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Oral Answers to Questions
(7 years ago)
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Derek Thomas (St Ives) (Con)
The Chief Secretary to the Treasury (Mr David Gauke)
The Government are protecting the core schools budget in real terms, reaching almost £41 billion this year. The Department for Education has consulted on a national funding formula to address the current postcode lottery in schools funding. The consultation lasted for 14 weeks, and received over 25,000 responses. The Government are considering the responses carefully, and will publish a response in the summer. For the St Ives constituency, the proposals would mean an increase in schools funding of 0.4%.
Derek Thomas
The majority of schools in my constituency are rated good or outstanding, due to the hard work and determination of teaching staff and their heads. However, Government funding for schools has not kept up with costs, which, according to the House of Commons Library, increased by 3.4% in 2016-17 and will increase by 8.7% by 2020. What message can I take back to my schools, which tell me they cannot maintain those standards if school funding does not keep up with these increased costs?
Mr Gauke
The Government do recognise that schools, like other organisations, face additional costs, such as salary increases. That is why the Department for Education is supporting schools to become more efficient, including with over £1 billion of savings from better procurement by 2019-20. It is also worth pointing out that, by protecting the total schools budget in real terms, as pupil numbers increase, so will the amount of money in our schools.
Helen Goodman (Bishop Auckland) (Lab)
If the Government are protecting the budget, why is the average cut in my constituency 8%, rising in some village schools, including to 22% in Butterknowle?
Matt Warman (Boston and Skegness) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
The Government are taking action to give the UK the world-beating digital infrastructure that it needs. Broadband across the country has been transformed by the Government-led £1.7 billion superfast programme, extending coverage at 24-plus megabits per second to 95% of UK premises by the end of this year. At autumn statement 2016, we committed over £1 billion more to support the market to deliver full-fibre broadband networks, to enable 5G mobile and to keep Britain at the forefront of the development of the internet of things.
Matt Warman
The reduction in business rates on new fibre roll-out is hugely welcome, but will the Chancellor assure me that we will incentivise the roll-out of more fibre in such a way that no tax is paid until the fibre is first used, rather than from when it is first installed?
Mr Hammond
The Government’s clear intention is to incentivise investment in fibre broadband networks. The Department for Communities and Local Government will shortly publish a consultation on the implementation of this relief, which will set out more detail on how new fibre will be defined, and we look forward to the responses to that consultation.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Why does the Chancellor not shake up some of his colleagues, and start investing in the digital infrastructure in the north of England, in Yorkshire in particular? Will he also look at other infrastructure, such as railways? When are we going to get the electrification of the TransPennine Express route?
Mr Hammond
At autumn statement, we announced £23 billion of additional investment in our infrastructure, and key priority areas such as research and development, specifically designed to address the UK’s productivity problem. This investment has to be spread across the whole of the UK economy to make sure that we deliver improved productivity and improved economic growth across the economy as a whole. Such investment is going in: public capital investment will be at a higher level in this Parliament following the announcement of this decision than it was before the financial crisis.
Sammy Wilson (East Antrim) (DUP)
While the Government boast about the speed of fibre broadband across the United Kingdom, there are many areas—especially in parts of my constituency—where sending mail by pigeon would almost be quicker than sending it through the fibre network. What action does the Chancellor intend to take to ensure that farmers, small businesses and others relying on digital means of communication in rural areas have a greater ability to deliver such messages?
Mr Hammond
I cannot speculate on how fast the pigeons are in the hon. Gentleman’s constituency, but I can tell him that all consumers now have a right to 10 megabits broadband. By the end of this year, 95% of properties will have access to 24 megabits broadband. The Government are investing more money to reach the last 5%, the hard-to-reach that are often in rural areas.
Stewart Hosie (Dundee East) (SNP)
In Scotland, the original plan was as for the UK: 95% coverage by this year, additional funding for rural areas, money for wi-fi in public buildings and a superfast broadband target of 100% property coverage by 2021. Given that this should be a common endeavour, will the Chancellor welcome the steps taken in Scotland to deliver on those performance targets?
Mr Hammond
We have a UK-wide target. We of course welcome any other actions taken on top of that to achieve yet higher levels of broadband penetration. That is a very positive move for the economies of the regions and nations they affect.
Stewart Hosie
I thank the Chancellor for that. However, the issue is not simply about the provision of infrastructure, but paying for digital usage. Will he give a guarantee to the House that when the UK Government enter the Brexit negotiations there will be no return to the super-expensive roaming digital phone charges for UK citizens working and living in the EU, and for EU citizens living and working in the UK?
Mr Hammond
I hear the hon. Gentleman’s concern and I am absolutely sure that the vast majority of our constituents would agree with his suggestion that we seek to maintain cost-effective access for UK phone users whenever they are roaming within the EU. I think that will be an issue for this Parliament post-Brexit unless we choose, in the course of the exit negotiations, to reach a reciprocal agreement with the European Union.
Helen Hayes (Dulwich and West Norwood) (Lab)
The Chief Secretary to the Treasury (Mr David Gauke)
The Government are protecting the total core schools budget in real terms. That is possible only through careful management of the economy. As a result, school funding is at its highest ever level, at almost £41 billion in 2017-18. Spending will increase to £42 billion in 2019-20 as pupils numbers rise. We are also delivering our manifesto commitment to implement fairer schools funding. The recent national funding formula consultation includes generous transitional protections for schools that would see a reduction in their funding. The Government are carefully considering replies to the consultation and will respond in the summer.
Helen Hayes
The 2015 Conservative manifesto promised that
“the amount of money following your child into school will be protected”.
However, the National Audit Office found that schools face a real-terms cut of 8% per pupil by 2019-20, even before the cuts the new national funding formula will bring to more than 9,000 schools in England. Will the Government therefore confirm that the Tory manifesto pledge on per pupil funding is now in tatters?
Rachael Maskell (York Central) (Lab/Co-op)
The Government are clearly not protecting pupil per capita funding in York, which is currently the seventh-worst funded local authority and will experience a £288 per child cut in funding. How is that protecting the formula?
Mr Gauke
I would expect the hon. Lady to share my view that it is not right that we fund schools on the basis of what has happened historically. Every pupil in England should be assessed on the same basis. It cannot be right, for example, that pupils in Hackney receive 50% more than pupils in Barnsley. That does not seem to me to be fair and it is right that the Government address that.
Rishi Sunak (Richmond (Yorks)) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
The Government are supporting economic growth across the whole country as a key part of our productivity agenda by investing in infrastructure and skills, and by developing our industrial strategy. At the autumn statement, I launched our northern powerhouse strategy and earlier this year set out our midlands engine strategy. We recently allocated a further £1.8 billion from the local growth fund and an initial tranche of £185 million of local transport funding across the English regions.
Rishi Sunak
From Merseyside to Teesside, ports are a great northern success story. Will my right hon. Friend look into the potential for the creation of free ports throughout the United Kingdom? Free trade zones would increase trade, create manufacturing jobs and boost regional growth, which are all key ingredients of our future economic prosperity.
Mr Hammond
My hon. Friend has made the case for free ports, and the Government have heard that case very clearly. We will consider all options that have the potential to support our ambition to see Britain as a great global trading nation, but before making any decisions we shall need to consider carefully not only the advantages that free ports can deliver, but the costs and potential risks associated with them.
Rachel Reeves (Leeds West) (Lab)
If towns and cities in our economy—including those in the north of England —are to flourish, we need banks and building societies that support them. Does the Chancellor agree that those banks and building societies should keep their branches open? Leeds Building Society has just announced that it will close its branch in Armley Town Street, which is in my constituency, following the closure of branches of HSBC and Yorkshire Bank in the last two years.
Mr Hammond
Of course we want there to be a viable branch banking network across the country, but we must recognise that the nature of banking is changing. More and more of us are using online digital banking, and that is bound to be reflected in the configuration of the branch networks that the banks operate.
Mr Steve Baker (Wycombe) (Con)
As the entrepreneurial heart of England, Buckinghamshire provides an excellent bridge to the east midlands and beyond. Will my right hon. Friend look into how investment in Buckinghamshire can help to stimulate growth throughout the country, not just in London and the south-east?
Mr Hammond
I am sure you are delighted, Mr Speaker, that my hon. Friend has lighted on the key role of Buckinghamshire as a bridge between the north, the south, the east, the west and every other part of the country. I should be happy to receive, and I confidently predict that I will receive, my hon. Friend’s detailed submission on the case for greater infrastructure investment in Buckinghamshire.
Steven Paterson (Stirling) (SNP)
Mr Hammond
As the article 50 notice letter set out very clearly, the Government are seeking to negotiate a deep and special partnership with the European Union, at the heart of which will be a comprehensive free trade agreement covering goods, services and networks. That will allow us to continue to work closely with the European Union after leaving the organisation.
The Government do carry out detailed analysis to inform their negotiating strategy, but I am sure the hon. Gentleman would not want me to reveal the outcome of that analysis, which would be of great use to our negotiating partners on the other side. That is not the way to get the best deal for Britain in these negotiations.
Tom Pursglove (Corby) (Con)
In Corby, there is a huge appetite for a new enterprise zone to help to boost jobs and growth further. What consideration has my right hon. Friend given to the introduction of a new round of opportunities?
Mr Hammond
My hon. Friend has made an important suggestion, and I will undertake to look at it carefully. No doubt an exercise will take place over the next few weeks that will involve our thinking about what commitments we want to make for the future, and I will take his question as a representation.
Peter Dowd (Bootle) (Lab)
An important driver of economic growth, both inside and outside London and the south-east, is productivity. Notwithstanding the rosy picture painted by the Chancellor, the Financial Times’s chief economist says that our productivity performance is “calamitous” and that the disparity in performance has widened regionally. Who do we believe, a respected economist or a backtracking Chancellor?
Mr Hammond
I do not recognise the picture that the hon. Gentleman paints of my position. I have stood at this Dispatch Box on countless occasions and lamented the fact that Britain has a poor productivity record—worse than Germany’s, and worse than those of the United States, France and Italy—but simply lamenting that fact is not enough. What we must do is put together a plan for tackling it, and it will be a long—
Mr Hammond
If the right hon. Gentleman checks the records, he will discover that this problem has existed for 40 years. It would be better if we tried to tackle this challenge in a spirit of bipartisan recognition and if we both recognised that there is a real problem that we have to tackle by investment in infrastructure, by investment in skills and by actions to spread growth and prosperity across the country.
Peter Dowd
Yes, seven years.
Although the £6 billion investment for a new two-mile lower Thames crossing is welcome, how does such imbalanced infrastructure spending help to close the economic gap of regions outside London and the south-east? Does not that simply reaffirm the Government’s pathological incapacity to see much beyond the M25? I will be happy to buy the Chancellor a satnav if he wants to take the opportunity to use it.
Mr Hammond
I am not going to take any lectures from the hon. Gentleman on regional awareness, but perhaps he should speak to the Mayor of London, who has a view on infrastructure investment and what should drive it. The Government are clear that we need to spread infrastructure investment around the country in a way that will tackle the productivity challenge. One of the ways we will tackle it is by harvesting the benefits of our city regions in the west midlands, in the northern powerhouse and elsewhere, which evidence across the developed world has shown can be major drivers of productivity improvement. That is what we have to focus on.
Rob Marris (Wolverhampton South West) (Lab)
The Financial Secretary to the Treasury (Jane Ellison)
As the hon. Gentleman may be aware, the Ministry of Justice recently ran a consultation on this issue and received 853 responses in total. The Government response to the consultation was published on 17 March and is on gov.uk. They have since laid the statutory instrument to implement the changes set out in that response.
Rob Marris
The majority of the responses to the consultation were against the proposals because, in a civilised democracy, access to justice should not depend on being rich. Unfortunately, this Government do not agree; they are intent on lessening access to justice by greatly increasing court fees. The increase in probate fees is another stealth tax and one that will affect almost half the estates in England and Wales. It is an attempt by the Government to hide the massive cut in inheritance tax for their rich friends. Will this dying, cut-and-run Government abandon their tax on access to justice?
Jane Ellison
I certainly do not recognise that characterisation of the fee structure. These fees are about helping to sustain an effective justice system that supports some of the country’s most vulnerable people and victims. It is fair to ask those who can afford to do so to support it. In fact, more than half the estates in England and Wales will pay no probate fees at all.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
The Economic Secretary to the Treasury (Simon Kirby)
I reassure the hon. Gentleman that the Treasury and the Department for Exiting the European Union are working closely on that issue. As we exit the EU, we will look to negotiate the best deal possible so that we can continue to work together to maintain justice and security both in the UK and across Europe.
Gareth Snell
The Panama papers showed that thousands of UK-based banks, accountants, lawyers and other intermediaries have helped to set up shady and opaque corporate structures to handle illicit cash flows after registering in the Crown dependencies and overseas territories. Almost a year on from the anti-corruption summit, will the Minister commit to a public register of beneficial ownership covering the Crown dependencies and overseas territories?
Simon Kirby
If only we could do that; we do not have the ability to do so. What I can say is that in March 2017 we published the draft money laundering regulations and announced plans for a new watchdog to ensure supervisors and law enforcement work together more effectively. Since 2010, law enforcement have seized £1.4 billion in illegal funds.
James Duddridge (Rochford and Southend East) (Con)
The EU is to blame for many things, but it is not to blame for money laundering and, in fact, any solution that looks to the EU to solve money laundering is missing the point that it is an international problem. Therefore, will the Minister confirm that he will be engaging internationally and not through the parochial lens of the EU?
Simon Kirby
We are of course a founding member of the Financial Action Task Force, which sets international standards for anti-money laundering and counter-terrorism financing. After exiting the EU, the UK will continue to lead in FATF and around the world.
Toby Perkins (Chesterfield) (Lab)
Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)
The Chancellor of the Exchequer (Mr Philip Hammond)
We’ll see how lucky, Mr Speaker.
The Government have undertaken a significant amount of work to assess the economic and fiscal impacts of leaving the EU, and they continue to carry out that work. This is part of a continuing programme of analytical work covering a range of possible exit scenarios, including sectoral analysis, but I have to say to the House that we are seeking the best possible deal for the United Kingdom, recognising that there is a range of possible outcomes to the negotiations, and the work being done reflects this. The Government have also committed to keeping Parliament informed, but it would not be appropriate to publish analysis that risks undermining our negotiating position.
Toby Perkins
Throughout the last seven years, the needs of the British people have had to play second fiddle to the needs of the Conservative party. As a result, the Chancellor has been forced to disown the manifesto commitment to balance the Budget in this Parliament. Is it not the truth that today’s announcement about a general election is another example of this Government putting their party’s interest ahead of the country’s interests at a time when there is a desperate need for stability in this country?
Mr Speaker
The question is about the departure from the EU and the effect thereof on the public finances.
Mr Hammond
In terms of the effect on the public finances, the decision that the Prime Minister made today is very much in the national interest, to strengthen her hand as she goes into the negotiation with the European Union, to provide a clear mandate for the type of exit that she set out in the letter she wrote to President Tusk two and a half weeks ago, and to ensure that the UK can negotiate its exit from the European Union, execute that exit, and then transition to the new arrangements with a clear run before the next general election.
Gerald Jones
After that party political broadcast on behalf of the Conservative party, may I ask the Chancellor a very serious question? Many billions of pounds of EU structural funds are invested annually in the UK, particularly in our deprived areas and regions. Wales, and Merthyr Tydfil and Rhymney, have benefited significantly from this funding. What steps will he take to replace this essential investment when we leave the EU?
Mr Hammond
As we have said on many previous occasions from this Dispatch Box, we recognise that alternative arrangements will have to be put in place. We will no longer be making large subscriptions—payments—into the European Union, but on the other side of the equation we will no longer be receiving some of the funding that we have been receiving for many years, including the structural funds. That places the opportunity back in the hands of this House—this Parliament—to decide how we should use our taxpayers’ funding to achieve the objectives of the UK Government and to achieve economic development in the way that is most appropriate for the UK.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
Does my right hon. Friend look forward to getting net £10 billion a year into the Exchequer, and does he note that the claims for tens of billions of euros from our friends in Brussels merely illustrate the financial incontinence on the continent?
Mr Hammond
Any Chancellor would always welcome any net tens of billions of pounds, or even any net billions of pounds, from pretty much any source whatsoever. In terms of the numbers bandied around in Brussels relating to the so-called exit charge, we should recognise them for what they are: an opening gambit in what will be a long and complicated negotiation—nothing more, nothing less.
Chris Philp (Croydon South) (Con)
Does the Chancellor agree that, whether inside or outside the European Union, the best way of delivering strong public finances is a strong economy supported by low tax and low regulation, and is that the future we can look forward to?
Mr Hammond
The only way of delivering strong public finances is through a strong economy, with sensible and balanced regulation. We have a very large financial services sector in this country, which is a very important contributor to our fiscal balances, and its success depends on our getting that regulatory equation exactly right: too much regulation and we would drive away industry from London; too little regulation and we may lose our reputation as a safe and secure place to do business. We have to get it right.
Margaret Ferrier (Rutherglen and Hamilton West) (SNP)
The Chancellor recently said that Brussels had set out a very aggressive starting line on the UK’s bill for quitting the EU. What assessment has he made of the worst case scenario, reported to be in the region of €60 billion, and what impact would that have on public finances?
Mr Hammond
I am not sure what the worst case scenario that the hon. Lady is talking about relates to. We have heard various figures bandied around in Brussels in terms of an exit charge. The work that the Government have been doing—which I was asked about earlier—relates to the economic and fiscal impact of different possible exit scenarios. The numbers being bandied around in Brussels are simply a question of a potential demand which would be raised in the negotiating process, but they are simply that: a negotiating strategy.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I agree with the Chancellor that one of the biggest contributors to the UK’s public finances is the tax revenue that we receive from the financial services sector. Now that we have had the triggering of article 50 and the Government’s White Paper, will he tell us whether he is confident that that revenue will not be significantly reduced, either through the loss of jobs or the loss of any major areas of financial activity?
Mr Hammond
Yes; the negotiating strategy and the objectives that we have set out in the article 50 letter would create an environment in which the financial services industry in the UK would be able, by and large, to continue the levels of commercial activity that currently take place with the European Union 27. But of course that will depend on negotiating the right arrangements with the European Union, and it is essential that we go into these discussions in constructive mode, recognising that there are real issues on both sides and that the UK’s financial services industry is an asset not only of the UK but of the whole of the continent of Europe. European businesses depend on those financial services.
Jonathan Reynolds
I share the Chancellor’s assessment that there is a mutually beneficial deal for us and the EU to agree on, if this Government have the ability to deliver it. Will he therefore state unequivocally that, as a result of the deal that the Government will seek to negotiate, there will be no significant loss of jobs in any major financial institutions, no removal of any major City-wide functions such as clearing, and no relocation of any EU-wide regulatory agencies such as the European Banking Authority?
Mr Hammond
On the hon. Gentleman’s last question, the location of the European Union’s agencies is clearly a matter for the European Union. We cannot credibly seek to leave the European Union and at the same time dictate to it where it should locate its agencies. On the initial items on his list, it will indeed be the UK Government’s objective, as we go into the negotiations, to protect our financial services sector.
Kelvin Hopkins (Luton North) (Lab)
Since the EU referendum, the substantial sterling depreciation has seen exports increase and the balance of trade deficit reduce from £13.7 billion in quarter 3 of last year to £5 billion in quarter 4. However, the Chancellor has repeatedly said that he is not concerned about the exchange rate. Is it not just plain wrong to dismiss the significance of the exchange rate?
Mr Hammond
I have never said that I was not concerned about the exchange rate. I have said that the Government do not take a view on what the appropriate exchange rate should be; that is very much a matter for the markets to determine. I am sure that the hon. Gentleman will have been delighted to note that my right hon. Friend the Prime Minister’s statement this morning has sent sterling up in the markets, demonstrating the confidence that the markets have in a future for this country under a Tory Government with a new mandate.
Susan Elan Jones (Clwyd South) (Lab)
The Financial Secretary to the Treasury (Jane Ellison)
As the hon. Lady would expect, given the emphasis that we have placed on tackling avoidance and evasion during this Parliament and indeed since 2010, the subject is regularly discussed among Cabinet colleagues. With regard to Treasury Ministers’ discussions with their European counterparts, I can confirm that this is something that we discuss with them on a regular basis. Most recently, the Chancellor spoke at an informal ECOFIN in Valletta as part of his regular ongoing dialogue with EU colleagues.
Susan Elan Jones
I am glad that everyone seems to be having a nice time having conversations, but as my 2015 Conservative opponent discovered when he came up from Chelsea to fight the Clwyd South constituency, most people in our part of the world work hard and pay their taxes. Will the Minister try again and give us a proper answer as to what is being done about this on an international level?
Jane Ellison
The question was about what meetings had taken place, and I plead guilty to answering it as asked. If the hon. Lady wants details, she can look at the many measures that have been put through since 2010, and, indeed, already in this Parliament. In fact, if she sticks around for the Second Reading of the Finance Bill, she will hear about even more things that the Government have planned to crack down on avoidance and evasion across the spectrum.
Robert Jenrick (Newark) (Con)
Had the tax gap continued on the trajectory left by the last Labour Government, it would be £47 billion, and the public purse would be £11 billion poorer. Instead, as a result of the policies of this Government, the tax gap is at £6 billion, which is its lowest level ever. Does my hon. Friend agree that talk is the best that some parties can offer on tax evasion and avoidance, and that it takes a Conservative Government to get something done about those problems?
Jane Ellison
That is exactly right, and this is something that we have taken extremely seriously. The UK’s tax gap is one of the lowest in the world, and it is certainly one of the most transparent and best documented. Since 2010, Her Majesty’s Revenue and Customs has secured £140 billion in additional tax revenue as a result of tackling avoidance, evasion and non-compliance. As I have said, the Government are ambitious to do more.
Maria Caulfield (Lewes) (Con)
The Economic Secretary to the Treasury (Simon Kirby)
Would you mind, Mr Speaker, if I started by sending my congratulations to Brighton & Hove Albion on their promotion to the premier league? They are an important part of the south-east economy.
At the autumn statement, we allocated £351 million to the south-east from the local growth fund, and the south-east will also benefit from more than £21 million from the coastal communities fund.
Maria Caulfield
I thank the Minister for his response and I, too, congratulate Brighton & Hove Albion. We have just under six miles of motorway in Sussex, and the Brighton & Hove Albion stadium is on one of our motorway junctions. Does he agree that we need to dual the A27 to make the south coast more economically viable? Will he join me in meeting other Sussex MPs to discuss how we can take that forward?
Simon Kirby
I am fully aware of the problems on the A27 and their impact on the A259 in my constituency, and I look forward to doing all I can to work with my hon. Friend to reach a solution.
Sir David Amess (Southend West) (Con)
Chris Green (Bolton West) (Con)
The Chief Secretary to the Treasury (Mr David Gauke)
We recognise the importance of infrastructure provision in all regions of the United Kingdom. That is why at autumn statement 2016 we committed additional capital to fund high-value economic infrastructure through the national productivity investment fund. We are committed to putting local and regional needs at the heart of this fund. For example, we are spending £1.1 billion on local projects to improve our existing transport networks. That will deliver improvements to hundreds of roads across the country.
Sir David Amess
What further help can my right hon. Friend give to infrastructure projects in Southend West, including the A127 corridor improvement works?
Mr Gauke
My hon. Friend is a tireless advocate of the case for Southend. Indeed, we met in November to discuss some of these issues. It is worth pointing out that the Government have supported improvements to the A127, with more than £35 million of local growth funding. Furthermore, local authorities will have the opportunity to bid into the £490 million local transport pot as part of the national productivity investment fund.
Chris Green
I welcome the investment in the electrification of the rail line between Manchester and Preston, but what more can the Chancellor do to ensure that we have vital road links, such as the Westhoughton bypass?
Mr Gauke
The Government are investing more than £13 billion in transport projects in the north and supporting local road schemes such as the Manchester airport relief road and the Heysham M6 link road. The Government are also looking at options for the Highways England north-west quadrant that should ease congestion in places such as Westhoughton.
Mr Stephen Hepburn (Jarrow) (Lab)
This Government cannot even begin to pretend that they are interested in boosting infrastructure outside London and the south-east. We need only look at transport spending for proof of that. In London, transport spending is £1,000 per head; in the north-east it is not even £300. Does that not tell us about the Government’s record and their priorities?
Mr Gauke
As I said a moment or so ago, we are investing more than £13 billion in transport projects in the north. HS2 will benefit the north of England. We make no apologies for also wanting to ensure that we invest in Crossrail to deliver for London, yes, but also for the economy of the whole United Kingdom.
Greg Mulholland (Leeds North West) (LD)
Before the last general election, Conservative Ministers were committed to the electrification of the Leeds-Harrogate-York line, on which commuters still suffer from travelling on Pacer trains. Will we do any better after the next general election and finally see the electrification of this line?
Mr Gauke
As I said, we are investing in our infrastructure. We already had significant plans before the autumn statement, which involved further investment to give us scope to improve our transport infrastructure. It is worth pointing out, however, that aggregate investment in economic infrastructure will rise by almost 60% between 2016-17 and 2020-21.
Jason McCartney (Colne Valley) (Con)
Mr Gauke
My hon. Friend makes an important point about interconnection between northern towns. It is worth pointing out that we are putting local and regional needs at the heart of the national productivity investment fund. That is why we are spending £1.1 billion on local projects to improve our existing transport networks.
Hannah Bardell (Livingston) (SNP)
In the same vein, I congratulate the Economic Secretary to the Treasury’s local team on their success, and I hope that I will be joined in congratulating Livingston FC, who have also gained promotion.
On infrastructure spending, there is no doubt that Crossrail is an engineering feat, but it is costing nearly more than a third of Scotland’s national budget. When will we see more devolution of infrastructure funding—perhaps to fix some of the problems of the Minister’s colleagues?
Mr Gauke
Scotland benefits from the Barnett consequentials of investment in things such as HS2, which will provide a step change in rail connectivity along the east coast corridor, bringing significant benefits to the UK economy as a whole. However, we can afford to spend money on infrastructure only if we have a stable and strong economy to deliver it.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Financial Secretary to the Treasury (Jane Ellison)
The Government have carefully considered the evidence for applying a 5% reduced rate of VAT on accommodation and visitor attractions, which has come up several times in the House, but we believe, on balance, that the costs of doing so outweigh the benefits. We keep all such things under review, but there are no plans for a reduction in the rate of VAT on tourism activity.
Mr Carmichael
That is a disappointing answer. The campaign for a reduced rate of VAT for tourism estimates that a 5% rate would produce a higher tax take and could create 121,000 jobs across the country. That would be of particular benefit to many economically fragile coastal and island communities. Will the Minister meet campaigners to discuss things in more detail?
Jane Ellison
I am familiar with the right hon. Gentleman’s figures, and Treasury officials have met campaigners over several years to look at them. We will always look at the evidence, but we disagree with the campaign’s economic assessment. Together with HMRC, the Treasury assesses that such a cut would cost around £10 billion a year—approximately £7 billion for restaurants and bars, and about £3 billion for leisure and accommodation.
Steve Double (St Austell and Newquay) (Con)
What further steps are being taken to support the tourism industry, particularly in places such as Cornwall, where tourism is so important to our local economy?
Jane Ellison
We look to support the tourism sector in a whole range of ways, and the sector is doing very well. We have seen great increases in the number of tourists, and my hon. Friend is a great advocate for his region. Tourism is one of the highest performing sectors in the economy. For example, the UK has one of the highest VAT registration thresholds in the EU— [Interruption.] The highest. That helps many small businesses that are providing goods and services to tourists without charging VAT at all.
Mr Speaker
We can now hear about tourism in South Down as well. I call Ms Margaret Ritchie.
Ms Margaret Ritchie (South Down) (SDLP)
With particular reference to that, does the Minister recognise the additional disadvantage faced by the tourism industry in Northern Ireland, particularly in border constituencies such as mine, given that the VAT rate on tourism in the Republic of Ireland sits at 9% and ours sits at 20%?
Jane Ellison
We explored those issues when I gave evidence to the Select Committee on Northern Ireland Affairs, so I know what the hon. Lady is alluding to. One example is that the Government’s decision in last year’s autumn statement to focus on investment in infrastructure will result in an increase of more than £250 million to the Northern Ireland Executive’s capital budget, which gives them the means to boost productivity and promote regional growth in Northern Ireland.
George Kerevan (East Lothian) (SNP)
The Economic Secretary to the Treasury (Simon Kirby)
In addition to the earlier answer to Question 4, in Scotland and Wales the Government are investing almost £1.3 billion in city deals for Glasgow, Aberdeen, Inverness, Cardiff and Swansea, and we are discussing further deals for Edinburgh, Stirling, the Tay cities and north Wales.
George Kerevan
Will the Minister guarantee that the city deal specifically for Edinburgh and my East Lothian constituency will be neither aborted nor substantially delayed by the calling of the general election?
Simon Kirby
What I can guarantee is that it is about time the Scottish National party started delivering for the people of Scotland. The level of growth in Scotland is a quarter of that across the UK.
Kevin Foster (Torbay) (Con)
Simon Kirby
I absolutely agree that it would be an ideal place to be in the first stream.
Alan Brown (Kilmarnock and Loudoun) (SNP)
When will the UK Government start to consider the Ayrshire growth deal seriously? The SNP Government back the growth deal and the local councils are all working together, so it is the UK Government who are holding back the delivery.
Simon Kirby
The Government are focused on delivering the existing deal. If the SNP Government want to do something in addition to that, it is within their power to do so.
Mr Virendra Sharma (Ealing, Southall) (Lab)
The Economic Secretary to the Treasury (Simon Kirby)
The UK has spearheaded improvements in the transparency of beneficial ownership information. Her Majesty’s Revenue and Customs is already building a register of trusts with tax consequences, which will improve transparency and assist law enforcement agencies.
Simon Kirby
We will carefully consider the commission’s proposals for a broader register. If those proposals go forward, the Government will consult on what the register should look like after the negotiations have concluded.
Stephen McPartland (Stevenage) (Con)
The Chief Secretary to the Treasury (Mr David Gauke)
The Government recognise the challenge that Britain’s productivity performance represents, and we are resolved to tackle the issue. At last year’s autumn statement we launched the national productivity investment fund to provide £23 billion-worth of additional spending, focused on areas key to boosting productivity. We went further at the Budget by investing an additional £500 million in technical education to ensure that businesses can access the skills they need.
Stephen McPartland
With the average worker spending 23% of their day on email, what assessment have the Government made of how the increasing reliance on email is stalling productivity?
Several hon. Members rose—
Mr Speaker
There can be a link between productivity and recent trends in the level of employment, so if the hon. Member for Northampton South (David Mackintosh) wishes to come in on Question 17, he is welcome so to do.
David Mackintosh (Northampton South) (Con)
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
The Financial Secretary to the Treasury (Jane Ellison)
As the Chancellor mentioned, the Government have undertaken a significant amount of work to assess the economic impacts of leaving the EU. It is part of our continuing programme of rigorous and extensive analytical work, covering a range of scenarios, as the hon. Gentleman would expect, sector by sector.
Mr Bailey
Small businesses manufacturing car components in my constituency are hugely concerned that, post-Brexit, this country may have to revert to the World Trade Organisation agreements, which would mean increased tariff costs and further regulation, and could have an impact on the viability of the booming motor industry. What assessment has the Chancellor made of that impact?
Jane Ellison
Treasury Ministers, and indeed Ministers right across government, are speaking to individual businesses and sectors all the time to understand their concerns about issues of this sort. Obviously, we are seeking the best possible deal for the UK, and all the work being done reflects that, including in respect of understanding how we can respond to those concerns and get a great deal.
Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
My priority is to ensure that the economy remains stable and resilient as we conduct our negotiations with the European Union. That means building upon this Government’s achievements in reducing the deficit by two thirds and getting unemployment down to the lowest rate since the 1970s, while tackling the long-term challenges of productivity enhancement and making steady progress towards our goal of a balanced budget. I am pleased to be able to tell the House that in the past few minutes the International Monetary Fund has upgraded its UK growth forecast for 2017 by 0.5%, to 2%.
Dr Poulter
Farms and other agricultural businesses are often deterred from making investments in new buildings and infrastructure because of a complex system of capital allowances, including agricultural buildings relief. Will my right hon. Friend examine this issue, particularly in respect of giving the agricultural sector a boost in the wake of Brexit?
The Financial Secretary to the Treasury (Jane Ellison)
Agricultural land and buildings are, of course, exempt from business rates, although I know my hon. Friend was talking in particular about some of the capital allowances. We are committed to a capital gains tax system that supports investment and growth right across the economy, which is why at Budget 2016 we reduced CGT rates from 28% to 20%, and from 18% to 10% for gains on most assets. Owners of agricultural businesses benefit from the same CGT rates and reliefs as other business owners.
John McDonnell (Hayes and Harlington) (Lab)
As you know, Mr Speaker, this morning the Prime Minister called a general election. She is breaking her commitment not to hold an early election, which was made only weeks ago. She has blamed Brexit, she has blamed our European neighbours and she has blamed the Opposition parties, but the real truth is that after seven wasted years of failure the Tories have failed to close the deficit; they have added £700 billion to the national debt; pay has fallen behind prices; 4 million children are growing up in poverty; our schools are in crisis; more people than ever are on NHS waiting lists; more families are homeless; and more elderly people are not getting the care they need. Will the Chancellor use this last opportunity before the election to apologise to the British people for the utter failure of this Government’s economic policies and for the pain he has inflicted on this country?
Mr Philip Hammond
The right hon. Gentleman has some brass neck to stand there and accuse us of having failed to eliminate the deficit, given that his policy is to add another £500 billion to it overnight. The British people understand very well what is going on here: we have a Conservative Government who are maintaining growth, and who have got unemployment down and record levels of employment, and a steadily closing deficit; and we have a Labour party which remains as fiscally incontinent as ever and which, if given a chance, would wreck this economy once again.
John McDonnell
There we have it: not one word of apology—no contrition whatsoever—from a Chancellor who has broken his promises to the British people and is still failing to deliver on a manifesto on which he was elected only 23 months ago. The Government are entering this election having scheduled £70 billion-worth of tax giveaways—for whom? It is for the super-rich and for the corporations, and is over the next five years. The Government are entering an election with a £2 billion unfunded black hole in the Budget the Chancellor delivered only a few weeks ago. So will he now use this opportunity before the general election to put on the record that his party will rule out raising VAT and rule out raising income tax? Will he commit unequivocally to support legislation to protect the triple lock? If the Tories cannot be straight with the British people, Labour will be.
Mr Hammond
The truth is that promises made from the Opposition side of the House are not worth the paper they are written on. The voters, pensioners and workers of this country understand that very well, and they will give their verdict on Labour’s promises on 8 June.
Mr Andrew Tyrie (Chichester) (Con)
Assuming the House votes for an election, will the Chancellor confirm that he will seek to truncate the Finance Bill, remove its controversial measures, such as making tax digital, and thereby enable everybody to focus on the economic issue that will matter most to the whole country over the next few months: which party can best be trusted to run the economy?
Mr Hammond
I certainly agree with my right hon. Friend on that last point. On the matter of process, assuming that the House votes in favour of my right hon. Friend the Prime Minister’s motion tomorrow, there will then be the usual end-of-Parliament process of negotiation with the official Opposition on measures that are currently before the House, with a view to passing them in whatever form is appropriate before prorogation.
Several hon. Members rose—
Mr Speaker
Brevity, please, because I am keen to get through as many colleagues as possible.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
Mr Hammond
I can confidently predict for the hon. Gentleman that, after the general election on 8 June, there will be a Budget that will give him the answers he is seeking.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
The Chief Secretary to the Treasury (Mr David Gauke)
Improved rail resilience in the south-west is a priority, which is why we committed £5 million in Budget 2016 and £10 million in autumn statement 2016 to support that work. The Government will continue to work with Network Rail to develop options for future investment in the south-west in Network Rail’s control period 6.
Gareth Snell (Stoke-on-Trent Central) (Lab/ Co-op)
Mr Philip Hammond
We are very keen on employees having an opportunity to take a stake in the businesses for which they work. We will look carefully at any proposals that would tend to enhance productivity by incentivising and encouraging employees.
Sir Henry Bellingham (North West Norfolk) (Con)
Jane Ellison
In most cases, the Ministry of Justice expects that banks will be able to release enough cash from the estate to pay the probate fee, and we know from HMRC that the average estate is 25% cash. The MOJ is working with the British Bankers Association and others to put arrangements in place.
Kate Hollern (Blackburn) (Lab)
Mr Philip Hammond
The hon. Lady will know that my right hon. Friend the Secretary of State for Education is considering responses to the consultation on the school funding formula. At the Budget, we announced a substantial increase in funding for 16-to-19 technical education, which will make an important contribution to improving the UK’s productivity.
Mr Andrew Turner (Isle of Wight) (Con)
Mr Hammond
I know that my hon. Friend regards the islands as particularly important, and I concur with him on that. The Government support continuing economic growth across the south-east, including all regions and islands. The Solent local enterprise partnership receives more than £180 million from the local growth fund, including funding for investment in local skills and business start-ups, with the Isle of Wight receiving about £15 million of investment in local infrastructure and skills.
Jim Shannon (Strangford) (DUP)
Will the Chancellor give us an assurance that he will not surrender to the outrageous demands of Tusk, Juncker and Barnier that the UK must pay €60 billion before it leaves the EU?
Mr Hammond
As I have already said, this should be seen for what it is: an opening gambit in a long and complex negotiation.
Peter Aldous (Waveney) (Con)
The Economic Secretary to the Treasury (Simon Kirby)
As someone who also represents a coastal community, I am pleased to say that coastal areas will benefit from nearly £40 million of investment through the latest round of the coastal communities fund, and that we will do all we can to get the very best possible deal.
Stewart Malcolm McDonald (Glasgow South) (SNP)
Will the Chancellor tell us which will be the first to go in the upcoming Tory manifesto: the pledge on international aid spending, the triple lock, or the promise not to raise any new taxes?
Mr Philip Hammond
I am afraid that the hon. Gentleman will just have to contain himself and ready his money, because he will be able to buy a copy in due course.
Matt Warman (Boston and Skegness) (Con)
Mr Hammond
We are making real progress in realising our holdings in the banking sector. We continue the programmed sale of our shareholding in Lloyds, which is now down from 43% to less than 2%. Just last month, we sold £12 billion of Bradford and Bingley mortgages in a highly competitive process. The Government are not at present actively marketing their stake in RBS. Our policy remains to return the bank to private hands as soon as we can achieve fair value for the shares, recognising that fair value could well be below what the previous Government paid for them. We must live in the real world and make decisions on the future of our holding in RBS in the best interest of taxpayers.
Mr Dennis Skinner (Bolsover) (Lab)
In the real world, seven years ago, a Tory Chancellor stood at the Dispatch Box and said that we had to cut the money to every single local authority in Britain by up to 40% because we needed to get rid of the deficit. Now, seven years later, that deficit is still more than £60 billion. Will the Chancellor apologise to the people of Britain for that lousy mistake?
Mr Hammond
That deficit is still £60 billion, but it was £200 billion when we started working on it.
Martin Vickers (Cleethorpes) (Con)
Following the football theme of this afternoon, I am sure that everyone would wish to know that Cleethorpes Town has finished as champion of the Northern Counties East League, which means that even more people will want to travel to Cleethorpes. Infrastructure development was mentioned earlier. Will the right hon. Gentleman give an assurance that all roads will lead to Cleethorpes?
Chris Stephens (Glasgow South West) (SNP)
Can the Chancellor confirm that HMRC takes eight months to fill a vacancy in the national minimum wage compliance unit? If that is so, what will he do properly to resource that service so that workers can get a decent day’s pay for a decent day’s work?
Jane Ellison
I will look into the specific issue that the hon. Gentleman raises, but I want to make it very clear that HMRC investigates absolutely every report of national minimum wage violations. We take the matter very seriously, and we do enforce it.
David Morris
In my constituency I held a public consultation on creating an enterprise zone or a business park. The Labour county council has blocked it considerably and constantly. Would my right hon. Friend the Chancellor like to come to my constituency and listen to what my constituents are saying about having an enterprise zone?
Mr Philip Hammond
As it happens, I was just planning my domestic travel arrangements for the next five weeks, and I will keep my hon. Friend’s request in mind when I do that.
Business of the House
(7 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Leader of the House of Commons (Mr David Lidington)
With permission, I should like to make a short statement about the business for tomorrow.
Wednesday 19 April—The House will be asked to approve a motion that allows for my right hon. Friend the Prime Minister to seek an early parliamentary general election under the Fixed-term Parliaments Act 2011. This will be followed by consideration of Lords amendments to the Technical and Further Education Bill, followed by a debate on a motion relating to section 5 of the European Communities (Amendment) Act 1993.
The business for Thursday 20 April remains Backbench Business Committee business, as I previously announced. I shall make a further announcement about future business in the usual way on Thursday.
Valerie Vaz (Walsall South) (Lab)
I start by thanking the Leader of the House for his statement and for coming to the House to inform us of the change of business to a motion calling for a general election. I now understand why it was so difficult to get out of the Leader of the House a date for the forthcoming Queen’s Speech, despite consistently asking him for it. Obviously, the Prime Minister’s U-turn has been a long time in the planning.
I am concerned that the Prime Minister chose to make her statement outside No.10 rather than come to the House. This is a massive U-turn. At least seven times, most recently on 20 March, the Prime Minister has ruled out an early general election. She said:
“I’m not going to be calling a snap election. I’ve been very clear that I think we need that period of time, that stability to be able to deal with the issues that the country is facing and have that election in 2020.”
Clearly, this Government cannot be trusted.
Given that the general election is on 8 June and there are 25 working days until Parliament can be dissolved, can the Leader of the House let us know the exact date for the Dissolution of Parliament? May I repeat that a statement of such importance should have been made to the House of Commons, given the nature of this massive U-turn. Her Majesty’s Opposition will ensure that we will promote stability, and that there is an alternative fairer vision for this country.
Mr Lidington
The hon. Lady asked about the date for Dissolution. That is laid down in statute: it has to take place 25 days before the proposed date of polling day. Therefore, the date of dissolution will technically be at one minute past midnight on Wednesday 3 May, so in effect we are talking about Dissolution at midnight on the night of 2 to 3 May.
I do not recollect any previous Labour Prime Minister announcing a general election on the Floor of the House of Commons. My right hon. Friend the Prime Minister went about things in the time-honoured fashion this morning. She is putting to the country the case for this Government to go forward on the basis of a clear mandate to provide the clarity and stability that the entire United Kingdom needs, as we approach the historic task of implementing the referendum decision taken by the British people and forging the new, deep and special partnership with our friends and allies in the European Union that we all want.
Mr Peter Bone (Wellingborough) (Con)
May I thank the Leader of the House for making a statement at the earliest possible opportunity, and the Prime Minister for making an announcement that was not leaked to the media in advance? Will my right hon. Friend confirm that it is not in the gift of the Prime Minister to decide whether there is a general election? It will be this House that decides, and if Her Majesty’s Opposition do not want a general election, cannot face it, or are worried about annihilation, they will not vote for it tomorrow.
Pete Wishart (Perth and North Perthshire) (SNP)
I thank the Leader of the House for his short but incendiary statement. Here we were believing that this was not the time for these types of big decisions, and that the core focus of this Government should really be on their hard Brexit. This is one of the most extraordinary U-turns in political history, and the Fixed-term Parliaments Act 2011 has been about the biggest possible waste of this House’s time. The calling of a general election now returns to a Prime Minister, and the interests of party now come before the interests of country. In the coming election, we will ensure that Scotland continues to be fully protected from this Tory Government’s attempt to take our nation off the cliff edge of their hard Brexit and from their obsession with austerity. The Tories might play their petty party political games, knowing that they are up against a woeful and pitiful Labour party, but the Scottish National party will ensure that Scotland is fully protected from the worst of this Government’s clutches.
Mr Lidington
The Prime Minister and the party she leads will take to the people the case for the Union of the four nations of our United Kingdom, and our belief that those four nations are better off working together in that unique enduring partnership of the United Kingdom. I say to the hon. Gentleman that the Prime Minister took her decision—a decision that, as she said this morning, she took with considerable reluctance—because it is in the interests of the people of this country. It is in the interests of the entire nation that we have clarity, stability and constancy of purpose as we move forwards.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
Does the Lord President agree that this is actually one of the rare occasions when it is absolutely right that the statement was first made to the British people—not to this House—because it is they who are being asked to use their sovereign power to determine the composition of a new House?
Mr Lidington
My hon. Friend makes a cogent point. It will, of course, be for this House in the first place to decide whether to approve the motion that we will debate tomorrow. If the Government’s motion is carried, we will then put our case to the people.
Tom Brake (Carshalton and Wallington) (LD)
The Prime Minister was not for calling a snap general election, but now she is, perhaps sensing a political opportunity. The choice to go for an election now is hers and hers alone, as was the choice of a hard Brexit. Will the Leader of the House make time available before the general election campaign starts for this House to discuss the party of government’s failure on the NHS, tackling violent crime, and dealing with people with disabilities and their benefits?
Mr Lidington
I am astonished that the right hon. Gentleman, on behalf of the Liberal Democrats, was able to talk about political opportunism with a straight face. The Prime Minister alone has to take the decision to put forward the motion tomorrow, but it will be a decision for every Member of the House of Commons when we meet tomorrow to decide whether that motion is approved.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
My right hon. Friend has confirmed that Parliament will be dissolved at midnight on 2 May. Will he please confirm on which date Parliament will be prorogued?
Mr Lidington
The usual discussions are under way between the usual channels about the handling of business that is currently before Parliament. On the assumption that the motion is carried by the House tomorrow, those discussions will intensify. I hope that I will be able to provide the clarity that my hon. Friend seeks as soon as possible.
Ms Angela Eagle (Wallasey) (Lab)
The Leader of the House has given us an image of the Prime Minister being dragged, kicking and screaming, into calling a general election when she did not want one. Can we find time in what is left of this Parliament to have a debate about why she decided to trigger article 50 and then throw the entire planning into doubt by then calling a general election, which will waste at least three months of the precious, short time we have left to get the best deal for Britain?
Mr Lidington
Far from throwing things into doubt, the Prime Minister’s decision has, assuming that the people return this Government—it will be a choice for the people to take—ensured that there will be the clarity of a mandate behind her and her Government to deliver a successful negotiation, and to implement it over the course of a five-year term.
Dr Matthew Offord (Hendon) (Con)
Some Members of this House are labouring under the impression that the next general election will be a rerun of the referendum. Will the Leader of the House confirm that article 50 having being triggered, regardless of who wins the next election there is no turning back?
Mr Lidington
The wording of article 50 is clear, and it is clear that any change to the two-year timetable can happen only if it is agreed unanimously by all member states, including the departing member state. As my right hon. Friend the Prime Minister has made clear, whatever side we took in the referendum campaign, we must respect the sovereign decision of the British people.
Ian Paisley (North Antrim) (DUP)
I thank the Leader of the House for his statement and assure him that the Democratic Unionist party will support the motion tomorrow. We say, “Bring it on: bring on the election and let people support the Union and the Unionist cause in Northern Ireland.” Will he clarify tomorrow the last date for people who wish to register to vote to do so, so that there is clarity and certainty about the registration process, especially in Northern Ireland?
Mr Lidington
Clearly, I do not want to pre-empt the decision that this House will take tomorrow, but, assuming that the motion is carried, I will try to provide that clarity as rapidly as possible.
Helen Goodman (Bishop Auckland) (Lab)
The Leader of the House says that he does not want to pre-empt tomorrow’s decision by this House. Was not the Prime Minister attempting to do that in naming 8 June?
Mr Lidington
What the Prime Minister was doing this morning was making her ambition clear about the timeframe for the general election. I have to say to the hon. Lady that the specific date would have been the first question put to the Prime Minister, in the House and outside, had she not named one.
Kirsty Blackman (Aberdeen North) (SNP)
Mr Speaker, you may remember—as you took an active part in it—a debate in January 2000 that went on all night so that the next day’s business did not exist. Given that in debating the Finance Bill the House can sit until any hour tonight, what will the Government do in the event of tomorrow not existing?
Mr Lidington
Given that question, I suspect that the hon. Lady and her colleagues are a bunch of fearties as far as a general election is concerned.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
The Leader of the House will agree, I am sure, that the prime responsibility of this House is to hold the Government to account. Does he not think that many, not just in this Chamber but outside across the country, will regard the Prime Minister’s rush to an early general election as a strategy to evade responsibility for the chaos we have had in this country since the previous Government arranged a referendum that they actually lost?
Mr Lidington
The Prime Minister’s decision is about inviting the British people, in the national interest, to return her to provide the leadership, the sense of direction and the clarity which this country needs and which those in the hon. Gentleman’s party are so clearly unable to provide themselves.
Mr Nigel Evans (Ribble Valley) (Con)
Will the Leader of the House confirm that should the motion pass tomorrow we are not voting for a new Prime Minister for just two years over the course of Brexit, but a new Prime Minister for the duration of a Parliament of five years? Many of us are expecting that either the current Prime Minister or the leader of the Labour party will walk through the door of No. 10 post 8 June. Will the Leader of the House encourage my right hon. Friend the Prime Minister to go head to head with the Leader of the Opposition in as many TV debates as possible before 8 June?
Mr Lidington
I suspect that the electorate would be fascinated to see the outcome of such a debate.
Mr David Hanson (Delyn) (Lab)
Will the Leader of the House confirm that in the event of a two-thirds majority not agreeing to tomorrow’s motion, the only way the Government could call a general election would be to table a vote of no confidence in themselves? When does he plan to do so?
Mr Lidington
We intend to go into tomorrow’s debate with the clear objective of persuading that two-thirds majority to support the Government’s motion.
Hywel Williams (Arfon) (PC)
The Prime Minister was inconsistent about Brexit, and now her iron determination not to call a general election transmutes into a leaden determination to have one. May I assure the Leader of the House that, with Labour in a writhing mess, we in Plaid Cymru relish the opportunity to provide a Welsh alternative to this ideologically driven, opportunist, right-wing Tory Government, and that we will be voting yes tomorrow?
Mr Lidington
I suppose I should express my appreciation for the hon. Gentleman’s final phrase, if not for the rest of his remarks.
Chris Bryant (Rhondda) (Lab)
For weeks constituents have been emailing me and telephoning my office because they are terrified of the changes to the personal independence payment regulations, which we were finally going to be allowed to debate and vote on tomorrow, but the Leader of the House has suspended that. Will he guarantee that this House, this Parliament, will have a chance to vote on and debate them before Dissolution?
Mr Lidington
As I have said, the usual channels will discuss the allocation of business between the debate concluding tomorrow and the date of Dissolution.
Greg Mulholland (Leeds North West) (LD)
The Liberal Democrats welcome the opportunity to take on this divisive, destructive Tory Government and their hard Brexit, but how much will this general election cost; and if the Prime Minister wanted to do it, why did she not call it for 4 May? The decision not to do so is going to cost a lot of taxpayers’ money.
Mr Lidington
The timetable for any general election is laid down by the Fixed-term Parliaments Act and the Political Parties, Elections and Referendums Act 2000. A general election on the same day as the local elections would not be possible, given what the laws require.
Mike Gapes (Ilford South) (Lab/Co-op)
Inflation is rising, real living standards are potentially going to decline and we know that there will be very difficult negotiations with our European Union partners. Is not the real reason that the Prime Minister has called this election so that she can avoid having a general election in 2020, which would be very dangerous for her party? She thinks that she can win now in order to avoid dealing with the consequences of a hard Brexit.
Mr Lidington
The country I look at is one in which unemployment is falling, employment is at record levels, the deficit is down and there are record levels of spending on key public services, which is made possible because of the strong economy that my right hon. Friends the Prime Minister and the Chancellor have fostered. I look forward to a general election and to making the case to the people for that programme of political commitment and the leadership of my right hon. Friend the Prime Minister to continue.
Alison Thewliss (Glasgow Central) (SNP)
The Government’s ridiculous rape clause came into force on 6 April, with no parliamentary scrutiny. The usual channels had promised that a Delegated Legislation Committee would be held to provide some parliamentary scrutiny of that despicable policy. Will that now happen, given that Parliament is to be dissolved very soon?
Mr Lidington
Any change to the law has of course to go before Parliament. I will put the hon. Lady’s point to my colleagues among the business managers, but I cannot give her an immediate promise that she will get the time she seeks.
Angela Smith (Penistone and Stocksbridge) (Lab)
Will the Leader of the House confirm what will happen to the Manchester Gorton by-election, given that on 4 May there will potentially be no Parliament for any candidate to be elected to?
Mr Lidington
There is no statutory provision for the cancellation of a by-election when a general election is in progress. It is up to the judgment of the acting returning officer, whom one might expect to regard the by-election writ as having been superseded. That was the course of action taken by the acting returning officer in the one precedent that I have found, which dates back to November 1923.
Mark Durkan (Foyle) (SDLP)
Will the Leader of the House tells us whether the Prime Minister took soundings from the Secretary of State for Northern Ireland as to the impact of this announcement on the ongoing inter-party talks, and does the Secretary of State for Northern Ireland still intend to bring legislation through this House and the House of Lords in the wash-up in respect of rates and topping up the mandate for the current Assembly to appoint an Executive?
Mr Lidington
My right hon. Friend the Northern Ireland Secretary is of course considering what difference, if any, should be made to his announced plans as a result of the Prime Minister’s announcement this morning. I will try to provide the hon. Gentleman with absolute clarity as soon as possible, but my expectation is that there will continue to be a need for such legislation.
Kate Green (Stretford and Urmston) (Lab)
Will the Leader of the House acknowledge that we will none the less elect a metropolitan Mayor in Greater Manchester on 4 May, who will take up office and responsibility for transport in the city region? Will the Government confirm that the Bus Services Bill will complete its parliamentary passage before Dissolution?
Mr Lidington
The passage of any Bill currently before Parliament will depend on the talks between the Government and the official Opposition which always take place ahead of a general election.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
In calling a snap election, do the British Government seriously take the view that a UK election will really change the EU 27 negotiating position? If so, are they not guilty of living in a land of fantasy?
Mr Lidington
It will be important that the newly elected leaders in France and Germany will meet a newly re-elected Prime Minister of the United Kingdom, all of them with the confidence that they have mandates from their voters as they approach those negotiations in a constructive spirit.
Alan Brown (Kilmarnock and Loudoun) (SNP)
To date, the Chancellor has refused to share with Parliament any analysis of the impact of Brexit—in fact, he seems to have refused to share it with the Secretary of State for Exiting the EU, given his shambolic performance in front of the Select Committee—but this general election is all about clarity. In the interests of clarity, will the Government print analysis showing the impact of a hard Brexit versus Scotland staying in the single market, which is what my constituents voted for?
Mr Lidington
I could make the arguments that the hon. Gentleman has heard before about the vital importance to Scotland of the United Kingdom single market, but I would say to him in particular that the Prime Minister’s objective of delivering a new deep and special partnership with our friends and allies in the EU27 will serve the economic and security interests of Scotland well, as it will serve those of the whole of the United Kingdom well.
Margaret Ferrier (Rutherglen and Hamilton West) (SNP)
Following the question asked by my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown), is the Leader of the House in a position to confirm or deny that the 2017 Tory manifesto will say “yes” to a single market, or will it be “out”?
Mr Lidington
I will put the hon. Lady on the priority mailing list for a copy of the Conservative party manifesto.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
The Scottish Parliament recently voted by a margin of 69 to 59 for us to have a referendum, yet the Prime Minister arrogantly and contemptuously told us that now is not the time. If it is now the time for this Parliament to make such a decision, should not this Parliament also empower the Scottish Parliament to allow the Scottish people to have a say on their future?
Mr Lidington
The hon. Gentleman and his parliamentary colleagues have been demanding, week after week, that the Prime Minister seek a new electoral mandate from the people of the United Kingdom in order to deliver our exit from the European Union. She is doing just that, and if the hon. Gentleman is to be consistent, he might welcome that, rather than complain.
Stewart Malcolm McDonald (Glasgow South) (SNP)
Following the question from my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown), the Leader of the House is right to say the general election will be about clarity. Does he, like me, look forward to the clarity that the TV debates will give us, and does he agree that any attempt by any political leader, especially one from the Government Benches, to shirk from those invitations would be wholly unacceptable?
Mr Lidington
Ahead of tomorrow’s debate it is somewhat premature to speculate on what the broadcasters will decide to propose with regard to the allocation of time for general election coverage, but I will take the hon. Gentleman’s comments as a representation.
Jess Phillips (Birmingham, Yardley) (Lab)
I was not going to speak, but like everybody else sat in this Chamber it may well be the last time I get the chance. [Interruption.] If hon. Members will let me finish. I came here to speak honestly and plainly, and to speak like the people outside this building. What I cannot understand from what the Leader of the House has said today is how any of this makes things clearer, or makes us feel more stable, more secure. All I ask is: how does this look to people outside? As somebody who came from outside, it looks to me like political opportunism.
Mr Lidington
I think and I hope that people outside this building will look at what the Prime Minister said on the steps of No. 10 this morning and believe that she is seeking an electoral mandate for herself as leader of a Government who will then be in a position to carry through the extremely challenging and ambitious European negotiations over the next two years. She would then implement the new partnership we are seeking with the EU 27, with confidence deriving from the fact that—I hope—the Government enjoy a secure, enduring parliamentary majority for those measures for an entire five-year term.
Syria and North Korea
(7 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Foreign and Commonwealth Affairs (Boris Johnson)
With permission, Mr Speaker, I should like to begin by paying tribute to the Britons who were killed in tragic circumstances in Stockholm and Jerusalem. Chris Bevington was among four people who died in Sweden when a truck was driven into helpless pedestrians on 7 April. Hannah Bladon was stabbed to death in Jerusalem on Good Friday in a senseless attack. Our thoughts and prayers are with their families.
I wish to update the House on two of the most significant foreign policy events of the last fortnight, namely the situations in Syria and North Korea. These disparate challenges encompass one common theme. In each case, hereditary dictators presiding over cruel tyrannies have challenged the essential rules that underpin our world peace. The United States has responded with strength and resolve, and in accordance with its traditional role as the guarantor of the rules-based system. In both cases, the United States has acted with the full support of the British Government.
Turning first to Syria, at 6.39 am on 4 April there was a chemical weapons attack on the town of Khan Sheikhoun in rebel-held Idlib province. The House will recall the horrifying aftermath: men, women and children convulsed in agony, some foaming at the mouth, as their bodies were poisoned by nerve gas. Rescue workers tried desperately to decontaminate the casualties. We saw children with oxygen masks clamped to their faces. Even by the standards of a civil war that has claimed more than 400,000 lives, this was among the most shocking incidents.
I want to repeat for the benefit of the House exactly what we know about the attack on Khan Sheikhoun, because there has been a concerted attempt to obscure the facts. We know beyond doubt that two Sukhoi-22 aircraft took off from Shayrat airfield, where we know chemical weapons are stored. We know that they were overhead at 6.39 am when, according to all eyewitness accounts, the attack took place. We know from shell fragments in the crater that sarin had not only been used, but that it was sarin carrying the specific chemical signature of sarin used by the Assad regime. Given that samples from the victims show conclusively that they had been exposed to sarin gas, there is only one conclusion to be reached: that the Assad regime almost certainly gassed its own people, in breach of international law and the rules of war. That shows the emptiness of the agreement—reached in 2013 and guaranteed by Russia—that was supposed to rid Syria of chemical weapons once and for all, and, I am afraid, exposes the misjudgment of those who regarded that deal as a substitute for resolute action.
The attack on Khan Sheikhoun is already the subject of an international inquiry by the Organisation for the Prohibition of Chemical Weapons. Thanks in large measure to UK diplomacy, the United Nations now has a joint investigative mechanism with a mandate to identify any party responsible for chemical attacks in Syria, and I trust that it will report as soon as possible. The House should bear it in mind, however, that UN investigators have already found the Assad regime guilty of using poison gas on three separate occasions in 2014 and 2015.
Some Members have suggested that we arraign Assad before the International Criminal Court. I must say to them that the only way of bringing Syria before the ICC would be through a referral from the Security Council, and we tried that option in 2014, only to be thwarted by the vetoes of Russia and China. Sadly, Russia’s response to the attack on Khan Sheikhoun has been to try to protect Assad yet again. On 12 April, it cast its eighth veto on behalf of Assad in the Security Council, blocking a resolution that would have demanded the regime’s co-operation with the international investigation.
The day after the atrocity I spoke to Secretary of State Tillerson, and it became clear that the United States was considering a military response. In the early hours of 7 April, the US did indeed take action, firing 59 cruise missiles at the military air base from which the gas attack is believed to have been launched. We were given advance notice of the operation, but at no stage did the US Administration ask for our military help; they asked only for political support. Advance warning was given to Russian military personnel, who were co-located with the Syrian air force at the same base, to minimise the risk of casualties.
The Government believe that the US action was a necessary, appropriate and justified response to an awful crime. As many as 20 Syrian military aircraft are believed to have been destroyed, and, as the House will know, Assad’s air force has been bombing civilians day after day for most of the past six years. The destruction of some of those strike aircraft will in itself save some lives, but still more important, I think, is President Trump’s emphatic message that the era during which Assad’s barbarism met with passivity and inaction has finally come to an end. America’s determined response creates an opportunity to break the deadlock and pave the way for a political settlement of Syria’s tragedy, but that will happen only if Russia is prepared to bring Assad to the negotiating table and begin a transition to a new Government who will represent the sole chance of peace in Syria. After the chemical attack and the American strike, the priority was for Secretary Tillerson to convey that message to Russia with the backing of as many countries as possible. The combined weight of the G7, and like-minded countries in the region, unanimously supported the US military action as a “carefully calibrated” response to a “war crime”, and mandated Tillerson to go to Russia and urge the Russians to
“promote a real and genuine political process in Syria”.
I want to stress that we in the UK have no intention of dislodging Russian interests in Syria; on the contrary, we recognise Russia’s long connection with that country and the national interests at stake. But Russia’s position in Syria does not depend on Assad. The unmistakable lesson of six years of bloodshed is that Assad cannot deliver what his people—and the wider world—so desperately need, namely, a peaceful and united Syria. Therefore, I hope I have the support of everyone in this House when I call on the Russians to end their blind support for Assad, stop the gas attacks and the barrel bombs, allow the delivery of aid to those who need it, deliver a real ceasefire and begin the political process that will include a transition away from Assad.
That was the message that Secretary Tillerson conveyed to Putin and to Sergei Lavrov on 12 April. We will do our utmost in the UK to hold accountable anyone found responsible for that gas attack, and we will work with our American counterparts to create the conditions for Russia to work with us and to escape its entanglement with the toxic Assad regime, which poisons Russia’s international reputation just as surely as it poisons its own people.
I turn now to North Korea. Last weekend’s events provided further proof of the threat that that country poses to international peace and security. On Saturday, North Korea paraded an arsenal of ballistic missiles in front of carefully regimented crowds. Only 24 hours later, the regime tested another missile, although this time the launch failed. Last year alone, North Korea tested two nuclear bombs and 24 missiles. I remind Members that all those tests break a series of UN resolutions dating back to 2006, when resolution 1695 was passed unanimously by the Security Council, yet on Monday the Pyongyang regime threatened further missile tests on a
“weekly, monthly and yearly basis”.
The regime is now developing intercontinental ballistic missiles, which would be capable of delivering a nuclear strike on the mainland United States. These weapons have not yet been fully tested, but no one can be complacent about the potential threat they pose.
Yesterday, I spoke to my Chinese counterpart, Wang Yi, and I urged him to use Beijing’s unique influence to restrain North Korea and to allow a peaceful resolution of this crisis. By suspending its coal imports from North Korea, China has given a welcome signal of its willingness to exert pressure on the regime. Later this month, I shall attend a special meeting of the Security Council on North Korea.
All hopes for progress rest on international co-operation —especially between China and the US—and the verifiable disarmament of North Korea’s nuclear weapons and ballistic missiles. The crises in Syria and North Korea represent a challenge to the law-based liberal international order in which this country believes. Britain’s role is to stand alongside the United States and our allies as we confront those threats. In that effort, we will not tire. I commend this statement to the House.
Emily Thornberry (Islington South and Finsbury) (Lab)
I thank the Foreign Secretary for advance sight of his statement and join him in sending my condolences to the families of Chris Bevington and Hannah Bladon.
Obviously, the Foreign Secretary’s statement is somewhat overshadowed by another announcement today, but the issues at hand here are far more important for the future of our world than the Prime Minister’s cynical short-term manoeuvres. She talked about the need for leadership and stability, yet is happy to plunge the country into six weeks of uncertainty exactly at the time Britain needs to provide stable global leadership on issues such as Syria and North Korea. However, we should not be surprised, because on those and other global crises the Conservative party is abdicating any effective leadership role for Britain.
I turn to Syria. We were all appalled by the dreadful attacks on civilians witnessed during the Easter recess. Two weeks ago, there was the horrifying chemical attack on Khan Sheikhoun, killing dozens of ordinary villagers and injuring many hundreds more. Just two days ago—I was rather surprised that the Foreign Secretary did not see fit to mention this—there was the suicide bombing of so-called pro-regime evacuees in Rashidin, with dozens of children among those who were killed. They were lured to their deaths by the promise of free crisps—a tragic reminder that in this conflict Bashar al-Assad does not hold a monopoly when it comes to horrific atrocities against innocent civilians, including children.
We need a peaceful settlement in Syria now more than ever. Indeed, last week the Foreign Secretary said that his priority was to
“build co-ordinated international support for a ceasefire…and an intensified political process”,
and I agree with him. So why, rather than working for co-ordinated international action properly to investigate, punish and prevent the use of chemical weapons, is the Foreign Secretary instead threatening more unilateral airstrikes by the US against the Assad regime? Why, rather than engaging in that peace process, did he instead cancel his proposed talks in Moscow, and in the process so comprehensively alienate the Putin Government that they have refused to talk to Britain in future? And why, rather than ensuring that the G7 spoke with one strong voice on Syria last week, did he instead present it with a half-baked, quickly rebuffed proposal for sanctions, without doing any preparatory work to win the support that was needed?
The Foreign Secretary ended last week disowned by Downing Street, ignored by Russia, and humiliated by the G7. The only straw he can cling on to, we presume, is this: that the United States State Department is still telling him what to say and do, and which countries he is allowed to visit. To that end, may I ask a final question on Syria? Based on his close relationship with the Trump Administration, can he clarify exactly what their strategy now is?
Turning briefly to North Korea, the Foreign Secretary rightly condemns the ongoing nuclear missile programmes being pursued by Kim Jong-un’s regime. I hope he will agree that, like Syria, this a crisis that can be resolved only through co-ordinated international action, through the de-escalation of tensions and, ultimately, through negotiations. So can he assure us that Britain will argue against any unilateral military action taken by the United States, and instead urgently back China’s call for a resumption of the six-party talks? When it comes to North Korea, the world needs statesmanship, not brinkmanship. We cannot afford blind loyalty to the Trump Administration if they are leading us down the path to war.
Peace in Syria and North Korea and our relationship with the Trump Administration are vital issues for the future of Britain and the world, and, as much as the Prime Minister would like the coming election simply to be about Brexit, we must ensure that these and other international concerns are not forgotten.
To that end, my final question for the Foreign Secretary is this: will he commit to join me in a televised debate between all the parties on foreign policy—no ifs, no buts? I am ready to say yes now, so will he commit today to do likewise: announce the first election debate and put his party’s promise of stable leadership on the line?
Boris Johnson
I am obviously disappointed that the shadow Foreign Secretary should choose to intrude into this very important consideration relatively separate issues of domestic political policy: we are trying to explain the position of the UK, and indeed the west, towards the Assad regime. And, by the way, we are having a televised debate now in case she had not noticed, and we should continue in that way.
To answer the right hon. Lady’s serious point, we are engaged in trying to use the opportunity provided by American action to drive forward the political process. It is not easy, and I think in all honesty that she should reflect on her approach, because what we are trying to do requires a great degree of cross-party support. We want the Russians to face up to the real option before them. If they continue to back Assad, they will be backing a regime that—I hope Members heard what I said about the use of chemical weapons—has been proved beyond a shadow of doubt to have used chemical weapons that are banned under international law. I would like the Russians to accept that there is a deal. That could be that they have an improvement in their relations with the Americans, and work together with the rest of us to tackle the scourge of Daesh. In return, the Russians need to understand that they need to make a serious commitment to a political process. At the moment, they are not doing that. They need to make a proper commitment to a ceasefire, and at the moment they are not making that commitment. They need to stop their client using chemical weapons. They said that they would do that in 2013. Rather than simply parroting the lines of the Kremlin, the right hon. Lady should support the collective action of the west, not just the G7 but the like-minded countries—
Boris Johnson
The right hon. Lady has said, for instance, that the west is divided in its attitude towards sanctions. Let us be absolutely clear that all we are trying to do is to follow where the evidential trail leads—[Interruption.] If the OPCW finds that members of the Syrian armed forces have been responsible for that attack, I hope she will agree that they should face sanctions. If she were to oppose that, I would find it absolutely extraordinary. The United States has moved to impose sanctions on a further 300 people, and there has been a large measure of support from all western countries for doing exactly that.
Furthermore, it seems unclear from the right hon. Lady’s account whether she supports the American action at all. I wonder whether she could enlighten the House as to whether she is in favour of what the Americans did. For the first time in five years, the Trump White House has shown that the west is not prepared to sit by and watch while people are gassed with weapons that should have been banned—
Mr Speaker
Order. We appreciate the Foreign Secretary’s inimitable rhetorical style, but I fear that the right hon. Lady, by moving as though to intervene, supposes that she is taking part in a debate. Let us await the televised debate, if it is to happen. At this point, the Foreign Secretary can content himself with responding to questions.
Boris Johnson
I am grateful, Mr Speaker.
It was far from clear to me, in listening to the right hon. Lady’s response, whether she actually supports what the United States has done. I would like some elucidation on that. As I have said, for the first time in five years, that action has shown that the west is willing to stand up to the use of these vile weapons. This has given us a political opportunity that we have hitherto not had, and I think that her best bet would be to support this Government and the efforts of western countries in trying to drive that forward and get the Russians to deliver a genuine political solution—[Interruption.]
Mr Speaker
Order. I say to the right hon. Member for Islington South and Finsbury (Emily Thornberry) that all sorts of things might be judged by some people to be intolerable, but I am afraid that what is above all intolerable is to depart from the normal process. She is a person of very considerable intellect and ingenuity. Doubtless, through her colleagues—and possibly subsequent to the statement—she can find ways of giving expression to her concern, but at this point if she could assume a Zen-like calm, the House would be the beneficiary of that.
Sir Nicholas Soames (Mid Sussex) (Con)
It is obviously right that a diplomatic joint approach in Syria is more important than unilateral action. Will the Foreign Secretary therefore commit to continuing to work closely with our American allies and other partners and friends to bring an end to this barbaric slaughter in Syria?
Boris Johnson
I am grateful to my right hon. Friend for his question. That is exactly what we are engaged in doing. I do not pretend to the House that it will be easy. We have been here before; we have seen the whole Kerry-Lavrov rigmarole that went on for months and months. However, this is an opportunity for Russia to recognise that it is supporting a regime that deserves the odium of the entire world. That is costing Russia friends and support around the world, but it now has a chance to go for a different approach, and that is what we are collectively urging it to do.
Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP)
I thank the Foreign Secretary for advance sight of his statement and I associate Scottish National party Members with his opening remarks, in which he paid tribute to those who lost their lives in Jerusalem and Stockholm. Our thoughts are with their families.
The international community must respond to what can only be described as the monstrous actions of the Assad regime. There should be an international investigation sponsored by the Security Council. If that is blocked, such an investigation should be ordered by the General Assembly of the United Nations. The mechanisms exist to enable that to happen, and the UK Government must lead the way. The findings should be taken to the International Criminal Court and those responsible should be arraigned and subjected to the force of international law.
The US air strikes on Shayrat airfield are a demonstration of the unpredictability of the Trump Administration, which many fear will only cause further escalation of the conflict. In their rush to congratulate that Administration on their recent strike, did the UK Government consider its repercussions? Until now, coalition aircraft have operated with relative freedom against Daesh in eastern Syria. Now, Russia has suspended the US-Russia air operations accord, and the Assad regime will likely activate its extensive air defences. The skies above Syria will therefore be much more dangerous for UK pilots, while Syrian civilians on the ground will suffer even more.
We in the SNP have questioned the UK Government’s policy on airstrikes from the very beginning, but now we must have answers. What changes will have to be made to adapt to the changing situation, and how will that affect the coalition aerial campaign against Daesh? UK jets and bombs will not bring peace in Syria. We call on the UK Government to reconsider their tactics and urgently present a revised military strategy in Parliament. Although dialogue aimed at ending the conflict is welcome, above all we want hostilities to cease and civilians to receive the basic food, shelter and medical care that they so badly need.
Finally, on North Korea, we urge all parties to lower tensions and use diplomatic means to work through disagreements. This is yet more evidence of the need to implement multilateral disarmament and put an end to the existence of weapons of mass destruction in general, and nuclear weapons in particular.
Boris Johnson
The hon. Lady will know that the UK is already the second biggest donor of humanitarian aid to the region, so we have a record that we can be proud of. I return to what she had to say about the American strike. I am looking at faces that are familiar from previous statements on Syria; month after month I have come here to update the House on how that tragedy is unfolding, and I see people who have taken a passionate interest in this subject and have called repeatedly for us to do more. Finally, the United States has taken what we believe to be condign action—action that I think is entirely appropriate—but somehow it fails to find favour with the hon. Lady.
I think that what has happened is a good thing, but we should not overstate its importance from a military point of view. We have to recognise that this is a political opportunity, and it is an opportunity for the Russians to recognise the manner of regime that they are propping up. That is the message that we need to get over loud and clear, and unanimously.
As for North Korea, the hon. Lady makes a good point about the need to get rid of nuclear weapons. I think it would be foolish—I hope that she agrees—for the United States even to begin to think of getting rid of its nuclear weapons before we have a denuclearised North Korea.
Crispin Blunt (Reigate) (Con)
I thank the Foreign Secretary for the detailed evidence he has presented to the House about the responsibility for the nerve agent attack in Syria. I commend him for giving the House that detail and, in doing so, I invite him to depersonalise his assessment of the Syrian regime simply around the personality of its President. We already have in place a mechanism by which that President will be held to account in future by the Syrian people if he wishes to seek their views under the International Syria Support Group conclusions of November 2015. That process has already been agreed on by 20 nations, and we should be relying on that and not using rhetoric that might make it more difficult to get into that process.
Finally, if I may ask my right hon. Friend about North Korea, I invite him to put pressure on the United States to try to dial down the public rhetoric. In some ways, North Korea is like an attention-seeking child who happens to belong to someone else—in this case, China. While the United States has proper responsibilities to the other nations in the area about their security, ratcheting up the rhetoric with North Korea is probably the wrong way of publicly dealing with it.
Boris Johnson
I entirely agree with my hon. Friend that we should be clear that our quarrel is not only with Bashar al-Assad, but with others in his regime. It will be possible to sketch out a route map to show how we can keep the institutions of Syrian government and yet get rid of the most murderous elements of the regime. We need to be getting that idea across clearly in the next weeks and months.
On North Korea, I am sure that my hon. Friend’s words on the need to avoid ratcheting up the rhetoric are wise—he speaks from experience—but I believe that the key lies mainly with China in this arena. It is very much in the interests of the Chinese and the Russians, who share a border with North Korea, to rein in Kim Jong-un and persuade him to abandon what I think is a path of self-destruction.
Hilary Benn (Leeds Central) (Lab)
In the light of the American Vice-President’s current visit to the region to consult, one hopes, South Korea and Japan, among others, on the most effective way of containing North Korea’s nuclear ambitions, and reflecting on the Foreign Secretary’s own experience at the recent G7 summit, does he think that there is the potential for further economic sanctions directed at Pyongyang? Does he think that China would fully support such a step?
Boris Johnson
The crucial thing is for the Chinese and others to implement the current sanctions and to allow them to have a full economic impact. As the right hon. Gentleman may know, there has been some doubt in recent months about the full application of those sanctions. The people of North Korea are living in absolute misery, penury and servitude. The trouble is that they can probably continue to live in that state for a long time to come, unless their Government see sense. We must work with the Chinese to persuade them.
Sir Hugo Swire (East Devon) (Con)
Given the fact that the Chinese, in a most welcome manner but rather surprisingly, did support sanctions at the UN in 2013, the chances are that they will come to the UN Security Council meeting at the end of this month in a positive frame of mind. The Foreign Secretary is right that Russia shares a small border with the Democratic People’s Republic of Korea. It is also a permanent member of the UN Security Council and is party to the six-party talks. In addition to having good discussions with his opposite number Wang Yi in China, will my right hon. Friend commit to talk to Sergey Lavrov and point out that this is another chance for Russia to rehabilitate its international reputation, which is extremely tarnished at the moment?
Boris Johnson
My right hon. Friend is absolutely right. He has great expertise in this matter. It is perfectly true that the economic relationship is overwhelmingly between China and North Korea, but, as he says, Russia certainly has a role. Russia should not be permitted to hide endlessly behind China’s skirts, a point that Rex Tillerson made in Moscow on 12 April.
Ann Clwyd (Cynon Valley) (Lab)
In 1988, I took a cross-party group from this House to see some of the survivors of the Halabja attack. There was lot of discussion about who was responsible, and people such as Professor Alastair Hay went out to Halabja and brought back soil samples and evidence. I wonder whether experts in the UK are again being used to find out who perpetrated this terrible carnage and suffering on the Syrian people. Has the Foreign Secretary talked to such people, who could be of help again due to their experience in dealing with chemical weapons?
Boris Johnson
I well remember the right hon. Lady’s efforts in respect of Halabja, and she played a big part in hardening my heart against Saddam Hussein many years ago. She campaigned on the matter with great effect, and rightly so.
What we are doing today is supporting the OPCW’s expert fact-finding mission, and I have sketched out all we know about what happened on the morning of 4 April—the best evidence that we have so far—and I hope the House will believe that the evidence is very persuasive indeed. The fact-finding mission will now draw on a variety of sources, including samples from the victims, environmental samples, munition fragments, footage of the incident and its aftermath, and interviews with survivors, people who were first on the scene, medics and eye witnesses. The mission will be able to draw on signals intelligence, flight tracking, data analysis, meteorological information and other information that will be shared by us and other countries concerned.
Our experience is that such fact-finding missions are able to reach conclusions in very difficult circumstances and, going back to the point I made to the right hon. Member for Islington South and Finsbury (Emily Thornberry), we need such information to create the evidential trail to the individuals responsible. There is good evidence already, and we will use what we have, when and where possible, not only to impose sanctions but to pursue prosecutions for war crimes.
Sir Eric Pickles (Brentwood and Ongar) (Con)
My right hon. Friend says that Russia’s position in Syria does not depend on Assad but that the Assad regime’s position in Syria is wholly dependent on Russia, and that Russia must accept its responsibility for the attack. If Russia’s reputation is to be rehabilitated, the first important step will be to help ease the Assad regime out of Syria.
Boris Johnson
I absolutely agree with my right hon. Friend. It is crucial to understand that the Russians, as they have freely admitted in the past, do not have any deep spiritual affinity with Bashar al-Assad. They do not love him but are wedded to him for the time being. I believe that, in the long term, there can be no future for Syria with Bashar al-Assad in power, and we have to find a way forward. What we want to do now is to reach out to the Russians, to get them to understand that point and to commit to a serious political process, and we should not abandon that goal.
Mr David Winnick (Walsall North) (Lab)
I do not regret any of my votes opposing military intervention in Syria, because at various times we were asked to oppose one side or the other, but if there had been no military retaliation in response to the chemical attack, is there not a case that it would have encouraged Assad to do it again?
Boris Johnson
The hon. Gentleman is absolutely right, and it is why we should acknowledge that the United States has changed the terms of trade in Syria. It is now up to us to make the most of this opportunity to get political change.
Alistair Burt (North East Bedfordshire) (Con)
I thank my right hon. Friend for his statement and for the tone with which he made it. One of the purposes of the American action the other day was, as it would have been in 2013, to demonstrate to President Assad that he cannot militarily subjugate all his people and, therefore, to give force to negotiations in which he will actually have to concede something. The difficult question is this: had the US Secretary of State asked my right hon. Friend for some sort of support that evening, what would have been his answer? Do he and the Government consider themselves bound by the decision of the House in August 2013 and David Cameron’s statement afterwards? If so, does he intend to return to the House to discuss the matter further? If not, what might the United Kingdom be able to do to demonstrate its force and resolve against such actions as those we saw from President Assad the other week?
Boris Johnson
As my right hon. Friend knows and as I said, we were not asked for specific support, but it is my belief—I stress that no such decision has yet been taken—that were such a request to be made in future and were it to be a reasonable request in pursuit of similar objectives, it would be very difficult for the United Kingdom to say no.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
Hannah Bladon was a student at Birmingham University, and our thoughts and prayers are with her, her family and her friends. As a result of her having been stabbed to death in Jerusalem, has the Foreign Office changed any of its travel advice?
Boris Johnson
I repeat my condolences to the family of Miss Bladon. All I can say is that although we are offering consular assistance to her family, at the moment we are not changing our general advice about travel to Israel.
Dr Sarah Wollaston (Totnes) (Con)
Given the vile propaganda role of Asma al-Assad in propping up a murderous and barbaric war criminal, will the Foreign Secretary update the House as to what discussions he has had with the Home Secretary so that we can send a very clear message that such a role is incompatible with British citizenship?
Boris Johnson
We do not discuss individual citizenship cases, as I am sure my hon. Friend knows, although I understand the feelings she is expressing. What I can tell her is that Asma al-Assad, in common with her husband, is certainly on the sanctions list.
Mike Gapes (Ilford South) (Lab/Co-op)
The Foreign Secretary’s original statement was comprehensive and measured, but it had one significant omission—there was no mention of Turkey. There are 3 million Syrian refugees in Turkey and, as he knows, the Turkish Government and President Erdogan have called for a no-fly zone. Others, including myself, have called for a no-fly zone over Idlib. What discussions are ongoing about how to protect civilians in Syria, not just from chemical weapons, but from barrel bombs?
Boris Johnson
The hon. Gentleman makes a very good point and he is right to draw attention to the cardinal role of Turkey in this whole crisis. As he knows, Turkey has borne the brunt of the huge tide of refugees, and I agree very much with what he is saying about no-fly zones, which are strongly supported by Rex Tillerson and the US. However, they cannot be delivered without a ceasefire, which is why I return to this challenge we are making to the Russians: it is up to them not just to stop the barrel bombs that the hon. Gentleman mentions, but to deliver a real ceasefire.
Sir Edward Leigh (Gainsborough) (Con)
The Foreign Secretary rightly dealt at length with the chemical attack, but I was surprised he did not take the opportunity to condemn also the appalling attack on Shi’a civilians in which 126 were killed, including 68 children, when fleeing from Foah and Kefraya. This highlights the problem faced by Alawites, Shi’a and Christians in Syria: however much they detest Assad, as we all do, they rely on him to protect them. For too long in this House, we have tried to engage in regime change—in removing Saddam, Gaddafi and now Assad. We should concentrate on humanitarian work and on protecting minorities in the middle east.
Boris Johnson
I fully appreciate the point my hon. Friend makes and he is perfectly right when he says that our thoughts should equally be with the 126 victims of that appalling attack, many of whom were children, as the right hon. Member for Islington South and Finsbury said. There are many, many victims in this conflict, but the overwhelming majority of the 400,000 who have died in the past five or six years—I believe this war is now in its seventh year—have been victims of the Assad regime and its supporters. For that reason, I must say to my hon. Friend that I understand his hesitations, which are of course shared by many people, who think instinctively that perhaps it would be better to stay with the devil we know, but this is a very, very odious devil indeed, and as I look ahead I just cannot see how Bashar al-Assad can remain in power in Syria in the long term. We have to go back a long way in history to find somebody who has murdered quite so many of his population and retained office.
Alison McGovern (Wirral South) (Lab)
I thank the Foreign Secretary for his statement. Of course, it is not for any of us in this House to decide who runs Syria; that is a choice for the Syrian people.
We should judge recent events in Syria as being successful only if they form part of a comprehensive strategy to protect civilian life. What conversations has the Foreign Secretary had with the Secretary of State for International Development about getting the aid that we as a country have paid for to those who need it in Syria? Thanks to you, Mr Speaker, we were able to call for such action for Aleppo, but we failed. Now, people in Idlib are being targeted in a way that we have discussed in this House previously. What strategy do we have to save civilian lives, to get aid in, to get people out of Syria so that they can receive medical attention, and to help to save each and every life that we can?
Boris Johnson
I pay tribute to the hon. Lady’s consistent campaigning on this issue over the years. She is right to draw attention to the appalling humanitarian situation. Around 1.5 million people are still being besieged by Assad’s regime, which is using starvation as an instrument of warfare. On what we are trying to do, I go back to my earlier points: there must be a ceasefire and the Russians must make it possible for the humanitarian convoys to access the people who need help. That is what we are trying to promote, not only in Geneva but at the Astana talks. It is up to the Russians. We can build the exit for them, and I think it is an attractive exit: they have the chance to get long-term western support for the rebuilding of Syria; they would have their strategic interests in Syria—at Tartus and Latakia—protected in the long term; and they could have a political role in Syria’s future, but they have to ensure that there is a ceasefire, an end to the barrel bombs and a proper political process.
Dr Julian Lewis (New Forest East) (Con)
Will the Foreign Secretary tell us what the outcome of that proper political process would be, given that even commentators who absurdly used to claim that there were 70,000 moderate fighters against Assad in Syria now accept that the overwhelming majority of the armed opposition is run by Islamists? While accepting that Assad is a monster in the tradition of Gaddafi and Saddam Hussein, does the Foreign Secretary also accept that there is a distinction between punishing him for using chemical weapons and removing him to replace him with a virulent Islamist regime?
Boris Johnson
I strongly agree with the wisdom of that remark. It will be essential to have a political process that preserves the institutions of the Syrian state while decapitating the monster.
Greg Mulholland (Leeds North West) (LD)
The international community has failed in Syria for too long, so I echo the Foreign Secretary’s comments: some action was indeed needed, and may be needed in future. His statement was quite rightly firm on Russia, but it did not give a sense of how the peace talks will move forward, which, as well as Russia changing its position, is clearly essential.
Boris Johnson
As several hon. Members have said, in the end, the new constitution and arrangements for Syria will be a matter for the Syrian people, but there are certainly people in Syria on either side of the debate who could come together to form a new federal Government for the country and take it forward to a much brighter future.
David Rutley (Macclesfield) (Con)
Russia has propped up the Assad regime for far too long. When I met the Russian ambassador a year ago, I urged him to request that his Government find a new home for Assad outside Syria to enable the political process to move forward and create peace in that country, but he declined. Does my right hon. Friend agree that it is time for Russia to change its mind on that matter?
Boris Johnson
To the best of my knowledge, the Russian President suggested that Bashar al-Assad should find refuge in some Gulf country, which I shall not upset by naming.
Mr Mark Hendrick (Preston) (Lab/Co-op)
In his statement, the Foreign Secretary said, “I stress that we have no intention of dislodging Russia from Syria.” Well, we would be fools to think that we could. He then went on to say, “But Russia’s position in Syria does not depend on Assad.” For the past seven years, Putin has supported Assad through thick and thin. He will not suddenly develop a conscience, as we can see from his actions over the years in Chechnya and elsewhere. We are left in a position in which Russia, as a member of the UN Security Council, will constantly block any military attempts, which leaves us with a scenario where Trump could take unilateral action, as he did on the Syrian airfield. Although I supported that particular action, how far are we supposed to support Trump in those actions without the backing of the Security Council? Clearly, he could take such action against Assad and against President Kim in North Korea.
Boris Johnson
I disagree very strongly with the hon. Gentleman. Of course, it is difficult. Of course the Russians have been backing Assad for many years, but this is an opportunity for them to have a new bargain in which there is a ceasefire, an end to the barrel bombs and an end to the chemical weapons—a real political solution—and in exchange they get a genuine relationship with the United States, join the rest of the world in the war against Daesh—[Interruption.] Yes, and they have an acknowledgment that they have a way out of the quagmire of Syria and that the west will step in, once it is possible, to pay for the reconstruction of that country.
Seema Kennedy (South Ribble) (Con)
Iran has committed hundreds of troops and billions of dollars to Syria. Furthermore, many Iranians in living memory have been victims of chemical attacks. Will my right hon. Friend reassure the House that his Department is taking advantage of the full diplomatic relations that we now have with Iran to put pressure on the Assad regime?
Boris Johnson
Yes, we certainly are. An important point to make to the Russians is that, in the end, it is the Iranians who are benefiting from any progress that the Assad regime makes. It is the Iranians who are the whip-holders in that relationship. In the end, the Russians need to detach themselves from the Iranians as well as from Assad.
Margaret Ferrier (Rutherglen and Hamilton West) (SNP)
I hear what the Secretary of State is saying, but a new report from Human Rights Watch suggests that US forces last month failed to properly confirm targets before launching a missile strike in Aleppo, killing dozens of civilians, including lots of children. They even destroyed a building that it has been established was a mosque. As the UK Government cheerlead yet more US airstrikes in Syria, what steps will he take to avoid yet more civilian deaths in Syria?
Boris Johnson
Obviously, we deplore any civilian deaths in Syria, but I also deplore any false equivalence between American actions and the dropping by the Assad regime of barbaric weapons, which were banned in 1925.
Rebecca Pow (Taunton Deane) (Con)
I welcome my right hon. Friend’s call for a peaceful and united Syria—who could disagree with that—and especially the need for the humanitarian protection of civilians, but does he agree that putting down shutters is never a productive way forward? In that light, will he confirm that he remains in regular contact with his Russian counterparts?
Ian Paisley (North Antrim) (DUP)
I appreciate the statement from the Foreign Secretary, and extend my sympathy and thoughts to the Bevington and Bladon families. He mentioned that his Government have to deal with odious devils. Of course some of those devils are home grown, and this Government have been able to deal with them in the past. It may seem attractive to remove one leader from power in terms of regime change, but does he accept that the real lynchpin in Syria is Russia? What is the true state of his relationship with Russian officials and of the relationship between Her Majesty’s Government and the Putin regime?
Boris Johnson
The hon. Gentleman is absolutely right. In the end, it was the Russian intervention that saved Bashar al-Assad’s regime. The Russians have it in their hands to change the outcome in Syria for the benefit of not just the Syrian people, but Russia as well.
James Cartlidge (South Suffolk) (Con)
I thank my right hon. Friend for his statement, but, to echo the question of my hon. Friend the Member for Gainsborough (Sir Edward Leigh), there are Members who are concerned about this phrase “regime change” and any policy that moves in that direction. Will my right hon. Friend confirm that if the US moves towards a more explicit regime-change policy with regard to Assad, we would support it only after a vote in this House endorsing such a policy?
Boris Johnson
The policy of the Government is spelt out very clearly in resolution 2254, which calls for a political process leading to a transition away from the Assad regime. I think my hon. Friend will agree that that is the right way forward.
Antoinette Sandbach (Eddisbury) (Con)
The Foreign Secretary confirmed that the regime had been responsible for three previous chemical attacks on civilians. Given that, can he confirm whether there is international support for targeted sanctions against military commanders, despite the way the negotiations went earlier?
Boris Johnson
I am grateful for that question because there was never a proposition for general sanctions against Russia, for instance. That was a piece of media ectoplasm, if you like, Mr Speaker. We have strong support for the idea of taking the evidence that the fact-finding mission will accumulate, using it to isolate the individuals who may have been responsible—by the way, there may be Russian military advisers who are complicit—and not only imposing sanctions on them, which I know my hon. Friend agrees would be the right thing to do, but arraigning them for war crimes.
Dr Matthew Offord (Hendon) (Con)
What role does the Foreign Secretary see the United Kingdom playing in confronting the bellicose actions of the North Korean regime?
Boris Johnson
The most important and useful thing we can do is to intercede with our Chinese friends to stress to them the huge influence that they have in this matter and get them to use their economic weight to get Pyongyang to see sense.
Points of Order
Emily Thornberry (Islington South and Finsbury) (Lab)
On a point of order, Mr Speaker. Is it in order for the Secretary of State, while refusing to answer the challenge of a televised debate, to use the opportunity of a statement to make the most extraordinary claims? Perhaps the biggest was that he was unaware of Labour’s position on this matter. We have made it abundantly clear that the way we should have proceeded was for UN inspectors to establish beyond doubt who was responsible and challenge the international community, including the Russians, to take multilateral action against the perpetrator, who is presumably Mr Assad.
Mr Speaker
What I would say to the right hon. Lady off the top of my head is that unawareness, whether real or proclaimed, is not disorderly. Proceedings have been orderly. Some people may feel better informed, others may not, but the right hon. Lady, who has considerable experience, both of this place and of pleading her case in the courts, has made her own point with her own eloquence in her own way, and it is on the record.
Ian Paisley (North Antrim) (DUP)
On a point of order, Mr Speaker. On Sunday 2 April and again on Sunday 9 April the former Deputy Prime Minister Lord Prescott claimed that my father, when Member of Parliament for North Antrim, had his phone tapped by the security services, contrary to the Wilson doctrine. This infringed the rights and liberties of all 650 Members of the House and, more importantly, the rights and liberties of our constituents. What steps can be taken to verify Lord Prescott’s claims and to hold to account those who failed to inform the Speaker at that time about the breaking of the Wilson doctrine? What course is now open to Parliament to uncover the truth in this affair?
Mr Speaker
I am grateful to the hon. Gentleman both for his point of order and for his characteristic courtesy in giving me notice of his intention to raise it. If he believes that the privileges of the House have been infringed, the proper course of action is for him to write to me, setting out the facts of the matter.
There is a specific reason for my exhortation to write in this particular circumstance. He is essentially raising a matter of privilege. Traditionally, in such circumstances the Chair always advises a Member to write to the Speaker. If the hon. Gentleman does so, I will make a decision on whether this should be pursued as a matter of privilege. We will leave it there for now. I am grateful to the hon. Gentleman.
Parish Council Governance (Principles of Public Life)
Tuesday 18th April 2017
(7 years ago)
Commons ChamberRead Full debate Parish Council Governance (Principles of Public Life) Bill 2016-17 View all Parish Council Governance (Principles of Public Life) Bill 2016-17 Debates Read Hansard Text
A Ten Minute Rule Bill is a First Reading of a Private Members Bill, but with the sponsor permitted to make a ten minute speech outlining the reasons for the proposed legislation.
There is little chance of the Bill proceeding further unless there is unanimous consent for the Bill or the Government elects to support the Bill directly.
For more information see: Ten Minute Bills
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mims Davies (Eastleigh) (Con)
I beg to move,
That leave be given to bring in a Bill to make provision for the governance and operation of parish councils in England; and for connected purposes.
I am bringing in this Bill to make a fundamental point— that, as we devolve power down to local communities, we should ensure that the councils to which we are giving more power are run in a good way. Throughout all of public life, we should ensure that elected representatives adhere to the Nolan principles of selflessness, integrity, objectivity, accountability, openness, honesty and leadership. Those principles need to be at the heart of all governance and, indeed, of parish councils.
I declare my own involvement in local councils. I was a district councillor and twice a parish councillor before coming to this place. I have helped to produce a neighbourhood plan and sat on various parish council committees. As a councillor and now via feedback as a Member of Parliament I have seen how parishes should work. I am passionate about the principle that decisions should be made as locally and as properly as possible. Indeed, as Hamble-le-Rice Parish Council is showing—it is to agree the first stages of a neighbourhood plan—good parishes can make a real difference, with committed people coming together in the best interests of their area. I also fully support those calling for Eastleigh to have a town council to give it a separate voice in the face of hostile development through Eastleigh Borough Council’s missing local plan. I completely support the Government’s great devolution programme, which empowers communities.
I will speak today about the most local form of government: parish councils. There is a patchwork of 9,000 parish councils across England, each offering the closest form of representation in our democracy. Serving on these parishes are 80,000 councillors—some elected, some unopposed and some co-opted. However, a strong part of ensuring that localism and the devolution agenda really work for people is ensuring that councils and councillors are ready to receive these new powers.
We need to ensure that parish councils are truly representative. Representatives should come forward to offer a mix of talent and experience—they should have varied backgrounds. However, the party politicisation of parishes in many areas sadly and brutally undermines that situation. This Bill would seek to reverse that. Multi-hatting, whereby a councillor sits on a number of different councils, is not in itself a bad thing. Vertical multi-hatting, where a councillor is a parish and a district councillor, or a parish and a county councillor, helps to foster good communication between councils. However, I draw the attention of the House to the growing negative version of this, which I call horizontal multi-hatting. This is when an individual sits on multiple parish councils.
A borough councillor in my constituency sits on Bursledon Parish Council and West End Parish Council. The seat that this individual is taking up could have been filled by someone who genuinely wanted to contribute to their community, rather than purely to be a political placeholder—somebody who is not just seeking to qualify simply by being within three miles of one or two boundaries. In such instances, it really is a case of keeping seats cold, rather than keeping them warm. Or is it just a question of spying on the other camp? There should be a restriction on this kind of horizontal multi-hatting so that people can get involved with community representation and political parties cannot simply block others from taking part in the community.
The Bill also highlights the concerning weakness of safeguarding in parish councils. A parish council often has a single member of staff in the form of a part-time clerk. Parish councillors are often heavily involved in the local community and the many organisations they work within. They are the lifeblood of the parish council. Two problems can arise from that. First, a proper and effective safeguarding policy is difficult to maintain with limited staff time and an often rather informal approach to governance. Secondly, and very seriously, in instances brought to my attention in my constituency and elsewhere, parish councillors have used their position to bypass safeguarding policies. I have heard reports that parish councillors are using their position within their communities, and their status as a councillor, in order to get inappropriate access to community places such as local schools and community buildings.
When we discuss these matters it is important to balance the real need for good safeguarding with the right to stand in a local election. I believe that this balance can be rightly struck by requiring all council candidates to be DBS—Disclosure and Barring Service—checked as a first step to being nominated for an election. We also need to ensure that best practice for safeguarding is instilled right down to our parish councils and right across the country. That will include effective tracking and logging of potential interactions between councillors while performing their duties, such as surgeries, particularly where vulnerable members of society will be approaching people for assistance by virtue of their councillor status. This will of course mean more focus on training for parish councillors.
As we push power downwards to local communities, we must also provide those communities with access to outstanding training for their local representatives. During discussions with the area branch of the National Association of Local Councils it has given me wonderful examples of effective and comprehensive parish council training packages, which can and must be implemented. I was particularly pleased to see the example set by Hampshire NALC, under the brilliant Colin Mercer, a councillor in Botley, who is ensuring that exactly this kind of work is done for our new councillors. NALC has provided me with a copy of its handbook, which it says is the most requested publication that it writes. The handbook points the way towards a national training standard for our parish councillors. At a time when we are giving more power, more responsibility and more discretion to parish councils, we need to fully understand their new role in localism and the devolution agenda.
I am sure that colleagues will sympathise with the feeling of having been elected and then suddenly told to just get on with it. That is clearly not good enough. The people making the decisions on planning for finance, for project management, for procurement, for key contracts, and for the challenging and complex issues that keep a vibrant community alive must be in the best possible position to decide on the outcomes. We need to look at a more effective system of oversight for our parish councils to give them confidence in good decision making.
I want to make it absolutely clear that in my experience as a parish councillor and as an MP, the vast majority of parishes are doing a fantastic job of representing their community and working hard within it. However, in the tiny minority of cases where things go wrong, we need to make sure that someone is there to properly scrutinise and learn lessons. Whether it is through expanding the remit of the ombudsman, bringing in a clear and stronger code of conduct review, or, again, standards boards, we need to be able to tackle this issue.
Fundamentally, my experience and my political outlook mean that I firmly believe in giving more power to local communities. While we debate here in this grand Chamber and even grander building, it is worth remembering that people across the country, this evening and throughout the week, will be putting on their coats and walking up to their local village hall, sitting regularly in their community spaces wanting to make their communities and local areas a little bit better. I believe that these measures will assist those councillors and make our parishes work better so that they can continue to serve their residents fully and even more confidently.
Question put and agreed to.
Ordered,
That Mims Davies, Scott Mann, William Wragg, Mrs Anne-Marie Trevelyan, John Howell, Amanda Solloway, Antoinette Sandbach and Lucy Allan present the Bill.
Mims Davies accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 12 May and to be printed (Bill 168).
Finance (No. 2) Bill
Tuesday 18th April 2017
(7 years ago)
Commons ChamberRead Full debate Finance Act 2017 View all Finance Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts
21:33 - The House divided: - Ayes: 54 / Noes: 314 - Question accordingly negatived.
21:47 - The House divided: - Ayes: 313 / Noes: 236 - Question accordingly agreed to.
The Financial Secretary to the Treasury (Jane Ellison)
I beg to move, That the Bill be now read a Second time.
This Government have long demonstrated that they can deliver a stronger, more secure economy. The economy is demonstrating robust growth, the employment rate is at a record high and the deficit has been brought down by almost two thirds since its pre-financial crisis peak.
We are in a much stronger position now than we were in 2010, but there is no room for complacency. Indeed, as we begin the formal process of exiting the European Union, we have an even greater incentive to provide a strong and stable platform for the future. Both the debt and the deficit are still too high, so we remain focused on getting the public finances in order, not continuing to endlessly borrow and jeopardise future generations, as some would have us do.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the Financial Secretary give way?
Jane Ellison
I will make a little more progress and then I will happily give way.
Before setting out the Bill’s contents in more detail, I should of course refer to the fact that the Prime Minister has today announced her intention to lay before this House a motion calling for an early general election.
Jane Ellison
Members should be paying more attention. Earlier today the Leader of the House updated right hon. and hon. Members on how that motion, if it is passed, will impact on the business of the House. We hope to hold constructive discussions with the Opposition, through the usual channels, on how this Bill will proceed.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
We are always here to help.
Jane Ellison
It is good to hear that Opposition Front Benchers are here to help.
To return to the matter under discussion, I will lay out the themes of the Bill and then I will allow the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) to intervene. We are very clear that our taxes and the system underpinning them need to be fair and competitive and, critically, they must be paid. This Bill will take the next steps in helping to deliver a fairer and more sustainable tax system, one that can support our critical public services and get the country back to living within its means.
The Bill implements changes that respond to the challenges that our tax system and, indeed, our society face. It delivers on intergenerational fairness by tackling inequality of health outcomes across and within age groups, and it delivers changes that better reflect the different ways in which individuals choose to work, enabling people to earn money and create wealth, whatever their chosen business structure, but at the same time ensuring that those choices are not distorted. The Bill also delivers vital revenues to put our public finances on a sustainable footing, secure the future of public services that we all value and help to further bring down the deficit.
Jonathan Edwards
Will the Financial Secretary confirm that the Office for Budget Responsibility report that accompanied the most recent Budget downgrades growth forecasts for each year in the forecasting period, by comparison with that which accompanied last year’s Budget?
Jane Ellison
I do not know whether the hon. Gentleman was in the House earlier, but the International Monetary Fund has today upgraded its growth forecast. All the economic indicators are pointing to robust growth, despite the acknowledged challenges of the negotiating period ahead.
George Kerevan (East Lothian) (SNP)
In the interests of this potentially more consensual period in the run-up to Prorogation, as we try to work out what will remain in the Bill, could the Financial Secretary tell the House where the £2 billion per annum to replace the non-raising of the national insurance contribution is going to come from, if she is so wedded to balancing the books?
Jane Ellison
The Chancellor was clear at the time and in our statements about the Budget and subsequent decisions that we are looking to balance the budget across the period. Clearly, if we are going into a general election campaign, we will have more to say about that in the manifesto. We will lay that out there; this is not the place for that.
Jane Ellison
Well, there are measures in the Bill that are immediately and openly about revenue raising, and we will come to some of those. The Chancellor was very direct about that when he made his Budget statement and, indeed, at the time of the autumn statement.
Let me say a bit about what the Government have done to support fairness between the generations. An essential priority for this Government is that everyone should have access to our NHS when they need it, and that everyone should enjoy security and dignity in old age. That is why we announced in the spring Budget an additional £2 billion—that has just been referred to—in funding for adult social care. This means that councils in England will have access to, in total, £9.25 billion more dedicated funding for social care over the next three years as a result of changes introduced by this Government since 2015.
On top of that, in the last two fiscal events we have done much to help to build a better future for our younger generation by helping people to save more of the money they earn; by investing in education and skills, which was a key theme of the autumn statement and of the Budget; and by building more affordable homes. The Finance Bill will build on this work, particularly by helping to tackle childhood obesity and to deliver a healthier future for our children.
Kirsty Blackman (Aberdeen North) (SNP)
Recent studies have shown that the youngest people in our society who are working, those aged 22 to 29, are earning less than previous 22 to 29-year-olds have ever earned, or certainly less than they have earned in recent times. They are also less likely to own a home and are more likely to rent, and they are disadvantaged by comparison with previous generations. What is the Minister doing to ensure that that stops and is reversed now?
Jane Ellison
I have just talked about some of the things we are doing. Some of these long-term trends need to be addressed through things such as investing in people’s skill levels. Ultimately, if we want to have a low welfare, high wage, high skill economy, we need to invest in people right from the earliest days. The package on skills in particular, which was unveiled recently, is intended to make the generational step change to ensure that people can get high skill, well paid jobs. That is exactly what we are talking about in relation to things such as affordable housing: we acknowledge that there are challenges for younger people and, indeed, we are looking to address them.
Let me talk about the issue of childhood obesity—an issue close to my heart, as a former Minister for Public Health. The UK has one of the highest obesity rates among developed countries, with soft drinks still one of the biggest sources of sugar in children’s diets. That is a cost not only to the productivity of our economy but to the public purse; indeed, there is also a great cost to individuals. The direct cost to the NHS of treating ill health due to people being overweight and to obesity totals over £6 billion a year.
The Bill will legislate for a new soft drinks industry levy to encourage producers to reduce added sugar in their drinks. The levy is working already: there have been reformulation announcements by Tesco, by the makers of Lucozade and Ribena, and of course by A. G. Barr relatively recently. I have had discussions with several companies during recent months, and I understand the effort and investment they are putting into changing their product and portfolio mix.
Even though revenues from the levy will be lower as a result of the earlier than expected reformulations—unusually, we in that sense welcome the fact that predicted revenues will be lower, because the policy is working early—we will maintain the full £1 billion funding for the Department for Education during this Parliament that we pledged to make. That is further evidence that the Government are committed to tackling childhood obesity. It is part of a programme of work being carried on across Departments to deliver fairer outcomes for future generations.
Joanna Cherry (Edinburgh South West) (SNP)
Cancer Research UK ambassadors like my constituent Sue Spencer have helped to highlight the fact that obesity is the second highest risk factor for cancer after smoking, so I welcome what the Minister has said about the provisions in the Bill for a soft drinks levy. May I ask her to confirm that the provisions will be part of a package of measures to tackle childhood obesity, including help for parents to protect their children from junk food advertising and steps to tackle high-sugar milk-based drinks, which are at present excluded from the Bill?
Jane Ellison
The hon. and learned Lady tempts me to talk about a subject from a previous portfolio that is very close to my heart, but it is clearly a matter on which, for the most part, the Department of Health leads. We are committed to tackling this right across the Government. To take one aspect—she mentioned products that are not within the scope of the levy—Public Health England, working very closely with manufacturers, is leading a very ambitious programme of work, which is well under way, to set ambitious targets. When we look at the progress this country has made in our world-leading salt reduction programme, we can see that it was all done through such close working, as well as by being ambitious and by pushing the industry. Alongside the levy, which has turbo-charged that work, that is a very substantial element of the plans. The Department of Health is doing other things, in particular working with schools, and with the money from the levy more can be done.
Let me turn to another theme of the Finance Bill, which we have talked about as a strategic challenge not just for this country but for many developed countries: the different ways in which people are now working. The Bill takes important steps within the tax system to adjust to and reflect the changing ways in which people are choosing to work. For example, individuals who work through a company currently pay significantly less tax than individuals who are self-employed or work as employees. This is true even in many cases where individuals are doing very similar work. Indeed, the Office for Budget Responsibility estimates that the faster growth of new incorporations compared with the growth of employment would reduce tax receipts by an additional £3.5 billion in 2021-22. The Government are committed to helping all businesses, large and small, in all parts of the UK to succeed, but we are clear that the tax system must ensure fair treatment between individuals working in different ways, and of course it must be sustainable.
The Bill will take some initial steps to help to address this issue and deliver a tax system that is fair and works for everyone. First, the off-payroll working rules will be amended for public sector engagements, with responsibility for administering the relevant tax rules moving to the body for whom the individual is working. This change will help to tackle widespread non-compliance with the current rules, which costs more than £700 million each year across the economy. Secondly, from April 2018 the Bill will reduce the dividend allowance from £5,000 to £2,000. This change will help to reduce the tax differential between individuals working for their own company and those working as employees or self-employed. Crucially, it will raise much needed revenue to invest in our public services, including adult social care, as the Chancellor explained at the Budget.
I want to assure right hon. and hon. Members that there will still be a healthy environment for investors. The allowances that the Government have introduced or raised mean that a general investor will still be able to invest about £50,000 without paying any tax on the resulting dividend income. For example, we have increased the amount that individuals can save or invest tax-free through an ISA by the largest ever amount: up to £20,000 this tax year. This and other allowances mean that 80% of all general investors will still pay no dividend tax on their investments. As I have set out, this change will help to address the rising cost to the public finances of the growth in incorporation. It is in that context that the change to the dividend allowance should be considered.
The Bill will further modernise the tax system by legislating for making tax digital. Just as taxation must adjust to the world around it, so must the administration of the tax system. With millions of businesses already banking, paying bills and buying services online, making tax digital is a natural extension of this reality. The Government have brought large swathes of government services into the digital age, including within the tax system, and we need to go on to complete that journey. Businesses will feel the benefit too, being helped to get their tax right first time and cutting down on excessive administrative burdens over the long term. Simultaneously, making tax digital will help to tackle the tax gap, as error alone cost the Exchequer £8.7 billion in 2014-15.
Sammy Wilson (East Antrim) (DUP)
Does the Minister not accept that all the studies conducted so far indicate that this will present an additional cost burden to small businesses, which will have to give returns four times a year? In many parts of the country, small businesses do not even have good access to the digital economy to make those returns.
Jane Ellison
On the latter point, I looked at this matter in detail recently. On what would be required of people in terms of the digital uploading of data, the vast majority of people in the country—in percentage terms, in the high 90s—have access to the right broadband speed.
As for what the change will mean for the smallest businesses, we do not recognise some of the figures that have been put in the public domain by some representative bodies. The Treasury has conducted its own analysis and published it, including the methodology behind it. We acknowledge that this will be a big change for the smallest businesses, particularly for those below the VAT threshold, which is why the Chancellor announced plans to defer for an additional year those businesses coming into the system. Given that the pilot has now started, that means that the system will be piloted for two years before some of the smaller businesses enter it.
However, we cannot sustain the current level of error and the size of the SME tax gap in the long term; we must begin to tackle those problems. A number of developed countries are increasingly digitising their tax systems, and that will have long-term benefits for business. I accept that the transition may involve challenges, but we shall try to provide support during that period.
Nigel Mills (Amber Valley) (Con)
I fully accept the need to tackle the tax gap, but if the advantages for the very smallest businesses are as my hon. Friend has described them, would she be willing to consider allowing such businesses to opt into the system, rather than making it compulsory for those with very low levels of turnover? Might they be allowed to see how the system works over a period of, perhaps, five years?
Jane Ellison
My right hon. Friend the Chancellor has already announced that businesses with a turnover below the VAT registration threshold will have an additional year, until April 2019, before digital record-keeping quarterly updates are made mandatory. I am sure that we shall debate the issue in more detail later, so I will not be drawn into it too much now. Suffice it to say that some of the alternative proposals do not tackle the level of error and the tax gap. We need to address that, because it is part of the general challenge relating to the sustainability of the tax base.
We believe that this change will benefit more than 3 million small businesses in the United Kingdom, the vast majority of which are banking online. We are going with the flow and following the direction in which society is moving. As I have said, however, a package of support will be available to the smallest businesses. We may have a chance to explore that a little further, but it will depend on how much time we have to debate the Bill over the coming days. HMRC will ensure that the needs of businesses are best met by enabling them to learn from the ongoing pilot phase, which, as I said earlier, will now be longer for the smaller businesses. We want to make sure that these much needed reforms are implemented smoothly at the operational level.
I have talked about the way in which the Bill can support the health of the next generation and about how it can help us to adapt our tax system to the modern realities of working life, but I also want to talk about how we can create a fairer, more sustainable tax base and raise much-needed revenue in the process. As I have said, the Government remain committed to their fiscal mandate of reducing the deficit. That is why, for instance, they made the difficult decision to increase the standard rate of insurance premium tax from 10% to 12% in the autumn statement, thus raising vital revenues that were required to support public services. The Chancellor set out very directly the need to raise additional revenue.
As I have made clear, the Government recognise that taxes must be fair. They should also be competitive, which is particularly important as we enter the critical next phase of the negotiations on our exit from the European Union. We need to ensure that our economy retains its competitive edge, and remains an attractive place for both business start-ups and ongoing inward investment. Some excellent decisions in that regard have been made in recent months. However, taxes need to be paid. That should go without saying, but, although ours is one of the narrowest tax gaps in the developed world, and although we are, in my view, one of the most transparent countries when it comes to the way in which we measure and report on it, we need to tackle tax avoidance at all levels to ensure that everyone—big business, small business and individuals—pays the right amount at the right time.
The Bill provides for further action to ensure that we receive the tax revenues that are due by continuing our work to tackle tax avoidance and evasion. We already have a strong track record. Since 2010, HMRC has secured about £140 billion in additional tax revenue as a result of tackling avoidance, evasion and non-compliance. The UK has also shown international leadership: it is at the forefront of many of the international discussions about tackling those issues. Indeed, some of the thorniest avoidance and evasion issues that we face, particularly where they involve complex multinational structures and businesses, can be tackled only in international forums. We have worked closely through the OECD and other international bodies and we will continue to do so and to lead the discussions to tackle those issues. This Bill will build on that work by introducing more than 10 policies that are forecast to raise over £5.5 billion by 2021-22.
First, the Government will update the rules on how companies claim tax deductions for interest expenses and losses. From this month, large businesses will no longer be able to reduce their UK taxable profits by deducting a disproportionate amount of interest expense in the UK. Nor will they be able to offset all their tax liability with past losses in years when they make substantial profits. Taken together, those measures will raise nearly £7 billion from large companies over the next five years.
Secondly, the Bill will continue the Government’s crackdown on the use of artificial disguised remuneration schemes by putting beyond doubt the existing rules and by introducing a new charge on outstanding loans from 5 April 2019. Those changes will ensure that scheme users pay their fair share of tax and will bring in £2.5 billion by 2020-21.
Thirdly, to deter those who gain financially from enabling tax avoiders, the Government will introduce a new penalty for those who enable the use of tax avoidance schemes that are later defeated by HMRC. That is an area on which we have worked closely and where policy development has benefited from a focus on quality tax policy making. We have worked closely with representative bodies to ensure that all people working within the spirit of their professional guidelines have nothing to fear from the new rules. However, it is important that we tackle the enablers.
I think we have all as constituency Members of Parliament heard from people who feel that they were given advice that was later revealed to have been poor advice. However, we have not had a system whereby we were able to pursue in the way we wanted those people who enabled the tax avoidance. That cannot be right. Therefore, the Bill will mean that enablers of abusive arrangements can be held accountable for their activities, while ensuring, as I say, that the vast majority of professionals who provide advice on genuine commercial arrangements will not be impacted. The Bill will also bring an end to a long-standing imbalance in the tax system by abolishing permanent non-dom status. That will raise £400 million each year by the end of this Parliament.
As a package, those measures will ensure that our tax system remains fundamentally fair and that people and businesses pay the taxes they owe. We have introduced them not only because it is important to sustain the tax base—that is important for the revenue we need for vital public services—but because it is important that people feel that everyone is contributing as they should be and that we are asking everyone to work within the rules. The quid pro quo for having a competitive and fair tax system is that taxes should be paid.
The Bill will help to deliver a fairer and more sustainable tax system, one fit for the digital age and responsive to the different ways in which people choose to work. It will continue our work to tackle tax avoidance and evasion. It will help to deliver improvements to the nation’s finances, to pay for critical public services and, by taking a significant step to address the issue of child obesity, to deliver a better future for our younger generation. The Bill delivers on the Government’s plan for Britain, a stronger economy and a fairer society. I commend it to the House.
Peter Dowd (Bootle) (Lab)
Plausibility ran through every sentence in the Minister’s speech. Plausibility ran riot, but plausibility I do not accept.
Who would have thought that a general election would be called on the day we were in this Chamber, which is packed-out, for this scintillating debate? I do not think anyone would have thought that. Only a few weeks have passed since the Chancellor’s shambolic Budget U-turn, yet today the Prime Minister has announced a U-turn in relation to the general election. We all thought the lady was not for turning, as she has led us to believe on at least seven occasions, and of course we were wrong. [Interruption.] Apparently the Prime Minister did not want an election, and clearly in the last few days she has had some sort of damascene conversion—a damascene conversion to democracy, apparently. We had the Brexit referendum last year which gave authority to push on with Brexit, but we now find that the Prime Minister says she wants even more authority. I thought we had been getting the Brexit vote pushed on us time after time, but clearly that has not been enough. The Prime Minister might possibly be feeling slightly insecure; I really do not know, but we are where we are.
As the Finance Bill is a product of the Budget, it is only right that we start this debate by offering a reminder of its contents. Notwithstanding what the Minister has just said, the Budget continued the Government’s programme of tax cuts for multinational corporations and the super rich: by the end of 2021 they would have received £70 billion-worth of tax breaks, paid for by those on middle and low incomes and of course the self-employed. [Interruption.] That is a fact; it is clear from the Office for Budget Responsibility’s figures and the Government figures.
The Budget failed, however, to address adequately the social care crisis, and we are now seeing 900 adult social workers in England leaving the profession every day—and goodness knows how many GPs getting their pension statements are ready for moving on as well. It also did little to support small and medium-sized business owners, who are the lifeblood of the economy and increasingly feeling the pressure as the economy slows and inflation rises.
More importantly, the Budget demonstrates that this Government are willing to break their manifesto commitments at the drop of a hat. Despite the Chancellor’s bravado, the Government’s economic ineptitude after seven years is clear for all to see. His Government have presided over the slowest recovery since the 1920s, with growth and average earnings downgraded yet again. The Chief Secretary said in his Budget speech that the Government do not believe in “spending and promising” what they “cannot deliver” and agreed that that is an important barometer by which to judge the Government’s record. Let us look, therefore, at what the Government have promised over the past seven years and what they have actually delivered.
On coming to power, the Conservatives committed to balancing the books by 2015—a Conservative broken promise. They said that would be pushed back to 2019-20—another Conservative broken promise. Instead, by 2020 they plan to be borrowing an eye-watering £21.4 billion. Some 10 of the Government’s 14 Budget and autumn statements since 2010 have seen an increase in forecasted borrowing. This Government’s record on borrowing has been missed target after missed target, with constant upward revision. The Government pledged that debt as a percentage of GDP would start to fall in 2015; instead it continues to grow—another Conservative broken promise.
The Government’s record on growth has been one of epic failure. The OBR has now revised down economic growth for 2018 and for every remaining year of the Parliament, notwithstanding the comments made before about the OECD. The British people wait to see any benefits of growth, but the only growth they can expect to see is in the size of the Government’s Finance Bills; this one is a whopper, coming in at 762 pages, longer than any previous Finance Bill and one of the largest pieces of proposed legislation ever presented to this House. Those 762 pages are hardly riveting reading, I have to say. [Interruption.] I have read every single syllable of it, several times.
We would need to search long and hard through those hundreds of pages for anything that helps ordinary taxpayers. Instead it is replete with ever-more complex giveaways to corporations and the super-rich. But even those hundreds of pages are not enough to contain the Government’s giveaways to the rich. This mammoth Bill will be supplemented by an unprecedented number of statutory instruments, on the back of the Treasury’s already unheard of use of SIs. There were 90 in the last Session, and there have already been 88 in this one. We have heard about Henry VIII edicts, but this makes the Chancellor look like a committed parliamentarian.
The growth in the size of the legislation is matched only by the growth in the number of broken Conservative promises. Are this Government doing anything to deliver growth that benefits the average household? The Chancellor has consistently pledged action to tackle the UK’s productivity gap, but under this Government, this country’s productivity gap with the G7 has grown by a fifth, and we now have the largest gap since 1991. The Conservatives were in government at that time as well.
This Government have done little to tackle the scandal of chronic low pay and insecure work. Despite falling unemployment, workers are currently suffering their worst decade for pay in 70 years. Rising inflation is now outstripping wage growth and, according to the Resolution Foundation, real-terms pay is now falling for around 40% of the UK workforce. The Government’s promise of a £9 national living wage has been consistently revised downwards—first to £8.80 and now to £8.75—while rising inflation results in the cost of living going up for everyone. It is clear that when it comes to introducing a wage that working people can live on, only a Labour Government will deliver. This Finance Bill does little to address the crisis in living standards that many of our constituents are currently feeling. Nor does it offer support for small and medium-sized businesses, which are facing rising costs and a lack of investment due to the Government’s hard Brexit strategy—if you can call it a strategy.
Tom Tugendhat (Tonbridge and Malling) (Con)
The hon. Gentleman is making some interesting points, but I hope he will forgive me for saying that they seem to run contrary to the facts as I see them. I see businesses coming to Britain, I see investment moving to Britain, and I see opportunity starting in Britain. This all seems to run contrary to his argument, and I wonder whether he can explain why businesses see Britain as a land of opportunity and growth when he clearly does not do so.
Peter Dowd
If that is what the hon. Gentleman sees, I suggest that he needs to take off his rose-tinted spectacles.
We are all aware that the only Conservative idea for the shape of a post-Brexit economy is to turn our once pride-worthy economy into a bargain basement tax haven. That is what the Conservatives want. We have had seven years of slogans from this Government, but we still have no evidence that their negotiations on Europe amount to anything more than something written on the back of a fag packet. They are non-existent, and they have been non-existent for the two or three years since the announcement of the referendum, other than their preparation to sell us down the river to tax avoiders and dodgy dealers across the globe.
The Government make great claims on tackling tax avoidance in the Bill—we heard the Minister talk about this earlier—but it is a charter for tax avoiders, and no amount of smokescreens and bluffing can hide that fact. The Chancellor wants us to believe that measures to bring some non-doms into tax will really tackle the problem, but throughout the Bill we see measures to preserve the special status of non-doms and to privilege that group over domiciled taxpayers. Even the Government’s headline “deeming” measure is undermined because they have chosen to preserve the non-dom status of offshore trusts. How on earth is this going to get more taxes paid if non-doms are being forewarned that they can simply hide their money away in a trust and still keep it beyond the Revenue’s grasp? When is closing a loophole not closing a loophole? When it is hidden in a magic spreadsheet.
The Bill fails to introduce any meaningful measures to tackle tax avoidance and evasion, which even this Government admit are costing at least £36 billion a year. In short, this Finance Bill continues to push our country towards a low-tax and low-pay economy in which a small minority of the rich can get wealthier at the expense of everybody else.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
I would love this to be a low-tax economy, but is the hon. Gentleman aware that tax as a percentage of GDP is going to be at its highest level since Harold Wilson was Prime Minister?
Peter Dowd
I am grateful to the hon. Gentleman for bringing that to my attention. Let me put it like this: if we had a Labour Government, the percentage would be even higher.
The Finance Bill does nothing to fund the NHS, which is facing its worst ever crisis. As the former Secretary of State for Health, Lord Lansley, has said, the Government planned for five years of austerity, but having 10 years of it was neither planned for nor expected. That came from a man who wasted £3 billion on a top-down reorganisation of the NHS. By underfunding and overstretching the NHS, the Tories have pushed health services to the brink; that must be in everybody’s postbag.
Tom Tugendhat
It is very kind of the hon. Gentleman to give way again. As he has brought up the NHS, I feel that it is only right for us to ask how Labour is doing on the NHS. We have to look to Wales to see how Labour is doing—not well, is the answer. The statistics from the NHS in Wales indicate that treatment is poorer, waiting lists are longer and people are less satisfied than they are in England or, indeed, in Scotland, where the SNP has, sadly, also delivered worse results.
Peter Dowd
I draw the hon. Gentleman’s attention to waiting lists in England, where an estimated 3.8 million people are waiting for treatment. I suggest that he should be more concerned about those 3.8 million people in England than he is about Wales.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Does my hon. Friend think it is remotely credible for a Tory MP on the eve of a general election to boast about the NHS? If one thing is certain as we go into this election, it is that people know who they can trust on the NHS.
Peter Dowd
My hon. Friend is completely right about that. If Conservative Members want to send me their manifestos on the NHS, I will be happy to look them through. As a matter fact, I might get even more votes if I put those manifestos through the doors in my constituency.
The Finance Bill does nothing to help to fund the NHS. It is as simple as that. By underfunding and overstretching the NHS, the Tories have pushed health services to the brink. The number of NHS beds has been cut by 10% since the Tories came into government; that issue has been raised. GP recruitment is at an all-time low, and more GPs are moving out of practice. Community pharmacy funding has been savagely cut back, in some instances by as much as 20%. As a result, as many as 3,000 pharmacies, in rural and urban communities alike, face closure. That is not the best record on the NHS; it is as simple as that.
Sammy Wilson
I accept what the hon. Gentleman has said about the difficulties that the NHS is facing. However, earlier in his speech he described borrowing as eye-wateringly high, so how does he propose to fill the gap in funding to increase standards in the NHS?
Peter Dowd
I referred earlier to the money—£70 billion, I believe—that the Government have given away to corporations. That would be a start, and I would welcome the hon. Gentleman’s support for my proposal in the next Parliament.
We have seen £4.6 billion cut from the budget for social care, which is linked to, and on a continuum with, the NHS. The Chancellor has pledged to return only £2 billion over the next three years—£1 billion for the year 2017-18 and £500 million a year for the two following years—which is half what the King’s Fund has estimated that the social care sector needs not for next year, but today. That is another Conservative broken promise. Missed targets are pushing the NHS and social care into further crisis. The Government are behaving like an ostrich in that regard, and the situation is coming back to bite them.
I turn to small and medium-sized businesses, which contribute more to the British economy than they have ever done. SMEs are forecast to contribute £217 billion to the UK economy by 2020, but the Finance Bill does little to address the concerns of many business owners. The business rate system continues to be rigged in favour of giveaways for big corporations at the expense of SMEs. How can it be right for the business rates bills of a leading supermarket’s biggest stores to fall by £105 million, while independent shopkeepers struggle with a cliff-edge hike in their rates? That is a fact today. The system needs to be fairer and weighted more in favour of SMEs, which is why a Labour Government would bring in a package of reforms to ease the burden of business rates. Rising business rates and rising inflation are creating a perfect storm for SMEs. Small business inflation has risen to its highest point in eight years, with basic costs soaring by 3.2% last year. SMEs’ costs are predicted to go up by £6.8 billion by the end of this year. All that is happening while the Conservatives continue to look the other way in complete denial.
Victoria Atkins (Louth and Horncastle) (Con)
In that spirit, does the hon. Gentleman welcome the additional £20 million to £25 million a year to support some businesses that will no longer receive small business rate relief after the revaluation?
Peter Dowd
Of course I welcome that figure, but the hon. Lady has to ask herself whether businesses should have been put in that position in the first place. That is the fact of the matter. It is too little, too late. I accept the £20 million figure, which is fine. Small businesses need all the support that they can get, because we are talking about people’s jobs and about businesses that people have worked hard to grow and nurture, and there is a danger that they will go out of business as a result of Government policies.
Sammy Wilson
Given that larger stores weathered the recession much better than many small businesses, would the hon. Gentleman consider the policy that has been introduced in Northern Ireland whereby larger stores pay a 15% premium on their rates to finance some relief for smaller businesses in town centres?
Peter Dowd
If that suggestion came from the Government side, I would say that I would listen to the representations, and we would listen to any representations, so to speak, that would help small businesses.
Moving on to alcohol duty, the Finance Bill will only further undermine our local pubs, which are already under threat, with 29 pubs closing every week. While we welcome plans to make tax digital, the Government’s plan will shift huge administrative burdens on to small businesses and the self-employed, who are just trying to pay the taxes they owe—so much for the Conservatives being the party of small business. There is no reason businesses should have to submit quarterly digital tax returns, particularly when they lack the time, resources and capacity to convert records into digital standards on a frequent basis. All that comes when they are under stress from business rates. That is why we support the view of the Treasury Committee and of small business owners and the self-employed that it is better to exempt the smallest taxpayers from quarterly reporting and to phase in making tax digital to ensure that implementation is right for all, rather than the Conservative party wasting taxpayers’ money and time by correcting mistakes further down the line.
Making tax digital will also place new burdens on HMRC, which is already teetering on the edge after the constant slashing of its resources over the past few years. Thousands of hard-working staff have already been dismissed, and taxpayers are waiting on the phone for hours, which costs far more than the cuts have saved. The closure of dozens of tax offices across the country is still to come, putting thousands of jobs at risk in my constituency alone. How will HMRC cope with the ever-increasing complexity of its responsibilities with just a skeleton staff? How will any of the “reduction in errors” expected from making tax digital actually come about? How will we ever close the tax gap when there are no tax inspectors left to help taxpayers get their returns right and when HMRC has been filched of the resources it needs to run a service? It is a total false economy.
Jane Ellison
I am sorry, but I rise to defend HMRC. What the shadow Minister just said is the most outrageous attack on the hard-working men and women of HMRC. Far from people hanging on the phone for hours and the various other exaggerations that we just heard, I suggest that he look at the publicly available figures for HMRC performance in a range of areas, where he will see that what he said is far from the truth. HMRC’s performance has been excellent in recent years in many areas, as shown not least by the £140 billion extra raised since 2010 from avoidance and evasion.
Peter Dowd
That attempt at plausibility has gone amiss yet again. The reality is that we are constantly contacted by people about HMRC. Those on the frontline, such as the thousands in my constituency, are doing a damn fine job. The idea that I would attack thousands of people from my constituency is complete nonsense. They are struggling against the odds, which have been stacked against them by this Government. That is the reality. The Finance Bill was a failure before it was even started. It is a busted flush.
The Minister referred earlier to helping homeowners. If the Government are setting aside resources to help homeowners, such as through lifetime ISAs, they should also tackle the threat to the stability of the housing market from organisations such as Bellway, which is tying people to their homes through its leaseholds. That is a scandal and an outrage. The housing market is in danger if such scams are allowed to continue. The Government are quite rightly putting in resources to fund the housing market, so if we are to deal with the issues in it, they should be calling those organisations in, getting a grip on them and telling them to stop ripping off the people who bought homes from them.
The Bill is making income tax payers, small and medium-sized businesses, and the self-employed pay the bill for the endless stream of tax cuts for corporations and the super-rich. It takes no serious action to tackle tax avoidance, putting in place get-outs and workarounds that mean it is just another smokescreen.
Lucy Frazer (South East Cambridgeshire) (Con)
Does the hon. Gentleman accept that the Bill comes from a Government who have significantly increased the number of people in employment? Earlier this year, only 370 people were unemployed in my constituency.
Peter Dowd
A million people in employment are on zero-hours contracts. Millions of people are in insecure work. Of course I welcome employment, but it has to be secure, well-paid, reasonable, sensible employment that allows people to sustain their families. Under this Government, millions of people are unable to sustain an ordinary life with the wages they receive. That is the reality.
Tom Tugendhat
The hon. Gentleman is being generous in giving way. Does he understand that his pledge further to increase taxes runs directly contrary to his hope for better employment? Increasing taxes and increasing the burden of the state on companies around our country would lead to employment falling, not rising. Welfare cases would rise, not fall. It would be generally bad for our entire economy.
Peter Dowd
I do not know which speech the hon. Gentleman has been listening to, but I did not refer to raising taxes.
Peter Dowd
No, I did not. I was asked earlier how I would pay for the changes, and I indicated that I would start with corporations. In effect, corporations receive £70 billion in relief over a five-year to six-year period through banking levy reductions and so on. That is the starting point for us. As far as I am concerned, the Bill takes us no closer to knowing when the Conservatives will finally meet their target of closing the deficit. A series of failures has led them to borrow more than any other Government in history, and far more than every Labour Government combined. That is the fact of the matter.
Lucy Frazer
Can the hon. Gentleman tell us how much Labour would borrow under his plan?
Peter Dowd
Certainly less than you. In short, this Bill is another Conservative broken promise, and I urge the House to refuse it a Second Reading.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to speak on this nice, brief and moderate Bill. I suspect the Bill that finally clears the House in the next couple of weeks will be a little thinner. I am not sure that I welcome the change to printing the Finance Bill in one block, rather than two; it feels worse.
My speech will focus on the content of the Bill rather than on trying to start the general election campaign, which does not technically begin until tomorrow, but I am sure I heard the hon. Member for Bootle (Peter Dowd) say that Labour wants tax to be a higher proportion of GDP than the Government currently have it. If that is a Labour manifesto pledge, I suspect it will appear on more leaflets for Conservative candidates than for Labour candidates. The only real way of achieving it is to raise income tax, national insurance or VAT, none of which will be popular with the electorate.
For coherence, I will address the Bill’s measures in order. First, there is a moderate measure that will allow employers to offer their employees up to £500 of pensions advice, and associated advice such as the impact on tax bills, tax-free. Where there are problems with people’s understanding of how the pensions system works, of how much they will have in their retirement and of how much they need to save and how they should save it, any effort we can make to encourage them to take more advice, and get good advice—the earlier, the better—has to be right. I welcome increasing the tax relief from £150 to £500.
Clause 31 addresses interest restrictions for corporates, which will be allowed to claim tax relief on interest only up to 30% of their earnings before interest, taxes, depreciation and amortisation. Before coming to this place, I spent many years advising large corporates on their corporation tax bills. I wrestled with the many efforts that have been taken to get the allowed interest deduction down to a sensible level. There are well over half a dozen different anti-avoidance measures, such as allowable purposes, thin capitalisation rules and the worldwide debt cap. We have had all manner of attempts to get to the right answer, but successive Governments—Conservative, Labour and coalition—saw it as a competitive advantage for the UK to try to attract inward investment from holding companies by having a generous interest deduction.
It is right to recognise that, in an era when large multinational corporations have been gaming the global tax system to a ridiculous degree, we cannot allow our system to be exploited by excessive interest deductions, especially where they are not real commercial interest costs to the worldwide group. It makes sense for us to get in line with the global consensus that the interest limit should be 30% of EBITDA. The House should approve the measure to provide some scrutiny of the downside impact of how we attract international investment.
How many businesses that employ large numbers of high-skilled people are here for the interest deduction that we effectively allow on profits earned across the world? What impact will that have on where those businesses choose to locate in future? I hope the impact is zero and that, because we are such a great place to do business and employ people, businesses do not come here to chase generous tax deductions, but it will be interesting to see the impact of this policy change.
The rules are complicated, and there are some sensible exemptions for infrastructure investment. We need to encourage private companies to invest in UK infrastructure, and our regime is not all that generous—we do not give tax relief for large amounts of industrial building, which can have a large infrastructure cost. We should reform those rules, too, to make sure that we have a competitive regime so that, if a multinational company is looking to invest in infrastructure, the UK is the place to do it, not somewhere else for tax purposes.
I welcome the deemed domicile rules that the Minister outlined. People out there who try to understand tax cannot understand why rich people can avoid tax because of where their father was born. We have had that strange historical system since the colonial days. It should be absolutely clear that people who are born here should pay all their taxes here, and people who have lived here for a long time should be paying the same taxes. The idea that a person can move and live here for 40 years, or even be born here, and avoid certain taxes is a ridiculous way of exploiting our tax regime, and I welcome the steps to change that.
Clause 71 introduces the soft drinks levy, about which I have raised concerns in previous debates. I welcome taxes on unhealthy activities, and we have lots of taxes on alcohol and tobacco for sensible reasons. We have an obesity crisis, and it is perfectly right to consider taxes on unhealthy foods and drinks. A sugar tax makes sense, but when a consumer sees a product they want to buy in a supermarket they should be able to see something that says, “This product is so unhealthy for you that it is taxed, so you will pay more for it.” That is how to get behavioural change. Someone walking down the aisles of a major supermarket should think, “A can of full-sugar cola is 10p dearer than Diet Coke because it is unhealthy, so I will buy the Diet Coke.” That should also apply to ridiculously sized portions of cake, to sweets that are very bad for you and to all those other unhealthy things that we eat. We should try to structure a sales tax on unhealthy products to get the behavioural change we want.
There are many reasons why the Government have chosen to go down the route of targeting a particular product, but there is a real danger that the market for cola is so complicated that the consumer might not know that the charge even exists. I happened to be in a supermarket over the weekend looking at the varying prices of cola. I am quoting Tesco because it is my nearest supermarket—I should declare an interest because my wife works there—and I can buy a 2-litre bottle of Tesco own-brand cola for 55p, a 2-litre bottle of Pepsi for £1.25 or a 2-litre bottle of Coke for £1.66, or two for £2.50. We are adding 18p a litre, so how a consumer will know from the varying prices, never mind all the promotions, which of those colas is the bad one and which one they should be avoiding is not entirely clear. Looking at the prices for smaller quantities, a 600-mililitre bottle of Pepsi is 99p, which is about the same as a 2-litre bottle.
Michael Tomlinson (Mid Dorset and North Poole) (Con)
My hon. Friend is making a cogent argument, but does he not welcome the targeted nature of the fund? The levy will go to the Department for Education to help all our children in all our constituencies to have healthier lifestyles. Does he welcome that, even if he has concerns about other aspects?
Nigel Mills
I welcome more funding to help children to be healthy and more funding for sports. I especially welcome the fact that the largest employer in my constituency, Thorntons, as part of the Ferrero group, gives big funding to school sports. More funding for healthy activities for children has to be a good thing. I am a little nervous about hypothecating taxes for individual spending, because there is a real risk that it would lead to a complicated tax system. It is a little like giving with one hand and taking away with the other. I welcome the fact that we are raising such spending, although I would not want to link it directly to a tax.
Jane Ellison
Just to clarify, one reason why the levy is on producers is that we want to drive the reformulation of products. Drawing on my previous role as public health Minister, every study that has ever been done across the world has shown that reformulating products at source is probably the most effective way of helping people to tackle obesity. I have spoken to supermarkets and producers for many months and, in their own research, they are getting the message back from consumers that tackling the problem at source through reformulation is what people want to see.
Nigel Mills
I agree that changing what people consume without their knowing it, and without their having to change their own behaviour, will get the calorie reductions that we want. If that is the argument, I am intrigued about why we are going for the soft drinks industry, which has produced diet brands that use no sugar and contain no calories, and has innovated with things such as Coca-Cola Life that have reduced calories and reduced sugar content by using different sugars. There is a risk that industries that have spent lots of money developing popular products and marketing them will think, “We do all that investment and are still getting clobbered by a levy, whereas other industries that do not do that investment do not have a levy. Perhaps we should not invest and run the risk.”
We can debate this at length, but what we are trying to do is right. The childhood obesity crisis is such that we have to take some measures. I accept that this measure targets something that contributes to that crisis, but as we develop this policy I would like us to have a clear thing that consumers can see in the shop which says, “This is unhealthy, so it will cost you more.” That would be a better way of getting the behavioural change and the change in diets we need, and it is likely to be more effective in the long run.
Kirsty Blackman
I appreciate the point the hon. Gentleman is making and I have a lot of sympathy with his wider point about reducing the consumption of sugary food. His point about making it obvious to people what they are consuming is interesting, and that could be done more widely, in relation not just to soft drinks, but to things such as pasta sauces, which contain a huge amount of sugar but where there is a lack of awareness. One of the biggest things we can do to change behaviour is increase awareness, rather than increasing the cost on all these things.
Nigel Mills
I agree with the hon. Lady about that. The products we should probably be targeting are those people think might be healthy but are not. I may buy a smoothie thinking that it contains lots of fruit so it must be good for me, but it, too, is high in calories. It is not a bad thing to consume that fruit; I need to have it as part of a balanced diet. Certain milk drinks are incredibly bad for people and may be worse than many soft drinks, but I am not entirely clear that the levy applies to those. If we had structured a tax that went on something high in sugar or high in calories, that may have been a way of getting to the outcome we were after.
Lucy Frazer
Does my hon. Friend accept that the provisions will give rise to a public debate, and therefore to public awareness of sugar in drinks? Some people may not have been aware of that before, but they will know about it now.
Nigel Mills
Having a broader debate to raise people’s understanding that a diet cola is much healthier that a full-sugar cola for most people is helpful. I am not sure how much of an impact debates in this place or taxes on producers will have on people’s consumer decisions when they are in the supermarket, as those are probably based on price, promotion and their personal preferences or historical buying habits. However, the Government are right to tackle this issue.
Clause 108 seeks to tighten up the rules on VAT collection from fulfilment businesses. Globalisation has changed how businesses are structured so that people buy from them online. People then avoid paying VAT due in the UK, which is a big weakness. We have a generous turnover threshold. Most countries in Europe do not let people have their first £80,000 of turnover VAT-free—I believe the figure is now £83,000. It is right that we have that exemption, but we need to find ways of stopping people selling things on internet marketplaces and exploiting it, because there is a big revenue leak. This also makes it very hard for UK businesses resident here that are trying to comply with the rules to compete with those internet-based sales where people are not charging VAT on products on which they ought to be charging it. All the measures we can take to ensure that anyone trading here who turns over more than £80,000 has to charge VAT on the things they sell have to be right, and I look forward to seeing how those measures work and what more the Government can do on them.
Clause 120 deals with making tax digital, on which the Minister and I had an exchange earlier. I accept that we have to make tax more digital than it is and we have to get everybody filing returns online. I can see why the Government would want the information much earlier than they are getting it and would seek to remove the errors. Individuals and businesses do not want to make errors and they want to get their tax right. I am not sure how much we help them when we add 762 pages of Finance Bill every year and they have to try to work out how to comply with them. Making tax digital is the right thing to try to do, but I worry that if we rush the smallest businesses into it we will end up with the wrong outcome. I accept that businesses turning over more than £80,000 are probably already filing their VAT quarterly, doing monthly PAYE activities, presumably on a computer, and reporting those, and doing the same thing for auto-enrolment. Those businesses are probably already gathering, just about in the right format, all the information they need, and making these returns should not be unduly onerous for them. In that area, the advantages outweigh the downsides. However, I do worry about ending up with a perverse outcome.
Mr Rees-Mogg
My hon. Friend is slightly glossing over the problems for businesses. Many of them will be paying accountants to make the filings that they are already making and this will be a further cost to them, which will bear down particularly heavily on smaller businesses.
Nigel Mills
Yes, and I was coming to that point about the smaller businesses. I suspect that businesses that are submitting VAT returns have already gathered all their sales data and invoice data, and will have to gather all their payroll data for their PAYE reports, and so most of the stuff they need to do this reporting has already been gathered and looked at coherently. Small businesses may do that only once a year and employ an accountant to do it, so we run the real risk of going from having an annual return prepared by a qualified person who has looked through the information and made it coherent and accurate to having a quarterly statement that the individual tries to do themselves, ending up with much less accurate information being prepared than before. We need to be careful to avoid going from a relatively reliable annual return to an unreliable four-times-a-year situation and unintentionally increasing the errors that HMRC has to look at. Instead of doing this once a year and making sure they have got it right, the risk is that people may choose not to pay an accountant or be unable to afford an accountant to do this four times a year. So there is some merit in thinking about how we phase in this measure for the smallest businesses. We could make the compulsory date a few years further away and encourage people to choose to opt in if they feel they can comply. In that way they would gain advantages from knowing that their tax bill is right and will not be shocked when they get the statement back from HMRC. There are some advantages here, so if we sell this right, businesses will choose to sign up to it and the final compulsion after a few extra years will perhaps not be as big a shock.
Sammy Wilson
Does the hon. Gentleman acknowledge that this may be meant to do away with errors and give businesses an idea of what their tax payments are going to be, but there are end-of-year adjustments—those relating to stock, work in progress, depreciation and so on—which will have an impact on a firm’s tax business? If these things have to be done once a quarter, it adds significantly to the work businesses have to do and therefore to their costs.
Nigel Mills
I agree with the hon. Gentleman that we have to think about how to do the annual adjustments—they have to be made only once—if we move to a quarterly system. A lot of very small businesses are already on simplified accounting methods in any case, so perhaps those issues will not apply to that extent. The Minister reminded me that the Government have been trying to expand on those simplified accounting measures to make things easier for small businesses, and so I hope that some of those issues would not arise.
During the debate on my first Finance Bill as a Member of this House, one of my amendments sought to suggest that we move the corporation tax system much closer to the annual accounts that people submit, rather than having lots of different tax adjustments. Such an approach would be much clearer for business and would create big cost savings. With more of these things, perhaps I will eventually get to that dream I had nearly seven years ago, although I am not entirely optimistic about that. To be fair, we should welcome the fact that the Government have relaxed the timetable for businesses whose turnover is less than the VAT threshold. I welcome that and it has been largely welcomed by most small businesses in my constituency, which did have concerns about this.
As we are dealing with corporation tax and as I was talking about amendments I tabled to the first Finance Bill on which I served, let me say that one of my other amendments sought to allow groups to file one corporation tax return for their whole group, rather than having to file one for every individual entity and then making loads of complicated claims about how losses are moved around the group. This Bill contains restrictions on how many of the losses brought forward from previous years can be used, but we are allowing those losses now to be used right across the group, rather than just in the entity that originally made the loss. That is a welcome change.
As we leave the EU and can finally lay to bed all the worries we had about whether we would have to include all EU companies in a group tax return, if we had one, because it would be discriminatory under EU law to include only UK companies, perhaps now is the time to look, as many other countries have, into allowing groups of companies to file one tax return that shows the profit for the whole group and does not have to track every individual transaction between all the companies. That would help us to tackle some tax avoidance schemes that have played on the different treatment of transactions between companies. It would make it easier to comply and help to tackle avoidance so, as we move through the Brexit process, I hope we can look at those issues that we have previously found difficult.
Suella Fernandes (Fareham) (Con)
Does my hon. Friend agree that the cut in corporation tax from 19% to 17% in 2020 is only going to be good for the economy—the previous cut produced an increase in revenue from corporation tax—and will set Britain out as a favourable place for business and investment as we enter the next phase of our history through Brexit?
Nigel Mills
I absolutely agree: it is important that we continue to send the signal that Britain is a great place to do business and to invest. We want as much international investment here as we can get, so it is absolutely right to have a headline corporation tax rate that is as low as we can have it. I welcome the fact that we are going to get it down to 17%. The previous Chancellor hinted that he might have used 15% to give a sense of direction; perhaps the Government will look into using that in the manifesto we are about to produce.
George Kerevan
Can the hon. Gentleman explain why Germany, which has a much higher headline rate of corporation tax, does so much better industrially?
Nigel Mills
I think I would have had to attend several of the hon. Gentleman’s lectures to understand better how the German economy works, but that is not something I have ever studied. We could probably talk about euro rates and the history of investment in skills and so on, but I suspect it is not all down to corporation tax.
Kevin Foster (Torbay) (Con)
In his consideration, will my hon. Friend, like me, bear in mind the fact that the closest and most comparable jurisdiction in the European Union is Ireland, where the headline rate is around 12.5%?
Nigel Mills
Yes, and Ireland has found that that corporation tax rate has been successful in helping to attract investment. I noticed that throughout all Ireland’s financial crises and its desperate need for tax revenue, that rate was one thing on which it was not prepared to move, which is a sign of how successful it thinks it has been.
Mr Alan Mak (Havant) (Con)
I hope my hon. Friend will join me in sharing the sentiments of our hon. Friend the Member for Fareham (Suella Fernandes) and celebrate the fact that Britain will have the lowest rate of corporation tax in the G20. To come back to the point made by the hon. Member for East Lothian (George Kerevan) comparing Britain to the German economy, does my hon. Friend agree that although the British and German Governments spend a similar amount on research and development—around 28%—the big deficit is actually in private sector investment? If we are going to lead the fourth industrial revolution, which will be important to ensuring that our economy is strong, we need to get the private sector to invest. That is what the Bill will do.
Nigel Mills
I agree with those sentiments. If we are going to get into a debate about the German economic model, though, I should probably step out of the middle of it because it is not an area I have ever looked at.
There is a clause in the Bill on the Northern Ireland corporation tax and how we will make the lower rate there work. This is probably my chance to sneak in a remark, Mr Deputy Speaker: I hope we can get an Executive formed in Northern Ireland so that they can take the decision to have a lower rate of corporation tax. I suspect we probably do not need to rush that clause through the wrap-up, given the current situation, although I guess it is not controversial in Northern Ireland.
Sammy Wilson
Does the hon. Gentleman accept that there will be great disappointment in Northern Ireland that because of Sinn Féin’s insistence on unrealistic demands, there will not be an Executive in the near future, meaning that Northern Ireland’s ability to reduce corporation tax, which was a key part of the economic strategy, will be removed from the Executive?
Nigel Mills
I do agree: it is regrettable that the inability to form an Executive means that it looks like a power that was long campaigned for will not be used on the timetable it should be. We have seen how important it is for the Northern Ireland economy to have a rate that matches that of the Republic of Ireland so that it can compete on attracting investment. Many issues will get lost in the upcoming general election, but I hope that the need for Northern Ireland to find a way forward is not one that we take our attention off for the next six or seven weeks.
I think it was to last year’s Finance Bill that the Government accepted an amendment to introduce territory-by-territory reporting for all large corporates as part of their annual tax strategy. When the Minister sums up, will she update the House on the timetable? When might that power be turned on so that we can start to see those reports?
I welcome the measures in the Bill to encourage social investment by increasing tax relief but making sure that it is focused on the right things and is not subject to avoidance. I recently heard that a group of residents in Holbrook had managed to raise the funds to buy a local pub that faced being knocked down and turned into housing, by getting 250 or so people to buy shares in the new business. That is a real example of what a community can do to save a valued asset and I pay tribute to their success.
I wish to touch briefly on air passenger duty. I do not want to revisit the whole debate—I accept that we need it to raise revenue—but I just wonder whether, as we leave the European Union and some of the restrictions on how we can regionalise taxes drop away, the Government will be prepared to look at measures to encourage new routes into regional airports. That would help to tackle the congestion and air quality in London, and it would help the economy outside London by providing direct routes to the high-growth parts of the world. I wonder whether it is possible to produce a scheme in which we have either lower rates of APD on routes into regional airports, including East Midlands airport near my constituency, or lower APD for a new route for a certain time period—perhaps three or five years—to enable such a route to become viable. Such measures would not have the big revenue hit that they would have on all the London airports, and would target the money that we can spend on getting the vital regional growth that would help the regions of England outside London. As APD is a devolved tax, if Scotland chooses to have a lower APD rate in future, we may see some interesting tax competition if airports in the north of England feel the need to respond.
Overall, I welcome the Bill. It contains many important measures that will help to protect our tax base and tackle avoidance—which we all want—and help the economy to grow. It is an important Bill and I hope its provisions will survive the discussions over the next few days.
Sammy Wilson
The hon. Gentleman quite rightly mentions tax avoidance. Does he accept that although there are measures in the Bill on tax avoidance, given that the tax gap is nearly £40 billion but the Government’s target is to collect £5 billion more between now and 2020, the issue is not being taken seriously? There will be frustration that rich companies will still be able to walk away with very low tax bills.
Nigel Mills
I was nearly finished, but the hon. Gentleman invites me into a debate on the tax gap. I do not have the numbers to hand, but it is important to understand what makes up the tax gap. Tax avoidance by large corporates is actually a relatively small part of it. From memory, the largest part is due to people who operate in the black market and do not pay VAT or declare their tax. Another large part is down to errors or mistakes by small businesses or individuals. It is right that the Government should bear down on all those aspects, but I do not think it is possible to get the tax gap down to zero—it would involve some kind of ridiculously heavy compliance burden. We could probably get there only by having zero tax rates or zero economic activity, so there will always be some level of tax that we cannot collect, but the measures that the Government have taken progressively over the past seven years to tackle aggressive tax avoidance have been the right ones. We have the general anti-abuse rule, which we are trying to tighten up in the Bill. When that gets to its five-year anniversary, I look forward to seeing whether we can change our strategy on targeted abuse rules, whether we might not need to have quite so many individual anti-avoidance rules, and whether we can rely on the general one.
Although we have discussed Making Tax Digital, a key part of reducing the tax gap is making businesses report and be more compliant on a more regular basis. We must press on with that and make it work, but we do not want to risk going too far. There are more measures that we could try to take to encourage people not to pay cash in hand to avoid paying VAT. It is very hard for an individual to know whether the person cutting their hedge or driving their taxi is tax registered. Perhaps we should have some kind of registration process so that a person can say, “I want to engage people who are fully tax compliant. If you can show me that you are, I will happily hire you. If you can’t, perhaps I will hire someone else.”
Mr Mak
My hon. Friend is making a very good speech about the changing nature of the economy, particularly in relation to the rise of the gig economy. Will he join me in welcoming the review by Matthew Taylor about how we can tax both the individuals and the companies operating in the gig economy to make sure that we strike that fair balance between taxation and innovation in our economy and our employment market?
Nigel Mills
Yes, I happily welcome that review. That has become an emerging issue that we need to tackle. It will probably blow up in the national insurance debate. I welcome the measures in this Bill, which propose that where the public sector engages with individuals who try to incorporate themselves, those individuals will not get the tax advantages. That has to be right. We need to find a way of doing that for very high paid individuals outside the public sector who try to do that. We need to ensure that they are taxed on that income in a way that the tax system intends, and not allow them to get an advantage through the corporation tax system. I accept that the reduction in the dividend relief that was announced in the Budget was the right thing to do. As we see our employment market changing, we need to ensure that the tax system is not encouraging unscrupulous employers to try to pretend that their employees are self-employed in order to get a tax advantage for themselves, leaving those individuals in a far worse situation without the security of being employed and without the rights to welfare, holiday, sick and maternity pay to which they are entitled. That review will be very important in enabling us to strike the right balance and to encourage people who are genuinely self-employed and taking risks. I accept that we should have a lower tax rate for people who do that. How we get our tax rules to match the changing way that people work will be extremely important, and that review will have an essential role to play.
I will wrap up my contribution by saying that I welcome this Bill and that, whatever passage it has, I wish it well.
Stewart Hosie (Dundee East) (SNP)
I beg to move an amendment, to leave out from “That” to the end of the Question and add:
“this House declines to give the Finance (No. 2) Bill a Second Reading because it derives from the 2017 Budget which confirmed the continuation of austerity, it fails to provide the necessary stimulus to compensate for the economic impact of Brexit, it fails to address the inequity of VAT being charged on the Scottish Police Authority and the Scottish Fire and Rescue Service, it fails to provide concrete measures to support the oil and gas industry, it increases Insurance Premium Tax above the level of inflation, it increases duty on Scotch whisky, and it is a wholly inadequate response to the economic challenges being faced by Scotland and the UK.”
We oppose this Finance Bill—well, someone has to—not so much because of what it does but because of what it does not do. Let me take as an example the inequity of Scotland’s police and fire and rescue authorities paying VAT. It is a long-standing problem, and this Government could and should have taken the opportunity of this Finance Bill to rectify it, but they did not. In the Budget, there was at least a recognition of the problems faced by Scotland’s oil and gas sector, but no specific measures were announced—just another options paper, which was effectively announced last year. This Finance Bill should have been the opportunity to make concrete proposals for UK content and for oil exploration and decommissioning allowances to ensure that the sector continues to thrive, to flourish and to provide substantial tax yields for decades, but of course it does not. It does, however, put up the duty on Scotch whisky, and increase insurance premium tax again by 20%, which is way above the rate of inflation. Effectively, the Bill treats the Scotch whisky industry and the insurance sector as cash cows for the Treasury.
Having said that, we do welcome some of the measures in the Bill, particularly those that are intended to clamp down on tax avoidance and evasion. I welcome what the Minister said about restricting the use of past losses, disguised remuneration, the initial penalties for tax avoidance enablers, and the removal of the permanent non-dom status. However, it is hard to see how this Bill will assist in any substantial way to address the long-term UK challenge of improving productivity or even helping to make society a little less unequal, which is vital to unlocking our growth potential. That is particularly the case when one considers that alongside this Finance Bill are a set of welfare proposals that do not support inclusive growth but, rather, drive a coach and horses through it. They include the cut of £30 a week to employment and support allowance for claimants placed in the work-related activity group; a 55% cut in the rate of ESA for disabled people under the age of 25; the freezing of the lower disabled child element of universal credit; and the changes for full-time students who receive disability living allowance or personal independence payments who are now not treated as having limited capability for work and are therefore not entitled to universal credit until they have been assessed, which means that they face long delays without support.
I do not want to digress too far from the Bill, but delivering those cuts when disabled people and those on low to middle incomes are already facing a barrage of cuts from this Government is a disgrace. Moreover, those cuts not only fly in the face of the Tory party’s last manifesto commitment to help more disabled people into the workplace—something that is vital—but undermine the essential drive for real inclusive growth, which is vital if we are to grow the economy and maximise our potential.
Rebecca Pow (Taunton Deane) (Con)
I just want to point out that, under the Scotland Act 2016, we are devolving benefits worth £2.8 billion to the Scottish Parliament. That is almost a fifth of Scottish spending. It would be really interesting to hear what the hon. Gentleman thinks about that. Indeed, he could even welcome the fact that this Government have created such a strong economy that Scotland is able to have that much money gifted to it.
Stewart Hosie
I am sure that the Scottish people will be delighted to hear that the hon. Lady thinks that somehow they do not pay taxes and that they are dependent on the largesse of ladies like her to fund our welfare system. We have had a very small amount of welfare devolved. If she wants to make such a contribution, she can read out the rest of the Whips’ briefing note when she catches your eye later, Mr Deputy Speaker. [Interruption.] The Tories can groan all they like, but they have called a snap election, and on the same day we are debating the Finance Bill.
In this Bill, the Minister wishes to reduce the dividend nil rate from 2018-19 from £5,000 to £2,000. I will listen carefully in the next 10 days or so to what the Government say about that. Perhaps they can prove that only very wealthy people benefit from that allowance and that it may be a reasonable change. Equally, it may be the case that many small and start-up business owners depend on that money to tide them over and that the measure will be nothing more than a tax on enterprise—a disincentive to start a business, to create jobs and to power local economies.
I did find it slightly jarring when the Minister explained that wealthy people could put lots more money in individual savings accounts. That is fantastic news for people who are already wealthy: they can save tax free. Let us juxtapose that with a change to the dividend nil rate from a modest £5,000 down to £2,000, which might act as a disincentive to people who genuinely want to start a business, while allowing already wealthy people to save tax free. That might be the kind of error we would have seen under the old fiscal charter and its requirement to run a permanent surplus quickly, almost irrespective of the economic conditions. However, the new fiscal charter is more flexible than the last one, which should make such a measure unnecessary. The Government are still targeting a surplus early in the next Parliament. Let us see how early it is in the next, next Parliament.
Again, without digressing too far, the numbers and the timescale for even a modest surplus within four or five years look precarious. The forecasts for a current account surplus are tiny, not even reaching 1.5% of GDP. If there is any external shock or capital flight if sterling suffers further devaluation, which is quite likely if the Brexit negotiations go wrong—again, highly possible—the figures could fall apart very quickly indeed.
At its heart, this is a Finance Bill delivered with the pretence that the hard Tory Brexit is not happening. It sits in splendid isolation from reality. We cannot assess whether it will assist with the challenges that lie ahead. We cannot even assess properly what the consequences of the limited measures in it will be, because the Office for Budget Responsibility told us about Brexit at the Budget:
“There is no meaningful basis for predicting the precise end-point of the negotiations as the basis for our forecast.”
In short, this Finance Bill, like the 2017 Budget, is effectively based on a central assumption that pretends that Brexit does not exist. That is a ridiculous thing to do, given that article 50 has already been triggered.
Mr Rees-Mogg
The hon. Gentleman quotes the OBR, which was one of the few forecasters that was responsible enough a year ago not to make wild assumptions about what Brexit would mean. Most of the other forecasters thought they knew what would happen and got it comprehensively wrong. It shows prudence, caution and common sense not to try to forecast that which is essentially unknowable.
Stewart Hosie
I think the hon. Gentleman has been on record attacking the OBR for its forecasts. If he has not, I apologise, but I am sure that many of his colleagues have. No one seriously suggested that on day one or in week one, month one or even year one, even before the negotiations were complete, Brexit would result in any kind of catastrophe, reduction in GDP or other such thing. The real danger is for the medium and long term. As the hon. Gentleman brings it up, let us remember what some of the forecasts said. The Treasury itself said that we could lose up to £66 billion from a hard Brexit, and that GDP could fall by about 10% if the UK reverted to World Trade Organisation rules, which echoed the Chair of the Treasury Committee and other assessments. The London School of Economics said:
“In the long run, reduced trade lowers productivity”—
a huge problem for the UK—which
“increases the cost of Brexit to a loss of between 6.5% and 9.5% of GDP.”
It put a range of figures on those costs of between £4,500 and £6,500 per household.
There are other assessments from the Fraser of Allander Institute, from the FTSE 500 senior executives and from the British Chambers of Commerce. The hon. Member for North East Somerset (Mr Rees-Mogg) may not believe those assessments. Some of them may not come to pass, but given that the warnings are very real and credible, one would have imagined that they would instruct a far bolder Finance Bill. That is the point that I was trying to make.
Mr Rees-Mogg
The point I was trying to make was that we have had incredibly wrong forecasts from all these illustrious bodies. The hon. Gentleman was only wrong on the OBR. I criticised lots and lots of bodies; the OBR was the one I singled out for not being so foolish as to make erroneous forecasts. The Treasury, the International Monetary Fund and the Bank of England all said that the day we left there would be Armageddon and we would have a punishment Budget. This turned out to be nonsense, and it is much wiser of the current Chancellor to avoid foolish speculation.
Stewart Hosie
I do not want foolish speculation; nor do I want rose-tinted spectacles or ostrich heads in sand. There are very credible warnings of what Brexit might deliver. If the Government fail to mitigate the risks, they fail the people, and that is incredibly important.
To be fair to the Chancellor, in terms of what mitigation measures he could take and has taken, last autumn he announced additional support for capital investment and research and development; and he has since reiterated some of his R and D statements and put some more flesh on the bones of investment. However, the figures from the last autumn statement show that public sector net investment falls in 2017-18, and presumably 2018-19, depending on what happens after the 8 June election. The figures announced only a few months ago for public sector gross investment show them falling again this year, compared with the forecast made last winter, and not increasing again until 2020 or beyond. We would argue that money should have been allocated, and the Finance Bill should have reflected this, to mitigate the damage that we and many others believe is likely as a result of a hard Tory Brexit.
Of course it is not all about Brexit. Nor is it about reminding the House—I will not do it today—of the failures and broken promises on debt, deficit and borrowing. It is not even about repeating the mistakes of the past on investment. We are now in such uncertain times that in order to protect jobs, to protect yield and to protect the current account, trade should be front and centre, but little was said about that today and there was nothing in the Finance Bill that would assist in that regard.
The Budget Red Book tells us already that the current account is in negative territory for the entire forecast period. The impact of net trade will be zero or a drag on GDP growth, without the impact of Brexit, for almost every year of the forecast period in the Budget. That is after a near 15% devaluation in sterling since the referendum. More should have been done, and it should have been done in this Finance Bill.
My hon. Friend the Member for East Lothian (George Kerevan) intervened earlier on how growth will be generated. It is forecast to be based on heroic levels of business investment after the uncertainty of Brexit ends, which we do not believe will be any time soon. It will be propped up by household consumption with a commensurate rise in household indebtedness; by central Government investment, which I welcome; and by fixed investment in private dwellings, but house price rises are forecast to be two or three times the rate of already rising inflation. That is not a balanced recovery, and there is nothing in the Finance Bill that would assist in balancing it.
However, the issue of trade is most worrying. The figures are clear, notwithstanding one quarter’s blip in either direction. The last full years for which we have figures saw the current account £80 billion in the red, and a deficit in the trade in goods of over £120 billion. Nothing in the Finance Bill today would assist businesses to trade in a way that would even begin to shrink or erode those deficits.
This is a thin debate today because of other announcements, so I will conclude by saying what I said at the start. We will oppose this Bill—not so much for what it contains as for what is missing. We will do so because, like the Budget that drives this Bill, it is wilfully blind to the damage that Brexit will do, and in our view it is a completely inadequate response to the challenges that the economy will face.
Dr James Davies (Vale of Clwyd) (Con)
It is a pleasure to be called to speak in support of this Finance Bill. As a whole, it is a Bill that prioritises economic stability, and there is much to welcome in it. My constituents will be pleased at the further increase in income tax thresholds.
I want to talk about the soft drinks industry levy, which appears in part 3, clauses 71 to 107. This was announced in the Budget a year ago, and it was reconfirmed in the childhood obesity plan last summer. At this point, I should declare an interest in that I devoured a very large Easter egg in recent days, but leaving that aside, I will get back on track to welcome the levy wholeheartedly as one lever in tackling obesity.
There is no single silver bullet to tackle the obesity crisis in the UK and in the west in general, but the levy is a necessary part of a package of measures to begin to tackle it. I have reached that clear conclusion through membership of the Select Committee on Health. I admit that if I had been asked about a sugar tax a year or so ago, I might have been somewhat uncertain, and it is clear that there is some uncertainty among hon. Members here today. I hope to convince some of those with lingering doubts to ensure that the provisions pass without further amendment.
Obesity affects about a quarter of adults in the UK, and it is estimated that it may affect up to 70% of us by 2050. One startling fact is that obese children are five times more likely to become obese adults, so there is a clear need to tackle childhood obesity.
Alison Thewliss (Glasgow Central) (SNP)
I am glad to hear that the hon. Gentleman supports the sugar tax. Does he agree, though, that the obesity strategy really does not go far enough because it does not start until children are older than two? Bad habits could already have been formed by that stage. Does he support an increase in the scope of the policy?
Dr Davies
It is true that the Health Committee—myself included—has called for additional measures, but the plan as it stands is certainly a step in the right direction. I will come to further points in due course.
One in five children starting primary school is overweight. By the end of primary school, it is one in three—quite a striking figure. The inequality between communities is also striking. Some 60% of five to 11-year-olds in the poorest neighbourhoods are obese; the figure reduces to just 16% in the most affluent areas. That translates into regional variation.
Kevin Foster
My hon. Friend is making an important point about the fact that there is a higher growth in obesity rates among those from the most deprived backgrounds. People who live on one side of a particular hill in Torquay live for 13 years longer on average than those who live on the other side. Does he share my concern that those sorts of stats could get worse?
Dr Davies
Indeed. I strongly believe that the measures outlined in the Bill go some way to tackling that situation.
Perhaps the main health effect of obesity among children is tooth decay. It is the main source of hospital admissions for five to nine-year-olds, with some 26,000 admissions, probably in England alone, and 179,000 teeth—if not more—extracted among the age group each year. Some 25% of children in the age group have tooth decay, and 90% of those cases are estimated to be preventable. Of course, sugar is a key cause of the problem. As for older children, 46% of 15-year-olds have tooth decay, and £129 million was spent on the extraction of teeth in under-18s between 2012 and 2016.
The impact of obesity on adults is even more concerning with tooth decay and, in no particular order, type 2 diabetes mellitus, cardiovascular disease, gastro-oesophageal reflux disease, gallstones, osteoarthritis, sleep apnoea, infertility, pregnancy problems, mental health problems, liver and kidney disease, and—last but certainly not least—cancer. At least 13 types of cancer have been implicated with obesity. In fact, obesity is thought to be the biggest cause of preventable cancer after smoking. More than 18,100 cases of cancer in the UK per year are estimated to be thanks to obesity. Those types of cancer include some well-known ones such as breast, bowel, endometrial, oesophageal and pancreatic. There is an impact on the NHS of an estimated £5.1 billion per annum, and a cost to the economy in general—£27 billion a year down to lost productivity, unemployment, early retirement and welfare benefits.
It is vital that we recognise the extent of the problem posed to the health and wellbeing of ever-rising numbers of people by the obesity crisis. How should we target this? Well, it is believed that there is a genetic susceptibility to obesity. That is not to say that all obesity is down to genetics, but it is thought that the inheritance of several genes—polygenic susceptibility—leads some to an increased drive to eat. Much has been said over the past decades about personal responsibility, education and exercise. Education and exercise do have an important place, but the reality is that they have not succeeded as the main way to target the problem.
We have an issue with more sedentary lifestyles and an obesogenic environment, whereby unhealthy, high-calorie foods are so easily available around us. Calorie intake sadly overwhelms most people’s efforts to exercise those calories off. Personal responsibility certainly drives many—perhaps those with the intellectual and financial resources to follow the path to deal with the problems they face —but it is not easy. In any case, children cannot be expected to exercise personal responsibility, because they do not have their own freedom of choice. Various measures are important in tackling the crisis, including reformulation targets by Public Health England and others, which will reduce sugar, fat, calories and so on in the foods that children eat.
Advertising is also important. Advertising restrictions have recently been expanded from television to other media such as social media and advergames, but more could be done if necessary. Labelling is important, and Brexit offers an opportunity in more flexibility in labelling our products. Promotions and discounts in supermarkets and elsewhere are critical. The issue of local authorities’ planning powers for takeaways and so on has been mentioned on a number of occasions.
Rishi Sunak (Richmond (Yorks)) (Con)
My hon. Friend makes an excellent point about the freedom for better labelling after we leave the European Union. Does he agree that one sector that could benefit from that is the dairy sector and dairy farming? Those products could have better country of origin labelling, which would help British shoppers to choose British dairy products and support British farmers.
Dr Davies
That is a very good point. A point has also been made about the flexibility to include information on labels such as the number of teaspoons of sugar in a product, which we are currently unable to do. A wide range of benefits could arise, which is interesting.
The soft drinks industry levy has a key role. Soft drinks are the biggest source of dietary sugar for children, but they contain little, if any, dietary benefit. Five-year-olds are believed to consume their own weight in sugar per year, and four to 10-year-olds each consume half a bathtub of sugary drinks per year. That is food for thought. The Scientific Advisory Committee on Nutrition and the World Health Organisation advise that free sugars should comprise less than 5% of daily energy intake; yet the estimated intake among our children is two to three times that figure.
The proposed mechanisms of the levy relate to producers and importers of packaged soft drinks with added sugar. The levy is designed primarily to encourage reformulation, as has been mentioned. The implementation date of April next year gives manufacturers time to pursue reformulation, and many have been doing an excellent job in achieving that. The levy drives manufacturers to reduce portion sizes and to market their low-sugar alternatives. It will be tiered, whereby 18p per litre is levied when the total sugar content of the drink exceeds 5 grams per 100 ml, and 24p per litre is levied when the total sugar content exceeds 8 grams per 100 ml. According to my mathematics, that is about 6p to 8p per can of drink. The levy will apply to drinks as ready-prepared or diluted as directed on the packaging.
The hope is that the levy will be passed on to consumers in the same proportion as applied. In other words, there will be no cross-subsidy. One concern raised by the Health Committee was that low or zero-sugar drinks might end up picking up some of the extra costs levied on manufacturers by their sugary alternatives. If that were to take place, it would be a missed opportunity to maximise the positive impact of the levy.
Mr Mak
My hon. Friend is making an excellent speech based on his personal knowledge and work as a medical doctor. Will he join me in encouraging children’s charities, such as Magic Breakfast, that play an important role in educating children about health eating and the avoidance of too many sugary drinks to redouble their efforts, and to use the sugar levy as a catalyst to do more work in the area?
Dr Davies
I will indeed. I will come on to the positive impact that the potential introduction of the levy has had on the general debate on sugar and obesity.
Coming back to the idea of cross-subsidy in terms of the cost of drinks, we, as a Government, should keep an open mind as to whether that needs to be regulated. The levy excludes fruit, vegetables and milk as a form of added sugar. It also excludes baby formulas, drinks for medicinal and dietary purposes, drinks comprising 75% or more milk, and small producers of under 1 million litres of beverage per year. The revenue raised is due to double the funding for PE, sport and breakfast clubs. It is expected that £1 billion will pass to the Department for Education for this purpose, with, of course, equivalent sums being passed to the devolved nations as per the Barnett formula.
The important thing to note is that, with successful reformulation, companies will pay no additional tax. It has been a mark of the success of the progress made with this policy that reformulation is already taking place, and it is therefore expected that in fact £1 billion will not be raised. I praise the Chancellor of the Exchequer for confirming that he will nevertheless pass on the full £1 billion in this Parliament for the purposes identified. Reformulation is possible—companies are already showing that. There has been success in the past with reformulation of products as to the amount of salt they contain. I mentioned before that this whole debate is causing a discussion throughout our nation about obesity and sugar, and that has to be a good thing. I hope that even this debate will help to further that.
Will such a policy work? There is no direct comparison, but in Mexico when a tax of roughly 10% was levied, it led to a 12% reduction in sugar intake, and in Hungary a 40% tax led to manufacturers reducing sugar content. A 2016 modelling study suggested that thanks to the levy 144,000 adults and children would be saved from obesity each year; that 19,000 would be saved from diabetes mellitus; and that the number of decayed teeth—270,000—would be reduced. We have certainly seen some tentative support among the public. I truly believe that in view of the scale and consequences of the obesity crisis, we do not have the luxury of time to make excuses. We can lead the world in this area and create evidence that other countries can then use and follow.
Matt Warman (Boston and Skegness) (Con)
Does my hon. Friend agree that this is an example of measuring success in terms not of the revenue raised but the behaviour that we change, and that the evidence that he talks about will not only change behaviour but genuinely change people’s lives in all our constituencies?
Dr Davies
My hon. Friend makes a good point. This is about how people live their lives in the foods and drinks they choose to consume and the way they look at their diet in general.
I would like to address a couple of criticisms raised by some. First, is this policy an example of the nanny state? I would argue that we use the tax system to influence behaviour and always have done. The Government have a duty of care to address important public health issues, as we do with tobacco and alcohol. As I said, freedom of choice is limited with regard to children, because they are not in a position to exercise freedom of choice. We live in a world that is skewed against our health interests; choice over healthy options can be difficult to come by as we are continually surrounded by unhealthy products. I would go so far as to suggest that some reduction of choice in sugary drinks on our shelves is a price worth paying to deal with the crisis that we face. I support the use of the tax system to support public health endeavours such as this one.
The second criticism is, “Is this just an extra tax, is it an attack on jobs, and is it regressive?” The tax can be avoided if products are reformulated or if existing sugar-free options are promoted. I would therefore argue that jobs in our food and drink sector should be safe. In fact, our food and drink sector can thrive if it can show the world how to tackle this agenda successfully. It is not a regressive measure either. The health gains are the biggest for those on low incomes, and sugar-free options are available which, we hope, will cost no more than they currently cost.
I support the soft drinks industry levy as a small but necessary part of the fight against childhood obesity.
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
As a consultant paediatrician I have seen and treated a number of children with obesity and seen the health consequences of this growing problem. Does my hon. Friend agree that this tax is a useful part of the Government’s programme but only part of a much wider programme to tackle obesity, and that education will ultimately be the major part?
Dr Davies
Yes. The levy is a bold and brave move, but it is only a small part of the efforts we need to make to tackle this problem. Unless we tackle it from a multitude of directions with a number of different strategies, we will not make progress. There is no one silver bullet.
We need to monitor and evaluate the impact of a levy over the coming year and beyond. I understand that secondary legislation had been due this spring. I am not sure whether that has been slightly delayed following today’s announcement, but it will no doubt follow in time for the levy to be applied from April next year. As a GP, a member of the Health Committee and a father of two young children, I will be following this topic with great interest.
Steve McCabe (Birmingham, Selly Oak) (Lab)
I want to follow the hon. Member for Vale of Clwyd (Dr Davies) in addressing my remarks to part 3 of the Bill and the chargeable soft drinks levy.
I was struck by the Minister’s comments about the Government’s remarkable record on borrowing. I wonder whether she has had an opportunity to look at the work of Professor Richard Murphy of the University of London, who has done a rather extensive comparative study of Labour and Conservative Governments over a 70-year period, which shows quite clearly that Labour in office always, on average, borrows less than the Conservatives, and always pays back more while in office. That is not quite the impression that the Minister may have tried to convey.
Mr Rees-Mogg
That is because Labour always inherits a wonderful financial situation from the Conservatives and we always inherit a mess from it.
Steve McCabe
Yes, of course that is the hon. Gentleman’s belief. However, if we go back in history, I seem to recall Tory Chancellors singing in the bath as the pound collapsed and we were jettisoned from the ERM. I seem to recall crisis after crisis, including one Tory Chancellor who left a note saying, “I’m sorry I’ve made such a mess of it, old chap.” I do not think it is quite as the hon. Gentleman remembers. I would say that the Minister’s claims on borrowing are about as reliable as the Chancellor’s reputation for competence proved after the shambles of his Budget.
Like many others, I would like to know what bad news is coming down the line. Why is it, after five public refusals to call a general election—after assurance after assurance that there would be no election before 2020—that the Prime Minister now needs one? What does she know that the rest of us do not know? I suspect that what she knows is that the NHS is in chaos, our schools are in chaos, the Brexit talks are in chaos, and the economy is heading for the doldrums. That is what I suspect is happening. [Interruption.] I think the hon. Member for Peterborough (Mr Jackson) would like to rise and say that for the benefit of Hansard.
Mr Stewart Jackson (Peterborough) (Con)
I am inordinately fond of the hon. Gentleman, but we have heard this—“24 hours to save the NHS”—so many times for the past 20 years. It is a fact that the Conservative party spends more on the NHS, is more committed to the NHS, and delivers better patient care than Labour has ever done.
Steve McCabe
The hon. Gentleman may be reading from one of those notes that the Whips have been passing around, but I have not got around to mentioning the NHS yet. I will come to it.
I want to comment on the points made by the hon. Member for Vale of Clwyd. I agree that high-sugar diets are associated with a large number of serious conditions, including tooth decay, cardiovascular disease and type 2 diabetes. I will not repeat the figures, but I am grateful to him for giving the stats for five to nine-year-olds and for saying that such diets are the leading cause of hospital admissions for that age group. Of course, that imposes a considerable cost on our already overstretched NHS. He also rightly said that sugar is a leading cause of tooth decay for 15-year-olds, whose permanent teeth are being damaged. That is all preventable, as he said.
I think we are agreed that excessive sugar consumption is the main cause of tooth decay, so in principle I am in favour of a soft drinks levy. However, I am worried that it is an isolated policy and that it will fail to bring about the lasting change we hope for in the consumption habits of the public.
The hon. Gentleman gave the example of Mexico. If he looks carefully at what actually happened, however, he will see that, after an initial dip in sales of soft drinks, they subsequently rose and are now slightly higher than their pre-tax levels. The risk of such an isolated policy is that it may not have the long-lasting effect we seek. Indeed, it is debatable whether there is any robust evidence that an isolated levy on soft drinks will actually reduce the prevalence of any of the health conditions associated with high-sugar diets.
Jane Ellison
I am happy to comment on a couple of things. First, the provision is designed slightly differently from the Mexican initiative and others around the world. It is deliberately a producer levy, to drive reformulation of product. Secondly, to recap what I said in my opening speech, it is not happening in isolation. I entirely agree that it would not be enough in isolation, but it sits alongside a very ambitious body of work, not least in relation to reformulation across a range of different food groups, particularly those focused on children’s diets, on which Public Health England will lead over the next few years, working closely with manufacturers.
Steve McCabe
I am grateful to the Minister. Obviously, we cannot cite Mexico as evidence in favour of the policy and then dismiss it when there is contrary evidence. That was the point I was making. I do not disagree with some of the stuff for which she is arguing, but I and a lot of other people want a broader public health approach. We need to do a bit more to promote healthy eating and improve awareness of the risks associated with unhealthy diets.
I ask the Minister to think again about an industry comprehensive code, because that might be much better and enforceable. If that was to work in conjunction with a soft drinks levy, it might make a much more significant difference. The obesity strategy has been mentioned, but the truth is that most people were pretty disappointed with it when it came out. I remember her in her previous incarnation being much more optimistic about it than appears to be the case now.
With the NHS—this is for the benefit of the hon. Member for Peterborough—significantly extending waiting times for those needing operations for hip and knee replacements, and in the absence of any announcement of additional funding for the NHS, and with the Government continuing, as we have just heard, not to recognise that a funding crisis is engulfing the NHS, the need for a comprehensive set of preventive health measures to complement any soft drinks levy has become all the more pressing. I simply make the point that a tax to plug a hole in yet another failed Tory Budget simply will not be enough. We all know how we arrived at this tax, but it will not be enough by itself.
I do not know how much of this Bill will ever see the light of day, but I do know that it does not address the funding crisis in our schools and our NHS; the impact of cuts in policing, which are now resulting in predicted rises in crime; or the sense in my constituency of Selly Oak that, when it comes to fairness and those who are just about managing, this Government’s economic plans and other policies do not help them. With unemployment in Selly Oak at 4.5%, against 2.4% nationally, this Government simply are not working for Selly Oak.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
It is a great pleasure to follow the hon. Member for Birmingham, Selly Oak (Steve McCabe) and to join in this discussion on the great subject of sugar. While listening to my hon. Friend the Member for Vale of Clwyd (Dr Davies), who told us the extraordinary fact that an average five-year-old eats his own body weight in sugar during the course of a year, I considered my own children. I do not have a five-year-old—I have a six-year-old, a four-year-old and lots of others—but the six-year-old weighs 3 stone, which seems to me to be similar to the weight likely to apply to five-year-olds. That is 42 lb, or 672 oz, so if a five-year-old is eating his own body weight in sugar in a year, he is eating 1.84 oz of sugar a day, which is equivalent to 11 teaspoons of sugar. One thinks of the lines of Mary Poppins:
“Just a spoonful of sugar helps the medicine go down”,
and one wonders whether the medicine goes down even better after 11 spoonfuls of sugar.
In spite of thinking that 11 teaspoons of sugar is quite a lot, I am not in favour of sugar taxes, because I do not think it is the job of the Government to tell me how much sugar to give to my children. I think that is a matter for parents to decide for themselves, and the tax system should be there to raise the revenue the country needs to pay its way. The tax system is not there to tell us how to live our lives. There may be an exception with tobacco, but that is not really the case with alcohol, which is a matter of raising revenue. Our rates on alcohol work very well in raising revenue, as, incidentally, do those on tobacco, which is a serious generator of funds for the Treasury to pay its way.
I am sceptical about the proposed approach. I was struck by my hon. Friend’s comments that a lot of obesity is in fact genetic. If that is the case, we are penalising people who have a genetic propensity to obesity while it is fine for people like me.
Mr Rees-Mogg
I give way to another hon. Gentleman for whom it is fine to eat lots of sugar.
George Kerevan
Indeed, I had a fine East Lothian Easter egg. Does the hon. Gentleman accept that the difficulty with the hands-off approach he suggests, leaving it entirely to the individual, is that there is a vast advertising industry that also influences consumer behaviour and that using a sin tax is a way of evening out that process?
Mr Rees-Mogg
There is indeed an advertising industry, but we live in a free country and people ought to be able to advertise products. We have a lot of misinformation, have we not? We now learn that fat is not as bad for people as it was said to be, and that people have put sugar into products from which they have removed the fat in order to make them taste nicer because fat-free products without sugar taste disgusting. Advice that turned out to be wrong has led to manufacturers doing things that then turn out to be unhealthy. I am suspicious of the advice that comes from Government and their ability to get it right. If they end up getting it wrong, force us to change our behaviour and tax us, we get the worst of all possible worlds.
A little bit of sugar does nobody any harm at all—only taking it to excess does so—and the only justification, which has indeed been made, is for children. However, I think that ignores the responsibility of parents, most of whom are responsible, and puts up the cost for responsible parents of giving their children what may, in many households, be an occasional treat rather than a regular habit. It is a tax that falls hardest on the poorest in society, who may occasionally be giving their children something that they like, because of the excesses of others. I do not really think that that is the job of the Government.
That leads me to the issue of hypothecated taxation. Ministers should write out 100 times a day, “Hypothecation is a bad idea.” That has been the Treasury orthodoxy for as long as there has been a Treasury. Hypothecated tax does not work because it produces the wrong amount of money for what it is seeking. We see that with the prospect of putting money from the sugar tax into schools. We now discover that not enough money is likely to come from the sugar tax to meet the obligations given to schools, and that money will therefore have to come out of general taxation.
If it were a good idea to put the money into schools in the first place, it ought to have come out of general taxation in the normal way. If it was not a good idea, but just a clever way of spending the money, taxpayers’ money should not have been used. If we get into the position that something is now being done that did not need to be done because it was promised as money from a tax that has not arisen, that is not a good way of carrying out Government policy. All hypothecation of taxation should be struck off: it simply leads to the wrong amounts.
That leads me to the broader point I want to make about this Finance Bill and the Budget that preceded it. It is very good news that an election has been called, because the Budget has become so hemmed in by the number of promises on taxation and revenue expenditure that have quite rightly been kept. Governments ought to keep their promises, and this Government have been absolutely rigorous in doing so, even ones that I do not like. For instance, I am not in favour of the 0.7% going on overseas aid, which I think has been a wasteful and extravagant promise when money is needed elsewhere. However, the justification was that it was in our manifesto, and in manifestos parties make a pact with the electorate that they ought to continue with except under the most extraordinary circumstances that have not arisen.
Such an approach has led to very many areas of expenditure being fixed, while taxation has been limited at the same time. The deficit has been brought down to a third of what it was when this Government came in—a very substantial achievement, of which this Government and their predecessor ought to be proud—but it has become very hard to take that any further because of the encapsulating commitments that are limiting the Chancellor’s freedom of action. That is why the Finance Bill, for all that it has 700 pages, will not lead to a great deal of fundamental reform. It is tweaking things at the edges—looking at little bits of money here and little bits there—rather than taking a fundamental or basic approach to our tax system.
Our tax system has become overly complex and, from the pressure of having to find little bits of money, it is becoming even more complex, which makes it difficult for taxpayers to pay the right amount of tax. We can see that more anti-avoidance legislation has come in to stop avoidance, because we have overcomplicated the tax system in the first place and a corrective measure has therefore had to be taken to try to prevent revenue from seeping away. A good example is the discussions we are having about perceived employment as opposed to self-employment. The Government were extremely proud of their achievement in making self-employment easier, but a constituent who came to see me explained that the £3,000 national insurance contributions exemption for small businesses had led to all the people working for him having to become individual companies, whereby it cost £3,000 a year less to pay them than if they were directly employed or were employed through one subsidiary company.
Very good ideas come into individual Budgets—particular tax breaks to encourage particular forms of behaviour to lead to certain outcomes that the Government wish to see—but they then have to be corrected by anti-avoidance measures because they get taken and used in a way that was not intended under the initial legislation. That is why the election will be a great opportunity to stand on a platform of tax simplification, and I hope we will achieve the sort of majority that will help to push that through. To achieve tax simplification, it will be necessary to ensure that avoidance is removed at source, rather than by anti-avoidance measures. That means taking away some of the existing exemptions and incentives that encourage people to set up more complex systems than they need to minimise the amount of tax they pay.
I am a defender of people taking such an approach. If Parliament legislates for tax to be collected in a certain way, with certain exemptions and thresholds, the individual taxpayer is completely and legitimately entitled to use them to their fullest extent. The approach is the fault not of the taxpayer, but of Parliament for putting exemptions into or leaving them in legislation. We should always be very careful to distinguish avoidance from evasion. Evasion is straightforwardly criminal—not paying the amount of tax that is, by law, due. Avoidance is looking at the tax system and saying, “I do not owe that tax, and I do not have to pay it because Parliament has not legislated for me to pay it.” As individual taxpayers, we are all entitled, as are all our constituents, to pay the tax Parliament requires, not a penny less or a penny more. If we had a system that was simpler overall, that would be hugely beneficial.
There is a lot about anti-avoidance in the Finance Bill, including the new rules for non-doms, about which I would be very careful. We live in a world where some very rich people want to come to the United Kingdom, and when they are here they employ people, spend money and pay taxes. We have a system that has barely changed since the days of Pitt the Younger—I cannot say I remember them, but I wish I did—and that broadly unchanged system was actually very beneficial for our economy because it brought into this country wealthy individuals who then provided economic activity. It is absolutely right to ensure that people who are obviously domiciled here in all normal senses of the word should be seen as being domiciled here, but we do not want such a difficult regime that people who might come here and contribute to our economy feel that they cannot do so.
Jane Ellison
I want to give my hon. Friend a degree of reassurance. A new measure in the regime advanced as part of the non-doms reforms will make it easier for anyone to invest in the real economy—business investment —which I hope he will welcome. I entirely take his point that we want to make sure that people can come to this country from anywhere and invest in the real economy.
Mr Rees-Mogg
Absolutely. That is an important part of the reforms, but there has perhaps been a tone—more from the previous Chancellor than from the current Chancellor—that the non-doms were using the system. A lot of them could actually go anywhere in the world, but they come here because of the great virtues of investing in the UK: we have clear rights of property; we have an effective rule of law; and we have had simple regulations that have allowed them to be here. However, we have now increased the charges on them and increased their eligibility for certain taxes, and I think we should be very cautious about that because one never knows, with these sorts of things, where the tipping point will come. It may be that the annual charges applied to non-doms seem quite small compared with their wealth, but when we consider that they have families—the charges have to be multiplied for the wife, the number of children and grandparents, or whoever—we may find that the charges become quite high. The people bringing such wealth into the country have enormous mobility: they can go elsewhere. I know that standing up for non-doms six weeks before an election is not necessarily going to be a great rallying call for North East Somerset, but ultimately I think good economics leads to good politics rather than the other way around. A lot of what was done with regard to non-doms was much more about politics and perception than the contribution non-doms make to this country. In the context of Brexit, we want to show that we are genuinely open to the rest of the world. We want people to come here to invest and to spend their money, because that is so important to our long-term economic prosperity.
There is a broad challenge with this Finance Bill, as there will be with its successor which will no doubt come. I have a feeling that this will be one of those happy years where we get more than one Finance Bill. Finance Bill debates are particularly enjoyable parliamentary occasions because they have no time limit. The hon. Member for Aberdeen North (Kirsty Blackman) said that we might go right through the night and not be able to have our debate tomorrow. I look forward to that happening at some point in the future, but I have a feeling it is not going to happen today. Finance Bill debates are the best debates because of their fluidity and flexibility.
When we get to the second Finance Bill, a fundamental choice will still have to be made. This relates to the answer we had from the hon. Member for Bootle (Peter Dowd) on the Opposition Front Bench. There is an absolutely key point at the heart of this Finance Bill, as there will be at the heart of any new Finance Bill. When I intervened on him and said that the tax rate as a percentage of GDP was at its highest since the days of Harold Wilson, his answer to me was that under Labour it would be even higher.
Peter Dowd
May we just have clarity on this? I did not say that. The hon. Gentleman brought it to my attention that it was high under Harold Wilson and I made the point that yes it was.
Mr Rees-Mogg
I look forward to reading the characteristically accurate transcript Hansard will have for us tomorrow. The great thing about Hansard is that it allows us to correct our grammar—indeed, it often corrects it for us—but it does not allow us to correct the sense, so we will see what was said precisely.
That is the choice. If the hon. Gentleman now wishes to move away from that choice I think that is telling: with an election approaching Labour Members are nervous about it, but the Labour party—the socialists—remains the party of high taxation. The Conservative Government have had to increase taxation because of the enormous deficit left by the spendthrifts of the last Labour Government who almost bankrupted the country. We would probably have gone to the International Monetary Fund at the time if it had had any money left, but it was bailing out Greece and everywhere else so it did not have much for us by the time the Conservatives came in. Through hard work, control of expenditure and, I am sorry to say, some tax rises, the deficit has been brought under control. That is the fundamental achievement of this Government.
As we go into an election, it is the really big picture that matters. It will give such a clear and forthright choice to the British people. Do they want to continue to be governed by people who recognise that it is their money—the money of the individual taxpayer—of which the Government must take as little as possible to finance that which they are required to do? Or are we going to go back to the days of socialist tax and spend, with a huge increase in the deficit to finance spending programmes and tax increases that are even higher than those in the days of Harold Wilson? It was, of course, Denis Healey who said that he would squeeze the rich until the pips squeaked. That was his approach to taxation. Do we, by dutiful, sensible and prudent management of the economy, get things back under control where, with proper reforms, we can lower the tax burden?
Dr Paul Monaghan (Caithness, Sutherland and Easter Ross) (SNP)
In that context, how does the hon. Gentleman explain a national debt of close to £2 trillion?
Mr Rees-Mogg
I would explain the national debt of approaching £2 trillion because of the place where we started. It is very interesting that when the previous Chancellor, my right hon. Friend the Member for Tatton (Mr Osborne), started reducing the deficit he was told by Opposition Members, “Too far, too fast!” They chanted it like a mantra as he stood at the Dispatch Box nobly defending his policies. In fact, he went at the right pace to ensure that the Budget deficit came under control, while at the same time the economy was not unduly affected by the reductions in expenditure and increases in taxes that had to be made. It was a first-class balancing act by my right hon. Friend and that is why the deficit is at £2 trillion.
Jonathan Reynolds
I am loth to give the hon. Gentleman further exposure, but if that strategy was as successful as he believes, why did it not meet its own objectives and we are still discussing the deficit and the very large amount of national debt today?
Mr Rees-Mogg
It has succeeded. We have the fastest growing economy in the G7. For all the stuff we heard a year ago, the economy has carried on motoring ahead. The economy has done pretty well every year now since 2010. That is the success of the economic strategy that the Government followed. The deficit is about a third of what it was in nominal terms, but as a percentage of GDP it is now within the normal bounds of deficits.
Jonathan Reynolds
I may be falling into my own trap, but I remember listening to the hon. Gentleman’s speeches in the previous Parliament when he said that if the deficit was at this level, going on from 2010, that would be a disaster. Now he is saying it is a huge achievement. Can he not understand why the lack of humility makes one cynical about the content of his speeches?
Mr Rees-Mogg
I do apologise for a lack of humility. I shall try to do better in that regard. I am, however, flattered that the hon. Gentleman remembers my speeches from years ago. I admire his attention to the debates in this House. The point I was making then was that a deficit of £150 billion a year, or 10% or 11% of GDP, was completely unsustainable. It is now down to about £50 billion and about 3.5% or 4% of GDP. It is at a manageable level. That is the achievement of the previous Chancellor and the current Chancellor.
Rebecca Pow
Is not one of the fundamental reasons why the economy is in safe hands with those of us on the Conservative Benches that Conservatives have an understanding of the importance of business? My hon. Friend is still in business. Unless one understands how business works and what makes it tick, we cannot raise the revenues necessary to pay for what we need in this country.
Mr Rees-Mogg
My hon. Friend comes from Somerset and her parents are constituents of mine. For both those reasons, she is invariably right and on this occasion particularly so. There is no money tree. It has to come from the success of businesses. It is a matter of balance. The hon. Member for Stalybridge and Hyde (Jonathan Reynolds) wishes to get away from that balance, but it had to be done at the right rate to ensure the least economic problems as taxes were raised and expenditure cut. That has been achieved.
Peter Dowd
If the long-term economic plan was such a wonderful strategy, why did the former Chancellor and the current Chancellor keep missing their targets?
Mr Rees-Mogg
Targets are based on forecasts and forecasts have variables within them that even the wonderful, or not always wonderful, boffins cannot get absolutely right. What matters is not the precision of the forecast, but the broad trend of the economy. We have had consistent economic growth. We have the highest employment on record. This is an enormous achievement. As I said a moment ago, we have the fastest growing G7 economy.
George Kerevan
I cannot let the hon. Gentleman continue with his analysis of the previous Chancellor’s single plan for the economy. In the first two years of the previous Chancellor’s reign, from 2010 to 2012, there was a very rapid move to austerity—tax rises and cuts in spending. Growth slowed precipitously and by 2012 the Chancellor reversed his policy. In fact, he got the Treasury and the Bank of England to print money and pump it into the housing market, so there was a change in policy. The original austerity did not work.
Mr Rees-Mogg
I do not agree with that analysis. My analysis is that the austerity allowed for a looser monetary policy which had beneficial consequences, that between 2010 and 2012 it was essential to operate a very tight fiscal policy to permit exactly the type of monetary policy to which the hon. Gentleman has referred, and that it would not have been possible to maintain the confidence of the markets if we had operated a loose fiscal policy and a loose monetary policy during those two years. The lack of economic growth during that period ties in with the considerable problems—the severe crisis—experienced by the eurozone and other economies.
On this occasion, I do not agree with the hon. Gentleman’s analysis of what went wrong, although I often do agree with him. I see a continuity in the policy of my right hon. Friend the Member for Tatton. However, although no time limit has been imposed this evening, I do not feel that I should go on forever. Many Members wish to speak, and others want to have their dinner. Let me end by reiterating that we face a great choice: between the higher taxes proposed by the hon. Member for Bootle and the opportunity for lower taxes, sound economic growth and prosperity. I know you are independent, Madam Deputy Speaker, but vote Conservative.
George Kerevan (East Lothian) (SNP)
I shall support the amendment, although that does not prevent me from believing that there are many interesting and good things in this draft Finance Bill. However, I find myself agreeing with my colleague on the Treasury Committee, the hon. Member for North East Somerset (Mr Rees-Mogg), in one respect. We will have two Finance Bills, because the current process has been truncated, and a much smaller Bill will be passed before the dissolution of Parliament. When a second Bill arrives later in the year, we shall have a chance to be more strategic and reforming, rather than continuing to add bits and pieces and ending up with the monstrosity—in terms of length—that we have at present. That said, I think that in the final few days, as we move towards a slimmed-down Finance Bill, there may be some room for an agreement between Government and Opposition on what can be achieved. In that context, I ask the Minister to deal with a couple of points when she responds to the debate.
Inevitably, in dealing with the financial period between 2015 and 2020—the year that would normally have marked the end of the current Parliament—the autumn statement and the March Budget made certain predictions about Government expenditure and taxation, along with certain promises about what would be achieved by 2020. One Parliament cannot bind another, and this Parliament, as it reaches its end, cannot bind the one that will arrive in the summer; nor can we predict who will govern following the general election. However, I think it would be helpful to Opposition Members if the Minister provided certain clarifications about the Government’s intentions, should they be returned in June, in respect of meeting the obligations that they set themselves for the period between now and 2020.
Let me give an example. The Government have guaranteed that they will meet their obligation to spend £1 billion derived from the sugar levy—the tax on the sugar industry—over the period ending in 2020. Normally that would fall, so I should like some indication of whether, should the Government be returned, that would continue to be their intention between now and the next Parliament It would be helpful for Opposition Members to know that. Although I think that the tax on the soft drinks industry is inadequate, and a bit quixotic in terms of what is and is not taxed, I also think that it is a step in the right direction. There are hypothecation issues, but, given that this is where we are, it would be useful if the Government guaranteed that, if re-elected, they would continue in the same direction.
City deals are another issue for Opposition Members. We were reaching an agreement with the Treasury on a number of city deals in, for instance, Edinburgh and East Lothian—some in the east of Scotland and some in the west—and I understand that the Treasury had intended to sign them off following the local government elections. Again, one Parliament cannot bind another, but I think it would be possible for the Treasury to provide some comfort on the subject of city deals before dissolution.
Mrs Anne Main (St Albans) (Con)
The hon. Gentleman is presenting a marvellous argument for people to vote Conservative. He is presenting the positive argument that if the Minister assures him that the wonderful things that he expects us to do will indeed be done, they will definitely be delivered if the electorate vote Conservative. I look forward to the Minister’s assurances, given that the hon. Gentleman has basically asked everyone to vote Conservative.
George Kerevan
I was very careful to say that I was not anticipating who would actually be in government. I was giving the present incumbents in the Treasury a chance to say what they might do should they be re-elected.
Let me move on now, because I think it important to analyse the contents of the Bill. I think that it contains two sets of structural weaknesses. The first reflects what I consider to be a change in the pulse of the economy, which has occurred since the end of 2016 and is embedded in all the latest data that we have—data that have emerged in the last month, since the start of the Easter break. I fully accept that the Government have presided over a period of economic growth since 2010. I do not want to dismiss the figures—in a number of years, our growth rate has been higher than those in other large industrialised countries—but what has underpinned that growth? All the figures suggest that it has been underpinned by consumer spending, largely funded by the rise in consumer debt.
I do not gainsay the growth, but, in her opening remarks, the Minister placed a great deal of emphasis on the Government’s success in that regard. If economic growth is founded merely on consumer spending, and that consumer spending is based on borrowing, it is not sustainable, and I think it entirely legitimate to question how long the Government can go on relying on consumer debt to fund growth. In fact, we are now approaching the end of that period. What worries me is that the fiscal plan embedded in the autumn statement and the March Budget assumes the continuation of growth that is beginning to falter.
Let me make a point that I raised after the autumn statement, and also during the Budget debate. It seems to me that the Chancellor gave himself plenty of fiscal fire power in the autumn statement through increased borrowing—or, at least, the removal of some of the more over-optimistic projections of the previous Chancellor, and some of his more egregious games with time limits in relation to when income would arrive. The current Chancellor, in the autumn statement, clearly borrowed sufficient money in order to give himself some fire power should the economy slow. The trouble is that in the autumn statement all that spending power was delayed until post-2019, which is when we will see what the Brexit deal actually is. If the economy slows between now and 2019, it will be too late to use the fiscal fire power. That was the criticism of the autumn statement that was made by me, and by other Opposition Members.
The March Budget was fiscally neutral, by and large, but it has run into some headwinds. If the incoming Government, whoever they are, post-8 June, do not make up the projected shortfall from the proposed rise in national insurance contributions by the self-employed, there is a hole of a couple of billion pounds to fill. That aside, as I have said, the March Budget was fiscally neutral. If we put together the autumn statement and the March Budget, the Chancellor has a nest egg that he can bring to bear on a slowing economy, but it is pencilled in for 2019. For the next two years, he is relying on economic growth funded by consumer debt. However, all the latest numbers show that that is no longer happening.
Jane Ellison
The hon. Gentleman is making an interesting speech and I welcome the consensual tone that he has struck on a number of measures. I have to push back on the charge that fiscal firepower will be delayed beyond 2019. The Chancellor was explicit in the autumn statement that we borrowed to invest in greater productivity and some of that is happening now. Some of the national productivity investment fund is for short-term investment. In addition, as the hon. Gentleman knows, Barnett consequentials of £800 million for the Scottish capital budget are there for the Scottish Government to spend as they see fit.
George Kerevan
I accept what the Minister says, but the extra investment from the productivity fund that is going into the economy at the moment totals hundreds of millions, not billions, of pounds. The bulk of the spend, when it comes in 2019, will be in long lead items. A lot of it will be for housing, which is one aspect of the productivity investment fund I have never quite understood, as I do not see how investing in housing will raise industrial productivity.
Let me come back to the key point on which I want the Minister to respond. The latest data on the economy show that consumer spending is starting to slow. The first quarter retail figures, out just this month, are the worst for six years. It is clear that the reserves of spending in consumer hands are disappearing.
The previous Chancellor was very lucky in that in 2010 to 2013 windfall gains came into consumers’ hands, particularly from insurance on mis-selling. In 2015, even though wage rises were limited, there was a precipitous fall in the inflation rate. That raised real incomes. It is clear that, in 2016, because of that boost to real incomes, people started borrowing again and consumer debt started to rise. By the end of 2016, the savings ratio in the UK had fallen to historically low levels. One can sustain that amount of consumer borrowing and spending only for so long. By the end of 2016, it was beginning to fall.
Like the hon. Member for North East Somerset, I was never moved by the visions of economic Armageddon from the Bank of England and the Treasury during the Brexit discussion. However, I do think that, in the next two years, investment will be impacted upon by Brexit fears. That is not happening at the moment. Therefore, I think that there is reasonable evidence that the tapering off of consumer expenditure is not to do with the Brexit debate; that is still to come down the highway. It is to do with the fact that consumers no longer have the reserves to go on increasing their spending, in which case we are looking at an economic downturn in 2017. That is precisely the time the Chancellor should be using his economic firepower, rather than, as in the March Budget, having a fiscally neutral stance.
When questioned on the matter, the Chancellor has said that the slack would be taken up by business investment. There is no sign of that. In real terms, business fixed investment has been falling since 2015. It started to fall well before the Brexit debate. It blipped a little in the middle of 2016, but it has gone on falling. There are no organic signs anywhere that business fixed investment is increasing. Business spending is going on all sorts of things—for example, moving corporate activities to Europe to protect against Brexit—and a lot of money is being spent on buying British companies. However, we are not getting fixed investment in machinery and plant, and even if we did, it would take several years for that to feed through into productivity gains.
The latest quarterly market purchasing managers’ report suggests that growth projections from purchasing managers, who are pretty hard-headed, have halved since the last quarter of 2016. My general conclusion is that the Government are being far too optimistic about where growth is going in the UK. It is going down.
Conservative Members like to quote international comparisons. The latest OECD projections for growth in 2017—the OECD never quite got to the more insane evaluations of a collapse in growth that some other agencies did in 2016—suggest that growth in the G20 countries, in the United States, in Germany and in Canada will on average outstrip UK growth, so the situation is no longer as rosy as the Minister would have us believe. Some of the fiscal proposals in the Bill are based on a previous analysis of where the economy is. They have been overtaken by events. If we go through a general election and come to an autumn Budget and a second Finance Bill, all bets are off and we will be back to square one. That is not the way to run an economy.
Earlier, we discussed corporation tax, which is a key element. There is a long-term plan to cut it, and that hinges on what happens in the Brexit discussion. Clearly, the Government want to try, in a post-Brexit world, to make Britain a very low-tax economy, in the sense of attracting inward investment by having low levels of corporation tax. The danger of that strategy is that other countries will follow us, particularly the US; the Trump Administration have already threatened that. However, there is a stark contrast between countries such as Germany, where the headline rate of corporation tax is still 30% to 33%, and the UK, which is cutting corporation tax. Germany has much better productivity and higher industrial investment. Why is it that it can do that, and outstrip the UK economy, when we, with corporation tax that is low at the moment and going lower, cannot seem to generate the industrial investment and higher productivity?
It comes back to the issue of consumption and relying on debt-fuelled consumption to power growth. If we power our economy through consumer debt, it becomes dangerous to raise taxes on consumers, because we would immediately see a drop in consumer spending. Germany has focused on driving its economy through industrial investment and exports. Once you have that, you take the pressure off taxation on the consumer. That is the solution to the riddle and it is why the Germans seem to tax their industries more but, by running the economy at a higher level and generating more sales from exports, take the pressure off. They recycle a lot of the tax money back into industrial and infrastructure investment. They equate the basis for the industrial wealth that they tax—
Kevin Foster
I am listening with interest to some of the hon. Gentleman’s points. Does he agree that one of the issues that the German economy has, particularly in its industrial sector, is that many of its markets are locked into exchange rates by the euro? In more free-flowing economies and in previous exchange rates, it would have been able to devalue and so increase its competitive advantage.
George Kerevan
I am happy to agree with that point. The weakness of the euro is that across Europe it has locked the German supply chain into an artificially low exchange rate. On the back of that, Germany has generated a massive trade surplus, which it is not redistributing. That is undermining the whole European economy. I perfectly accept that. I was not arguing that the German economy is perfect; rather, I am suggesting that it is too simplistic to link the headline level of corporation tax with the performance of the economy, because we can find all sorts of examples that go the other way.
My real criticism, which I still direct to the Minister, is that the growth that the Conservative Government have trumpeted as their success is based on the shifting sands of consumer debt, which has now reached a level that cannot be sustained, so we need something else. We definitely do need to increase the level of industrial investment, and that requires a different set of fiscal tools in order to encourage consumer saving and recycle that consumer saving into industrial investment. That is the whole weakness that underlies the Finance Bill: it is a set of small measures based on the assumption that the economy will go on growing because consumers will go on spending. If they do not, the whole rationale of the Finance Bill falls apart.
I will now briefly move on to the second pillar, and the second strategic weakness, of the Finance Bill. In order to maintain the level of consumer spending, this Government have had to pass a series of pieces of legislation to bind their own hands when it came to raising taxes on consumers. If we do that, we then have to find money from somewhere else. Therefore, although this Bill contains a series of small tax rises here and there, in the aggregate what is happening is that this Government are being forced to start distorting the entire tax system because they have no other way to go but to invent new stealth taxes to maintain the level of income to Government.
The Clerks to the Treasury Committee came up with a rather interesting example on probate—the tax, if tax it be, on the probating of wills. The proposal for the levy on probating added to the cut in inheritance tax results in an anomaly. Where a father and mother leave a house to their children that is worth, let us say, £1 million and one penny, the inheritance tax is tiny—it works out at 40p—but the probate that has to be paid is £8,000. So in effect, cutting inheritance tax and replacing it with a probate levy gets us back to where we started. We can see that once we start down that road, we will go on increasing the levy on probate simply as a revenue earner.
That is not just happening with the tax on probate; it is happening in a whole series of small tax changes. By legislating to put a lock on income tax and other taxes, we end up having to raise revenue in a series of anomalous and distorting ways, and that makes the Finance Bill even more complicated.
Mr Rees-Mogg
Does the hon. Gentleman share my concern that the difficulty with doing this through charges is that they come through in a statutory instrument, whereas new taxes go through a much fuller parliamentary procedure? We should all be concerned about taxes that do not see the full rigour of parliamentary scrutiny.
George Kerevan
I could not agree more, and I look forward to the hon. Gentleman taking that up in the 1922 Committee—as I am sure he has.
If we run through a whole series of the provisions in the Bill for raising taxation, we see this creeping distortion of the tax system, such as the tax-free allowance on dividend incomes being cut from £5,000 to £2,000 to raise £800 million, which is a substantial, chunky sum. We can see where the tax-free allowance on dividend income is going to go. As for VAT on mobile phones used outside the EU, I can pretty well guarantee that if this Government are returned, the moment we are out of the EU that roaming tax will go on to our phone bill when we are taking our holiday in the 27 member states.
The insurance premium tax is one of the worst means that this Government have tried simply to increase revenue. They keep raising it year by year, so the increase of 20% proposed in the November autumn statement is simply a revenue-raising tax—there is no rationale other than simply to raise money. In terms of the insurance premium tax, there is a whole series of insurance forms not yet covered by the tax, so one can quickly see a future Chancellor saying, “Well, let’s put the insurance premium tax on reinsurance, or on buying shipping and aircraft. Why shouldn’t an airline pay insurance premium tax on buying an aircraft?” Rather than using the core taxes like income tax, we will end up with a series of distorting taxes, including the rise in spirit duty and the tax on whisky in the March Budget. I presume the Chancellor said to himself, “Well, with the significant fall in the value of the pound, there will be a gain in terms of export prices, so we can afford to claw some of that back as a tax,” but it is not strategic to the needs of the industry; it is simply a revenue-raising power.
What is wrong with the Bill as it stands? It misunderstands the nature of where the economy is and makes no allowance for the fact that consumer spending is about to decelerate, and it introduces a whole raft of new taxes, or increases in stealth taxes, which are fundamentally a change in direction and a distortion of economic processes.
I hope that when we come back after 8 June for a second bite of the cherry with a second Finance Bill, the Government might, should this Government be returned, be willing to look at some of these matters.
Kit Malthouse (North West Hampshire) (Con)
It is a joy to follow my Treasury Committee colleague, the hon. Member for East Lothian (George Kerevan). That should imply not an endorsement of his views, but rather an appreciation of his passion and erudition. I rise to welcome the Finance Bill—if it goes through unmolested, and even if it does not—and to concentrate my remarks, brief as they may be, on a couple of areas.
As an aficionado of my speeches and interventions, Madam Deputy Speaker, you will be aware that I have developed something of an obsession about the future of the British economy being based on a combination of science and private capital. We are fortunate in this country in being a science superpower. In the south-east of England we have five of the world’s top 20 science universities: in King’s, UCL, Oxford, Cambridge and Imperial, we have possibly the largest agglomeration of scientific research on the planet, not just in life sciences, but in physical sciences, synthetic biology and all sorts of new exciting and interesting areas.
We are incredibly good at science. Our history of scientific endeavour points to that. There is one Cambridge college that has more Nobel prizes for science than the whole of Japan, for example. So we are good at science; what we are not so good at is turning those scientific discoveries into companies. We used to be good at that of course, back in the 19th century; much of the wealth of this country was built on the discovery and innovation of the Victorian era, put together with what was then much more adventurous private capital to create some of the monoliths—the huge companies we built over the following century and have sadly too often since sold to the rest of the world.
During that period, and particularly after the war, we were, however, lax in planting the acorns that would be required to produce the forest of oaks that we could chop down and sell to the highest bidder in the future, so our stock of these large companies has diminished. In fact, this is a European problem. Of the top 500 companies in the world, only two have been created in the past 40 years. Fortunately, those two are both British—Vodafone and Virgin—but that is not enough. If we are to continue our proud history of industrial innovation and of creating these large multinationals, we need to start planting those acorns. The operation of private capital and its dynamism in finding the ideas, the discoveries, the molecules, the therapies and the inventions are absolutely critical.
I have raised this issue again and again with the Chancellor in questions and during debates. I have asked about the complexities that are put in the way of individuals who wish to invest in innovations. The primary vehicles for investment that the Government allow private individuals to use are the enterprise investment scheme and the small enterprise investment scheme. They are welcome schemes that provide incentives for investors and some tax relief on disposal, but they are complex. Over the past eight to 10 years that the EIS has been in place—the SEIS has been in place for slightly less time—a body of case law has built up around their operation, as always happens with these things. Investors have tried to be innovative with the schemes, and investments have often been disallowed on technical bases. As a result, people are to a certain extent becoming shy of using them. Looking at the SEIS in particular, we see that the number of companies availing themselves of the scheme has levelled off. It has been broadly the same for the past three or four years.
I therefore welcome the measures in the Bill to introduce flexibility into the EIS and SEIS. If the Government really want to see a cascade of private capital into small, innovative businesses and into scientific endeavour, they need to make those schemes as flexible and easy to operate as possible. At the moment, if I want to invest a relatively small amount of money—£10,000 or £15,000—in a company, I need an accountant and a lawyer, and I need to get pre-approval from the Inland Revenue to ensure that I get my tax relief. I have to do all that in order to invest a relatively modest amount, in investment terms. So is it any wonder that the level of investment in these schemes is not enormous?
In this country at the moment, the Government are making 60% of the investments below £2 million through various schemes and funds and through the British Business Bank. That is all very welcome, but for a capitalist country, this is not right. The majority of investment should be from private capital, and it should be individuals who are making those investments. Accessing retail capital and putting it next to science to allow the two to create a powerful cocktail of wealth creation is key to the future of the British economy. I hope that, if we have another Finance Bill this year, the Government will seek to liberalise the investment regime for private investors in private businesses, particularly those that are innovative or science based.
The same applies to venture capital trusts. These were an enormously beneficial invention when they came in about a decade ago. They attracted huge amounts of capital. There was a time when people saw them as the last 100% tax shelter, but they, too, have fallen out of fashion. Their complexity and the poor returns that they produced compared with the tax relief available for them have meant that the number of VCTs has shrunk and the capital under management by VCTs has been broadly static over the past few years. These two things together—private capital investment through the EIS and SEIS and private capital coming in through VCTs—must be the twin planks underpinning the future of the British economy. We know that we cannot rely on foreign investment and that we cannot rely entirely on institutional investment. They are far too cautious for some of the innovations that need investment. So re-energising private capital and providing easy, flexible ways for individuals to invest quite small amounts of money into innovative companies will be absolutely key. I welcome some of the flexibilities in the Bill and I hope that the Government will be more ambitious over the next 12 months.
Mr Steve Baker (Wycombe) (Con)
My hon. Friend’s speech is an absolute treat because it is a much better version of the speech that I made on science and markets in the Vehicle Technology and Aviation Bill Committee on which we served together. Does he agree that one of the key spirits that we need to recapture from the 19th century, when we took science and innovation and turned them into big companies, is getting people who know how to do things, such as engineers, to become entrepreneurs—perhaps in the spirit of I. K. Brunel? In that way, those who know how to produce will also know how to invest and how to serve people in a commercial way.
Kit Malthouse
My hon. Friend makes a powerful point. This is a chicken and egg situation. If people with ideas and inventions who are thinking about starting their own business know that capital is more easily available, they will be much more likely to go out and take the risk of starting that business. It is often the paucity of capital and the difficulty of raising it that lead such people not to proceed.
Let me give the House a small anecdote. When I was deputy mayor for business and enterprise in London, I went to a life sciences fair where companies were making presentations about their inventions. I came across a group of young biochemists from Cambridge who had invented what they called an espresso machine for DNA. When people are doing primary research, they often need to manufacture DNA on which to carry out their research. The standard ways of doing that are either to send off to have it made elsewhere, which is time consuming and expensive, or to make it themselves by trial and error. This group had developed software and invented a machine to produce the necessary kind of DNA. I thought that was incredible. It was an amazing British invention. The group had won a prize at Cambridge and received a small grant. I thought that they would need £5 million or £10 million, and if I had had it, I would have given it to them. When I went up to them afterwards, I discovered that they were trying to raise only £250,000, but they were having difficulty in doing so, even though, as far as I could see, their incredible invention was going to revolutionise research. Time and again while I was doing that job, I met young, ambitious and exciting scientists who had a molecule, a therapy or an invention but who were unable to access the necessary capital and would therefore go off and become chartered accountants, like me, instead. We lose a huge amount of talent that way. My hon. Friend has made a strong point.
I lament the passing of the employee shareholder scheme, which was introduced by the previous Chancellor, under which employees could enter into an agreement to vary their employment rights in exchange for which shares in the company. Sadly, the scheme was abused. It was often not taken up for the purpose for which it had been intended. It was abused by some as a form of disguised remuneration. The Government are quite right to close the scheme down, but that nevertheless leaves us with a problem. Not enough people in the United Kingdom participate in the balance sheet of this country. The Prime Minister has often talked about having an economy that works for everyone, but such an economy surely has to be one that is largely owned by everyone. I do not mean owned in a statist or communist way; I am talking about an economy in which everyone has some kind of financial interest from a balance sheet point of view.
We spend a lot of time in this House obsessing about people’s profit/loss account. Is my income bigger than the next chap’s income? Am I earning more than the lady round the corner? We obsess about income inequality, but we rarely obsess about wealth inequality; yet intergenerational wealth is built on the balance sheet of the family. It is built on the investments, albeit small ones, made by one generation. That wealth is expanded by the next generation and built on by the third one. That was certainly the story in my family. We came from fairly lowly beginnings, yet here I am now. This has been built on the fact that my grandparents made investments and my parents started a business. Hopefully, in turn, they will pass some of that wealth to me, although not, I hope, for a long time yet. We have a collective family balance sheet. We are able to buy stocks and shares, for example, but that is denied to lots of people in this country.
The one place in which individuals should have a share of wealth is in the companies that they work for. If we are really to have an economy that works for everyone, we need an economy that is largely owned by everyone. The Government have schemes available, particularly for employee share ownership, in which companies can set up pools of capital for their shareholders. I have been looking into this for my own business, but the scheme is incredibly complicated. In dealing with relatively small amounts of money, I need lawyers and accountants and pre-approval from the Revenue. There is an incredible frictional cost involved in getting such a scheme under way.
My plea to the Government, having got rid of the employee shareholder scheme, is to think about how to facilitate that idea—how to make sure that it is in the interests of employers and business owners to involve their employees in the business in a capital sense. That will enable employees to create for themselves a balance sheet on which to begin the intergenerational wealth creation that the country needs. If we can do that, we will start to build an economy that works for everyone.
I want to talk about two other small things. I welcome the change to the allowance for investment in grassroots sport. Members may not have noticed, but the Finance Bill will make investment in grassroots sport deductible for businesses, and that will be extremely welcome to football, cricket, hockey and many other clubs. I am proud to say that my business has sponsored local children’s football clubs at schools and so on. The more we involve business with school and grassroots sport for young people, the more both parties will see each other on the same level and the more interested they will be in each other. That is a good thing.
Finally, I want to say something about the overall tenor of the Bill. It has become clear to me over the last three or four Finance Bills that we in this House will increasingly struggle to tax a changing economy. We have seen in the discussions about national insurance and business rates that because of the changing nature of business, the standard Whitehall way of taxing the world will not last that much longer. We are moving into a world of cloud computing, the gig economy, non-domiciled businesses and cashless businesses that operate from third or fourth countries. All those things will be difficult for us to tax, and one of our challenges over the next Parliament will be to think more radically about how to deal with the changing nature of our economy and how to tax it to pay for the things we need.
My personal view is that given the changing nature of our economy and the removal of a lot of cash from the business cycle, it may be time to start to look at things other than direct taxation. Corporation tax is difficult, complex and hard to collect. There is a big tax gap compared with VAT, which is relatively easy to collect and where compliance is high. If I were Chancellor, I would probably prefer to have VAT.
With international businesses transacting in the UK and extracting money, we may need to start to look at the notion of a universal sales tax. Such a sales or turnover tax would be more easily collected and might well allow us to have a lower tax rate, spread across a wider tax base, because we would catch international businesses that transacted from, say, Luxembourg or Ireland. Fundamentally, the rule should be that if the sale takes place in the UK, the tax on the sale is collected here, no matter where the company is domiciled.
We will have to think quite carefully over the next five years, after we get through the general election in the next few weeks, about the changing nature of the economy and the radical measures we need to take to keep up with it. Beyond that, we are making good progress.
Kirsty Blackman (Aberdeen North) (SNP)
I want to talk about quite a few things. I might have given a somewhat different speech had there not been a general election looming. I might have kept my speech briefer, because I would have known that we would get the chance to discuss things in Committee of the whole House and Public Bill Committee. But just now, everything seems to be up for grabs and there is no clarity about what we will get to discuss. It is really important to lay out the SNP’s position on several matters so that the Government are absolutely clear about where we stand as they make decisions before prorogation. We are in quite uncharted territory.
I want to start by talking about the budgetary process and the issues around it. Earlier this year, the “Better Budgets” report was published by the Chartered Institute of Taxation, the Institute for Fiscal Studies and the Institute for Government. They made several recommendations for making the budgetary process better and ensuring that better decisions are made. I have written to ask the Select Committee on Procedure to look at the procedural matters that could be changed to meet the recommendations. The Government have already done one thing; the report suggested that we should have only one fiscal event a year, and the Government have agreed to that. I am pleased that they have done so, and I think it makes much more sense for the planning process, consultation and scrutiny if everything happens in a single event rather than being split over two different events.
I would also like the Government to consider taking evidence in the Finance Bill Committee. It is a slightly bizarre quirk of the Finance Bill that we do not take evidence in the Committee, and I think it would be really sensible to do so. I know that the Treasury Committee takes evidence, but it is different from the Finance Bill Committee, so the members of the Bill Committee do not necessarily hear the things that are said. I would appreciate it if the Government considered that.
Generally, I have been fairly critical of the budgetary process, the lack of scrutiny around it and the lack of consultation about some of the measures. Things have been slightly better in the last couple of years and fewer rabbits have been brought out of hats, but that still happens and it still inspires U-turns, as we have seen. This Government and future Governments have a huge amount of work to do to secure better scrutiny of the budgetary process and enable better decisions to be made. Decisions are more likely to stick and to be adhered to if they are good decisions in the first place.
I want to talk about a few things, including a few things that are actually in the Finance Bill. The elephant in the room, which was not talked about enough at the Budget, is Brexit and its impacts. My hon. Friend the Member for East Lothian (George Kerevan) covered a lot of that.
One thing that must not be underestimated is the impact of inflation on households, particularly those that have less than £100 in savings. The statistics show us that nearly 50% of households are in that position. For a lot of people here, who have been relatively comfortably off for most of their lives, it is quite hard to understand that. But it is quite easy to end up without that much in savings. It is quite easy to be a broken-down washing machine and a new car battery away from financial disaster, or to be a couple of months without pay away from real financial problems. As my hon. Friend also mentioned, people in that position do not have the access to debt and credit that they used to have. That is a problem that we are storing up for the future, and things such as the changes around ISAs do not help a huge amount. People can save into ISAs only if they have money to save. Changes to wages and the living wage have been positive—
Victoria Atkins
Does the hon. Lady accept, in the spirit of this part of her speech, that the introduction of the national living wage and its increase this very month to £7.50 help exactly the people whom she is talking about, and that raising the threshold at which we start to pay income tax must help as well?
Kirsty Blackman
I absolutely agree that things such as the national living wage—it is not a living wage, however; it is an increase in the minimum wage, and no calculation is done as to whether people can live on it—and the increase in the personal allowance have been positive for people at the bottom of the pile, in particular. However, the reduction in tax credits more than balances things out in many cases. People are losing more as a result of the changes to tax credits, for example, than they are gaining from the changes to the personal allowance and the minimum wage. I absolutely agree that those things are positive, but people are still feeling that their household budgets are squeezed by the cost of food going up in recent weeks, for example, which is set to increase, particularly for imported food.
A few people have mentioned intergenerational fairness, which is a real issue for me that I have spoken about a lot, and there has been a lot of stuff in the news this week about millennials. I am one of the 39 millennial MPs—I am 31 this year and was born in 1986—and many of my peers are worse off than their parents’ generation was in terms of the wages that they can expect to receive at a younger age and their access to property, whether through property ownership or through rents as a proportion of their income. This is purely anecdotal, but many people at my age are thinking about putting off having children because they cannot afford a secure home. For a Government looking forward to a future tax take, that is a real issue for a few years down the line. Many people have spoken about that, although we do not yet have the statistics for how the numbers will look.
The hon. Member for North West Hampshire (Kit Malthouse) talked about the gig economy, and I get that the Government need to find a different way to tax it due to the avoidance of normal tax routes. However, we need to find a different way to ensure that young people who find themselves working in the gig economy have a measure of stability in their lives and can continue to be able to pay money that they owe, such as rent, in order to finance what is a reasonable lifestyle, rather than a particularly comfortable one.
On austerity, I have mentioned the changes that the Government have made for those at the very bottom of the pile who need to claim benefits—not just out-of-work benefits, but tax credits and so on, which encourage people into work. According to what we hear from those who come into our constituency offices, the Government’s changes to the Motability cars scheme have made it more difficult for people to access work, because their vehicle has been taken away, which has an impact on the Government’s tax take and will increase the amount of benefits that will need to be paid to some people.
Moving from the general context to some of the specific issues in the Finance Bill and the things on which we want the Government to be aware of our views, I will start off with the police and fire services. My hon. Friend the Member for Dundee East (Stewart Hosie) mentioned the VAT on police and fire services in Scotland. We have raised this matter on many occasions and will not stop raising it, because the Government do not have a principled position. They cannot say that they are treating Scotland fairly when they have allowed VAT exemptions for Highways England and the London Legacy Development Corporation, which is a UK-wide organisation. The Government cannot stand on the moral high ground, because they have allowed those exemptions. We ask again that the UK Government change the VAT treatment of the Scottish police and fire services. I imagine that they will say no, but we are asking again and will not stop asking until a UK Government of whatever colour change the VAT treatment.
We also want to raise the issue of Scotch whisky, as people may imagine. The above-inflation increase in Scotch whisky taxation is a real issue for our whisky producers. International trading is slightly more uncertain than it has previously been due to Brexit, so whisky trading with European markets could be less easy than in the past, and the same could be said for countries that the EU has free trade arrangements with. Whisky is a high-value product. It creates a huge number of jobs in Scotland. It generates taxation for the UK Government at levels that are not pennies. The UK Government need to think seriously about how they are treating Scotch whisky, and if this Bill goes its full course, we will table an amendment stating that we do not want this above-inflation increase in taxation.
My hon. Friends the Members for East Lothian and for Dundee East both mentioned insurance premium tax, so I will not rehash the arguments too much, but it is being levied largely on people who purchase insurance who are just trying to do the right thing by getting insurance. They are trying to create a safety net for themselves, and the Government should be applauding that, not taxing it. The problem is that the tax has increased dramatically even over the two years that I have been an MP. The Government need to think carefully about whether insurance is a sensible place to tax people when it forms part of a behaviour that we want to encourage.
Colleagues on both sides of the House have talked about their support for the soft drinks levy and positive changes relating to childhood obesity, mentioning the studies that have been done on whether it will make it a difference. The Health Committee suggested that it is important for milk-based drinks to be included and, having looked at the Government’s rationale, their statements on milk-based drinks and the Health Committee’s report, I do not see a good reason for them to be excluded—some milk-based drinks have the same proportion of sugar as their non-milk-based counterparts. If the Bill were to run its full course, we would table amendments suggesting that the loophole should be closed. We generally support the measure, but the loophole should not be left open. If we are creating such a tax in primary legislation, we should do it properly. There is no good reason for milk-based drinks to be excluded at the moment.
There has been a lack of consultation on Making Tax Digital and the changes to self-employment, and the UK Government have had to change their position on a number of things. They have had to slow down the roll-out of Making Tax Digital and change their position on national insurance for the self-employed. Partly because the consultation done in advance is not good enough, they do not properly understand the implications of what they are doing before they do it and, therefore, have to row back on it. Real change is needed.
Some Conservative Members have mentioned the proposed changes to things such as the taxation of self-employment. I get that the UK Government are trying to equalise self-employment and employment, but those in employment get the benefits of holiday pay, maternity leave, sick pay and all those things. If there is to be a massive change to the treatment of self-employment, it must be looked at in its entirety. The changes must be made within that context, rather than the tinkering around the edges that we get in Budgets with a general movement towards a general idea.
The Government should make no changes to this for the next few years while they do a comprehensive survey and work out what self-employment looks like now, in 2017-18. The kind of people who are self-employed certainly did not look the same 10 or 15 years ago—the number of women in self-employment is much higher than in previous years—and we need to make sure that the goalposts are not moved for them. The tinkering needs to stop. If the Government are to make changes, they should make them in one go after a proper consultation. They should make a reasonable change in one move.
Talking about a lack of consultation moves me on nicely to oil and gas. I was frustrated with the UK Government’s spring Budget because they announced exactly the same thing as they announced last year on the transfer of late-life assets. The Minister is shaking her head, but the transfer of late-life assets was announced in last year’s spring Budget. This year the Government have announced exactly the same thing about making it easier to transfer late-life assets, but now they will have a group of experts look at it. Why did they not do that last year? I am frustrated that this has not happened quickly enough. I would have liked it to happen more quickly, but I am pleased that the UK Government are doing it. We have been asking for it for a long time and it is a positive move, but they need to move a bit quicker.
We are seeing platforms move towards decommissioning as fields move towards the end of their useful life. Getting oil out of those fields will not be a priority for the big players, but if a new entrant were to come in and take on an asset, it would get as much oil or gas out of it as possible. We need to encourage such behaviour. If the UK Government do not do that, they will have less tax income in future, so it is key for everyone that it happens.
Let me move on to other matters relating to oil and gas—the UK Government will not be surprised to hear us calling for these because we have called for them before and we will keep doing so in the hope that they might actually happen. We want changes on exploration. Although the moves the Government have made on seismic surveys have been hugely positive and very much welcomed—we really appreciate them—we need to make it easier and more cost-effective for companies to explore. We need more exploration allowances. A huge amount of oil is still under the North sea, and the UK Government could receive a huge amount of revenue from the extraction of these minerals. They need to take action now to secure those future levels of taxation.
So there are a few things the UK Government can do. Exploration is really important, as are small pools. I have lost my notes on this, but I believe there is the equivalent of 3.4 billion barrels of oil in small pools in the North sea. There are more than 360 pools with less than 50 million barrels of oil where extraction is not yet taking place. Those pools are treated in the same way for tax purposes as all the other pools, but we could do some fairly simple things to make them much more economically viable. We could remove the supplementary charge on small pools, which would reduce the taxation level from 40% to 30%. That would make it much more likely that we get anything at all from some of those pools.
We could change the taxation level for those small pools so that it is equivalent to the level for onshore oil and gas extraction. The Government obviously think that that level is reasonable for onshore extraction, so it should also be reasonable for these areas where the technology is new. Extracting from a small pool is different from extracting from the bigger areas—those we have previously extracted from—and people are going to have to innovate to do this. The tax system needs to recognise that this is more difficult to do and that we are not talking about the bigger pumping that we saw previously. This is a different situation and the UK Government will not get any tax take from these pools if they do not do something about it.
I have two more things to say about oil and gas—Members would expect an Aberdeen MP to talk about oil and gas! Some Conservative Members were talking about private capital, and companies and businesses not having enough access to capital investment. We have been calling on the UK Government to be more positive about oil and gas supply chain companies so that they can get increased investment. There is a huge, positive future for oil and gas companies, particularly in the supply chain. The North sea is the gold standard for things related to supply chain extraction and the services that we provide; I am told that you cannot go to Houston without hearing an Aberdonian accent, because of the number people, as well as the skills and expertise, that we have exported. Even in these times of reduced revenues coming from the oil and gas that they are extracting, those companies still need to be innovating, in order to get the more difficult oil and gas out. They need capital financing to do that, and the UK Government need to do what they can to make sure that those companies are linked with the right people and that, for example, banks are not cancelling overdrafts at a moment’s notice. Those changes need to be made.
My hon. Friend the Member for Aberdeen South (Callum McCaig) and I recently had a meeting with the London Stock Exchange Group, when we invited it to Aberdeen to talk to companies about its ELITE programme, which trains companies in accessing capital financing. Although it was a hugely positive meeting, not enough of these companies knew about such schemes or where they could go to get finance. There is a real issue to address and the UK Government need to do what they can to be positive, particularly in relation to the oil and gas supply chain, so that we can secure that future in Aberdeen and the UK more widely.
On that note, the other thing the SNP were going to table an amendment on—we still will if we have the opportunity—was UK content. Decommissioning is coming through in a bigger way. It is not by any means the end of exploration and other things in the North sea, but we are going to see more decommissioning in the coming years. A huge number of people are concerned that not enough of the decommissioning tenders are going to UK companies. Currently, not enough of the tenders for other things relating to oil and gas are going to UK companies, either. We would like the UK Government to take action to see what they can do to ensure that, wherever they can be, companies are incentivised to use UK suppliers and UK content. That would be hugely positive for jobs, including high-value jobs, in the UK.
It is important that the UK Government think about oil and gas and keep it front and centre, because it certainly was not enough of a priority in the industrial strategy and the leaked documents on Brexit priorities. Given the amount of revenue the UK Treasury has received from the oil and gas industry and the amount of future revenue, we need to ensure that the industry is listened to and that as much as possible is done to make sure that the UK Government can take the maximum amount of taxation.
On tax collection and avoidance, a 2014 Credit Suisse report on the success of small countries mentioned the fact that for large countries corporate tax collection as a percentage of GDP is significantly smaller than for small countries. That is partly an issue of size, but this is a real problem that will continue to come through for the UK Government. Over the past couple of days we have seen news reports about Border Force officials being stretched as it is and not being able to take action on immigration. Well, Border Force staff also deal with some of the customs issues. If we do not have an appropriate customs service in place, we will not be able to ensure that we collect the right amount from whatever tariffs we have in place. That will be another tax loss for the UK Government, so wherever they need to upskill, they should upskill. Frontline staff will have to ensure that tax is collected in the new scenarios where currently we are not having to do nearly as much tax collection.
I appreciate the opportunity to speak in this debate. As I have said several times, we do not know what is going to happen with the rest of the Bill, but I think I have made as clear as I can the SNP’s position on the things that we consider to be most important.
Victoria Atkins (Louth and Horncastle) (Con)
So much has already been said in this debate that I am going to attempt to be short and, I hope, concise in my remarks. I am aided by the fact that a little time ago I got an A-level in economics, and I hope I will be able to explain my views on the Bill in language of which my economics teacher would be proud.
It is particularly appropriate that we are discussing the Finance Bill because, of course, the Prime Minister today made a momentous statement announcing the next general election. It is only right that we are talking about the economy and finances of this great country, because a strong economy is vital to achieve all that we care about. In my constituency, Louth and Horncastle, a strong economy means jobs and successful firms creating prosperity, and from that, taxes flow. Of course, taxes pay for everything that we care about, from the national health service to defence, in which I have a particular interest because RAF Coningsby is in my constituency. They also pay for schools, and I am sure that we all in this House are united in our wish to ensure that the young generation are educated properly and fully so that we can make a success of not only Brexit but the future. I was particularly pleased today to see the Prime Minister emphasising not only her plans for Europe but the future beyond Brexit.
But—there is always a but—we must still continue to get public spending under control. There is no magic money tree, no matter how often Opposition Members would like to pretend there is. We have, sadly, a debt of nearly £1.7 trillion, which equates to almost £62,000 for every household in the country. We are spending more money on debt interest than on defence and policing combined, which is why we must learn to live within our means.
I have to say that, having spent several hours in the Chamber listening to erudite colleagues, I was a little concerned when, in answer to how much money Labour planned to borrow after the next election, the shadow Chief Secretary to the Treasury said something along the lines of—I hope I am not misquoting him—“We will borrow less than the Conservatives.” I did not hear any detailed financial planning. I will look forward to that in the coming weeks.
One of the best ways to ensure that this country succeeds and is prosperous is to make it the best place in the world in which to do business. That is precisely why we are cutting corporation tax, which was 28% under Labour, to 20% today, falling to 17% in a couple of years’ time.
Victoria Atkins
Indeed. I hesitate to rely on my A-level economics, but companies employ people who pay taxes, and companies themselves pay taxes—not just corporation tax, but VAT, payroll tax and business rates. This is all about giving businesses the best chance of succeeding.
Victoria Atkins
I am glad to see that the hon. Gentleman agrees with me.
One of the most important things about any tax system is not just that it should help to pay for the things that we care about, but that it should be fair. In my previous career, I prosecuted tax fraudsters for a living. I am delighted to say that the main offence that we used to prosecute such people was cheating the public revenue, because if they commit tax fraud, they are a cheat. I look forward to helping the Government not just in the Finance Bill, but in the Criminal Finances Bill, to ensure that tax fraudsters feel the full force of the law.
Looking beyond Brexit, the reason I welcome this Finance Bill is that it places a very great emphasis on helping working families with the cost of living. I intervened on the hon. Member for Aberdeen North (Kirsty Blackman) to say that we have raised the national living wage in April to £7.50, which means an income boost of more than £500 for a full-time worker this year. The personal allowance will rise for the seventh year in a row, benefiting 29 million people, which means that a basic rate taxpayer will pay a full £1,000 less in income tax than they did in 2010 under Labour.
I also welcome this Bill for the help that it gives local authorities for adult social services—I am talking about an additional £2 billion of funding over the next three years—and the extra £100 million it provides in 2017-18 for capital investment for accident and emergency departments in England. I also welcome the £320 million to extend the free schools programme. The fact that the Prime Minister has called an election today shows that the Conservatives are the true Government of the United Kingdom. I know that the Scottish National party will welcome the fact that, under this Bill, Scotland will get more money, as will the Welsh Government and the Northern Ireland Executive. I welcome this Bill and I look forward to the campaign on the principles therein.
Suella Fernandes (Fareham) (Con)
I am pleased to speak in support of this Finance Bill on a day when the general election has been announced, giving the British people a real choice to determine the future of our country—a choice between an overspending, overtaxing, profligate Labour Government propped up by SNP subversives and a prudent, fiscally sensible Conservative Government who can continue the achievements that have been secured so far.
I will focus my comments on clauses 1 and 2, relating to income tax. First, though, it is important to put it on the record that the British economy is strong, resilient and robust, which enables it to punch above its weight in the world. Thanks to the decisions of this Government, employment is at a record high. In Fareham, 968 fewer people claim out of work benefits, a drop of 73% since 2010. The budget deficit has been reduced by nearly three quarters, and public sector net borrowing is forecast to fall from 9.9% of GDP in 2010 to 2.6%. In addition, the Bank of England has upgraded its forecasts for growth in 2017. Global businesses such as Google and Nissan are making huge investment decisions in our country. We are seeing expansion in manufacturing, construction and services. So all the predictions that we heard last year about recession, unemployment and stagnation have not been borne out.
While the Bill does not change the income tax thresholds for the 2017-18 financial year, the Government have made sensible changes to income tax in clauses 1 and 2, which should be highlighted. In particular, by raising the tax-free personal allowance threshold to £11,500 this year, we are supporting families, workers and those on lower and middle incomes. This means that the amount that someone can earn tax free will be over 75% higher than it was in 2010. Someone on a salary of £15,000 will pay £800 a year in tax now, compared to £1,700 in 2015. That is a massive boost to those incomes. By taking millions of people out of income tax altogether, we are committing ourselves to supporting people to keep the money that they earn and we are incentivising work.
So why are these lower taxes important? This is a basic principle of economics that the left simply fails to grasp. They just do not seem to get that raising taxes stifles innovation, reduces the incentive to work and kills the desire to get out there and earn a salary.
Mrs Main
My hon. Friend is making an excellent speech. Of course it is the Conservative party that has increased the thresholds so that people keep more of their own money. The Labour party got rid of the 10% tax rate and brought more people into paying tax than ever before.
Suella Fernandes
I could not agree more. That is the point that I want to make. It is a principle of basic economics. My hon. Friend the Member for Louth and Horncastle (Victoria Atkins) referred to her A-level economics. She will be familiar with the Laffer curve and basic economics, which say that higher taxes do not necessarily lead to higher tax revenues because they reduce the tax base.
George Kerevan
Does this Bill not raise taxes on insurance, and on this, that and the other thing? Is the hon. Lady in favour of the Bill or not?
Suella Fernandes
I completely agree. I am not saying no tax rises at all. I am saying that tax rises have to be prudently applied, and this Conservative Government definitely apply that principle, as we are seeing when it comes to income tax. Let us look at why people work. They go to work because they want to preserve the amount of money that is not taxed. It is the post-tax amount, not the pre-tax amount, that we all work for. Increasing the tax rate reduces the amount that people have available for themselves and decreases the amount available to be taxed.
Suella Fernandes
Yes, but let us see what history has shown. When Gordon Brown increased the higher rate of tax, tax revenue fell. When my right hon. Friend the Member for Tatton (Mr Osborne) dropped it again, tax revenues increased. It shows that we need to incentivise people to work and invest in education and training, and incentivise businesses to invest in this country and to employ people, which generates more economic activity and revenue that can be ploughed back into our public services. That is what Opposition Members fail to grasp and Conservative Members see very clearly. That is why under Governments led by Labour we ended up with higher taxes, higher borrowing, higher debt and in a recession that this Government are still tidying up.
To close, I am pleased that this Government are committed to enabling people to keep more of the money they earn so that individuals and businesses can take part in our economy. We can create a fairer Britain, and a country in which we can all prosper and be rewarded for our efforts.
Rishi Sunak (Richmond (Yorks)) (Con)
From the discovery of Australia to the invention of the cat’s eye, the history of Yorkshire’s people is nothing if not entrepreneurial. That spirit is alive and well in my constituency in particular. From Heck sausages to Tennants auction house and the Wensleydale Creamery, ambitious SMEs are at the heart of our community and economy. Before I arrived in this place, I spent my career investing, backing businesses like those with the capital they needed to grow. I am delighted that this Finance Bill recognises what my years in the investment industry taught me—that ready access to finance is the fuel of success for ambitious SMEs, just as successful SMEs are the fuel of a prosperous economy. Yet, as I have said in the House before, the UK funding landscape for growth businesses presents challenges.
Just 3% of British companies manage to expand beyond 10 employees—half the success rate of businesses in America. The UK has a relatively shallow bond market for early stage businesses, and a venture capital sector that is just a seventh the size of America’s. British entrepreneurs often face an uphill struggle to attract equity risk capital. That is why the Government have enhanced the enterprise investment scheme and created the seed enterprise investment scheme. Since their inception, these programmes have together helped more than 3,000 companies to raise more than £15 billion in early stage finance. The Finance Bill builds on that success to ensure that these schemes help even more small businesses to access investment, grow and create jobs.
Under the current regulations, shares with a right to future conversion are unfortunately regarded as a pre-arranged exit, making them ineligible for EIS and SEIS. But that goes against the reality of conversion arrangements. Far from opening the door to tax avoiders, conversions are often a crucial mechanism for facilitating an initial public offering. If an SME has the ambition to accelerate its growth through accessing the public markets, the Government should not stand in the way. I am pleased to say that the Bill addresses that anomaly. However, there is more we can do.
Many lawyers, accountants, investors and entrepreneurs say that the EIS process is often too complicated and takes too long. The Government’s recent consultation on the advance assurance service, which lets HMRC assess a firm’s EIS eligibility before it seeks funding was welcome, and provoked ideas about what we can do to speed things up. First, I can see the logic for introducing some form of fee for advance assurance. This would help to raise the resources necessary for HMRC to provide a smoother service with greater transparency around processing times and specific dates for document review. Secondly, we could look at the use of standardised documentation, which would save time and money for all participants, enabling HMRC to speed up its approvals.
Thirdly, we must look at how to simplify the EIS rules and their interpretation. Of course, provisions must be made to stop tax avoidance, but the widespread view of practitioners is that the pendulum has swung too far the other way. In the words of one leading venture capital lawyer, there are now “too many gotchas” in the current set of rules. In general, it is the view of the EIS Association, admirably chaired by Lord Flight, that a large part of the reason for this complexity is the need for our laws to comply with EU state aid rules. I hope that when we leave the European Union, the Government will have the opportunity to look at simplifying the EIS rules and ensure that our SMEs get the capital they need to flourish.
I will briefly touch on two other points in the Bill: tax reliefs for sports clubs and companies donating to them; and museums and touring exhibitions. The internet enables us to be so much closer, but we cannot replicate the presence of being close to a Barbara Hepworth sculpture or looking at Shakespeare’s first folio. The Government’s incentives to take exhibitions around the country will enable us all to share in our cultural history and heritage.
When it comes to backing small businesses, this Finance Bill—like the others that came before it—shows wholeheartedly why this Government’s record is unmatched. As the British voters decide in the next few weeks who can best steward Britain’s economy, I commend this Bill to the House.
Rebecca Pow (Taunton Deane) (Con)
There is much to welcome in this Finance Bill and I am very pleased to be taking part in this fascinating debate.
Contrary to the ill-informed comments of the hon. Member for Aberdeen North (Kirsty Blackman), this Bill provides the framework for making the UK one of the most competitive fiscal regimes for oil and gas in the world. I was going to intervene to make that point but decided to save it for my speech.
This Bill brings with it the specific tools we need to keep the economy soundly on track. It demonstrates that this Government have a clear understanding of what is needed to run the country, keeping it on a firm financial footing while enabling businesses to grow and thrive, as my hon. Friend the Member for North East Somerset (Mr Rees-Mogg) said. It enables hard-working individuals and families to live within their means. It enables funds to be raised through our fair tax system to provide the necessary public services we all need. It enables us to have the vital funds to treat and to help those who are not so able to help themselves. That is always something essential that we, the Conservatives, should not and never will forget.
All this has been made possible in challenging times. I welcome the Chancellor’s announcement that we have just been able to allocate another £2 billion of additional funding for adult services, another £100 million to the NHS, and an additional £300 million to fund 16 to 19-year-olds in the new technical education system of T-levels. I applaud that because we absolutely have to skill up our young people to keep our economy strong and growing, but also, in this Brexit world, we need to be on top of our game to maintain and grow our global position.
I applaud the increase in the personal tax threshold to £11,500. This is often mentioned on the doorstep in Taunton Deane. People see it as a real bonus and a real benefit, and say thank you for it. Keeping corporation tax low generates more tax revenue, so that has to be applauded. Given the number of times that businesses collar me to mention this, I have definitely got the message, and certainly the Chancellor has.
I am not going to go on any more about the nitty-gritty of those aspects of the Bill because I want to turn to my own constituency. If the Government, with their solid plans for a strong economy, can get it right for Taunton Deane, they can get it right everywhere—and they are getting it right with their sound economic plan. Since I have been the MP for Taunton Deane, as I am absolutely delighted and honoured to be, it has attracted much more funding than ever before, especially for infrastructure. Traditionally, Taunton Deane, and indeed the rest of the south-west, has been completely underfunded under the Liberal Democrat regime that has held sway there, but this is changing, and I am delighted to be a part of that.
Rebecca Pow
Indeed. Where are they, to speak up for themselves?
Having made a strong case with my Conservative local council, my Conservative county council, and the line-up of all the other Conservative MPs in Somerset, we have money coming forward to upgrade the A358 and create a super-expressway to the south-west. We have had £7 million for a smart motorway on the M5, £6 million for the Tone Way and the Creech Castle junction, and £4.6 million to upgrade Taunton rail station, which is the hub of the south-west and will welcome everyone to the south-west. This is absolutely phenomenal, and none of it would have been possible without a sound economy. It is helping to drive up productivity, which is much needed in the south-west, and it is working. It is creating jobs; indeed, unemployment has never been so low in Taunton Deane, at 3.6%. Get this right and everything works.
Finally, I will touch on an unusual area to mention in a finance debate, namely the environment. With a sound economy and appropriate funding, if we want to have healthy air, clean water, flood-resilient measures and wider catchment processes, and if we want to protect our special landscapes, including ancient trees and sites of special scientific interest, we need to fund farmers and landowners to manage the habitat appropriately for all of us. I say to the Chancellor that that will not happen without a thriving economy. If we want to encourage businesses not to use microbeads in their products, they need the time and money to invest in research, so they also need to be thriving. Indeed, if we want to encourage businesses to go along the lines of the circular economy, they need to invest to find the right way to do it. They might have to invest, but in the end it will pay dividends.
That all needs to be done within the positive framework of a sound economy. I applaud the steps that the Chancellor has taken. The right framework is in place, regardless of Brexit, so let us continue to build on it. Thank you, Madam Deputy Speaker, for including my name last on the list.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
It is a pleasure to close today’s debate on the Finance (No. 2) Bill, even if other events have possibly overshadowed today’s important parliamentary business. In fact, I understand that there are reports circulating this evening that the Crown Prosecution Service is about to charge 30 senior Conservatives with election expenses fraud, so I am afraid it is possible that we may be squeezed down the news cycle still further. I am grateful to Members for their thoughtful contributions to today’s debate.
This is a poor Government who have achieved very few of the aims set out by David Cameron when he first came to power in 2010, especially in relation to the public finances. Instead, they have created a crisis in living standards and underfunded essential public services. Those of us who entered Parliament in 2010 know that the Government’s promises on the economy when they came to power have not even come close to being fulfilled, and this Bill takes a lot of pages to deliver very few tangible improvements on that poor level of performance.
I will begin by reiterating the concerns raised by my hon. Friend the Member for Bootle (Peter Dowd) at the beginning of today’s debate. The Bill is certainly large, adding complexity and technical detail to the statute book, yet we have been presented with an almost impossibly tight timeline in which to properly scrutinise and discuss it. The stakeholders we have consulted have echoed those worries. For example, industry bodies tell us that they have struggled with interpreting and analysing the Bill’s full impact, given the time and volume involved. I imagine that that process will be truncated still further, given the imminent general election.
On the specifics of the Bill, HMRC is rightly at the centre of the Government’s plans to tackle tax avoidance. The Government’s own estimate of the current tax gap stands at £36 billion, which in the opinion of many tax experts is a highly conservative figure, given the method of calculation. It is extraordinary that the Government believe that they can address that gap by drastically cutting HMRC’s staffing and budget levels. At autumn statement 2016, the Government announced a series of cost savings via administration and operational measures at HMRC, totalling £180 million a year by 2021-22. It goes entirely against reason that the Government are trying to find £180 million in savings in an organisation that is critical to efforts to recoup a slice of that £36 billion in missing revenue.
The significance of that tax gap has never been more critical. Our NHS has been pushed into crisis by the Government’s failure to fund it and social care properly. Each week brings new and damning revelations about the state of the service we all rely on, with the end result being that in some areas the Government have simply given up on their own targets, such as the 18-week waiting time for hip and knee surgery. We need a properly funded plan for the NHS that takes into account the real needs of delivering a 21st-century health service with patient welfare at its heart.
We also face the significant added complication of Brexit, which remains unaddressed in the plans for HMRC. Although we all remain in the dark about what exactly our departure terms will look like, we face the reality that we may for the first time in decades have a customs border between us and the EU that will need policing. We are already seeing a crisis in VAT evasion from overseas sellers, potentially costing the Exchequer as much as £1.5 billion a year, by its own estimates. Should we leave the single market, there will be a huge increase in pressure on the customs system, which is struggling to cope as things stand. These are serious matters for consideration, related to the fulfilment section of the Bill. UK retailers are not on a level playing field with unscrupulous sellers from around the world, at a cost to both our competitiveness and our Exchequer, and HMRC is currently ill-equipped to tackle that abuse.
Businesses of course operate in a global environment today. That brings its own challenges, and we need to make sure we are providing the right framework for businesses to handle it. We are approaching what has been termed the fourth industrial revolution, which has precipitated a huge shift in the nature of work and employment. It is unsurprising, therefore, that many of the clauses in the Bill legislate for those changes, such as those involving IR35 and Making Tax Digital.
Undoubtedly, we must change our approach to how we treat employment in the 21st century, but the Government seem to be firing unsuccessfully at a moving target. This change in approach comes far too late and, in our opinion, has the wrong focus. The rise of the gig economy has brought opportunities for some, but challenges and exploitation for others. Flexibility and independence have been highly valued advantages for some workers, but self-employment has also been abused by unscrupulous employers as a means to reduce their tax bill and to avoid giving contractors the rights and entitlements of employees. So far, the Government’s only answer has been to propose punishing the employees by increasing taxes on them, not to consider the rights and obligations of both sides of this equation.
We saw that reflected in the chaos of the Budget last month, when the Chancellor’s completely wrong-headed decision to introduce NICs parity with employed workers highlighted the lack of understanding at the highest levels in the Treasury of the modern nature of work. The Government rightly backed down on the issue, but it showed that trying to legislate piecemeal for what has effectively been a revolution in the world of work has been ill thought through and will not succeed.
For example, IR35 shifts the entire burden of taxation on to contractors, rather than looking at the underlying issue of why the public sector has become so dependent on these types of employees. As is argued by the Low Incomes Tax Reform Group, the rules on errors in taxpayer documents seem to ignore the fact that low-income groups could now be caught in punitive anti-avoidance measures simply because they have no choice but to operate through an agency, or because they cannot afford accountancy advice to help them to fill out their tax returns. As an alternative, we advocate a wholesale review of the package of measures offered to self-employed individuals. Our scrutiny of the measures in the Bill is delivered through that lens: these are a succession of piecemeal changes that risk hurting people unwillingly caught in the net of self-employment, rather than wealthy tax avoiders.
Opposition to the NICs rise for the self-employed was so intense because the UK prides itself on being a country of entrepreneurs, and on being able to create an environment in which small businesses and independent workers can thrive. The Making Tax Digital proposals are yet another illustration of how the Government continue to miss the point when legislating for a changing world of work. These proposals will put undue pressure on small businesses and the self-employed, who simply do not have the resources to input tax information on a quarterly basis.
Even the House of Lords Economic Affairs Finance Bill Sub-Committee has said that it does not share HMRC’s confidence in its estimates of how far the tax gap will be reduced by this measure, which it has described as fragile and little more than guesswork. Evidence given to the Sub-Committee showed that the initiative is in fact likely to result in greater errors in taxpayer reporting, not fewer, as businesses come under pressure to fill out accounts four times as frequently. Again, HMRC will be expected to accommodate this system at the same time as its resources are being cut and even more legislation is being piled up for it to enforce. In line with the rise in business rates, it is difficult to see how the Government can truly say that they are seriously committed to helping UK business to succeed. Instead, 2017 has so far been characterised by punitive measures and uncertainty, and this looks set to continue.
We should be discussing a Finance Bill—this is what we needed—that would address the real problems that exist in this country: the fact that real pay is still lower than before the financial crisis, that 6 million people earn less than the living wage, and that 4 million children live in poverty, two thirds of whom are in households where their parents work. We should be talking about how to balance the tax system and spread the burden, not simply getting into a race to the bottom on corporation tax while seeing crushing rises in business rates, alongside increases in bureaucracy and administration. We should certainly be discussing a serious and realistic plan for the NHS and social care; from what I have seen in my own constituency, I reject entirely the Government’s assertion that they are properly resourcing social care in particular. We have a Finance Bill that does none of these things. For that reason and many others, we will oppose giving it a Second Reading tonight.
Jane Ellison
With the leave of the House, I will close today’s debate, and it is a pleasure to do so. It has been an interesting and wide-ranging debate, and I thank all hon. Members for their contributions. I will try to touch briefly on their contributions, but I suspect, with the time being rather against me, that I will not be able to answer all their questions. As I said in my opening speech, we no doubt have several discussions ahead of us about the next steps on the Finance Bill.
The Finance Bill takes the next steps in helping Britain to succeed both now and in the future. What was lacking from the rather opportunistic speech we have just heard was any willingness to face up to the economy’s strategic challenges. Many are touched on in the Bill and I will refer to some of them now. One theme that emerged—in the speech by the hon. Member for Bootle (Peter Dowd) at the beginning of the debate and in other speeches—was a focus on productivity. Nobody could have been clearer about facing up to the country’s productivity challenge than the Chancellor. I think everyone should be able to support the measures we have laid out to respond to the long-term challenge as a priority, and to take targeted action to invest in innovation and infrastructure.
We are also introducing measures on setting corporation tax to make our economy more competitive. I wholeheartedly reject the comments we hear from the Opposition that try to set small business against large business against medium-sized business. All businesses, over 1 million of them, large and small, will benefit from our cuts to corporation tax. We want to ensure that we offer SMEs enhanced research and development tax relief, and other measures that will help them to grow. I welcome the emphasis placed by my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) towards the end of the debate on that very issue of how we help businesses to grow. I find it extremely disappointing that the Labour party seeks to pass judgment. We want small businesses to become big businesses and we want to ensure that we help that to happen.
There have been a number of comments, not least from both Opposition Front-Bench spokesmen, about HMRC resourcing. I sprang to the defence of HMRC’s record. It has made sustainable cost savings of more than £1 billion over this Parliament while improving performance. Over the same period, it has collected a record level of tax revenue, reducing the tax gap to a historic low of 6.5% in 2014-15. Measures in the Bill will build on the measures already passed by both this Government and the coalition Government to close the tax gap. I would be very disappointed to think that Opposition Members are not supportive of those measures.
Turning to Back-Bench contributions, my hon. Friend the Member for Amber Valley (Nigel Mills) made an excellent and typically thoughtful speech. It was wide-ranging and I will not be able to respond to all the points he made, but he was supportive of the soft drinks industry levy. He rightly focused on measures to tackle the tax gap in VAT and important new steps we are bringing forward. He spoke about a number of other issues. He asked me about when we might look to turn on the power we took last year with regard to country-by-country reporting. We have always said that we want to make the case at various international forums to work through that in an international context. We will continue to raise the issue and pursue international agreement on public country-by-country reporting.
My hon. Friend also sought reassurance on the compressed interest restriction, a measure that, along with the loss relief measures in the Bill, stands to raise £7 billion across the period in question—very significant sums of money from large corporations. He wanted reassurance that that would not be a block on growth and investment. I think I can give him that reassurance. We have a very open and competitive economy, and we have a very competitive tax system, but we expect businesses to pay the right amount of tax. We are not the only country with an interest restriction: for example, Germany, Italy and Spain have similar rules, and other European countries will be introducing similar rules over the coming years. I hope that gives him a degree of reassurance.
My hon. Friend the Member for Vale of Clwyd (Dr Davies) gave a very thoughtful speech on the soft drinks industry levy. I very much welcome his support, drawn from his experience not just on the Health Committee but professionally. He gave a tour de force speech outlining the reasons for providing a prescription to tackle obesity. Obesity offers a considerable threat to the long-term finances of the NHS. I welcome his support for the levy.
The hon. Member for Dundee East (Stewart Hosie) expressed a degree of scepticism about the work that we have done to support the oil and gas industry. I do not think that that scepticism can be justified. We have worked very closely with the industry, and we now have one of the world’s most competitive fiscal regimes for oil and gas, although we intend to go further. At the time of the 2017 Budget, we published a discussion paper on how taxation could better support the transfer of older late-life assets—an important issue for the basin—and ensure that we could put them into the hands of companies that wished to invest. I have met industry stakeholders to discuss the issue, and I know that the announcement has been welcomed. I think it should also be welcomed by Members in all parts of the House, not least members of the Scottish National party—including the hon. Member for Aberdeen North (Kirsty Blackman), who raised similar issues.
The hon. Member for Dundee East also mentioned insurance premium tax. When we made announcements about the proposed new rate, the Chancellor made clear that it was intended to raise vital revenue to fund our public services. Those who oppose such a rise must themselves make clear where they would find the sizeable revenues that we need to invest in our front-line public services and generate income for our economy. I did not hear many answers to that question during today’s debate.
The hon. Member for Birmingham, Selly Oak (Steve McCabe) spoke mostly about the NHS. Let me respond by saying that a strong NHS needs a strong economy, and that is what we are trying to build.
The hon. Member for East Lothian (George Kerevan) made a thoughtful speech, and I agree with him about the need for long-term investment to address the productivity challenge. He gave a degree of support to the soft drinks industry levy, and sought a number of reassurances—not all of which I can give him tonight—about some of the steps that would be taken in the weeks ahead. I was glad to hear that he thought there was much to be commended in the measure. I expect that we shall return to the issue of the productive growth agenda, but let me repeat what I said to him in an intervention: £800 million of additional capital will flow, in Barnett consequentials, to the Scottish Government as a result of the announcements in the autumn statement about the national productivity infrastructure fund. The hon. Gentleman also talked about household debt. I merely note that the debt interest to income ratio is at a record low: it was 4.5% in 2016, compared to 10.1% in 2008.
Although I was not in the Chamber at the time, I believe that my hon. Friend the Member for North West Hampshire (Kit Malthouse) made a typically robust speech in which he supported all measures to promote investment. He talked about science, the need to encourage entrepreneurs, and the challenge of taxing the gig economy, which the Chancellor has acknowledged to be one of the strategic challenges facing not just our economy but developed economies throughout the OECD area. We are contributing to the international debate on that subject. There is more to be said about it, but measures in the Bill begin to address, for example, how some online trading platforms deliver in terms of VAT. That missing VAT represents one of the big parts of the tax gap, and we hope that there will be widespread support for our measures.
The hon. Member for Aberdeen North referred to the scrutiny of tax policy. I think that she and I can agree about many aspects of the announcement of the move to a single fiscal event. As for her other points, we have worked extremely closely with a number of industry stakeholders on some of the more complex measures in the Bill. I think that those measures have been greatly improved as a result, and the stakeholders have given the Government credit for that. We heard another rerun of the argument about VAT refunds for the Scottish police and fire and rescue services, and once again—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. It is a little impolite to make so much noise that the House cannot hear the Minister. While there may be other matters that Members need to discuss, there is nothing more important than the Minister’s summing up of a debate on the Finance Bill.
Jane Ellison
What could be more exciting and important to talk about? I wonder.
I reiterate that the Government warned Scottish Government officials at the time that the new funding model that they proposed would lead to the loss of eligibility for VAT refunds. I expect the SNP will raise the matter again, but it will continue to get that straightforward response to the issues that it has raised.
There was a cluster of pithy and important speeches towards the end of the debate. My hon. Friend the Member for Louth and Horncastle (Victoria Atkins) spoke about the need for sound finances and about reducing borrowing. She made a welcome contribution. My hon. Friend the Member for Fareham (Suella Fernandes) put a welcome emphasis on the increase in personal allowances. How little we heard about that from some Opposition Members. Since 2010, there has been a huge increase in what people can earn before they are taxed.
My hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) drew on his experience and gave voice to the entrepreneurial spirit of Yorkshire. He focused on early-stage finance for growing businesses. He is right that there are things that are helpful in that regard in the Bill, but we are always happy to hear more ideas about how we can support entrepreneurs and businesses to grow.
Fittingly, my hon. Friend the Member for Taunton Deane (Rebecca Pow) ended with the message that we need to keep the economy on track to greater growth and stability. That brings me to my conclusion.
The changes that the Bill is introducing are significant in a number of regards. They will raise significant revenue to support the public services on which our nation depends by tackling tax avoidance and evasion. The Labour party has been a little opportunistic in some of the things it has said in the debate. In the coming weeks, it will have to answer questions about how it would close the tax gap and balance the books to gain any credibility in the eyes of the electorate. It will also have to address in the coming weeks questions on the strategic challenges that this Government have been prepared to face up to—the challenge to look at a tax system that works however people choose to work, and the challenge to address the erosion of the tax base in a serious, long-term, strategic way. The Government are prepared to face up to those challenges, and measures in the Bill begin to address some of those head on.
We are also addressing head on the critical issue of childhood obesity. We are tackling it with our game-changing soft drinks industry levy; that is just one of the measures being taken across Government to tackle childhood obesity. It was welcome to hear support on all sides for that measure. I hope that we are able to make good progress with that because it is a game changer.
The Bill demonstrates the Government’s commitment to a stronger, more secure, more productive economy. I am therefore delighted to commend it to the House.
Question put, That the amendment be made.
Business without Debate
Adjournment (Summer)
Employment and Support Allowance
(7 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Neil Gray (Airdrie and Shotts) (SNP)
Earlier today, we were all gripped with anticipation for an hour or so as to what the Prime Minister would say at the Downing Street lectern. It was a closely guarded secret. Was she to speak about her own ill health, North Korea, Syria or perhaps even Northern Ireland? In the end, we heard a statement of opportunistic self-interest in calling for an early general election. This evening, we hope we will hear what we have been anticipating for months. We hope we will get some detail on what the Government are doing to honour their promises to long-term sick and disabled people who have been found unfit for work but are losing £30 per week from their employment and support allowance. I intend leaving plenty of time for the Minister to respond to this speech, so that she can finally set out the support that is going to be available for sick and disabled people who are, as of now, receiving £30 a week less than they were before 3 April. I noticed before the debate was due to start that she was walking into the Chamber on crutches. I hope that she has not done herself too much of a disservice and that she is able to take part in the debate in a full and meaningful way.
The ESA work-related activity group is for people who have been assessed as being unfit for work, but who must carry out some form of work-related activity—for example, training courses. There has long been an acknowledgement that people in receipt of ESA WRAG have higher costs associated with their illness or disability in carrying out that work-related activity than someone who is fit for work. That is why ESA WRAG has paid a higher weekly amount than jobseeker’s allowance: it is on the understanding that people will rely on ESA WRAG for longer and have higher costs.
Indeed, the Minister acknowledged that when she said:
“We must ensure a person’s liquidity is in place, so that they can afford the additional costs brought by looking for work, or by being poorly or disabled: higher energy bills; mobile and internet access costs; the cost of getting insurance; the cost of a special diet, in some cases; the extra travel costs that come with unpredictable itineraries; clothing and bedding costs; and the cost of specialised equipment—to name just some of those costs….
When that security and liquidity goes, often so, too, does a person’s dignity and wellbeing.”—[Official Report, 17 November 2016; Vol. 617, c. 462.]
Yes, Minister—indeed. Yet, as of 3 April this Government are going to pay £30 per week less to ESA WRAG recipients to bring their allowance down to the level of jobseeker’s allowance, at £73.10 per week. We do not yet know what the Minister is doing or has done to mitigate the £30 per week cut to ESA WRAG, which it is estimated will realise £640 million in annual savings for the Government in a short space of time. She hinted in the passage I just read out, and further on in that speech on 17 November, that she would take steps financially to mitigate the cut. I shall take some time to look at some more of what the Minister has said on this issue.
Stephen Timms
I am grateful to the hon. Gentleman, who is making an important argument. Did he hear, as I did, the Minister give an assurance only three weeks ago in response to a question from the hon. Member for Enfield, Southgate (Mr Burrowes) that the Government will provide full mitigation for the losses incurred by ESA claimants in the work-related activity group? Has he yet heard any information at all about any mitigation, let alone full mitigation?
Neil Gray
I thank the right hon. Gentleman for that intervention. Several statements have been made, and I shall come on to speak about them, but we have not had any detail about how they are going to be realised. I hope that this debate can impress it on the Government that they should finally provide that detail, albeit sadly after the changes have been introduced.
Jim Shannon (Strangford) (DUP)
This is an important issue that has kept a good number of Members in the Chamber for the debate. Does the hon. Gentleman share my concern that some of those who are assessed and put into the work-related activity group should not be there in the first place? A number of my constituents fit into that category; is the same true for him?
Neil Gray
Absolutely. There are great problems in the assessment process. It is part of a wider problem with the system as it stands. To take away £30 a week from people who have been assessed as unfit for work and who are in the work-related activity group is certainly not the right way to go about things. We impress it on the Minister that these cuts should be paused.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
I congratulate my hon. Friend on securing this debate and raising these critical issues. Does he recognise that many of those in the work-related activity group will be people who move in and out of work as their conditions fluctuate? When they go back on the benefit during a period of ill health, they are going to find themselves in a very much disadvantaged position compared with before. This is just no way to treat people who are battling and living as best they can with often incurable, long-term, debilitating illness.
Neil Gray
My hon. Friend is absolutely right and, to her credit and in her typical way, makes her point well. The Government have suggested that there will be a 12-week window in which recipients of ESA in the WRAG may well be able to return to the previous rate; I suggest that that is not enough. If the Government will not reverse the cut, there should be a longer grace period to allow people the opportunity to return to work and to attempt to sustain that work, which is not always easy for some of these people to do.
Patricia Gibson (North Ayrshire and Arran) (SNP)
My hon. Friend is being generous with his time. Does he agree that despite the 12-week pause—this window that he has talked about and that the Minister has mentioned—the sanctions imposed on the people who are losing this money will push them further and further away from the prospect of work, further and further into poverty, and therefore further and further into social isolation and away from the job market?
Neil Gray
Absolutely. I thank my hon. Friend for that intervention, because that point has been made by the expert disability charities. They do not see this cut as an incentive for people to find work; rather, it hinders their opportunities for getting back into work, if they are able to do so as part of a timely process.
In November, in response to the debate on a cross-party motion on this subject that I introduced in this Chamber, the Minister committed to ensuring that a replacement system of support would be in place for ESA recipients in the WRAG before the cut was to take place, but we have no clarity over what that system is or will look like. She said that support would be provided and an additional £15 million invested in the flexible support fund, but, of course, the flexible support fund is a discretionary fund used by jobcentres to help those in receipt of unemployment benefits to find work. It can be used to help with the cost of travel to interviews, childcare, clothing or uniforms to start work. However, the flexible support fund has been heavily criticised by the National Audit Office, the Work and Pensions Committee and others, because of its complexity and under-utilisation.
There have been allegations that jobcentre staff have been pressured into not using the fund. It is also one of the best kept secrets in Whitehall as information about it is not available on the Government’s own website. What concerns me most is that there is no detail over how the flexible support fund, which will total only £83 million after the additional allocation, will directly support ESA WRAG recipients. Have jobcentre staff been told to target the flexible support fund on disabled people?
Another commitment made by the Minister was to secure better deals with service providers to help disabled people financially. She was going to broker deals with energy companies and telecoms suppliers to help sick and disabled people with their bills, but how many people will be able to afford a BT TV package or Sky broadband on even the higher rate of ESA WRAG? Even if she has managed to secure better deals on energy or insurance costs, we have not been told about them. How much will they aid disabled people? Will they make up the shortfall? Who are the deals with? When will they come into force? Will the Government promote them?
The Minister also committed to having personalised support packages in place by now—either a place on the Work and Health programme or Work Choice. Of course the Work and Health programme has yet to start and Work Choice is not new support. Additional places were also to be provided on the specialist employability support programme, which is a very small project, with only 1,700 members in 2015. Another idea was on job clubs, but we have not had any further detail on that. There is also the drive for work experience places with wrap-around support for young people, but again there have been no detail on whether this will be available for WRAG recipients.
Increased funding for the Access to Work mental health support service has also been mentioned. It has been launched, but is available only if a person is in work or signed off work sick, so it will not help those on ESA WRAG. All in all, we have had many different ideas. There have been different, tentative and ultimately detail-free announcements. In the end we have no detail and no way of knowing how the Government plan to live up to their promise of ensuring that ESA WRAG recipients are not punished financially or how they intend to halve the disability employment gap by 2020, as was promised.
Hannah Bardell (Livingston) (SNP)
I thank my hon. Friend for giving way and congratulate him on bringing this serious issue to the attention of the House. Does he agree that the Government are just piling on more pernicious cuts on top of—let us not forget—the closure of Remploy a few years ago, and a missed opportunity in the industrial strategy where there is very little talk of how they will close the disability employment gap? They need to be much more ambitious and much more helpful.
Neil Gray
I agree with my hon. Friend. Indeed I understand that submissions to that effect have been made to the Government’s consultation on the industrial strategy.
All of us—colleagues across this House, Members of the House of Lords, expert disability charities, which have opposed this cut, and disabled people themselves—are expecting detail from the Minister this evening. She has had two weeks’ notice of this debate. She will have known what I was going to raise because I have been asking the same questions for months. There can be no excuse for not being very clear and for not providing great detail on how her Government are honouring their many promises in debates past to placate their own Back Benchers.
Of course I can predict one thing the Minister will say. The Scottish Government now have limited powers over some aspects of social security and she will claim that the Scottish Government can therefore mitigate this cut for the people of Scotland. I hope that I can pre-empt her reading out that nonsense by telling her that I am standing here defending employment support not just for disabled people in Scotland, but for disabled people up and down these isles. Secondly, the Scottish Government have already spent almost £400 million since 2013 mitigating Conservative cuts to social security in Scotland. At a time of austerity, when Scotland’s budget is being cut back to the tune of £2.9 billion in this decade, and the Scottish Government are having to divert depleted funds to mitigate Tory social security cuts, I do not think that telling Scotland to pay twice for disability employment support would be the strongest position for the Minister to take, and it does nothing to help or answer the questions of disabled people elsewhere. So perhaps she will stick to finding a credible argument to justify this cut and outline what additional support she will provide rather than deflect responsibility for it.
The Disability Benefits Consortium brings together 70 different expert disability charities and they have opposed this cut from the start. On the same day as the cross-party motion presented to the Backbench Business Committee was debated in November, they signed an open letter to the Government calling for the cuts to be stopped. They have criticised in particular the Government’s idea that somehow disabled people are disincentivised to work by receiving an extra £30 per week. The Government completely ignore the fact that the majority of sick and disabled people are desperate to work but struggle to find a job. The Government ignore the fact that a third of ESA recipients sometimes cannot afford to eat on the old ESA WRAG rate. Almost seven in 10 say that this cut will cause their health to suffer. The Government have done nothing to assess how this cut will impact on the mental health of recipients. Nobody could suffer a one third cut in their income and not see their health deteriorate in some way as a result, especially when they are already struggling to get by.
The people we are talking about today are people with disabilities or mental health conditions. They want to work, but they cannot. They are faced with the double indignity of wanting to work but being unable to find a job, and then being told that the financial support they are struggling to live on is a disincentive to find work. I am aware—not just from the debate in November when a number of Tory MPs followed MPs from eight other parties through the Lobby to call on the Government at least to pause these cuts, but since then—that all is not well on the Government side of the House in relation to this policy. I understand that the Prime Minister attended a meeting with concerned Tory MPs a few weeks ago and was told directly by them that she needed to do more. Perhaps we will get some clarity tonight as a result.
We need to hear from the Minister what she is going to do to live up to that quote about liquidity. What is she doing to ensure that disabled people, who are already struggling to get by, will be financially supported in addition to any enhanced employment support that may be forthcoming?
This will be one of the final debates of this Parliament. So far the Government have failed to listen to the disability charities, Opposition parties, the Work and Pensions Committee or the will of the House, given the vote in November. Perhaps in the coming weeks, Government MPs will hear more from the electorate about this devastating cut and come back in the next Parliament with a more serious response.
The Minister for Disabled People, Health and Work (Penny Mordaunt)
I welcome the debate secured by the hon. Member for Airdrie and Shotts (Neil Gray) and thank all Members who have attended and intervened on his speech. I shall concentrate my comments on the work-related activity group issue, which is at the heart of the debate. The hon. Member for Livingston (Hannah Bardell) asked about measures to deal with the disability employment gap. Clearly, we are going through the Green Paper consultation responses, but we want to build on the momentum created on these issues and wish to bring forward a White Paper at the earliest opportunity. Additional working up of those ideas will be done with employers and the third sector, which will be able to continue the momentum.
Hannah Bardell
I thank the Minister for dealing with that point, but does she not think that that should have been done before the cuts were made? Would that have been a logical approach, rather than making the cuts, leaving people destitute and devastated, and then thinking about how they are going to be helped?
Penny Mordaunt
The WRAG issue was debated heavily last year and voted on in the House. The measures that were put in place to provide additional support to that group, which I will go into in detail, were debated at the time and confirmed in the Green Paper. So the issue was mentioned in the Green Paper, but it had been consulted on extensively beforehand.
On the point about the industrial strategy, we are very much engaged with the Department for Business, Energy and Industrial Strategy, and we are looking at what can be secured on this agenda from that strategy.
Help is available to enable people to live independent lives and ensure that those who can work have the opportunity to do so. This includes personal independence payments, the Access to Work scheme; local authority-provided social care support and aids and adaptations; NHS-provided aids; free prescriptions; free or discounted travel, for example to hospital appointments; the blue badge scheme; disabled students allowance; the disabled facilities grant; budgeting loans, cold weather payments through the social fund; and housing benefit. I shall not repeat the arguments that I made, as the hon. Member for Airdrie and Shotts has quoted me, but I will address some of the points on liquidity before moving on to his questions about the support package.
We have announced some additional funding for the flexible support fund in the coming years, which offers grants to support claimants with the associated costs of returning to work. Through the flexible support fund, Jobcentre Plus has a discretionary fund that is available to claimants. This includes barrier awards for individual claimants. Such awards could include travel and care costs to help people to attend training or the jobcentre itself. The funds can also be allocated to help claimants to move closer towards or into work—for example, for clothes to attend a job interview and start work, and much more. Each district manager is allocated a proportion of the national budget. There are very few national guidelines, and they have considerable freedom as to how to deploy the funds locally. This clearly helps with work and employment support-related costs.
As the hon. Gentleman will know, at Christmas we introduced a new procurement tool, which enables people quickly to purchase things, commission services and so on using the flexible support fund, so I take issue with the allegations he makes. Maybe the process has involved a lot of admin historically, but that is currently not the case.
Penny Mordaunt
Yes. I will come to that point shortly. I also briefly mention the social fund, which can help with non-work-related costs.
We looked at several ways of potentially ring-fencing funds to this group, but in all cases we felt that it would be subject to legal challenge, so this is by far the simplest thing to do. We can monitor how this is being used and see where the money is going. The flexible support fund and the social fund are the only real route to be able supply additional funding to help people, whether that funding is cost-related to work and moving closer towards getting into work, or whether it is other costs associated with the cost of living.
We have also looked at what we can do to reduce a person’s outgoings. I thank my officials, who have done a huge amount of work with telecoms and energy suppliers to establish what support is on offer, and to encourage new offers and some low tariffs. That work has concluded and the Department for Work and Pensions will signpost claimants—not just WRAG claimants, but others—to services that help to reduce those costs. For example, tariffs are available, particularly to those on ESA, that package up broadband, phone and other costs at a low tariff of £10 a month.
When work coaches meet claimants, they will be able to offer signposting to services that help claimants with budgeting and saving money on household bills. That will be supported by a fact sheet that can be given to claimants. The fact sheet is already in operation and has been distributed through our operations arm. It is a one-stop shop that has all the information in one place, as well as signposting to local services. That is a big step forward. The leaflet, “ESA40”, which is sent to all ESA claimants at the beginning of their claim journey now includes a link to the Money Advice Service and its free support on saving money and household bills. This links into the work that the Department has been doing to follow on from the Extra Costs Commission, and it is a big step forward for the Department.
When ESA was introduced by Labour in 2008 as “a radical reform package”, the work-related activity component was intended to act as an incentive to encourage people to participate in work-related activity and, therefore, return to work quicker.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I do not want to get the Minister up and down on her feet, but I refer her back to what she said about the additional support that will now be available. The Government’s own impact analysis estimated that half a million people would have £30 a week less—£1,500 a year less. What proportion of those 500,000 people will be in receipt of the additional support that her Department is making available, and to what extent?
Penny Mordaunt
That very much depends on an individual’s circumstances. We have looked at a range of circumstances that someone might find themselves in—for example, someone who might need also to apply for PIP. We have looked at the time lag between someone, for example, coming on to being a new claimant for ESA and their actually being able to access that benefit. We have looked at a range of scenarios that someone might find themselves in. However, this support is available to anyone in that circumstance. Indeed, some of it is available to all claimants—for example, the social tariffs, which is a big step forward for the Department.
Neil Gray
The Minister stated in November:
“When that security—
that is, money and liquidity—
“goes, often so, too, does a person’s dignity and wellbeing.”—[Official Report, 17 November 2016; Vol. 617, c. 462.]
Is she therefore confident that the measures that she is putting in place, and the tariffs that are going to be available, will compensate people for this £50 a week?
Penny Mordaunt
I hope that what I have said, and what the hon. Gentleman has quoted me as saying in previous debates, at length, would give him some confidence that I really do understand that we have to do both things. We have to ensure that people are able to pay their bills. If we want them to focus on getting well and on moving closer to, or going back into, the workplace, then putting additional stresses on them is not remotely helpful. That is why we have undertaken this new work in the Department to see whether we can reduce someone’s outgoings, and why we have worked with our operations arm to ensure that this is not something that just sits in a drawer but is being offered to people. These budgeting conversations are happening. So yes, I am confident that this will be acted on throughout our Jobcentre Plus network, and we can monitor how progress is being made.
I mentioned the original intent of the work-related activity component in acting as an incentive. The hon. Gentleman will know that we have recently consulted on radical reform of the work capability assessment. As the hon. Member for Strangford (Jim Shannon) mentioned, it is deeply flawed. We have had many consultation responses on that area, and it will be a major focus of the forthcoming White Paper.
I want to provide some reassurance about the additional support that will be in place, and is in place. All the support that is outlined in the Green Paper is currently in place. That includes recruiting 300 disability employment advisers; the capacity to have one-to-one health and work conversations with a Jobcentre Plus work coach to raise someone’s confidence and help them to manage their health condition; additional places on Work Choice and the work and health programme for all eligible and suitable claimants who wish to volunteer for it; additional places on our specialist employability support programme to support those, in particular, who are furthest away from the jobs market; increased funding for the access to work mental health support service to provide support for in-work claimants; jobcentres reaching out to small employers to identify opportunities and to help match people to jobs with the new small employment offer; and the community partners, who are now all recruited and in place.
Heidi Allen (South Cambridgeshire) (Con)
I am conscious that all the things I am hearing are excellent in terms of getting people into work, but so much of this £30 is about, for example, “Can I turn my heating on because I am in long-term recovery from cancer chemotherapy and I am at home a lot.” Would it be possible for the Department to give us some case studies so that we can see how the £30 is made up—what specific funds, whether a broadband deal or whatever it might be, are in place for Joe Bloggs? I know that the Chair of the Work and Pensions Committee, the right hon. Member for Birkenhead (Frank Field), has written to the Minister about this.
Penny Mordaunt
Yes. As I have said, in the work we have done we have tried to look at people who may be in different circumstances. They may have additional costs or there may be a gap between them and the ability to attain those costs. Clearly, the amount of benefits that someone might receive from the additional funds—whether they be in-work support, cost-of-living support or social tariffs—will depend on the individual, but we could certainly create some case studies. We could also, as time rolls on, give some real-life case studies of how this is working and how the flexible support fund and other provisions are being used.
We have recruited some very high calibre individuals to the multidisciplinary teams, including specialists in mental health and community support. We received more than 2,500 applications for those posts. Many other areas of support are available and I would be happy, although this is going ahead, to continue the dialogue with colleagues who may still have concerns.
Question put and agreed to.