Financial Conduct Authority: Accountability

Alistair Carmichael Excerpts

Wednesday 1st May 2024 Westminster Hall

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I beg to move,

That this House has considered the accountability of the Financial Conduct Authority.

It is a pleasure to serve with you in the Chair, Sir Philip. I welcome the Minister to his place. I know that he has an interest in these issues, and I hope that this debate will be a productive exercise for us all.

It may be worth explaining a little bit about how I came to be interested in the FCA. I probably speak more about fishing than financial services in this House, but the FCA came to my attention as a consequence of constituents who I have been helping. They were victims of a Ponzi scheme, and they lost hundreds of thousands of pounds as a consequence of fraud. The perpetrator was sentenced to 14 years, later reduced to 10 years, in the High Court of Justiciary.

On no fewer than three occasions, the FCA, or the Financial Services Authority as it was initially, failed to read the warning signs and take action. As a consequence, that was allowed to continue. Had it acted at the first available opportunity, there would have been only one victim of Alistair Greig, rather than hundreds.

As is often the case with these matters, a handful of people were determined to fight, but they were rebuffed at every turn. They were told, “No, this is nothing to do with us. It is not a matter of regulation; it is a question of the creation of a principal and of an agent,” and the rest of it. They took court action, which cost them £2 million, and they lost, but eventually the FCA was forced to put them into the financial services compensation scheme, which gave most of them compensation, albeit capped at £85,000. One of my constituents was out for £130,000, so he is £45,000 down and has suffered a further loss as a consequence of the fact that he was one of the brave souls who was party to the court action. The 95 people who were behind that court action are now left with a bill of almost £2 million.

Notwithstanding the fact that this is a consequence of the way that the FCA has gone about its business, it wishes to have no further part in any discussions with the people who were affected. I organised the screening of a documentary in the House a few weeks ago. Even the judge who heard their case turned up. I have never heard of this happening before, but the Financial Conduct Authority did not want to know. No one from the organisation was prepared to come to this House, sit in a room for an hour with the people whose lives had been most dramatically affected by their decisions, look them in the eye and explain what they had done.

[Wendy Chamberlain (North East Fife) (LD)]

My right hon. Friend is outlining a very concerning story. When many hon. Members think about the FCA, including me as an MP from the 2019 intake, it is in relation to its legislative authority for ensuring the changes on access to cash. Does he agree that ensuring that people get the right support so that communities have the access to cash that they deserve is a real concern?

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[Mr Carmichael]

I absolutely agree with my hon. Friend. In fact, as I hope will become clear as my remarks develop, the way that the FCA is going about its duties at the moment is working for nobody. It is clearly not working for the communities most directly involved, for the financial services sector or for members of the public such as my constituents, who have been left to beat their head against a brick wall for years in their dealings with the FCA.

[Jim Shannon (Strangford) (DUP)]

I wholeheartedly endorse what the right hon. Gentleman has said. Does he agree that, for many of us who have brought constituents’ financial issues to the FCA over the years, the FCA often appears to be a barrier rather than a help for the ordinary man or woman? Let us be honest, that perception needs to be altered by a seismic shift in how the FCA engages. I know he feels the frustration that all hon. Members present feel.

[Mr Carmichael]

I am delighted and relieved to see the hon. Gentleman in his place; he is absolutely right. The engagement of the average constituent—I am legally qualified, but I include myself in that—with the financial services sector is often a matter of supreme consequence. Very often, they have to rely on the judgment and expertise of the people with whom they are dealing, who are regulated by the FCA. That is why this matters for all of us.

The parallels with the Post Office are unavoidable. It is the same situation time and again: a well-resourced public body decides to deny, deny, deny until eventually people have to give in. That worked for the Post Office, although we were able to break through it. That is just one of the most egregious examples. Lower down the food chain, where fewer people are affected, including my constituents, it is much more difficult for anybody to get justice.

That is how I became interested in the first place. As is often the case, when one starts to lift rocks, what is underneath takes one off in other directions. I am afraid that I have found little under any rock that I have lifted to make me think there is anything in the FCA at the moment about which we should be happy or optimistic.

The FCA is consulting on proposals to change its enforcement code. Essentially, it is talking about naming and shaming much earlier people who have become a subject of concern. That has to be viewed in the context of its performance: an average FCA investigation takes at least four years. In 65% of cases referred to it, no further action is taken. For such an industry, the reputational consequences of naming and shaming at such an early stage could be catastrophic. The people most directly affected are not the big City firms, because they are big enough to withstand the damage, but the small and medium-sized enterprises, for which the FCA does not demonstrate the level of concern that it should.

A report by Spotlight on Corruption in February showed that 90% of the value of fines against directors in the financial services sector was levelled against directors in SMEs, and only 2% against senior executives in large companies. It is part of the culture that the regulator seems to be staffed and driven by people in the big City firms, who seem to get a different level of service and, dare I say, protection than the SMEs. That matters in relation to the enforcement code changes because there is a real risk of undermining this country’s reputation for stable and predictable regulation. Given the importance of financial services to the economy as a whole, the wider national economic interest is clearly at play.

The culture also goes wrong when we look at the way in which the FCA runs itself. I have had the benefit of a briefing from Unite the Union, and will turn later to some questions it poses through me. Independently of that, I have spoken privately to a handful of people who work for the FCA. I am not going to tell the House what they told me, because even though what they told me was in general terms—just for my own background and understanding—they were concerned that if something I said allowed them to be identified within the organisation, it would be to their professional detriment. Just hold that thought for a second: they are so concerned, and the culture in the FCA is so poor, that they are not prepared, even anonymously, to speak to Members of Parliament. If anybody doubts that there is a cultural problem within the FCA, that should surely remove those doubts.

The morale among staff is pretty poor. I have to say, though, that the staff I met genuinely understand the importance of the work they do in the public interest; they value the role they play, but clearly feel undervalued by the senior executives and the people at the top—and, actually, they are undervalued. Sixty staff working at the FCA earn salaries of less than £29,500, which is the Joseph Rowntree Foundation’s minimum salary recommendation that is required for an acceptable living standard. In fact, that amount would not even allow someone to bring a spouse into the UK under immigration regulations these days.

Unite the Union has surveyed staff extensively and speaks about the toxic environment within the FCA for staff reps, who are given little assistance or support and minimal information. The FCA carries out a quite remarkable performance assessment framework, which is not a million miles removed from the one that I knew when I first became a civil servant at the start of my legal career 30 years ago. I thought we would have moved well away from that, because it was hopelessly inadequate—but no; it seems as if it is almost designed to encourage mediocrity. It is the sort of system that was used by a number of public sector and City companies for a long time, but I do not know of many companies that have used that sort of framework for the last 10 years. It has destroyed the collaborative working environment within the FCA, and 81% of respondents to the Unite survey identified it as being unfair to them.

Unite has posed some questions to me that I will read into the record. I do not expect the Minister to answer them all, but perhaps he could follow up in correspondence. Why does a public sector organisation that pays its chief executive over £450,000 a year find it acceptable to pay a large number of staff below the Joseph Rowntree Foundation’s minimum income standard? Why has the FCA not made any cost of living adjustments for its staff in the 2024 pay round, following a punishing cost of living crisis? Why has the FCA not delivered the resource and priority it has promised staff representation in the wake of recent failures? If the FCA is committed to “best in class” staff representation, as the FCA chair Ashley Alder told the Treasury Committee last year, why will it not recognise a trade union?

What are the Government doing to hold the FCA leadership to account for the problematic culture of fear and burnout, the high staff turnover and the sinking morale that Unite the Union has consistently reported over the years? Why has the FCA persisted with a severely outdated model of staff performance grading, long abandoned by the industry it regulates? Surely the FCA should be leading the sector as a role model, should it not? Finally, why has the FCA made no headway in its large disability pay gap? Unite the Union reports that staff with disabilities, neurodivergence or complex personal circumstances are simply getting poorer performance and pay outcomes than their peers.

The FCA as an organisation does massively important work in the public interest but as I said to my hon. Friend the Member for North East Fife (Wendy Chamberlain), it is surely clear that it is working for nobody. It is not working for members of the public who rely on the protection it might give them, as evidenced by my constituents and the impact they felt from the Midas Financial Solutions Ponzi scheme’s fraud. It is not working for the benefit of the sector that it regulates, as evidenced by its proposed changes to the enforcement code. It is not working for our communities, as evidenced by the work on access to cash referenced by my hon. Friend, and it is most certainly not working for the benefit of the people it employs.

It is apparent to me that the poor culture in the FCA is driven from the top and then bleeds into every aspect of its work. As an organisation, it has lost direction and lacks leadership from the top. However, we all remember why we have it and why it was set up. For the national economic interest of us all, it is too important to fail, but surely it is apparent that it is failing, and somebody needs to take control and change that.

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[Bim Afolami]

The hon. Lady makes an important and fair point. I agree with her that access to cash—which, as she knows, this Government legislated for—needs primacy in the way she has described. Banking hubs are a replacement when several banks have shut in a town or large village, and I believe that the assessment criteria relating to where they come in and the speed of the roll-out should be looked at again. To be fair, that is not down to the FCA. The expected timeframe for it to finish its consultation on access to cash is the third quarter of this year, and although the FCA is part of that process, it is worth saying that it is not the primary driver; the primary driver is the industry.

Let me come to a case that I know is close to heart of the right hon. Member for Orkney and Shetland: the failure of Midas Financial Solutions. Mr Alistair Greig perpetrated a large-scale fraud over a period of several years, lying to those who trusted him with their pensions and life savings. Those were people who had done the right thing in their lives—they had done everything right—and because of the fraud of that individual and his company, they lost out. The FCA intervened in 2014, following the receipt of intelligence related to the Midas scheme. The Financial Services Compensation Scheme was subsequently able to compensate eligible customers for a significant portion of what was lost, and Mr Greig was charged, found guilty of fraud and imprisoned.

It is imperative that the FCA continues to robustly enforce its rules and standards, not just against firms that are carrying out blatantly fraudulent activity as in the case of Midas, but to ensure that all the firms it supervises meet high standards and deliver high-quality outcomes. The FCA operates a risk-based approach, not a zero-failure regime. It is important Ministers say this: we are not in a world—nor should we aim to be in one—where it is impossible for anything to go wrong ever. What we have to do is say to the FCA, “Your job is to maintain a high standard and high quality in the market for all the firms you supervise.”

[Mr Carmichael]

I have absolutely no argument with the Minister on that point—it is absolutely sensible—but the fact of the matter is that the regulator was told not once, not twice, but three times, and each time it failed to take the appropriate action. It was sometimes just as basic as putting people through to the wrong extension when they phoned. The truth of the matter is that if my constituent and the 94 others who took legal action had not stuck with it, nobody would have got any compensation from the FCA. That is why there is surely a basic point of fairness and justice here: having been the ones who got the money for everyone, the money that they spent getting that compensation should be recognised.

[Bim Afolami]

I thank the right hon. Member for that point, which I will consider carefully while I discuss the accountability of the FCA to Parliament and the Treasury. The Financial Services and Markets Act 2000 establishes multiple ways for the Government, Parliament and the public to scrutinise the FCA—through, for example, its annual reports, which must set out how it has advanced its objectives. This year, down to the proposals of this Government and this Treasury, the FCA will for the first time report on how it has embedded its new growth and competitiveness objective. The Treasury can direct the FCA to include extra things in its reports. The FCA also regularly publishes a large amount of data on its performance—for example, on the time taken to respond to applications for authorisation—which demonstrates to the public whether it is meeting its targets. Indeed, the Treasury can shape the focus of the FCA by writing to it to set out which aspects of Government economic policy it should have regard to when advancing its objectives and carrying out its functions.

The right hon. Member mentioned concerns that had been shared with him about the internal culture, and pay decisions by the FCA. It is not appropriate for a Minister to pronounce on those things, beyond saying that I will be with him in scrutinising the annual report when it comes out to see in which areas those things are addressed. I am happy to discuss that with him, as well as the methods for accountability in that regard. It is also important that we set out through the Financial Services and Markets Act 2023 that the regulators are now required to respond annually to the recommendation letters. This provides greater transparency about how the regulators respond to Government recommendations.

The Treasury also has a range of powers to direct the FCA in certain exceptional circumstances. For example, it can require the FCA to conduct an investigation of relevant events where it is in the public interest. That happened once in relation to the FCA; in 2019, the Treasury directed the FCA to review the events relating to the failure of London Capital & Finance. After that report was done, the FCA subsequently accepted and implemented all recommendations, which included a significant overhaul of its operations through its transformation programme.

In addition to the Government and the Treasury, Parliament also has a vital role in scrutinising the actions and performance of the FCA. We have the Treasury Committee, and there is a new House of Lords Financial Services Regulation Committee, which regularly examines the work of the FCA. I would add that it is important that we think more about how we scrutinise in the most effective way. I fear that sometimes when it comes to the FCA, there are so many methods of accountability that it almost appears that there are none. They are so disparate, bitty and numerous that it is time consuming and expensive for the FCA, and often difficult to follow for Members of Parliament.

There is more work that we can do to streamline the process of accountability to ensure that it is rock solid and firm, and focused on not just consumer outcomes but ensuring the market works—and to do so in a way that makes sense for both Houses of Parliament. For example, between December 2019 and March this year, the FCA provided oral evidence to Select Committees on 36 occasions. That is a lot. In addition, there is constant discussion between Members of this House and the FCA. I think there is accountability, but we need to find ways to ensure that it is streamlined and more focused.

I hope I have reassured the right hon. Member for Orkney and Shetland that the Government take holding the FCA to account very seriously—I know that I do in particular. The legislative framework is designed to strike the right balance between the independence of the regulators and ensuring that they are held properly accountable. The Government have built on that accountability through the Financial Services and Markets Act 2023. This House, and Parliament as a whole, will be able to judge the FCA’s progress through things such as the upcoming report on how it has advanced its new secondary growth and competitiveness objective since it came into effect last year, and whether it takes account of the view of this House and the Chancellor on its naming and shaming proposals.

Question put and agreed to.

Furnished Holiday Lettings: Taxation

Alistair Carmichael Excerpts

Wednesday 1st May 2024 Westminster Hall

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I understand the concerns about housing shortages, which I have in my constituency. The answer to the shortage of housing, however, is to build more houses; it is not to punish what is a very important part of the local economy, including in parts of the country like mine. The advantage of such a tax provision is that it allows for the improvement and professionalisation of the sector, which at the end of the day can only improve the visitor offering.

[Peter Aldous]

I agree with the right hon. Member on both counts. There are other measures being introduced, such as the register, that I believe will help bring professionalism into the sector. In fact, I know from the constituents I have spoken to and the businesses that operate this type of furnished holiday accommodation that they are incredibly professional businesses.

--- Later in debate ---

[Nigel Huddleston]

I thank my hon. Friend for that point, which she has raised with me previously. I should put on the record that many hon. Members in the Chamber have raised concerns about the implementation of this proposal with me. The challenge is that one of the goals is simplification, and when we start moving into the area of carve-outs and exemptions, it opens up the system to challenges and potential abuse. I hear what my hon. Friend has to say. She will always hear from Ministers that we keep tax policy under review, but as soon as we start moving to an exemption here and an exemption there, it causes great difficulties. I also thank PASC for its constructive engagement with me on this issue and for giving me information.

I have had lots of correspondence and have engaged with colleagues, and I want to make this very clear. There is a belief that when we said we were abolishing the FHL tax regime, that meant we were abolishing FHLs. No, of course we are not. As I said, they play a vital role in the visitor economy, but we want to change the tax policy. The intention is for the tax reform to apply to all properties.

There will continue to be benefits. After the abolition of the FHL tax regime, a higher rate paying landlord with mortgage interest costs of £12,000 per year would still get up to £2,400 taken off their income tax bill through the relief. If they spend a further £8,000—for example, on insurance, letting agent fees and replacing domestic items such as sofas, fridges, washing machines—they could save a further £3,200 in income tax by using the reliefs that are available for all landlords. It is about levelling the playing field. There will still be tax incentives, but we do not want that distortion. When somebody buys a new property or an existing property, there is a false incentive that is causing some problems, because human behaviour that naturally seeks a better return on investment leads them towards short-term lets, rather than long-term lets. That is what we are trying to correct.

[Mr Carmichael]

On a point of order, Dame Siobhain. When I intervened, I should have pointed out that I have a declarable interest registered. I apologise to the Chamber for not doing so at the time and I hope the position is now clarified.

[Dame Siobhain McDonagh (in the Chair)]

Okay. That allows me to shorten what I was going to say.

Motion lapsed (Standing Order No. 10(6)).

HMRC Self-Assessment Helpline

Alistair Carmichael Excerpts

Wednesday 20th March 2024 Commons Chamber

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

The reprieve is welcome, but if we are to keep these helplines open, can we at least resource them properly and make them work? I spoke to a chartered accountant in my constituency this morning, and he tells me that when he recently phoned HMRC with a complex query on behalf of a client, it took 40 minutes to get an answer. When the phone was answered, there was an acknowledgment of the problem. He suggested that the answer might lie in his client’s wife’s data being incorrectly ordered, at which point he was told that the staff were allowed to handle only one case per call, and that he would have to hang up and phone back, with another 40-minute wait for an answer. Surely that is no way to treat a customer.

[Nigel Huddleston]

I thank the right hon. Gentleman for raising that point, and I am happy to raise it with HMRC.

National Insurance Contributions (Reduction in Rates) (No. 2) Bill

Alistair Carmichael Excerpts

Committee of the whole House
Wednesday 13th March 2024 Commons Chamber

[James Murray]

I thank my hon. Friend for bringing us that update from the Treasury Committee about what the Chancellor has been saying. Again, we can see the Chancellor being reckless by talking about merging national insurance with income tax without having a second thought for what impact that would have on hard-pressed taxpayers, particularly pensioners. Pensioners do not currently pay national insurance on their earnings and would be hit by a tax increase as a result of national insurance and income tax being merged. That is another example of how reckless these plans are, and how reckless it is for Treasury Ministers to refuse to stand up and explain how their plans would be funded.

The public deserves to know. If Ministers vote against our new clause or they refuse to come clean, then the British people will have it confirmed, yet again, that the Conservatives cannot be trusted with the economy, public finances or the finances of households across our country.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

Thank you for calling me, Mr Evans—surely it is long overdue that it should be Sir Nigel, but we will go with Mr Evans for today.

I stand to move new clause 2 in the name of my hon. Friend the Member for Richmond Park (Sarah Olney). Hon. Members will see that the effect of new clause 2 would be fairly short in its compass. It would compel the Treasury to report to this House its forecasts of the change to the number of people who are set to pay national insurance contributions as a result of the thresholds for payment remaining frozen until 2028, instead of increasing in line with the consumer prices index, which would be the case otherwise. The Chancellor and other Ministers have spoken today about the pride the Government take in what they are doing. In the interests of transparency, the Government should have no difficulty accepting new clause 2. I am sure it is merely an inadvertent omission that those measures are not part of the Bill already.

It is apparent that comments made by the Chancellor, the Prime Minister and others about the idea of abolishing national insurance altogether have started a debate, as we have seen this afternoon. It is a substantial commitment to make—£46 billion—and we do not yet know where that money would come from. That is maybe not the novelty that it used to be, certainly before the mini-Budget. However, it offers us an opportunity to think a little bit about the nature of national insurance as a tax, because it is quite distinct in its composition and operation.

In practical terms, functionally, national insurance is more or less like any other tax, in as much as money is paid into the Exchequer and fills the coffers, and then is spent as the Government or Governments see fit—in relation to health, policing, transport, Ministers’ legal fees or whatever else it is going to be.

As a matter of intent and purpose, however, national insurance is identifiably different from the other taxes we pay. More than any other levy, it is the symbol of our shared obligations—what we owe each other as a society and as communities in support throughout our lives. The point of national insurance is that we pool and share resources geographically and generationally. We pay our stamp on each payslip, trusting that, when the time comes for us to retire, someone else will continue to pay taxes that will fund our pensions.

Let us remember that the roots of this tax are in Lloyd George’s Budget, and that the introduction of national insurance came with the introduction of the pension. That is why we have the legacy of the link between national insurance and pensions, which was pointed out by the hon. Member for Denton and Reddish (Andrew Gwynne) in an intervention. That is significant. These are matters that must be clarified before we undertake a change of this sort.

At the heart of any healthy liberal democratic society, there is the idea that we have lasting obligations to one another. We have obligations to those we know, to those we do not know, to generations that are older than us, and to those who are yet to be born. We can be bound by policies with which we disagree, and sometimes we must pay taxes for things that we dislike or that we feel we do not need. That is the system in which the national insurance contribution has a demonstrably significant and different impact than other taxes. It is part of the tapestry of government and public life in this country.

This is perhaps just pulling at a thread, but the Minister and, indeed, people in all parts of the House would be well advised to consider exactly what they may be unravelling by pulling at this thread. Full transparency from the Government on the effect of freezing national insurance contributions in the way that has been proposed should be an important part of this debate as it proceeds.

[The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)]

Thank you very much. Can someone from the Liberal Democrats inform the Chair who their tellers will be, as their amendment has been selected for a separate Division?

Coastal Tourism and Hospitality: Fiscal Support

Alistair Carmichael Excerpts

Thursday 22nd February 2024 Westminster Hall

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is a pleasure to serve with you in the Chair, Ms Cummins. I congratulate the hon. Member for North Devon (Selaine Saxby) on securing this debate. By accident or design, Members have spoken about a range of communities although there have been a number of common threads.

I first remind the House of my entry in the Register of Members’ Financial Interests: I am a partner in the firm that runs my family farm, which also includes holiday let accommodation. In many ways, that is a living example of the changes and opportunities that the visitor economy brings to communities such as mine in Orkney and Shetland, and doubtless to those in other coastal and island communities around the country.

Tourism is of enormous importance to communities such as ours. I listened with interest, as always, to the hon. Member for Strangford (Jim Shannon), who described the ripple effect of dropping a stone in the water. The stone in this case is the visitor economy. The benefits come very obviously to those who operate the hotels, the bed and breakfasts and the self-catering accommodation, and they go out to those who are able to work part time as self-employed tour guides, for example, and those who have jobs servicing that accommodation—they go out and out. Tourism may be a useful add-on to a conventional business. The hon. Gentleman said that a number of farm businesses in rural and coastal communities have some sort of tourism add-on—perhaps seasonal. At the end of the day, it is what they can show to their accountant at the end of the year that matters.

The way in which our rural and island coastal communities have got up and done things for themselves is an inspiring story. The real beauty of it is that, by and large, these are the self-employed or small businesses—medium-sized enterprises at most—and the money they earn and pay out stays in the communities. It goes into local shops and post offices. It allows families to live in those areas, because their children can go to local schools. We can keep local doctors, services and banks; the story continues. There is no single silver bullet for these economies, but tourism is an important part that makes the whole thing more feasible.

There are a number of significant challenges. They are not, strictly speaking, fiscal, but they are significant, given the way that they hold back island communities. In Scotland, we have an ageing ferry fleet. For island communities, that has been problematic for the past few years, and sadly it is only getting worse. The availability of labour in the local community causes real difficulty, especially in a seasonal economy. People moving into work in island communities need accommodation at a time when people are coming to stay in the same accommodation, so housing availability in our island and coastal communities is a significant issue, and Government-led—public sector —provision could make a real difference to businesses’ ability to grow.

The regulatory burden unfortunately seems to get greater every year. In Scotland, we now have the short-term let licensing scheme. It will be interesting to contrast how that works with the way in which things are now being done south of the border through a planning mechanism. I have not yet seen figures for it, but my sense is that we may see, especially in the smaller outer isles in Orkney and Shetland, a lot of people walking away from the provision of bed and breakfasts or self- catering accommodation as a consequence of the licensing regime. It is expensive for people to comply with, especially if they are away from the centre of the population. Goodness knows it is difficult enough for someone operating a business in Kirkwall and Lerwick to get work done, but if they are operating in one of the outer isles—in Sanday, Stronsay or North Ronaldsay, or perhaps in Unst, Yell or Fetlar in Shetland—that becomes yet another extra burden and cost. The farther the accommodation is from the centre, inevitably the fewer weeks in the year it can be let and the fewer people coming to stay in the community. Again, at the end of the day, is it worth it? The balance is sadly tipping in the opposite direction, towards saying no.

Those are some of the challenges, but at the end of the day, these people are self-starting and entrepreneurial and do a lot to bring economic growth to their communities, and there are certain levers that the Treasury could use to help them grow their businesses. The difference between the fiscal levers we can pull and the other grant-aided incentives and opportunities is that fiscal levers give people more opportunity to decide what is best for them and their business, rather than having to design their business to conform with the various requirements of a grant application or discount scheme.

There is a real opportunity for the Government to add value and opportunity to tourism and visitor-economy businesses in our island and coastal communities. The single most important change I hear advocated by those businesses, time and again, is the one touched on by the hon. Member for North Devon (Selaine Saxby)—the reduction in value added tax. It is rare in any sector that we hear such consistency in message. We have seen a small example of that already with the reduction to 5% during the covid pandemic. It would be interesting to know what analysis the Treasury has done of the tax take in that time—albeit everybody was operating in a much-reduced market.

I come back to my experience from my time in government, when we reduced the duty on spirits. We did so—for only the second time in history, I think—in the expectation of a significant cut in revenue. In fact it produced a significant increase in revenue to the Treasury. I cannot remember the exact figures of the tax take, but I think we expected a £600 million decrease and actually got a £800 million increase. That shows what is possible sometimes when we reduce the burden on industry and business and allow them the opportunity to use that extra cash to grow their business. I strongly suspect—indeed, significant research has been done on this by some of the big consultancies; Ernst and Young springs most readily to mind—that the same would be possible for the visitor economy in our island and coastal communities. That being the case, at a time when we want to grow the economy and are relying on that to spread the benefits of growth throughout the country instead of hoarding them here in London, surely that is something that must commend itself to the Government.

Oral Answers to Questions

Alistair Carmichael Excerpts

Tuesday 19th December 2023 Commons Chamber

[Jeremy Hunt]

I would be happy to ask one of my colleagues to meet the hon. Gentleman to discuss why freeports are not appropriate in his part of Leicestershire.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

3. What recent discussions he has had with his Scottish counterpart on farm budgets for the financial year 2024-25.

[The Chief Secretary to the Treasury (Laura Trott)]

A very merry Christmas, Mr Speaker. The Government guarantee to maintain the £2.4 billion annual budget for farmers across the UK for every year of this Parliament. As agriculture is devolved, it is ultimately for the Scottish Government to decide how to allocate that money to farming in Scotland.

[Mr Carmichael]

The Minister will be aware of the frustration that is felt by many farmers and crofters in Scotland that the £33 million that was given to the Scottish Government for a specific purpose as part of the Bew review has been deferred hitherto. What will she do in future to ensure that where money is given for the express purpose of supporting Scottish agriculture, it is in fact used for that purpose?

[Laura Trott]

The right hon. Member raises an excellent question. The SNP Government are yet to clarify when this ringfenced money will be returned. I hope they will do so this afternoon at the Budget.

Oral Answers to Questions

Alistair Carmichael Excerpts

Tuesday 14th November 2023 Commons Chamber

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

14. What fiscal steps he is taking with Cabinet colleagues to help support households in fuel poverty.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The Government have taken significant action to help households with rising energy prices and the costs of living by providing one of the largest packages of support in Europe, totalling £94 billion.

[Mr Carmichael]

Orkney and Shetland have the worst rates of fuel poverty of anywhere in the country. Provisional figures show that, for last winter, both Orkney and Shetland recorded record levels of winter mortality. In his new office, will the Minister bring his colleagues together from across Government to hear from agencies such as THAW—Tackling Household Affordable Warmth —in Orkney that are working to tackle fuel poverty, because if we can tackle fuel poverty in Orkney and Shetland, we can tackle fuel poverty?

[Gareth Davies]

We are incredibly sympathetic to the right hon. Gentleman’s constituents, who have suffered a very difficult time. That is why we introduced the energy price guarantee, which will remain in place until March 2024 as a safety net. We continue to engage with lots of stakeholders and we are very happy to include the ones he suggests.

Oral Answers to Questions

Alistair Carmichael Excerpts

Tuesday 20th June 2023 Commons Chamber

[Andrew Griffith]

I thank my hon. Friend for her question. She will be aware of what is in our Financial Services and Markets Bill, and I can update the House by saying that the Government have tabled an amendment to protect free access to cash withdrawal and deposit facilities. I would be happy to meet her to discuss her constituency’s needs.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

T8. I remind the House of my entry in the Register of Members’ Financial Interests. Recent Government pronouncements relating to food security have been welcome, but if they are to be meaningful then farmers and crofters need certainty about the future of Government support and, critically, the amount of money that will be available to fund that. Will the Chancellor tell us when he will engage with the Department for Environment, Food and Rural Affairs and the devolved Administrations about the size of the budget that will be available? In the meantime, will he meet with me and the National Farmers Union Scotland?

[John Glen]

As the right hon. Gentleman knows, the farming support payment is ported to Scotland and operates on a different basis because it is devolved. We have committed to the sum of £2.4 billion for the duration of this Parliament and there are a number of schemes where the uptake is now increasing. I will continue to engage with my colleagues at DEFRA as those schemes develop further.

Funding for Major Infrastructure Projects

Alistair Carmichael Excerpts

Wednesday 3rd May 2023 Westminster Hall

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is a pleasure to serve with you in the Chair, Mr Sharma. I congratulate my hon. Friend the Member for Bath (Wera Hobhouse) on securing today’s very timely debate. It strikes at many of the issues that we face in politics at the moment—issues that must be dealt with over something longer than the current electoral cycle. One of the failings of politics and the frustrations with Government that we have all experienced over the years is that we are all focused on the next four or five-yearly electoral event. For some infrastructure projects—we have touched on HS2, and I will speak about some that are closer to home for me than that will ever be—we need a more strategic approach.

When it is at its best, the Treasury is very good at doing the strategic, but often it becomes a bit hidebound by its own rules, and it lacks a little of the creativity that we require. For those of us in the northern isles, the most important infrastructure that we have is our transport infrastructure, in particular our ferries. We have the ferries that go between Orkney and Shetland and Scotland—or mainland Scotland, as some people like to call it—and the ferries that go between the different isles that make up Orkney and Shetland. What brings me to the Chamber today is the community discussion of those internal ferry services in recent years.

Earlier in the sitting, I was pleased to welcome the announcement of funding of £26 million for a replacement Fair Isle ferry—a significant amount of money, but that money is critical to preserving one of the smallest and most economically fragile communities to be found anywhere in these islands. The geography of Shetland is such that, apart from Fair Isle, Foula and others, the islands are pretty close together on a map. To our mind, it makes perfect sense for those islands to be joined not by ferry services, which are subject to weather delays, breakdowns and all the rest of it, but by a series of short tunnels—fixed links. In recent years, the debate on the islands has very much headed in that direction. We look with some envy at what our Nordic cousins in the Faroe Islands have done by linking their islands together and at the west of Norway, where parts of the mainland are linked by tunnel, as indeed are some of the smaller islands.

As a consequence of those discussions, which have been happening in the community for some time, my colleague Beatrice Wishart MSP and I set up a series of town hall meetings in the summer of last year. Obviously there are no towns, so they were not in town halls; they were in community halls and church halls in Fetlar, Unst, Yell, Whalsay, Out Skerries and Bressay. In an age in which we are always told that people are uninterested in politics and will not turn out for a public meeting, about 250 people from these small communities came out over the course of a week to offer their views on what fixed links could do for their communities.

A tiny number of people demurred, but the overwhelming consensus was that in our communities the construction of fixed links could be absolutely transformative for the design and delivery of public services. Keeping GPs based in an island community of a few hundred people is a big ask, for example. Then there is the creation and ongoing maintenance of schools in those communities, which are constantly shifting.

I was born and brought up in Islay; I grew up there in the ’60s, ’70s and early ’80s. In those days, one GP served our end of the island. If he went fishing for the day and someone had an accident, they had to wait until he came back from his fishing trip. In the 21st century, thankfully, that is not how the NHS works. We need a wider range of clinical practitioners, and people expect different standards from those practitioners. Maintaining public services of that sort in such communities becomes ever more difficult and challenging for us.

At every meeting we heard the same story. Overwhelmingly, the view was that young people wanted to stay in the outer isles in Shetland, but were forced to leave by the nature of the opportunities for employment, health and education for their family and were desperate to return. If these people stayed in our island communities, they would contribute to their economic growth. They would be able to found, run and grow businesses or maintain businesses that had been run by their family for generations, keeping children in the schools and keeping money going through local contractors into post offices, shops and all the rest of it.

For the bigger economic development projects, getting products from the outer isles to the market will always require at least one ferry service, but there is no reason it should need two. I think of businesses such as Cooke Aquaculture, which has a processing station in Mid Yell: it has to construct an entire staff rota on the availability of ferry services to get its product from Mid Yell down to Lerwick before it catches the ongoing ferry. That is how the infrastructure provided has a very direct impact on one of the most important food-producing businesses in my constituency.

[Wera Hobhouse]

I do not know too much about ferry services, but I think the point that my right hon. Friend is making is that we cannot just look at one product in isolation. The cost benefits are wider, in the round.

[Mr Carmichael]

Absolutely. I am horrified that, having been a colleague of mine, my hon. Friend says she does not know much about ferry services—she has clearly not been listening! However, the point she makes is a good one.

This is where Treasury rules and funding come into play. If we are looking at ferries, for example, we look for a pay-down over a 20-year or possibly 30-year period. A tunnel will be several times that, but Treasury rules constantly push people towards a like-for-like replacement. They seem to lack the flexibility and creativity necessary to provide the services that will maintain the economic and social viability of such communities in the longer term.

There is also a continuing role for EU—sorry, for Treasury—funding.

[Peter Grant (Glenrothes) (SNP)]

You were right the first time.

[Mr Carmichael]

Yes, I am always right the first time.

There is a continuing role for the Treasury in relation to funding, because a significant proportion of the ferries that we are now looking to replace were purchased and commissioned in the first place with a proportion of EU funding. That funding now sits with the Treasury, so although transport as a whole is devolved, there is still an obvious and strong role for the Treasury.

Following on from the Tunnel Vision roadshows that we ran in the summer of last year, as we suggested, communities set up tunnel action groups to decide how they could make the case. The case for a big infrastructure project like that, for a small community, is always that it should basically be designed by the community itself. I am happy to tell the House that the Unst and Yell tunnel action groups, working together, have already obtained pledges in the region of £100,000 towards the £200,000 that they think might be necessary to get the first stage of a feasibility study.

The project will have not just local strategic importance, but national significance. Unst will probably be the earliest and most effective—possibly the only—spaceport in the United Kingdom that is capable of doing vertical as opposed to horizontal launches. The people behind the SaxaVord spaceport in Unst tell me every week that that will be critical to their ability to exploit to the maximum the potential of the project in which they are investing.

There is also the question of the carbon cost. In the medium to long term, tunnels will always be much more carbon-efficient than ferries, with respect both to running costs and to ongoing replacements.

The Treasury has a pot of money that is currently set aside as a consequence of the wish of the last Prime Minister but one, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), to build a bridge from south-west Scotland to Northern Ireland. I can promise the Minister that there are none of the problems with unexploded ordnance that befell that particular project. The money still sits there in a ringfenced pot, so if the Minister wants to stand up and give me a commitment to fund tunnels for Shetland, I will be delighted to take it.

What we are looking for at the moment is a bit of willingness from the Treasury to engage with our community and allow us the opportunity to make the contribution to the rest of the United Kingdom that we have always made and that we know we can continue to make. Might the Minister agree to meet me and a delegation from the Shetland communities and the Shetland Islands Council to hear their intentions and hear what they want to do to make this happen? A small amount of Treasury money at this stage, to establish the case with scientific and technical rigour in a way that as a community we may be unable to do for ourselves, could be transformative in future.

[Several hon. Members rose—]

--- Later in debate ---

[Peter Grant (Glenrothes) (SNP)]

I am pleased to begin summing up the debate, and it is good to see you in the Chair, Mr Sharma. I commend the hon. Member for Bath (Wera Hobhouse) on her very well informed introduction to the debate. I heard her say that she did not win the ballot for this debate, but was asked to hold it later. That may be a lesson for us all: losing one vote does not prevent you from having another go later.

The hon. Member for Wimbledon (Stephen Hammond) gave a very interesting examination of the technical and organisational factors needed to get a project right, and to make sure that future projects go well. One thing that has struck me in this place is that when a big project goes wrong, nothing gets learned. If the Department of Health and Social Care has a project, the Department for Transport does not learn anything from the mistakes, so it makes exactly the same mistakes. We could fill a library with the things that we could learn from problems with Ministry of Defence contracting, for example. There does not seem to be any process for making sure that lessons learned are remembered and transferred across the whole organisation.

The right hon. Member for Orkney and Shetland (Mr Carmichael) gave a very interesting speech. I know a bit about Orkney and Shetland. I have not been to Shetland yet, but I have been to Orkney and hope to go back. He reminded us that we often think that a lot of the public are not interested in politics, but when they understand the impact that an issue will have on their life, they are interested. If the public are not interested, it is maybe more of a comment on politicians, who manage to turn the public off. It is certainly not the public’s problem if the way we do politics causes people to turn off.

I like the right hon. Member’s comments about the GP service on Islay, because several years ago two of my best friends spent two summers on the neighbouring island of Jura, providing cover for the only GP on the island; he was not allowed off the island unless he got cover. The right hon. Member reminded us that for a number of very remote communities in these islands, and sometimes for communities that are not all that remote, the realities of life can be very different from how they appear in this place, and possibly from the way they appear to Ministers or civil servants ensconced in their fancy buildings in Whitehall and around Westminster.

The right hon. Member mentioned the inflexibility of Treasury rules. I do not understand how we can possibly run a 25 to 30-year contract on an annual and cash-limited budget; it just cannot be done. It produces incentives to do stupid things. We have seen that with HS2. He also mentioned the very strong part that the EU played in the previous round of procuring ferries for the islands in his constituency. Yes, the Scottish Government have attracted, and probably deserve, criticism for their record on some of the ferry procurement that we have done in the past. Nobody gets it right all the time. Interestingly, the right hon. Member’s comment seems to show that the people who we were told were remote, unelected bureaucrats in Brussels could sometimes get closer to delivering what people in our communities wanted than the decision makers down here. Perhaps that is because the EU knew that it was sometimes remote, so it did not think that it knew what was best. Most of the funding programmes that it ran had to be managed by the Scottish Government, mostly in partnership with local authorities or other local organisations. Although not everybody agreed with every project that was approved, people could at least point to strong evidence that the project was born in the community and funded from elsewhere, rather than having been invented to fit a set of criteria that were often not relevant to the community in which the project was delivered.

[Mr Carmichael]

I bridle slightly at the hon. Gentleman’s use of “remote”. I am always being told that I live in a remote community, which means that I have to define the place I call home in relation to somewhere else. Surely the point is not about the distance between Brussels and the place where the projects were delivered; it is about understanding that the European Union enabled communities to do something for themselves. That is a very different model from the one in Edinburgh and London these days. Viewed from Shetland, both those places are pretty remote.

[Peter Grant]

I take the right hon. Member’s point. Let me clarify that I do not measure remoteness by how far people are from this place or anywhere else. It is arguable that parts of the right hon. Member’s constituency are more remote from each other than they need to be, because the infrastructure is not there, so a journey of a few miles can be a lot more difficult than it needs to be. The important point is that far too much infrastructure spending in Scotland is not done according to the priorities of the Scottish Government, local authorities, or the Scottish people. The fairy-tale vision of the former Prime Minister, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), of a bridge to Ireland is a good example of that. I have not heard anybody in my constituency or elsewhere in Scotland say that that was a priority.

Too many funded schemes in Scotland are the priority of somebody in London who holds no mandate whatsoever in my constituency or anywhere else in Scotland. The criteria are set by somebody in London, sometimes having invited comments from the devolved nations or local authorities; most of the time, they ignore any comments that come in. The allocation of money does not have any rational basis, or follow any measure of need or priority. For example, the UK Government promised that the shared prosperity fund would fully replace the EU structural funding that Scotland lost after we were dragged out of the European Union against our will. Over three years, we expected to get about £549 million in structural funding; through the shared prosperity fund, we are getting £212 million. We are losing £337 million, more than half of what we would have had.

Other Government investment schemes, such as levelling up, were supposed to be based on a prioritisation of need, but somehow that prioritisation of need meant that the Prime Minister’s constituency got more than the whole of Glasgow. Of course, Glasgow got nothing. The Prime Minister’s constituency got exactly the same as mine, which is one of the most seriously deprived areas in the United Kingdom. The towns fund was the same. On the face of it, that fund was based on some kind of objective assessment of need, but everybody knows that it was more about who the sitting MP was, or which party hoped they might win the seat at the next election. The way that the criteria are set is not in the interests of the communities that the fund is supposed to serve. The funding allocation is not about need or what is right; it is about what suits the party of Government.

Almost 20 years ago, my very good friend and then fellow member of the council, Michael Woods, discovered that the then Labour administration in Fife Council had a secret plot to close the award-winning sports centre, the Fife sports institute in Glenrothes, and Kirkcaldy swimming pool. Thanks to Michael’s determination, that plan was abandoned. In 2007, Michael and I were both re-elected to the council, formed a joint administration with the Liberal Democrats, and immediately put in place plans to not demolish those two institutions, but replace them, and make them brand new. Six years after we were elected, we delivered a new sports centre in Glenrothes. Sadly, Michael did not live to see it happen, but the Michael Woods sports and leisure centre remembers that it would not be there had it not been for Michael. That is what can happen if we have the political leadership that knows what needs to be done, understands what communities need, and is prepared to deliver it. We had to devise a new delivery model to make the sports centre happen. I note the comment from the hon. Member for Wimbledon. If that delivery model had not worked, it would not have been the fault of the delivery model; it would have been our fault. It was our responsibility to set out a delivery mechanism that would work.

If we want to look at something on a bigger scale, in 2007, when the SNP was elected to the Scottish Government for the first time, it inherited a Forth Road bridge that was in danger of becoming unsafe and being closed. Some 10 years after, the SNP having inherited no plans whatsoever, the new Queensferry crossing was opened to the public. It was a £1.3 billion investment, let it be noted. The SNP did that without putting the albatross around their neck of a private finance initiative, and the crossing is toll-free, as are all the bridges, motorways and roads in Scotland.

Compare that with HS2. In 2009, the Government set their delivery company a budget of between £31 billion and £36 billion. By 2013, almost exactly 10 years ago, the National Audit Office was already warning about problems. We are now looking at a cost of somewhere between £72 billion and £98 billion. The cost of a single railway station at Euston has increased by £2.2 billion, and construction on that station has stopped for two years. How can one Government—or one series of Governments—get one project so catastrophically wrong so often, with no one being held to account?

Lack of accountability is a significant problem. We could ask what has happened to the 40 new hospitals; maybe some of them will happen, but there certainly will not be 40 of them. We seem to be living in a time when “a long-term investment strategy” means “to get us through the next election”. We are clearly living in a time when “priority areas of need” are marginal seats, and 40 new hospitals means, if we are lucky, half of that number—most of them will never be built. Partly due to covid and partly due to the self-inflicted damage of Brexit, construction project costs are rising, often faster than the official rate of inflation. Contractors and subcontractors are finding it harder and harder to recruit the skilled workers they need, because in that industry a lot of the skills are international. The market is global, and Britain is making itself a less attractive place for overseas workers to come to and work. That is not just because of Brexit, but because of how it has been seen to be implemented by the Government.

We need a complete change in the way that the Government allocate and manage the funding for their major infrastructure projects. The hon. Member for Bath was a fellow member of the Public Accounts Committee for a while; I have not seen any evidence, in the reports that come to the Committee, that lessons have been learned. I would love to be able to say that during my time on the Committee—or even in Parliament—I have seen evidence that this Government are becoming better at managing large-scale projects. I cannot say that; if anything, I would say that they are becoming worse.

We have a Government and a governing party that are becoming more inward looking, more concentrated on looking after their own interests, less willing to face up to the decisions that need to be taken, and, frankly, less caring about the impact on communities all over these islands of their failure to deliver the kind of infrastructure that a modern western democracy should be allowed to take for granted.

Finance (No. 2) Bill

Alistair Carmichael Excerpts

Committee of the whole House
Wednesday 19th April 2023 Commons Chamber

[James Cartlidge]

We have had strong support from public health groups for the differential duty, because the evidence shows that is healthier to drink in a social environment than privately. That is another significant benefit.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

rose—

[James Cartlidge]

This is a popular area of the debate. I give way.

[Mr Carmichael]

I think the Minister has a sound case in relation to what the Government have done on beer duty. What is less clear, however, is why they have chosen to treat spirits so differently. Spirits are also an important part of the on trade. What will the impact be on the spirits trade from the differential that the Minister has now baked into the duty system?

[James Cartlidge]

There are spirits that will benefit from the differential—not spirits served from what I think are called optics, but spirits served on tap. There are mixers served on tap that will benefit from a more generous differential duty. On spirits, I am more than happy to set out further detail when I respond to the relevant amendments, because I think they are specifically focused on Scotch whisky, and I understand the concerns there.

I just want to finish my point on our Brexit pubs guarantee. Just to underline what we are doing, we are giving pubs a new permanent competitive advantage. We are levelling the playing field against supermarkets. Following the difficult times that pubs have had with the pandemic and higher energy costs, that hopefully gives them a new narrative for their communities with more positive times to look forward to ahead. That is what we want for our pubs. As my right hon. Friend the Member for Bexleyheath and Crayford (Sir David Evennett) said, they are so important for our communities and our economy. We continue to do everything possible to back the great British pub.

--- Later in debate ---

[The Chairman of Ways and Means (Dame Eleanor Laing)]

I call Alistair Carmichael.

[Mr Carmichael]

Thank you, Dame Eleanor. It is perhaps not a novelty to see you back in the Chair, but it is still a great pleasure none the less. I am delighted to serve with you in control.

I rise to speak to amendment 7, which stands in my name and those of my hon. Friends. In doing so, I should indicate at this stage that it is my intention to divide the Committee and establish opinion on it. The effect of amendment 7 would be to freeze the level of duty on the production of spirits. The Minister kept saying these are Scotch whisky amendments. He maybe knows me too well, but I would readily concede that many other spirits will be affected by this, and they are just as important. I think the hon. Member for Aberdeen North (Kirsty Blackman) will speak to her amendments, which do relate specifically to Scotch whisky, but I have had discussions with her, and she tells me that SNP Members are in fact minded to support our amendment, instead of pursuing their own. She will doubtless speak for herself, as she always does, later in the debate.

When we consider that 70% of the gin produced in this country is, in fact, produced in Scotland—my constituency has no fewer than four gin distilleries, and we find that situation replicated across Scotland—the impact of rises in duty are not just going to be felt by areas that produce Scotch whisky. We have also seen a number of distilleries appearing in recent times—a much smaller number, but it is significant none the less—producing rum. So it is important that we have a coherent strategy for the excise duty on these products. The difficulty I have with what I hear from the Treasury Minister is that it is difficult to discern exactly what the Government are trying to achieve in this Budget.

Scotch whisky in particular is very important to the UK as part of our manufacturing base. Indeed, it is an enormously important part of our export portfolio. It is also critical for many of the most economically fragile communities that can be found around the highlands and islands of Scotland. I was born and brought up on Islay, and people will know the importance of the whisky industry, and in recent years the growth of whisky tourism to that economy. In my constituency we have Highland Park and Scapa. Occasionally other interests are declared, but we still have only two producing distilleries. They are very important to our local community, not just in relation to the jobs they provide directly, but because of the spin-offs—the visitor centre, the merchandising, and the visitors that those distilleries bring to the community. Whisky tourism is enormously important, and it is it enormously important that the whisky industry has confidence that the Government are on their side. I am afraid that the signals we have seen from this Government in recent months have been, if I am to be kind to them, mixed at best.

The Chancellor was right to say in December that there would be a freeze on duty. We welcomed that, as I am sure did others. Three months later, to then turn around and whack a duty increase on spirits in the region of something just north of 10%, makes us wonder what the Government are trying to achieve. When I was Secretary of State for Scotland, along with Danny Alexander, who was Chief Secretary to the Treasury, we argued successfully for a 2% duty cut. In 2015, the Red Book of the day said that that would bring with it a reduction in the amount of duty received and revenue brought in, but in point of fact we brought in more revenue with a lower level of duty than had been the case before it was cut.

If we are trying to do something that will bring in more money to the Treasury, surely a duty freeze, at the very least, should be on offer. Indeed, Treasury data illustrates the point well, because a recent history of cuts and duty freezes has actually had a beneficial effect on revenue brought in. For some reason, we now seem determined to introduce a duty increase that will have an inflationary impact, and for some of the most economically fragile communities in the country that will have the effect of stymying growth.

The position laid out by the Minister on sales of beer was exceptionally interesting. He will be aware that spirits account for one third of the serves of alcohol consumed in this country, but less than one fifth of the units consumed. On the other hand, beer has 60% of the units consumed but accounts for less than 50% of the serves. It is clear that the effect of this measure will be inflationary and have a detrimental effect on the economic growth that we are all supposed to be pursuing.

The Chief Medical Officer tells us that we should safely consume 14 units per week—I think I have read this correctly—per week. If we are to consume 14 units of cider, we pay £1.13 in tax. If we consume 14 units of wine, we pay £3.36 in tax. But if we consume 14 units of spirits, we pay £4.06 in tax. To put it another way, Scotch whisky, and spirits as a whole, are taxed 256% higher than cider, and 16% higher than wine.

It was presumably for that reason that the Secretary of State for Scotland is reported in The Scotsman as having argued against it. This was not some source quoted as saying that, but the Secretary of State himself. He said that he was disappointed the Chancellor acted in the way he did. I think we can all very much share the disappointment of the Secretary of State for Scotland. For the avoidance of doubt, I did let him know that I would be referring to him in the course of my speech. Our real disappointment, however, is that, having publicly disagreed with the Government on the matter, I have a strong suspicion that if it is put to a Division he will be in the other Lobby. It is all very well to wring your hands, but if, when the moment comes and the Division bells ring, you are not prepared to do what you know is right for such an important industry in Scotland in so many of our communities, then I feel we are, as politicians, failing in our duty to our constituents and those whom we seek to serve.

We heard a lot from the Minister about the harmonisation of duties, but the House has heard the truth of the matter. The position in relation to on-sales consumption of beer will widen the gap. It simply makes no sense. If the Minister can answer no other question when he comes to respond, can he answer this: what strategy are the Government seeking to deliver by bringing forward a duty increase in excess of 10%? I do not see it. It flies in the face of the Treasury’s own data and contradicts it. It is difficult to understand what the purpose of it is, other than simply an attitude that says, “Well, you’ve had it good for a few years now, so we’re going to treat you differently and it’s time for you to take some of the pain.” An industry as important as the production of spirits deserves rather better consideration from the Treasury.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

I rise in support of my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), who speaks for my constituents as much as he does his own.

I want to make two simple points. First, the distilleries in my constituency—I could name them all, but I have done that before in this place—are part and parcel of each community in which they are based, and they are important to the people in those communities. They see them as their own. As my right hon. Friend said, the jobs they provide in some of the most sparsely populated and economically fragile parts of Scotland are absolutely crucial. Inver House, a company that owns two distilleries in my constituency, Balblair in Edderton and Old Pulteney in Wick, sponsors the Wick Gala each year. As something that epitomises the culture of Caithness, I would honestly recommend that all right hon. and hon. Members come to Wick and see the Wick Gala—it is something they will not forget. That company is a part of it and makes it happen, which is incredibly important. In my own home town of Tain, Glenmorangie, now owned by the French company Louis Vuitton, has for a number of years pretty well paid for the Tain highland games. Again, I say to Members: come see them and enjoy. So the distilleries are a part of the community and what they do is crucial for the community. It is about rural jobs in sparse areas.

The second point I want to make to those on the Treasury Bench is about levelling up. Those are not the words I would have chosen, but it is a good concept to take parts of the UK that have lost out in the race and bring them up—giving them a leg up—to be equal to the richer parts of the UK. By definition, the areas where there are distilleries are very often some of the more hard-up parts of the Scottish highlands and of Scotland. If Government Members want to go about levelling up, they need to get into the parts of Britain that need help.

[Mr Carmichael]

As my hon. Friend says, these are often some of the more hard-up areas of the country, but the truth of the matter is that down the years they have contributed enormously to the GDP of this country and they have the potential to do more. We are not looking for any special treatment. We are not looking for any favours or handouts. All we are looking for is a fair crack of the whip.

[Jamie Stone]

That is an extremely valuable point. I would bolt on to it that we have new distilleries starting up. In John O’Groats, there is a brand new one called 8 Doors. These enterprising local Caithness people have done it off their own bat. To get tourists to go to John O’Groats, we have 8 Doors, which has done it along the coast of Caithness. We have Wolfstone—I think I have that right.

[Mr Carmichael]

Wolfburn.

--- Later in debate ---

[Abena Oppong-Asare]

As I mentioned, we have consistently raised concerns about the Government’s U-turns on the issue. We have scrutinised them and put forward recommendations, which the hon. Member will hear us talk about in further detail in the Public Bill Committee.

It is important that today the Minister lays out what measures the Government will take to support the sectors most affected by the duty changes, as well as what consideration the Treasury has given to the potentially inflationary impact of the increases. The explanatory notes to the Bill state:

“The commencement of changes to approvals will be announced at a later date.”

Perhaps the Minister could give some certainty to businesses by fleshing out some further detail today.

Clause 50 and schedule 8 set out measures for a new draught relief that will provide a reduced rate of duty on qualifying draught products. Clause 51 sets out the requirement that qualifying draught products be under 8.5% ABV and be packaged in containers that hold at least 20 litres and are designed to connect to a dispensing system. Clause 52 sets out the rules on the repackaging of qualifying draught products. Decanting from 20-litre containers into smaller containers will be prohibited unless the products are to be consumed on the premises at which decanting takes place.

Labour supports these measures, which will support and protect the hospitality sector, but our analysis has found that more than 70,000 venues have had to reduce their opening hours because of energy bills. I have seen that in my constituency. These are businesses that enrich our communities and boost our high streets, but they are being let down by the Government and many of these changes will come far too late.

I note that the draught relief has been designed in a way that will exclude the wine sector. Can the Minister explain why? Will he let us know whether the Government will introduce any other measures to support British wine and spirit producers?

Clause 54 lays out measures to replace the small brewers relief with a small producer relief. Clause 55 specifies that eligible producers will be those whose products have an alcoholic strength of less than 8.5% ABV and who produce less than 4,500 hectolitres of alcohol per year. The remaining clauses and schedules lay out precise measures for calculating rates of relief.

Labour introduced the small brewers relief in 2002 and is proud of the effect that it has had by supporting small brewers and creating a vibrant UK beer scene. We therefore support the extension of relief to other producers, but I note that that may not occur under the new scheme, as British wine and spirit producers are largely excluded from these measures. Perhaps the Minister could lay out why the scheme has not been further extended.

In conclusion, Labour recognises the need to simplify the alcohol duty regime while striking a balance between supporting businesses and consumers, protecting public health and maintaining a source of revenue for the Exchequer.

[Mr Carmichael]

May I take up the point about small producers? Deerness distillery, in my constituency, is a family-owned business that is seeking to move into whisky production. Surely, as a small producer in a market dominated by big corporates, it should be given the same opportunity to grow as a brewer. Why, in principle, should there be any difference in their treatment?

[Abena Oppong-Asare]

We, too, are concerned about that, and I have met various stakeholders in the sector who have highlighted their concerns. I hope that the Minister will take the issue on board in his response.

We do not oppose the clauses and schedules, but we want answers to the questions that have been raised, and, most important, we want certainty for the businesses and consumers who have suffered over the past few months and years as a result of the constant chopping and changing that the country has seen from various Conservative Governments.

[James Cartlidge]

Before I turn to the very good speeches that we have heard during the current debate, let me clarify a point relating to our earlier debate on the electricity generator levy. I mistakenly said that “private wire” was included in the levy, when of course I meant to say that it was excluded.

Let me begin by saying that I welcome the support expressed by the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) for the clause relating to devolved welfare payments. As for alcohol duty, the right hon. Member for Orkney and Shetland (Mr Carmichael) may not recall the debate that he initiated in Westminster Hall in October 2017, when I was a mere Back Bencher, but I was the first Member to intervene on his speech. All the others were Scottish. I intervened because a leading company in my constituency produces the bottle tops for the whisky trade. That, along with the East Anglian grain that is sent up to Scotland from time to time to help support the sector, underlines the fact that this is a UK industry, and a UK export. We are all proud of Scotch whisky and the role that it plays in our economy. However, I must say this to the right hon. Gentleman, and also to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone), who spoke with his usual eloquence and conjured up wonderful images. I understand the importance of the Scotch whisky sector, and we have supported it—in nine of the last 10 Budgets, we have either frozen or cut the tax—but the key point is that not introducing the RPI-linked increase would have a significant cost.

[Mr Carmichael]

The Minister is making our case himself, so presumably he will be joining us in the Lobby—as, indeed, the Secretary of State for Scotland should be doing—or else accepting my amendment.

[James Cartlidge]

I had never thought of the right hon. Gentleman as a cheeky chappie, but for that brief moment, he almost was. Let me now address his amendment 7. The Scottish National party Members have, very nobly, effectively withdrawn their amendments to ride on the back of it, which is perfectly fair: they seek, ultimately, to arrive at roughly the same point, which could be described as the protection of spirits, and Scotch whisky in particular, from the RPI-linked increase.

The proposal in amendment 7 would cost an amount between £1.7 billion and £2 billion. An overall RPI freeze would cost £5 billion across the scorecard. We have, of course, supported freezes in the past, and it was I who announced the freeze back in December. Members may recall the reason for that freeze: in view of the August reform, we did not want the sector to go through two separate alcohol tax increases. We supported the industry, but it is expensive, and with the public finances as they are, we feel that the responsible option is to introduce the RPI-linked increase—which, after all, is not a real-terms increase—but, nevertheless, to bring in the differential duty to support our pubs.

[Mr Carmichael]

rose—

[James Cartlidge]

I will give way to the right hon. Gentleman, for the last time.

[Mr Carmichael]

The Minister needs to look at the actual data relating to the revenue brought in over these years of cuts and freezes, because the story that it tells is very different from the forecasts on which he relies. He should remember that in 2015 the forecast was for a 2% reduction, but in fact there was a 4% increase. When will the Government become a bit more realistic about the effect of their own policies in this area?

[James Cartlidge]

I have to disagree with the right hon. Gentleman’s use of the word “realistic”. I have met representatives of the Scotch Whisky Association, whom I greatly respect, and they have said to me that if we freeze the tax we get the revenue. Unfortunately, however, the Government have what I believe is the very important and successful policy of using an independent body, the Office for Budget Responsibility, which makes forecasts independently for Governments on the effects of fiscal measures. [Interruption.] I hear voices behind me saying that they are wrong. The point is that the OBR is not a collection of soothsayers employed to predict, entirely accurately, exactly what will happen in the future. With the greatest respect to everyone, if that was the case, I suspect they would spend rather more of their time looking at accountancy of the turf-related kind rather than trying to forecast the national accounts. The point is that this enables us to ground fiscal events in a forecast of where we are at that time and the fiscal costs at the time, therefore adding credibility to the decisions we make and avoiding the easy situation where we do not have to make the difficult trade-offs that households and businesses know that, in reality, we have to face. If we want to cut one tax, we have to find the money from somewhere else. It is a good discipline.