Tourism Industry and VAT

Angus Brendan MacNeil Excerpts

Tuesday 17th March 2015 Westminster Hall

[Mr Mark Williams (Ceredigion) (LD)]

I am grateful for the opportunity to have this debate and it is a pleasure to serve under your chairmanship, Ms Dorries. In the midst of Wales tourism week and on the eve of the Budget, I would like to make the case for a reduction in the VAT rate for the tourism industry from 20% to 5% specifically, and importantly, for visitor attractions and accommodation, to bring our country into line with competitor destinations in the European Union.

The Minister has been well lobbied on this issue and perhaps he gets tired of hearing the arguments that some of us advance for that cause, but I would like to draw his attention to research published recently on behalf of the Cut Tourism VAT campaign. I am aware that the campaign recently met Treasury officials. The research further strengthens the case for making a change in our VAT regime. That case is borne out by the number of Members here for the debate representing constituencies across the United Kingdom.

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

As the hon. Gentleman is mentioning the diverse, wide range of constituencies, this is an opportune moment to say that I have had correspondence from Shonnie MacRitchie from the County hotel in Stornoway, who points out that the UK is the 138th most competitive of 140 for VAT in tourism. Indeed, there are only two other countries in the EU that have not reduced that VAT rate. That could be done now without any derogation from Europe, so does he agree that it should be done?

[Mr Williams]

I am mindful of your stipulations, Ms Dorries, but I very much concur with that intervention. The debate is about making all component parts of the United Kingdom competitive across the board with our friends and colleagues in Europe. There are few constituencies—in fact, I cannot think of any—that would not benefit from a reduced rate of VAT, whether through accommodation or visitor attractions.

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[Albert Owen]

Yes, indeed; it was a brave step. [Interruption.] It is interesting that we are getting heckled from across the Chamber by people who voted to put VAT up previously, but are campaigning here today to cut it. We are not going to take any lessons from some Members here in the Chamber today. I believe, as does the hon. Member for Ceredigion, whom I congratulate on securing this debate, that cutting VAT would give a great example to the industry.

In the past few months, I have spent time in France and the Republic of Ireland, where I have seen our near neighbours benefit from a cut in value added tax.

[Mr MacNeil]

I agree with what the hon. Gentleman is saying about VAT, but I have to ask him this: when VAT was increased in this Parliament, why did the Labour party abstain on that vote?

[Albert Owen]

I do not speak for the Labour party, and if the hon. Gentleman checks the records, he will see that I do not vote with the Labour party when I think that that is right. I speak for myself. Unlike the sheep in the Scottish National party, who are all herded through one Lobby, I tend to have a little independence of spirit and mind when it comes to these issues. I feel very strongly that the case has been made to cut VAT on this occasion and I will certainly support any amendment tabled in the Budget to ensure that there is a cut. I hope that Conservative Members who voted to put VAT up before but now support a cut will follow their conscience and vote to cut VAT for tourism.

Since 2012-13, there has been growth in tourism right across the four nations of the United Kingdom. It is a resilient industry, but it is the industry itself that is asking for a cut, because it feels that it could contribute so much more in employment and generating wealth for regional economies and the UK economy if there was a cut.

As the hon. Member for Ceredigion said, Ireland has reduced its VAT on tourism to 9%. Only last week, I was in the Republic of Ireland. We were launching the new vessel that goes between my constituency and Dublin. Holyhead to Dublin has been branded the new Dover to Calais, and as Dublin is one of the fastest growing ports in Europe, that benefits my constituency. Also, as we are near neighbours, the vessel takes people, who come from places across the United Kingdom, from Wales to holiday in the Republic of Ireland. My colleagues from Northern Ireland will have experience of this. The crossing from Holyhead to the Republic of Ireland takes only two hours. Many tourism operators that book people going to Ireland overnight say that one reason why they are going to Ireland is that the Irish Government have focused on tourism, focused on the brand and focused on how tax reductions on accommodation help the industry.

Future Government Spending

Angus Brendan MacNeil Excerpts

Wednesday 4th March 2015 Commons Chamber

[Mr Gauke]

We stand by the OBR’s projections. We have made considerable progress at a time when other economies have struggled and when there has been a eurozone crisis. But for the steps that we have taken, our debts would have risen much more quickly.

Let us return to the position of the Labour party. Where are its answers on deficit reduction? We get the old answers, which are that it would squeeze the rich and reintroduce the 50p top rate of tax. It conveniently forgets that the previous Government had a top rate of 40p for all but 36 of their 4,758 days in office.

The House will want to be aware that our move to the 45p rate cost only around £100 million—a small price to pay for making the international message loud and clear that we are open for business. How much does Labour think that reversing that policy would raise? I am happy to give way to the shadow Minister on that. To say that a return to the 50p rate would bring in an extra £3 billion a year, which is what he implied, is frankly ludicrous, and I challenge him to identify one reputable economist between now and 7 May who will support such a position.

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

The Minister has probably forgotten that when it came to the millionaires’ tax cut, the Labour party abstained and did not vote against it. More importantly, the National Institute of Economic and Social Research said that if it were not for austerity, UK GDP would be 5% higher. The tax take with 5% more GDP is about £32 billion, or equivalent to 30% of the current deficit. Does the Minister accept that austerity has been a mistake and that we should have gone for growth through investment?

[Mr Gauke]

I am not persuaded by the argument that if we borrow more we ultimately borrow less—I am afraid that is far too easy an answer.

The Government believe that those with the broadest shoulders should bear the biggest burden, and as the Institute for Fiscal Studies confirmed today, that is exactly what is happening. That is why the richest in our society now pay more in tax than at any point under the previous Government. The Labour party can lecture us all it likes about taxing the rich, but it was not on our watch that private equity managers paid a lower rate of tax than their cleaners. It was not on our watch that the wealthy could sidestep stamp duty, or that higher earners could disguise their remuneration as loans that were never repaid. Under our watch, however, every single Budget that we introduced raised revenues from the most well off in society.

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[Chris Leslie]

rose—

[Mr MacNeil]

Give him both barrels!

[Mr Gauke]

I will give way to the man who believes that the answer to our public finances is to raise fees for gun licences.

Oral Answers to Questions

Angus Brendan MacNeil Excerpts

Tuesday 27th January 2015 Commons Chamber

[Mr Osborne]

My hon. Friend is absolutely right that we want our rural communities in the north to be part of the powerhouse. It is not just about connecting the cities; it is about ensuring that the rural economy is a vibrant part of the northern economy. Superfast broadband is a key part of that, and, as she well knows, we have made special efforts to develop it in North Yorkshire. Rural transport is also incredibly important, as is supporting agriculture. The investment that we are making in agricultural science will benefit agriculture all over the country, including in her constituency.

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

The Chancellor will have noticed that, for the first time in a recessionary period, the unemployment figures in Scotland—our northern powerhouse—are consistently better than in the rest of the UK, as the SNP Government, where possible, have followed different economic policies. Is his opposition to proper economic powers for Scotland based on a fear of being further outperformed by the Scottish Government? Is he afraid of the competition from a real northern powerhouse?

[Mr Osborne]

I am delighted for Scotland that unemployment has fallen and it is seeing growth. I remember, however, that the SNP predicted that our economic plan would cause unemployment to rise in Scotland and shrink the Scottish economy. That has not been the case because Scotland has been part of a stable United Kingdom that is following a long-term economic plan that is benefiting the entire country.

Charter for Budget Responsibility

Angus Brendan MacNeil Excerpts

Tuesday 13th January 2015 Commons Chamber

[The Chancellor of the Exchequer (Mr George Osborne)]

I beg to move,

That the Charter for Budget Responsibility: Autumn Statement 2014 update, which was laid before this House on 15 December 2014, be approved.

The charter sets out the next steps we take to turn Britain around and ensure that the mistakes of the past are not repeated. People will remember the fiscal crisis facing this country five years ago: a deficit that stood at more than 10% of our national income; a Government borrowing £1 in every £4 they spent; a Treasury whose departing Chief Secretary left a note saying simply that there was no money left; a country described by international bond investors as sitting on the financial equivalent of a bed of nitro-glycerine; and a British economy whose ability to pay its way was questioned in the world. That was the appalling inheritance left to us by the last Labour Government.

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

The Chancellor mentions a British economy with an ability to pay its way. When did the UK last pay its way? When was it last not in deficit?

[Mr Osborne]

The last time it was not in deficit was when people followed Tory spending plans: there was a surplus at the end of the 1990s and 2000. That is what we advocate again.

At the moment of maximum danger five years ago, as much of the rest of Europe became engulfed in a sovereign debt crisis, Britain faced a choice: did we have the resolve to cut our spending, cut our deficit and set a course for economic stability, or did our country go on borrowing and spending our way to economic ruin?

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[Ed Balls]

I will give way in a second, but let me first explain this point to the former Chancellor.

Even as recently as the March Budget, the OBR made a forecast for growth and for tax revenues. Between the Budget and the autumn statement it revised the growth forecast up by a little bit, but revised income tax and national insurance substantially down because, owing to this year’s stagnating wages and cost of living crisis, growth has not brought in the revenues that the Chancellor wanted. In comparison with the March Budget, we have actually lost £8.4 billion in this fiscal year, not because spending cuts have not gone ahead or tax cuts have not been delivered, but because the tax revenues have not come in as a result of growth and stagnant wages. Ultimately, the only way of reversing the problem is yes, to cut spending, and yes, to raise taxes—as the Chancellor has done in this Parliament—but also to get the economy growing in a stronger way which will bring in tax revenues. If he does not do that, the Chancellor will carry on failing year after year, as he has in this Parliament.

[Mr MacNeil]

The right hon. Gentleman has said that he supports this motion on austerity. Tonight he will walk through the Lobby hand in hand with the Tories. Will he tell us how the Labour party differs from the Tory party?

[Ed Balls]

I will explain the nature of the fiscal charter and how it works in a moment. I am sure that the hon. Gentleman will then see the stark difference between our position and the position of the Conservatives. He will probably find that he agrees much more with our position than with theirs.

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[Ed Balls]

I will do so. Let me just say, for the interest of the former Chancellor, because it was not like this in his day or when I was in the Treasury, that our trend rate of growth in 2014—1.17%—puts us 19th out of 34 countries in the OECD. We have a lower underlying trend than Chile, Israel, South Korea, Australia, Mexico and Poland—and the list goes on. The right hon. and learned Gentleman is completely right: we have to find a way to strengthen the underlying growth of the economy.

Let me come on to Labour’s position. We will cut the deficit every year. We will get the current budget into surplus. We will get the national debt falling as soon as possible in the next Parliament, fully consistent with this fiscal charter. How fast we can do this will depend on what happens to growth, wages, the housing benefit bill and events around the world. But our approach will be very different from that of the Conservatives, on the following fronts. We believe, unlike the one-club Chancellor, that three different things need to be done to properly and fairly balance the books in the next Parliament.

First, as we have said, because we will cut the deficit every year, there will be sensible spending cuts in non-protected areas. We will cut the winter allowance, taking it away from the richest 5% of pensioners. We will cap child benefit at 1% for two years, and our zero-based review is examining every pound the Government spend in order to find savings. Secondly, we will make different and fairer choices, including reversing this Government’s £3 billion-a-year top-rate tax cut for people earning more than £150,000. Thirdly, our plan will deliver the rising living standards and stronger—

[Mr MacNeil]

Will the right hon. Gentleman give way?

[Ed Balls]

No. Our plan will deliver the rising living standards and stronger growth needed to balance the books: We will have more free child care, paid for by the bank levy; we will properly capitalise the business investment bank; we will raise the national minimum wage faster than wages; we will repeat the bank bonus tax to get young people back to work; we will devolve full growth in business rates to city and county regions; and we will get the houses built that we need—200,000 a year more by 2020. That is all part of a proper long-term plan for growth and jobs.

The OBR figures show that if our economy was not to slow down next year, the year after and the year after that but instead grew 0.5% faster, that cumulatively would bring in £32 billion in the next Parliament. If we could increase the underlying trend rate of growth in the next Parliament by 0.25%, that would mean £19 billion a year more in tax revenues by the end of the Parliament. This is not only about tax rises and spending cuts; it is also about growth, jobs and the underlying trend. This Chancellor has seen growth downgraded—we have got to do a better job. Unless we do that, we will not see the books balanced in the next Parliament. So that is what we mean by an economy that works for working people and a tough, fair and balanced plan to get the deficit down.

Barnett Formula

Angus Brendan MacNeil Excerpts

Tuesday 16th December 2014 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Sir Alan. I am grateful to have this opportunity to discuss the future of the Barnett formula in a little more depth than recent debates have allowed.

My reason for calling for the debate was neither to call for the abolition of Barnett, nor to say that it must stay unchanged for ever more. My motivation was born out of frustration at some of the ill-informed comments made about it. In advance of the draft legislation on further devolution to Scotland, which is due before Burns night next year, I want to put on the record an explanation of what the Barnett formula is and, perhaps more importantly, what it is not. I also put on the record that I absolutely support extra fiscal powers for the Scottish Parliament. That is good for the democratic accountability of Holyrood.

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

The hon. Gentleman mentioned the Barnett formula and, before he goes too far, I want to highlight its operation. About a fortnight ago, the Treasury gave out money because roads and health in England had a shout for that. Therefore, from that followed Barnett consequentials to Northern Ireland, Wales and Scotland.

However, I notice that, if there is a need in Scotland, Wales or Northern Ireland for money for health or transport, the Treasury does not dip its hands in its pockets in the same way with Barnett consequentials running in the other direction. Barnett consequentials follow on from need in England. It is surely a governance problem when the Treasury responds only to health and transport needs in England and then we get consequentials. Should not the Treasury give money and have consequentials running in the other direction when need arises?

[Sir Alan Meale (in the Chair)]

Order. May I point out to Members that we have only a short time for the debate? If interventions are to be made, can they be questions to the speaker at that time rather than statements? Hopefully everyone will have an opportunity to speak.

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[Mr MacNeil]

Will the hon. Gentleman give way?

[Iain Stewart]

Once more and then I must make some progress.

[Mr MacNeil]

While the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) may be correct that England pays more, it pays more only because it is larger; it does not pay more per capita. Unfortunately, that has been Scotland’s preserve: it has paid more tax per capita into the UK each and every year for the past 33 years.

[Iain Stewart]

Again, I shall address those very points in a few moments. I want to shed some light on the issue. Critics of Barnett usually start by quoting Treasury figures that say that public spending per capita in Scotland is £1,600 greater than in England as a consequence of the Barnett formula. For once I may be in agreement with the hon. Gentleman, because that is not correct. The Barnett formula is only one part of the complex fiscal relationship between the different parts of the United Kingdom.

The Barnett formula applies only to certain parts of public spending. Currently, about 40% of public spending in Scotland is not covered by it because that spending is not determined by the Scottish Parliament. That proportion will reduce in time as further taxes are devolved, but that point is important. Nor does Barnett determine the size of the Scottish block grant as a whole. That has built up incrementally over the years and the Barnett formula determines only the annual changes.

In simple terms, Scotland gets a population share of a departmental budget change in England where the equivalent is determined by Holyrood. Each year, the changes for each spending programme are totalled up and an overall adjustment to the previous year’s block grant is made. It is then up to the Scottish Parliament to decide how it spends that grant; it is not hypothecated. If Scotland gets £100 million more for health services because of the change in England, it is not obliged to spend that on health. That partly explains why some public services and other matters in Scotland are different from south of the border.

It is important to note that when the formula was introduced in the late 1970s it was designed as a convergence formula to narrow public spending per capita between Scotland and England. In advance of the devolution legislation proposed by the Wilson and Callaghan Governments, the Treasury carried out a needs-based review to determine the extent to which public spending per capita in Scotland would need to be higher to provide a comparable level of public services to those in England. It was found that because of factors such as Scotland’s proportionally greater landmass, rural population, council housing stock and poor health indicators, spending needed to be 16% per capita higher than in England. It was actually 22% higher, so Barnett was introduced gradually to narrow the gap and avoid the annual round of what was described as table-thumping over agreements between the different spending Departments.

It would seem that convergence has not happened, and it is important to understand why. First, in the initial years of operation, the population share was never adjusted, and that was at a time when Scotland’s population relative to England was falling. For a decade or so, a bias was therefore built in to the formula in Scotland’s favour. In the 1990s, the population share was adjusted, but it helped to sustain the higher levels. Secondly, and more significantly, were the number of deals done outside the Barnett formula. Whatever calculation Barnett produced, there was always pressure, under Governments of all parties, for extra funding arrangements. In his autobiography, the noble Lord Lang notes that when he was Scottish Secretary, between 1990 and 1992, Barnett should have reduced the Scottish Office block grant by £17 million, but, as a result of separate deals agreed with the Treasury, it was increased by £340 million.

[Mr MacNeil]

Will the hon. Gentleman give way?

[Iain Stewart]

I hope that the hon. Gentleman will forgive me, but I must make some progress.

The simple point is that if Barnett were to be ended tomorrow, the issue of comparative spending would not go away. There has not been a needs-based review since the 1970s, in which time many economic, social and demographic changes have taken place, so we do not actually know what the current position is. There are also difficulties in defining exactly what territorial spending is. One example is the building of High Speed 2, a project of which both phases will be entirely within England. One could therefore argue that spending on it should accrue only to England, but there is a benefit to Scotland and Wales—

[Mr MacNeil]

And France.

[Iain Stewart]

I am not quite sure whether the hon. Gentleman’s geography is correct. High Speed 2 will go from London to Birmingham and the north of England.

[Mr MacNeil]

The hon. Gentleman has conceded, as he is right to do, that High Speed 2 will be built in England, and says that it will also bring benefits to Scotland. If there are benefits to Scotland in the north, surely there will also be benefits at the other end, in the south—namely, to France. The benefits will be not only within but outwith the United Kingdom. High Speed 2 is not running in Scotland, but the hon. Gentleman argues that it will benefit Scotland; if it is going to benefit Scotland, it will benefit France in the same way.

[Iain Stewart]

Given the fact that there is currently no straight link between High Speed 2 and High Speed 1, that is a slightly tangential point. I have simply given High Speed 2 as an example of how difficult it is to assign exactly public spending on a territorial basis; I could cite many other examples.

It is worth while to look not only at public spending relationships between Scotland and England and Wales and England, but within each nation and the regions of each nation. There is currently a process of further devolution in England, which is producing more demands for tax and spending powers in the cities and regions. The north of England says quite regularly, “We’re being hard done to because of the Barnett formula.” London says that it pays far more than it receives in public spending—[Interruption.] I am not saying whether that is right or wrong, merely that such comments are made. I have funding issues in Milton Keynes in my constituency: with a rapidly growing population, sometimes the funding formulae do not keep up with the population need. There are also tensions between urban and rural spending—the issue is not only between the component countries of the United Kingdom.

We must start to open up a wider debate about the allocation of public spending right across the UK, bearing in mind the fact that we have a finite pot of money. We must also look at the tax receipts side of the ledger, which is also controversial. We have never definitively established the comparative amount of taxes raised north and south of the border, or, indeed, within England, because we have never had to assign taxes territorially. Many studies have been conducted, but they have been based on controversial assumptions.

It is difficult to assign tax revenues on a territorial basis because we have long had a unitary system. For example, my father was employed by the Civil Aviation Authority. He was based at Prestwick but spent one week in every two working at head office in London. He commuted between the two, so his time was spent equally between Scotland and England, and, to throw another spanner into the works, his tax office was in Cardiff. It would not be impossible to unpick all that, but it would be difficult, for corporation taxes as well as personal taxes. Nevertheless, it is something that we will have to do if more tax powers are devolved to Holyrood. We must also look at the disaggregation of national insurance and pension receipts and liabilities.

Simple calls for the retention or abolition of Barnett are very wide of the mark. If we are going to dismantle what has been a unitary fiscal system, there are many aspects to consider. Without updated figures on the current costs of providing public spending in each nation of the UK and within each region of each nation, we are working in the dark. I gently suggest to my hon. Friend the Minister that the Treasury looks at providing those figures.

My final point echoes the excellent one made by my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw). We must look at this matter in the context of the cohesion of the United Kingdom. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) has left the Chamber, but his party, the SNP, lost the referendum. We must make the Union work better and we need a sense of fairness; as my hon. Friend the Member for Redditch (Karen Lumley) said, every part of the Union must be treated fairly.

A few years ago, I began to do research for a book, and I looked at what is done in places such as Canada, Germany, Spain and the United States with regard to different tax-raising and spending powers in the component parts. Whatever the system, everyone still argued about spending levels and transfers from more to less affluent areas. That will never end—it is part and parcel of political debate—but the important thing is that we have a sense of fairness. I hope that today’s debate has helped to shed some light on matters that are often simplified and on a debate that is often inflamed, and that I have made a useful contribution to a much longer debate that we must have about public spending in the UK.

Money Creation and Society

Angus Brendan MacNeil Excerpts

Thursday 20th November 2014 Commons Chamber

[Steve Baker]

That is absolutely right. It would be wonderful if the history curriculum covered the Bank Charter Act 1844. I would be full of joy about that, but we would of course need to cover economics, too, in order for people to really understand the issue. Since the hon. Gentleman raises the subject, there were ideas at the time of that Act that would be considered idiocy today, while some ideas rejected then are now part of the economic mainstream. Sir Robert Peel spent some considerable time emphasising that the definition of a pound was a specific quantity and quality of gold. The notion that anyone could reject that was considered ridiculous. How times change.

One problem with the Bank Charter Act 1844 was that it failed to recognise that bank deposits were functioning as equivalent to notes, so it did not succeed in its aim. There was a massive controversy at the time between the so-called currency school and the banking school. It appeared that the currency school had won; in fact, in practice, the banks went on to create deposits drawn by cheque and the ideas of the banking school went forward. The idea that one school or the other won should be rejected; the truth is that we have ended up with something of a mess.

We are in a debt crisis of historic proportions because for far too long profit-maximising banks have been lending money into existence as debt with too few effective restraints on their conduct and all the risks of doing so forced on the taxpayer by the power of the state. A blend of legal privilege, private interest and political necessity has created, over the centuries, a system that today lawfully promotes the excesses for which capitalism is so frequently condemned. It is undermining faith in the market economy on which we rely not merely for our prosperity, but for our lives.

Thankfully, the institution of money is a human, social institution and it can be changed. It has been changed and I believe it should be changed further. The timing of today’s debate is serendipitous, with the Prime Minister explaining that the warning lights are flashing on the dashboard of the world economy, and it looks like quantitative easing is going to be stepped up in Europe and Japan, just as it is being ramped out in America—and, of course, it has stopped in the UK. If anything, we are not at the end of a great experiment in monetary policy; we are at some mid point of it. The experiment will not be over until all the quantitative easing has been unwound, if it ever is.

We cannot really understand the effect of money production on society without remembering that our society is founded on the division of labour. We have to share the burden of providing for one another, and we must therefore have money as a means of exchange and final payment of debts, and also as a store of value and unit of account. It is through the price system that money allows us to reckon profit and loss, guiding entrepreneurs and investors to allocate resources in the way that best meets the needs of society. That is why every party in the House now accepts the market economy. The question is whether our society is vulnerable to false signals through that price system, and I believe that it is. That is why any flaws in our monetary arrangements feed into the price system and permeate the whole of society. In their own ways, Keynes and Mises—two economists who never particularly agreed with one another—were both able to say that currency debasement was the best way in which to overturn the existing basis of society.

Even before quantitative easing began, we lived in an era of chronic monetary inflation, unprecedented in the industrial age. Between 1991 and 2009, the money supply increased fourfold. It tripled between 1997 and 2010, from £700 billion to £2.2 trillion, and that accelerated into the crisis. It is simply not possible to increase the money supply at such a rate without profound consequences, and they are the consequences that are with us today, but it goes back further. The House of Commons Library and the Office for National Statistics produced a paper tracing consumer price inflation back to 1750. It shows that there was a flat line until about the 20th century, when there was some inflation over the wars, but from 1971 onwards, the value of money collapsed. What had happened? The Bretton Woods agreement had come to an end. The last link to gold had been severed, and that removed one of the most effective restraints on credit expansion. Perhaps in another debate we might consider why.

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

Does the hon. Gentleman agree that the end of the gold standard and the increased supply of money enabled business, enterprise and the economy to grow? Once we were no longer tied to the supply of gold, other avenues could be used for the growth of the economy.

[Steve Baker]

The hon. Gentleman has made an important point, which has pre-empted some of the questions that I intended to raise later in my speech. There is no doubt that the period of our lives has been a time of enormous economic, social and political transformation, but so was the 19th century, and during that century there was a secular decline in prices overall.

The truth is that any reasonable amount of money is adequate if prices are allowed to adjust. We are all aware of the phenomenon whereby the prices of computers, cars, and more or less anything else whose production is not determined by the state become gently lower as productivity increases. That is a rise in real living standards. We want prices to become lower in real terms compared with wages, which is why we argue about living standards.

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[Steve Baker]

As I am explaining, QE is a great evil; it is a substitute for proper reform of the banking system. But this is the point: if the greatest bubble has been blown in the bond markets and equities have been pushed up by broadly the same amount, that is a terrible risk to the financial system.

[Mr MacNeil]

Surely there is a difference depending on where the QE goes. In an economy that has a demand deficit and needs demand to be stimulated, if QE goes into the pockets of those who are going to spend the money, surely QE can create some more motion in the economy, but if QE goes into already deep pockets and makes them larger and deeper, that is a very different thing.

[Steve Baker]

Again, the hon. Gentleman touches on an interesting issue. Once the Bank legitimises the idea of money creation and giving it to people in order to get the economy going, the question then arises: if you are going to create it and give it away, why not give it to other people? That then goes to the question: what is money? I think it is the basis of a moral existence, because in our lives we should be exchanging value for value. One problem with the current system is that we are not doing that; something is being created in vast quantities out of nothing and given away. The Bank explains that 40% of the assets that have been inflated are held by 5% of households, with 80% held by people over 45. It seems clear that QE—a policy of the state to intervene deeply in money—is a deliberate policy of increasing the wealth of people who are older and wealthier.

[Mr MacNeil]

One word the hon. Gentleman used was “moral”, and he touches on what the economist Paul Krugman will say: some on the right see the recession and so on as a morality play, and confuse economics and morals. Sometimes getting things going economically is not about the straightforward “morality” money the hon. Gentleman has touched on. That could be one reason why the recovery is taking so long.

[Steve Baker]

I am conscious that I have already used slightly more time than I intended, and I have a little more to say because of these interventions. All these subjects, as my bookshelves attest, are easily capable of being explained over hundreds of pages. My bottom line on this is: I want to live in a society where even the most selfish person is compelled by our institutions to serve the needs of other people. The institution in question is called a free market economy, because in a free market economy people do not get any bail-outs and do not get to live at somebody else’s expense; they have to produce what other people want. One thing that has gone wrong is that those on the right have ended up defending institutions that are fundamentally statist.

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[Mr Meacher]

My hon. Friend anticipates the main line of my argument, so if he is patient I think I will be able to satisfy him. Crucially, only 8% of the money referred to went to businesses outside the financial sector, with a further 8% funding credit cards and personal loans.

[Mr MacNeil]

I hear what the right hon. Gentleman says about money going into building, housing and mortgages, but is that not because the holders of money reckon that they can get a decent return from that sector? They would invest elsewhere if they thought that they could get a better return. One reason why the UK gets a better return from that area than, say, Germany is that we have no rent controls. As a result, money is more likely to go into property than into developing industry, which is more likely to happen in Germany.

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[Mr Lilley]

No; they can and should be controlled. They are controlled both by being required to have assets, and ultimately by the measures that Government should take to ensure that they do not expand lending too rapidly. That is the point that I want to come on to, because a failure to focus on the nature of banking and money creation causes confusion about the causes of inflation and the role of quantitative easing.

As too many people do not understand where money comes from, there is confusion about quantitative easing. To some extent, the monetarists, of whom I am one, are responsible for that confusion. For most of our lifetime, the basic economic problem has been inflation. There have been great debates about its causes. Ultimately, those debates were won by the monetarists. They said, “Inflation is caused by too much money—by money growing more rapidly than output. If that happens, inevitably and inexorably, prices will rise.” The trouble was that all too often, monetarists used the shorthand phrase, “Inflation is caused by Government printing too much money.” In fact, it is caused not by Government printing the money, but by banks lending money and then creating new money at too great a rate for the needs of the economy. We should have said, “Inflation follows when Governments allow or encourage banks to create money too rapidly.” The inflationary problem was not who created the money, but the fact that too much money was created.

The banks are now not lending enough to create enough money to finance the growth and expansion of the economy that we need. That is why the central bank steps in with quantitative easing, which is often described as the bank printing money. Those who have been brought up to believe that printing money was what caused inflation think that quantitative easing must, by definition, cause inflation. It only causes inflation if there is too much of it—if we create too much money at a faster rate than the growth of output, and therefore drive up prices—but that is not the situation at present.

[Mr MacNeil]

The right hon. Gentleman is giving a very good explanation of the different circumstances in which money is created. He has spoken about the morality, and about quantitative easing. When there is demand, what is his view of the theory of helicopter money, and where that money gets spread to?

[Mr Lilley]

As a disciple of Milton Friedman, I am rather attracted to the idea of helicopter money; I think it was he who introduced the metaphor, and said that it would be just as effective if money were sprayed by a helicopter as if it were created by banks. Hopefully, as I live quite near the helicopter route to Battersea, I would be a principal recipient. I do not think that there is a mechanism available that would allow us to do that, but I am not averse to that in principle, if someone could do it. My point is that the banks, either spontaneously or encouraged by the central bank through quantitative easing, must generate enough money to ensure that the economy can grow steadily and stably.

[Mr MacNeil]

Could it not be argued that increasing welfare payments would be a form of helicopter money, because the people most likely to spend money are those with very little money? If we put money in the pockets of those who have little money, it would be very positive, because of the economic multiplier; the money would be spent, and would circulate, very quickly.

[Mr Lilley]

There are far better reasons for giving money to poor people than because their money will circulate more rapidly—and there is no evidence for that; I invite the hon. Gentleman to read Milton Friedman’s “A Theory of the Consumption Function”, which showed that that is all nonsense. There are good reasons for giving money to poor people, namely that they are poor and need money. Whether the money should be injected by the Government spending more than they are raising, rather than by the central bank expanding its balance sheet, is a moot point.

All I want to argue today is that we should recognise that the economy is threatened as much by a shortage of money as it is by an excess of money. For most of our lifetimes the problem has been an excess, but now it is a shortage. We therefore need to balance on either occasion the rate of growth of money with the rate of growth of output if we are to have stability of prices and stable economic activity. I congratulate my hon. Friend the Member for Wycombe on bringing these important matters to the House’s attention.

[Austin Mitchell (Great Grimsby) (Lab)]

I welcome this debate and congratulate hon. Friends on securing it, because we have not debated this matter for over 100 years, and it is time we did so. This House and the Government are obsessed with money and the economy, but we never debate the creation of money or credit, and we should, because, when it comes to our present economic situation and the way the banks and the economy are run, that is the elephant in the room. It is time to think not outside the box, but outside the banks; it is time to think about the creation of credit and money.

I speak as a renegade social creditor who is still influenced by social credit thinking; I do not pledge total allegiance to Major Douglas, but I am still influenced by him. As has just been pointed out, 93% of credit is created by the banks, and a characteristic of what has happened to the economy since the ’70s is the enormous expansion of that credit. I have here a graph from Positive Money showing that the money created by the banks was £109 billion in 1980. Thanks to the financial reforms and the huge increase in the power of the banks since then, by 2010 that figure had risen to £2,213 billion, whereas the total cash created by the Government—the other 3%—had barely increased at all. Since 2000 we have seen the amount of money created by the banks more than double.

That has transformed the economy, because it has financialised everything and made money far more important. It has created debt-fuelled growth followed by collapse. It is being controlled by the banks, which have directed the money into property and financial speculation. Only 8% of the credit created has been lent to new businesses. The Government talk about the march of the makers, but the makers are not marching into the banks, because the banks are turning them away. Even commercial property is more important than makers. That has created a very lop-sided economy, with a weak industrial base that cannot pay the nation’s way in the world because investment has been directed elsewhere, and a very unequal society, which has showered wealth on those at the top, as Piketty shows, and taken it away from those at the bottom.

A very undesirable situation is being created. We have built an unstable economy that is very exposed to risk and to bubble economics, thanks to the financialisation process that has gone on since 1979. The state allocates all credit creation to the banks and then has to bail them out and guarantee them, at enormous expense and with the creation of debt for the public, when the bubble bursts and they collapse.

Some argue—Major Douglas would have argued this—that credit should therefore be issued only by the state, through the Bank of England. That would probably be a step too far in the present situation, given our present lack of education, but we can and should create the credit issued by the banks. We can and should separate the banks’ utility function—servicing our needs, with cheque books, pay and so on—and their speculative role. The Americans have moved a step further, with the Volcker rule, but it is not quite strong enough. In this country we tend to rely on Chinese walls, which are not strong at all. I think that only a total separation of the banks’ utility and speculative arms will do it, because Chinese walls are infinitely penetrable and are regularly penetrated.

We can limit the credit creation by the banks by increasing the reserve ratios, which are comparatively low at the moment—the Government have been trying to edge them up, but not sufficiently—or we could limit their power to create credit to the amount of money deposited with the banks as a salutary control. We could tax them on the hidden benefit they get from creating credit, because they get the signorage on the credit they create. If credit is created by banknotes and cash issued by the Government, the Government get the profit on that—the signorage. The banks just take the signorage on all the credit they issue and stash it away as a kind of hidden benefit, so why not tax that and give some of the profit from printing money to the state?

Martin Wolf, in an interesting article cited by my right hon. Friend the Member for Oldham West and Royton (Mr Meacher), has argued that only central banks should create new money and that it should be regulated by a public credit authority, rather like the Monetary Policy Committee. I think that that would be a solution and a possible approach. Why should we not regulate the issue of credit in that fashion?

That brings us back to the old argument about monetarism: whether credit creation is exogenous or endogenous. The monetarists thought that it was exogenous, so all we have to do is cut the supply of money into the economy in order to bring inflation under control. That was a myth, of course, because we cannot actually control the supply of money; it is endogenous. The economy, like a plant, sucks in the money it needs. But that can be regulated by a public credit authority so that the supply matches the needs of the economy, rather than being excessive, as it has been over the past few years. I think that that kind of credit authority needs to be created to regulate the flow of credit.

That brings me to the Government’s economic policy. The Government tell us that they have a long-term economic plan, which of course is total nonsense. Their only long-term economic plan is slash and burn. The only long-term economic planning that has been done is by the Bank of England.

[Mr MacNeil]

To quote Harry S. Truman, the worst thing about economists is that they always say, “On the other hand”. The hon. Gentleman talks about limiting and regulating how much money is to be sucked in by the economy, but who would decide that? The difficulty is that although the economy might be overheating in a certain part of the country, such as the south-east of England, it could be very cool in others, such as the north of Scotland. What might be the geographical effects of limiting the money going into the economic bloodstream if some parts of the plant—I am extending his metaphor—need the nutrients while other parts are getting too much?

[Austin Mitchell]

The hon. Gentleman often asks tricky questions, but this one is perfectly clear-cut. The credit supply for the peripheral and old industrial parts of the economy, which include Scotland, but also Grimsby, has been totally inadequate, and the banks have been totally reluctant to invest there. I once argued for helicopter money, as Simon Jenkins has proposed, whereby we stimulate the economy by putting money into helicopters and dropping it all over the country so that people will spend it. I would agree to that, provided that the helicopters hover over Grimsby, but I would have them go to Scotland as well, because it certainly deserves its share, as does the north of England. However, I do not want to get involved in a geographical dispute over where credit should be created.

The only long-term plan has been that of the Bank of England, which has kept interest rates flat to the floor for six years or so—an economy in that situation is bound to grow—and has supplemented that with quantitative easing. We have created £375 billion of money through quantitative easing. It has been stashed away in the banks, unfortunately, so it has served no great useful purpose. If that supply of money can be created for the purpose of saving the banks and building up their reserve ratios, it can be used for more important purposes—the development of investment and expansion in the economy. This is literally about printing money. Those of us with a glimmering of social credit in our economics have been told for decades, “You can’t print money—it would be terrible. It would be disastrous for the economy to print money because it leads to inflation.” Well, we have printed £375 billion of money, and it has not produced inflation. Inflation is falling.

--- Later in debate ---

[Zac Goldsmith]

I certainly agree with the sentiment expressed. I am excited by the challengers, but I do not believe that it is enough. Competition has to be good because it minimises risk. I know that my hon. Friend the Economic Secretary has dwelt on and looked at this issue in great detail.

Even fractional reserve banking is only the start of the story. I will not repeat in detail what we have already heard, but banks themselves create money. They do so by making advances, and with every advance they make a deposit. That is very poorly understood by people outside and inside the House. It has conferred extraordinary power on the banks. Necessarily, naturally and understandably, banks will use and have used that power in their own interests. It has also created extraordinary risk and, unfortunately, because of the size and interconnectedness of the banks, the risk is on us. That is why I am so excited by the challengers that my hon. Friend has just described. As I have said, that is happening on the fringe: it is right on the edge. It is extraordinary to imagine that at the height of the collapse the banks held just £1.25 for every £100 they had lent out. We are in a very precarious situation.

When I was much younger, I listened to a discussion, most of which I did not understand, between my father and people who were asking for his advice. He was a man with a pretty good track record on anticipating turbulence in the world economy. He was asked when the next crash would happen, and he said, “The last person you should ask is an economist or a business man. You need to ask a psychiatrist, because so much of it involves confidence.” The point was proven just a few years ago.

The banking system and the wider economy have become extraordinarily unhinged or detached from reality. I would like to elaborate on the extraordinary situation in which it is possible to imagine economic growth even as the last of the world’s great ecosystems or the last of the great forests are coming down. The economy is no longer linked to the reality of the natural world from which all goods originally derive. That is probably a debate for another time, however, so I will not dwell on it.

[Mr MacNeil]

The hon. Gentleman is making a good point that we should remember. It was brought home to me by Icelandic publisher Bjorn Jonasson, who pointed out that we are not in a situation where volcanoes have blown up or there have been huge national disasters, famines or catastrophes brought on by war; as a couple of the hon. Gentleman’s colleagues have said, this is about a system failure within the rules, and it is worth keeping that in mind. Although there is much gloom in relation to the banking system, in many ways that should at the same time give us some hope.

[Zac Goldsmith]

The hon. Gentleman is right, but a growing number of commentators and voices are anticipating a much larger crash than anything we have seen in the past few years. I will not add to or detract from the credence of such statements, but it is possible to imagine how such a collapse might happen, certainly in the ecological system. We are talking about the banking system, but the two systems are not entirely separate.

We had a wake-up call before the election just a few years ago. My concern is that we have not actually woken up. It seems to me that we have not introduced any significant or meaningful reforms that go to the heart of the problems we are discussing. We have been tinkering on the edges. I do not believe that Parliament has been as closely involved in the process as it should be, partly because of the ignorance that I described at the beginning of my speech.

I want to put on the record my support for the establishment of a meaningful monetary commission or some equivalent in which we can examine the pros and cons of shifting from a fractional reserve banking system to something closer to a full reserve banking system, as some hon. Members have said. We need to understand the pros and cons of such a move, how possible it is, and who wins and who loses. I do not think that many people fully know the answers.

We need to look at quantitative easing. I think that hon. Members on both sides of the House have accepted that it is not objective. Some believe that it is good and others believe that it is bad, but no one believes that it is objective. If the majority view is that quantitative easing is necessary, we need to ask this question: why not inject those funds into the real economy—into housing and energy projects of the kind that Opposition Members have spoken about—rather than using the mechanism in a way that clearly benefits only very few people within the world of financial and banking wizardry that we are discussing?

The issues need to be explored. The time has come to establish a monetary commission and for Parliament to become much more engaged. This debate is a very small step in that direction, and I am very grateful to its sponsors. I wish more Members were in the Chamber—I had intended to listen, not to speak—but, unfortunately, there have not been many speakers. This is a beginning, however, and I hope that we will have many more such debates.

Income Tax

Angus Brendan MacNeil Excerpts

Wednesday 5th November 2014 Commons Chamber

[Frank Dobson]

No, I will not, because others wish to speak.

Let me make it clear that the Labour Government did not bring down the top rate of income tax to benefit the richest and at the same time freeze the pay of nurses, freeze the pay of doctors and freeze the pay of teachers, while at the same time the bankers got their bonuses. At HSBC, which lost £27 billion in the credit crash, Barclays, which lost £8 billion, and Lloyds, which lost £5 billion, bankers’ bonuses have risen, in 2012 and since then. At HSBC, 239 people are currently receiving £1 million or more a year. The worst off received a £40,000 tax benefit, and most will have received £100,000. For example, Mr Stuart Gulliver, chief executive of HSBC, apparently receives £32,000 a week in what are described as “special allowances”. I do not even know whether he pays tax on those special allowances, but that means that he receives, each week, an amount that is close to the national average annual income that is over and above his pay, yet Members on the Government Benches object to the idea that he should pay 50p in the pound tax on that. All I can say is that, following his and his predecessor’s efforts, he obviously has to spend a lot of time trying to minimise the amount of money he has to set aside to pay off for swindling exchange rates and to pay off for the consequences of money laundering and what happened with LIBOR and, generally speaking, in organising an outfit that might be described as the tax avoiders’ alliance.

We have heard talk of behavioural change reducing the possible income from a 50p rate of tax, but these bankers are really good at behavioural change. They do nothing else. They organise all the way around the world, helping people to avoid tax. With the exception of Lloyds, more than 30% of the subsidiary companies of these banks—in some cases these companies exceed more than 1,000 in number—are located in tax havens, and they are not located in tax havens just because the weather is better; it is because they are involved in promoting tax avoidance.

Bankers also say that their pay is a compensation package. I have checked the Oxford dictionary and compensation means recompense for loss, injury or suffering. What have any of these bankers experienced in the way of loss, injury or suffering? It is the rest of us who have had to experience loss, injury or suffering as a result of their stupidity leading up to the financial crisis. Their incompetence and greed inflicted loss, injury or suffering on the rest of us. I thought at one point that it was a perversion of language to use the word compensation in such circumstances, but I actually believe it is a perversion of mindset. They have obviously concluded that they should be compensated for inflicting loss, injury and suffering on the rest of us.

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

Will the right hon. Gentleman give way?

[Frank Dobson]

No, as I shall finish shortly.

None of these people would have any difficulty finding an extra 5p or even 10p in the pound on their income tax.

--- Later in debate ---

[Mr Browne]

I do not understand why so many Members of Parliament have such an antagonistic attitude towards people who start up businesses, create wealth and employ people.

[Mr MacNeil]

Will the hon. Gentleman give way?

[Mr Browne]

In a moment—the hon. Gentleman has only just come into the Chamber. It seems to me that those people should be lauded and celebrated for their achievements, and they should pay a reasonable amount of tax—and they do under this Government—but they should not be reviled by politicians. The reason why unemployment is falling and the economy is growing is that we have more wealth creation, and that is what we need to do more to encourage.

The Labour party—not just Labour; there are others, I am sure, Madam Deputy Speaker—seems to me to have an extremely narrow, parochial focus. There are economies right around the world that are expanding and are wealthier than ever before. Hundreds of millions of people in Asia are being lifted out of material poverty because those countries are embracing the basics of free-market economics and wealth creation. Those countries are seeing the benefits of improved health care systems, improved life expectancy, reduced infant mortality and improved education outcomes. We must not allow ourselves to adopt an approach of insular socialism in just this one country. That approach involves a belief that we can continue to penalise a small number of wealth creators for being successful, which is completely counter-productive.

We need to step back and ask ourselves what a country would do if it wanted to be competitive in a globalised economy. What could we do to encourage businesses not to locate to France, Germany or the United States or, increasingly, to Mexico, Brazil or India? What could we do to encourage them to locate here? Could we ensure that we had competitive levels of corporation tax? I congratulate the Government on achieving that. Could we ensure that we had competitive levels of personal taxation? In my view, we are in a reasonable place on that. We would be in a worse place if the gist of this motion were accepted.

Perhaps we could ensure that the percentage the state took from overall GDP was sustainable. At the moment, the Government spend a much bigger proportion of GDP than they did in any of the 10 years that Tony Blair was Prime Minister, and in my view that is too much. It is unsustainable. Could we ensure that we were not borrowing too much and living beyond our means? At the moment, we are clearly living beyond our means. These are all straightforward propositions for a country that wants to be successful in a global marketplace.

[Mr MacNeil]

I am almost sorry to interrupt the hon. Gentleman’s sermon in favour of inequality. Why, according to this Government, do the poor have to be punished and the rich have to be incentivised? The only thing that the bedroom tax, VAT and the millionaires’ tax have in common is that Labour abstained on all those issues, which were designed either to punish the poor or to incentivise the rich. The hon. Gentleman seems to believe that the poor must be punished and that the rich must be incentivised. Why?

[Mr Browne]

I have not the faintest idea what the hon. Gentleman is talking about. It seems like complete nonsense. I am not in favour of punishing anybody. If people can keep a higher proportion of the product of their labour, they will be incentivised to keep working and be productive. That applies to people who are earning £20,000, and who have seen a big cut in their income tax under this Government, but it also applies to people who are earning £220,000 and who might have set up successful companies employing 150 people in the hon. Gentleman’s constituency or in mine. I am not seeking to punish people. I am not one of those politicians who believes that we can make some people happy only by making others unhappy. I want us to be a harmonious country in which everyone is incentivised to work and can see the product of their labour.

[Mr Browne]

I do agree with that, although I do not always agree with everything put forward by those on the Government Front Bench. For example, it is important—as the hon. Member for Wyre Forest said—that we should remain a member of the European Union. I know that some Conservative Members are uncomfortable with that, but we are part of the world’s biggest single market. It is an attraction to investors from outside the EU that they can invest in the United Kingdom not only because it is the sixth biggest economy in the world but because we can act as a stepping stone into the largest single market.

We also need to adopt a broadly liberal approach to migration. It is extremely important for our country that we can attract high-talent people from outside the European Union. We see quite a lot of that in London, with people coming to our capital city as well as to the other parts of the United Kingdom to invest and to grow businesses. That is important for our national prosperity.

I take an economically liberal approach across the board, but it is important that we have an enterprise economy for all the reasons that I have stated. An enterprise economy is important if we are to fund public services, for example. Many Members will have travelled widely. I would simply recommend that they try out the public services in countries that have had a heavy dose of socialism. After all, people were only escaping over the Berlin wall in one direction. They were not trying to escape from the west to the east in search of a better quality of life or better public services. A lot of the dysfunctional countries with real social problems are those that do not raise enough money to be able to fund decent public services. In no country in the world do politicians want to have bad hospitals and bad schools. Some countries do not have good hospitals and good schools because they cannot afford to fund them, and that is because they do not have an economy that raises enough revenue to do that. That is because they keep deterring wealth-creating entrepreneurial behaviour. It is all so straightforward that it feels frustrating having to explain it to people.

My philosophical and concluding point is this: all the money we are talking about is being earned by individuals working; it is not our money, the Government’s money or the Leader of the Opposition’s money. When he talks about giving money back, as if he were some sort of Santa Claus figure who is there to decide how much of your own money you are allowed to have and we should be extremely grateful to him, or to the shadow Chief Secretary, for benevolently allowing us to keep a bit of it—

[Mr MacNeil]

rose—

[Mr Browne]

Let me finish this point. The crucial philosophical problem I have with a 50p tax rate is the underlying presumption that the state co-owns your income with you, and that when you work you are in a 50:50 shareholding relationship and for every extra hour of work you do, half the money belongs to the former Member for Shipley and half belongs to you. It is as though it is good of him that he is letting me keep half my cash; I do not accept that as a basic philosophical argument.

Oral Answers to Questions

Angus Brendan MacNeil Excerpts

Tuesday 4th November 2014 Commons Chamber

[Mr Osborne]

We will have developed and costed plans for HS3 from—[Interruption.] There was no proposal for HS3 from the Labour party for 13 years in government and then for four years in opposition. Labour Members are now complaining that I came up with a proposal four months ago. We already have detailed support for that proposal from David Higgins and we are going to have a costed plan for it. There was absolutely no attempt to connect the north of England from east to west under the last Labour Government. It is happening under this Conservative-led Government.

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

Is not the best way to have a northern economic powerhouse to have full fiscal autonomy for Scotland? After all, the Prime Minister did say that all options for devolution are there and all are possible. Does the Chancellor agree, or is he afraid of the competition from a more socially just Scottish treasury making better policies for the people of Scotland?

[Mr Osborne]

We will honour the commitments made during the referendum campaign by all the Unionist parties to devolve further fiscal powers to Scotland. We will honour the commitment we made, and I would ask the Scottish National party to honour the promise it made that this was a referendum which would settle the issue of Scottish independence at least for

“a generation…perhaps for a lifetime”—

I am quoting Alex Salmond. Perhaps the SNP should stop trying to reopen the question that was resolved, and work with us to make sure that Scotland has a great economic future.

Oral Answers to Questions

Angus Brendan MacNeil Excerpts

Thursday 3rd July 2014 Commons Chamber

[Sajid Javid]

Superfast Cornwall has a satellite broadband offer for premises that currently have slow-speed broadband and are not likely to gain a fibre-optic connection. The grant of almost £3 million that the Government gave in February in phase 2 will help increase coverage. My hon. Friend’s constituent can make an application to Superfast Cornwall, and that will be a decision for it to make. We are making progress on the issue, but I agree that there is much more to do.

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

10. Finland and Sweden will cover about 99% of their populations with 4G networks capable of delivering high-speed broadband, but the UK’s model of coverage with 2G and 3G has failed many people in rural and island areas. Will the Secretary of State consider a different approach to 4G for rural areas, including mast-sharing and controls on rents at mast sites, especially as 4G will deliver up to 30 megabits and might wirelessly reach areas that cable broadband might not reach?

[Sajid Javid]

The hon. Gentleman will be pleased to know that there has been a significant increase in superfast broadband coverage since 2010, rising from 45% to 73%, but there is much more to do. There has also been a significant change in 4G coverage in the UK, which many people use for broadband, as he rightly highlights. For example, O2, which has a licence for 4G, is committed to extending it to 99% of the country.

--- Later in debate ---

[Mr Vaizey]

We are putting more than £1 billion into broadband roll-out. We continue to invest to take it to 95%. I will happily work with any Member to ensure that the broadband rural programme goes smoothly in their constituency.

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

T8. The theme of much of this morning’s exchanges has been broadband and mobile coverage. Will the Minister meet me and other interested rural and island Members of Parliament to discuss how proper 4G coverage on a Swedish or Finnish model may help the aims of comprehensive mobile and fast broadband coverage in the years to come?

[Mr Vaizey]

Broadband is going extremely well in the UK, mainly because we are better together. We are working with Scotland and Wales to roll out broadband and 4G coverage. The hon. Gentleman should not be so modest: we have outstripped a lot of the Scandinavian countries. We have just laid 400 km of undersea cable to the highlands and islands. That could not have been done without the UK Government working with the devolved Government to bring broadband to our rural areas. We are better together.

Finance Bill

Angus Brendan MacNeil Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Stewart Hosie]

Indeed; I recognise all those points, and the pressures that are being applied to finite and very mobile resources, such as rigs and accommodation vessels, but I will come back to some of that later.

This measure not only penalises the drilling and accommodation vessel sector, but potentially impacts on the entire £35 billion upstream oil and gas supply chain. Derek Henderson from Deloitte UK said:

“While it doesn’t affect operators directly, many expect that the costs will be passed on to them and could discourage drilling.”

That would impact on the entire support and supply chain that is dependent on drilling activities.

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

On the point about making other jurisdictions more attractive, are the Government not actually helping Scotland’s competitors by ensuring that rigs, of which there is a shortage, go to more sympathetic jurisdictions?

[Stewart Hosie]

Indeed, and Malcolm Webb from Oil and Gas UK made a near-identical point when he said:

“It is perplexing…that the Government has chosen to proceed with the bareboat measure. This can only increase costs on the”

UK continental shelf. He also said:

“we fear that this move will drive drilling rigs, already in short supply, out of the UKCS.”

That would be a ridiculous thing to do.

What makes this measure all the more peculiar is that the bareboat charter arrangements are commercial arrangements that are widely used across a range of industries, and not just in the oil and gas sector. The arrangements we are talking about are used internationally, and have formed a consistent part of the UK continental shelf operation for 40 years. So why pick now to take an extra £500 million or £600 million out of the North sea over the next five years? The Treasury’s decision in the Budget to apply this measure only to the oil and gas industry, and only now, to a few specific vessel types, is utterly illogical.

I do not want to detain the House too long, so I think that the key thing to do is to consider the points that the International Association of Drilling Contractors makes about the measure. This is not a gentle criticism of a mildly inconvenient tax; it is an excoriating critique of what the UK Government have done. The association says:

“The measure is unfair and a unilateral deviation from international best practice…with no ability for contractors to reset prices,”

it

“amounts to retrospective and double taxation”,

and in a real and practical sense, it does. It says:

“The measure will depress economic activity. The…changes affect the cost base of the drilling industry”,

with all the impact that might have. It goes on:

“The measure targets a single, specialist sector for additional rent…Specialist international companies that have relocated”

to the UK “will be particularly hit”, when they and their investment should be welcomed instead.

The association argues:

“The government has manipulated the introduction of the measure to avoid proper scrutiny.”

In a particular criticism, it goes on to say:

“It is not appropriate for legislation as complex as this to be published in initial draft form”

on the day it was due to come into effect. That is a preposterous way for the UK Government to behave. The association continues:

“The consequences of the measure have not been properly assessed by HRMC”,

and it says that there are reports that up to £2 billion could be lost from the continental shelf. It also says:

“The measure is deliberately discriminatory...all vessels bar drilling rigs and accommodation units have been exempted for reasons that are far from clear.”

To put that another way, only two sorts of vessels remain included in the scope of the measure, which appears to be the usual sort of smash-and-grab cash raid that this Government make on the North sea.

There appear to be a great many reasons why the bareboat chartering regime is wrong. There appears to be an illogicality about the way it is being introduced, as well as a complete lack of transparency and time properly to assess the long-term impact, not just on drilling rigs and accommodation vessels, but on the entire supply chain. Little concern appears to have been felt about the consequential impact on growth and jobs in the sector and in the economy in general. That is quite a scathing set of criticisms to make of this Government, although it is not unique and could apply to any number of other things that they have done.

I look forward to hearing what the Minister has to say, but unless there is a very credible explanation of the amount of tax that he believes is lost, and of how the proposals will help, rather than having the consequences that I have described, I fear that we might divide on new clause 1.