Finance (No. 4) Bill

Anne Marie Morris Excerpts

Monday 16th April 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I wish to make only a short speech in support of giving this Bill a Second Reading, because I made a speech on the broad thrust of the Budget on Budget day itself and because, once again, I have been the lucky winner of the Liberal Democrat Whips Office lucky dip competition and will be serving on the Committee. I therefore have many days ahead of me going through the Bill’s detailed provisions, both in this Chamber and on the Committee corridor upstairs.

One Budget highlight of a month ago for Liberal Democrats was the largest rise in history of the income tax threshold. My hon. Friend the Member for Gainsborough (Mr Leigh) mentioned John Bright, and I am sure that John Bright would have approved of that simplification of the tax system, as it would have disproportionately benefited the thousands of factory workers that he represented in Birmingham. Other highlights of the Budget were the introduction of effective wealth taxes and anti-avoidance measures, and, in order to make the United Kingdom more competitive internationally, the two reductions in corporation tax scheduled for the next couple of financial years.

Taken together, those measures in the Budget involve billions of pounds, but since the Budget we have heard much about the pasty tax, the granny tax, the church tax and the charities tax. Now we hear from the hon. Member for Kingston upon Hull North (Diana Johnson) about the caravan tax. I had not heard about that before, but no doubt we will take much interest in it as the Finance Bill progresses. Even though all those measures and all those controversies are important in their own right, the focus on them suggests that the broad thrust of the Budget—rewarding work, taxing wealth effectively and making the United Kingdom economy more competitive—was right and that the Chancellor and Chief Secretary struck the right Budget judgment.

All those measures will, of course, be discussed during consideration of this Bill, which is another behemoth of a Bill. Every year we hear that the Treasury has produced another mammoth Bill and this one seems to be a bit of a record, as it contains 225 substantive clauses and 38 schedules. We can all look forward to dealing with them over the next few weeks.

Clause 1—it is rightly clause 1—is the Bill’s most important, because it announces the increase in the personal income tax threshold that took place on 6 April, while we were on recess, raising the threshold to £8,105. We know from the Budget statement that in a year’s time that threshold will be raised to £9,205. Cumulatively, since the general election, we will have raised 2 million people out of the income tax net altogether and provided a tax cut in cash terms of more than £500 to more than 20 million basic rate taxpayers. We also know that there is to be a proposed stamp duty charge on properties worth more than £2 million. As the hon. Member for Kingston upon Hull North said, we do not have a mansion tax, but we do have a mansion duty—a new stamp duty charge on properties worth more than £2 million. This was indeed a Budget that gave a tax break for the millions while taxing effectively the wealth of millionaires.

In business terms, the Liberal Democrats very much welcome the fact that corporation tax will be cut this year to 24% and next year to 23%. We also welcome the introduction of yet another scheme to encourage entrepreneurial activity, the seed enterprise investment scheme. It is a five-year scheme to support small business start-ups. As the Member of Parliament for Bristol West, I particularly welcome the announcement in the Budget of a consultation in order to proceed to giving tax credits to the television industry, and, in particular, for animation, on the same basis as those for the film industry. I met Aardman Animations Ltd, which is based in my constituency, last week and I understand that discussions between the Treasury—with my hon. Friend the Exchequer Secretary and his colleagues—and the animation industry are progressing well. I look forward to the Finance Bill 2013 and to the full provisions for that tax credit to support important British business being introduced in a year’s time.

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

Given the hon. Gentleman’s interest in small businesses, does he welcome, as I do, the new provision for a cash-based tax return that will make it much simpler for small businesses with turnovers of less than £77,000? Simplifying the tax return and making it cash-based is a real step forward for the smallest businesses.

[Stephen Williams]

Yes. I welcome my hon. Friend’s intervention. When I met representatives of the Federation of Small Businesses, they were particularly keen that that measure should be introduced in the Budget and they are no doubt very pleased that the Government have responded to their representations and those made by hon. Members, such as my hon. Friend, on its behalf.

The anti-avoidance measures in the Budget and the Bill are also very much welcomed by the Liberal Democrats, particularly the consultation on introducing a general anti-avoidance and anti-abuse role based on the paper prepared for the Treasury by Graham Aaronson. We will need to wait until the next Finance Bill to see how that pans out. There are also specific anti-avoidance measures in the Bill, such as those to tackle the use of envelope schemes by corporate bodies and unincorporated bodies to acquire properties while avoiding stamp duty. That abuse was overlooked for far too long by the previous Administration and I am delighted that the coalition Government are tackling it head on.

Other more controversial potential abuses are being tackled in the Bill through the limits on tax reliefs that individuals are able to claim. Before the Budget, the Deputy Prime Minister talked about a tycoon tax. Across the Atlantic, President Obama has been talking about a minimum rate of tax, such as 30%, that US citizens should be expected to pay, and Warren Buffett has been making very similar points. We have many reliefs available in our tax code in this country to encourage enterprise, such as the enterprise management incentive scheme, the enterprise investment scheme and the venture capital schemes of which, in my life before 2005, I used to help many businesses and entrepreneurs to take advantage.

The Bill provides another relief, the seed enterprise investment relief, but all the reliefs available at the moment are capped. They are limited as regards both time and the amount that can be put into them, and therefore the amount of tax relief—whether it is on income tax or capital gains tax—that a wealthy individual might be able to obtain. That leaves various uncapped reliefs that are available under our tax code for income tax losses, loan interest and, of course, philanthropy, which is where a lot of the controversy has come about in recent weeks.

From the outset, it is right to say that the extension of restrictions and caps on reliefs, whether they are on gifts to charity or loss reliefs, is entirely logical. When restrictions are imposed on existing reliefs, such as gift aid, the Government and the Treasury must take greater care than when they are imposing reliefs from the outset for a new scheme, such as the seed scheme. The Government and the Chancellor have already said that they intend to work very closely with the charitable sector on the introduction of the restriction on gift aid, and I hope that that will lead to a measure that meets the Government’s objectives of protecting our tax base while ensuring that philanthropy can continue.

It is important, however, to say that, contrary to much of the coverage that we have read about and that constituents have written to us about, the restriction on reliefs is not the same as the abolition of reliefs. The phrase “charities tax”, which has been bandied around the Chamber this afternoon, has left hanging in the air the implication that the Government are somehow withdrawing tax relief from philanthropic activities altogether. That is simply not true. An individual will still be able to donate and receive tax relief on the higher of £50,000 or a quarter of their annual income. Some of us might dream of this, given the salaries that we are on, but if we had an annual income of £1 million, we could still donate £250,000 to charity while receiving full tax relief. I understand from figures that I have seen from the Charities Aid Foundation that the median donation that our constituents make is about £11 a year, so very few people will be affected by what the Government have proposed. It is right that such details should be closely considered by the Treasury and by all of us, as parliamentarians, to ensure that they work.

There are various things that the Government could do. The limits are annual and perhaps they could consider rolling up the annual limits. If you, Mr Deputy Speaker, were to win £1 million on the lottery, you would not be able to donate an amount to charity under the Bill’s provisions while getting tax relief and while, more importantly, the charity got the gift aid matching relief, too. That would be an absurd anomaly and I am sure that it was not intentional.

--- Later in debate ---

[Nia Griffith]

My hon. Friend is absolutely right. The frightening thing is that we have not seen anything yet. The cuts in the public sector jobs are just beginning to bite, but the cuts in the tax credit system and in the housing benefit system are loaded towards the next two or three years. The worst thing happening this year was the terrible cut in tax credits on 6 April, with some of the least well-off people losing £4,000 per year because they cannot get extra hours. We know perfectly well that getting extra hours is extremely difficult.

By contrast, our Chancellor lowered the number of hours from 30 to 27 at one point, after the 2008 economic crisis, in order to help people who could not claim working tax credit because they could not get enough hours. We made the reverse decision because we recognised that people were desperate for hours. I met many people who were desperate for any sort of work.

The Government’s policy is very damaging but, as my hon. Friend pointed out, the vast majority of cuts are still to come. The effect on Wales of the tax credit cuts is that £17 million went last year, £148 million will go next year, £188 million the following year, £219 million the following year and £222 million the year after that. Each year the savings are greater, and with every saving there is a bigger cut in people’s income. The same is happening with housing benefit and all the reforms to the universal credit that are coming in.

Those cuts represent a tragedy for each individual family, but more importantly for the whole economy, that is money being taken out of the economy. In other words, it is money that people do not have to spend and therefore money that is not circulating. That will have a devastating effect on our high streets where we are already seeing many well known retailers closing shops. We are lucky in Wales that we had a rescuer for Peacocks. My hon. Friend the Member for Pontypridd (Owen Smith) has its headquarters in his patch and it has been taken over. None the less, more than half the stores are closing, including two in my own town. That is just one example. I could list dozens of retailers, as I am sure all hon. Members could, in towns up and down the UK, each of which tells the same story: nobody has any money to spend.

It is vital that we consider which way round we should be working in order to get money back into the economy, rather than taking it out. We start with the situation in which money is being dragged out of the economy. What do we do to try and stimulate the economy? We could create jobs. One of the things that Labour suggested is a repeat of the bankers’ bonus tax. We could use the money to create jobs for young people and to stimulate the housing industry and other building projects, such as schools or roads. If we did that, we would be repeating a tax which raised a lot more than this Government seem to be prepared to raise from their banker friends. Their present tax proposals would raise a limited amount from the bankers. Believe me, on the doorsteps people say that they still want to see the banks paying their fair share to put right the problems that they put us into in the first place.

We are lucky in Wales that we have a Labour Welsh Government. Welsh Government Ministers are implementing policies specifically to create jobs. We have spoken about creating jobs through a bankers’ bonus tax. The Welsh Government are creating 4,000 jobs with the limited finances that they have. It is specifically a young person’s jobs programme, with an emphasis on the private sector because we recognise that a much greater emphasis on the private sector is needed. We recognise that we are too dependent on the public sector.

[Anne Marie Morris]

May I take it, therefore, that the hon. Lady welcomes the new scheme in this Budget that will enable young people to apply for loans to start up businesses, in the same way as they can to go to university?

[Nia Griffith]

I certainly applaud measures to give young people the opportunity to take out loans to start up businesses, but even people with immense experience are finding it incredibly difficult to do that. There is just not the right climate at the moment to start a business. I would like to see more stimulus for the economy so that people who want to establish start-ups have a viable chance of making a success of them. At the moment, it is terribly difficult for anybody to sell anything to anyone or to persuade anyone to part with their money, which is the essence of getting a business going.

In Wales, we are trying to create jobs for young people; we are also investing money in infrastructure projects, again within the limitations of the Welsh budget. The Welsh Minister for Business, Enterprise, Technology and Science is providing grants and loans to companies to help them to expand and get their businesses going, because we are having so much difficulty with the banks. For example, in my constituency, Tallent Automotive has received money to keep workers in work, which people are very pleased about, and EBS Automation, a very enterprising engineering firm, has received money to expand, which means new jobs for young people in a high-skilled field. Those are the sorts of programme that I would like to see from the UK Government. What the Welsh Government can do affects only a small part of the economy in Wales. I would like to see the same kind of stimulus across the UK. First and foremost, my concern is about the lack of a coherent growth strategy.

Consumer confidence remains low. Many people fear that they may lose their job or have their hours cut. People have been hit hard by rising prices, which have been compounded by the VAT rise. Obviously, people on low and modest incomes have little spare income to put by, so their money goes straight back into the local economy. That contrasts with the money given away to millionaires at the top, who do not have to do anything with it immediately and do not know what they will do with it. They know that there is no benefit to them from putting it back into the local economy.

The Economy

Anne Marie Morris Excerpts

Tuesday 6th December 2011 Commons Chamber

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

The Office for Budget Responsibility has shown clearly that productivity is slowing, and our recovery therefore depends on getting productivity moving forward faster. I suggest that one of the key barriers is over-regulation, which I think is borne out by many of the surveys that the Federation of Small Businesses and the Forum of Private Business have carried out.

The sector of the economy that is perhaps most affected by over-regulation consists of the very smallest of our businesses: the micro-businesses. A micro-business, for the most part, suffers from the same level of regulation but has less resource, by virtue of its size, to deal with it.

So why should we worry about micro-businesses? Because research has indicated that 90% of new jobs after a recession come out of that sector, and because it is in our rural communities that many of those micro-businesses exist. They are critical to the economic viability of our rural communities. We should also be concerned about the existence of micro-businesses in deprived urban communities, where, again, they play a key role in terms of cohesion.

What is a micro-business? The EU defines it as an organisation with fewer than 10 employees, but in fact, 90% of our businesses have fewer than five employees. Therefore, they have very little managerial support and expertise.

The Government have done their level best to help small and medium-sized businesses, and specific provision has been made to help the micro-business. So why do micro-businesses feel unloved and, in the words of one, invisible? Perhaps I may make some suggestions to the Treasury on how we can rectify that and support the sector better. We have given a three-year moratorium on new regulation for our micro-businesses, but the challenge is that they are still subject to existing regulation, a lot of which comes from Europe, and if they have only two or three people in the business, that is a very heavy burden. We need a “keep it simple” system for micros.

On employment, the Government have helpfully provided a national insurance break for start-up businesses. We have also examined the tribunal system and considered a simplified system for smaller businesses, but we must remember that businesses with no employees comprise 70% of all our businesses—or about 3 million businesses altogether—and if we gave those very small businesses national insurance relief, we would go a long way towards solving our unemployment problem.

On finance, I am delighted that we have the new seed enterprise investment scheme, as it will make a big difference. The point I would make to the Treasury is that we need to examine who is going to use that type of support. It will be the fast-growth entrepreneur who is looking for external investment, but what about social enterprises and what about the plumber who is setting up, having just been made redundant? Some of the money that they will be seeking could be offered by their families, but they are excluded from the scheme.

[David Rutley (Macclesfield) (Con)]

My hon. Friend is a passionate advocate for micro-businesses and I commend her for her extraordinary efforts. Does she agree that it is vital that our micro-businesses are better at articulating the problems they are facing, so that the Government can more effectively strip back the regulation that she and I both want removed?

[Anne Marie Morris]

I agree with my hon. Friend absolutely, and that brings me nicely to the challenge that we face in getting some of the main schemes to assist with finance. Project Merlin, the enterprise finance guarantee scheme and the regional growth fund have all been aimed at the smaller business. The problem is that in practice, because there is no carve-out and no requirement that any percentage of those schemes goes to our very smallest businesses, these businesses by and large get left out. That is because they are perceived to be invisible, too difficult or too small, or it is perceived that they cannot write a business case or are not after a big enough loan. I hope that when we examine the new credit easing arrangements, we might consider a carve-out specifically for micros.

Even some of our institutions that are supposed to be looking at our small businesses exclude them. I have spoken to officials in UK Trade & Investment, and it appears that a small business of fewer than five employees is, unfortunately, beyond its notice. I have talked to those in the National Apprenticeship Service, which now has a small business unit, and they say that a micro-business with fewer than five employees is, again, outside its remit.

May I suggest to the Treasury that the solution, is, first, that we should properly recognise this group for what they are? Let us define them properly as organisations with four or fewer employees, as is happening around the world, and let us devise a scheme specifically for this group. That is perfectly possible, as the French have come up with such a scheme for their smallest micro-businesses. It provides limited liability, a very simple form of establishing a business, simple accounting procedures and a very simple tax system, and it also provides for very simple sets of regulation, particularly in respect of employment. So something simple for our smallest micro-businesses is just what we need.

In the last minute available to me, I suggest also that, because much of the regulatory burden comes from Europe, there is a case to be made for considering an exclusion for micro-businesses from European regulation. I commend that to the Treasury and the Chancellor, if and when we come to treaty negotiations, as something that might be usefully traded.

Autumn Statement

Anne Marie Morris Excerpts

Tuesday 29th November 2011 Commons Chamber

[Mr Osborne]

I know that the previous Government were

“intensely relaxed about people getting filthy rich”.

We are introducing transparency in pay. We are bringing regulations before the House to force banks to disclose the incomes of their eight highest paid employees. We are also consulting on high pay more generally. We have introduced the bank levy, which the previous Government failed to introduce in 13 years and which the shadow Chancellor could have introduced when he was City Minister, but never did.

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

I congratulate the Chancellor on his support for micro-businesses, which, as he well knows, I extensively champion. The extension to small business relief is great and the new seed enterprise investment scheme is fantastic. Can we hope to have more focus on the very important tiny companies that are too often overshadowed by the big brother SMEs? They are the area for new jobs and for growth in the economy.

[Mr Osborne]

My hon. Friend is indeed a powerful champion of micro-businesses. She has spoken to me about them on a number of occasions in the past year. We have set out a number of measures that will help such businesses, including the rate relief holiday, the seed investment scheme and the support for innovation. We are consulting and having a call for evidence specifically on compensated no-fault dismissal for firms of fewer than 10 employees.

Fuel Prices

Anne Marie Morris Excerpts

Tuesday 15th November 2011 Commons Chamber

[Andrew Selous (South West Bedfordshire) (Con)]

I, like others, warmly congratulate my hon. Friend the Member for Harlow (Robert Halfon) on bringing this important debate to the House today.

In my constituency the car is essential really to all my constituents. We have three market towns and 14 villages, and although the bus companies do valiantly they cannot serve all my constituents, many of whom have to commute a long way—for 90 minutes or even longer—out of my constituency to find regular work. When there were difficulties with the buses in villages such as Hockliffe and Eggington there was enormous upset, because many people in those areas find motoring so expensive.

In rural areas, on average only 10% of people do not have a car, because they are so necessary, and more than half of households need two cars to get their families around.

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

Is my hon. Friend aware that in rural constituencies such as ours the cost of filling up at the petrol pump comes to 10% of the wages of an individual on the lowest income? That is an enormous amount, and does he agree that it puts a particular burden on those living in rural communities?

[Andrew Selous]

My hon. Friend is absolutely right: that adds insult to injury.

The huge disparity in petrol prices experienced by so many of our constituents is extremely difficult. In addition, the disparity between the price of diesel and unleaded petrol concerns me greatly. Diesel used to be more expensive. We then had parity, and now diesel has shot up again. It is apparent that we have an inadequate supply of UK refining capacity for diesel in this country. We have to import much of our diesel from Russia, which causes particular problems given that around half of all car sales are of diesel vehicles.

Arch Cru Compensation Scheme

Anne Marie Morris Excerpts

Wednesday 19th October 2011 Westminster Hall

[Tom Greatrex]

My hon. Friend makes a very important point. I want to come on to the inadequacy of the payment deal—it is not a compensation deal—on the table at present, because there are serious questions to ask about that as well.

If what I have set out was Capita’s reputation among some in the industry, it is perhaps not surprising that Capita appears not to have known about the activity of the sub-funds investing in the very high-risk activity via the Guernsey cells; that Capita appears not to have been aware of the illiquidity in the fund by 2008; and that Capita appears not to have provided a proper sign-off for the accounts. I say “appear” because we do not know for certain the detail of the failings, because the FSA, in correspondence that it has copied to Members of Parliament, says that it is unable to provide details of its investigations.

Suffice it to say that those independent financial advisers who trusted the Capita brand worked on the basis of the CF Arch Cru marketing material, which Capita would have had responsibility for signing off and copies of which I have with me. It includes material headed “Going Well” from November 2008, by which time the FSA had, we know, started looking into Arch Cru. There is also a weekly update from 9 March 2009—four days before suspension of the fund. In approving tones, it boasts of cumulative decline year to year of 2.6% compared with double digit falls in most major traditional public asset houses. It says that all its UK funds retain a top five rank in their category. Those statements were issued to financial advisers just four days before the fund was suspended.

In addition to that type of material, the chief executive of Capita Finance Managers, Chris Addenbrooke, in Investment Adviser in September 2008, said:

“We’ve got the credibility to take on the ACD”—

authorised corporate director—

“role. Our clients see that as attractive.”

Given that material and comments such as that, there is no doubt that people thought that they were investing in something that was very different from what it turned out to be. It is apparent that at the very least there were serious shortcomings in the role of Capita as the ACD.

Secondly, there is the role of the FSA. Earlier this week, I spent some time with representatives of the FSA, discussing Arch Cru, and I am grateful for their time and their engagement in seeking to answer some of my questions, but serious questions remain for the FSA to answer. It was statutorily responsible for regulating Capita Financial Managers. Why did it not know or not appear to know what was happening with Arch Cru? I also spoke to people who had previously worked for the FSA. They said that the ARROW—advanced, risk-responsive operating framework—visit was not until late 2008 and that was not atypical given the risk matrix, which would have meant that the likely ARROW visits would have taken place only every 18 months approximately. I understand and accept that this matter can be complex.

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

Is the hon. Gentleman making the point that this is not simply a matter of what the FSA did and whether it did it appropriately, inappropriately, negligently or otherwise, and that there was something fundamentally wrong with the processes of the regulatory regime that was operating at the time?

[Tom Greatrex]

I thank the hon. Lady for her intervention. There are two points: a point about what the FSA did in relation to Arch Cru, and a further point about the regulatory regime. As I said, with the FCA about to be set up, there is an important issue for the Government to deal with in that regard as well.

Road Fuel Duties

Anne Marie Morris Excerpts

Tuesday 13th September 2011 Westminster Hall

[Mr Donohoe]

The hon. Gentleman should know, as should all Members, that I would be the last person in this place to call for a revolution and civil disobedience.

There is absolutely no doubt, however, that the high fuel prices are at the point of driving people out of jobs, which is the most serious aspect of the matter. I shall give an example, which makes me angry, of the desperate situation of a nurse in my constituency. She has had to put up with a wage freeze for the next two years, her pension contributions have gone up, she has to pay double for parking at the hospital in Glasgow where she works, and she has to find £100 extra a month to get to and from work because of the high fuel prices. That proposition cannot feasibly be sustained for too long, but she cannot use public transport because of where she stays and where the hospital is. That problem must be looked at.

Regarding what the Government take per litre, I always remember a case from some years ago of a retailer who was determined to show the breakdown of the price of petrol and diesel. He was told that that was not the form, and the petrol company said that it would no longer supply him, for some obscure reason. When one considers that of the average 135p price of a litre of fuel, 81p is taken, one starts to understand the cost to the individual buying the petrol or the diesel. A good 60% goes on dealing with Government intervention in the form of fuel duty, and there is also VAT. Indeed, 20% VAT increases the price of petrol by 2.5%, putting something like 2.5p on it. In addition, outside of Government intervention in the price, there are the oil companies, and it is time to argue for a windfall tax on their profits. I know that there has already been a tax, which a lot of colleagues are very concerned about in relation to the oil companies’ continued investment, but I believe that the Government should look at the correlation between profit and price.

I have already argued that a significant portion of the price of petrol and diesel in this country is made up of the Government take, and I argue that it is higher than in most other European countries as a consequence of the high level of tax. Is there any opportunity to make the price cheaper? I am sure that the Economic Secretary will argue that in the present climate there is no leeway—no room for manoeuvre—but I suggest that there might be, and I shall come on to that later.

The reason for this debate is obvious: the price of fuel is crippling a great number of the people whom I represent and, I am sure, a great many of those represented by other Members here this morning. The Institute for Fiscal Studies has announced that the living standards of UK families will decline by more than 10% over the next three years, and it predicts that in real terms the typical household income will fall by 3.5% in the year to April, which will be the steepest drop since 1981. We understand that there is little room for offsetting falling living standards by cutting taxes, but the matter must be looked at. The level of tax and duties on petrol and diesel is cutting off the prospects of many struggling families and small businesses, and since I secured this debate I have had dozens of e-mails from small businesses with examples of just what it is doing to them.

The situation is also destroying job prospects, in particular among young people. I have already had a summit in my constituency, attended by the Secretaries of State for Work and Pensions and for Scotland. Youth unemployment is reaching levels that I never thought possible—it is as high as 70% in many areas. That cannot be sustainable and it is not helped at all by the cost of living today, particularly in more rural areas—I see that the hon. Members for Argyll and Bute (Mr Reid) and for Na h-Eileanan an Iar (Mr MacNeil) are present.

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

I am delighted that the hon. Member for Central Ayrshire (Mr Donohoe) has brought this important topic for debate. Is he aware that the current Chief Secretary to the Treasury called in 2007 for a rural fuel discount scheme, and so may have a favourable view? Like the hon. Gentleman, I am concerned, because the south-west has a very rural community. Three quarters of the land is agricultural holdings, so a rural discount would be of great benefit.

[Mr Donohoe]

We will have to wait for the Economic Secretary’s response on that point. As an Opposition Member, I am not in a position to give any assurances.

We must consider the problems with the Government’s approach. Although they have frozen fuel tax duty for the next couple of years, we must take into account the fact that the freeze will be more than offset by the rise in inflation. As petrol is always an easy revenue raiser, it is widely expected that the Government will make up their losses, leaving the consumer no better off in the long term.

I will highlight three areas of concern. The first is environmental, the second is economic and the third involves the social impact of the road fuel duty. The removal of the duty differential will affect the green economy. The UK Sustainable Biodiesel Alliance has raised concerns about the Government’s decision to remove the 20p duty differential for biodiesel produced from used cooking oil by April 2012. I ask the Economic Secretary to consider that loss more closely. It does not stack up against the Government’s views on the green economy. Many see the impact of the removal of the duty differential for biodiesel as a disastrous blow for the growth of the green economy. Just outside my constituency is the company Stagecoach, which runs buses on biodiesel. It is highly successful, and particularly popular with youngsters, but it will come to an end if the differential is not maintained. Will the Minister clarify why on earth the Government, whom we have heard are the greenest Government ever, continue to consider it?

On the economic side, we risk the demise of the independent fuel sector. Retail Motor Industry Petrol told me that MRH, the UK’s largest independent forecourt operator, has highlighted the unfair pricing practices used against it by both hypermarket chains and oil companies. That is a concern. In addition, the four big supermarket chains are struggling with their own retail this year due to the downturn, which in turn is placing greater pressure on and compounding the problems of independent retailers.

Such relentless competition has been going on for some years. It is responsible for the closure of around 400 independent forecourts, and it continues. It will lead to a sparse population of fuel retailers, obliging motorists to drive great distances to top up their tanks, which is not sustainable. More than 6,000 garages have closed since 1998, which is a problem, as anybody knows who travels off motorways. Particularly in more rural areas, as I have seen at first hand, running out of fuel because there are no petrol or diesel stations is always a danger.

--- Later in debate ---

[Mr Reid]

I am grateful to the hon. Gentleman for his intervention. He is correct that there is no profiteering at the local filling station, although the distribution network, as he has indicated, might be another issue.

The high price obviously has a great impact on people’s living standards and on anyone trying to run a business on an island or in a remote rural area. I was therefore delighted when the Government announced their intention to pursue a pilot scheme under which there will be a 5p a litre fuel duty discount on many of the country’s islands, including all the islands of the Inner Hebrides and the Clyde. The Treasury is currently consulting filling station operators on the terms of the pilot scheme. Its original consultation proposals were met with significant concern by filling station operators, because they would have caused a cash-flow problem. I was pleased when the Government responded quickly to those concerns and revised their proposals in a way that removes the cash-flow problem.

The revised consultation proposals envisage two possible schemes—a distributor-based scheme and a retailer-based scheme. Of the two, it looks like the distributor-based scheme would be easier to operate, because the distributor has the resources to carry out the administration, which the small retailer would often find more difficult. I appreciate, however, the Government’s concern that a distributor-based scheme may fall foul of EU state aid rules and might not be approved by the European Commission. I hope that a distributor-based scheme can be devised that is acceptable to the Commission. If not, we would have to proceed with a retailer-based scheme.

The cash-flow problem in the original proposals has been overcome, but filling station operators are still concerned that it is not clear how they can prove to the Treasury that they are passing on the discount to the consumer. An essential principle of the scheme is that the 5p discount is passed on to the consumer. What retailers have asked me is whether the Government can provide clarity on how they should demonstrate that they are passing on the discount. That clarity would be welcomed because, as I say, the retailers are still not clear what they would have to do to comply with the scheme—and, of course, they are all keen to participate. If the islands’ pilot scheme is successful, as I am sure it will be, I would like it to be extended to remote areas of the mainland.

[Anne Marie Morris]

I absolutely endorse what my hon. Friend says, but some of the rebates that have been given in France, Portugal and so on are not limited just to the islands. The Government’s current view is that it is only in an island situation that such relief can be made available, but that does not seem valid.

[Mr Reid]

I wholeheartedly agree with my hon. Friend. As she said, other EU countries are operating a similar scheme, so I am sure that it can be successful here.

Private Finance Initiative

Anne Marie Morris Excerpts

Thursday 23rd June 2011 Westminster Hall

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

I will endeavour to make my contribution brief. This has been a very valuable and worthwhile debate on a number of issues. We need to consider the PFI as quite a complex challenge. Although my hon. Friend the Minister is here to help us with some of the financial issues, it is a challenge not just for her but for her Cabinet colleagues, because it is not just the finances that need to be reviewed. There are issues of complexity that we need to deal with in trying to find a way forward. Those issues are not just about the way in which the contracts are currently structured. There is also an issue about cultural change, because much of what has happened has changed the way in which decisions are made and outcomes are delivered for patients in hospitals and children in schools. That is why, although I support the argument for a rebate, it is only part of the solution. It deals with the existing, financial challenge, but it does not deal with other issues. It is right that we should be looking for a different way to do things, but it is a very complicated challenge.

The PFI was always well intentioned as a concept. It was to deliver quality and it was to deliver projects on time and on budget. In many ways, it achieved that. We have 700 schools, hospitals, prisons and other infrastructure projects that would not exist or would not be in the pipeline but for this initiative. We have £67 billion-worth of expenditure signed off.

The problems fall into at least four categories. First, the risk was overestimated, in part because of the public sector’s inability to deal with a very complex negotiation, as has been said. The consequence was that the taxpayer was lumbered with a very large part of the bill. As has been said, the amount of £210 billion is outstanding. By contrast, the investor is doing extraordinarily well. A number of figures have been cited, and I will add to that list. An EU think-tank tells me that 154 schemes are delivering a 50% return. That is huge. Clearly, therefore, one matter that we must consider is how we simplify not only future contracts, but the existing ones. I believe that we must consider renegotiating not just a chunk of money, but some of the terms.

[Mark Pawsey]

Does my hon. Friend agree that a justification for a rebate arises from the effect of the spending review on those Departments whose budgets have been reduced? If the PFI element remains fixed within the budget, by definition the non-PFI element has to reduce by a greater proportion, so budgets that may have been reduced by 2% could end up being reduced by 4%. It is entirely appropriate that those who are making the sums of money that we have heard about should bear their share of the burden of getting our country’s finances into order.

[Anne Marie Morris]

I agree. My argument is that that is part of the problem, rather than the totality of the problem. My second request is that we find a way of delivering transparency and better management of the contracts. One hospital was charged £333 to change a light bulb. I dare say that that changes the hospital’s decision about whether it will change many light bulbs. One school was charged £300 just to install an electrical socket. How many times will the school install a socket on that basis? One Army official was charged £103 for a 1-inch Land Rover screw that actually cost just over £2. That is not the right way of doing things.

[David Mowat]

The three examples that my hon. Friend has cited are powerful, but they represent procurement failures by the public sector procurement people involved and structural failures in the nature of the contract, because the contract did not have to specify, for example, exactly how light bulbs would be maintained. We have examples of multiple procurement failures. PFI is being used as a proxy for that. Those procurement failures can happen with any technique or contract.

[Anne Marie Morris]

My hon. Friend makes a valid point, which is why the issue is far more complicated than a rebate.

The risk is overestimated. Projects are not monitored, partly because there is no transparency. As has been said, the size of the debt has been hidden because it is off balance sheet. If we looked at the real national debt figure, then rather than £910 billion, we would probably be looking at £1.12 trillion.

I can perhaps best illustrate the distortion in the way in which public services are used by explaining what is happening in my constituency. There is a wonderful new build hospital in Newton Abbot. It was the winner of the 2007 HealthInvestor PFI deal of the year award. But what has happened? In that hospital, we are finding considerable underuse of facilities. Beds and consulting rooms are not being used as they might be. Why? The reason, as I understand it from individuals who have come to me to raise this concern, is that it is just too expensive to use those facilities rather than the cheaper facilities in neighbouring hospitals. I am pleased to say that the primary care trust has taken the matter up and is considering how better use of the facilities at Newton Abbot hospital can be made. However, it is an example of how behaviour can be changed.

The challenge, therefore, is not only to get the cost down. Reference has been made to what the Government are already doing. I am pleased that we have a PFI hit squad, which has already taken £4 billion out of the project list. I am minded to look very favourably on the concept of a rebate, but as I said, a rebate will not be enough. There are two aspects to trying to sort out the financial mess. One is the issue of maintenance. Clearly, there are ways of reducing maintenance costs under the contracts, and whatever saving comes out of any renegotiation needs to be shared with the taxpayer and the local community. The second aspect is the payback rates. We have heard many examples of the payback rates in this context being well above the payback rates for similar risks in the market. Those two issues need to be considered.

To return to where I started, one issue that we need to consider is the impact on what happens in other parts of Government. We need to consider our health care reforms, because many of the PFI contracts are currently held by the primary care trusts. Those PCTs will cease to exist in the not-too-distant future. As and when we see their demise, what will happen to those contracts? Is that an opportunity or a threat? That is a serious issue, which my right hon. Friend the Secretary of State for Health will need to consider in conjunction with the Treasury. We have heard about the examples of schools and the challenges for some of negotiating academy status because of existing PFI contracts. To conclude, this is a complex issue. It is not something that the Treasury can deal with alone. Some joined-up thinking needs to be applied to it across a number of Departments.

--- Later in debate ---

[Neil Carmichael]

I thank my hon. Friend for making a good point; I shall answer it later in some detail.

I turn next to the history of the PFI. It goes back much further than 1992. The United States has been using PFI schemes for decades because it wanted private money to be used to provide public utilities, roads and so on. The PFI has a history in the US, in many parts of Europe and in most regions of the world. We have plenty of experience of it. There is much activity in that sector that we can draw upon in order to improve the way in which it works. That is the key point.

PFI schemes have recently become far too complicated. As was pointed out earlier, in many of the original schemes things were simply designed, built and then maintained. More recently, however, we have been throwing in services and all sorts of extras. As a result, the process has become complicated; indeed, many of us have used that word today. That is largely because we have confused the original concept of the PFI by adding on services and so on. There is nothing wrong with that, but it brings me to the fact that we must get the procurement systems right. To do that, we must specify much more clearly what is wanted. Local authorities have to learn to do that, as must the health service; it is a question of commissioning. My hon. Friend, who represents a beautiful Cornish seat—it is in Cornwall, is it not?

[Anne Marie Morris]

It is in Devon.

[Neil Carmichael]

Devon: it gets better! My hon. Friend made that point rather well. It certainly needs to be considered, as specifying and procurement are critical.

We also need to understand value for money. Most PFI schemes under the previous Government did not seem to do so. The next big task is to define value for money. That will be helped if we get the data right and if we understand the systems in each project. Many people talk about the difficulties of PFI schemes in hospitals. I am not surprised, given that many hospitals cannot even tell you the cost of an operation. We need more data. If we have much more information about what is happening, it will inform the debate about value for money.

Another big problem is the lack of accountability in the decision-making process. I said that it is important to specify and procure properly, but if we do not hold those who do the specifying or procuring properly to account we will have only ourselves to blame. We need systems to ensure that specifications are clear and all-inclusive and produce the right procurement. We then need to ensure the right attitude to procurement, a point made by my hon. Friend the Member for Warrington South (David Mowat).

Motoring Fuel Costs

Anne Marie Morris Excerpts

Tuesday 14th June 2011 Westminster Hall

[Robert Halfon]

I agree that that should happen. I also have another proposal, which I will set out later. I congratulate the hon. Gentleman on his work on fuel prices in a debate in the main Chamber some months ago.

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

My hon. Friend is being very generous in giving way.

Although the focus has very much been on the individual motorist, we have spoken a little about small business. If we combine the issues of rural businesses and micro-businesses, they are the ones that are badly hit. That is where we need the economy to grow. As for the range of prices, my hon. Friend talked about an average of £1.36 a litre, but in fact it is between £1.30 and £1.51, mostly in rural areas.

[Robert Halfon]

My hon. Friend is right. I will set out in a minute what the Federation of Small Businesses says about how the fuel price is crushing business and economic growth.

In total, my town is spending at least £63 million a year on petrol, of which about £40 million is tax. That does not even include gas and electricity bills, which are spiralling out of control. The budget of my local council is only £13.5 million a year. Imagine if people could keep even a fraction of that money in their pockets, to spend on the local economy, rather than giving it away to big oil companies, foreign countries and, dare I say it, the Treasury. However, I welcome what the Chancellor has done so far. When he refused to implement Labour’s petrol tax of 4p in April, and cut duty by 1p, he saved Harlow motorists at least £2.5 million every year, putting fuel into the tank of the British economy when we need it most.

Finance (No. 3) Bill

Anne Marie Morris Excerpts

Tuesday 26th April 2011 Commons Chamber

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

I welcome the Finance Bill, which will reform the economy, deliver real growth for business and create jobs. One of the very special parts of the Bill is what it does for the very smallest businesses, as they are going to be the key to re-growth in our economy. I am sure that the House is well aware that two thirds of our businesses are so small that they have fewer than five employees and a turnover of less than £250,000. They may represent only 15% of our economy but they are vital because, first, all our successful businesses have to start somewhere, and it must be there, and, secondly, without those very small businesses—whether it is the plumber or the electrician—some of our rural communities and some deprived urban communities would find it difficult to keep economically active. For these very small businesses, I am pleased to see a mandate for growth.

I shall elaborate on some of the provisions mentioned by my right hon. Friend the Chief Secretary and look at what they deliver and how they might be developed in future. Businesses rates are, for me, one of the most important issues and the subject of many complaints from small businesses in my constituency. I am delighted that the small business rate relief has been extended for a further year, and pleased that half a million businesses will benefit. In the south-west, which is my part of the country, 68% of businesses will see some economic benefit from that relief.

Will my right hon. Friends and the Treasury team look carefully at business rates in future? An awful lot more needs to be done. Issues such as turnover are relevant criteria. It is not uncommon for me to walk into a pub and to be told by the publican that the way in which the business rates have been calculated is biased against small pubs. It is not uncommon for me to walk into a small retail business and to be told, “This used to be the high street but it’s not any longer, and I feel that my business rates are disproportionate and inappropriate.” A shake-up of business rates is needed.

I welcome the reduction of fuel duty by 1p and the removal of the escalator. Without that, the projection from the Federation of Small Businesses that all small businesses would find their bills going up by £2,000 in six months would have become a reality. To me, that reduction is crucial. I am sure that those on the Opposition Benches would be the first to say, “But at the pump, prices don’t seem to have come down.” My response is that they would have been an awful lot higher but for these changes. We need to consider how to ensure that those who are delivering petrol at the retail end are passing on those reductions to the customer. A number of people have expressed concern that the help that we as a Government are giving has not been passed on to the consumer.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

If I follow the hon. Lady’s logic correctly, she welcomes a policy, the results of which, she admits, have not been passed on to the customer, so what benefit have most of her constituents received from the fuel duty cuts?

[Anne Marie Morris]

They are 6p a litre better off than they might otherwise have been. The challenge that we face is the retailer, but I do not believe that the Opposition would have been able to do anything different. That is another aspect that needs to be looked at going forward. But we digress. Let us move on to some of the other issues facing small businesses, such as income tax and national insurance.

For many small businesses, national insurance is a headache and it is one of the key reasons why they will not take on new employees. We have the largest tax code in the world. One of the things that I am pleased to see predicted for the future, though not in the Bill, is a move to simplify tax and to consider combining income tax and national insurance. That would be a great step forward and a huge saving in administrative time and burden for very small businesses. I was sad to see that the NI holiday was not extended further for existing businesses, a matter that I have raised with the Treasury team on a number of occasions. If in future we could find a way of combining income tax and national insurance, that would be a good step forward.

I am pleased that corporation tax is coming down to 26%, and I am pleased to see a move to deliver the lowest corporation tax in the G7. That is extremely good news. Given that my mandate is to shout loud for the very smallest businesses, it would have been even better for the small companies rate to have come down further. I appreciate that it has already come down to 20%, which is a good move, but anything further that can be done going forward would be welcomed. The special provision to increase the SME rate of research and development tax credit to 200% is extremely welcome. I thank the Treasury team very much for that as it will make a significant difference.

The crucial challenge for many small businesses is finding investment, so I am particularly pleased to see entrepreneur relief changes which will increase the capital gains tax lifetime limit to £10 million. That is a hugely welcome step. I am pleased that the enterprise investment scheme has been also been developed so that the income tax relief has moved from 20% to 30%, and the eligibility criteria have changed so that larger businesses will be included in EIS. However, I would be grateful if the ministerial team would look at how we can extend EIS so that it attracts investment for the very smallest businesses. At present it is much more geared towards a small or medium-sized business and corporations. It is not intended for a sole trader or a partnership. If we could come up with EIS-lite in some form, that would be extraordinarily helpful.

In summary, I am delighted to see the focus on the smallest of businesses. I sincerely hope that that will be a trend to be welcomed for the future. One thought I have for the Treasury team is that, going forward, we might look more closely at a specific definition of a micro-business, a small business and a medium-sized business. If we did that, as happens in other countries, we might find that the Treasury team had a little more flexibility to give particular help to the very smallest businesses, from which growth will ultimately stem.

Fuel Prices

Anne Marie Morris Excerpts

Tuesday 15th February 2011 Westminster Hall

[Miss McIntosh]

When the Minister responds to the debate, he may want to touch on that issue. Also, when I come to put my case for a rural rebate, I will acknowledge that there might be problems with regard to the EU directive in this sector.

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

I wonder whether my hon. Friend has examined the impact of rising fuel prices on micro-businesses. In our rural communities, micro-businesses are key, and the Federation of Small Businesses has estimated that rising prices will cost each one of these businesses, which are already sorely pressed, an extra £2,000 every six months.

[Miss McIntosh]

Some 6,000 small businesses in Thirsk, Malton and Filey will be affected, and I congratulate the FSB on its excellent campaign.

The impact on farmers—across north Yorkshire, farming is often the main business, and it certainly is in my constituency—of rising fuel prices has been catastrophic. That issue has pushed up the cost of producing livestock and the cost of taking livestock to market. Moreover, for those who train racehorses across North Yorkshire, many of whom are based in Thirsk and Malton, rising fuel prices have pushed up the cost of feeding the horses and the cost of transporting horses and jockeys to races.