity of the follower notice, or of any accelerated payment notice or partner payment notice under Chapter 3 related to the follower notice.”—(Mr Gauke.)

Schedule 27

Follower notices and partnerships

Amendment made: 3, page 535, line 45, at end insert—

‘(7A) Section 207(2A) applies to an appeal by virtue of sub-paragraph (7)(a) as it applies to an appeal under section 207(1).”—(Mr Gauke.)

Clause 291

Removal of limitation period restriction for EU cases

Amendment made: 4, page 199, leave out lines 23 to 29.—(Mr Gauke.)

Clause 73

Air passenger duty: adjustments to Part 3 of Schedule 5A to FA 1994

Amendments made: 5, page 61, line 18, leave out “as follows” and insert

“in accordance with subsections (2) to (10)”.

Amendment 6, page 62, line 9, at end insert—

‘( ) Accordingly, in section 1 of the Air Passenger Duty (Setting of Rate) Act (Northern Ireland) 2012 (setting of rate of air passenger duty)—

(a) in subsection (1)—

(i) omit “(3)(a) and (b), (4)(a) and (b),”, and

(ii) for “(5A)(a), (b) and (c)” substitute “(5A)(c)”, and

(b) omit subsections (2) to (5), (8) and (9).”—(Mr Gauke.)

Schedule 7

Employment-related securities etc

Amendments made: 7, page 311, line 41, at end insert—

“9A (1) Section 428 (restricted securities: amount of charge) is amended as follows.

(2) In subsection (7), after paragraph (ba) insert—

“(bb) any amount that was charged to non-UK income tax in respect of the acquisition of the employment-related securities, but only so far as that amount exceeds any amount within paragraph (b) or (ba),”.

(3) After subsection (7) insert—

(7A) In subsection (7)(b) and (ba) the references to an amount of exempt income, in a case in which the amount that constituted, or was treated as, earnings in respect of the acquisition was not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applied, includes any amount that would have been an amount of exempt income if any of those charging provisions had applied.

(7B) In subsection (7)(bb) “non-UK income tax” means a tax chargeable on income under the law of a territory outside the United Kingdom that corresponds to United Kingdom income tax.

(7C) A tax is not outside the scope of subsection (7B) by reason only that it—

(a) is chargeable under the law of a province, state or other part of a country, or

(b) is levied by or on behalf of a municipality or other local body.””

Amendment 8, page 312, line 8, at end insert—

11A In section 446T (securities acquired for less than market value: amount of notional loan), after subsection (3) insert—

(3A) In subsection (3)(b) and (ba) the references to an amount of exempt income, in a case in which the amount that constitutes, or is treated as, earnings in respect of the acquisition is not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies, includes any amount that would be an amount of exempt income if any of those charging provisions were to apply.”

Amendment 9, page 312, line 10, at end insert—

12A In section 480 (securities options: deductible amounts), after subsection (5) insert—

(5A) In subsection (5)(a) the reference to an amount of exempt income, in a case in which the amount that constituted earnings in respect of the acquisition was not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applied, includes any amount that would have been an amount of exempt income if any of those charging provisions had applied.”

Amendment 10, page 313, line 26, at end insert—

23A In section 149AA (restricted and convertible employment-related securities and employee shareholder shares), in subsection (7)—

(a) after “include” insert “—

(a) ”, and

(b) at the end insert “, or

(b) in a case in which the amount that constituted, or was treated as, earnings was not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 of ITEPA 2003 applied, any amount that would have been an amount of such exempt income if any of those charging provisions had applied.””—(Mr Gauke.)

Schedule 6

Employee share schemes

Amendments made: 11, page 273, line 29, at end insert—

139A (1) Section 94A of ITTOIA 2005 (costs of setting up SAYE option scheme or CSOP scheme) is amended as follows.

(2) In subsection (1)—

(a) in paragraph (a) omit “that is approved by an officer of Revenue and Customs”, and

(b) omit paragraph (b) and the “and” before it.

(3) In subsection (2)—

(a) at the beginning of paragraph (a) insert “Schedule 3”,

(b) at the beginning of paragraph (b) insert “Schedule 4”, and

(c) omit the final sentence.

(4) In subsection (4) for “approval is given” (in both places) substitute “relevant date falls”.

(5) After subsection (4) insert—

(4A) In subsection (4) “the relevant date”—

(a) in relation to a Schedule 3 SAYE option scheme, has the meaning given in paragraph 40A(6) of Schedule 3 to ITEPA 2003, and

(b) in relation to a Schedule 4 CSOP scheme, has the meaning given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.””

Amendment 12, page 276, line 42, after “under” insert

“section 94A of ITTOIA 2005 or”.

Amendment 13, page 294, line 48, leave out “paragraph 141” and insert “paragraphs 139A and 141”.

Amendment 14, page 295, line 1, after “under” insert “section 94A of ITTOIA 2005 or”.—(Mr Gauke.)

Schedule 9

Tax relief for social investments

Amendments made: 15, page 328, line 20, after “charity,” insert—

“() an accredited social impact contractor (see section 257JD),”

Amendment 16, page 330, line 33, after “Part” insert “(except section 257JD)”.

Amendment 17, page 330, line 34, at end insert—

257JD

“257JD Accreditation as a social impact contractor

(1) In this Part “accredited social impact contractor” means a company limited by shares that is accredited under this section as a social impact contractor.

(2) Applications for accreditation as a social impact contractor must be made to a Minister of the Crown in the form and manner specified by a Minister of the Crown.

(3) A Minister of the Crown is to accredit a company if, but only if, that Minister is satisfied that—

(a) the company has entered into a social impact contract (see section 257JE),

(b) the company is, and at all times since its incorporation has been, established—

(i) for the purpose of entering into and carrying out a social impact contract, or for that purpose and purposes incidental to it, but

(ii) for no other purpose, and

(c) the activities of the company in carrying out that contract will not consist wholly, or as to a substantial part, in excluded activities (see section 257MQ).

(4) If a Minister of the Crown is satisfied that the condition in subsection (3)(b) or (c) has ceased to be met in relation to a company that is an accredited social impact contractor, that Minister is to withdraw the company’s accreditation with effect from the time the condition ceased to be met or a later time.

257JE Meaning of “social impact contract”

(1) In this Part “social impact contract” means a contract that meets such criteria as may be specified in regulations made by the Treasury.

(2) The criteria which may be specified under subsection (1) include, in particular, criteria as to a party to the contract other than the company seeking accreditation.

(3) Criteria may be specified in regulations under subsection (1) by reference to material published by, or on behalf of, a Minister of the Crown after the making of the regulations (as well as by reference to material published before the making of the regulations).

(4) Regulations under subsection (1) may make different provision for different cases or circumstances or in relation to different areas.

257JF Accreditations: supplementary provisions

(1) An accreditation must be made so as to be conditional on compliance with—

(a) any requirements imposed by or under regulations, and

(b) any other requirements considered appropriate by the Minister of the Crown who is accrediting the company concerned.

(2) The requirements that may be imposed by virtue of subsection (1) include requirements relating to the provision of information.

(3) Regulations may—

(a) make further provision about applications for accreditation,

(b) make provision for the variation of an accreditation (including its provisions as to its duration),

(c) make provision which, in a case where a company is or has been an accredited social impact contractor, imposes or authorises the imposition of requirements on the company, or on any other party to the social impact contract concerned, to provide information,

(d) make provision about the consequences of a failure to comply with any requirement of an accreditation imposed by virtue of subsection (1) or with any requirement imposed by virtue of paragraph (c), including in particular—

(i) provision for the withdrawal of the accreditation concerned with effect from the time of the failure or a later time, and

(ii) provision for the imposition of penalties,

(e) make provision for publication of information about an accreditation or accredited social impact contractor, and

(f) make provision for reviews of, or for appeals to the tribunal against, any of the following—

(i) a refusal to grant or vary an accreditation,

(ii) the imposition of a requirement under subsection (1)(b),

(iii) the withdrawal of an accreditation (whether under section 257JD(4) or by virtue of provision made under paragraph (d)(i)), and

(iv) the imposition or amount of a penalty imposed by virtue of provision made under paragraph (d)(ii).

(4) Regulations under subsection (1) or (3) may—

(a) make provision for the making of decisions by a Minister of the Crown as to any matter required to be decided for the purposes of the regulations,

(b) be framed by reference to material published by, or on behalf of, a Minister of the Crown after the making of the regulations (as well as by reference to material published before the making of the regulations),

(c) make different provision for different cases or circumstances or in relation to different areas, and

(d) contain incidental, supplemental, consequential and transitional provision and savings.

(5) In this section—

“accreditation” means accreditation under section 257JD, and

“regulations” means regulations made by the Treasury.

257JG Period of accreditation as a social impact contractor

(1) An accreditation under section 257JD has effect for a period—

(a) beginning with the day specified in the accreditation, and

(b) of a length specified in, or determined in accordance with, the accreditation.

(2) The day specified under subsection (1)(a) in an accreditation may not be earlier than 6 April 2014 but subject to that—

(a) may be, or be earlier than, the day it is decided to grant the accreditation (and in particular may be, or be earlier than, the day the application for the accreditation is made), and

(b) may be earlier than the day section 257JD comes into force.

(3) This section has effect subject to sections 257JD(4) and 257JF(3)(d)(i) (withdrawal of accreditations).

257JH Functions of Ministers of the Crown under sections 257JD to 257JG

(1) A Minister of the Crown may delegate any function given to a Minister of the Crown by or under sections 257JD to 257JG other than a power of the Treasury to make regulations.

(2) In those sections and this section “Minister of Crown” has the meaning given by section 8(1) of the Ministers of the Crown Act 1975.”

Amendment 18, page 331, line 1, at end insert—

( ) Subsection (1)(b) is subject to the provisions in sections 257LB and 257MJ to 257MN which provide for conditions set out in those sections not to apply where the social enterprise is an accredited social impact contractor.”

Amendment 19, page 334, line 44, at end insert—

( ) Subsections (2) to (4) do not apply if the social enterprise is an accredited social impact contractor.”

Amendment 20, page 335, line 12, after “257MJ(2)(c)” insert

“or is a parent company that is an accredited social impact contractor”.

Amendment 21, page 339, line 23, at end insert—

257M

“257M The continuing to be a social enterprise requirement

The social enterprise must be a social enterprise throughout the shorter applicable period.”

Amendment 22, page 343, line 11, after “period” insert

“, but this does not apply if the social enterprise is an accredited social impact contractor”.

Amendment 23, page 343, line 15, after “business” insert “—

(i) ”.

Amendment 24, page 343, line 17, leave out “non-qualifying” and insert

“non-trade activities, and

(ii) does not consist wholly, or as to a substantial part, in the carrying-on of excluded”.

Amendment 25, page 344, line 14, at end insert

“, and

“non-trade activities” means activities which are neither of the following—

(a) activities carried on in the course of a trade, and

(b) activities carried on in the course of preparing to carry on a trade.”

Amendment 26, page 345, line 26, at end insert—

( ) This section does not apply if the social enterprise is an accredited social impact contractor.”

Amendment 27, page 346, line 19, at end insert—

( ) If the social enterprise is an accredited social impact contractor, the preceding provisions of this section apply with the following modifications—

(a) in subsection (1), for “28 months” substitute “24 months”,

(b) in that subsection, for “the funded purpose” substitute “the carrying out of the social impact contract concerned”, and

(c) omit subsections (2), (3), (5) and (6).”

Amendment 28, page 347, line 7, at end insert—

( ) This section does not apply if the social enterprise is an accredited social impact contractor.”

Amendment 29, page 347, line 20, at end insert “257JD,”

Amendment 30, page 353, line 10, at end insert—

( ) If the social enterprise is an accredited social impact contractor, subsection (1) applies with the omission of its paragraph (a).”

Amendment 31, page 354, line 8, at end insert—

( ) If the social enterprise is an accredited social impact contractor, subsection (3) applies with the omission of its paragraph (a).”

Amendment 32, page 355, line 8, at end insert—

( ) An order under this section may make different provision for different cases or purposes.”

Amendment 33, page 372, line 31, leave out “257MA” and insert “257M”.

Amendment 34, page 373, line 24, after “sections” insert “257M,”.

Amendment 35, page 374, line 13, at end insert—7

(7) If the event mentioned in subsection (1) is one whose occurrence results in the requirement in section 257M not being met in respect of the investment, the references in subsections (2) and (3) to the social enterprise are to—

(a) the body concerned even though it has ceased to be a social enterprise, or

(b) the body into which the social enterprise has been converted.”

Amendment 36, page 376, line 11, after “prevent” insert

“—

(a) ”.

Amendment 37, page 376, line 12, at end insert—

“(b) disclosure to a Minister of the Crown for the purposes of functions of a Minister of the Crown under sections 257JD to 257JG, or

(c) disclosure to a person for the purposes of functions delegated to the person under section 257JH(1).”

Amendment 38, page 376, line 18, after “Information” insert

“originally disclosed in reliance on subsection (2)(a)”.

Amendment 39, page 376, line 19, at end insert—

(5) Information originally disclosed in reliance on subsection (2)(b) or (c) may be disclosed in reliance on subsection (3)(a) only for the purposes of—

(a) functions of a Minister of the Crown under sections 257JD to 257JG, or

(b) functions delegated to a person under section 257JH(1).

(6) If, in contravention of subsections (3) to (5), any revenue and customs information relating to a person is disclosed and the identity of the person—

(a) is specified in the disclosure, or

(b) can be deduced from it,

section 19 of the Commissioners for Revenue and Customs Act 2005 (offence of wrongful disclosure) applies as it applies in relation to a disclosure of such information in contravention of section 20(9) of that Act.

(7) In subsection (6) “revenue and customs information relating to a person” has the meaning given by section 19(2) of that Act.

(8) Subject to subsections (3) and (5), no obligation as to confidentiality or other restriction on disclosure, whether imposed by an enactment or otherwise, prevents disclosure of relevant information—

(a) to a Minister of the Crown for the purposes of functions of a Minister of the Crown under sections 257JD to 257JG,

(b) to a person for the purposes of functions delegated to the person under section 257JH(1), or

(c) to an officer of Revenue and Customs for the purpose of assisting Her Majesty’s Revenue and Customs to discharge their functions under the Income Tax Acts so far as relating to matters arising under this Part.

(9) In subsection (8) “relevant information” means information obtained—

(a) by a Minister of the Crown, or

(b) by a person to whom functions have been delegated under section 257JH(1),

in the course of discharging functions under sections 257JD to 257JG.

(10) In this section “Minister of the Crown” has the meaning given by section 8(1) of the Ministers of the Crown Act 1975.”

Amendment 40, page 381, line 20, leave out “by way of, or amounts” and insert

“not by way of, and does not amount”.—(Mr Gauke.>)

Schedule 10

Investments in social enterprises: capital gains

Amendment made: 41, page 387, line 5, at end insert—

(8) A reference in this paragraph to a social enterprise is a reference to a body that is a social enterprise for the purposes of Part 5B of ITA 2007 (see section 257J of that Act).”—(Mr Gauke.)

Clause 61

Business premises renovation allowances

Amendments made: 42, page 52, line 12, leave out “(EC) No 800/2008” and insert “(EU) No 651/2014”

Amendment 43, page 52, line 41, at end insert—

‘( ) In the application of section 360L of CAA 2001 in relation to expenditure incurred before the day on which this Act is passed, the definition of “General Block Exemption Regulation” in subsection (6) of that section is to be treated as referring to Commission Regulation (EC) No 800/2008.”—(Mr Gauke.)

Schedule 33

Companies owned by employee-ownership trusts

Amendments made: 44, page 559, line 35, leave out “(see sections 236J to 236L)” and insert

“at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls (see sections 236J to 236L and subsection (4A) of this section)”.

Amendment 45, page 560, line 1, leave out “but does meet it at the end of that year” and insert

“but—

(i) it meets that requirement at the end of that tax year, and

(ii) if it met the requirement at an earlier time in that tax year (whether before or after the time of the disposal) it continued to meet it throughout the remainder of that tax year,”

Amendment 46, page 560, line 7, at end insert—

‘(4A) For the purposes of subsection (4)(b)—

(a) unless the settlement met the all-employee benefit requirement by virtue of section 236L (cases in which all-employee benefit requirement treated as met) at the time of the disposal, that section does not apply for the purposes of determining whether the settlement continues to meet that requirement after the disposal, and

(b) if, at the time of the disposal, the settlement met that requirement by virtue of section 236L and later continues to meet it otherwise than by virtue of that section, it may not again meet the requirement by virtue of that section.”

Amendment 47, page 560, line 19, at end insert—

‘(7) Section 236NA makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked.”

Amendment 48, page 563, line 46, leave out

“is treated as meeting that requirement”

and insert

“at any time is treated as meeting that requirement at that time”.

Amendment 49, page 564, line 9, leave out

“day of the disposal mentioned in section 236H(1)”

and insert “time in question”.

Amendment 50, page 566, line 10, at end insert—

‘(A1) The limited participation requirement is met if Conditions A and B are met.”

Amendment 51, page 566, line 11, leave out

“The limited participation requirement is met if”

and insert “Condition A is that”.

Amendment 52, page 566, line 15, at end insert—

‘(1A) Condition B is that the participator fraction does not exceed 2/5 at any time in the period beginning with that disposal and ending at the end of the tax year in which it occurs.”

Amendment 53, page 566, line 18, after “(1)(b)” insert “and (1A)”

Amendment 54, page 567, line 7, at end insert—

“236NA  No section 236H relief if disqualifying event in next tax year

(1) This section applies where—

(a) a disposal is made in circumstances where paragraphs (a) and (b) of section 236H(1) are satisfied, and

(b) one or more disqualifying events occur in relation to the disposal in the tax year following the tax year in which the disposal occurs.

(2) A “disqualifying event” occurs in relation to the disposal if and when—

(a) C ceases to meet the trading requirement,

(b) the settlement ceases to meet the all-employee benefit requirement,

(c) the settlement ceases to meet the controlling interest requirement,

(d) the participator fraction exceeds 2/5, or

(e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.

(3) No claim for relief under section 236H may be made in respect of the disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs.

(4) Any claim for relief under section 236H made in respect of the disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made.

(5) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (4) (regardless of any limitation on the time within which any adjustment may be made).

(6) Section 236H(4A) (restrictions on application of section 236L) applies for the purposes of subsection (2)(b).

(7) Section 236N(2) applies for the purposes of subsection (2)(d) as it applies in relation to section 236N(1)(b) and (1A).”

Amendment 55, page 567, line 11, after “occasion” insert

“, after the end of the tax year following the tax year in which the acquisition occurs, when”.

Amendment 56, page 567, leave out lines 13 to 25 and insert—

‘(2) A “disqualifying event” occurs in relation to the acquisition if and when—

(a) C ceases to meet the trading requirement,

(b) the settlement ceases to meet the all-employee benefit requirement,

(c) the settlement ceases to meet the controlling interest requirement,

(d) the participator fraction exceeds 2/5, or

(e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.”

Amendment 57, page 567, line 26, leave out “after” and insert “before”.

Amendment 58, page 567, line 34, leave out “(2)(b)(i)” and insert “(2)(b)”.

Amendment 59, page 567, leave out lines 44 to 48.

Amendment 60, page 568, line 1, leave out

“(2)(b)(ii) as it applies in relation to section 236N(1)(b)”

and insert

“(2)(b) as it applies in relation to section 236N(1)(b) and (1A)”.

Amendment 61, page 568, line 36, at end insert—

‘(7) Section 236PA makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked.”

Amendment 62, page 568, line 36, at end insert—

“236PA  No section 236P relief if disqualifying event in next tax year

(1) This section applies where—

(a) a deemed disposal arises in circumstances where paragraphs (a) to (c) of section 236P(1) are satisfied, and

(b) one or more disqualifying events occur in relation to the disposal in the tax year following the tax year in which the deemed disposal arises.

(2) No claim for relief under section 236P may be made in respect of the deemed disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs.

(3) Any claim for relief under section 236P made in respect of the deemed disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made.

(4) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (3) (regardless of any limitation on the time within which any adjustment may be made).

(5) “Disqualifying event” is to be construed in accordance with subsections (2), (6) and (7) of section 236NA except that—

(a) references in those subsections to the disposal are to be read as references to the deemed disposal, and

(b) in applying sections 236I to 236O and 236R for this purpose—

(i) references in those provisions to the settlement are to be read as references to the acquiring settlement (within the meaning of section 236P(1)), and

(ii) references in those provisions to C are to be read as references to the company mentioned in section 236P(1)(b).”

Amendment 63, page 570, line 17, leave out “The” and insert

“Subject to paragraph 2A, the”.

Amendment 64, page 570, line 18, at end insert—

2A In relation to disposals made on or after 6 April 2014 but before 26 June 2014, TCGA 1992 has effect as if—

(a) in section 236H— in section 236N—

(i) in subsection (4)(b), for the words from “at the time of the disposal” to the end there were substituted “(see sections 236J to 236L)”,

(ii) subsection (4)(c)(ii) (and the “and” before it) were omitted, and

(iii) subsections (4A) and (7) were omitted,

(iv) in subsection (A1), for “Conditions A and B are” there were substituted “Condition A is”, and

(v) subsection (1A) were omitted,

(b) section 236NA were omitted,

(c) in section 236O—

(i) in subsection (1) the words “, after the end of the tax year following the tax year in which the acquisition occurs, when” were omitted,

(ii) for subsection (2) there were substituted—

“(2) A “disqualifying event” occurs in relation to the acquisition if and when—

(a) at any time after that tax year—

(i) C ceases to meet the trading requirement, or

(ii) the settlement ceases to meet the controlling interest requirement, or

(b) at any time after the acquisition—

(i) the settlement ceases to meet the all-employee benefit requirement,

(ii) the participator fraction exceeds 2/5, or

(iii) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.”,

(iii) in subsection (3) for “before” there were substituted “after”,

(d) section 236P(7) were omitted, and

(e) section 236PA were omitted.”

Amendment 65, page 575, line 36, leave out

“day of the disposal mentioned in section 236H(1)”

and insert “time in question”.

Amendment 66, page 582, line 9, leave out

“date of the disposal mentioned in section 236H(1)”

and insert “time in question”—(Mr Gauke.)

Third Reading

18:02

[Mr Gauke]

I beg to move, That the Bill be now read a Third time.

I will keep my remarks brief, but I would like to remind the House once more of the important provisions before us. Finance Bill 2014 delivers measures that will help British businesses invest and create jobs, help British households work and save, and help to ensure that everyone in Britain pays their fair share of tax. The Bill builds on the strong foundations that we have secured in the past four years, safeguarding our economic stability, creating a fairer more efficient and simpler tax system, and driving through reforms to unleash the private sector enterprise and ambition that is critical to our recovery.

Let me focus first on growth and competitiveness. When this Government took office, we inherited an economy in crisis. We have had to make some tough choices, but we have delivered our economic plan. As a result, the UK economy is finally getting back on track. The deficit is shrinking, employment is at record levels and the our economy grew faster than that of any other advanced economy over the past year. To support the recovery, it is vital that the UK tax system attracts investment to this country and does everything possible to ensure that UK businesses can compete in the global race. That is why, in the corporate tax road map in 2010, we set out our ambition to give the UK the most competitive tax regime in the G20.

In my conversations with financial directors and tax advisers I am told again and again of the importance of a low headline rate and the signal it sends. I am proud to say that, as a result of this Government’s actions, the main rate of corporation tax will fall to 20% by 2015-16—not only significantly lower than the uncompetitive rate of 28% we inherited from Labour, but the lowest of any major economy in the world. It is vital for our national interest that we continue to have that low competitive rate. Altogether, by 2016, our corporation tax cuts for small and large businesses will be saving businesses £9.5 billion every year. These reforms have been a central plank of the Government’s economic strategy, and that strategy is working.

Competitiveness is not just about the rate of corporation tax. That is why this Bill will raise the annual investment allowance to £500,000 with effect from April 2014 to December 2015. This doubles the amount of investment on which firms can get up-front tax relief. More than 4.9 million firms will benefit, the vast majority of which will be small and medium-sized enterprises.

The Bill will also reduce business and household energy costs by freezing the carbon price support rate to £18 in 2016-17. The Government have also committed to maintain the freeze until the end of the decade, which will save businesses £4 billion by 2018-19. The Bill includes measures to give targeted support to the innovative sectors that will drive growth in the 21st century. We will legislate further to increase the generosity of the research and development tax relief for small businesses, with an increased rate of support for loss makers of 14.5%. This demonstrates the Government’s commitment to supporting research-intensive SMEs and start-ups and could support up to £1 billion of investment over the next five years. We will support social enterprise with a 30% tax relief, unlocking up to £500 million in additional investment over the next five years, and we are making permanent our successful seed enterprise investment scheme to support investment in start-ups and early-stage firms. Let me mention again the new theatre tax relief, which we have just debated, that recognises the unique cultural value that the theatre sector brings to the whole of the UK.

With low corporation tax rates, support for innovation and help for small business, Finance Bill 2014 sends the clearest possible message that Britain is open to multinational companies, open to entrepreneurs, open to investors: Britain is open for business.

Let me deal with fairness. While the Bill supports businesses, it also provides for individuals and helps families with the cost of living. We are delivering our coalition commitment to raise the income tax personal allowance to £10,000 and we are going further to increase it to £10,500 in 2015-16. By April 2015, a typical basic rate taxpayer will be more than £500 better off than under the previous Government’s plans. Taken with previous increases, the Government will have lifted over 3.2 million people out of income tax altogether. That is real help for hard-working people.

The Finance Bill rewards those who want to save for the future. We recognise that people who rely on their savings income have seen low returns in recent years. From April 2015, the 10% starting rate of tax on savings will be abolished, and a 0% rate will be extended to the first £5,000 of savings income above the personal allowance. This will benefit 1.5 million people, over 1 million of whose total incomes will be below £15,500 a year. They will pay no tax on their savings income at all.

We are delivering our promise to recognise marriage in the tax system by introducing a new transferable tax allowance for married couples and civil partners, allowing spouses in households where neither partner is a higher or additional rate taxpayer and where one partner has not used up the full allowance, to pay tax on up to £1,050 less of their income from 2015-16.

Let me deal with some of the measures we are taking to tackle avoidance. The vast majority of individuals and businesses pay the tax that they owe, but there are some who continue to pursue unacceptable ways of reducing and delaying their tax bill. This Government are determined radically to reduce both the incentives and the opportunities for individuals and businesses to engage in abusive behaviour. This Government have taken unprecedented steps to tackle avoidance and abuse. Since 2010 we have legislated to close more than 40 tax avoidance loopholes, and we have made major strategic reforms such as introducing the United Kingdom’s first anti-abuse rule. As a result, the market for tax avoidance schemes is shrinking. The number of disclosures of tax avoidance schemes fell by nearly 50% between 2011-12 and 2012-13.

However, we are not complacent. That is why the Bill introduces a new requirement for users of avoidance schemes which have already been struck down by the courts, which fall within the scope of the DOTAS rules, or which are being counteracted by the general anti-abuse rule to pay the disputed tax up front. That will generate nearly £5 billion of revenue over the next five years, and ensures that those who knowingly enter avoidance schemes will not be able to hold on to the disputed tax. They will have to pay up front like most other taxpayers. We are also cracking down on high-risk promoters of tax avoidance schemes by imposing minimum standards of behaviour, supported by onerous information powers and stiff penalties for those who do not comply. Those measures demonstrate the Government’s continued commitment to swift, effective and targeted action to tackle avoidance and aggressive tax planning.

The Bill may be substantial, but it contains a number of provisions to clarify or simplify the tax system. It contains proposals to simplify the tax rules and administrative procedures for employee share schemes, and to merge the main and small-profits rates of corporation tax. Those changes will make it easier for small businesses to meet their tax obligations, and will give them greater certainty that their tax affairs are in order. The Bill also follows a longer, more thorough process of policy development. In December 2013 we published more than 300 pages in draft legislation for comment, and we received more than 300 responses, which have improved the final legislation.

The Bill once again delivers on the Government’s commitment to unprecedented levels of consultation and scrutiny in the development of new tax proposals. It has also undergone 31 hours of scrutiny in the Public Bill Committee. Let me take this opportunity to thank and pay tribute to the Members on both sides of the House who served tirelessly on the Committee, as I did not have a chance to put all my thanks on record at the end of the Committee stage.

I particularly thank the Whips: my hon. Friend the Member for Hastings and Rye (Amber Rudd) provided invaluable help, and I also thank the hon. Member for Scunthorpe (Nic Dakin). I thank my hon. Friend the Member for Gosport (Caroline Dinenage) for her assistance in ensuring that inspiration flowed readily. I thank the members of the Opposition Front-Bench team, who probed diligently. We did not necessarily agree, and Ministers certainly did not accede to any of their endless requests for reports and reviews, but they put their case in, for the most part, reasonable terms.

I thank the hon. Members for Birmingham, Ladywood (Shabana Mahmood), for Kilmarnock and Loudoun (Cathy Jamieson) and for Newcastle upon Tyne North (Catherine McKinnell)—not forgetting, of course, the hon. Member for Nottingham East (Chris Leslie), who at least was there at the beginning and is here at the end. That is half the skill of dealing with a Finance Bill, as far as I can see.

I thank the Financial Secretary to the Treasury and the Economic Secretary to the Treasury for their help in setting out the Government’s case. I also thank my hon. Friends on the Back Benches, whose contributions were generally both valuable and brief: I am grateful for that.

I fear that my time is almost up, Mr Deputy Speaker, so I shall draw my remarks to a close. The 2014 Finance Bill rewards hard work, and restores our private sector’s competitiveness. It encourages investment, tackles avoidance, and helps those on low incomes. This is a Bill that takes difficult steps but delivers real change, and I commend it to the House.

18:14

[Chris Leslie]

Now that we have reached the final stages of consideration of the Finance Bill, may I join the Minister in commending all hon. Members in all parts of the House who took part in the scrutiny, and in considering all the details? As he said, there were 31 hours of consideration of the Bill. I particularly pay tribute to my hon. Friends the Members for Kilmarnock and Loudoun (Cathy Jamieson), for Newcastle upon Tyne North (Catherine McKinnell), and for Birmingham, Ladywood (Shabana Mahmood). Let us be honest: they did the heavy lifting in Committee and on Report, as did—in an equal but perhaps less audible way—my hon. Friend the Member for Scunthorpe (Nic Dakin), the Opposition Whip, who made sure we kept to time and that everything was pursued diligently. Many hon. Members, certainly from the Opposition side of the Chamber, pushed Ministers and probed on specific matters of policy, and I grant that Ministers tried to address many of those points, though they were ably assisted, I suspect, by the officials from the Treasury, who also put a lot of work into these Finance Bills.

The Bill is long on clauses but short on ambition, I am afraid. I said on Second Reading that our goal was to try to improve the specifics. We have tried our best in a number of areas, but I fear we have not always succeeded in persuading Ministers to see the error of their ways. Let us consider some of these specifics, such as the crass and ill-timed tax cut for investment fund managers through the abolition of stamp duty reserve tax. At a time when so many people in this country are struggling with cuts to tax credits, such as the bedroom tax, and finding it difficult to make ends meet, the Government’s priority was to give that support and help first and foremost to those poor, hard-up investment fund managers. It is a badge of shame that that was their priority.

[Ian Swales]

Will the hon. Gentleman give way?

[Chris Leslie]

I do not know whether the hon. Gentleman is an investment fund manager who has done well out of this, but I will give way and find out.

[Ian Swales]

The hon. Gentleman is repeating something we have discussed over and over again. Does he not understand that the money from the change in stamp duty goes to the investment funds, not the manager, and that, in fact, millions of ordinary people up and down the country benefit from this change?

[Chris Leslie]

I am sure those investment fund managers have absolutely no interest in the abolition of SDRT in any way! I thought the hon. Gentleman was once a Liberal Democrat. Before the general election, the Liberal Democrats used to pretend they were in favour of standing up for the vast majority of people, against the vested interests in society who tend to look after their best interests, yet here he is again, voting for tax cuts for investment fund managers. This is a specific element of the Bill that we opposed. We tried to persuade the Government to drop that measure, but we were unsuccessful.

[Mark Field]

I feel I must stand up for investment fund managers, not least because their business brings significant amounts of money to the UK. I reiterate the sensible words of the hon. Member for Redcar (Ian Swales): ultimately it is all of us who are investors in such funds who will reap the benefits of ensuring that this business comes to these shores, rather than to many other globally competitive financial centres.

[Chris Leslie]

The hon. Gentleman represents very many of those investment fund managers. He is doing the job he was sent to do, but this is a matter of priorities, and I have to say that the Opposition just disagree. The Treasury has finite resources at its disposal, and at a time of pressures, cuts, and rises in tax—through VAT and in other ways—that hit the least well-off in society, I just disagree with Ministers and Members on the Government Benches that this should have been the priority.

There were other specific areas where we tried to persuade the Government to improve the Bill, such as the proposal to give shares to employees in exchange for employment rights. We believe that undermines what should be a healthy approach to employee share ownership, because it gives the sense that something is being taken away, and that there is a disadvantage. That point was voiced not just by Opposition Members, but by some Government Members. Again, however, we could not persuade the Government on that.

So many tax loopholes need to be addressed, and the Finance Bill should have been the opportunity to tackle some of them, not least the notorious quoted eurobond exemption, which is costing taxpayers hundreds of millions of pounds. Ministers ought to have had the courage to take on that issue. Some of the Bill’s proposals for pensions flexibility are sensible, but big questions remain about the advice we will be able to give retirees to make sure that they get the guidance they need, at that most crucial point in their financial lives, to make the right choice, if they are not purchasing an annuity. Ministers have not lived up to the challenge of ensuring that that guidance and advice is possible. In the debate, I heard that that guidance may currently equate to 15 minutes of face-to-face advice—perhaps I should say face-to-faces advice, because the Minister with responsibility for pensions is now saying, “We will give you some guidance, but it might be as part of a group of people.” The Government have to improve the legislation in this area.

The Bill contains a proposal for a married couples allowance. The Chief Secretary to the Treasury and, I suspect, the Chancellor personally disagree with it, but in a coalition they have to throw a bit of meat to the Back Benchers. The allowance discriminates between forms of partnership and does not help many married couples at all, as we see when we look at the total number who will benefit. If we have tax cuts to give, they should be given to as many people as possible.

Of course, we also tried to improve the specifics and dissuade the Government from continuing their tax cut for millionaires—the reduction from 50p to 45p in tax on earnings of more than £150,000. Again, that is a sign of their priorities: they stand up for those who already have significant wealth in society, but do not respond to the needs and requirements of the least well-off.

We tried our best to improve the Bill, but it missed a number of opportunities. Significant reforms should have been in it, but are conspicuous by their absence. Why did the Treasury not put the cost of living concerns front and centre in this legislation? I am not just talking about making sure that energy companies stop ripping off households up and down the country, or about passing on wholesale price reductions to ordinary households; the Bill should have contained, for example, steps towards a 10p starting rate of tax. There are a number of ways in which cost of living issues should have been far higher up in this legislation.

[Mr Jim Cunningham (Coventry South) (Lab)]

The Conservative Government of the early 1970s recognised that there was a cost of living problem in this country, and they gave a cost of living payment, through the wage packet, to the low-paid in industries.

[Chris Leslie]

One would have thought that by now Ministers would have twigged that for all the talk of growth and the recovery, their constituents, never mind ours, are not seeing the benefits in their daily lives. That should have been a focus in the Finance Bill. It should have focused more on housing, as we have a crisis in this country, whereby demand exceeds supply and we have the lowest level of house building since the 1920s. Yet Ministers seem intent on structuring a lopsided recovery in our housing market, failing to deliver the 200,000 properties a year we should be aiming towards by 2020. In addition, many tenants are being ripped off by lettings agencies in our private rented sector. We need reforms to deal with those sorts of things and the Budget ducked those issues, as did the Finance Bill.

The Bill could have dealt with some of the exploitative zero-hours contracts. It should have contained measures to help small and medium-sized enterprises with business rates, because many firms in our constituencies are finding it difficult to get by. We should make sure that we help them, not just with business rates but by making sure that the banks do their job and provide credit. Those are the sorts of reforms that would make a big difference, but again, they were not in this Finance Bill.

[Mr Brooks Newmark (Braintree) (Con)]

The hon. Gentleman should at least acknowledge that we dropped the small business rate by at least 1p, which has helped businesses. Will he guarantee before the House that he would not increase corporation tax should the country be unfortunate enough to see a Labour Government in power after 2015?

[Chris Leslie]

That is already on the record. Our view is that the proposed change in corporation tax from next April—from 21p to 20p—should not proceed. That help, instead of going to 2% of companies, should go to 98% of businesses, including the small and medium-sized companies that are the backbone of our economy and that form the bedrock of enterprise in this country. Funnelling that resource through business rates is our preferred choice, but we will set out all our plans in a manifesto, as I suspect the Minister will do as well. We had a debate on this matter earlier, in which we focused on annual investment allowances—the capital allowances for businesses. As we all know, the Minister cut that allowance to a very small level straight after the general election, causing great chaos for very many businesses. Amazingly, it is going up again, in time, coincidently, for the next general election. He revealed in the small print today that it is a temporary change, so the allowance will presumably go back down again.

[Mr Gauke]

rose—

[Chris Leslie]

I will give way to the Minister if he will tell us what that investment allowance will fall back down to in 2015. Will he tell us?

[Mr Gauke]

It is hardly in the small print. It was in the announcement that was made when we extended and increased the annual investment allowance until December 2015. After that, it is a rate of £25,000. That rate is in the public domain, and, presumably, it is the rate that the Opposition have as well.

As the hon. Gentleman did not quite respond to the question from my hon. Friend the Member for Braintree (Mr Newmark), let me ask it again. The Labour party has given a heavy hint this week that it could increase corporation tax up to 26%, as that would still be the lowest rate in the G7—that is the test that it has set itself. Will he provide some reassurance today that a Labour Government would not increase corporation tax to 26%?

[Chris Leslie]

We know the Minister’s game. He is again trying to scare firms and businesses with various suggestions on tax. We have made it very clear that we need to ensure that corporation tax levels remain at their most competitive among the G7. We will set out our tax plans in a manifesto, as the Minister will be required to do as well. If my hon. Friends think that VAT is due to stay at 20% under a Conservative Government, they should think again. I have heard that the Conservatives may wish to increase VAT to 21% or 22%. I will give way to the Minister if he can rule it out for us right now, here in the Chamber, that he does not have any plans to increase VAT in the next Parliament. Will he rule that out?

[Mr Gauke]

I will tell the hon. Gentleman what we can do: we can continue to reduce the deficit without increasing taxes. That is more than he can offer. Unlike his party, we have not given a heavy hint that the test based on the most competitive rate in the G7. Canada has a rate of 26.5%. If the Labour party imposed a rate of 26%, it raises the question of whether it would be complying with that commitment.

[Chris Leslie]

Let the record show that the Conservative Minister did not rule out increasing VAT to above 20%. It is telling that he gave a heavy hint that that remains open as an option. We can have these discussions and examine these particular issues, but I am looking at the missed opportunities—the things that should have been in the Finance Bill. We are now on its Third Reading, and it is time that Ministers realised that people from across the country are crying out for significant changes and improvements that will affect their lives.

I am thinking, for example, of the 5 million people in low pay and the incentives to deliver a living wage. That could have been part of the Finance Bill, but it is not. I am thinking of those families who are struggling with the high cost of child care, which is increasing at a rate higher than inflation. If only the Minister had designed his bank levy properly in the first place and collected the £2.5 billion that he promised the country, we could afford to move from 15 hours of free child care for working parents of three and four-year-olds to 25 hours. That is the sort of reform that could make a big and appreciable difference to the lives of working people up and down the country.

[Mr Jim Cunningham]

Once again, it comes back to helping families with the cost of living. The Government cut Sure Start, nursery places and so on. Although they boast that they expanded that provision, they did not—they cut it, although we do not have the exact figures. The situation is exacerbated for a lot of families by the bedroom tax, which is forcing people into more expensive accommodation and thereby driving rents up. There is also a lack of social house building in this country.

[Chris Leslie]

That is my point. The Press Gallery is not bursting at the seams because the Government do not want people to think about what could have been in the Finance Bill. That is not something they want to talk about. They want it to be a “steady as she goes” Finance Bill. They do not want to address the problems of the bedroom tax or to supply real help to the long-term unemployed through starter jobs to give them the opportunity to repair their CVs and get a foot on the ladder. Repeating the bankers bonus tax would have supplied the revenue for that. There are funded ways of doing those things; despite how Ministers seem to want to portray it, this is not about unfunded commitments or borrowing. There are clear, practical and well-costed ways of delivering real improvements to people’s lives, but Ministers refused to do them.

Why are Ministers missing the opportunity offered by this Bill? As far as they are concerned, everything is fine with the economy. It is all going perfectly well. That is their view, but I am afraid that we disagree on that point. As far as Ministers are concerned everything is fine with living standards, but the OBR has said that people will be worse off in real wage terms in 2015 than they were in 2010. Ministers think that everything is fine in the welfare system, but they do not realise that the welfare bill is rising because they are not tackling the root causes of welfare inflation, such as rising rents, long-term unemployment and the subsidies required for low wages. Those are the sorts of challenges that should have been covered in the Finance Bill but are not.

On the deficit and the national debt, Ministers think that everything is fine even though the past couple of months have seen the deficit rise. It is going in the wrong direction. They have added a third to the national debt, which is now at £1.2 trillion. If interest rates go up even by 25 basis points—0.25%—an extra £2 billion of public expenditure will be required to service the debt that they will be accumulating.

Ministers think that everything is fine with productivity, yet infrastructure output is down by 10% compared with in 2010. They think that everything is fine in the housing market, yet we can see by the lopsided nature of what is happening in the economy that there are real risks that mortgage rates might well rise prematurely because of how they have failed to recognise the need to match demand and supply more effectively. They might be satisfied with the state of the economy, but we are not.

[Mr Cunningham]

It is interesting that my hon. Friend has mentioned interest rates, because, one way or another, they are bound to go up over the next 12 to 18 months. That will have a major effect on negative equity for people who have bought their houses, but, more importantly, it can affect small businesses that want to borrow money and are not getting much help from the banks at the moment. The Government spend half their time blaming a Labour Government for the mess that the banks created. They have never attacked the bankers, who made the economic situation worse, not better. They are apologising for the bankers and blaming us.

[Chris Leslie]

Government Members and Ministers do not understand how important it is that we ensure that the recovery is sustained and sustainable. A premature rise in interest rates has considerable risks. Three quarters of credit and debt is floating, so if interest rates do rise prematurely, significant harm will come to many householders. Even a quarter point rise in interest rates will cost the typical householder £240 per year. [Interruption.] The hon. Member for Suffolk Coastal (Dr Coffey) may be relaxed, as the Chancellor is relaxed, about interest rates. The Chancellor says that he is not bothered—that he is relaxed about rising interest rates. Is the hon. Lady relaxed about rising interest rates? I will give way to her if she is.

[Dr Thérèse Coffey]

All I will say is thank God we have not had a Labour Government for the past four years, because I expect that interest rates would now be at 10% and people would be handing back their keys and hoping that the hon. Gentleman does not get into power next year.

[Chris Leslie]

I do not know what evidence the hon. Lady has for that spurious assertion.

We will see what happens in the coming months. We will make sure that mortgage customers in the hon. Lady’s constituency know that the increases in interest rates are partly related to the condition of the housing market, which is causing significant risk. The Governor of the Bank of England is trying to deal with this very lopsided situation. Of course, it is a matter for him to decide on. Government Members need to speak to the Chancellor to get him to pull his finger out on the housing market and make sure that this is pursued correctly. They do not understand why it is important for the recovery to be fair for all—to be something that everybody in every part of the country benefits from. The richest 1% having been doing especially well in the past year.

[Mr Gauke]

The hon. Gentleman says that it is important that the whole country benefits from the recovery, and I entirely agree. Does he accept that three out of four new jobs created in the past year have been outside London?

[Chris Leslie]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Just to be helpful, there are three more speakers to come. The debate that is ping-ponging across the Chamber is very interesting, but I would like to hear from Back Benchers as well.

[Chris Leslie]

You are completely right, Mr Deputy Speaker. We have had this debate going on throughout the day.

The Minister is a Member of Parliament for Hertfordshire. If his constituents find work in London, under one set of statistics the jobs are classified as located in London, but under the set of statistics he prefers, they are located in Hertfordshire and not London. We can talk about the methodology used in relation to these things.

Ultimately, this Finance Bill is not focused on the long-term best interests of this country. It is not a long-term Finance Bill for stability and for the vast majority of this country; it is a short-term Finance Bill from a part-time Chancellor who is more concerned about getting from here to election day than building a sustained recovery that is fair for all. The defining challenge of our times is to reconnect the wealth of our country with the ordinary finances of households up and down the country. I urge my hon. Friends to vote against the Finance Bill and to send this Bill and these Ministers back to the Treasury drawing board.

18:38

[Mark Field]

I am glad that I am looking more youthful and Conservative this afternoon, Mr Deputy Speaker.

This is a very good Bill containing much that I agree with. The Minister has rightly pointed out that it does some important things, particularly on something close to my heart—the theatre industry in my constituency—but also on technology, which is one of the big growth areas for the future prosperity of this country.

I want to talk about an ongoing concern of mine. The Minister will be aware of what I am about to say. Barely a fortnight ago, Her Majesty’s Revenue and Customs began writing to some 5.5 million taxpayers to confess that it had got things wrong. Errors in the pay-as-you-earn calculation had led the taxman to charge some 2 million fellow citizens too much tax and a further 3.5 million Britons had been assessed too leniently. That latter group now faces the prospect of several years of repayments. All this is in spite of expensive IT and personnel reforms that were meant to improve the system’s accuracy.

That news came at a time when the House was scrutinising this Finance Bill, which proposes bestowing ever more powers upon that organisation—in my view, an unjust reward for yet another year of error-strewn performance. Meanwhile, a consultation is now under way as to whether HMRC should be given direct access to UK citizens’ bank accounts so that it can claim from source any tax that it believes it is owed. I share the view of many people on the Government Benches who are concerned that this coalition Government are overseeing the transfer of very considerable powers to the state. I fear that a precedent will be set for a future Labour Government, which we all hope will not come any time soon. However, such a Government might well be minded to expand further the taxman’s remit.

Will the Minister reconsider the new accelerated payments regime that is proposed in the Bill—other Members have spoken on that in the past couple of days—about which I raised my own concerns at Second Reading? It is vital that the Treasury considers carefully the impact of granting such powers to an organisation that, I am afraid, has proven itself time and again to have incorrectly calculated tax on a grand scale.

[Mr Gauke]

Since 1944, there has been an end-of-year reconciliation under the PAYE system, because not all the information necessary to calculate the PAYE amount is available to HMRC during the year. To some extent, the PAYE amount is a provisional one, which is corrected at the end of the year. Notifying people at the end of the year quickly is not the system failing; that is how the PAYE system operates. It is not errors; that is the system.

[Mark Field]

I do appreciate that, but the Minister will also appreciate that trust in many institutions, whether Government, banks or this House, has been at an all-time low in recent decades. If we are going to pass on more powers to such institutions we—

[Mrs Mary Glindon (North Tyneside) (Lab)]

Will the hon. Gentleman give way?

[Mark Field]

If the hon. Lady will excuse me, I will make some progress, as there are other Members who want to speak.

We are now looking at drawing tax avoidance measures so widely. It has been common practice for investors to err on the side of caution and sign up, as the Minister knows, to the HMRC’s own disclosure of tax avoidance schemes—DOTAS—register. Currently, if the UK tax authorities wish to challenge the legitimacy of a DOTAS-registered scheme in court, the taxpayer is permitted to hold on to the disputed tax while the case is being resolved. The Government believe that that incentivises scheme promoters to sit back and delay resolution, so they propose extending the accelerated payments measure to existing DOTAS-registered schemes. That will mean that disputed tax is paid up front to the HMRC, and will be returned if a scheme is subsequently found to be legitimate.

I quite understand why the Minister has felt tempted to explore that route. There is, I understand, a desperate need for money to shore up the public finances, which are still far less rosy than any of us would wish, with a recovery that remains somewhat fragile. There is also, understandably and justifiably, a consciousness of the need to deal more quickly with the tens of thousands of outstanding mass-marketed avoidance cases that are currently clogging up the courts.

However, there is also a vital issue of principle at stake. The Government have been celebrating and espousing their reverence for the eight-centuries-old principles set out in Magna Carta. It was that charter that established the supremacy of the law by dictating that no Englishman could be punished without first going through the proper legal process. That set in train a constitutional revolution that has seen billions across the globe having their rights expanded and protected against an all-powerful state.

Yet at the same time, our Government are now overseeing the creation of a law that will permit HMRC to confiscate a citizen’s property before the courts have established who is legitimately entitled to it. The DOTAS register was a good idea. It was designed to promote openness and transparency in investors’ relations with the HMRC. It is now, in effect, introducing retrospective legislation, with DOTAS declaration being used as a stick with which to beat legitimate investors—those who had never planned on having the liquid assets to meet disputed liabilities.

No doubt the Government—any Government—feel they can railroad those proposals through on a wave of popular demand for new measures to tackle tax avoidance, but although I agree that we have to clamp down on illegitimate tax avoidance, I worry about the potentially very wide-ranging consequences, including the fundamental undermining of the Government’s overarching aim to make Britain a place that is open for business. I support many of the underlying measures in the Bill that are focused on that aim, but this measure expands a profoundly anti-Conservative notion of retrospective legislation. The Minister and I have both been shadow Ministers; we know the number of Finance Bills proposed by the erstwhile Labour Administration in the latter half of the last decade that we expressed concern about because they contained precisely this type of anti-avoidance legislation with retrospective elements. We have to recognise that considerable hardship is imposed on many of those who are affected by such provisions.

I addressed these issues in an article in The Daily Telegraph several months ago. I was and continue to be inundated with letters and e-mails from ordinary people across the country who are utterly dismayed that a Conservative-led Government would initiate such a change in law. Let me highlight some of their comments, so that the Minister is fully aware of the impact of the proposal. One correspondent advised me:

“If this goes through, HMRC will be able to demand immediate and upfront payment of the money it says I owe as a result of their changing the law retrospectively—but without me even being able to present any arguments to the tax courts in my defence. If this were to happen I would need to lose my home in order to pay the bill. It is a monstrous injustice.”

Another correspondent wrote:

“If one was to listen to the Government, it could easily be believed that users of the structures declared under the DOTAS are malicious, super rich individuals, out to escape payment of their ‘fair share’, in contrast to ‘honest taxpayers’. I have been an employee of a company that provided a remuneration structure duly registered under the DOTAS.

In the aftermath of the most severe economic crisis in generations, the IT industry, in which I work, got hit very hard. I have been subjected to rate cut after rate cut since 2009, and for me, nominal income is only going in one direction: down. Yet, if I listen to”

the Government,

“it sounds like complying with an ‘accelerated payment’ will be but a well-deserved inconvenience, forcing me maybe to sell one of my numerous yachts or…homes. I am shocked and appalled at the cynical discourse that consists of creating this false image. I personally feel deeply insulted…. I am not a rich person by any stretch of the imagination; my partner and I rent a one bedroom apartment, and we live modestly.”

What is slightly depressing is that this sort of scrutiny has not really happened. I well understand why the Labour Opposition feel they do not want to stand up for those individuals affected by the accelerated payments regime. I ask the Minister once again in the implementation of the Bill to consider an exception in the case of existing DOTAS-registered schemes whose promoters have taken all reasonable measures to enable a dispute to be brought before the statutory appeals tribunal. I think there should also be a right to appeal against an accelerated payment on the ground that the money is not due, or that a follower notice or accelerated payment notice is not applicable.

Although the Government say the legislation is not retrospective, as it does not change an underlying tax liability, it will in fact apply with retrospective effect over the past 10 years to anyone who currently has an open appeal or inquiry. In my view, if the provision is to come into effect, it should be applied only in cases involving tax planning carried out after Royal Assent to this Finance Bill.

I am sorry if I sound a little churlish. The Minister is well aware, because we have discussed this privately as well as on the Floor of the House, that I think there is much that is good in the Bill, but it is right that these things are properly scrutinised and that scrutiny is ongoing. We are putting into place certain measures that I think set a potentially dangerous precedent and run counter to a principle that should be close to all our hearts: that the British tax system and the British economy should be open for business and open to the opportunities that we all want our constituents to benefit from as we move into a strong economic recovery in the years ahead.

18:49

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to follow the hon. Member for Cities of London and Westminster (Mark Field), who always speaks with great expertise in his field. I served on the Bill Committee—I have not missed a Finance Bill Committee since I entered the House. On the first Committee on which I served in 2010 I was full of enthusiasm and, having listened to the Minister, I am still filled with that enthusiasm as he has negotiated a thousand different ways to say no. I pay tribute to all the Members who served on that Committee.

As we approach the general election, the public are crying out for help to ease their burdens as the economy belatedly shows some green shoots of recovery. People around their kitchen tables wondering how they will pay their bills, those in the workplace who are worried about their job security, and those running a small business will judge the Bill on three tests—are taxes fair for my family and myself, do business taxes encourage growth and are they fair, and how will pensions reform—

[Mel Stride (Central Devon) (Con)]

The hon. Gentleman mentions business taxes. The shadow Minister was repeatedly pressed to say whether business taxes might rise under the next Government. We know from what the Opposition have said that business taxes could rise to 26.5%, the level that they are at in Canada. Does the hon. Gentleman share my concern that that could be a major brake on business development in the future?

[Chris Evans]

Of course I share the hon. Gentleman’s concern. I shared the concern that the very first act in the very first Budget of this Government was to put VAT up to 20%, increasing the tax burden by 2.5% for businesses all over the country. That was not exactly pro-business, but I am not here to talk about what the Tory Government have done or not done.

Let us deal with facts. Working people have seen their wages fall by £1,600 a year on average under this Government. Real wages will have fallen by 5.6% by the end of the Parliament. People feel worse off. On growth—the one test that the Tories said they would achieve—after three years of a flatlining economy, we see the economy growing by only 4.6%. The Chancellor does not talk about his forecast that the economy would grow by 9.2% in 2010. Our present rate of growth is far slower than that of America at 6.6% or Germany at 5.7%. GDP growth this year is still expected to be lower than the independent Office for Budget Responsibility forecast in 2010.

On borrowing, on which the Conservatives attacked the Labour Government, the present Government promised to balance the books by 2015, but borrowing will be £75 billion that year. Over this Parliament borrowing is forecast to be £190 billion more than planned at the time of the first spending review. National debt as a percentage of GDP is not forecast to start falling until 2016-17, breaking one of the Government’s own fiscal rules.

All the headlines following the Budget were about pension reform. Yes, annuities need to be reformed, and I support increased flexibility for people in retirement and reform of the pension market so that people get a better deal. However, the Labour party has consistently called for reforms to the annuities market and a cap on pension fund charges over the past three years. The Government have failed to reform the private pensions market to stop people being ripped off and to create a system that savers can trust. The Government are failing to prevent savers from being ripped off by delaying bringing in a cap on charges. This is costing savers up to £230,000. The Government are failing to make tax relief on pensions fair, with 15% of all relief—£4 billion—going to the richest 1% of taxpayers.

When we talk about the reform of pension markets and the ending of annuities, I believe we should set three tests. The first is the advice test. Is there robust advice for people providing for their retirement, with measures to prevent mis-selling? Forget the patronising “buy a Lamborghini”. I do not believe the people of Britain are so naive as to go out and buy a Lamborghini. As a former financial adviser, I am talking about good advice. With the reform of the annuities market there will be new products—products that we have not thought of before, such as bonds, investment trusts and all sorts of vehicles that people can invest in. Those will be complicated and people will need advice, but that will not be achieved by 15 minutes of guidance, where advisers cannot sell.

The second test is fairness. The new system must be fair, with those on middle and low incomes still being able to access products that give them the certainty they want in retirement. The billions we spend on pension tax relief must not benefit only those at the very top.

The third test is cost. The Government should ensure that this does not result in extra costs to the state, either through social care or through pensioners falling back on means-tested benefits, such as housing benefit. The Treasury must publish an analysis of the risks it considers when costing this policy. I was deeply concerned when the Minister said this afternoon that this change, which is the biggest ever to the pensions market, is still to be worked out and that a consultation on advice is still running. For those facing this change, advice is vital.

I talked for little short of half an hour yesterday on the other major change introduced in the Bill: exchanging employment rights for company shares. I will try to break it down into two fundamental arguments. First, if an employer has an employee they are suspicious of, why would they give them shares in the company? Equally, if a company wants to trade shares for rights, does that mean it trusts the employee? Will they be hard-working and industrious for that company? Secondly, if a company is going to dismiss an employee, why would it give them shares in the company anyway? Surely share save schemes should be used to reward employees for hard, industrious work, but that is not happening. We still need reform.

We have talked about a report and analysis. Even though the statistics now show that after a 33-week consultation only five of the 200 companies that responded said that they were interested in taking up the scheme, the Government still say that it is far too early to even think about a report.

As we bring to a conclusion our consideration of the Finance Bill, which I am sure all of us who served on the Bill Committee are excited about, the one question we have to ask ourselves is this: is it fair to the people of Britain? Based on the statistics, it is not. I will therefore be joining my colleagues in the Lobby tonight and voting against the Bill.

18:56

[Mr Brooks Newmark]

(Braintree): It is always a privilege to follow the hon. Member for Islwyn (Chris Evans). I want to focus on one small aspect of the Bill, new clause 10, which I know Opposition Members hold dear to their hearts. A couple of years ago the Government extended the £25,000 rate tenfold to £250,000. I told the Chancellor that that was going down extremely well with small businesses and asked whether there was any chance that we could extend it a little longer. He said, “I can do better than that; I’ll double it again, to £500,000.” That takes in pretty much 99% of companies, which is a good thing.

For some reason, Labour wanted to enshrine in law the need to review the impact of the annual investment allowance, which I find peculiar. I do not think it is necessary at all. Governments review every year what is going on and whether tax cuts or increases work. I see no need to introduce that requirement into law.

However, I thought that it might be helpful for Opposition Members if I offered a quick review of what we have done for business. I have come up with 10 points. First, we have lowered corporation tax. Secondly, we have cut the business rate by extending the small business rate relief scheme. Thirdly, we have brought in electronic invoicing. Fourthly, we have raised the threshold for the enterprise investment scheme. Fifthly, we have introduced the seed enterprise investment scheme, helping small businesses get a kick start. Sixthly, we have brought in the employment allowance, saving businesses £2,000. Seventhly, we have cut national insurance contributions for under-21-year-olds, saving businesses £500 per young person they employ. Eighthly, we have introduced the Small Business, Enterprise and Employment Bill. Ninthly, we have frozen fuel duty, making it cheaper for people to go back and forth to work. Finally, we have improved the research and development relief for businesses. We have done a lot for businesses.

What has the impact been on businesses? The confidence index is at an all-time high. We have rebalanced the economy, with growth of 3% in construction, services and manufacturing. We do not need to enshrine in law the need to review the impact of the investment allowance on business, because actions speak louder than words. The Government’s long-term economic plan is working and Britain is back in business.

19:00

Debate interrupted (Programme Order, 1 July).

The Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83E), That the Bill be now read the Third time.

19:00

Division 32

Ayes: 289

---

Conservative: 245
Liberal Democrat: 44

Noes: 228

---

Labour: 217
Scottish National Party: 5
Democratic Unionist Party: 3
Social Democratic & Labour Party: 1
Plaid Cymru: 1
Green Party: 1

Bill read the Third time and passed.

Business without Debate

Wednesday 2nd July 2014 Commons Chamber

Delegated Legislation

Wednesday 2nd July 2014 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Housing

That the draft Housing (Right to Buy) (Maximum Percentage Discount) (England) Order 2014, which was laid before this House on 5 June, be approved.—(Mark Lancaster.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Local Government

That the draft Openness of Local Government Bodies Regulations 2014, which were laid before this House on 3 April 2014, in the last Session of Parliament, be approved.—(Mark Lancaster.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Defence

That the draft Armed Forces Act (Continuation) Order 2014, which was laid before this House on 13 May 2014, in the last Session of Parliament, be approved.—(Mark Lancaster.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Legal Aid and Advice

That the draft Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Amendment of Schedule 1) Order 2014, which was laid before this House on 31 March 2014, in the last Session of Parliament, be approved.—(Mark Lancaster.)

The Speaker’s opinion as to the decision of the Question being challenged, the Division was deferred until Wednesday 9 July (Standing Order No. 41A).

Motion made, and Question put forthwith (Standing Order No. 118(6)),

International Immunities and Privileges

That the draft African Legal Support Facility (Legal Capacities) Order 2014, which was laid before this House on 6 May 2014, in the last Session of Parliament, be approved.—(Mark Lancaster.)

Question put and agreed to.

Electoral Commission (Motion)

Ordered,

That the Motion in the name of Mr Andrew Lansley relating to the Electoral Commission shall be treated as if it related to an instrument subject to the provisions of Standing Order No. 118 (Delegated Legislation Committees) in respect of which notice has been given that the instrument be approved.—(Mark Lancaster.)

Petitions

Wednesday 2nd July 2014 Commons Chamber

19:15

[Valerie Vaz (Walsall South) (Lab)]

The petition is from the residents of Beacon Heights park homes. A petition in similar terms has been signed by 65 people.

The petition states:

The Petition of a resident of Beacon Heights Park Homes Park,

Declares that following the removal of the 934 and 936 bus services from Beacon Road, Walsall after 7pm and on Sundays many elderly people who do not drive cannot access public transport at those times and further that the Petitioner calls for a bus service or minibus to be introduced to replace the 934 and 936 bus service.

The Petitioner therefore requests that the House of Commons urges the Government to take all possible steps to encourage Walsall Metropolitan Borough Council to consider the objections of the local residents.

And the Petitioners remain, etc.

[P001363]

[Mr Speaker]

It is a splendid thing when somebody who introduces a petition has a brother behind her in support.

19:16

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The petition states:

The Petition of residents of the United Kingdom,

Declares that the Petitioners object to the closure of the Park End Clinic, Skelton Medical Centre, and Skelton NHS walk-in centre; further that the Petitioners object to the proposed closure of minor injuries units at East Cleveland and Guisborough Hospitals; further that the Petitioners are concerned these reductions in provision of primary care services will increase demand on the Accident and Emergency Department at James Cook University Hospital; further that the Petitioners believe that Ministers in the Department of Health should meet with the honourable Member for Middlesbrough South and East Cleveland to discuss these closures, and regret that Ministers have not committed to such a meeting.

The Petitioners therefore request that the House of Commons urges Ministers to meet with the honourable Member for Middlesbrough South and East Cleveland to discuss these changes in service provision, and encourages NHS England and the South Tees NHS Clinical Commissioning Group to abandon these closures.

And the Petitioners remain, etc.

[P001364]

Nigeria (Abducted Girls)

Wednesday 2nd July 2014 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mark Lancaster.)

19:17

[Mr Gordon Brown (Kirkcaldy and Cowdenbeath) (Lab)]

I am grateful to you, Mr Speaker, for permitting me to raise the desperate and continuing plight of more than 200 Nigerian girls who were abducted from school on 14 April and have been held in captivity for the past 80 days, with no sign of their imminent release. These wholly innocent young girls—Lugwa Abuga, Rhoda John, Comfort Amos, Maryamu Yakubu and 200 others—are now incarcerated in the forest areas of Borno state. Some have perhaps been dispersed across three other countries: Niger, Cameroon and Chad. Their physical and mental health is a worry for everyone.

We now know that the girls were kidnapped by the terrorist group, Boko Haram, whose name in Hausa means “western education is a sin”. They are being held hostage simply because they wanted an education. Their only crime in the eyes of Boko Haram is that they wanted to be at school. Eleven weeks in captivity will seem like an eternity for young, once-optimistic 14, 15 and 16-year-old girls, whose future was all ahead of them until that day.

I am sure that everybody in the Chamber would accept that such an outrage is every parent’s nightmare: your child leaves home and goes to school, but never comes home again; you wake up every morning not knowing whether your child is dead or alive, and spend every waking hour of the day not knowing whether your child is being molested, raped, trafficked or sold into slavery; and you have the terrible truth brought home to you that schools are no longer safe havens for your children, but theatres of war.

Boko Haram’s perversion of its faith is so profound that it is apparently unperturbed by practising violence against young girls, even rape that causes unwanted pregnancies—damage to young girls that will endure and be lifelong, and that cannot be wished away even if they are returned safely to their homes.

As we heard only a few minutes ago, in a Committee Room of the House of Commons, from Ngozi Okonjo-Iweala, Finance Minister and Co-ordinating Minister of the Economy—my grateful thanks to you, Mr Speaker, for chairing the event—across the country, tragedy is being piled on tragedy. There has been a series of attacks: a wave of bombings in Borno state yesterday; an explosion in a shopping mall in Abuja last week, which killed 24 people; a medical college raid last week in Kano, killing eight; a hotel bombing in Bauchi city, killing 10; and attacks on four churches, killing 24. Residents of remote villages in northern Nigeria are fearful of night raids and running short of food and supplies. They are fleeing to the mountain caves, or to bigger towns. With more than 1,000 reported abductions in the past year alone, and more than 5,000 deaths at the hands of Boko Haram in the past five years, the governor of Borno state, who has courageously spoken out, is warning that failure to help his embattled schools and families will spell disaster for the rule of law in the whole of Nigeria.

The 200 girls, whose faces and names are now known to the world, thanks to the efforts of the brave chairman of the Chibok community council, are not the only victims. There is another, less obvious, set of victims: the thousands of girls, and many boys, who can no longer go to school. Schools are closed in many parts of Borno state, and teachers are in fear of their lives. Education International, the global teachers’ union, which is well organised and engaged with this problem, has reported in the past few years on the murder of 171 teachers who were shot, usually in their own home and in front of their families, who were then kidnapped by gunmen. Their crime was to dare to teach girls at all. We therefore have another emergency in Nigeria: education in Borno state is coming to a standstill for fear of terrorists, and that demands an international and domestic response.

In the days immediately after the abduction, I and many others tried to secure international attention and the widest possible global support for the Nigerian girls. A month ago, an enormous wave of concern was expressed in every capital of the world. There was, as we know, a period of intense publicity, and a worldwide campaign to bring back our girls secured 1 million supporters, but once again the attention span of the world has proved limited, and interest has ebbed. Even when it was reported last week that another 90 children—60 girls and 30 boys—had been kidnapped, there was only a flicker of attention across the world.

Following the speech by Finance Minister Ngozi Okonjo-Iweala this evening, I wanted a debate before the summer recess—thanks to you it has happened, Mr Speaker—because it is time to wake up fully not just to the horror of what is happening, but to the ramifications for children, Nigeria and that part of Africa if nothing is done. A few terrorists can never be allowed at any time to blackmail a whole nation. We must do more to help the Nigerian Government back up the endeavours of President Goodluck Jonathan to secure the rescue of the girls and make inroads into the advances made by the terrorists.

I am here to thank the Government for what they have done so far, and for their moral, physical and military support to the Nigerian people. I know that the President of Nigeria wishes to give thanks for the offers of support from China, the United States, France and Israel, as well as Britain. I have met the President on three occasions recently, and he has sent an additional 5,000 troops to the Borno state and is ready to do more. As a result of his pleas to the international community, Nigeria, Benin, Cameroon, Chad, Niger, Britain and the US have already established an external intelligence response unit to share security information. While it is right to recognise that there has been a great deal of international support, it is also right to acknowledge that in its hour of need, Nigeria requires more helicopter support, more aircraft cover, and more surveillance equipment. I believe that we should also support President Jonathan’s call for a better co-ordinated system for sharing intelligence across borders, and for, if necessary, the use of special forces and law enforcement agencies to help Nigeria confront terrorism.

[Jim Shannon (Strangford) (DUP)]

I sought the right hon. Gentleman’s permission to intervene, and I thank him for bringing this matter to the House. The House is filled with Members who are equally concerned about this issue, and on behalf of the Church groups and my constituents, I want to share the right hon. Gentleman’s concerns publicly in the Chamber today. There has been an unwillingness, or perhaps the Nigerian Government have been unable, to respond in the way that we back home think they should. Is that because they are unable to seek the covert assistance that they need in order to ascertain where the schoolchildren are and bring them back? Does he feel that perhaps the covert assistant that this Government could offer is one way forward?

[Mr Brown]

I am grateful for the support of the Churches in the hon. Gentleman’s constituency and elsewhere. Support from around the world is giving succour and confidence to the Nigerian people. I met schoolchildren who have been writing letters to the Nigerian President in support of Nigeria’s efforts to try to capture the terrorists and release the girls. He is absolutely right that there is a real problem. If the girls have been dispersed to a number of different places, a rescue mission for one group would immediately put the other groups at risk. That is the dilemma that confronts the Nigerian Government, as I understand it. That is why they need additional support to monitor what is happening and, if it is necessary to intervene, the troops, security services and the air cover to do so.

There is a second thing that we can do to help. We cannot have safe schools if we do not have safe communities. In addition to the rising military and security presence in these towns, we need to allocate extra resources to reassure parents, teachers and children that they can go to school. The safe schools initiative, launched this afternoon in Britain by Finance Minister Ngozi Okonjo-Iweala, is a plan to rebuild the burnt-out schools that have been the casualties of terrorist incursions, starting with the Chibok school. Our promise must be that it will be rebuilt immediately and made safe, so that when the girls are returned to their homes, their school at Chibok is safe for them to learn in without fear. The worry for many in northern Nigeria is that their school will be the next to face a terrorist raid.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

I am very grateful to my right hon. Friend for securing such an excellent debate. Does he agree that in the north some of the problems arise from illiteracy, from the fact that people cannot find jobs, and from extreme poverty? Sadly, this is encouraging some people to move towards religious fundamentalism.

[Mr Brown]

I am grateful to my right hon. Friend. He has a very honourable record in fighting for the causes of poor people in Africa, Asia and every part of the world, and I want to acknowledge the work that he has done over many years. He is absolutely right. Ngozi, the Finance Minister, referred to that point only a few minutes ago. The Government of Nigeria have to do more—she says they will do more—to help young unemployed people to get work, and to enable young ambitious girls and boys to complete their education by having safe schools, and universities and colleges, to go to.

The whole world should help Nigeria in this emergency. It has to make its schools safer, so that there is confidence among pupils and families that children can go to school. That may mean better perimeter fencing, walls, lighting, and communication and security systems to keep people in touch. We have to reassure people that everything possible is being done, otherwise we will give a propaganda advantage to the terrorists.

The Safe Schools fund has already attracted $10 million from the Nigerian Government, $10 million from the business community, £1 million from the UK and $1.5 million from Norway. Money is coming from other countries in the EU, and there are promises from the United States of America. I hope that one outcome of the debate will be to convince the Government that it is worth providing more than £1 million. Without this initiative, many of the other measures in which we are engaged to help education in Nigeria cannot be successful.

The United Nations has just passed a Security Council resolution that says that schools should have the same legal protection in conflict areas as hospitals. The Global Coalition to Protect Education from Attack is calling on each nation to introduce and integrate guidelines into their military manuals’ rules of engagement and operational orders, so that schools have the chance of being safe havens, rather than being militarised. I hope the Government can encourage every Administration in Africa to do that.

As we heard this evening from Ngozi, and in speeches by the Secretary of State for International Development, the deputy leader of the Labour party and the Chair of the Select Committee on International Development, the kidnaps are part of a wider problem. In the last few weeks alone, we have seen reports of young girls raped and then murdered in India, and we have seen public outrage at the death sentence passed on a young Sudanese mother simply because a woman is considered to have no right to choose her own religion. Attention is now moving to Iraq, where extreme Islamists are fighting for demands that include changing the Iraqi constitution to legalise marriage for girls at the age of eight. This week and every week, around 200,000 school-age girls—some only 10, 11 or 12—are married off against their will because they have no rights that properly protect them. For many, child marriage will be preceded by genital mutilation—still to be successfully outlawed in many African countries.

A total of 7 million school-age children as young as eight or nine will be in full-time work, some of it slave labour in fields and in domestic service, and many will be trafficked into prostitution as part of a subterranean world of international trade in girl slave labour when they should be at school. As a result, 32 million school-age girls are not going to school today, or any other day. The basic right to be in education is denied to 500 million girls who will never complete their education.

Thus the abductions, the killings, the rapes, the mutilations, the trafficking, the exclusion from opportunity and the kidnaps are not isolated incidents, but part of a pattern whereby girls’ rights are not taken seriously enough in many countries, or indeed by the international community as a whole. The violation of girls’ rights is commonplace. In the end, in some countries, rights are only what the rulers decree, so that the opportunities for girls are no more than what a few patriarchs are prepared to bestow. Seventy years after the universal declaration of human rights, we are, in my view, in the midst of what I see as a great global civil rights struggle—a liberation struggle that has yet to establish, in every country of the world, every girl’s right to life, education and dignity. It is falling to girls themselves to lead the fight for rights, largely because of the failure of us as adults, who should be discharging our responsibility for and to them.

A few days ago, there was a youth takeover of the African Union in Addis Ababa; then 20 parliamentary takeovers by young people who occupied, with the permission of the parliamentarians, national assemblies in support of the Chibok girls. This was backed up by demonstrations in cities across the world, including in Rio, Lagos, Hanoi, Cairo and Islamabad. These young people still need the world to see their problem and their fight for what it is.

The bigger truth is that for years we have somehow assumed a clear, if often rocky, pathway towards human rights and universal education, but today in Pakistan the Council of Islamic Ideology is calling for all age limits on girl brides to be abolished; India has just passed up on yet another chance to outlaw child labour; countries all across Africa are failing to act on genital mutilation; and progress to get 58 million out-of-school children into school has stalled in recent years. We should not and must not stand by as many countries in the world lurch backwards when it comes to the imposition, preservation and upholding of girls’ rights.

In northern Nigeria today, we have on the one side terrorists, murderers, rapists and cowards hellbent on acts of depravity, and on the other side we have the defiant, relentless, brave beyond comprehension young people who are desperately fighting for a future but are too often oblivious to our attention. We must be clear that in the battle between the girls of the world and the backward-looking extremists, there will, in the end, be only one winner, but we should not have to wait another half-century with millions of lives ruined, millions of dreams destroyed, millions of hopes and aspirations crushed, for the world to deliver—as we must for the Nigerian girls, and for girls everywhere—the opportunities that should be and are every girl’s birthright.

19:34

[The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)]

I am most grateful to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) for securing this evening’s important debate, which unites the House. I would like to take the opportunity to praise the right hon. Gentleman’s ongoing work as UN Special Envoy for Global Education to promote the vital importance of education. I pay tribute to the determination he has shown in helping Nigeria face the scourge of gender-based violence and terrorism. I am aware of the meeting that he had earlier—chaired by you, I believe, Mr Speaker—with the Nigerian Finance Minister, Ngozi Okonjo-Iweala, and my right hon. Friend the Secretary of State for International Development, among others.

I know that Members on both sides of the House will join me in utterly condemning the actions of Boko Haram. Its members prey on, and deliberately target, the weak, the innocent and the vulnerable. They have no regard for religion, ethnicity, gender or human life, and, as we have just heard, they are bringing untold misery to Nigerians and people throughout the region. The appalling Chibok abductions may have focused the attention of the world on Boko Haram’s activities, but that is, alas, just one example of the death and devastation that it is inflicting on northern Nigeria. It is 79 days since the abductions—79 days, and 219 schoolgirls are still missing; 79 days during which at least another 200 people, women, girls, boys and young men, have been abducted.

I commend the right hon. Member for Kirkcaldy and Cowdenbeath for his important work in spearheading the safe schools initiative, which was designed to protect children at school. In recognition of the vital work that it will undertake, and of the potential that education has to transform Nigeria and the lives of individual children, my right hon. Friend the Prime Minster announced on 17 May that the United Kingdom would contribute £1 million of support directly to the initiative. That will be in addition to existing commitments to support education throughout Nigeria.

As my right hon. Friend the Foreign Secretary said at the 12 June London Ministerial on security in Nigeria,

“We want to make sure that Boko Haram does not succeed in its twisted mission to deny education to girls.”

So—in addition to our support for the safe schools initiative, and in the first partnership of its kind in Nigeria—the Department for International Development and USAID will work to share resources and experiences to provide safe places in which children can learn. As a result, an additional 1 million children will receive a better education in northern Nigeria by 2020, and more than half of those children will be girls. During the current financial year, DFID will spend approximately £20 million on education projects in Nigeria. That is a signal of our determination to demonstrate that education is a right, not a privilege, and that it should be free from the fear of terrorism and abduction. Overall, we have seen a dramatic increase in DFID’s investment in education as a result of the steps that we have taken to meet our commitment of 0.7% of gross national income to international development.

The search for the schoolgirls—led by the Nigerian Government, but supported by the international community—continues. British experts are working in Nigeria alongside others from the United States, France, Canada and elsewhere to analyse and process the available intelligence and supply advice to the Nigerian authorities. We have provided, and will continue to provide, surveillance support. The resolve of the United Kingdom and the international community to continue the search and reunite the girls with their families remains unwavering. However, to ensure that the tragedy of Chibok cannot be repeated, we must end the scourge of Boko Haram.

Last week Abuja was shaken by another bomb attack, the third in as many months. More than 200 died in an attack in Jos on 20 May. A suicide bomber attacked a university in Kano on 23 June. Even those watching the World cup in public have been callously targeted and killed. Meanwhile, the murderous reported Boko Haram attacks in the north-east of Nigeria continue. The latest occurred yesterday: a car bomb attack in Maiduguri. More than 2,000 people are believed to have died at the hands of Boko Haram or others connected to them since the beginning of this year, including 59 boys who were murdered at the federal government college in February, when militants blocked the exits of a boys’ dormitory, set it on fire, and killed the boys who tried to escape the flames. Those left inside were burned alive.

The international community has mobilised to help Nigeria face this threat. Last week the UN listed Boko Haram leader Abubakar Shekau and the terrorist organisation Ansaru on the al-Qaeda sanctions list. This followed the listing of Boko Haram on 22 May. It is now an offence for any individual or entity to provide financial or material support to Ansaru, Shekau or Boko Haram, including the provision of arms or recruits.

These latest listings were among a series of commitments made at the London Ministerial to strengthen regional and international co-ordination, and reaffirm our commitment to the fight against Boko Haram. Nigeria and her neighbours Chad, Cameroon, Benin and Niger participated, with the US, France, Canada, the EU, and our international partners the UN and the African Union. Given the Chibok abductions, it was fitting that this ministerial was held in the margins of the summit to end sexual violence in conflict.

Nigeria and her neighbours agreed to establish a regional intelligence fusion unit to share and process intelligence. Chad, Cameroon, Nigeria and Niger will each contribute a battalion to the multinational joint taskforce and increase the frequency of simultaneous or co-ordinated border patrols. The UK, the US and France will between them provide support to the regional intelligence-sharing arrangement and training for the taskforce battalions, and we, the participants at the ministerial, were united in our agreement that any effective response must be fully in accordance with human rights.

British commitments, in addition to the pledge to bring a million more boys and girls into basic education in northern Nigeria by 2020 that I mentioned a few moments ago, include: significantly expanding our training and assistance to the Nigerian armed forces, particularly helping to train those units deployed on counter-insurgency operations, to strengthen their capacity to tackle Boko Haram; and support for the Nigerian presidential initiative for the north-east—PINE—supporting development and prosperity, including the provision of basic services and infrastructure to those communities most at risk.

I am sure the right hon. Gentleman, and indeed the whole House, will agree with me that the UK should be proud of its contribution to the fight against Boko Haram and in standing alongside Nigeria in the face of extremism and mindless violence. Our commitment, and that of the international community, to defeating Boko Haram, to ending the scourge of terrorism in Nigeria, to securing the safe return of the missing schoolgirls, to preventing sexual violence in conflict, and to the empowerment and education of women and girls was underlined last month at the ministerial meeting here in London.

In the wake of the heinous abduction of the Chibok schoolgirls, I am pleased that the countries of the region have all endorsed the ending sexual violence in conflict declaration. It underlines the importance of eliminating this horrific practice around the world, and the right hon. Gentleman will no doubt be supportive of the Prime Minister’s initiative to host a girls summit later this month. This will seek global commitment on issues the right hon. Gentleman raised in his speech this evening, such as early forced marriage and female genital mutilation.

I am most grateful to the right hon. Gentleman for keeping this issue very much in the thoughts of everyone in this House. I have discovered in my role as a Foreign Office Minister that events overtake events and it is too easy to forget those that matter. This is one that most surely does.

Question put and agreed to.

19:44

House adjourned.

Petitions

Wednesday 2nd July 2014 Petitions

Wednesday 2 July 2014

EU Ban on Import of Indian Alphonso Mangoes

Wednesday 2nd July 2014 Petitions

The Petition of residents of Leicester East,

Declares that the EU ban on the importation of Alphonso mangoes from India is unjust, that petitioners are anxious about the hugely detrimental impact that this ban will have on the livelihoods of millions of people in, and on the economies of, both the UK and India, and further declares that there has been a significant lack of consultation with both the Parliament and the affected people.

The Petitioners therefore request that the House of Commons urges the Department for the Environment, Food and Rural Affairs do everything possible to reverse this ban, to develop an action plan on how best to progress in this matter and to better communicate with the people affected.

And the Petitioners remain, etc.—[Presented by Keith Vaz, Official Report, 7 May 2014; Vol. 580, c. 245.]

[P001348]

Observations from the Secretary of State for Environment, Food and Rural Affairs:

The Government thank the petitioners for raising this issue in the House of Commons.

The temporary ban on the importation of five plant products, including mangoes, from India was introduced on 26 April. This will be reviewed in December 2015. However, an earlier review of the ban is possible but this can only be achieved if the Indian Government can satisfy itself and the European Commission that exporters are meeting the EU’s import requirements. Although the imports in question are not significant (e.g. the mangoes account for c 8.5% of mango imports into the UK), the Government recognise that they are of economic and cultural significance to the Asian community in the UK. Defra is therefore liaising with the Indian High Commission on what support the UK can offer to India to help it ensure compliance with the EU requirements.

Defra has taken extensive actions on this issue. Before the ban was introduced on 26 April, when it was first mentioned as an option Defra took immediate steps to discuss the issue with the main trade association, the Fresh Produce Consortium (FPC). Since the ban, Defra’s Secretary of State has had discussions with the Indian High Commissioner and officials have also met with the National Asian Business Association (NABA). In May, Lord de Mauley, Defra’s Minister with responsibility for plant health, chaired a roundtable meeting which included the NABA and FPC, and representatives from the Indian High Commission (IHC). A follow up meeting has been arranged for July.

At the roundtable meeting, Lord de Mauley reaffirmed the Secretary of State’s commitment to facilitating communication between the Indian Government and the European Commission. He also offered that Defra’s Food and Environment Research Agency (Fera) could, if requested, provide technical assistance and training to the Indian plant health authorities. Fera has sent a draft training programme to the IHC and is awaiting confirmation of acceptance as well as details of participants.

The ban followed a long series of exchanges between the European Commission and the Indian authorities because of frequent findings of harmful pests in these products over several years. An increase in interceptions of harmful pests on produce from India prompted the Commission to ask its audit team, the Food and Veterinary Office (FVO), to investigate. In 2010 and 2013, these audits revealed major shortcomings in India’s phytosanitary export certification system. Despite assurances and action taken by India, the number of interceptions did not reduce; in 2013 there were more EU interceptions of harmful organisms from India than any other third country. Whilst the ban is an emergency action rather than a long-planned measure, it comes after the signals sent by the negative audit reports in 2010 and 2013 gave notice to India to address the major shortcomings identified.

Plant pests and diseases such as those intercepted from India in recent years can cause serious damage. The UK’s glasshouse crops—an industry worth over £300 million per annum—are at risk from such pests, which were found in over 200 consignments of fruits and vegetables from India imported into the EU in 2013. Protecting plant health is one of Defra’s highest priorities and addressing the threat of plant pests and diseases and the damage they cause to the UK’s economy and environment is a key objective.

The FVO has arranged a further audit of India’s export systems in September 2014. If this concludes that the necessary measures have been put in place to meet EU requirements, the UK will argue for the ban to be lifted before the current end-date of December 2015. This would require a proposal from the European Commission and the agreement of member states.

The Government hope that imports will resume as quickly as possible and will continue to work with the European Commission and other Member States to facilitate this, subject to India’s exporters and Government showing that the necessary standards are being achieved.

UK Hunger and the use of Food Banks

Wednesday 2nd July 2014 Petitions

The Petition of residents of the UK,

Declares that there is an online Petition requesting that Parliament has a debate on UK hunger and the rise in food bank use, which has received over 130,000 signatures.

The Petitioners therefore request that the House of Commons urges the Government to hold a debate on UK hunger and the rise in food bank use as soon as possible.

And the Petitioners remain, etc.—[Presented by Rachel Reeves, Official Report, 9 December 2013; Vol. 572, c. 1P.]

[P001310]

Observations from the Secretary of State for Work and Pensions:

A Parliamentary debate on food banks and food hunger was held after the date of this petition on Wednesday 18 December 2013.

The benefits system supports millions of people who are on low incomes or unemployed and provides further support such as hardship payments, short term benefit advances and budgeting loans. While it is not the Government’s role to control the price of food, the impact of food price inflation is a real concern for this Government.

Defra monitors food prices and their impact on household expenditure through the Family Food Survey. According to the Survey the proportion of income spent on food by the lowest 20% of households, by income, has remained relatively static over the last 10 years and was 16.6% in 2012.

We also work internationally to promote transparent, open global markets and a competitive domestic market that helps producers and retailers offer the best prices to consumers.

Westminster Hall

Wednesday 2nd July 2014 Westminster Hall

Wednesday 2 July 2014

[Mrs Linda Riordan in the Chair]

Cross-border Rail Services in Wales

Wednesday 2nd July 2014 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(John Penrose.)

09:30

[Jessica Morden (Newport East) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Riordan. I thank other hon. Members and hon. Friends from Wales for showing up, and I know that more hon. Members would be here if it were not for the fact that the Select Committee on Welsh Affairs is considering other business.

Transport debates, by their nature, can be extremely parochial, but I make no apology for introducing this debate on rail issues that affect my constituents, because those issues are a big concern for the commuters I represent. I will concentrate on overcrowding and problems with the franchise in my area, but other hon. Members might want to make more general remarks about the franchise, the electrification of the valleys lines and related funding issues.

Like many hon. Members, I receive a lot of complaints from constituents who are frustrated by the day-to-day problems they face when they commute or travel for leisure. My constituency is near the border, so many of my constituents travel to the south-west, Bristol and Bath and to London. The debate is born out of great frustration with train companies and train operators, which is felt by me, by the excellent Severn tunnel action group—I know I am biased, but I believe that it is the best rail users’ campaign group out there—and by their fellow rail campaigners in the next village, the Magor action group on rail. Our frustrations are overcrowding, lack of connecting services and lack of information on electrification. We need to ensure that those concerns are heard as we approach the renewal of the franchises. The debate is a chance to get some of that on record.

The Severn tunnel action group was set up after the last Greater Western franchise, because its members felt that cross-border services were poorly covered. They have campaigned tirelessly for the reinstatement and protection of services, and their aim is to develop Severn Tunnel Junction station, one of the stations in my constituency, to encourage more people on to rail from cars by providing better services. They are a constructive and positive lot who have a lot of rail expertise, but I sense real frustration with the lack of engagement by rail companies. I want to convey that to the Minister as we approach the new franchises.

The latest figures from the Office of Rail Regulation highlight the importance of cross-border journeys to all Welsh rail users, with around a third of the 27 million annual journeys crossing the Wales-England border. Many of those journeys are back and forth to and from the south-west and London. My constituents commute to cities such as Bristol, which offer big employment opportunities, so we need reliable and affordable public transport. However, all too often, people face an unenviable choice: pay the Severn bridge toll—which is too expensive and should be reduced, although that is a topic for another debate and I am sure we will return to it—or run the gauntlet of an often overcrowded and inconvenient train service. Unsurprisingly, given the cost of fuel and the fact that the Severn tolls are whacked up every year, people are increasingly opting for the train service.

Partly as a result of that, we have seen substantial growth in passenger numbers. The Welsh Affairs Committee report “Crossing the border: road and rail links between England and Wales”, which was completed a couple of years ago, picked up on that:

“Cross-border services have seen significant growth in passenger numbers in recent years, and it is expected that demand will further increase in the future. First Great Western said that its Cardiff to Bristol service had seen particularly high growth”.

According to the Office of Rail Regulation, the number of passengers going to and from Severn Tunnel Junction station has increased by 72% in the past seven years. That growth is partly caused by commuters, students and tourists connecting from places such as Chepstow and Lydney. Connections have increased by 192% over the same period. That is a huge growth in usage, and it increases every year.

At the Monmouthshire end of my constituency, there are several new housing developments and more are planned. The same is true of Chepstow and Gloucester. Many occupants of those new homes will commute to Bristol and other cities in England, and they will end up at Severn Tunnel Junction station to catch connecting trains, but the rail service has not kept up with demand. For many years, we have received complaints from commuters, but the service remains the same or even gets worse. The main reason I applied for the debate was frustration with the lack of response from First Great Western to the chronic overcrowding on our commuter routes to Bristol; demand for services to Bristol has greatly increased. In fairness to First Great Western, I should say that I have finally got a meeting with the company next Monday.

After having received many complaints, I recently went out with Severn tunnel action group members to survey users on those commuter trains, and I am in no doubt about how frustrated they are. One of my constituents calls the service “the sardine express”. Commuter trains are always overcrowded and, sadly, it is not uncommon for large numbers of passengers to be left on the station because there is no space in the carriages. The 07.55 First Great Western service has been recorded as leaving more than 30 passengers behind at Severn Tunnel Junction station. Some of those passengers have paid more than £1,500 for an annual season ticket, so it is easy to imagine their frustration and anger. I will share a few comments from commuters whom I surveyed:

“Members of my family catch the 07.55 train from this station as they commute to Bristol. For several months now, the train has been made up of only two coaches instead of what used to be five. We have experienced overcrowding, standing room only, people unable to board, etc, etc. I have written to First Great Western on more than one occasion to complain in the strongest terms, but no avail.”

Another said:

“I sometimes catch a train on the opposite platform and have counted some 100 or so persons waiting on the 07.55 to Bristol! When there are only two carriages, the train is full before it arrives at Severn Tunnel. Completely unacceptable, particularly considering the exorbitant ticket costs in this country.”

Another person recently reported that a passenger had fainted:

“FGW must be in breach of health and safety standards at the very least. Something must be done about this.”

Another commuter directly linked the situation to the effect of the Severn bridges:

“It’s all inefficient. I can’t jump into my car because of the Bridge Tax of £120 per month on the most expensive toll in the country. If I could drive instead I would in an instant. I’ve suffered the pain of these trains for only 12 months. There is no innovation, no new trains, no new operators and prices are set high.”

I have many more examples, but will end on this e-mail from a constituent:

“They just need an extra coach on each train—it’s not rocket science!”

Why is that so hard to deliver?

There is an obvious lack of rolling stock, which has led to a lack of carriages on peak services. There should be five carriages, as constituents have said, on the 07.55 train, but frequently there are three or sometimes even two. I understand that the train company has looked into hiring additional rolling stock to address the shortfall while some of its stock could be away for months on heavy overhaul, but that has not happened. We can only surmise that, as a private business, its financial model means that to do so would not be financially viable, so it has decided not to go ahead. Will the Minister take the matter up with First Great Western following the debate? Does he agree that it is not acceptable for the company to ignore the problem and to ignore complaints from commuters who have legitimate concerns about services they have paid for?

My second complaint is the perennial problem of poor connections, which was covered in the Welsh Affairs Committee report on cross-border transport a couple of years ago, but which has still not improved. Poor connections are not only a problem for those of us who live on the border; they have knock-on implications for those further into Wales. Commuters from Caldicot, Chepstow or Lydney may face a lengthy wait for a connecting service, and poor connections at peak commuting times are common. For instance, there are no trains from Caldicot between 7.40 am and 9.40 am, which is bad for people who are trying to get to work. Stations such as Caldicot have huge potential, particularly among people who want to use them for work, but we need a service that is fit for purpose. Lots of people want to use that service. What can the Minister and his Welsh counterparts do to ensure that the First Great Western service connects better with the Wales and borders franchise, which is up for renewal in 2018? Better connections is a constant grumble, and the matter has been raised by the Welsh Affairs Committee. We need action on better connecting services.

[Albert Owen (Ynys Môn) (Lab)]

I congratulate my hon. Friend on securing the debate and on the work on connectivity that she does on behalf of her constituents.

In the north, we now have better services; there has been huge investment on the west coast over many years, which has provided extra trains. Does my hon. Friend agree that the connectivity between the franchises must be looked at? In north Wales, both are coming up for renewal at a similar time. I am sure that the Minister is aware of that, and that forward planning is being done. Does my hon. Friend agree that there is a need for a direct link from Liverpool to Holyhead, which would bring Dublin and Liverpool closer together? We need to look at the big picture, and we have time to plan to do so before the franchises are renewed.

[Jessica Morden]

I thank my hon. Friend for his intervention. He is exactly right: with the franchises coming up for renewal, we must think strategically. The Government and the Welsh Government must work together for the good of the transport system. They must be constructive so that we can iron out some of the problems. I also agree with his point about the link between Liverpool and Holyhead.

We all support electrification and hope that we will benefit from it soon. As the Welsh Affairs Committee pointed out, it has been an example of good collaborative working and has demonstrated what can be achieved when the two Governments work together on transport—apart from the row over funding the valleys lines. For constituencies such as mine, which will suffer much, it would helpful if the Minister let us know early on what the disruption will be, when the work is to be carried out and what form it will take. We hear talk of the closure of some stations so that work can be carried out on the bridges, but the lack of concrete information is causing confusion. When can we let communities know what will be going on as a consequence of electrification? Staff in my office have asked for information and timetables, but so far we have heard nothing. If would be helpful to know when local commuters will be informed fully.

An example of the uncertainty caused is that commuters at Severn Tunnel Junction raised the issue of the safety of the passenger footbridge, which many rail users feel is unsafe. In fact, an Arriva fire inspector expressed concerns a few weeks ago and Network Rail was forced to do remedial work. If it is unsafe, it must be sorted out, but the latest letter we received from Network Rail—it has been a lengthy correspondence—said that the delay in sorting it out was due to the electrification plans. We have been chasing information about the bridge for some time, but the situation is now critical. The new bridge is funded under the Department for Transport’s Access for All scheme, but is clearly unsuitable as it is now. Will the Minister please intervene with Network Rail, because his Department is funding the improvements? We need action quickly.

I want to discuss the renewal of the Great Western franchise. We have all recently been asked to respond to the consultation on the franchise, which I have done. Rail groups in my constituency want to reiterate to the Minister that whoever is awarded the contract needs to meet commuter demands. In my area that would include a half-hourly or better train service from south Wales to Bristol Temple Meads and Bath; an additional hourly service from Ebbw Vale via Newport and Severn Tunnel Junction to Bristol Parkway, which would provide new journey-to-work opportunities to take advantage of the development and employment sites planned for the area around Bristol Parkway; a minimum of five coaches on the peak services from south Wales to Bristol; a commitment to ensure that train capacity is sufficient for future demand; and greater emphasis in the franchise on working in partnership on interchanges, and on rail companies working together on timetables.

Getting rail services right in my constituency is an important part of the effort to increase economic and employment opportunities, but we should also give commuters the service they deserve, given how much they pay for it. The debate is focused on getting the cross-border services right, but I should also mention the great work that the Welsh Government are doing on the metro system, which could be of great benefit to communities in my area, such as the people of Magor who are campaigning for a new station through the Magor action group on rail.

It is so important for constituencies such as mine that the two Governments work together on rail as we depend on a properly co-ordinated approach and properly thought out train services. I know that other Members will make more general points about other cross-border rail issues, but I am grateful to the Minister for listening to my speech and hope that he will address some of my specific concerns about the franchise.

09:39

[Chris Ruane (Vale of Clwyd) (Lab)]

At the risk of sounding like Monty Python’s “Four Yorkshiremen”, the first job I ever had, at the age of seven, was casing on Rhyl railway station with my older cousins. We would take a pram, and the trains would roll in, 10 to 14 carriages long, and disgorge their passengers. People did not have cars back in the 1960s—or not many working class people did—so they would place their cases on our prams and we would take them to the guesthouses, hotels and caravan parks in Rhyl and round about.

The train has been good to Rhyl and Prestatyn. The train arrived in Rhyl, my hometown, in 1849. I was recently talking to a 94-year-old local historian from Prestatyn, Fred Hobbs, who has researched the topic. He told me that when the train came to Prestatyn, it opened up the Welsh seaside towns to the industrialists and merchants of Manchester and Liverpool, who came and lived in Rhyl and Prestatyn and commuted to Liverpool and Manchester. They brought with them their wealth and investment, and our local towns prospered.

Rhyl was just a fishing village back in the 1840s, but it grew and grew: between 1849 and 1900, there were 900 hotels and guesthouses. The train brought great wealth to the town. The west ward of Rhyl was one of the richest wards in Wales because of the investment in hotels and guesthouses. Unfortunately, those ex-hotels and ex-guesthouses are responsible for the deprivation of seaside towns, as they have now been turned into houses of multiple occupation, but that is a discussion for another day.

The train has been good to the coastal towns of north Wales, and especially to Holyhead. The route planned in the 1840s went from London to Dublin, which was still part of the British empire in those days. It was a very important route. We want to ensure that the primacy of that route in the 19th century is re-established in the 21st century. The trains and transport links to north Wales brought wealth and investment right through the 20th century, up until the 1960s when I was casing to make a few bob on a Saturday morning. The downturn came to the north Wales coast in the 1970s, when people stopped coming to coastal towns for their traditional two-week bucket-and-spade holidays in a coastal town and chose to go elsewhere—to Spain and France. That left a big hole in the north Wales economy for a 40-year period, and we are only just beginning to put that right.

The challenge for the 21st century in north Wales is better connectivity between north Wales and the north-west of England. There are 650,000 people living in north Wales, and 6.5 million people live in the north-west—it is a huge population centre, and if a bit more of the area across the Pennines is included, it becomes even bigger. That was an opportunity in the past, it is an opportunity in the present and it is an opportunity for the future. We must improve train and transport connectivity.

[Mark Tami (Alyn and Deeside) (Lab)]

Does my hon. Friend agree that we must think about that now for the future? One problem is that rail has been something of an afterthought. Industry and a lot of other things have come, but the rail system is not up to the standard required to serve industry and the people of our area.

[Chris Ruane]

I agree with my hon. Friend to a certain degree, but he is no great user of the train, unlike me and my north Wales colleagues. I have witnessed a vast transformation from when I became an MP in 1997 and it took me four hours to arrive in London from Rhyl in my constituency. The trains then were grubby and had not been cleaned; there was chewing gum on the old and faded seats. Now, we have Pendolino and Voyager trains. There has been massive investment, for which I am grateful to Virgin and Arriva. There has been improvement, but I agree with my hon. Friend that we must not rest on our laurels.

Huge investment—something like £45 billion—is coming from HS2. I want to ensure that my area, the north Wales coast, gets its fair share of that investment—that we are electrified and our stations are improved. Big progress has been made: Chester, Flint and Prestatyn stations have been improved—a huge investment of £7 million was spent on Prestatyn. Last week Arriva, Network Rail and Denbighshire county council started a £2.5 million improvement programme for Rhyl railway station. Improvements have been made, but we must not rest on our laurels. We must push for further investment in our stations along the north Wales coast.

The big cities of Liverpool and Manchester were totally transformed under a Labour Government, and we did not make enough of that. Those cities were derelict and riot-strewn in the 1980s, and they are now vibrant communities. Manchester has one of the biggest student population bases in Europe, with 45,000 students. Liverpool is the same. Two principal airports serve north Wales, Liverpool and Manchester, and they have both grown exponentially over the past 10 years. They are the local airports for north Wales, and we need connectivity to them. It is difficult to get directly to those airports by train, so we need to consider a dedicated transport link from the north Wales coast to Liverpool and Manchester airports.

Liverpool and Manchester have huge population bases and huge research capacity at Manchester and Liverpool universities. We need to connect those universities with businesses in north Wales such as Airbus, the OpTIC incubation and research centre in St Asaph in my constituency and Bangor university. We need more co-operation, which would increase and improve if we had proper transport links. Connecting the science base of the north-west with the science base of north Wales would be helped tremendously by a proper transport system.

North Wales not only needs to be better connected with England; we need better connections inside Wales, including with the constituency of my hon. Friend the Member for Alyn and Deeside (Mark Tami) in north-east Wales. In 1998, the Labour Government made a £0.5 billion launch aid investment in Airbus, with the Welsh Government investing £25 million. That was a public-private partnership that produced one of the most expansive factories in western Europe. There are 6,000 engineering jobs at Airbus making the biggest wings in the whole world. We have to ensure that our population base in north Wales, especially in the bigger coastal towns that have large numbers of unemployed people, is better connected to the job opportunities at Airbus and the Deeside industrial estate in my hon. Friend’s constituency. Tens of thousands of jobs have been created and will be created, and they need to be made available to unemployed and underemployed people along the north Wales coast.

Ten years ago, the Department for Work and Pensions provided transport grants that helped people get to work. We should be drawing down grant money, European funding, DWP funding or Welsh Government funding to ensure that we have dedicated pull-in stations and dedicated trains early in the morning to take those workers to the huge factories in north-east Wales.

I will conclude on modal points, where trains connect with airports and hovercraft. I am probably one of only two MPs who can claim to have a constituency that has been, or will be, served by a hovercraft. The first passenger hovercraft service in the whole world was between Rhyl in my constituency and Wallasey. I mentioned that fact in a debate in this Chamber in December, and within three days, three hovercraft companies contacted me about restarting the service. The time taken to travel from Rhyl to Liverpool by train is one-and-a-half hours, possibly involving two changes. The time taken for a hovercraft connection to Liverpool would be 34 minutes. I would like to see people coming along the north Wales coast by rail, stopping at Rhyl railway station and getting on the hovercraft for a direct passage to Liverpool. The proposal is for a hover link that takes people from north Wales, through Rhyl, to Liverpool airport. That is a fantastic opportunity, but we need to ensure that we have the facilities to take people by rail, by car or by bus from Rhyl to Liverpool.

We are also blessed in Wales with a fine coastal path. We are the only country in the UK that has committed to, and delivered, a path along the whole coast. Walkers are coming to Wales, and in my constituency we are blessed with being at the northern end of the Offa’s Dyke footpath. We need to ensure that walkers can come to Rhyl or Prestatyn by train to do their rambling—I hope I am not rambling, but I intend to finish soon.

[Mark Tami]

You are hovering.

[Chris Ruane]

Yes, I am hovering about rambling. Thanks very much.

In Wales we are also blessed with fine cycleways, most of which are along the coast. The Sustrans bid for Big Lottery funding delivered a £4.5 million dedicated cycle bridge at Rhyl harbour. We need to make the most of the investments that have come to my town and north Wales by connecting them to rail users, which is a challenge for all of us. We have two well performing train companies. Virgin has massively improved the service over the past 14 or 15 years, and we north Wales Labour MPs campaigned to ensure that Virgin did not lose the franchise. We were highly concerned when it looked as if a second-rate company was going to take over the franchise, and I hope that Virgin continues to invest. Arriva Trains Wales is also investing heavily in north Wales, but we need to put pressure on the train companies to ensure that they deliver not for the past or for the present but for the future.

09:49

[Ian Lucas (Wrexham) (Lab)]

It is a pleasure to take part in this debate and to hear my hon. Friend the Member for Vale of Clwyd (Chris Ruane) tell us about Rhyl station. Big changes have happened in north Wales and in the rest of the country over the past 30 or 40 years. For the benefit of the Minister, it is important to appreciate that north-east Wales, and its economy, is among the most successful and progressive areas of the country. North-east Wales has world-beating companies in the aerospace, automotive and pharmaceutical sectors that compete internationally to secure jobs and high-quality investment for British industry. In a globalised economy, it is important that the world knows we have infrastructure that is competitive, enabling those businesses and people in north Wales to journey to north-west England and beyond.

There is good news for my constituency of Wrexham, because the Welsh Government are investing some £44 million in dualling the line between Wrexham and Chester. In the 1980s, the Conservative Government made the absurd decision to limit the infrastructure for rail services between the largest town in north Wales, Wrexham, and Chester, which therefore inhibited regular rail services. Ever since, we have been able to have only one train an hour between Wrexham and Chester. In fact, we re-established an hourly service only in 2007—the impact had been so negative that rail usage substantially diminished.

Since the reintroduction of hourly services in 2007, there has been a massive increase in the use of rail services, which I see every week when I travel to London. The economy of this important economic area has developed, Glyndwr university has been established and we have seen a large increase in rail usage.

It is important that we use this opportunity to introduce three trains an hour between Wrexham and Chester, which would provide a major boost to the local manufacturing and retail economies by increasing the connectivity between Wrexham and Chester. Businesses that operate on both sides of the border would benefit from access to new markets. Such investments are important, and there are massive further opportunities in the immediate area of north-east Wales.

Another cross-border line runs between Wrexham and Liverpool, and my hon. Friends from north Wales will forgive me for mentioning it again. It runs from Wrexham, the largest town in north Wales, by the Deeside industrial estate, which has businesses such as Toyota, and goes through the constituency of my hon. Friend the Member for Alyn and Deeside (Mark Tami), up through the Wirral, very close to the GM factory at Ellesmere Port, then up through to Birkenhead, and links in to Liverpool. The service is interrupted by a necessary change at the Bidston interchange. Direct access along that line would be a massive boost for north-east Wales, the Wirral and north-west England as a whole, so it is important that we consider looking at that line again and designing an improved infrastructure.

In my role as a shadow Foreign Affairs Minister, I visit other countries, particularly in the middle east and Africa, and it is striking to see the investment and support for infrastructure that our competitors are introducing to their economies. Those people are keen to secure the jobs that our own constituents have at the moment and that our young people wish to have in future, so we must focus on delivering improvements to our infrastructure. Although we have had some improvements, particularly on the longer journeys from north Wales to London, which my hon. Friend the Member for Vale of Clwyd mentioned, the connectivity between north-west England and north Wales is still limited and needs to be much better.

Focusing on the airports is massively important. The airports that serve north Wales are Manchester and Liverpool, but it is virtually impossible to travel to either by public transport. The region has an increasingly choked road system that was essentially designed in the 1970s and 1980s, and in substance has not changed since. It is absolutely imperative that we focus on delivering an improved public transport system to service the airports and to increase connectivity. If we do not do so, we will lose out in the longer term to our competitors.

For me the real frustration over the years has been the investment system, which is too centralised to be able to deliver local transport projects. I am pleased by the tone and content of the Adonis review, which was issued yesterday and talked about the importance of much more regional approaches to investment across England. The lesson also applies in Wales. We cannot have a top-down system only in Whitehall or Cardiff Bay—away from the localities that actually understand the need for local investment and how to facilitate it—determining investment in regional rail projects. That is one of the major reasons why our infrastructure system is so bad.

Contrast that with, for example, Frankfurt in Germany. On a recent visit, I saw the connectivity between the rail system and the airport system. The city is a major regional power player in Germany. There is a regionalised system of cities such as Hamburg, Munich and Berlin, which all contribute massively to their regional economies. The fact is that in the United Kingdom—this issue affects all our constituents—there is a massive focus on south-east England. The major transport infrastructure investments have gone to south-east England. That is unbalancing the economy throughout the country. It is a central issue not only for our constituents, but for the whole United Kingdom.

A tide is flowing in all political parties that recognises the importance of that issue. The practical impact of the policies we are pursuing is that we do not have the regional investment to facilitate projects that could create world class infrastructure. It is important that we have the capacity and the authority in north Wales to develop regional infrastructures. The development of lines such as Wrexham and Chester and Wrexham and Liverpool would facilitate investment in the rail system, which would support business and jobs in the local economy. Give us the responsibility, authority and power to make decisions, and we will continue to deliver a powerful economy in north-east Wales that will be able to compete in future.

10:05

[Glyn Davies (Montgomeryshire) (Con)]

Thank you, Mrs Riordan, for calling me to speak in an important debate on an important issue in mid-Wales. I, too, congratulate the hon. Member for Newport East (Jessica Morden) on securing the debate. She spoke about services in south Wales and there have been contributions on north Wales, but I specifically want to talk about the services that serve not only my constituency of Montgomeryshire, but mid-Wales.

The line from Aberystwyth, on the extreme west coast of Wales, to London runs in two parts: from Aberystwyth to Birmingham, and the direct service from Shrewsbury to London. They overlap to some extent, but the two lines are particularly important for that rail journey. As other Members have said, the line is very important for the economy of mid-Wales. Perhaps more so than in other parts of Wales, the railway tackles the perception of remoteness, which has always been a negative factor in attracting business.

My purpose today is not to make demands of the Minister. I am highlighting the importance of both parts of the line, and I want to make certain that the long overdue good news that we have had about the intention to invest in both parts comes to fruition and is beneficial.

First, on the Aberystwyth to Birmingham line, I have been involved in the campaign for an upgrade for about 30 years, so I have a reasonable right to call this a long overdue investment. The first issue was upgrading the line with passing places to enable an hourly train service. There has been only a two-hourly service, which is hopelessly inadequate. The campaign started 20 or 30 years ago, and money has been invested. It has taken a long time, but we now have a commitment from Arriva Trains and the Welsh Government that an hourly service will be introduced. I think the various people associated with running the trains are now being trained. The service is due to run from May 2015, just in time to bring the newly elected Members in the general election of 2015 from mid-Wales to London.

The second part of the line is the Shrewsbury to Euston connection, which is hugely important to mid-Wales. People will be able to drive to Shrewsbury, park, and then catch the direct service to London. Having to change is incredibly inconvenient and it discourages people from using the line. I would prefer to use the train and not drive to London, but that is simply inconvenient for me. However, the hourly train service will change that.

Such a service used to run, but it was stopped. We had a promise that it would run when there was an agreement with FirstGroup to provide a west coast main line service. The franchise was let, but it was cancelled. Now, of course, there is an agreement with Virgin Trains that the line will run from December. Perhaps the Minister will confirm how often that train will run and at what times. It is hugely important that it runs at convenient times that enable people who wish to work in and travel to London to use it. Otherwise, we would deliver on a promise but not deliver on the actual need.

So, there are two aspects. One is the line within Wales, which we anticipate will come into effect in May next year. I very much hope that that is the case. There is no reason why it should not happen, but we must always be vigilant to ensure that it does. Secondly, the Minister here today has responsibility for the direct line from Shrewsbury to Euston, and I very much hope that that line comes to fruition later this year, with times and frequency that are convenient for the people of mid-Wales.

10:10

[Nia Griffith (Llanelli) (Lab)]

I congratulate my hon. Friend the Member for Newport East (Jessica Morden) on securing the debate, which is extremely important to all of us in Wales.

First, I will speak about the main line that goes from London to Fishguard, connecting to ships going over to Rosslare in Ireland. The line goes right through my constituency, passing through the stations of Llanelli, Burry Port and Kidwelly. It is absolutely vital that we are part of the trans-European network and that we have good connections on the line.

Recently, the Welsh Government made significant investment in the Loughor bridge, which has enabled it to take two-way traffic, but what grieves me is how few through trains we have. I hope that, with the new franchise, the fact that we have this new bridge will enable us to have much greater connectivity and far more through trains. To have only one train from west Wales up to London and only one from London to west Wales per day is not good enough, and even those trains go only as far as Carmarthen; they do not go right up to the Pembrokeshire coast.

The problem that that poses for people is the lack of connectivity. There is the inconvenience of having to change trains and the fact that, often, the trains run by First Great Western are late, so people end up having to wait at stations for long periods—usually Cardiff, Port Talbot or Swansea—because there is simply no way to get from west Wales to London without changing, except for two trains, one each way, per day.

Let me give an example. If I got the 5.25 am train from Llanelli to come up to London morning, I would hope that I could make a 10 am meeting in London by getting to London at 9 am. However, only recently I had the experience of sitting on that 5.25 am train, which had been five minutes late, and being told that we were waiting outside Port Talbot station to let the First Great Western train go through, so the very train that I needed to catch to get to London was passing by my window. My only option, therefore, is to get the 3.25 am train if I want to get to an early morning meeting in London, which is quite inconvenient.

Rail is also vital for freight. We have refineries in Milford Haven and obviously the steel industry also uses the railway line. Last winter, storm damage closed this line for three or four days. Mercifully, that was all the time it was closed for. However, there is significant risk of closure because the railway line follows the coastline, which is exposed to the elements, and it will need continuing investment. I stress that that needs to be UK Government investment, because this line connects London with Ireland.

I look forward to electrification and remind those present that the Labour Government had a commitment to electrify as far as Swansea. I am sure that my hon. Friend the Member for Swansea West (Geraint Davies) will speak at greater length about what has happened since then and about the uncertainty over electrification.

I understand fully why we are not going for bimodal trains—trains that can be both diesel and electric. They are heavier than other trains and any investment in them would be a major investment, for what I hope would be only the short term. I want electrification to come not only to Bristol, Cardiff and Swansea, but right through west Wales. However, there will be an issue when part of the line is electrified: when that happens, where will we change trains and how will that change work?

To my mind, addressing that issue will be crucial to keeping passengers loyal to the service, because if the process of electrification is messed up and we end up with yet another, perhaps inconvenient change—bearing in mind that we already have one change for west Wales—that will make things very difficult.

I would like there to be only one change—a change off the train from where the line has been electrified up to and on to another train to take people all the way to west Wales. Whether that happens to be at Swindon or at Bristol, there should be only one change so that we do not end up with people having to make two changes to reach west Wales.

The line that goes from Pembrokeshire up to Manchester Piccadilly can be a useful service if I am going to conference, but I do not meet many passengers who go all the way from Pembrokeshire to Manchester. The argument that the train will not stop in some local stations such as Kidwelly because it is trying to get from Pembrokeshire to Manchester as quickly as possible seems to be completely fallacious. If someone is going to spend six or seven hours on a train anyway, an extra 10 minutes is neither here nor there. The fact that this train is going through stations at a very low speed but does not always stop at them is extremely annoying. If it stopped just on request, that would be a help. The argument about not stopping is fallacious, and I understand that some towns on the English side of the border are also concerned about the fact that some of those trains do not stop at their station.

I reiterate the comments on overcrowding made by my hon. Friend the Member for Newport East. I have constituents who commute to Filton Abbey Wood and to Bristol, and they have to change and catch very overcrowded trains. If they cannot get on those trains, they are disadvantaged as they are unable to get connecting trains back to west Wales, so they are very concerned about overcrowding.

We need a much greater number of Sunday services, particularly in winter, when it is impossible to get from my constituency to important places such as Twickenham, where rugby matches happen. People cannot get there on a Sunday, and I am sure the Minister understands the importance of such sporting events. Not to be able to get from west Wales to London on a Sunday in time to get to a match is obviously very much a disadvantage nowadays, when people do so much on a Sunday, from shopping to—of course—going away on holiday.

That brings me to the issue of the train that, last year, got stuck in remotest Wiltshire for six hours. It was a First Great Western train coming from the west country, but it could equally well have been a train from west Wales. I wrote to the Minister asking what lessons had been learned from that case, or perhaps I put down a parliamentary question, but it was too early to get a response because a report on the case had not been produced by that time. I hope that that report has now been produced; I could not understand how that case happened. We all allow for First Great Western trains being at least an hour late, if not two or three hours late, but when people are going away on holiday they do not allow time for a train to be six hours late. People were kept on that train without adequate water for all that time.

I understand that it was not necessarily possible to get a bus up to where the train had stopped, but it would have been possible to get other trains along the track, which would either have allowed passengers to be decanted and taken on or allowed water to be taken to the passengers. A six-hour delay is completely unacceptable, and I hope that steps have been taken so that my constituents do not have to face such a situation if they are going away and hoping to get to Heathrow airport or are going to London for any other reason this summer.

I will make one last point that may not seem terribly relevant to this cross-border debate, but is terribly relevant if people have to change trains: on Cardiff station and on Port Talbot station, it is impossible to get into a ladies toilet cubicle with a very large suitcase, probably because the cubicles are made to a specific design that came from one book. I would suggest that some quite large or portly women might find it difficult to get themselves into those cubicles. Of course, it becomes necessary for people to use the cubicles if they have to change trains, and for some passengers—in particular, some older passengers—using toilets on trains is quite difficult.

Will the Minister take note of the fact that, whenever stations are being redesigned, consideration should be given to that issue, so that we do not end up with the situation we used to have in Paddington, whereby people had not only to go down stairs, but get their suitcases over a turnstile before they could get to a cubicle. That has now been put right, and people can use the disabled toilet on the platform. Nevertheless, those issues need to be taken into consideration.

10:19

[Geraint Davies (Swansea West) (Lab/Co-op)]

I noticed an advert in London the other day that mentioned a Virgin train from London to Manchester costing just £19 and taking two hours and nine minutes, a train from London to Birmingham taking one hour and 24 minutes and costing £7.50 and, of course, one from London to Swansea that takes three hours and costs £78.

The Government have decided to invest more than £40 billion in High Speed 2. There is an issue about geographical equity in economic development, and we need to think about that. Some £5,000 per head is spent in London, versus £500 elsewhere. It is important to people from Wales—certainly, those from south Wales—to link up to the city regions in south Wales, which are also networked into the city regions in the south-west. As it happens, my father was the head of economic development in the Welsh Office many years ago—Rhodri Morgan used to work for him, interestingly enough—when a study was done showing that, in respect of the invoice network, the economy of south Wales was linked more to the south-west than to north Wales. Clearly, infrastructure investment in rail and road connectivity should follow that.

There has been talk about HS2 connecting to north Wales, but KPMG has suggested that it will be different in south Wales and that we in Swansea, for example, will be losing some £16 million a year and Cardiff will lose £70 million a year. There is a case for a Barnett consequential of approaching £2 billion to help connectivity to south Wales.

I appreciate that the Minister will mention electrification, and I was pleased that the Prime Minister promised to electrify the railway from Paddington to Swansea, but I should like some clarification on that, because there is a bit of a spat going on with the Welsh Government. It now seems that the Government are saying that they will electrify as far as Cardiff and then from Bridgend to Swansea, but not from Cardiff to Bridgend. The issue is who pays for the electrification of the valleys lines. In my mind, the bit that runs from Cardiff to Bridgend, which is not the valleys, does not seem to be involved in this spat and should be paid for by the Prime Minister’s undertaking. Although we welcome electrification, we will be worse off downstream in inward investment, as I have already said.

My focus is on acknowledging that we should be making connections between the economic clusters in, for example, Neath-Port Talbot, Swansea and Lllanelli, and Cardiff and the valleys, so that we can stimulate economic growth. My hon. Friend the Member for Newport East (Jessica Morden) mentioned tolls. Today is not the time to talk about tolls, but, again, that is a cost for south Wales that is not faced elsewhere.

We have a second-class service. In that regard, hon. Members have mentioned the frequency of trains, which is arguably equivalent to train speeds. From Swansea, there are two trains an hour to London Paddington, one at 28 minutes past the hour and one at five minutes to the hour, and people have to change at Cardiff from one of those trains. However, on the way back, at various times, particularly in the afternoon, there is only one train an hour. An inward investor thinking of investing, and going back and forth between Swansea and London, might have to wait nearly an hour at Paddington before getting a train, and they will then spend three hours on the train—a total of four hours. I urge the Minister to work with the Welsh Government on train timetabling. For example, in the other direction—I do not mean to be too parochial—people get the Manchester Piccadilly train one way, get off at Cardiff and then pick up another train and go on. On the way back, why can they not get the Cardiff train, then pick up the Manchester Piccadilly train or even a Bath train?

Hon. Members mentioned connectivity with Manchester. Looking at traffic flows, the economic network is, as I mentioned earlier, with the south-west, not with Manchester. It would be better to have much better, regular connectivity between Swansea and Bath and the south-west than connectivity with Manchester. Traffic flow and volume make the economic case for frequency and connectivities. I appreciate that it would involve working with the Welsh Government to get the train timetabling right. That is a simple thing that could be done within the next weeks, and overnight we could end up with an assurance of having two trains an hour from Paddington to Swansea. That would make a big difference to me when talking to inward investors who might want to go to Swansea bay city region.

There has been talk about nationalising Arriva Trains and about public ownership of various franchises. The Minister knows that the east coast main line is in public control and we are saving something like £700 million a year. It is worth looking at such cases around Britain. I understand that in Wales, we are spending some £170 million a year of taxpayers’ money on Arriva Trains. Again, the Welsh Government should look at that, not for the sake of it, but to deliver best value for money for the taxpayer.

I appreciate that Deutsche Bahn, the biggest railway company in Europe, has command over our freight system and, with a turnover of £39 billion, has the economic muscle to make the investment. I am particularly interested in investment in the south Wales rail network to make it part of the transnational transport network acknowledged by Europe. As Members will know, South Wales is not on the map of strategic European rail routes that people are willing to invest in; the connectivity just goes up the spine of England, not to south Wales, and one reason is that the criteria for such investment include core ports and airports.

In respect of the Silk report, there is a case for nationalisation of ports in Wales, in particular—the Minister may think this is an ideological point—so that Swansea port and the port at Port Talbot would be regarded as one port. Then we could increase the amount of freight to that port, triggering a process to make it a core port and in turn triggering its becoming part of the transnational rail network. That in turn would trigger European funding to provide connectivity that would then extend, transnationally, over to Ireland. My hon. Friend the Member for Llanelli (Nia Griffith) made those points.

The trouble is that, if the only way to get rail investment is on the basis of its being demand-led as opposed to supply-led, we will always have a problem in Wales. The reality of the economics of transport is that, when a rail or tube link, or whatever, is provided, more people use it and more people buy houses, so house prices increase and there is more economic activity. To a certain extent, we have to lead with greater frequency and greater investment, and I certainly want to see that.

I am asking the Minister about extra investment in Wales, so that we get our fair share; about the frequency of trains; about whether he has a balanced view of whether the public or the private sector should run particular train franchises; and about whether he is willing for the public sector to bid in, as with the east coast main line. That would, of course, be a question for the Welsh Government.

In passing, let me mention some other rail projects. We should look more imaginatively at opportunities for some trains to go directly to Swansea from Cardiff without stopping, or from Cardiff to Port Talbot Parkway, with a light rail route going all the way through to the Mumbles.

The Minister may or may not know about the conversations about the Swansea tidal lagoon. I saw a presentation recently about it—three new lagoons would be provided, stretching across Swansea bay city region, but not the whole way across. It would not go as far as Swansea bay itself, so as not to distort the view towards the Mumbles. There would be a reconfiguration of the road and rail networks and a visitor centre that would generate, in the view of the plan’s originator, some 3 million visitors a year.

Will the Minister explain whether the planning regime is merely some sort of incremental process of upgrading, extending or reducing existing networks, or whether it is part of a more creative vision of economic development, which perhaps embraces a vision of Swansea—the area I represent—as not only an economic and academic hub, with its universities and traditional industry, but a quality tourist destination, building on the city of culture bid, Dylan Thomas and so on? That vision is of a place in a global marketplace, in which increasing numbers of people from China, India, Russia and Brazil want to go to English-speaking non-sun cultural destinations. How should that infrastructure be planned? How should we provide multi-modal connectivity with road, rail and the development of Cardiff airport to ensure that that vision works in a holistic way, rather than keeping an incremental, slightly pedestrian approach to transport planning?

10:31

[Lilian Greenwood (Nottingham South) (Lab)]

It is always a pleasure to serve under your chairmanship, Mrs Riordan. I begin by congratulating my hon. Friend the Member for Newport East (Jessica Morden) on securing this important debate. Indeed, I thank all my hon. Friends for their contributions. Clearly, the transport infrastructure linking Wales and England is of great importance. In many ways the debate represents a continuation of the ongoing parliamentary scrutiny of cross-border transport links. It follows the publication of the Welsh Affairs Committee’s 2012 report on cross-border road and rail connections, which was debated in Westminster Hall in February and the Westminster Hall debate in November on transport infrastructure in north Wales, which was ably led by my hon. Friend the Member for Alyn and Deeside (Mark Tami).

My hon. Friend the Member for Newport East set out the real challenges for her constituents, including those who commute over the border. She spoke about the difficulties of aligning timetables so that connections can be made, and the overcrowding that some passengers still experience. I am familiar with some of those services, because the CrossCountry trains from Cardiff terminate in my constituency at Nottingham station. I have a sense of how overcrowded those trains can be. Clearly, however, there are significant issues with some First Great Western services in her constituency. It is clear from her contribution that more needs to be done, and it is important that the Department look closely at the rolling stock issues that she raised, which are giving rise to that overcrowding.

A similar message may well apply to all rail services in Wales and cross-border services. In the past 20 years, passenger numbers in Wales have more than doubled, and the increase in the number of people travelling between Wales and England has been almost as impressive. As my hon. Friends the Members for Vale of Clwyd (Chris Ruane) and for Wrexham (Ian Lucas) said—in fact, I think everybody has said this—it is vital that people in Wales can connect to airports and the jobs and educational opportunities available in places such as Manchester and Liverpool. Similarly, good connections are needed in south Wales to Bristol, Bath and other places in the south-west. The Welsh Assembly Government have successfully opened the Ebbw Vale line, where passenger numbers have exceeded all expectations, and there was the welcome news in April that hourly peak services will be funded between Aberystwyth and Shrewsbury, starting next year. The hon. Member for Montgomeryshire (Glyn Davies), who is no longer in his place, noted that that would be just in time to carry newly elected Labour MPs. The internal devolution within Network Rail is an important step towards achieving a more cost-efficient railway that is more responsive to local issues. My hon. Friend the Member for Wrexham described the welcome investment in the Wrexham-Chester line, and we have also seen funding committed for greatly improved cross-border inter-city services through investment in electrification and the new intercity express programme trains.

There are, however, real obstacles to overcome. The cuts of the Beeching era, a long time ago now, still cast a long shadow. The Heart of Wales line only narrowly evaded closure. It is well known that a rail journey from south Wales to the north is by necessity a cross-border trip, as passengers must travel into England first. As we have heard, there have been problems with timetabling onward connections. Given the number of services that cross the border at some point on their journey, there is a continuing need for close co-operation between Governments and transport authorities. One cross-border operator was lost in 2011, when Wrexham & Shropshire failed. Passengers as well as some of the excellent local rail user groups that have been mentioned hope that existing services can be improved across Wales. I know from colleagues that it can sometimes cause frustration if we talk about north and south Wales in isolation, but it is important that future service specifications take into account the needs of passengers in mid-Wales and west Wales. My hon. Friend the Member for Llanelli (Nia Griffith) described some of the frustrations facing her and her constituents and touched on issues to do with freight operations.

Welsh Ministers have spoken of their desire to play an active role in shaping service priorities after the Wales & Border franchise expires in 2018, and the National Assembly for Wales will be entitled to act as co-signatory under the Railways Act 2005. However, in their submission to the Silk commission of March last year the Government said that the Department for Transport

“is in discussion with the Welsh Government to assess the feasibility of devolving franchise responsibilities, the financial and legal requirements of doing so and how the UK Government’s interests in services affecting locations in England could be protected.”

Will the Minister update the House on any progress arising from those discussions? What form does he envisage that devolution taking, and would he compare the models under discussion to the control that the Scottish Government exercise over the ScotRail franchise? What proposals has he put forward for managing risk, and what protections would be in place for English customers whose services are provided by Arriva Trains Wales? His answers will be of keen interest to passengers and transport planners on both sides of the border.

Further discussions have so far yielded more heat than light from the Westminster Government, and I hope that the Minister will provide some illumination. In the official response to the Welsh Affairs Committee’s 2012 report, the Government said that they would

“work with the Welsh Government to explore how Wales can get the most out of the new national high speed rail network.”

My hon. Friend the Member for Swansea West (Geraint Davies) spoke about maximising Wales’s benefits from investment. Will the Minister update us on that work? We have heard Members speak about how High Speed 2 will bring direct benefits to Wales and its cross-border services—in particular, I have in mind the contributions of my hon. Friend the Member for Clwyd South (Susan Elan Jones)—but can we expect to see a strategy document from the Government? In the same official response, the Government stated:

“The UK Government will continue to work with the Welsh Government and train operators to identify cases where the frequency of cross-border rail services could be increased, without the need for additional public subsidy.”

Will the Minister tell us what progress has been made in that area? The Welsh Government have committed to funding hourly peak services from Aberystwyth to Shrewsbury in 2015, but have any additional cross-border services been identified by the UK Government since that commitment was made last May?

On transport investment, it is certainly true that the Welsh Administration have looked at additional projects, but it must be recognised that they are doing so in an extremely challenging climate. The Tory-led Westminster Government have cut the Welsh capital budget by almost a third, which has constrained the ability of Welsh Ministers to deliver important investment projects, and it is difficult to resist the conclusion that those restraints are holding back growth. My hon. Friend the Member for Wrexham described the importance of improving transport infrastructure to support economic regeneration, and the strong desire for more local decision making, closer to those who understand the population’s needs, is well known.

Notwithstanding the improvements that have already been secured, we believe that the Government’s proposals for devolution, as set out in the Wales Bill, do not go far enough. In particular, Ministers have not explained why Wales must have a borrowing cap that is more constrained, on a like-for-like basis, than that of Scotland. The Silk commission concluded that the Welsh Government should have

“the capacity to borrow for capital investment on a prudent basis subject to limits agreed with HM Treasury.”

That investment could well be in public transport schemes, such as the rapid transit proposals for Cardiff mentioned today which have secured additional funding. Such projects could attract investment to deprived areas and deliver much needed skilled jobs, but the allocation of that funding should be decided by Welsh Ministers and the Welsh National Assembly. Long-term funding settlements could deliver the certainty needed to keep costs low and to ensure that projects are actually delivered, as would the political stability that would be established were the Welsh Government’s powers moved from a conferred to a reserved basis, as my colleagues in the shadow Wales team have set out.

That desire for stability contrasts with the reality under this Government. Electrification of the great western main line is a case in point. Despite the previous Labour Government committing to the project in 2009, it was paused after May 2010. We then faced a drawn-out process by which the plans were slowly reconfirmed. Electrification to Newbury was announced in November 2009, but the project’s extension to Cardiff was not announced until March 2011. Ministers said then that the line to Swansea would not be electrified, as originally planned. A year later and in the face of public pressure, however, they agreed that the route to Swansea would be electrified after all. In other words, thanks to the Government’s prevarication, a project initially announced in July 2009 was not confirmed until three years later. Following the delay in bringing forward that investment, will the Minister offer an assurance that the reported hold-ups in the initial works elsewhere on the line will not cause the timetable for electrification to Wales to slip? I hope that he will also assure my hon. Friends the Members for Swansea West and for Llanelli about future services and connections.

Similarly, the Government’s position on valley lines electrification has also changed somewhat. Ministers need to demonstrate that they are working in a spirit of constructive collaboration with their counterparts in Cardiff, and I hope that the Minister will provide an update on progress in the talks between the two Governments and answers to the questions posed by my hon. Friends.

Finally, I have a technical question for the Minister. Level 2 European rail traffic management system technology—ERTMS—has been trialled on the Cambrian line, but teething problems have been reported. What conclusions have been drawn from the trial? Is ERTMS fully operational again on the line following the extreme weather damage in January and the reopening of the line to Harlech in May?

In conclusion, the railways helped to forge the industrial strength of both England and Wales. As my hon. Friend the Member for Vale of Clwyd described in interesting terms, the tourism industry in Welsh seaside towns depended on the development of the railways—and obviously provided employment for young boys in Rhyl. From the world’s first passenger rail services on the Swansea and Mumbles railway to Brunel’s Severn tunnel, Wales has a railway heritage to be proud of. Cross-border services make a vital contribution to the modern economy of Wales and those of its neighbouring English city regions. It is clear from today’s debate that hon. Members of all parties want to see those services improved.

10:43

[The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)]

It is a pleasure to serve under your chairmanship, Mrs Riordan. Today’s debate has shown the importance of transport and the rail industry to economic growth and the lives and livelihood of so many people across the country. I congratulate the hon. Member for Newport East (Jessica Morden) on securing the debate.

Many of the questions that hon. Members have posed this morning reflect the challenges of success. Since the Conservative Government took the decision to privatise the railways back in 1993, the number of people using the railways has doubled. The hon. Lady raised issues of great importance to the economic development of both England and Wales. From her service as a member of the Select Committee on Welsh Affairs, she will know that cross-border links have been the subject of several inquiries, as have tolls on the Severn bridge, and I am grateful that she did not raise that matter today.

I will now address several of the points that hon. Members have raised during the debate. The hon. Member for Newport East asked some specific questions about her constituency, some of which I will answer in writing, if I may. On timetabling, however, franchise agreements require train operating companies to co-ordinate services, but that co-ordination clearly has not been as strong in certain areas as it might. There has been dialogue between the Severn tunnel action group, Arriva Trains Wales, Arriva and the Welsh Government, but I am disappointed that no sensible conclusion has been reached thus far. I urge the groups to continue to talk, because meeting the obligation is possible.

On connectivity, some of which is determined by constraints on the Cardiff to Cheltenham and Birmingham to Bristol routes, if there is a solution, which is possible, it will require some substantial work by Network Rail, the TOCs and the Welsh Government to investigate the options and then agree on one.

The hon. Lady also mentioned her constituents’ desire to be able to use the Bristol service to work there. Some substantial work has been done with local authorities in the west of England to fund additional services, including those to Portishead, which will introduce a metro service to the area. While that is of benefit to the Bristol area, as the hon. Lady is right to say, we are currently encouraging the Welsh Government and the West of England local enterprise partnership to talk to ensure greater connectivity between the two schemes, which would be of benefit to her constituents.

The hon. Member for Vale of Clwyd (Chris Ruane) spoke of his time as a casing boy, as I think he described it. Although probably not as glamorous as that of the hon. Gentleman, I too had a job on the railways and spent two rather hot summers as a carriage cleaner many years ago during my university career. He was right to mention the potential of connectivity to Airbus in Deeside to generate jobs, but that is unfortunately a matter for the Welsh Government, so I urge him to take the matter up with them to see whether it can be improved.

[Chris Ruane]

The Minister will recall that I said that the Department for Work and Pensions had grants available 10 years ago to improve transport from areas of high unemployment to areas of employment. Is that not another possible source of funding?

[Stephen Hammond]

Most issues concerning rail services wholly inside Wales are now a matter for the Welsh Government, which is the key point here.

The hon. Member for Alyn and Deeside (Mark Tami), who is no longer in his place, suggested that rail is an afterthought. That may or may not have been the case previously, but it is certainly not the case under this Government. Rail is at the heart of both our economic and transport strategies.

The hon. Member for Wrexham (Ian Lucas) referred to the scale of investment that he had seen elsewhere. The scale of investment proposed in the current control period between now and 2019 dwarfs any of the investment that he has seen in any other country, because £38 billion is being invested in this country’s rail system. On top of that, £30 billion is going towards the road system. He mentioned regional input, and we will soon be announcing local growth funds, into which local authorities will bid. We have also encouraged local authorities to come up with local rail projects, and there is also the local pinch point fund, so there is much local activity.

The hon. Gentleman also referred to the Wrexham to Bidston line, and I recognise and understand his desire for its electrification. At the moment, however, the aspiration should be to get a more frequent diesel service so that plans can move forward. The hon. Gentleman is right to have such hopes and I promise to work with him, because increasing frequency on that line would be of substantial benefit to his constituents.

My hon. Friend the Member for Montgomeryshire (Glyn Davies) spoke of his campaign for an hourly service from mid-Wales so that newly elected Conservative MPs can actually get to London, and I am delighted that that service is in place. He also asked about the new Virgin direct award deal and direct services from Shrewsbury to Euston. I confirm that he is absolutely right: there would be little point in putting in place a service that did not allow for economic growth and for easy movement from London to Shrewsbury, and the other way around, to do a day’s work. The first train in the morning leaves before 6.30 am, but gets into London by 9.15 am; the last train back in the evening leaves around 6.30 pm—I think at 6.32 pm—which gets someone back into Shrewsbury for 9 o’clock, allowing a full day’s work in London if necessary.

The hon. Member for Swansea West (Geraint Davies) made a number of points, some of which I will cover later in my speech. He talked a little about his aspiration for renationalisation of certain parts of the line. I am not entirely sure where that fits with the shadow Chancellor ruling it out on the television on Sunday. I am happy to reaffirm to him, however, that the Government’s view is that franchising, and the creation of partnerships between the public and private sectors, is the best way to get value for money and better services for the fare payer and the customer, as well as the taxpayer. That is clear.

[Geraint Davies]

What I was getting at was that the east coast main line is now in public ownership, or publicly run, and we are saving £700 million, so does the Minister have an open mind on individual franchises? There was a basis for competitive tendering to include the public sector, so that we got the best value for money. I am not talking about total nationalisation for the sake of it; I want best value for the taxpayer. Does he agree with that, or does he want to give money away willy-nilly to the private sector because he is the one that is ideologically driven, not me?

[Stephen Hammond]

I absolutely disagree. The east coast franchise, however, will be out of public hands and back into private hands as a result of the franchising. By the end of the year, we will have announced the winner of that competition.

The hon. Gentleman must have noted the Rail Delivery Group report that came out on Monday, which pointed out that, since privatisation, the level of private sector profits for the rail companies has fallen, while the premium going to the Government has risen by more than £400 million. The facts show not only that privatisation has seen a doubling of passenger numbers, but that franchising has benefited both passenger and taxpayer. He should agree that those facts bear out the point that the process is not ideologically based at all.

The hon. Member for Llanelli (Nia Griffith) talked about the Pembrokeshire to Manchester stopping service, but that is a matter for the Welsh Government, because the stops would be inside Wales. I am sure that the Welsh Government will read her comments, and I hope that they will take them on board. As hon. Members know, it is true that co-operation on and, where appropriate, co-ordination of transport matters between the Department for Transport and the Welsh Government is important to the success of cross-border links. Relationships have advanced significantly and co-operation under the joint parties agreement occurs regularly. The Welsh Government and the Department have a good working relationship. Officials can therefore provide Ministers with the best advice possible to deliver some of the aspirations that we are discussing.

Co-operation between the two Governments is clearly vital if we are to secure the best possible benefit from the record levels of investment now going into the rail network. The investment for 2014 to 2019 that I mentioned—the details were published in July 2012—is built around four priorities: further electrification; increased capacity and faster journey times between key cities; facilitating commuter travel between and into major urban areas; and improving the major railway links to ports and airports. More specifically in Wales, the strategy includes the £1.35 billion electrification of the Great Western main line between London and Cardiff, on which services are expected to be electric by late 2017, and the electrification of the valley lines, which is due to be completed by 2019. Furthermore, the UK Government are specifying and funding electrification of the line from Bridgend to Swansea, thereby completing the 47-mile main line electrification from Cardiff to Swansea.

[Geraint Davies]

Is there, therefore, an undertaking for the Government to finance it all the way from Paddington to Swansea? The Minister also seems to be suggesting the valley lines will be included, but is there now at least a commitment that the UK Government will pay from Paddington all the way through to Swansea? Is there clarification of who is paying for the valleys bit?

[Stephen Hammond]

As the hon. Gentleman knows, that discussion is ongoing. The Welsh Government have raised issues about the arrangement signed with my right hon. Friend the Member for Putney (Justine Greening), who was Secretary of State for Transport at the time.

[Nia Griffith]

Will the Minister flag up in all franchise discussions the issue of people having to change trains as the line is gradually electrified, so that we do not end up with more changes than necessary? We want one simple change, if necessary, in Swindon, Bristol or Cardiff, according to how far the electrification has gone, and then to go right through to west Wales.

[Stephen Hammond]

With regard to that and to First Great Western, we have undertaken a consultation this year about what the services might be and how they might be improved in the next direct award. I hear what the hon. Lady says, and I am keen not only to specify services that provide the best value and best opportunity for travellers, but to allow the privatised companies the best advantage to ensure that they can look at new services and new opportunities for new markets, using innovation within the franchise.

Other elements of our strategy will also be of benefit to Wales. The Heathrow western access scheme will reduce journey times between Cardiff and Heathrow airport by about 30 minutes from 2021. The UK Government have committed to the introduction of super-express trains on the Great Western main line by 2018, which will reduce the journey time between Cardiff and London from about 2 hours to 1 hour and 42 minutes. Crossrail will then speed up access between Paddington and central London from 2019, which will provide a fast, one-change journey from south Wales to the City of London, the docklands and beyond. Welsh stations will also share in the £100 million of station improvement funds and the £100 million of Access for All funds from 2014 to 2019. Overall, therefore, Wales stands to benefit directly and indirectly from almost £2 billion of investment in modernising the rail network.

Cross-border rail services between England and Wales are provided by four franchised train operators. The Department for Transport has a statutory obligation to consult Welsh Government Ministers before issuing any invitation to tender for a franchise agreement that includes cross-border services. As I said in response to a number of questions, where a service is provided wholly within Wales, the Welsh Government must be a signatory to the franchise.

The Arriva Trains Wales franchise is not due to expire until October 2018. The Welsh Government specify and fund services within Wales and across the border, and they carry out the day-to-day management of the franchise and have the powers to fund improvements. Train operators are of course free to run additional services if they consider that is the right thing to do. The Department is working with Arriva Trains Wales to provide additional cross-border services from December 2014.

On Silk and further devolution, which came up several times, the Government support the decision to devolve Welsh services in the Wales and Borders franchise to the Welsh Government. A joint agreement governs joint management of the existing franchise to 2018. In our evidence to part 2 of the Silk commission, the UK Government noted the strong case in favour of modifying the devolution boundary in respect of the Wales and Borders franchise. The Silk commission subsequently reported that further devolution of the rail network in Wales would be possible and desirable, although it would require close cross-border co-operation. Our response to Silk made it clear that recommendations that did not require primary legislation could be implemented early if we were satisfied that the case for change had been clearly made and there were support across Government for its implementation.

We recently held a consultation on the second direct award, and I recognise the concerns that have been expressed about the First Great Western franchise. That was why we carried out the public consultation, so that it could inform us of some of the concerns and issues so that they can be addressed when the award is made.

A number of Members raised the issue of the high-speed network. High Speed 2 will deliver significant benefits for Wales through the interchange at Old Oak Common and the improved journey times to London and the north via Birmingham and Crewe. It will also allow for greater commuter, freight and local services from the capacity released on the existing networks. Intercity express programme trains will also be coming to Wales from 2017—

[Mrs Linda Riordan (in the Chair)]

Order.

To allow the next debate to begin, I ask Members leaving the Chamber to do so quietly.

Rural Paper Industry

Wednesday 2nd July 2014 Westminster Hall

11:00

[Mr Iain McKenzie (Inverclyde) (Lab)]

It is a pleasure to serve under your chairmanship once again, Mrs Riordan. I thank the Minister for coming along to give his thoughts on the Government’s position on securing and enhancing our rural economy.

Creating business opportunities and increasing jobs rightly continues to be an important focus of this Parliament. There is no greater challenge than bringing jobs and business to all areas of the UK, be they rural or urban. My constituency has both rural and urban communities, and the more rural areas are growing. Although those communities can be sustained by people travelling to towns and cities for employment, for various reasons we still need to provide work for the rural population.

With that in mind, I recently visited a new business venture in my constituency called West Coast Woodfuels. The business, which was set up in the hills behind the village of Inverkip, uses sustainable forestry management to produce and supply wood chip for biomass energy. However, the sustainable forest maintained for that purpose relies on servicing a limited number of biomass customers. The plan was always to establish a green industry, acknowledging that the UK’s forest and timber industries are virtually carbon neutral.

Forestry management maintains vital investment in rural economies and plays an important role in the construction, renewable energy, paper and tourism sectors. Historically, forests were planted, maintained and harvested to provide wood and building materials, as well as tools and timber for industry. Britain saw a serious decline in its forested land in the 19th century, when deforestation occurred at an alarming rate to meet agricultural and industrial demands. The 19th century also saw wood pulp from trees gradually replace other sources of fibre used for paper making, such as straw, grasses and rags. Our history shows that the recovery from world war two did much to focus minds on the need to rebuild industries and the economy. As a result, forests were intensively harvested primarily for timber production.

[Guy Opperman (Hexham) (Con)]

I congratulate the hon. Gentleman on securing this important debate. I speak as the representative of the constituency with the largest forest in the United Kingdom—Kielder. Egger, in my constituency, has a cross-border interest in Barony, which is in Ayr, and in Hexham. As a supplier of wood chip, it is very dependent on the businesses the hon. Gentleman is talking about. Does he agree that this and future Governments must consider the commercial forests of the future so that we have an ongoing forestry ecosystem?

[Mr McKenzie]

The hon. Gentleman is absolutely spot on: forestry must be managed for the future, to provide not only raw materials but jobs and industry in the areas I am talking about.

The trend towards deforestation has now been arrested, but even though the UK has favourable growing conditions, only 12% of its land is forested, compared with 28% in France and 32% in Germany. Since the 1950s, increasing quantities of paper have been made from recycled sources, but the rest comes mainly from virgin wood fibre from coniferous trees grown in sustainably managed and certified forests. On the whole, that makes good economic and environmental sense in the densely populated but under-forested UK.

Of the timber extracted in the UK, less than 5% is used in paper and pulp production, compared with about 11% in other countries. That timber is lower-grade conifer logs and forest thinnings. Higher-grade timber is generally used by other industries, such as construction and furniture making.

Clearly, the paper industry depends on trees and needs new, thriving forests. It is very much in the industry’s interests for trees and forests to be used sustainably and to remain available as a raw material for future generations and as a source of future employment. The industry employs thousands of people across the UK and indirectly provides even more jobs in sectors such as publishing and packaging. That helps to generate wealth, and it creates jobs in predominantly rural areas, where it can be the only source of revenue for local populations.

In many ways, the pulp and paper industry is a business model of sustainability, and 2013 was relatively successful for it—more so than recent years. Increased consumer spending helped the packaging sector and other sectors. Looking to the recent past, we see that peak employment directly in the paper industry was reached in 1959, when it employed 100,000 people. By 1960, UK paper consumption exceeded 4 million tonnes per annum for the first time. However, by 1981, imports of paper and board exceeded UK production for the first time. Since then, this employment has declined, along with the number of mills. However, tonnages have continued to increase. By 2012, there were 53 mills in the UK, producing an estimated 4.4 million tonnes of paper and board.

Paper mills use recycled paper to produce 70% of the fibre for paper making in the UK. However, paper can be recycled only a set number of times—I am told the maximum is about seven. After that, the paper loses its fibre and is no longer useful for making good quality paper, so forestry still underpins the industry.

Virgin pulp comes from northern England, Scotland and abroad, and 5% of harvested UK timber is used in paper making. As I said, UK timber can also be used in biomass energy production, making biomass an ever-growing additional competitor of the paper industry for new wood, and suggesting that more forests are needed. Forests are a renewable, sustainable resource. They are carbon neutral, and they also create pleasant environments for leisure activities. In the UK, there is consensus that improved forest management would increase rural employment.

What, then, of the impact of recycling as we steadily improve our performance on our recycling targets up and down the country? Since the 1950s, UK paper makers have steadily increased their use of recovered paper, and nearly 70% of the fibres used to make paper in the UK now comes from paper that has been collected and recycled. As I said, however, there is a limit to the number of times paper can be recycled. There is also an ever-growing and fiercely competitive market for recycled paper, so new pulp needs to be sourced.

It is not only the paper industry that requires access to new pulp. The UK packaging manufacturing industry also requires it. It has annual sales of £11 billion and employs 85,000 people, and represents 3% of the UK’s manufacturing work force. It is a powerful addition to those demanding access to new sources.

I have visited a packaging firm in my constituency. McLaren Packaging, which produces packaging for more than 100 whisky products, has invested in cardboard tube manufacturing with great success. In fact, most of the whiskies that are on display in shops or exported will feature distinctive packaging from McLaren Packaging in Port Glasgow.

The cardboard packaging industry’s main product segment, however, is corrugated cardboard boxes, with additional cartons and cases. Such products are made of three layers of cardboard sheeting, with a corrugated sheet in the middle, making the box more durable than standard containers. Cardboard boxes have a wide variety of applications and are used to package many products across a range of sectors. Its customers include manufacturers, wholesalers, storage owners and retailers. In general, demand for cardboard boxes correlates with demand for consumer goods as greater manufacturing output triggers a greater need for packaging.

In my part of the UK, forestry is sometimes described as the secret industry. About 40,000 jobs would disappear from the area if there were no forests or forest industries. Every week, some 4,000 lorry loads of harvested wood are transported to mills for conversion into timber for house building, quality paper and many other essential products. After felling, more trees are planted and the cycle continues. That makes forestry truly sustainable. It promotes economic activity in rural areas in ways that protect and conserve the natural environment and wildlife. Forests also support a network of interdependent businesses, including those of forest owners and managers who produce wood while creating wildlife habitats and providing recreation facilities. There are forest nurseries, where young trees are grown. In addition, contractors harvest the wood, and hauliers transport it, and there are businesses that process wood, such as the paper industry.

The development of wood-processing industries really took off in the 1980s. That was when the forests created during the middle part of the 20th century began producing significant volumes of softwood. However, careful management of the forests can also produce the energy for manufacturing of paper through energy biomass. Thus there is a natural resource that can not only be transformed into a product but can fuel the manufacturing process to create the product. More than half the energy used in the EU paper industry now comes from biomass, and the UK paper industry is using biomass with increasing frequency. That means that more forests will be needed to provide adequate supplies for both energy biomass and other industries, such as paper. Creating a rural paper industry next to a forest would seem as natural and logical as it was in the past to match up a mill with a stream for hydro power.

The European pulp and paper industry is in many ways a business model of sustainability, and it is largely rural.

[Guy Opperman]

The industry experts to whom I have spoken on both sides of the border are opposed to Scottish independence and the impact that that would have on the businesses we are concerned about. Does the hon. Gentleman agree?

[Mr McKenzie]

I thank the hon. Gentleman for bringing in the Scottish question, which I think will come into just about every debate from now until September. Yes, clearly, as he pointed out, in the context of the industry, independence would create another problem for the population of Scotland.

A need has been identified for more forests in the UK, and it would seem that a clear start could be made by creating more forests in the rural north of Britain. Related manufacturing industries could then be attracted to forested rural areas, bringing even more jobs and business to areas of the UK where we can tap into a sustainable natural resource. The Confederation of Paper Industries, which has 68 member companies employing 25,000 people directly, tells us that there is a need for access to new sources of paper, to sustain demand and enable the industry to grow. Also, the paper industry is said to support a further 100,000 jobs indirectly. The turnover of CPI member companies is reported to be in the region of £6.5 billion. Competition for recycled paper and the limits on the number of times paper can be recycled mean that new sources are increasingly in demand. Great quantities of paper are never recycled—we need think only of the volume of paper being flushed away each day that will never be recycled.

Will new technologies ever truly replace paper? That idea is used as a counter-argument—against increasing the number of sources of new paper and pulp fibre. We strive for the paperless office, but we are miles away from achieving it. Merely looking around Parliament provides evidence of that. Paper and card will always be necessary for packaging. Paper is more environmentally undisruptive than plastic. Even paper for print and writing is unlikely to die out, despite e-books. Some 80% of social network users—diehard committed onliners—say they still require paper. Demand for paper and paper products can only increase. Even the mighty iPad requires packaging.

Rural and semi-rural areas can only benefit from sustainable management of their forests and attracting a paper industry with access to new material and an energy source. That would hopefully mean an increase in jobs, business and population for rural areas. Let’s try to see the wood from the trees.

11:15

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I congratulate the hon. Member for Inverclyde (Mr McKenzie) on securing a debate on this important matter. As he said, the paper industry is an important one and always has been. The hon. Gentleman gave historical figures, and he might like to know that I was brought up in a paper mill village. Bullionfield paper mill in the village of Invergowrie supplied high-quality paper for more than 100 years, including, as I recall, paper for the Tokyo Olympics programmes.

The Government recognise the challenges facing all the energy-intensive sectors, including paper, and I welcome the industry’s positive recognition of Government support in its June 2014 review. That review commended the steps being taken by the Government to ease the direct and indirect costs that climate change policy places on the industry. Improving economic conditions have fed through, as the hon. Gentleman said, to a more successful year for most paper sectors. The data show that measures to help the paper industry have resulted in real growth in the sector. I want to comment specifically on what we are doing to help the paper industry with its energy costs and respond to what the hon. Gentleman said about the importance of job creation in rural areas. If there is time, perhaps I will give a little more detail on what we are doing to promote sustainable forestry.

The Government are increasingly concerned about the effects of high energy prices on the competitiveness of our energy-intensive industries, including paper. That is why we now make compensation payments for the indirect costs of the EU emissions trading system. We intend to make the first payments for the indirect costs of the carbon price floor this summer. Further measures were announced in the Budget: a cap of £18 per megawatt-hour on the carbon price support mechanism, which will benefit all sectors of the economy; and compensation for the costs of the renewables obligation and small-scale feed-in tariffs from 2016. That is the most significant policy cost affecting the price of electricity. The Chancellor also announced the continuation of the ETS and CPF compensation schemes until the end of 2020.

We have paid some £32 million in ETS compensation to 53 companies so far, across the UK, including £5 million to eight companies in Scotland, operating 17 sites between them. The paper industry shared £8 million between 28 companies, including three in Scotland: Ahlstrom Chirnside in the borders, UPM-Kymmene near Kilmarnock, and Tullis Russell paper makers, near Glenrothes. Those companies have been benefiting from the support that we are making available. I am pleased that paper, as an energy-intensive industry, is eligible for compensation across the whole spectrum of measures. The industry recognises that those Government support measures will save it up to £170 million over the coming years.

The hon. Gentleman said some important things about the role of the paper industry in helping to stimulate jobs in rural areas. That is a priority for the Government. We have introduced a range of policies and initiatives to promote growth in rural areas by helping to deliver new infrastructure, particularly broadband; by raising skill levels; and by supporting small and medium-sized enterprises. We are also trying specifically to support the rural economy by investing in rural tourism and supporting micro-enterprises. We have five pilot rural growth networks—not in Scotland but in Cumbria, in the north-east of England, and in the south of England—aimed at tackling specific barriers to growth in rural areas such as a shortage of work premises, slow internet connectivity and fragmented business networks. Those pilots are expected to create up to 3,000 jobs and support up to 700 new businesses. We want to share the lessons we learn from them with local authorities and local enterprise partnerships.

Tourism is an important driver of the rural economy. We must ensure that we are doing more to take advantage of the predicted growth in the tourism sector as a whole to ensure that the rural part of the tourism sector does not lose out. We are making funding grants available to tourism businesses to boost the rural economy through the rural economy growth review and rural broadband. We are also providing support for a high-quality tourism visitor economy through a £25 million package of support, including £6 million for partnership projects funded by the rural development programme.

I turn to the creation of sustainable forestry that can feed back into the industry. Forestry is a devolved matter, so any specific concerns the hon. Gentleman has relating to Scotland should be raised with the Scottish Government and Scottish Parliament. Throughout the United Kingdom, we are working to promote the future success of our woodlands by ensuring their sustainability. In January 2013, we set out our vision in a forestry and woodlands policy statement, which included our priorities for future policy implementation, focusing on protecting, improving and expanding public and private woodland, and recognising the multiple benefits that woodlands provide to the economy, to society and to the environment. Alongside that, we recognise that a strong timber industry helps to deliver the core objectives of protecting, improving and expanding woodland, and contributes to the growing strength of the rural economy.

[Guy Opperman]

We all agree that we need more forestry to cope with existing businesses and the enhanced and expanding subsidised biomass businesses. Post-world war one, we planted Kielder in my constituency specifically to accommodate the need for large forestry infrastructure. I am worried that the Government do not have the big project ideas for large forestry planting going forward. Will the Minister expand on that? It is very much what businesses that I speak to, including forestry businesses, are looking for a steer on.

[Michael Fallon]

My hon. Friend is right, and I will address the steps that the Government are taking.

The forestry industry makes a significant contribution. It provided some £230 million gross value added in the latest year for which figures are available, an increase of 52% over the two or three preceding years. We are committed to invigorating the woodland economy, bringing neglected woodland back into management and helping to create jobs and growth. We support and are encouraged by the new sector-led “Grown in Britain” initiative, which is creating increased market demand for British wood products. Although it was launched only in October 2013, it already has the support of 200 organisations, ranging from forestry suppliers, processors and product manufacturers to big-name high street retailers and UK construction firms.

“Grown in Britain” is driving a change in forestry that could see the management and new planting of woodland become more economically viable. Strengthening and expanding our forestry supply chains is not only creating new market opportunities but, crucially, creating an incentive for increased private investment in woodlands. We are working with “Grown in Britain” to pioneer ways of making it easier for businesses to direct their corporate responsibility investments into projects that improve the ecosystem services delivered by woodlands and result in more tree planting.

We are also making good progress in expanding the woodland cover across England. It is now as high as it has been since the 14th century. We want it to increase by planting the right trees in the right places for the right reasons. We also want more of our woodlands to be managed sustainably to maximise their public benefits. We estimate that if we work together with the sector, we could help to achieve 12% woodland cover by 2060, provided that private investment in woodland creation increases in line with our expectation.

We continue to do our bit in supporting woodland creation. The total area covered by the woodland creation grant in the year to March 2014 was 2,691 hectares, which is more than the seven-year rural development programme target of an average of 2,200 hectares a year. In this financial year, some £30 million of rural development programme funding is being invested, £24 million of it on management of the existing resource and £6 million for planting about 4 million trees on 2,000 hectares of new woodland.

Our woodland carbon code also provides a mechanism further to enhance private sector investor confidence in woodland creation projects for carbon benefits. More than 142 projects have sought certification to the code, representing more than 14,000 hectares of new woodland being planted that will sequester more than 5 million tonnes of carbon dioxide during its lifetime. That is a huge increase from the position a year ago and reflects the growing interest in domestic carbon emissions projects and the success of the woodland carbon code.

On improving woodland management, more than 50% of England’s woodlands are now managed under the UK forestry standard, which sets good practice guidelines for sustainable forest management. The UKFS is a world-class forestry standard administered by the Forestry Commission, and is the foundation for good forestry practice throughout the United Kingdom. It is therefore fundamental to the delivery of sustainable forest management. It provides a valuable toolkit for helping woodland owners to manage their woodlands productively and sustainably. Its application can lead not only to increased timber yields but to better flood risk management, the safeguarding of clean water supplies and the conservation and enhancement of biodiversity.

Our ambition is to increase the proportion of existing woodland under the UKFS. In our forestry and woodlands policy statement, we estimated that working effectively together with the sector could bring two thirds of woodlands into active management in the next five years, with the potential to reach some 80% if markets develop. Good progress is being made, and already the area of woodland under active management has increased from 52% three years ago to 55% in March this year. The key to bringing more woodland into such management is economic viability, and a range of measures are promoting sustainable woodland management, underpinned by the UKFS.

We are actively supporting the sector-led “Grown in Britain” initiative in its efforts to increase demand for and supply of British wood and wood products. Although still in its early stages, the initiative is beginning to make a difference. For example, to date some 19 major UK contractor group companies with a collective turnover of more than £24 billion have pledged to look into ways of procuring more British timber for their construction projects. Their buying power will help to stimulate demand for British wood products, which should lead to more woodland management and economically sustainable woodlands, and in turn to more private investment in woodlands, which we all want to see.

I am grateful to the hon. Member for Inverclyde for raising these important topics. The paper industry is important to us, and we recognise the challenges it faces and the high cost of the energy that it necessarily uses. I have outlined the measures we have taken to alleviate those costs. I have also explained how we see rural development as a major part of our economic recovery and our pilot work to improve the success rate of small businesses in rural areas. Finally, I have explained what the Government are doing to increase investment in private woodland and to drive up the proportion of woodland that is under active, sustainable management to increase the supply of timber to our own industries.

11:29

Sitting suspended.

Disabled Students Allowance

Wednesday 2nd July 2014 Westminster Hall

[Mr Jim Hood in the Chair]

14:29

[Mr Jim Hood (in the Chair)]

Before I call Dr Julian Huppert, I inform hon. Members that I already have 12 speakers on my list, plus the two Front Benchers, and I will be calling the Front Benchers at 20 minutes to 4. After Dr Huppert has made his speech, I will then work out a time limit and advise hon. Members of it. I hope that interventions, if they are taken, will be brief, and I may have to remind Members of that if they try to make speeches in their interventions.

[Dr Julian Huppert (Cambridge) (LD)]

It is a pleasure to serve under your chairmanship, Mr Hood. I will do my best to abbreviate my speech in deference to the large number of Members who have shown up. It is good to see everybody who has come here. We are united by a belief that everybody, regardless of who they are, should be able to aspire to go to university. Regardless of disability, whether it is physical or mental, visible or invisible, there should not be a barrier as a result of it. There have been improvements on widening participation. At the university of Cambridge, where I used to be and which I now have the pleasure to represent, in 2007, only 4% of students were disabled. That has gone up to 10% now, and it is a trend that we see across the country. Universities have worked very hard to try to get disabled applicants to apply, to support them and to get rid of barriers. As a former director of studies and supervisor, I have seen some of that work and engaged in some of it to try to support students.

We have to ensure that the progress continues, because there are challenges. In general, life costs more for people who are disabled, and the same applies to student life. The disabled students allowance is a lifeline for many students with disabilities. That is why I sought the debate and why I am pleased to have secured it, after having seen the Minister’s proposals and heard the concerns that many people have expressed to me.

[Caroline Lucas (Brighton, Pavilion) (Green)]

I congratulate the hon. Gentleman on securing this important debate. Does he share my alarm that that National Union of Students has said that as many as 55% of students with disabilities have seriously considered giving up their courses, many of them precisely because of financial concerns?

[Dr Huppert]

I do indeed share that concern—I will now take that point out of my speech—and the key point is that that number is significantly higher than it is for non-disabled students. I have been working with the National Union of Students, Anglia Ruskin university students’ union and Cambridge university students’ union on that. I want to draw Members’ attention to early-day motion 48, which was tabled by the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett). It is a pleasure to work with him on that—I am one of the co-sponsors—and we have now reached 99 signatures to that motion. I hope we can get over 100 today, because it shows that the issue matters to Members across parties.

In 2012-13, the payments helped 54,000 students up and down the country, doing so at a slightly lower cost than was necessary in 2011-12.

[Mr Mark Williams (Ceredigion) (LD)]

I congratulate my hon. Friend on securing the debate. He talks about “the country”, but has he considered the implications of the policy for students studying in Wales and in Scotland, where there is great concern about the Government’s proposals? Although the review is England-only, it has dire implications for Wales and Scotland.

[Dr Huppert]

My hon. Friend is absolutely right. I have mostly been focusing on the effects in England, and mostly on the effects in my constituency, but he is right that there are concerns about what might happen in Wales and Scotland. Of course, students study across the borders.

The support helps students with all sorts of equipment, such as computer software, but also with non-medical helpers, note-takers and all sorts of travel costs. It helps people to reach their potential, and it works. Figures from the Equality Challenge Unit report the year before last showed that disabled students who get the support are more likely to achieve a first or upper second-class degree than students who do not get that sort of help.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

Does the hon. Gentleman share my concern that although an equality analysis of the proposals has not yet been carried out, the Minister, in a letter I have just received, states that it is the detail of the implementation of the proposals that is yet to be decided?

[Dr Huppert]

The hon. Lady raises an absolutely reasonable concern, and I will, again, take that point out of my speech.

We should be able to help people, and there are so many advantages to attending university; as well as the human benefits, the economic benefits are clear. It boosts the national economy, and it boosts personal earnings by something in the order of £100,000 over a lifetime.

As the Minister said in a speech to the Higher Education Funding Council for England last year:

“Going to university increases the chances that you will vote and appears to make you more tolerant. It improves your life expectancy. You are less likely to be depressed, less likely to be obese and more likely to be healthy. These are benefits for individuals and for society.”

He went on to say that

“I said it would be a tragedy if anybody were put off from applying for university”

because of costs. That is what this modernisation could do; it could act against those excellent words from the Minister.

[Kate Green (Stretford and Urmston) (Lab)]

Will the hon. Gentleman give way?

[Dr Huppert]

I will make some more progress.

Although the Minister will, I am sure, make it clear that the changes are not due to come in for another 18 months, and that current students will be protected for 2015-16, they are already having an effect. Paddy Turner, from the National Association of Disability Practitioners, said that his staff are already seeing prospective students who are rethinking 2015 entry applications because they are concerned about the changes. Open days are already under way. Many students are visiting universities to find out what will happen, and universities simply do not know what to say. The changes could mean that people are put off, or that they struggle when they get to university.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Will the hon. Gentleman give way?

[Dr Huppert]

I would like to make some more progress, if I may.

I have spoken to many people about the issue. I pay tribute to the three unions—from Cambridge university, the National Union of Students, and particularly the union from Anglia Ruskin—that organised a fantastic event with a large number of people who have been supported by DSA. They spoke very movingly about the experiences that they have had. I was intending to say a bit more about individual cases, but in the interests of time I will not. However, I was struck by how many of the cases involved mental health issues rather than just the physical health issues that people so often think about. There were people with dyslexia who had not had the support that they needed. It was only quite late on that they discovered the help that was available. They would never have been supported otherwise; they would have never have been able to do what they wanted to do.

At Anglia Ruskin university, 1,800 students are eligible for DSA, so there are 1,800 stories of people being helped. There are similar numbers at the university of Cambridge. It has made a huge difference, but that is at risk, because universities are being expected to provide the support themselves. Where will they get the extra money? There is to be no additional funding—indeed, the right hon. Member for Sheffield, Brightside and Hillsborough has had that confirmed through a written question.

[Mr Ben Bradshaw (Exeter) (Lab)]

How far does the hon. Gentleman think that the reasons for this decision go back to the Government’s mismanagement of the student loan book and student finance as a whole?

[Dr Huppert]

That is a somewhat broader question. There have been issues with the student loan book dating back some 15 years, as I am sure the right hon. Gentleman will know. Rather than arguing about that broader debate—he will know that I am staunchly against the fee system that his Government set up, which is being expanded—we should fix the problem in question. I am always happy to discuss those issues with him, as he well knows.

We have heard concerns from the National Autistic Society about what support will be available for people who are on the autistic spectrum. How will they be able to hold universities to account?

[Mr Robert Buckland (South Swindon) (Con)]

I commend my hon. Friend for securing the debate. In the course of proceedings on the Children and Families Act 2014, there was much discussion about whether the duty in it should extend to higher education. We were assured that in light of the particular grants that are available, we need not worry. Does he agree that it may be necessary to reconsider extending the duty to higher education, to cover students between 19 and 25 years of age?

[Dr Huppert]

I agree completely. My hon. Friend makes an essential point. He is a dedicated campaigner on autism issues—and I will now remove page 12 of my speech.

What sort of support will there be? I have some sympathy for the Minister’s comments about the provision of basic computers. The world has changed since I was an undergraduate. Most people have a computer now, but a lot of the software that is needed simply will not run on a basic computer. What happens if people need software that is not compatible with the perfectly reasonable computer that they have? What about technical support—how would that work? What about support for scanners if optical character recognition is needed? What about training? There are many, many questions.

[Several hon. Members]

rose—

[Dr Huppert]

I will take an intervention from the hon. Member for Birmingham, Erdington (Jack Dromey), then I will continue.

[Jack Dromey]

I congratulate the hon. Gentleman on securing the debate. He is absolutely right about the importance of access for disabled people. Does he agree with the comments of the Muscular Dystrophy Campaign that young women such as Keisha Walker in my constituency—she is from a modest background, and no one in her family had ever gone to university before—simply could not have gone to university, stayed at university and become a success, as she is determined to do, without the help of DSA?

[Dr Huppert]

I agree completely. The Muscular Dystrophy Campaign’s trailblazers case studies have been incredibly powerful. I hope that the Minister has had a chance to look at them. I will not go through them in any detail, in the interests of time, but there are many of them.

[Duncan Hames (Chippenham) (LD)]

Will my hon. Friend give way?

[Lucy Powell (Manchester Central) (Lab/Co-op)]

Will the hon. Gentleman give way?

[Dr Huppert]

I will take these two interventions and then try to finish my speech. I will take the hon. Lady’s intervention first.

[Lucy Powell]

The hon. Gentleman has been very generous with his time. I agree entirely with his point about computer facilities. I met my constituent Suzannah last week. She suffers from autism and described to me exactly what the hon. Gentleman is saying, but she also said that the desire for students to use banks of computers is not appropriate for those with autism and other problems, who find public areas too distracting and too difficult to work in.

[Dr Huppert]

The hon. Lady is absolutely right. We need to tailor the support to the individual. What is suitable for people on the autistic spectrum can vary substantially, which is why they need assessment and the help that is right for them. For some people, a bank of computers will be perfectly fine; for others, it will not be.

[Duncan Hames]

I thank my hon. Friend for giving way and for securing this important debate. My constituent, a member of the British Assistive Technology Association, points out that whoever is providing the support, whether it is the Government or higher education institutions, it is vital that students have the support that they need to use the technology—hardware and software—as effectively as possible, to get the maximum benefit from it.

[Dr Huppert]

My hon. Friend is absolutely right. As it happens, my mother is registered blind and relies on assistive software. It takes a huge amount of support for her to be able to use it, and I often have to provide that support. My hon. Friend is absolutely right to raise the point about the need for that.

I will make further progress, because I understand that many hon. Members want to speak. The NUS has highlighted a number of specific concerns about how the system will work, and I would be interested in the Minister’s specific response. There is a risk that the reforms could deter institutions from actively recruiting disabled students, because if the institutions are responsible for paying the extra costs, there will be an incentive not to take people who will be a bit more expensive. Although universities have a duty to provide reasonable adjustments for their students, there is no clear definition of what “reasonable adjustments” mean and no funding available to provide them.

The NUS makes another point, which is about the routes of redress for disabled students when there is a problem. There is only a finite amount of time available to fix that. Who would provide advocacy—would it be the disability support office? It could cause huge internal tensions if one part of the university is having to fight another.

[The Minister for Universities and Science (Mr David Willetts)]

I am grateful to the hon. Gentleman for giving way; he is rattling through a lot of important points very quickly.

It is important to recognise that universities are of course under an equality duty. The House has voted under successive Governments to introduce that duty, and at no point has there been the suggestion that extra funding has to be given to a public or private body to enable it to discharge its equality duty. Fortunately, the resources available to universities for teaching are increasing from £7.9 billion at the beginning of this Parliament to £9.9 billion at the end of this Parliament. That is a result of the changes that the hon. Gentleman “steadfastly opposed”, to use his words. They are among the few major national institutions that are seeing increases in cash, and they have a clear equality duty. Along with the retention of DSA, does he not accept that we should expect them to discharge that duty?

[Dr Huppert]

The Minister makes a valid point about the total cash being spent on teaching. As he knows, my problem is with the method of payment rather than the existence of the extra money for teaching. We should be keeping DSA—he is right about that, and we will talk further—and universities should apply the equality duty, but there will still be pressures on them and there will still be changes. I look forward to his detailed answers to the concerns.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Will the hon. Gentleman give way on the Minister’s point?

[Yasmin Qureshi (Bolton South East) (Lab)]

Will the hon. Gentleman give way?

[Dr Huppert]

No. I would like to make more progress.

Universities themselves are not content with what the Minister has been saying. I spoke to the head of the disability resource centre at the university of Cambridge, John Harding, who highlighted the fact that the real concern for higher education institutions, including Cambridge and all the Russell Group institutions, is the significant lack of clarity in the announcement and the complete lack of prior consultation. The Minister would have been better able to make his case had there been formal consultation and discussions. How will “complex” be defined? What is “the most specialist support”? There are many concerns about how this will work for people.

[Yasmin Qureshi]

Will the hon. Gentleman give way?

[Dr Huppert]

I will give way if there is time towards the end, but I know that many hon. Members want to speak.

Mental health problems are more common among students than the general population, and we must take action on that. Some 3,500 people applied for support last year citing mental health issues. It can help people to develop realistic study patterns and with organising their time and setting goals—things that are easy for some, but much harder for others. Students can require support from specialist autism mentors. It is unclear what band those would fall into and whether people would still be able to get support.

There are many concerns about how the new system will work. We know that people are likely to drop out if the cuts occur while they are at university. Randstad, an organisation that works with many institutions, surveyed students and found that more than one third would not have attended university without DSA and that about the same number would be more likely to drop out without it.

[Kate Green]

Will the hon. Gentleman give way?

[Yasmin Qureshi]

Will the hon. Gentleman give way?

[Dr Huppert]

I will try to finish.

We have many problems, and the Open university is concerned. It has about 20,000 disabled students. Where will it get the funding to support them? The university of Cambridge has short, intense terms, which changes the nature of the help that is needed. DSA is tailored at the moment. I am sure that some universities will provide good support, but I fear that others will not.

[Mr Willetts]

Will the hon. Gentleman give way?

[Dr Huppert]

I will always allow the Minister to intervene.

[Mr Willetts]

There is no picking or choosing. Universities have an equality duty. They have more funding for teaching, and they also have more funding in relation to access agreements—more than £700 million. Under the hon. Gentleman’s approach, that funding might not exist. Does he accept that, in my letter to the Office for Fair Access on how universities discharge their access obligations, I specifically identified disabled students as one group to whom they had to reach out in access agreements, for which extra funding is available?

[Dr Huppert]

I do not have the Minister’s letter to hand, but I do not doubt the facts of what he says. However, there is a concern among higher education institutions, among students and among Members of this House—about 100 of them—that the system will not work and will result in a less even playing field and less of the support that people need. I therefore urge the Minister to rethink it some parts of it.

I have asked many questions—I realise that I have rushed through a number of them—that the Minister will have heard before in letters from me and from other right hon. and hon. Members and seen in comments from the National Union of Students and all sorts of other organisations. I hope that he will consider them and rethink the cuts, the way they are being made and the pace of them. I hope that he will then return with alternative proposals that achieve what we surely all want to see, which is that support is available and we do not leave people out as we are trying to develop them through the university system.

[Several hon. Members]

rose—

[Mr Jim Hood (in the Chair)]

Order. As I said earlier, there are 12 hon. Members on the list of speakers, and I would like to get through everyone, so I will begin with a four-minute limit on speeches. I may have to cut that down if there are too many interventions.

14:39

[Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)]

I congratulate the hon. Member for Cambridge (Dr Huppert) on obtaining the debate and on rushing through his speech, which I will also have to do. The sadness about this move is that it is clearly driven by the desire of the Department for Business, Innovation and Skills to cut £117 million from its budget. That is a tragedy for those who will be affected and a failure of Ministers, whom I like, to have fought the battle with the Treasury on this matter.

Let us be clear: the pre-consultation was non-existent. The review was not undertaken with or on behalf of those affected, those who support those affected or those who will have to pay out. It was not, in my view, honest, because the Government, during the passage of the Children and Families Act 2014, which has been referred to already, gave reassurances that there was no need to extend the Act’s requirements precisely because of DSA. Baroness Northover wrote to the Royal National Institute of Blind People and said that disabled students in the higher education sector are already successfully supported by institutions and directly by the Government through DSA. DSA is not means-tested, is awarded in addition to the standard package of support and does not have to be repaid. We should not seek to duplicate or replace the system. Either the Government meant it or they did not.

[Kate Green]

My right hon. Friend will be interested to know that it is not only in the context of the Children and Families Act that the Government said one thing before and are saying another now. In relation to the independent living fund, Ministers in the Department for Work and Pensions are citing DSA as an alternative source of support.

[Mr Blunkett]

And if we want another contradiction in relation to Government policy, I have to say to the Minister, who has always been extremely helpful and respectful to me, that it is not acceptable to use the argument that the universities have a lot of money and therefore can afford to replace DSA under the Equality Act 2010. If that were the case, the Department for Work and Pensions—God forbid it should hear this and do it—would remove the access to work requirements, on the grounds that quite a lot of individuals who receive the support could go to a potential or actual employer and say, “You have a lot of money swilling about with your shareholders. Why don’t you use some of that to fulfil the equalities requirements on you?” That would include public services. Please, please do not get the idea that universities have got money so it can be diverted from somewhere else and benevolently given to support students who have a right not to some sort of benevolent charity, but to be supported properly.

[Stephen Lloyd (Eastbourne) (LD)]

For profoundly deaf students, DSA pays for note-takers. Without a note-taker, how on earth would a profoundly deaf student be able to take notes during their lectures when they are at university?

[Mr Blunkett]

Absolutely, and that would entail employing someone, not simply diverting a bit of resource. My support systems, back in ’69 to ’72, were funded by the local authority; at the time, the local authority had a duty to support students under the grant system. Even though the local authority was helpful, however, I had to organise reading circles of volunteer students to assist me. That was a mutual arrangement and it was obviously socially responsible, but it should not have been necessary. Under the proposals, we will find ourselves going back to a bygone era where people have to plead for help rather than receiving it directly.

[Mr Willetts]

Will the right hon. Gentleman give way?

[Mr Blunkett]

I just want to make this point, because I think others want to speak. I emphasise what the hon. Member for Cambridge has already said. When it comes to taking a student in, the access provisions of universities and other higher education intuitions will always contain a subliminal question: can this student manage? That question was asked of me all those years ago. If the answer is, “Yes, if I have the support systems necessary: the equipment, the extra readers and other provision that other people will not need”; if the university thinks, “Is it worth it?”; and if the department thinks, “What imposition will this cause? Will resources be diverted from somewhere else? Will this responsibility be devolved to this department?”, there is a chance that that student will not be offered a place. If that were to be the case, I say to the Minister: be it on your conscience. Go back to the Treasury and say that the money in its existing budget should be retained. The rights and opportunities of individual students should be retained, and the Government should be ashamed of themselves if that does not happen.

14:52

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

For the avoidance of any doubt, I will not take any interventions to ensure that as many people speak as possible. I am pleased to speak in the debate, because I am one of the few MPs who benefited from DSA, as a student in 1994. I had some problems and I had to use a computer for part of my course. I thought I would get a laptop, but when I went to my assessment, I was given a half-screen word processor. I say that not to underpin the point that we do not need laptops any more, but to agree with the Minister that we should not gold-plate the provision. The fund is limited, and we cannot write a blank cheque for it.

I accept that, after 25 years, we have to look again at disability living allowance in particular, and I accept that public bodies have to adhere to their duties under the Equality Act 2010. However, I have concerns about the detail of the proposals. The Minister is thoughtful, good and decent, and I urge him to listen carefully to what we have to say before he places his regulations before the House.

I will try not to repeat myself too much. The report from the Muscular Dystrophy Campaign’s trailblazers team, a key member of my all-party group on young disabled people, has been mentioned. That report stresses that DSA was the area of the university experience that worked best. What concerns me most is the language of written communications from the Minister. It may seem obvious, for example, to translate the language of disability from the 2010 Act into DSA, but there are real concerns that that leaves, for example, dyslexia, dyspraxia and dyscalculia outside the remit of DSA. Will the Minister guarantee that no disability that was previously covered by DSA will be left out under the new regime?

I am also worried about the laxity of some of the language, which has caused real concern among those with the most complex disabilities. If, for example, someone requires a non-medical helper to stay with them overnight, the language is not clear enough to give that person confidence that they will be covered under DSA. That is causing a lot of anxiety.

More widely—the hon. Member for Eastbourne (Stephen Lloyd) has mentioned note-takers—I am greatly worried by the idea that a course can be delivered in such a way as to allow the student to benefit from it without having to participate in the same way as the other students. I want students to be able to attend lectures, participate fully and enjoy full integration in student life. If one goal of DSA is to enable them to complete the course at the lowest possible cost, it will reduce the university experience almost to the level of a correspondence course. I am sure that that is not the Minister’s intention whatever, but that is where the language appears to be leading us.

I also stress my concerns about augmentative and assistive communications software. I urge the Minister to consult with the Communication Matters forum, which is the specialist in that regard. It is a fallacy to think that much of that technology can be used even on the most complex laptops, let alone on iPads. As technology, particularly AAC technology, advances ever faster, the computing technology required advances equally.

Finally, in the 30 seconds that remain, I draw the Minister’s attention to the document “Fulfilling Potential: making it happen”, published by the Department for Work and Pensions. Great strides have been made in increasing disabled students’ participation in higher education, but one key indicator measured in “Fulfilling Potential” is the number of students who abandon their course after one year. If that number goes up as a result of the changes, that will be a serious concern and we will need to look again at what we are doing. I urge the Minister to have regard to “Fulfilling Potential”. I will write to him with everything else that I wanted to say.

14:56

[Mr Andrew Smith (Oxford East) (Lab)]

It is a pleasure to follow the hon. Member for Blackpool North and Cleveleys (Paul Maynard). His powerful arguments and testimony, like those of my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), underline the argument made by the hon. Gentleman who represents the other place, the hon. Member for Cambridge (Dr Huppert). I agreed with everything he said in his opening speech.

I was particularly keen to take part in the debate because in our area we are lucky to have not only two great universities but ACE centre south—ACE stands for aids to communication and education—which has achieved great things working with students with severe communication disabilities and giving them a voice. Twenty years ago, many of them would have been locked in a world without communication and unable to go to school, let alone university. Now, however, some of the young people whom the centre has helped have got PhDs. Quite rightly, there was cross-party support to save the ACE centre when it had financial difficulties in 2012. We need a big cross-party effort to stave off the cuts to DSA. It is heartening to see so many Members present and to hear the arguments from both sides of the Chamber.

The cuts risk rolling back what has been achieved and blocking access to education for many disabled students from poorer backgrounds, in particular, including those who have dyslexia and other specific learning difficulties.

[Yasmin Qureshi]

Bolton university in my constituency is not rich and has 900 students who receive DSA. Imagine the impact of the proposals on those students and the university, which has not got the resources to look after them if they do not have enough money.

[Mr Smith]

My hon. Friend makes a very good point. As has been said, there is a real danger that the proposals will provide universities and other institutions with a perverse disincentive, with the best will in the world, to accommodate all the students that they would like, especially those who have the most severe disabilities. Like other hon. Members, I have been contacted by many students, academic support staff and lecturers who are appalled, as I am, by the proposed cuts. I recently had the pleasure of speaking to the disability officers of the two university student unions in my constituency. They brought powerful testimony of how students at both Oxford’s universities have benefited from DSA and are well on their way to building fulfilling careers. Their determination to help ensure that young people with disabilities have the same opportunities in future is inspiring. One of them told me:

“I pretty much failed the first year of my law degree due to my disability and not being fit to study. I couldn’t afford to buy any of the accessibility items I needed. DSA gave me a lifeline. With the specialist equipment including a specialist mouse bar, laptop, dictaphone, extra-large screen, specialist software, printing and book allowance and various other provisions, I was able to retake everything the following year and actually cope with the work load. Without DSA I wouldn’t be where I am now.”

Even under the current system, it is not easy to get support. One student in my constituency is having to get an unnecessary diagnosis of dyslexia because his diagnosis undertaken the previous year in the sixth form was not accepted by the DSA authorities. Since there is no clinical need for a new diagnosis, he is having to apply to the university hardship fund to pay for it privately.

For all its difficulties, DSA provides an essential lifeline for people with disabilities who without it would have to give up on their education and ambitions, or would not have been able to apply in the first place. Cutting it will make many disabled students’ lives much more difficult, but, worst of all, it will result in a country where people with disabilities begin to think that they cannot even aspire to higher education and must limit their ambitions. It will do incalculable damage to equality. I urge that the proposed cuts be abandoned.

15:00

[Kate Green (Stretford and Urmston) (Lab)]

I congratulate the hon. Member for Cambridge (Dr Huppert) on securing such an important debate. Since so many others wish to speak, I shall make only four points. I endorse the comments made by colleagues from all parties.

First, I want to repeat the point about how vague the specifications are for access to support. That is true for computers but also for accommodation. Will the Minister comment on the guidance in the Student Loans Company handbook in relation to the non-medical help manual? Are there any plans to revise the guidance on what makes someone eligible for the help outlined in bands 3 and 4?

Secondly, students need access to good quality advice, and not just in relation to the disabled students allowance. When this debate was announced and I posted on Twitter to say that it would be taking place, I was contacted by someone who told me that they had been told that they could not access DSA unless they were on employment and support allowance or in receipt of personal independence payments. That is clearly incorrect, but it suggests that someone in the university advice service is misinformed about eligibility and the welfare benefits system. What support is going to be given to university advice and welfare services to ensure that they are properly equipped to support students who might have an entitlement?

Thirdly, what will happen to students who begin a course in 2014 when the new provisions come into effect in 2015-16? Will they be able to maintain any support that they have been receiving ahead of the changes right through to the completion of their studies after 2015-16?

Finally, what assessment has the Minister made of the effect that the changes may have not only on disabled students’ access to university but on their choice of university? We already know that access is a key criterion for disabled students when they select a university, and these changes could further constrain choice by further restricting the courses that disabled students can consider if universities that offer their desired courses are not supportive with access and in facilitating their studies. Has the Minister paid any attention to the question of choice and the need to maximise access to not just any university but the university and course that would be right for the student? That should be disabled students’ driving criterion, not whether or not they get disabled student support.

15:03

[Sarah Champion (Rotherham) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hood. I thank the hon. Member for Cambridge (Dr Huppert) for securing such an important and timely debate.

I begin by addressing the reality of what it means to be a disabled student. Despite living in what we assume is an open and inclusive society, disabled young people often face problems that do not make the headlines, and they start from a young age. We already know, for instance, that 27% of young disabled people aged 16 to 19 are not in any form of education, employment or training. By contrast, the same is true of only 9% of their non-disabled peers.

A Disability Rights Commission study found that 45% of disabled people said they had experienced problems at school as a consequence of their impairment. Further to that, 26% of disabled people have reported negative experiences in mainstream education, in part because of poor facilities and the negative attitudes of other people. In turn, it is hardly surprising that disabled adults are only half as likely to have formal qualifications as their non-disabled counterparts. All these issues arise prior to university. To redress these compound barriers, it becomes even more important that we make it as easy as possible for disabled students to make the transition to higher education.

Last year, the Muscular Dystrophy Campaign found that 40% of university inter-campus transport was inaccessible to disabled students. In addition, 30% of university social and leisure facilities were not accessible to disabled students. I find it surprising and saddening to hear that the Government plan to introduce changes to funding for disabled students that cut out all but the most severely disabled people. It strikes me as unfair for a number of reasons. There cannot be a sliding scale of equality: you are either equal, or you are not. Everyone should be treated equally and allowed access to the support and modifications that will enable them to flourish.

Cutting funding to disabled students with what the Government deem to be lesser support needs will mean that although some students are given support to access university on a level playing field, others will be denied access to equality of education.

[Mrs Ellman]

Does my hon. Friend share my concern that the Government have stated that they want to replace existing Government support to disabled students with support from local authorities? This is at a time when local authorities are under the hammer, particularly those in poorer areas such as Liverpool.

[Sarah Champion]

I completely agree with my hon. Friend. It seems that local authorities and the voluntary and charitable sector are meant to fill all the gaps created by this Government.

It is unfair and unreasonable to think that any person should be barred from furthering their education because of a disability. The Rotherham Disability Network has told me the same thing. Its chair said that the major impact of the funding cuts on disabled students in Rotherham is that the potential hardship caused by paying for modifications will mean that many families will have to decide whether they can afford to send their son or daughter to university at all. Many such students are from disadvantaged backgrounds, with the odds stacked against them in economic and disability terms. Unfortunately, the funding cuts will be make or break when it comes to deciding whether to go to university. Surely that is not fair.

Around 40,000 disabled people graduate each year, but levels of disabled students dropping out of university are high. I worry that that figure will become higher under these changes, resulting in a drop in the number of disabled graduates. Disabled students have enough barriers to face in getting to university in the first place; we should not be cutting the vital support they need to access university learning and services while they are there. That exemplifies why the amount of money given to students should be needs-based, rather than based on arbitrary caps associated with the Government.

Ultimately, there must be genuine equality between disabled and non-disabled students, and if funding to disabled students creates a high bill, it is a price we must pay for equality. More than that, it is a price we must pay for the economic viability of the country. I would much prefer a short-term financial intervention to enable disabled students to fulfil their potential and get a good job to their being stuck in a world of part-time, low-pay work for the rest of their life.

The Government must find some other way to fund this critical support. They certainly should not be penalising disabled students, so I urge them to reverse their decision.

15:07

[Andy McDonald (Middlesbrough) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Hood, and I thank the hon. Member for Cambridge (Dr Huppert) for securing the debate.

I start by saying to the Minister that it is reprehensible that we are here talking about a backwards step for disabled people’s access to education. I thought we were supposed to be in the business of making life better for people, not worse. It simply cannot be right for the Minister to abdicate his responsibility to universities and say, “You get on with it. It is your duty to provide access to education and observe the principles of the Equality Act.” Surely to goodness that responsibility rests with Government as well.

The National Union of Students has reported that 59% of disabled respondents to their “Pound in Your Pocket” survey are worried about not having enough money to meet the basic living expenses of university, while 55% are considering leaving their course. Putting another barrier in their way is certainly not going to help. Such financial challenges only add to the multitude of barriers already faced by disabled students. They are more likely to drop out than their non-disabled counterparts and less likely to be able to access postgraduate degrees. Disabled students also face reduced choice when deciding which university to attend. Many students take the opportunity to travel away from home, but for disabled students that might not be an option. Students with special care needs may require support from parents or assistants, and their choices are dictated by accessibility.

Receiving the disabled students allowance massively improves disabled students’ experience and success while in higher education. Research has shown that students receiving DSA are more likely to achieve the very highest degree classifications than those who do not. The decision to remove DSA funding for standard specification computers, software and associated instruments compromises disabled students’ ability to get ahead and make the very best of their time in university.

[Mr Sheerman]

Does my hon. Friend agree that the fundamental difference between us and the Minister is that he does not understand that the direct payment was the emancipation of disabled people, allowing them to see going to university as a right?

[Andy McDonald]

Absolutely. My hon. Friend makes a powerful point. That principle has been enshrined, and we should treasure it.

It is not good enough to suggest that everyone owns a laptop or that computers are now ubiquitous among students. They are not cheap, and it simply cannot be assumed that everyone from an area like mine has one. For those from a well-heeled background, where these things are easily provided, that is fair enough, but it is not the case for families from other backgrounds.

The changes to DSA also fail to recognise the needs of the up to 98% of disabled students who require specific software to help them with their studies. The Government have suggested that cheaper tablet and notebook devices might be suitable for disabled students, but such machines are simply not equipped with the power or memory to support specialised software alongside standard office and internet programs, as the hon. Member for Blackpool North and Cleveleys (Paul Maynard) so eloquently explained.

My second major concern is about moving responsibility for providing non-medical support from the Government to individual institutions. The reforms assume that disability is evenly distributed, but that is not the case. There are smaller institutions where disabled students make up a higher percentage of the total number. How will those institutions cope with the changes? Some higher education institutions might be deterred from actively recruiting disabled students, simply because of the cost if they attend. Indeed, Teesside university in my constituency has warned that it might cost up to half a million pounds to replace any funding elements that are withdrawn.

Universities currently have a duty to provide reasonable adjustments for their students, but they are largely undefined and open to interpretation. I am greatly concerned that if institutions are unable adequately to provide for disabled students, there will be limited means to raise the issue. Confusion and uncertainty will undoubtedly affect the level of applications from disabled people and the subsequent willingness of disabled people to seek the support they need to progress and attain qualifications.

Many disabled students in Middlesbrough would suffer as a result of the changes, and I recently met the NUS welfare officer at Teesside, who provided some key examples. A student in computing and digital forensics suffering from—I hope I pronounce this correctly—visual stress/Irlen syndrome required ClaroRead software and modified glasses to enable her to read without undue hindrance, but she would not have been able to purchase those essential tools without DSA. We can all cite many such examples, and they will be repeated all over the country, but I will bring my comments to a close. These individuals are not seeking to cheat the system or to get something for nothing; they simply want their right to succeed in education. The punitive changes to DSA will undoubtedly limit the ability of disabled students to fulfil their ambitions and their potential. It is simply incomprehensible that legislators in a wealthy, modern country are looking to withdraw support from those who require it simply to get an education.

15:09

[Lilian Greenwood (Nottingham South) (Lab)]

I congratulate the hon. Member for Cambridge (Dr Huppert) on securing this important debate, and it is good to see it so well supported. When the Universities Minister announced the Government’s proposed changes to DSA on 7 April, they came as a real shock to universities and students alike, and gave rise to a great many questions.

All of us here know the difference DSA can make to disabled students and to their ability to benefit from the opportunities offered by higher education. In that regard, a couple of students in my constituency have written to me. One says that they have just completed their BA in sociology, for which they have been awarded a first-class degree, and that they are going on to do a master’s degree next year. They add that

“quite honestly I could not have achieved this without support from disabled students allowance.”

Having a hearing and visual impairment, they feel that there are real challenges in studying for a degree and that DSA has been absolutely essential. In this student’s case, DSA provided funding for note-taking support in lectures; library browsing support; reader support, whereby a support worker could read aloud sections of written text; practical support with finding buildings on campus; assistance with paying for books, paper and printer ink; and assistive technology, including a laptop, a printer and magnification capacity. It is clear that all those things are necessary for someone to achieve such great results.

I had a further letter from a mathematics undergraduate at the university of Nottingham. They say they received a DSA-funded mentor, who not only helped them to undertake their work, but supported them with social situations—obviously, part of university is the opportunity to operate in a new environment. They say:

“Without my mentor my experience at university would have been very different and I fear I would have been overwhelmed with academic issues.”

They say they would not have had the opportunity to experience university in the same way as a non-disabled student might.

The Equality Challenge Unit showed us that disabled students who receive DSA do better than those who do not, and we should look at extending it, rather than reducing it. When the Minister made his statement to the House, he talked about modernising the system, the equality impact assessment and limiting the public funding available and making sure it was targeted at those most in need. That raises a number of questions, which he really must answer. How is the review being carried out and who will be properly consulted? When will the equality impact assessment be published and to what extent will its conclusions require changes to his proposals?

There is real concern about the funding for disabled student support and about potentially targeting it on those in most need. What happens to those who have minor or moderate needs, but for whom DSA is nevertheless important? As one of my hon. Friends said, there is also the impact on institutions, especially smaller ones and those with a disproportionate number of disabled students.

I am particularly concerned to raise one other issue. The university of Nottingham has told me that Student Finance England has jumped the gun, is assuming that DSA will be cut and has started implementing reforms—before we have even had a proper debate in the House. Will the Minister confirm that any changes will be properly consulted on and debated before they are implemented? Will he ensure that Student Finance England is made aware of the fact that its actions are unacceptable and have caused unnecessary panic and distress, as the university of Nottingham told me?

DSA is vital, and any revisions must be undertaken only with care and after proper consideration and debate. The Minister must listen and respond.

15:16

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate the hon. Member for Cambridge (Dr Huppert) on securing the debate. It is clear from the comments made how strong feeling is on the issue—not only in the House, but outside.

I would like to quote my constituent, June Jacobs, who recently wrote to me:

“The allowance made a big difference to me and it saddens me to think that the next generation of students would not have access to funds that could make the difference between succeeding in their studies or not.”

With the word “succeeding”, she puts her finger on the issue before us. Succeeding is about aspiration and about enrolling on the course of our choice, remaining on it and achieving—it is about all that, and DSA has a track record of helping people to succeed.

From my experience as a principal of a sixth-form college, I know that the message DSA gave young people was about building aspiration and belief. It allowed them to believe in themselves and to believe that they would go forward. It also showed leadership by the Government on this crucial issue. That leadership helps to break down barriers and create access. As a result, DSA was, and is, transformative in people’s lives.

By going down the proposed route extremely hastily, the Government risk giving the wrong message. Indeed, as my hon. Friend the Member for Nottingham South (Lilian Greenwood) said, that message is already out there and causing damage, which will create more damage tomorrow. The proposals will constrain people’s aspirations and choices, which is really negative.

The Minister is a good Minister, and I hope he is listening, reflecting on the debate and trying to find ways, as my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) said, to take the battle back to the Treasury. We will be with him in that battle, because he needs to win it. As things are, the pain will far outweigh the gain, and that, in political terms, is the test.

We risk making a very bad decision very hastily. This process is happening too quickly for us to have proper consultation and to involve all those who need to be involved if we are to get this right and ensure that, if we go down a different route, the implementation of any proposals will protect the future.

15:20

[Paul Blomfield (Sheffield Central) (Lab)]

I join the congratulations to the hon. Member for Cambridge (Dr Huppert) on initiating the debate, which is important to me. I am delighted to represent more students than any other Member of the House—36,000 of them. Both Sheffield’s universities are in my constituency and I have met students from both to talk about their concerns, and mine, about the DSA proposals.

In a letter to Members of 3 June, to brief us in anticipation of the NUS lobby on the Friday of that week, the Minister described the changes as “measures to modernise” DSA. I would have thought better of him than that, because it is the sort of Orwellian doublespeak that makes people cynical about politics. This is not about modernisation, as he knows. It is about balancing the Department’s books on the back of disabled students, just as the Treasury sought to do with other vulnerable groups, with the attack on the student opportunity allocation earlier this year. He fought his corner then, and I hope he will do so in the present case.

In the letter, the Minister identified what he described as unsustainable growth in spending on DSA, with an increase over this Parliament of £37 million. That is a tiny proportion of his budget and just 6% of the £620 million growth in grants and loans to students in private colleges, which is partly policy design and partly a failure by his Department to maintain adequate controls over that budget line. The wrong people are paying for the consequences of those mistakes. The priorities are wrong, and those with disabilities are being punished for the black hole in the Minister’s budget.

Disabled students’ No. 1 priority in choosing a university is the access and support that they will have; that is more important to them than the choice of courses. They are more likely to drop out than non-disabled students. We can all throw statistics around, but I want to share a story about a university of Sheffield student union officer, Kat Chapman. She is dyslexic and recently finished her degree, with a high 2:1. She is delighted to be embarking on a master’s degree at Cambridge. She is the model for the sort of person we want to progress in universities: a woman and a scientist. She clearly said to me that her delight at going to Cambridge

“is overshadowed by the fear of not receiving the same help that I have done through my undergraduate degree.”

The Minister has said that universities should meet the cost of supporting students such as Kat, but will making disabled students more expensive for universities improve access to higher education? Of course not. Universities will fulfil their equality obligations, which the Minister talked about earlier, but that will happen at a cost if there is no funding. The universities that are the most inclusive will face the greatest costs.

The Minister said in a communication of 25 June that

“it is not the case that students with ‘mild’ dyslexia”—

such as Kat—

“will no longer receive DSA funding.”

An assessment of Kat’s needs would determine who pays. I ask him for clarity: which needs will the Government help to meet, and which will it be left to universities to meet? Will he think again about this foolish short-term policy and take the case to the Treasury?

15:20

[Mrs Emma Lewell-Buck (South Shields) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hood. I thank the hon. Member for Cambridge (Dr Huppert) for obtaining the debate.

Many people already know that I have mild dyslexia and dyspraxia. I know that without the support that came from my university I would never have qualified as a social worker, and that is why the proposals concern me. From 2016, a person in my position may be denied the opportunities that allowed me to succeed academically.

According to the Minister, the Government propose to ensure that the limited public funding available for DSA is targeted in the best way, to achieve value for money, while ensuring that those who are most in need get the help they require. However, I am not convinced and the Government have not provided enough evidence to show that support for those with moderate needs will be maintained. There is still a threat that they will be locked out of higher education. That is a further blow to disabled students who are already suffering as a result of the Government’s trebling of tuition fees. A report by the National Union of Students found that 55% of disabled students have considered leaving their courses, compared with 35% of non-disabled students. I cannot imagine how the changes will encourage students to remain on their courses, or future students to enter higher education.

Universities have a duty not to discriminate against students with disabilities under the Equality Act 2010, passed by the previous Labour Government. It is of course right to expect higher education institutions to carry out those duties as my university did. However, the Government have been unable to explain how institutions are supposed to meet the duty under the reformed scheme. Their share of responsibility will greatly increase, but we do not know where they will find the resources to carry out that responsibility. We do not even know the effect that the proposals will have on the total DSA spend. It is worrying that the Government have rushed ahead without either conducting a full analysis of the impact or holding a public consultation, to ask institutions whether they will be able to cope with plugging the gaps left by DSA.

Even more worryingly, by giving institutions more responsibility for delivering specialist support, the Government will create a situation in which the most inclusive universities will be hit hardest. That could, as the National Association of Disability Practitioners pointed out, have perverse consequences: those universities might not be able to afford to be so inclusive, or they might be forced to make cuts in other areas.

Disabled people already face disadvantages in higher education. They are less likely to enrol and to study full time, and more likely to drop out before finishing their course. If that is the situation now, we can expect it to get worse once the Government’s DSA cuts take effect. Disabled people thinking about entering higher education today will have no idea what support to expect, or what the effect on their finances will be.

I feel lucky to have been supported with my dyslexia and dyspraxia. My condition is relatively mild, but the help that I received made a difference and helped to get me where I am today. I am concerned that people with mild conditions will be written off under the Government’s proposals and will never get the opportunities that I have been lucky enough to have.

15:26

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member for Cambridge (Dr Huppert) on obtaining the debate.

I want first to say clearly that I am concerned about the cuts and the dramatic effect that they will have on the people who need the DSA the most. The hon. Member for Scunthorpe (Nic Dakin) talked about belief, hope, opportunity and ambition, and all those things will be hurt by the slashing of the grants.

Early-day motion 48 notes the NUS research finding that

“55 per cent of disabled students have already seriously considered leaving their course compared to 35 per cent of non-disabled respondents”,

with 54 per cent citing financial difficulties. Clearly, there is an issue. The reason I, a Northern Ireland Member, am speaking in the debate, is that the change will affect students from Northern Ireland who go across to universities on the mainland. The hon. Member for Ceredigion (Mr Williams) talked about Wales and Scotland, and there will be an effect for people from Northern Ireland as well. The change will affect us all.

I know from some of my constituents that the DSA helps with buying special equipment required for studying, non-medical helpers such as note-takers or readers, extra travel costs that disabled students may have and others costs for things such as tapes and Braille paper. Non-medical help such as that provided by note-takers is critical to disabled students. Some require their help throughout the semester; others need their assistance whenever they must go into hospital, which for some is a fact of life. Surely, the House recognises the importance of such helpers, particularly those who help when a student is in hospital.

I am sure that hon. Members have already looked through the background notes for the debate, which clearly explain who needs help: they include people with autism, people with sight or hearing issues and people with learning difficulties, of whom there are almost 22,000, as well as about 3,400 people with mental health issues, nearly 3,600 people with multiple disabilities and 540 people with wheelchair mobility. Clearly, complex health and physical needs must be addressed. People’s concern about the proposal is therefore understandable.

According to the Equality Challenge Unit, 71% of disabled graduates gained employment in 2012, compared with 42% of disabled non-graduates. Already a high number of disabled students consider leaving university because of high costs, and surely the figures are testament to the importance of providing disabled students with DSA, which enables them to pursue some of the ambition that we in this Chamber want to encourage.

If the change to DSA is pursued, there will be direct implications for people whom I and other hon. Members represent. We have heard about the cutting of DSA for dyslexic students, and the Minister has referred to those with complex needs or exceptional circumstances receiving DSA. I should like to know, for the life of me, exactly what that means, because I do not see that coming down to the people whose grants will be taken away from them.

The one issue that has perhaps not been hinted at is the bill for DSA. In 2011-12, the bill was £124 million for 53,000 undergraduates. The latest figures from the Student Loans Company, however, show that spending on DSA had reduced by almost £5 million in 2012-13, despite the number of claimants rising by almost 2,000. More seems to be being delivered with less money, so will the Minister say how his figures work out, given the reduction of almost £5 million and the almost 2,000 extra students? Why are we considering further cuts given some of the cuts that are happening already? In 2013, of the whole United Kingdom, Northern Ireland was hit hardest by the benefit cuts, with £750 million taken out of the economy. The case for the DSA proposal is not proven and is not acceptable. I strongly object to what is taking place.

15:30

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Mr Hood, it is very kind of you to call me to speak briefly, even though I failed to tell you that I wanted to speak. I am conscious of that.

As the MP for Huddersfield, I represent Huddersfield university, which was the university of the year this year. The university has an amazing student body—including Coco Toma, the communications officer, and others—that constantly talks to me about how the proposals will affect disabled students. The empowerment and emancipation of students provided by this direct gift from the Government is wonderful. People know about DSA; they anticipate it; and it changes lives. I have talked to disabled students who say that, if they had the new system that the Minister will introduce, they would not have thought about going to university.

I know that the Minister will be embarrassed, but he and I get on very well. I think that he will change his mind. If he does not, this will be a big political issue at the general election. I hope that an incoming Labour Government will make it clear that we will change the proposal, because it is wrong.

I have great respect for the hon. Member for Cambridge (Dr Huppert), but disabled students are particularly double-whammied because the tremendous increase in student debt hits them more than anyone else. Disabled students have not forgotten the pledge or that the Liberal Democrats led us up the garden path. We all thought that they would never be in a coalition.

[Dr Huppert]

Will the hon. Gentleman give way?

[Mr Sheerman]

No. The hon. Gentleman did not give way to me, so I will not give way to him. The fact of the matter is that some people in Cambridge tell me that, whatever he does, they will not forget the pledge. He might work hard for the disabled students allowance, but they will not forget the breaking of that pledge.

[Dr Huppert]

Will the hon. Gentleman give way?

[Mr Sheerman]

No, I will not give way. The hon. Gentleman will get his come-uppance at the next election, and so will any Government who introduce this dreadful scheme.

15:33

[Jason McCartney (Colne Valley) (Con)]

Thank you for squeezing me in, Mr Hood. It is a pleasure to serve under your chairmanship, and it is a pleasure to follow my near neighbour, the hon. Member for Huddersfield (Mr Sheerman). Like him, I have engaged closely with the students union of my local university, the award-winning Huddersfield university. I thank Josh, the president of the Huddersfield students union, and Daniel, the democracy and campaigns officer, for coming down to brief me. I voted against the rise in tuition fees in December 2010 because I was concerned that students from low-income backgrounds would be put off applying to university. I did not go to university.

[Dr Huppert]

Like my hon. Friend, I voted against the rise in tuition fees. I am the first Member of Parliament for Cambridge to vote against a fee rise. When there was a Labour MP, she voted for a fee rise having promised to oppose it.

[Jason McCartney]

That is worth putting on the record.

I am concerned about the proposed changes—they are just proposed at this stage—because Josh and Daniel explained to me the implications, the worries about the cost of modifying laptops, and the importance of scribes and note takers. They talked about their first hand experience of students they study with who have dyspraxia and dyslexia. That is why I am here representing them today. They have questions about the complexity of different learning difficulties and how they would be categorised. There is also the cost of modifications to accommodation. Huddersfield university is investing hundreds of thousands of pounds in new accommodation, and there would be concerns about that, too. They told me that more than 700 students at Huddersfield university currently receive DSA, so it is close to people’s hearts in my part of the world.

I look forward to hearing from the Front Benchers, particularly the Minister, whether we will look again at the proposed changes. I encourage the Minister to engage with local students unions, to involve them in the process and to work hard so that every student, no matter what their economic background or disability, has a fantastic opportunity to engage in our world-class universities, particularly my wonderful, award-winning Huddersfield university.

15:35

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Hood. I add my congratulations to the hon. Member for Cambridge (Dr Huppert) on securing this debate.

I have a simple argument to put to the Minister: the proposals are flawed, they need to be dropped and they need to be dropped now. I agree with my hon. Friend the Member for Huddersfield (Mr Sheerman) that the Minister is a good Minister and a good man. He has been put in a difficult position, and I hope that in today’s excellent debate he sees a consensus that stretches across the House. We are here with him to help him win the argument and to put the proposals where they need to be, which is in the bin.

We have heard powerful arguments this afternoon about the success of DSA, how the proposed changes are slipshod and why it was wrong to develop these proposals not in the open but in secret. We have heard powerful arguments about why DSA is so successful. We do not give disabled students enough help to change their lives by going to university, and we have to hold on to that basic fact in this debate. I congratulate the National Union of Students on its work to expose how important DSA is to thousands of students. Some 60% of disabled students are terribly worried about the cost of living, which is a much higher proportion than for most students. More than half of disabled students have thought about dropping out of their course, which is a much higher proportion than for most students. That is why DSA is so important to students across the country.

Today’s debate has been particularly powerful. My hon. Friend the Member for South Shields (Mrs Lewell-Buck) told her own story, but we have also heard stories from my hon. Friends the Members for Birmingham, Erdington (Jack Dromey), for Middlesbrough (Andy McDonald), for Scunthorpe (Nic Dakin) and for Rotherham (Sarah Champion) and from my right hon. Friend the Member for Oxford East (Mr Smith) about people they represent who have serious worries. The National Union of Students has collected similar stories, such as the story of Lucia, who said that university “wasn’t easy.” She knows that

“without the validation and…support from DSA I wouldn’t have kept going… I certainly wouldn’t have been able to get my first class honours degree, and I would have been lucky to finish.”

There are stories such as Suzanna’s. She said:

“I get DSA for dyslexia. I expect I am one of those David Willetts would class as having ‘mild difficulties’. My study…advisor is a godsend.”

She now wants to finish neuroscience and cure Parkinson’s disease. She said:

“Without DSA I would probably still be a waitress. A bad waitress at that.”

There are stories like Charlotte’s. She said that when she was making her university choices the availability of DSA was key to her getting into university and changing her life. In the background briefing for this debate we have heard argument after argument for protecting, preserving and enhancing DSA.

The Campaign for Science and Engineering makes the interesting point that if we care about the supply line of science, technology, engineering and maths skills in our economy, we should care about the future of DSA:

“One of the most worrying developments for STEM is the removal of…‘higher specification and/or higher cost computers…because of the way in which a course is delivered’”.

CASE continues:

“DSA funding will… only be provided for ‘the most specialist non-medical help (NMH) support.’ The definition of… ‘specialist’ is not clear.”

Many hon. Members have made that point today. The proposal would damage the chances of people on STEM courses in particular, which is why the changes are such bad news. In this House we are always happy to hear the case for reform. When pressed by hon. Members at oral questions the other day, the Minister said that no student would be worse off. That is a very big promise. Let us be honest: most of us here would like to believe him, but when my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) tabled a parliamentary question to the Minister on 26 June about the extent to which DSA would be supported in future, answer came there none. The question was dodged, and that is why so many of us in this House have such serious concerns.

The Minister will no doubt want to remind us that the bill for DSA has gone up. That is true, but in the last year for which figures are available it has gone down by £5 million, while the number of disabled students who are supported has gone up, so each of them is actually getting much less. That is why we are so worried about a kind of carte blanche shunt of responsibilities to universities.

We have heard very clearly today the warnings from experienced people in this House about what happens when responsibility is shunted over. The hon. Member for Blackpool North and Cleveleys (Paul Maynard) put the case powerfully. There is too much ambiguity in an Act as high level as the Equality Act, important though that is. We should be honest about what is going on. This is a cost shunt to universities—let us call it what it is—but it is a cost shunt without any safeguards to go with it, and that is why so many of us are worried. I think the Minister will acknowledge that that is one heck of a gamble with the futures of disabled students in our country. It is certainly not a gamble that we want to see.

My hon. Friend the Member for Stretford and Urmston (Kate Green) made an important point when she underlined how the risk of a postcode lottery in the way disabled students are supported will mean that people’s choices will be damaged. They will not be able to pursue the choices that they want. As my hon. Friend the Member for Sheffield Central (Paul Blomfield) pointed out, it will be the most inclusive universities that are most damaged by the proposal. The worst-case scenario, we are told, is grim indeed.

I was concerned, as I know the Minister was, when I read the briefing from people who are expert in supporting disabled students, which stated that the worst-case scenario could see 60% to 70% of DSA eliminated. That is an enormous bill. The Minister accepts there is a problem with supporting disabled students at university, which is why he is not proposing the abolition of DSA. The fact that DSA is to continue is an acceptance of the principle that extra central Government support is needed.

We are not being told what the real objectives of the reform will look like. By how much does the Minister seek to cut the bill? How big will the cost shunt be? They are not the sort of questions we should be debating here this afternoon. We should have been debating them long ago—in January, February or March—before the ministerial statement appeared. Opposition Members are worried, as I am sure the hon. Member for Cambridge is too, that organisations such as the National Deaf Children’s Society felt they were not given a real chance to put their points of view in meetings that were simply cut short. That is not a standard of consultation that we are prepared to see, because the issue is simply too important.

If there is a need for modernisation, let us hear it. The Minister is a good man and a good Minister. He should be up front with us about how much he is seeking to save. He should be debating with us what extra safeguards need to be put in place to protect the rights and opportunities for disabled students in the years to come. The need is urgent. Lord Addington has told the other place that guidance for April is being drawn up. All of us wanted to be part of any changes that needed to be introduced. That is what we got when the DWP proposed to change the DLA and introduce the personal independence payment. It is the approach that we saw when the DWP wanted to introduce universal credit. Those were big and important changes, and Opposition Front Benchers were invited to the Department to discuss them. We may have disagreed with the conclusions, but at least we had the chance to flag up a few warnings, make a few suggestions and ensure that the debate was had in public, not in secret.

I think the Minister is a good man who will want to think again about the proposals. The debate should not have been today; it should have been in the early part of the year before the proposals were drawn up. If modernisation is needed, let us hear the arguments. If there are savings to be had, let us hear the targets, but we will not stand by while disabled students are given a bunch of proposals and told to like it or lump it. Disabled students demand and deserve much better than that.

15:44

[The Minister for Universities and Science (Mr David Willetts)]

It is a pleasure to respond to this important debate, and I congratulate the hon. Member for Cambridge (Dr Huppert) on securing it.

I want to make it absolutely clear that we are not abolishing DSA. Some Members who intervened have assumed it would disappear. It is a substantial item of spending now running at about £125 million, but we envisage that there will continue to be significant DSA in future. Several Members, particularly the hon. Member for Sheffield Central (Paul Blomfield), did not like my statement that we were modernising it, but let me explain briefly what modernisation means and why we are engaging with it.

The system of DSA has not changed significantly since it was introduced in 1974. Since then, there have been widespread technological changes, some of which have improved disabled people’s ability to access education through advances in IT, but some things that were previously available by special arrangement are now widespread. For example, many people have laptops or other forms of access to IT. So there have been advances in technology, which have spread across the country.

Let me tackle head-on another significant change that has happened: the spread of equality duties under the Disability Discrimination Act 1995 and the Equality Act 2010. The right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) was emphatic on that point. I have enormous respect for him and his work, but it is reasonable for us to say what is the right balance of responsibility between institutions’ legal obligations under the Acts and individual payments to students via the DSA. There may well be types of provision that are better and more efficiently delivered on an institutional basis via the universities’ obligation than via individual student support.

Perhaps as a lay person I can give a simple practical example. If a university has a library where people with disabilities find it hard to access material, it is a legitimate question to ask whether the DSA should provide for their costs to access the library or whether the library should be organised in such a way that every time someone comes in—

15:47

Sitting suspended for a Division in the House.

16:02

On resuming—

[Mr Jim Hood (in the Chair)]

Before I call the Minister, I remind right hon. and hon. Members that 15 minutes extra—the time taken for the Division—will be added to this debate. The debate that was supposed to start at 4 pm will start 15 minutes later.

[Mr Willetts]

I am not sure that this extra time will be as good as that in the Belgium versus United States match, but I will do my best. I welcome hon. Members who have come for the next debate and apologise to them.

I was starting to wind up the debate, explaining why it is legitimate to carry out the review and why the term “modernisation” is legitimate. One argument in that regard was about technical change. I was also saying that there is a genuine issue about obligations under the Equality Act, whereby universities have a duty to make reasonable adjustments for students who are disabled. We have to get the balance right between the institutional obligation on the university and personal financial support for the individual student. I was giving an example of how a library should function, saying that the obligation could be discharged by a library properly training its staff to help people with a range of disabilities. That may be a more effective way of delivering support for disabled people than individual disabled students turning up at the library with a personal assistant to help them. It is legitimate to try to get the individual versus institution balance reviewed in the light of the equalities duties.

The right hon. Member for Sheffield, Brightside and Hillsborough did not like the fact that I referred to the funding available for universities, but several hon. Members, beginning with my hon. Friend the Member for Cambridge but not only him, specifically asked, “How will universities pay, given that you are expecting them to discharge these institutional obligations?” There are two genuine points to be made in response, although more could be made.

First, with regard to the equalities duties that the House has introduced under successive Governments, by and large we do not say, “We therefore need an extra stream of funding for the NHS”, any more than we say that there should be extra public support for Marks & Spencer. Hon. Members should remember that, legally, universities are independent institutions outside the public sector. The general view across the House, when we have imposed equality duties, has been that that is just part of the proper functioning of an institution.

Secondly, it is fortunate that our universities are in a healthy financial position. I will not stray from the point, as happened in the argument a few minutes ago between the hon. Member for Huddersfield (Mr Sheerman) and my hon. Friend the Member for Cambridge, but the sums going to universities for teaching—the combination of the grant income and the fee income that they receive—is rising substantially as a result of the controversial changes that we introduced, going from £7.9 billion total income in 2011-12 to £9.9 billion in 2015-16.

To be frank with hon. Members who voted against the £9,000 fee—I suspect that the majority of those in this Chamber did so—it is inconceivable that universities would have enjoyed a £2 billion increase in teaching income in the life of this Parliament under any other model of financing universities, especially one that depended on public expenditure through grant. There is a genuine increase in their financial resource. Several hon. Members expressed concern that our proposal comes at a bad time, when universities have not got any money, but in fact they have had an increase in their cash resource.

[Mr Byrne]

I am grateful to the Minister for giving way with characteristic generosity. Can he help hon. Members? He has made an eloquent argument for the need to rebalance responsibilities between central Government and independent universities, saying that we need to do so because it is a long time since we have considered the matter. By how much is he seeking to reduce the DSA budget over the next financial year and the one after? He must know, because he has a list of specific measures.

[Mr Willetts]

I was going to get to that point in a moment. We are still consulting—it is a genuine consultation—so I cannot give the House a specific figure, because that will depend on a host of things, including exactly how the proposals are implemented and wider effects. However, it is a budget that has grown rapidly. Incidentally, the right hon. Gentleman said that that growth had stopped. There is always a difference between the provisional figures and the final outcome figures. My personal expectation is that the final outcome figures for the latest year should be higher than those for the previous year. It is not fair to compare final outcome figures with provisional figures. We will see. The budget has increased from about £88 million when we came to office to about £125 million now, so it is legitimate to look at it. However, we do not have a specific allocated figure.

[Mr Sheerman]

Will the Minister give way?

[Mark Durkan (Foyle) (SDLP)]

Will the Minister give way?

[Mr Willetts]

I will give way briefly to the hon. Member for Huddersfield, but I have a lot of specific points to make, so after doing so I shall make progress.

[Mr Sheerman]

The Minister knows what I am going to say. He is looking through rose-tinted glasses at the future of finance in higher education, but it is not all as rosy as that. A vice-chancellor recently said to me, “The real worry that I have is that the whole HE system is based on a mountain of student debt.” That is our worry. It is not as rosy a picture as the Minister has painted.

[Mr Willetts]

That is a separate issue. The graduate repayment system is a fair, sustainable and viable way of financing our universities, and it would be a mistake to try to reverse that.

I turn to some of the specific issues that have been raised. Let me say clearly to right hon. and hon. Members that we will fund non-medical help that would not be a reasonable adjustment for higher education institutions to make. We will define the obligations of the institutions, and on top of that there will be support for non-medical help, which in certain situations will include support for students with specific learning difficulties, as well as other groups. Hon. Members mentioned IT, and we will make a contribution to the costs of higher-cost and higher-specification computers in certain circumstances if they are required purely because of the student’s disability. We will pay the extra costs that arise from those computers being required by students with a disability, rather than have a general payment for laptops when they are now widespread across society. We will also cover additional costs of specialist accommodation in exceptional circumstances.

[Mr Andrew Smith]

Have the Minister and the Government looked into the implications more widely, beyond higher education, of the Government making such a definition of what is a reasonable adjustment by universities? Is there not a real risk that others will cite that definition and say that anything that goes beyond it is not a reasonable adjustment for them, thereby denying disabled people in other areas too?

[Mr Willetts]

That will be the last intervention that I take, because time is tight.

We are consulting, and we will produce guidance that will help make the crucial distinction between what institutions can legitimately be expected to do and where individual funding is required.

We are talking about education, and I want to come back to that, because several Members raised the topic. It is a distinct responsibility. We are consulting, and we will continue to meet a whole range of groups representing disabled people. We have already discussed the policy changes with, for example, the National Union of Students, Universities UK and the Office for Fair Access, and there will be many further such meetings in the future.

Institutions will be expected to have reasonable adjustments in place by September 2015. We believe that the time scales provide sufficient time for us to work with institutions and stakeholders to ensure that changes are introduced effectively, but I understand that some institutions are concerned that they will be disproportionately affected due to their high numbers of disabled students. Several Members have made that point, which will be considered before guidance is issued to the sector in the autumn. The guidance will help institutions understand better the role that DSA will play, enabling them to consider the support they will need to provide. We will also provide regular updates for the HE sector over the coming months.

Student information and guidance, which will include information on DSA changes as well as on the wider student support package, will be available in September in the normal way. Once we conclude our consultation meetings, we will be in a position to issue draft guidance in early autumn on what DSA will cover. That guidance will benefit higher education institutions and assessment centres in particular. Stakeholders will have the chance to review it and ensure that it is sufficiently clear and understandable before it goes live. I undertake to lay the relevant regulations at that time, which will allow Members to see the regulations and the draft guidance in parallel. Before adopting either, the Government will continue to have due regard to the impact of the changes on the aims set out in the Equality Act 2010. We will publish our analysis on that at the same time.

A point was raised about existing students and DSA students beginning university in 2014-15. They will remain on the current arrangements in 2015-16. I have already announced that the maximum available DSA amounts will not be changing. We are not adopting a blunt approach to the provision of non-medical help. We realise that non-medical help will be the responsibility of higher education institutions, but we recognise that in certain areas, perhaps as a result of the impact or severity of a disability, DSA has an additional role to play once reasonable adjustment has been made. In the case of complex needs, we will assess the severity of the impact on the education of the student. It will not be a simple physical assessment of their disability; it will be an assessment of how the disability challenges they face affect their ability to benefit from higher education. That is the assessment that has to be made. We will focus on the educational impact and the severity of their educational needs. I would also like to—[Interruption.]

[Mr Jim Hood (in the Chair)]

Order. When the Chairman can hear conversations at the back of the room, someone is out of order. I urge Members to pay attention to the Minister’s contribution.

[Mr Willetts]

Thank you, Mr Hood. I was trying to go almost too fast, because there is so much material to cover. I was trying to clarify the issue of specific learning difficulties and dyslexia, which has arisen in the debate. My announcement used the term “complex needs”, and I wish to make it clear that DSA will support those for whom the impact on their higher education needs is most severe. That is the approach we propose to take.

We are in consultation on technology with groups such as the British Assistive Technology Association. I assure Members that the Government are committed to supporting disabled students in accessing higher education. Students are right to expect support from their higher education institution, and DSA has been available to complement that support for nearly 25 years. That is not changing. What is changing is the balance between the two types of support, and that balance should be struck in the light of the Equality Act 2010. I conclude by assuring Members that over the summer, the Government and officials will continue to develop thinking, engage on policy issues and consolidate our work. We will, of course, continue to consult and keep the House informed as our proposals develop.

Flooding (Somerset)

Wednesday 2nd July 2014 Westminster Hall

16:09

[Mr David Heath (Somerton and Frome) (LD)]

I am extremely pleased to have secured the debate, which will consider the aftermath of flooding in Somerset. I am delighted to be supported on this occasion by my hon. Friends the Members for Wells (Tessa Munt) and for Taunton Deane (Mr Browne) and the hon. Member for Bridgwater and West Somerset (Mr Liddell-Grainger). We have been acting effectively as a team on the issue, and long may that continue.

I cannot honestly say that I have not had the opportunity to speak at length about flooding in Somerset on previous occasions. By my count, this is the 16th occasion this year when I have spoken on the subject. It has been a recurrent theme over my 18 years in Parliament, and sometimes I feel that I have spoken about little else. Looking back in Hansard the other day, I found that in March 2009, in a debate that I had introduced on the subject, I said:

“I am convinced that if we had proper dredging of some of our rivers and proper clearing of debris and strengthening of banks on some of the smaller tributary streams, it would make a substantial difference to the way in which we deal with these matters.”—[Official Report, 12 March 2009; Vol. 489, c. 553.]

I was right on that occasion, as were many, many local people, who had been saying the same things year in, year out for a long time. I had the opportunity to say some of those same things to the Minister’s predecessor, the hon. Member for Newbury (Richard Benyon), when he came down to see me in Langport in April 2012.

No one can honestly say that the flooding in Somerset this winter caught them by surprise; we knew it was going to happen. The good news is that, despite the reports about the conditions underfoot at Glastonbury festival last weekend, Somerset is now predominately dry. The floods have gone. We need to keep repeating that, because there are still people who ring up businesses in my constituency—I am sure it happens in my colleagues’ constituencies, too—saying, “Is Somerset open for business? Are you still under water?” No, we are not under water. Come and have a jolly good holiday in Somerset. It is a much better place to go than places that are further away. [Interruption.] No, I do not mean the Minister’s constituency. Somerset is a thoroughly good place to have a holiday.

Before I proceed to a catch-up on where we are, I repeat, as I have on many occasions, my thanks to everyone who was concerned during the flooding crisis with dealing with the conditions on the ground. People worked tirelessly, whether they were officers of the Environment Agency, the police, the fire brigade, council officers or volunteers. There were so many that it would be invidious to mention people by name, but they know how much their work was appreciated. I also thank those who helped in other ways, such as providing cattle fodder from the far ends of the country or providing cash to the appeals organised by the Somerset Community Foundation and others. We are deeply appreciative of that, as we are of the attention we were afforded for a few brief weeks by the Government.

The Prime Minister, the Deputy Prime Minister, the Secretary of State for Environment, Food and Rural Affairs, the Minister and many other members of the Government came down to see for themselves what the issues were. Were we lucky that we happened to have a few weeks before the Thames valley flooding to make our point? Yes, I suspect we were, but nevertheless, we did, and we appreciate the attention we were given.

[Mr Jeremy Browne (Taunton Deane) (LD)]

Will my hon. Friend expand on the point he just touched on? We all feel a genuine sense of gratitude that leading members of the Government—the Prime Minister, the Deputy Prime Minister and others—took such a close interest in the situation in Somerset, but surely the task now is to ensure that that interest is not passing and that the legacy of the attention afforded to our county is that we see over a period of years, not months, exactly the changes that were promised during those visits. That will ensure that the risk of floods is alleviated in the future.

[Mr Heath]

My hon. Friend is absolutely right, and that was why I called for today’s debate, which is perhaps unseasonable. Now is the time not only when work must happen in Somerset, which it is, but when decisions must be taken that will affect the situation for years to come. That is what I want the Minister to respond to.

I will briefly touch on the background, because we cannot escape the fact that elements of the Somerset flooding were avoidable. We expect flooding on the levels; it is a normal state of affairs. This occasion, however, was unprecedented due not only to the extreme weather conditions, but to now widely acknowledged policy mistakes. I have drawn attention to two glaring errors many times over the years, but they now have a common subscription. First, the landscape is artificial and does not maintain itself. Every drop of water that needs to be pumped away from the fields and the communities in the area must be pumped uphill into rivers that are higher than the surrounding landscape. People forget that and talk nonsense about natural drainage and flood plains when such drainage will never happen. The land is effectively reclaimed. It is land from the great mere of Somerset. Unless the water is pumped, drainage will not happen.

Secondly, an environmental heresy was allowed to develop for far too long at senior levels in the Environment Agency. It was assumed that the environmental benefit of the area was in the watercourses rather than in the land in between, which meant that what are essentially canals were being artificially preserved at the expense of the quite invaluable flora and fauna. I hope that that is now a thing of the past.

What is on the list of things to be done and how have we been managing? There have obviously been immediate acts of recovery and restitution. I understand that farm funding is considerably undersubscribed, but the Minister might be able to provide an up-to-date assessment of whether the funding has reached the farmers who need it. I also wish to add one caveat: we have not to date seen huge damage to orchards, but it is possible that it will appear later on. If we need to come back to the Department, I hope the Minister will be sympathetic if orchards have lost tree stock.

Dredging is now happening. There has been a lot of local cynicism as to whether it has been done sufficiently quickly and properly, and whether lip service has been paid, but I am satisfied that genuine dredging is taking place along the identified stretch. After a slow beginning, it is starting to catch up, and I think six crews are now at work. What a pity it is that we do not have the equipment that was given away or sold for peanuts many years ago. Nevertheless, the relevant area has been reconstituted and we have the hard-standings that enable the dredging machines to do their work. Will the Minister update us as to when he expects the initial tranche of dredging to be completed?

Increasing the capacity of watercourses will not satisfy local people, however. We accept the argument that increasing capacity is the most effective use of early funds, but I am conscious of the fact that the upper reaches of the Parrett were also severely flooded. Around Langport, Muchelney and Martock, there are bottlenecks that need addressing. Are we able to increase capacity under the bridge at Great Bow wharf at Langport? There are also plans to widen and deepen the Sowy diversion stream to provide extra capacity, which is a sensible idea that I would like to see happen, but it needs to be properly planned. We need to consider the potential consequences for other communities and reassure them that they will not be adversely affected by the Sowy being used to a greater extent. That issue would be particularly apparent at Beer Wall, which is where my constituency adjoins that of Bridgwater and West Somerset, and Aller Drove, which saw unprecedented flooding. Aller does not normally flood, but this time it did. I think that there was a miscalculation and that someone made a mistake in lowering the level of the river wall. Those calculations have to be right. As we use the Sowy, we must be sure that adverse effects are not happening elsewhere.

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

My hon. Friend is making some good points about the Sowy. The Minister is aware that part of the Sowy development must include the barrage or the sluice—whatever we want to call it—below Bridgwater, which would complement what my hon. Friend is discussing. Will the Minister also consider ensuring that the scheme goes into the autumn statement? We need money for the Sowy and for the barrage, but it can come only from central Government. Does my hon. Friend think that that may be a way forward?

[Mr Heath]

I most certainly do agree, because that was going to be the principal point—

[Mr Liddell-Grainger]

I am so sorry.

[Mr Heath]

We are at one on the issue. This is the big ask. This is what we need from the Minister. I know that he will not answer today, because he is not in a position to do so, but this is the most important demand.

Purely local schemes to alleviate flooding are also needed. Thorney is a tiny village—a hamlet—that is now rather curiously described as two different places for the purposes of flooding, because it floods separately at two ends, so we now have Thorney north and south, or greater and lesser—I am not quite sure how to describe the two ends of the village. A bund of some kind—a way to stop the water coming in—would be effective, however. That is a relatively low-cost solution and one that is being considered. I want an assurance that it actually will be built to protect the people of Thorney.

Similarly, we need to look at Muchelney Ham, a small part of Muchelney that was subjected to flooding. We also need to examine the highways situation, where the county council will be taking the lead.

I think we all agree that it is extraordinary in this day and age to have a village such as Muchelney completely cut off for week after week. We must establish at least one way to get in and out. Feasibility studies are being carried out as to whether it should be the Drayton road or whether there is a better alternative, but something must be done to ensure that people can get in and out of the village.

[Mr Browne]

I am hugely sympathetic to the residents of Muchelney, but while my hon. Friend is on the topic of highways, will he also discuss what could be done to improve the resilience of the A361? It is a major trunk road that links Taunton, the county town of Somerset, to the main body of the county, including Street and Glastonbury, but its resilience is inadequate. There seem to be two tasks: keep the flood water down and try to ensure that the road is open for longer stretches of time during floods.

[Mr Heath]

I am grateful to my hon. Friend, because the next thing written on my piece of paper is “A361”. I do not like the idea of Taunton being cut off from civilisation and we need to do something about the A361, but the question is, what? I am not convinced that simply raising the level of the road along its entire length is the most sensible use of funds, but we need to do something in combination with the sluice, which I will come back to in a moment. We need to mobilise whatever funding is available—whether from Network Rail, which otherwise needs to do something about its track across the levels, or the roads agencies—and use it in the wisest way to ensure that the road is not closed again and that we all have easy access to the pub at Burrowbridge, which served as such a useful headquarters for the media during the flooding.

Are we going to see the replacement of the necessary pumping facilities? Some have already been done, but we brought in those massive pumps during the crisis and they were an extremely good thing. We need to ensure that they are available when we need them, and without having to ask, as we need a boat to be available when necessary. Such facilities need to be built.

That brings me to the two big ticket items. One is the Parrett sluice, which I agree entirely with, having looked into the matter. As the hon. Member for Bridgwater and West Somerset knows, I was initially sceptical as to whether the sluice would include improvement for my area—it clearly would for his—but I am now convinced that it would. Preventing the influx of water from the Bristol channel at high tide, thereby ensuring that we can drain away water from the upper reaches of the levels, is crucial. We need the Chancellor of the Exchequer to announce the funding in the autumn statement—no doubt about it, we need it there in black and white. When we have that, we will be satisfied that the Government are keeping their promises to the people of Somerset.

[Tessa Munt (Wells) (LD)]

While we are on the subject of sluices, will the Minister address the problem of Bleadon sluice, bearing in mind that we have all talked about how any approach has to be for the whole catchment area? My concern is with the Axe and Brue rivers; there is a need for dredging on the Brue, but my most important concern is the Axe, which drains out into the northern part of my patch and over towards Weston-super-Mare. Bleadon sluice was closed by the Environment Agency, which put a red notice on it in 2009. There has been a bundle going on—no one will take responsibility. I was told earlier this year that the sluice was going to be fixed at some point during the year, but we are a long way through it and nothing has happened. Will the Minister address that, since we are on the subject of sluices?

[Mr Heath]

My hon. Friend is absolutely right. We cannot divorce the issues of the Parrett and Tone from those of the Axe and Brue. That is why the next ask is equally important: setting up the Somerset rivers authority, to absorb the interests of the existing internal drainage boards and to create real capacity to manage our complex water systems appropriately and with the benefit of local knowledge. That will not happen unless we have a revenue stream to support it, which in turn will not happen unless the Department for Communities and Local Government realises that Somerset is an exception and does not fit its rules. The Department will have to give way to establish what is already the case in some parts of the east of England—a separate levy to fund the maintenance we know to be necessary. Again, that is an ask to which the answer must not be no, because otherwise we will not have done our job.

Will the Minister also update us about how the common agricultural policy reforms as implemented in England—the pillar two payments, in particular—will be used to encourage water retention, the sort of sustainable use of land that will reduce the amount of water entering the lower reaches of the levels at the right time? That is a key component, whether it involves reforestation or simple changes in land use, to enable us to hold more water at higher levels, releasing it slowly when it can get away.

We need a balance between the environment and the community, including the agricultural community. The environment of the levels is precious. I will not have it said that the environmental benefits of the levels do not matter, because the levels are irreplaceable—if we allow them to drown, they die. Therefore, it is in our interests as environmentalists, as well as representatives of our community, to ensure that the balance is created. As I have said often, flooding 3-feet deep for three weeks is fine. That is what we expect in Somerset; it is the levels way. Flooding 10-feet deep for 10 weeks is unacceptable; that is when people are in difficulties, businesses and communities die, and vegetation dies as well.

I hope that the Minister will give as many answers as he can. We will excuse things not having been completed by next winter, provided that we have clear intent that they are under way. After all the promises that we have been given and all the efforts made, however, we will not excuse things simply being said only for nothing to happen. We will have flooding again this winter—that is a fact—but if it is as bad as it was last winter and we can turn around and say, “The Government have failed to do all those things that they said they were going to do,” then, frankly, the Government will have to answer not only to the people in this Chamber, but to an awful lot of people in Somerset, who will be very angry indeed.

16:35

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)]

It is a pleasure to serve under your chairmanship, Mr Hood, and to have the opportunity to respond to the debate.

I hope to satisfy my hon. Friend the Member for Somerton and Frome (Mr Heath) with my response, as far as I can on the day. As he said, he has raised the issues consistently, since long before my time with this portfolio. More recently, we have had a number of opportunities for debate inside and outside Parliament. He has been entirely consistent, as have my other hon. Friends present today, and they have worked together as a team, along with our right hon. Friend the Member for Yeovil (Mr Laws), who has also raised the issues with me.

I have only a short time to respond, so I will not set out everything to do with the extreme weather that we experienced, although it is important to mention that the effects in Somerset were replicated in other parts of the country. Yesterday I was debating with right hon. and hon. Members from the Humber estuary. My hon. Friends here today will be delighted to know that those Members were only requesting £880 million for the schemes identified in that area. We are not short of positive ideas to deal with flooding around the country.

The specific issues affecting Somerset are not so much to do with the large numbers of properties flooded—as my hon. Friend the Member for Somerton and Frome said, in other areas a much larger number flooded—as with the volume of the water and its duration, producing the longer term economic impacts on the communities affected. There was in excess of 65 million cubic metres of floodwater, covering an area of 65 sq km. Exceptionally, that floodwater stayed on the levels for more than 12 weeks.

The Environment Agency did an excellent job in carrying out the single largest pumping operation ever undertaken in Somerset. As my hon. Friend said, the emergency services, the volunteers and all the other groups from local communities and from across the country who offered assistance did a magnificent job in some very difficult conditions. In addition to the 40 permanent pumps, the Environment Agency mobilised a further 24 temporary units, increasing the ability to pump by more than 150%, although there is an interaction between the tidal nature of the catchments and the ability to get the water out into the sea, which my hon. Friend considered when talking about the sluice. I want to make it clear that there are no plans to reduce the number of Environment Agency front-line flood and coastal risk management posts. That issue has been raised in the past.

On my first visit to the Somerset levels with my hon. Friend during the episodes of winter flooding there, the clear ask from the community was for dredging of the rivers. I came back to the Department determined that we should re-examine the case for doing so. The Secretary of State for Environment, Food and Rural Affairs followed up with a visit and asked all the local organisations to meet and to put an action plan together, with support from officials in the Environment Agency and DEFRA. That happened in a remarkably speedy six weeks. I chaired the first meeting and returned later to hear about some of the progress. We now have the action plan, whose delivery is crucial for the future of the levels.

[Tessa Munt]

Will the Minister give way?

[Dan Rogerson]

I will give way briefly, but I do not have much time.

[Tessa Munt]

It is a brief point. Will the Minister make absolutely certain that DEFRA officials stay engaged with the process, because an internal drainage board cannot do things on its own? It is crucial that DEFRA officials carry on working with the boards.

[Dan Rogerson]

DEFRA officials and indeed Ministers will remain involved. The Secretary of State was in the area again recently to look at progress. He has been appointed flood envoy for Somerset and Wiltshire by the Prime Minister, as I have for Cornwall. We maintain an interest in the delivery of the plan which, as my hon. Friend says, is crucial. Money has been made available from the Department for Transport, DEFRA and the Department for Communities and Local Government. For example, an additional £12.3 million from the Department for Transport has been made available to the county council to help roads recovery.

I want to pick up on some of the issues in the action plan and the progress that has been made against that plan. An important element is resilience, which is perhaps slightly more intangible than dredging and hard defences but is important. The Somerset civil contingencies partnership is providing a dedicated programme of targeted support to help people, farms, businesses and neighbourhoods to recover, including by accessing the support and advice that we have made available. They are working hard on plans to increase resilience in the future. As my hon. Friend the Member for Somerton and Frome said, flooding will happen again, so we must ensure that communities have what they need at their disposal. That is particularly so for people who have moved to the area and may not have been through this before, unlike the old hands who have and know about resilience and how to support one another.

Implementation of the action plan has started with the dredging of the Rivers Parrett and Tone. It started when the banks were stable and safe enough to support the weight of the heavy equipment, when local access permission had been sought and preparations made for receiving the excavated silt. The dredging is progressing well and is on target to be completed by the autumn. The plan is to dredge 8 km of river; so far 1.7 km has been completed and the number of gangs has increased from two to six.

Work is in hand to find alternative ways of getting water to flow from the Parrett catchment area by increasing the capacity of the River Sowy and the King’s Sedgemoor drain so that water can be pumped more easily and be diverted to Dunball where extra pumps are working. The footings have been made permanent so we can call on them if necessary. That will lower the levels in the River Parrett sufficiently to enable the pumping stations to be operated, helping to lower water levels on the moors around Langport, and to a lesser extent around West Sedgemoor, Curry moor and North moor.

The Environment Agency is currently scoping this work and hopes to appoint a consultant by the end of this month who will work with communities and professional partners to agree aims and to include them in the development of the options. By the autumn, the agency expects to have assessed a range of options to see what is feasible. Partnership funding will be needed to build the scheme. Further key action is the construction of a barrier or sluice to deal with the impact of a rise in sea level and to protect Bridgwater from flooding, and to look at future development.

On Friday 6 June, the Environment Agency, with Sedgemoor district council, organised a technical meeting to discuss various options for the type of barrier that could be used. The meeting was attended by 60 people who received presentations from experts from across the country who have been involved in the design of other flood defence barriers. The long-term vision for Bridgwater was also discussed. A group will review these options and compile a report by September. That report will contribute to an informed decision on the preferred option.

The Environment Agency estimates that it will be three to five years before construction starts and that it will take two years to complete notwithstanding discussions on funding, to which my hon. Friend is keen to draw attention. If we have a plan by September, that will allow serious consideration of the funding options.

Under the action plan, a new Somerset rivers board is being set up. It will have greater control of and responsibility for work to maintain water and flood risk management in the area. This work is being co-ordinated by Somerset county council, working closely with district councils, the Environment Agency, Natural England and the internal drainage boards, which do such crucial work not just in the Parrett and Tone catchment areas but the Axe and Brue areas.

The Somerset rivers board was discussed at an interim leaders implementation group meeting on 20 June. It was a positive meeting that acknowledged the need for compromises and urgency. The options under review include organisational structures, legislative requirements and funding models, all issues that will need to be discussed by local and national Government to ensure a sustainable model in the future. Proposals being considered include an appropriate catchment-wide funding mechanism to generate additional funds. These proposals will be discussed at the next leaders group meeting on 7 July. When proposals have been agreed, next steps will include consultation and engagement on them. In addition, work is under way to consider raising the road to Muchelney and building a ring-bank flood protection scheme for Thorney. My hon. Friend was keen to make the case for that.

We have made provision through funding such as the farming recovery fund, and 167 applications were received from Somerset by the 27 June deadline. That represents 44% of all the claims. It was available to other areas of the country that experienced winter flooding from early December 2013 to April 2014. The total value of claims from Somerset is over £1.5 million of the money that was made available. Repair and renew grant is also available, and householders and businesses may claim up to £5,000 to establish flood resilience measures on their property. Of the 283 properties that were flooded in Somerset, 219 were in the area covered by Sedgemoor district council. Other councils have also taken that option.

In the few seconds remaining, I should say that I greatly appreciate the leadership that has been shown in communities. This has helped to bridge the gap between local and national agencies. We will continue to focus on delivering the action plan. There are challenges ahead, but if we work together we can overcome them so that that resilient community has a better time in future.

VAT on e-books

Wednesday 2nd July 2014 Westminster Hall

16:45

[Mr Tom Harris (Glasgow South) (Lab)]

Through you, Mr Hood, I thank Mr Speaker for giving me the opportunity to raise this matter. I raised the subject under a Labour Government in the last Parliament, before the 2010 election. Sadly, many of my concerns have not receded. I welcome the Minister to her place.

It is not necessary to go into a long exposition about the importance of books or reading. We can take for granted the Minister’s agreement that encouragement to read books is a good thing, and that any Government, whatever their political colour, want to promote the reading and enjoyment of books.

I declare an interest at the outset in that I am an avid reader and, in the past four years, have become an avid reader of e-books downloaded to my Kindle or my iPad—my personal iPad mini, which I bought myself, not my publicly-funded iPad. I say that for the record lest the tiresome usual suspects see an opportunity to berate me for misuse of public funds.

My experience seems to be fairly familiar to other e-book readers. Purchasing an e-reader prompts the reader to buy more books than he or she did before. An additional benefit of e-readers is that I can now purchase books and store them unread on my Kindle instead of buying physical books and leaving them unread and gathering dust on my shelf.

Amazon states that UK users of the Kindle buy up to four times as many books as they did before they bought their Kindle. For those of us feeling the dreadful physical onslaught of the years, e-readers make print more accessible with adjustable font size and colour, and so encourage reading.

E-books offer greater consumer choice. I was delighted to discover that books by my favourite science fiction writer—the late, great Bob Shaw—which were out of print, are available again online to download. The renewed availability of previously out-of-print books from a huge range of authors has provided a much-needed revenue stream for publishers and authors, as well as offering readers greater choice.

E-books are a British success story and have helped to drive the recovery of the UK publishing industry since the financial crisis of 2008. Consumers in the UK are already the biggest e-commerce spenders in the world, and have been fastest in the EU to embrace e-books, partly because of the huge choice of English language books, partly because of competition and choice in e-book readers, and in large part because of the price competitiveness of e-books. That has brought big new opportunities to readers, writers and publishers.

Rapid year-on-year growth saw e-book sales in 2013 account for 21% of the value of the UK’s total book market, up from 8% in 2011. The Publishers Association reported that 29%, or about £1.5 billion, of UK publishing revenues in 2013 was derived from digital products. Amazon.co.uk’s Kindle e-books already outsell print books.

That is all good news, but the Minister will be aware that a change is coming that will have damaging consequences for all concerned, except the Treasury. For everyone else—authors, readers, publishers and online retailers—the consequences of the changes to be introduced in January, just six months from now, will reverse much of the good that the introduction of e-books has achieved in recent years.

Unlike printed books, which rightly attract a zero rate of VAT, e-books have the full rate of VAT added to their price. That is simply wrong, and I have thought so for several years. It is clearly unfair to recategorise a book as an electronic service, which is the justification for adding VAT, simply because it is downloaded rather than picked off a shelf. A book is a book is a book. The full UK rate of VAT is charged on any e-book sold in the UK, but that does not affect readers who buy a book from the Kindle store, because the VAT rate is that applying in Luxembourg, where Amazon is based.

From 1 January 2015, however, VAT will apply wherever the purchaser lives. For example, Donna Tartt’s “The Goldfinch”—which I would highly recommend to the Minister, although a drawback of e-books is that it is much harder for people to lend others their copy—which I purchased from Amazon a couple of weeks ago for £3.49, included a nominal VAT rate of about 3%. If we add an additional 20% to that cost, which is what I would have had to pay had I waited until next year to buy it, that will undoubtedly have the effect of discouraging many readers—not all, but many—from buying it.

The decision to buy a book is price-sensitive. Ofcom research shows that the willingness to pay for a single book download declines steadily as the proposed price of a book download increases. The average price that respondents were willing to pay was £3.74. About 42% of people were willing to buy an e-book at £5. Once VAT at 20% was added, bringing the cost up to £6, the proportion of consumers willing to buy it fell dramatically to 28%.

According to the Publishers Association, digital sales across all publishing increased in 2013 by 305% and digital revenues are now £509 million—or 15%—out of an overall book market of £3.4 billion. In fiction, e-books account for a third of all sales—that is £200 million —and for 7% of non-fiction sales.

But the association adds:

“These figures are likely to continue to increase, but at a slower rate of growth than in the earlier years of e-reading take-up, as the market matures... A further check on the growth of ebooks will come from the fact that they currently attract VAT (in the UK at the full rate of 20%). This is compared with the application of the zero rate of VAT on physical books—a long-standing feature of the UK’s tax regime—and is a reflection of the belief that the tax should not act as a disincentive to reading and learning. However, this important feature of the fiscal regime is absent for digital publications on which the full rate of VAT of 20% is applied. Research suggests that consumers are discouraged from buying ebooks by the VAT rate.”

The association continues:

“The European Commission Directorate-General for Taxation is conducting a full study of the whole of the VAT regime, and has identified ebooks as a particular focus of attention.

“We currently await a Communication from the Commission outlining its findings and recommendations—however, publication of this seems to be suffering from repeated delays. We believe that the UK Government should urge the European Commission to publish its findings following its study; and that the Commission should resolve to allow Member States to investigate applying lower rates of VAT on e-publications (books and academic journals). The UK should itself then undertake a similarly detailed study to analyse the impact of reducing the VAT rate on e-publications, with a view to reducing to the zero rate.”

E-books are a hugely important part of the UK publishing industry, which is itself a hugely important part of our creative industries, and in a week when the Government are pledging to help and support our creative industries, this debate has come at an appropriate time.

The UK is the largest e-book market in Europe, but the Society of Authors is concerned that publishers’ practices and the Government’s policies are creating barriers to growth and hindering development of the publishing industry. It told me this week:

“The largest barrier to growth for most authors is the difficulty of obtaining a proper return for their professional work. Authors’ incomes continue to be squeezed: fewer books are published and sold; advances and royalties have fallen while more unpaid work is expected of authors in marketing and publicising their work, including appearances and use of social media.

“Print books attract a zero rate of VAT, but their electronic equivalents attract a rate of 20 per cent in the UK. Other EU countries, such as France and Luxembourg, have unilaterally reduced the rate of VAT on ebooks. This means the UK will now be at a competitive disadvantage, as ebooks sold in the UK will be more expensive than those sold elsewhere. The result is often to drive down prices leading to a smaller net sum going to authors. Most of the major players in the ebook market are based abroad.

“Given the rapid pace of development in the ebook market, there is an urgent need for removing VAT on ebooks to avoid the UK slipping behind European competitors.”

There are those in the industry who welcome the change from charging VAT in the country where the e-book is sold to charging the consumer where he lives. As someone who has spoken in the Commons against Amazon and others for not living up to their moral obligations to pay tax, it is a change that I understand. However, this is not about Amazon or Kobo or any of the other e-book sellers avoiding tax. VAT on e-books is not paid by the seller; it is paid by us, the consumers. If the change goes ahead in January, while the Treasury sticks to its position of insisting that an e-book is not a book at all but the equivalent of a video game and is therefore subject to 20% VAT, the industry—the whole industry, not just those specifically involved in producing and selling e-books—will suffer, and suffer significantly.

The Government argues that their legal advice

“indicates there is no scope to change the VAT treatment of the sale of digital book… products under EU law.”—[Official Report, 14 May 2014; Vol. 580, c. 682W.]

I simply cannot accept that, because Luxembourg and France have already challenged it. They cut their rates for e-books to 3% and 5.5% respectively in 2012. There is no reason why the UK cannot follow suit. I certainly do not believe that Ministers in this Government, of all Governments, are reluctant to pick a fight with the European Commission.

Other European Governments have taken on the EU on this issue. Germany, Poland and Italy are all calling for reductions in the rate of VAT on e-books. Will the UK add its voice to that call? Even assuming that the Government stand by their legal advice, which has been published and publicised, will they add at least their voice to the calls on the European Commission for change?

Incidentally, the German coalition Government’s executive board decided in April to cut VAT on audio books to 7% from 19%. The German Ministry of Culture is also pushing at the EU level for the same 7% VAT rate to apply to e-books, in line with the rate for print books in Germany, so the decision, if made, would make e-books and print books equal as far as VAT is concerned.

A German Government spokesman said:

“Due to rapidly advancing digitisation”—

I do not know what the German for “digitisation” is, by the way, but I would be quite interested to find out—

“we insist on a rapid implementation of the agreed points. We want to make sure that print and electronic media and audio media are treated equally for tax.”

Well, hooray for the Germans.

In the House, we are only too aware of the need to nurture the next generation. As parents, we understand the importance of encouraging our children to read. My own children often borrow my Kindle to take to bed, although they have not yet mastered the art of charging the damn thing after they have used it—that may be further down the line. So, for a new generation who view CDs as a quaint old-fashioned way to buy music; who watch TV shows when it suits them, not when it suits the broadcasters; who download their video games, rather than queuing outside the shop; and who have a far greater number of distractions than any previous generation to prevent them from sitting down with a book, but who will, when choosing to read a book anyway, be more likely to buy it electronically, are we really saying that increasing the cost of that product by up to 20% can really be reconciled with an ambition to encourage the young to read literature?

Do the Government still accept that we should promote reading and literacy and do all in our power to widen reading and literacy? I know, of course, that the genuine answer from the Minister will be yes, but should we not therefore widen our support for print books to their digital equivalent? Are the Government willing to engage with the European Commission to hasten the completion of its impact study assessment of options to reform EU VAT rules, including those affecting VAT on e-books? Should the Government not be standing up to Europe and following the examples of France, Germany and Luxembourg by insisting on a substantially lower rate of VAT on e-books? This is one area where I would like to see a race to the bottom. I want the Government parties and my own party competing in the next few months leading up to the general election to see who can offer the lowest rate of VAT on e-books, because consumers, readers and authors, not politicians, would emerge the winners.

Lastly, and importantly, one activity I use my taxpayer-funded iPad for is reading newspapers, and I am a subscriber to the digital edition of The Times. I am delighted that, as revenue from journalism is increasingly scarce, newspapers have found a route to survive in the 21st century through digital subscriptions, but their route to survival is similarly under threat. This country removed taxation from newsprint more than 300 years ago—removing what was seen, rightly, as a tax on free speech. Now, however, the Treasury is stealthily reimposing it by requiring the 20% VAT levy for the proportion of every newspaper subscription that is digital. It was not this Government who introduced that, but the previous Government. This Government have merely continued it, and it is wrong.

As a former local newspaper journalist, I want a successful future for our local, as well as our national, press. When quality journalism by properly trained and professional staff is competing with numerous free sources, as well as so-called citizen journalists—well meaning amateurs with dubious qualification to write about their chosen field of interest—imposing an unnecessary 20% charge on newspapers is a serious blow to freedom of expression. That argument was first deployed, successfully, 300 years ago. It is no less relevant today. The Minister and her colleagues have an opportunity to be on the side of fairness, literacy, opportunity and culture. The question is whether her Treasury colleagues will allow her to grasp that opportunity.

17:00

[The Economic Secretary to the Treasury (Andrea Leadsom)]

It is a pleasure to speak under your chairmanship, Mr Hood. I congratulate the hon. Member for Glasgow South (Mr Harris) on securing a debate on this very important subject. I am aware that he has asked a number of questions on the issue recently. As he will be aware from the answers that he has received, I am filling in for my hon. Friend the Exchequer Secretary to the Treasury in Westminster Hall, as he is in the main Chamber leading on the Finance Bill. In his absence, I will do my best to answer some of the hon. Gentleman’s questions.

Of course, no one needs to be an expert on tax to recognise the importance of books. The hon. Gentleman is absolutely right—publishing is an industry in which the United Kingdom can boast to have always been, and to remain, one of the world’s leaders, be it because of Charles Dickens, Jane Austen or Agatha Christie. I understand that Barbara Cartland is one of our most lucrative book exports, but I am not personally so familiar with her novels.

[Mr Harris]

I suppose that at this point we should acknowledge that one of the Minister’s colleagues, the hon. Member for Mid Bedfordshire (Nadine Dorries), is consistently in the top six on the Amazon bestsellers list for e-books.

[Andrea Leadsom]

I am sure that my hon. Friend will be delighted to have been name-checked. Her sales will no doubt rise dramatically as a result of that helpful intervention.

The Government also recognise the crucial role that reading can play in increasing literacy among our younger generations, which is important to their future success. I remember that my two sons were five and three when the first Harry Potter books by J. K. Rowling came out. We used to snuggle up together, and none of us wanted them to go to bed, because we just wanted to get on to the next bit. There is no doubt about the contribution of some of the great British children’s and adults’ literature. I include C. S. Lewis and some of the other great children’s authors among those who have helped to support and sustain literature and pleasure in reading among young people and adults. Our new national curriculum, which comes into force this September, is clear that all pupils must be encouraged to read widely, both for pleasure and for information. We absolutely recognise the important role that books have always played in this country and will continue to play.

On the issue of tax, I begin by reassuring the hon. Gentleman that the Government recognise the importance of the e-services market in the UK and that Ministers are taking a number of actions to support the digital economy. E-services are a growing part of our economy, and we expect them to generate significant tax revenues going forward.

On the specific issue of VAT, I should briefly explain that, as the hon. Gentleman pointed out himself, it is governed by EU law, and that reliefs from VAT are strictly limited under EU law. As hon. Members may know, when the UK joined the European Community in 1973, we successfully negotiated to keep our existing zero rate on items such as children’s clothing, most foods and physical books, newspapers and journals. Most other member states do not benefit from that derogation.

[Mr Harris]

I apologise for interrupting, but when the derogation was granted on our accession to the EU in 1973, there was no reference to physical books, because e-books did not exist at the time. There was a concession on books, and as that derogation stands, it could be extended to e-books, as e-books come under the definition of being a book.

[Andrea Leadsom]

Yes, I accept the hon. Gentleman’s point, and I will come on to it if he will bear with me.

EU VAT law allows member states to implement reduced rates of VAT of no less than 5% for certain goods and services, listed in annexe III of the VAT directive, at the discretion of member states. One of those reliefs relates to the supply of books on all physical means of support, newspapers and periodicals, other than material wholly or predominantly devoted to advertising. Although that may sound like it includes e-books, article 98(2) of the VAT directive specifically excludes electronically supplied services from the reduced rates in annexe III. That means that the UK charges the standard rate of VAT, 20%, on e-books and the zero rate of VAT on physical books.

As hon. Members will be aware, the UK’s e-books market is a growing one. Therefore, it is not clear that it is in need of a stimulus in the form of a reduced VAT rate. Between 2011 and 2012, e-book sales in the UK increased from £138 million to £261 million, so at a time when the Government are working to tackle the economy’s problems head-on and deliver a recovery that works for all, it is not clear that we should offer fiscal support for such a rapidly expanding industry.

[Fiona Mactaggart (Slough) (Lab)]

How many e-books are currently subject to UK rates of VAT and how many are subject to, for example, Luxembourg rates?

[Andrea Leadsom]

The hon. Lady will forgive me—I do not have those specific breakdowns to hand, but I will happily write to her on that point. I apologise for that.

[Mr Harris]

I am grateful to the Minister for giving way again. She has shown great patience, and I appreciate it. What she has just said, though, rather misses the point of my debate. No one is asking the Government to offer subsidies or favours to the e-book industry. What I am asking is that an impending charge that consumers in this country are not currently paying not be levied. She is right to say that the industry is doing well and growing. The problem is that people who buy books currently and pay 3% or 5% VAT will from 1 January pay 20%. We are not asking for any kind of subsidy from the Government; we are asking for the current situation to continue.

[Andrea Leadsom]

Again, I understand entirely the point of the hon. Gentleman’s debate. The issue is specifically that e-books are not counted as zero-rateable books from the point of view of the EU directive, so this is not an optional VAT charge. The EU directive requires us to treat e-books in that way, because they are treated as an electronic service. As the hon. Gentleman said at the start of his remarks, people can change the font; they can download e-books; they can switch from page to page without having to move pieces of paper, and so on. Therefore, they are deemed to be an electronic service and not the same as a physical book. The point that I am making is that our charging VAT on them is not optional.

Let me come on to the case of France and Luxembourg, about which the hon. Gentleman spoke, and in particular the difficult issue of books on Amazon. I am sure that, although he would support not paying VAT on e-books, he recognises that there has been an issue with big companies locating themselves in other places to take advantage of beneficial tax regimes that no doubt help their sales. As he pointed out, since 2011, France and Luxembourg have levied reduced rates of VAT—7% and 3% respectively—to bring them in line with their VAT rates on physical books. That is creating competitive distortions in relation to economic operators in other member states, and there has been pressure from the industry for the UK to reduce its VAT rate on e-books. The European Commission has begun European Court of Justice infraction proceedings against France and Luxembourg, and it has formally instructed them to apply their standard VAT rates to supplies of e-books. If the UK were to reduce the rate of VAT on e-books, it is extremely likely that we, too, would be infracted. I would be interested to know whether the hon. Gentleman thinks that we should seek to avoid infraction proceedings from the European Court of Justice or embrace them. We could be, unusually, on opposite sides of the argument on that point.

[Mr Harris]

I seem to remember being complimentary to the Minister when she spoke powerfully in favour of votes for prisoners in a debate on which we took the opposite points of view, and I believe that we are going to do the same again. I am more than relaxed about the UK being the target of court action by whichever European institution is relevant. I was relaxed about the idea when it came to votes for prisoners—we have to keep our position on that—and I see no difference, frankly, in this case. If the move would be good for the UK industry, we should stand up for that industry against interference by the EU.

[Andrea Leadsom]

I absolutely respect the hon. Gentleman’s position. Were we unilaterally to decide to change the VAT rate, we would, no doubt, be subject to ECJ infraction proceedings.

The other real issue is that a reduction in the rate of VAT on e-books would be likely to create border-line issues in the wider electronic services market, because problems of definition could lead to a widening of the relief through legal challenge and industry changes. That would put at risk serious amounts of revenue in the UK market, which is worth more than £2.5 billion.

I turn to the VAT changes that will be introduced in 2015. Currently, supplies of services, including electronically delivered services such as e-books, are taxed in the member states where the supplier is based at the VAT rate of that member state. Member states with lower VAT rates therefore have a competitive advantage, which encourages suppliers to locate there and sell to EU consumers, including the UK, at lower VAT rates. From 1 January, therefore, there will be a place of supply change, which will mean that e-books and other e-services will be taxed in the member state where the customer belongs at the VAT rate of that member state. That is designed to make competition fairer and to remove distortions.

Legal advice obtained by the Government indicates that there is no scope to change the VAT treatment of the sale of digital books and similar products under EU law. The Commission’s position is clear on the VAT rate of e-books: e-services attract a standard rate of VAT, because they are electronically supplied services. The UK’s rate is in line with EU law, and there is currently no intention to reduce the rate of VAT for e-books.

I am sorry to disappoint the hon. Gentleman by my reply, but I hope that he will be pleased to know that Ministers are focused on actions outside the VAT system to support the digital economy. In that area, we are making great efforts to encourage the digital economy. For example, in June 2013 the Government launched an information economy strategy, which includes positioning the UK strongly in the field of e-commerce by, among other things, improving digital skills across the population and creating the infrastructure to support innovation and growth.

Although I am sure that the hon. Gentleman is disappointed by my answer on VAT and e-books, I hope that he and other hon. Members are reassured that the Government support the sector and will continue to do so and that we are confident that the electronic services market will continue to grow and generate significant tax revenues.

[Mr Harris]

As there are a couple of minutes left, I wonder whether I could be cheeky and get in with another couple of points.

[Mr Jim Hood (in the Chair)]

Order. The hon. Gentleman was able to intervene, but the Minister has sat down and the hon. Gentleman cannot make another speech.

Question put and agreed to.

17:13

Sitting adjourned.

Written Statements

Wednesday 2nd July 2014 Written Statements

Wednesday 2 July 2014

Maths and English (Post-16 Education)

Wednesday 2nd July 2014 Written Statements

[The Minister for Skills and Enterprise (Matthew Hancock)]

I am today setting out the Government’s plans for strengthening English and maths in post-16 education, increasing uptake of reformed GCSEs in these subjects.

A total of 40% of pupils do not get GCSE grades A* to C in English and maths by age 16. Worse still, 90% of those who do not reach this basic standard by 16 do not achieve it by age 19. From August 2014 students who have not achieved a good pass in English and/or maths GCSE by age 16 must continue to work towards achieving these qualifications or an approved interim qualification as a “stepping stone” towards GCSE as a condition of student places being funded.

Reformed GCSEs in English and maths will be available for first teaching in schools from September 2015 with the first examinations being sat in summer 2017. These new GCSEs will both be more stretching at the top, and more practical than existing GCSEs.

These new GCSEs will then be introduced into post-16 education in phases between 2015 and 2020.

With effect from August 2015, we will amend the funding condition, so full-time students aged 16 to 19 with prior attainment of grade D in English and/or maths will take GCSE, rather than any other qualification in these subjects.

We will further revise the funding conditions relating to the teaching of the new GCSEs in English and maths to students aged 16 to 19 enrolling for full-time courses from August 2017. The final requirements will be set nearer the time, informed by the outcomes of Ofqual’s consultation on grading standards for the reformed GCSEs.

For many, reaching GCSE standard requires progressive stepping stones, for example through functional skills qualifications, and a curriculum that suits their needs. We will ensure that such stepping stones are available to support students en route to GCSE and that these are fit for purpose.

GCSE is also a valuable qualification for adults and the reformed GCSEs will assess many of the skills that employers tell the Government they need.

Our ambition is that, by 2020, adults aged 19 and over and apprentices of all ages studying English and maths will be working towards achievement of the reformed GCSEs, taking stepping-stone qualifications if necessary. Functional skills will continue to be part of apprenticeship completion requirements but we will work with apprenticeship providers to enable them to offer GCSEs to their apprentices.

We will launch a call for evidence, so that we can draw in advice from a wide range of stakeholders on how to reach this goal for young people, adults and in apprenticeships, and how far the new GCSEs meet the functional skill requirements of all adults and apprentices. In response to this call for evidence, we want stakeholders to advise us on how to ensure that all parts of the sector are ready to deliver against this new ambition.

We are also introducing high-quality new “core maths” qualifications—aimed at the 40% of young people who achieve a C or better at GCSE but do not take A-level maths. They will give some 200,000 students a year the opportunity to study maths in post-16 education, starting in 179 schools and colleges this autumn, before being rolled out nationally in 2015.

The majority of students who do not achieve A* to C GCSE English or maths at 16 go on to further education. As part of our plans to support these changes, we are publishing the FE work force strategy. This will set out the steps we are taking to improve the quantity and quality of teachers to support the delivery of maths and English; to increase business engagement in FE; to improve the quality of leadership and governance; and to enhance the use and effectiveness of technology to support teaching and learning.

We are announcing details of a new “golden hello” scheme for maths teachers recruited after April 2014, as part of a £30 million package to raise the quality of teaching in maths and English in FE. This includes bursaries to attract more graduate teachers and programmes to enhance the skills of existing maths and English teachers so they can teach GCSE. The Education and Training Foundation will play a lead role in implementing this strategy. This extra support for FE sits alongside incentives we have already announced to recruit high-quality maths teachers into schools, alongside significant investment in maths training and support for existing teachers.

From the beginning of academic year 2015-16, providers who teach English and maths GCSE to adults aged 19 and over outside apprenticeships will receive a higher rate of funding through the adult skills budget. In line with the policy outlined above, the Government will cease to fund level 2 qualifications and credit framework (QCF) English and maths qualifications from the same point, so that adults studying at level 2 will either take functional skills or GCSE.

These changes build on wider reforms under this Government to put academic and vocational education on an equal footing. We are reforming apprenticeships to put employers in the driving seat and make apprenticeships more rigorous and responsive to the needs of business. Our new technical awards are as rigorous and demanding as the new reformed GCSEs and will give 14 to 16-year-olds real-life skills in practical subjects. TechLevels for those aged 16 to 19 must be signed off by employers. Technical awards and TechLevels comprise a clear set of high-quality options for students wishing to follow a vocational route, and so help ensure all young people better get the chance to achieve their potential.

Double Taxation Agreement (Tajikistan)

Wednesday 2nd July 2014 Written Statements

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

A double taxation agreement and protocol with Tajikistan was signed on 1 July 2014. The text of the agreement and protocol has been deposited in the Libraries of both Houses and made available on HM Revenue and Customs’ website. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.

Arms Embargo (Azerbaijan and Armenia)

Wednesday 2nd July 2014 Written Statements

[The Minister for Europe (Mr David Lidington)]

The UK regularly reviews export policy to embargoed destinations in the light of our international obligations and the situation on the ground, to ensure that implementation continues to be legally robust, diligent and consistent with the terms of the sanctions in place.

Following a thorough review of their procedures for processing export and trade licence applications to Armenia and Azerbaijan, the Government will continue to apply the Organisation for Security and Co-operation in Europe (OSCE) embargo to the supply of military list equipment to military, police and security forces and related governmental entities, where this equipment could be used in the Nagorno-Karabakh region, or on the land border between Azerbaijan and Armenia. For the supply of military list equipment which does not have the technical capacity to be used or modified for use in the Nagorno-Karabakh region or on the land border between Armenia and Azerbaijan, the Government will consider licence applications in line with the consolidated EU and national export licensing criteria. Supplies of military list equipment to other end-users; such as, humanitarian, peacekeeping, research or media organisations, will not be considered subject to the embargo, unless there is a clear risk of diversion to the armed forces, police or security forces of either state.

All export and trade licence applications for Armenia and Azerbaijan as elsewhere will be assessed on a case-by-case basis against the Consolidated EU and National Arms Export Licensing Criteria and we will not issue a licence where to do so would be inconsistent with the criteria.

The south Caucasus is an area of strategic importance to the UK. In partnership with Armenia and Azerbaijan the UK continues to work for peace, security and mutual understanding in the region. In the 2012-13 financial year, the UK funded £1.245 million worth of projects to promote peace between Azerbaijan and Armenia. On Nagorno-Karabakh we have funded a series of projects designed to strengthen the likelihood of a peaceful resolution of the conflict by working with civil society in Armenia, Azerbaijan and Nagorno-Karabakh.

We strongly support the work of the OSCE Minsk group to find a peaceful and lasting resolution to the Nagorno-Karabakh conflict. It is for this reason that the UK continues to adhere to the embargo on deliveries of military list equipment to forces engaged in combat in the Nagorno-Karabakh area in accordance with the precursor to the OSCE, the conference on Security and Co-operation in Europe’s declaration of 1992.

Local Government Pension Scheme

Wednesday 2nd July 2014 Written Statements

[The Parliamentary Under-Secretary of State for Justice (Jeremy Wright)]

Tameside metropolitan borough council, the operator of the Greater Manchester pension fund, has asked that we provide a guarantee that the Department will meet employer or employee pension contributions for employees that were former probation trust employees who have been transferred or are recruited to community rehabilitation companies while in ownership of the Secretary of State. The guarantee will be limited to where a community rehabilitation company becomes insolvent. I can inform the House today that we will provide such a guarantee in respect of each community rehabilitation company and a parliamentary minute, which sets out the detail of the guarantee, has been laid in both Houses.

The provision of the guarantee ensures continued pension provision in the local government pension scheme for staff following the sale of shares in community rehabilitation companies as part of a public procurement exercise.

The provision of the guarantee is considered to be value for money for the taxpayer as it will avoid community rehabilitation companies having to obtain appropriate security in relation to their pension obligations which would have been funded by the Secretary of State. Further, in some cases the inability to obtain the appropriate security may have prevented some companies from participating in the tender process.

I have placed copies of the associated documents in the Libraries of both Houses.