Finance Bill

Geraint Davies Excerpts

Committee stage
Wednesday 30th November 2022 Commons Chamber

[Geraint Davies (Swansea West) (Lab/Co-op)]

May I ask a simple question? Why has capital gains tax not been brought completely into line with income tax? I know that it is converging, but are there any plans for it to converge further, for equity’s sake—in terms of working and investment?

[Victoria Atkins]

We acknowledge that there may be people who receive very small amounts of capital gains—through historic investments in shares, for example—but for some there is also an element of risk taking, perhaps when they are starting their own businesses. We want to reflect that, but we are mindful of the need for a closer relationship between the two systems, which is why we have tried to achieve a fair balance between those who earn their incomes through paid employment or self-employment and those who obtain theirs through dividends and capital gains.

Clause 9 maintains the current levels of inheritance tax thresholds for two years longer than previously planned, until 2028. Despite these changes, qualifying estates will still be able to pass on up to half a million pounds tax free, and the estates of surviving spouses and civil partners will still be able to pass on up to £1 million tax free. More than 93% of estates will continue to have no tax inheritance liability in each of the next five years; only 6% are expected to have a liability in 2022-23, and it will still only be 6.6% in 2027-28.

Let me now turn to the clauses relating to the taxation of electric vehicles. The transition to EVs continues apace, with new electric car registrations increasing by 76% between 2020 and 2021. Given the OBR’s forecast that 50% of all new vehicles will be electric by 2025, it is right that we seek to bring those vehicles into the motoring tax system.

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[Victoria Atkins]

I will happily write to the hon. Gentleman, who I know takes a close interest in this issue, but I must challenge the assumption that the measure will lead to a decline in the take-up of electric vehicles. This is an example of the Government’s boosting interest in electric vehicles at quite a delicate stage in their development. I say that as a proud early adopter of an electric vehicle—and even a few years ago, the number of charging points was far lower than it is now.

Of course there is much more to be done over the coming years, but I think the public will begin to gain even more confidence in the range of electric vehicles, especially as companies are able to improve their range and we build an infrastructure of charging points around the United Kingdom. That in itself will help to encourage take-up, along with, of course, the bold commitment to prohibiting the sale of new petrol and diesel cars in 2030. We wanted very much to encourage this in its early days, but we think we have now reached a stage at which the 7 million or so electric vehicles on the road should be contributing their piece towards keeping the road network in the state that we would expect.

[Geraint Davies]

Is the Treasury looking into the possibility of higher taxes on SUVs? These much larger vehicles consume more petrol and diesel, but also take up more parking space and kill more children and other pedestrians. They also stick out in the road and obstruct cyclists. The number of SUVs is increasing enormously. Is there any reason for the fact that the Minister did not look into that higher taxation, perhaps some political reason? It would clearly be a good environmental and economic initiative.

[Victoria Atkins]

We introduced the expensive car supplement some time ago, and a great many of the cars that the hon. Gentleman has described would fall into that category, particularly if they were bought new. Notwithstanding his assertion, there is no ideological reason for this. We are very conscious of the pressures on the majority of road users, and although, as the hon. Gentleman fairly pointed out, the use of SUVs has increased, that certainly does not mean that everyone who buys a third-hand or fourth-hand SUV is among the wealthiest in society. So we have tried to balance the rights and interests of those who are already paying car tax and also of those driving electric vehicles, who we think, after a certain period of time, should be contributing more towards the tax system than they do at the moment.

As I was saying, clause 11 deals with company car tax rates in order to provide businesses with the certainty they need to plan in relation to vehicle provision. Finally, clause 12 simply sets out the short title of the Bill in the usual manner for such legislation. I hope that hon. Members will not have anything to say about that, but I look forward to any comments on clause 12. I have stuck to the Bill itself because I want to listen to those hon. Members who have kindly put down amendments, which will be debated now. I will attempt to answer some of those challenges, questions and points as I wind up the Committee stage of the Bill in due course.

Autumn Statement Resolutions

Geraint Davies Excerpts

Monday 21st November 2022 Commons Chamber

[John Glen]

I thank my right hon. Friend for her observations; she is one of the most respected voices in the House on this subject, and I am happy to meet her to go into some detail on where we are and what she thinks can be done.

I will now turn to infrastructure, innovation and growth.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Will the Minister give way on education?

[John Glen]

I shall give way one more time, and then I shall make some progress.

[Geraint Davies]

The Minister will know that the Institute for Fiscal Studies has said that, had trend growth under the previous Labour Government continued until now, average wages would be £10,000 higher. He has just mentioned that his plan is to increase investment in education just up to the level Labour left it at in 2010, 12 years ago. What sort of growth plan is that? A hopeless one.

[John Glen]

I try to resist this sort of knockabout politics. The bottom line is that I have been very plain and clear with the House where the financial settlement takes us. I know we have increased the skills budget by 42% in cash terms. By any observation, there has been a significant investment. We can dispute how far it would have been possible to go, but I know that when we came into office in 2010 there were some challenges in the public finances.

Our plan is to achieve a highly skilled, highly paid economy; one in which where people are born does not determine where they end up. Yet the sad fact is that too often someone’s postcode does decide their future, and we have to change that. Connections will spread opportunity. By spreading opportunity, we will drive growth, and growth will drive higher living standards.

We are going to build the roads, rail, broadband and 5G infrastructure we need. That is why we will maintain our capital budgets at the same level in cash terms for the next three years. We will proceed with Sizewell C, making the initial £700 million investment, with contracts to be agreed in the coming weeks, subject to final Government approvals, because low-carbon, reliable energy will be at the heart of our modernised economy. On the issue of energy, we are also increasing our investment in energy efficiency measures, including making £6 billion of new Government funding available between 2025 and 2028.

We will deliver the core Northern Powerhouse Rail, HS2 to Manchester and East West Rail; we are building new hospitals as part of the new hospitals programme; and we are rolling out gigabit broadband. All these and more will be funded as promised, with over £600 billion of investment over the next five years, to connect our country and grow our economy. On top of that, we will proceed with round 2 of the levelling-up fund, at least matching the £1.7 billion spent in round 1. We will drive growth across the UK by working with the Scottish Government on the feasibility study for the A75, supporting the advanced technology research centre in Wales, and funding a trade and investment event in Northern Ireland next year.

Something that this Government, led by the Prime Minister, are extremely clear on is that we must maintain our seat at the table of science superpowers, so we will increase public funding for R&D to £20 billion by 2024-25. Innovation is in our DNA as a nation, and by deciding changes to EU regulations in our five growth industries—digital technology, life sciences, green industries, financial services and advanced manufacturing—we can capitalise on those strengths.

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[Jonathan Ashworth]

The hon. Gentleman has elevated me to be his right hon. Friend, and I am delighted to consider him a friend. Of course, we have an ageing and growing population, which is why the health services have always expected a higher uplift. The point I was making is that, in order to get the headlines and in the hope of giving people some good news in his otherwise quite miserable set of announcements, the Chancellor thought he was giving the NHS a huge uplift. However, if we look at public health, training and the other budgets, which, as we know—and as the Chancellor knows—is how health spending is properly measured, we will see that he is giving them a 1.2% uplift.

The reason why this is particularly significant, and why what is happening with the NHS is causing us such a problem, is that we now have 2.5 million people out of work for reasons of ill health. The OBR predicts that these figures will rise by another 1 million, costing £7.5 billion extra in sickness benefits. That is the OBR’s projection, and it is projecting that to be permanent, not to come down. The UK has seen the largest employment rate drop in the G7 since the pandemic because of rising numbers of people—the over-50s and those with long-term sickness—leaving the jobs market. Once people are out of work for sickness, that in itself can be bad for their health, and the lack of proper help and support leaves them trapped out of work. Only one in 10 disabled people or older people out of work is currently getting any help with employment support to return to work. When one looks at the case load for employment and support allowance, which is the old sickness benefit—obviously people are migrating to universal credit—one sees that only 4% of people come off sickness benefit or disability benefit and move into work each year. Those people should not be ignored and forgotten as they are at the moment. That is a dereliction of our responsibilities to those people, many of whom want help. Some have suggested that 700,000 want help. The Secretary of State has suggested that it could be as high as 1.7 million people who are economically inactive.

Offering no help to those people now undermines our economic performance, too, but instead of a plan to help people move into work, all we got was a review. We did not get a plan for our already overstretched jobcentres, which will be responding to an extra half a million unemployed and to 600,000 extra coming for interviews. We need action. Instead, the Secretary of State has launched a review: the Stride review. I could do the review for him—I can give him the Ashworth plan to get people back into work. We should be aiming for the highest employment in the G7 by using not threats and more sanctions or more humiliating assessment tests—we know too well that a letter from the DWP can fill people with dread—but a completely new approach. That is what we need.

First, the Government have actually underspent by £2 billion on their own employment schemes. Perhaps my old friend the Minister for Disabled People, Health and Work, the hon. Member for Corby (Tom Pursglove), can take this message back to his boss: the Secretary of State for Work and Pensions should stand up to the Treasury and, rather than hand back that £2 billion, refocus it on the economically inactive over the next few years. That could help an extra million people.

Secondly, when we know that mental health is a growing burden of sickness for those out of work, we should be doing more to better integrate jobcentres, employment services and the NHS. We should be building on individual placements and support. We should be building on the pilots where employment advisers have been located in “improving access to psychological therapies” services, and we should locate employment services alongside primary care and addiction services, too.

Thirdly, to help more disabled people into work, Access to Work should be made more flexible. The unacceptable waiting lists also need to be urgently tackled. Perhaps the Minister can tell us whether the Access to Work allowance was frozen or lifted in line with inflation in the autumn statement; that is not in the details of the Budget.

Fourthly, we should devolve more, and not use national contracting, which we know does not provide value for money. As we have seen in Greater Manchester, for every pound spent by the working well programme on getting people back into work, we get £1.75 back. Devolving more allows services to work better with adult education providers, which is vital when 9 million of our fellow citizens have poor literacy and poor numeracy. Older workers should be given more opportunities to access retraining and upskilling.

Finally, we need flexible working options, especially for those with caring responsibilities. So there we have it: a five-point plan to tackle inactivity. The Chief Secretary can take that back and implement the Ashworth plan. He is more than welcome to it. It is simply unacceptable to waste our most precious resource: the extraordinary skills and talents of ordinary people.

[Geraint Davies]

My right hon. Friend will be aware of the OECD reports that have shown conclusively that less inequality means greater growth. Is he aware of the report in the Financial Times showing that, for every extra pound spent on the health service, we get £4 of growth? Therefore, it is completely false economics for the Tories to be miserly in their real-terms giving to health if we want to grow the economy and get people back to work.

[Jonathan Ashworth]

In fairness, I have not seen the specific report that my hon. Friend references, but I have seen numerous reports saying that we will be spending £7.5 billion more on sickness benefits and that the Government have underspent by £2 billion on their own employment services. That money should be reallocated urgently to focus on those who are out of work for reasons of sickness and want help to get back into work. We do not need to wait for a review when we have a million vacancies in the economy and are predicted to be short of 2.5 million workers by 2030.

In conclusion, the autumn statement has failed both tests. It was unfair and, as the CBI said, it offered no plan for growth. The autumn statement was the day of reckoning for 12 years of economic failure—the highest tax burden for 70 years, and public services in a worse state. It is clear that this Government have failed to make amends for the past and cannot be trusted with the future. For all the figures in the statement, there is one inescapable fact: the hard-working people of Britain are poorer because of 12 years of the Conservatives.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

We are told it is not the Government’s fault that we have seen the biggest fall in living standards—7%—in living memory, the highest debt cost, the highest share of tax, roaring inflation, rising interest rates, and one in four adults and one in five children living in food poverty. Food bank users have increased from 26,000 in 2010 when Labour was in power to 2.6 million in 2021—a hundredfold increase—and that was before the number of people in food poverty went up to one in four.

We are told, “Oh, it’s all the pandemic, it’s all Ukraine”, and we all of course appreciate that we have had a pandemic and we have a problem in Ukraine. We had the vaccine first, yet we had the highest death rate—over 200,000 people dead—because of the recklessness with which the pandemic was managed. On Ukraine, the Government tell us we have more protection because only 2% of our gas is Russian, while the EU is more exposed. That is true, but why is it that the economies of the G7 have all recovered and are larger than they were before the pandemic and the UK’s has not? Our Prime Minister—or rather, the one before last—used to say every week that there were another half a million people in jobs since the pandemic, but he forgot to include the self-employed, and the ONS pointed out that we have 400,000 fewer people in jobs.

Then there is the botched Brexit. Not many people are talking about this, but the OBR has come out with figures of 4% lower productivity thanks to the botched Brexit, 15% lower trade, 6% higher food prices, lower wages, workforce shortages and higher inflation than the rest of the G7. The Prime Minister before last, dressed up as Santa Claus and promising £350 million a week for the NHS, arrived on Christmas eve with an empty sack—his Brexit deal—and look where we are now, with 7 million people on waiting lists. In Swansea, as elsewhere, we see rising numbers of people using food banks. There is concern about not enough money going to Wales to fund heating and wages, so there will be redundancies in schools and even hospitals. It is a complete mess.

What about trade? Half of companies across Britain say they are trading much less or not at all with Europe, and one in four companies has given up altogether on trading with the EU. Trade as a share of GDP is now down 12.5%, two and a half times worse than any other G7 country. We have a deal with Australia, we are told, but again the OBR tells us that that will add 0.1% to GDP over 15 years. The deal we did with Japan was worth £1.5 billion, but it would have been worth £2.6 billion had it been done via the EU; we do not have the trading muscle of a bigger grouping.

Finally, the Government say, “Oh, all these problems are Labour’s fault; Labour was in power 12 years ago and that legacy is now with us.” Of course, when Labour was in power, the economy grew by 40% in 10 years, and that money was not just frittered away; it was used to invest in doubling the expenditure on health and the NHS and in lifting 1 million pensioners and 1 million children out of poverty. Had that trend continued, the average wages in Britain would be £10,000 higher and we would have been more resilient to the pandemic, Ukraine and the energy crisis.

People might ask whether that is possible. Yes, it is. We have already heard that the average increase in wages is £10,000 more in all OECD countries except this one. This is a failed country, thanks to the legacy of the Tories over so many years, including George Osborne, who we now hear is giving advice to the Chancellor. The Chancellor might be better off listening to Gordon Brown if he wants some advice.

The OECD, of course, has shown that greater inequality means less growth. We need a Government who are fair, strong and green, which this Government are not. The Chancellor tells us he aims to get education expenditure up to the 2010 level, where Labour left it, by next year. What sort of record is that? We know that in the last 10 years the amount spent on further education is 14% down and the amount spent on sixth forms is 28% down. How are we going to build growth if we are not investing in our young people for the future? In Swansea, they have announced they are possibly closing 50 projects and losing 270 jobs in business-linked green projects at the university, because they will no longer have any EU money, which the Government promised to continue, but have not.

What are we going to do about all this? There are ways forward: simple ideas include increasing productivity by having more flexible work at home. The ONS found that if that was facilitated and enabled, people—particularly women with caring responsibilities—would retire later. Such changes could lead to later retirement and GDP going up by as much as 5%.

What about trade with the single market? Part of the UK, Northern Ireland, is in the single market. If one in four businesses is giving up trading with the EU, why do we not move some of them to Northern Ireland so that they are in the single market? That would generate some economic energy, which we could tax, and we could use that to negotiate a reduction in barriers to trade between Northern Ireland and the UK, and indeed with the EU.

The Government are beginning to talk about a Swiss-style arrangement with a certain amount of managed migration, and the OBR is predicting migration of a couple of hundred thousand people a year. Why do we not move forward there? We need to fix things. We also need to invest in our rail infrastructure in Wales. It takes three hours to get to Swansea. We should have our £4.6 billion share of HS2.

We need real growth so that we can tackle the debt problem. When Labour left office, debt as a share of the economy was at 45%; now it is 90%, and it is going up to 100%. As has been pointed out, changes such as equalising capital gains tax with income tax, taxing windfall profits and so on can generate investment to generate wealth in a fair and balanced way. The truth of the matter is that we need a new Government. This one has been a complete failure. We need a stronger, fairer, greener future, but we will only get that with a change to a Labour Government.

Economic Responsibility and a Plan for Growth

Geraint Davies Excerpts

Wednesday 19th October 2022 Commons Chamber

[Andrew Griffith]

I thank my hon. Friend, and pay tribute to my right hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) for all that he did to put the economy in a strong position, and to navigate the very difficult shoals of the unprecedented covid pandemic.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Will the Minister give way?

[Andrew Griffith]

I will make a little progress and then give way. As the Chancellor said, at this point all measures remain on the table. My hon. Friend the Member for Salisbury (John Glen) will indulge me if I do not announce that policy at the Dispatch Box today. His point is well understood, and others have made it to me, as Financial Secretary.

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[Andrew Griffith]

I will not give way at the moment. The difficult decisions that were taken by the Chancellor earlier this week will ensure that we continue to grow the economy. Those decisions will raise around £32 billion every year. Perhaps the Opposition will use the opportunity of the debate to enlighten the House, but to date they have said very little about how they would find the money to do that.

[Geraint Davies]

Will the Minister give way?

[Andrew Griffith]

Not at the moment.

That brings me to our energy price guarantee, which is a landmark policy that will help millions of people to get through this most difficult winter. Independent and external forecasts expect it to reduce inflation by around five percentage points. It is one of the most generous schemes in the world, and was the biggest single expense in the growth plan, with an estimated cost of around £60 billion between now and the end of March.

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[Geraint Davies]

On a point of order, Madam Deputy Speaker. Is it in order for a Member to say that he is against fracking but will vote in the opposite direction?

[Madam Deputy Speaker (Dame Rosie Winterton)]

That is not a point of order. Each Member is accountable for their own decisions on voting, and I am sure the hon. Gentleman would not want me to interfere with that.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

The mini Budget has obviously been a complete disaster and catastrophe, and that is what the motion is about. There was the unfunded tax cuts for the rich—whether the 45p rate, bankers’ bonuses or corporation tax—and letting the fossil fuel companies with their excess profits off the hook. It was unfair and unforecasted, and it led to sterling going down, mortgages going up and debt costs going up—a complete disaster. When the Chancellor stands at the Dispatch Box and says, “Okay, it was all a mistake. We will reverse it. Don’t worry, we’ll grow the economy,” that is completely ludicrous.

It is possible to grow the economy. Labour grew the economy by 40% in the 10 years to 2008 and used that to double investment in the health service and education and to lift a million children out of poverty and a million pensioners out of poverty. What have we seen in the last 12 years, since 2010? To start with, we had George Osborne’s austerity, where he said that he would sack half a million public servants. The response of the market was that consumer demand went down. We have also not seen any growth or any increases in pay, so the country and the economy had no resilience for the pandemic, wars or outside shocks.

The truth is, as the Institute for Fiscal Studies said, had the trend rate of growth under Labour continued up to the pandemic, average wages in Britain would have been £10,000 higher, so people would have been stronger to take on the shocks that we have all suffered. That is because of the Tories. It was not all right before the mini Budget—it was already a disaster—and now this is a complete crisis caused by the Tories.

Under Labour, in 2010, 26,000 people were using food banks. By 2021, the figure was 2.6 million—100 times the level—and now it is far worse. One in four children, and one in five households, are now in food poverty. What are the Government doing about it? Very little.

In Wales, where there is a Labour Government, we have free breakfasts in schools and free lunches for which anyone can sign up, because we recognise, as Winston Churchill did, that the health of the nation is its most important asset and keeping people fed is critical. On Monday, the Financial Times said that for every £1 invested in the NHS, we get £4 back in growth. When I put that to the Chancellor, he completely misunderstood the point and started talking about tech businesses or something. This is about having a healthy nation that can work and proper jobs in the NHS.

In 2014, in a massive study of many countries, the OECD found a direct relationship between inequality and growth: namely, where there is less inequality, there is higher growth. So if the country wants higher growth, why did we have a mini-Budget that was all about giving the super-rich more money and clobbering the poor? Why index benefits to wages instead of prices, which are rocketing? It is completely inept, completely unfair and completely immoral, and it is going on and on.

The Government talk about productivity. We know from the Office for National Statistics that we would increase productivity if we had more people working online—in particular, older people with caring responsibilities who want a more flexible work-life balance—but we have a Secretary of State at the Department for Business, Energy and Industrial Strategy who, as I understand it, does not even have a computer and pooh-poohs the idea. He thinks, “You can’t be working if you’re at home.” It is completely inept.

We should have equal wi-fi offered to everyone by providing wi-fi clouds in towns and on all our trains. When I commute back to Swansea, we are just wasting hours because there is no proper wi-fi. That is because it is not a public service and the private provider cannot be bothered to put it in. It is completely ridiculous.

We know that austerity, which it has been promised that we will go back to, produced 300,000 excess deaths. We know that trade is down, largely because of a cocked-up Brexit. We know that Conservative MPs voted for the current Prime Minister, who endorsed the mini-Budget that has created an even worse catastrophe. We know that Tory MPs did not support the Chancellor, who is now getting us back to square one. The only reason why we have a certain stability in market confidence is because of knowledge from the polls that there is some prospect of a Labour Government in two years who will put us back on track. What we should do morally, economically and politically is give the people a choice—give them a general election now—so that we can sort out the economy and give power to a party that can and has delivered growth and which will deliver a better, stronger, fairer, greener Britain, and kick this lot out.

Economic Update

Geraint Davies Excerpts

Monday 17th October 2022 Commons Chamber

[Jeremy Hunt]

I will absolutely give that assurance. My hon. Friend’s own background is in mental health and he understands just how vulnerable people can get. Those concerns will be topmost in our mind.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Before the Chancellor goes on a spending cut spree of public services, will he look at the analysis in today’s Financial Times that says that every £1 invested in the NHS generates £4 in growth? Will he also do what he can to protect poorly paid health workers who are facing much higher mortgage costs due to his Government?

[Jeremy Hunt]

Until the hon. Gentleman got to the end bit, I was going to say that that sounded like the question I should have been asking the previous Chancellor as Chair of the Health and Social Care Committee. I am very aware that the NHS does not just cost us money but can contribute to our growth. There is an enormous opportunity for this country to become one of the life science giants of the world.

Cost of Living Crisis: Wales

Geraint Davies Excerpts

Tuesday 19th July 2022 Westminster Hall

[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a great pleasure to follow my hon. Friend the Member for Cynon Valley (Beth Winter), who emphasised the depth of inequality, despair and impoverishment in her constituency and across Wales due to the cost of living crisis and a long history of cuts that we have seen disproportionately in Wales.

We are talking about Wales, and it is worth remembering that Wales is poorer, sicker and older. That was already the case before the austerity cuts began to bite from 2010 onwards. Let us put this in context. Austerity cut public services and welfare, and Wales is disproportionately reliant on public service jobs, has more older people on welfare and all the rest of it. That was the starting point. We know, from a University of York study that was published by The BMJ, that something like 50,000 extra people across the UK died from austerity.

Then, of course, we had covid. Again, we had the background of a poorer, sicker and older nation, where we would have expected, therefore, a much higher death rate. In fact, the death rate above the five-year average was something like 13% in Wales and 20% in England, but of course the average was much higher to start with because we had a poorer and sicker nation. The lower death rate was through the good governance of Mark Drakeford and his Welsh Government.

We are now coming to a situation after having had those massive cuts. Let us face it: in Wales, we are operating at 70% of gross value added, so average wages are about 70% of the UK average. We are having cuts and pay freezes in a very difficult situation, so people are suffering more. We have had Brexit. I know that the Minister is a big fan of Brexit, but 60% of Welsh trade was with Europe. In England, it is more like 48%. The problems that we have had, including problems with the Northern Ireland protocol, are again disproportionately hitting Wales.

Take a typical example of a public sector worker, for instance a nurse who is the only breadwinner in a house in the valleys, or wherever it is. If there are pay freezes on public sector workers, that house is impoverished. We have all heard the sorts of cases that were just mentioned: children who hold back half their free school meal to eat in the evening, because they do not have any food at home; children washing their hair with washing-up liquid; people not having the lights on, and so on. We know from the Trussell Trust that there are now 14 million people in poverty. There are, I think, 2.6 million people using food banks in the UK—up a hundredfold—and the majority of people who use food banks have some level of disability.

There is a pressing case for the Government to act now, whether through indexing social security or the universal credit uplift. There is also a pressing case for doing something about rent, which is not talked about very much. We talk about energy and food, but the local housing allowance has not been indexed. For example, studies by the Bevan Foundation show that, in an online search of private rented accommodation in Wales, only about 1% fits in with the local housing allowance. People are therefore driven into squalid, Rachmanite living conditions—another terrible fact.

In his intervention, the Minister implied, “Whose money is this, anyway?” I suggest that not only have the cuts disproportionately hit Wales but, as he knows from our meeting last week with Professor Mark Barry, there has been a historical lack of investment in Wales—of getting our fair share to boost productivity, jobs and wealth, so that we can pay our way. Over the last couple of decades, rail enhancement investment has operated at about 1.5% of the UK total, and we have 5% of the population and 11% of the rail track. Looking forward, instead of at the historical legacy, if we take 2020 as the baseline, Wales is being promised £0.5 billion out of an England promise of £106 billion, including High Speed 2, which is outrageous. HS2 is north-south. It will help Scotland much more than Wales, yet Scotland is getting its fair Barnett consequential. If we got it—90% of the 5% population—it would be £4.6 billion.

The Minister knows from that meeting that there are plans on the drawing board for about £2 billion to £3 billion. That is about half the amount that we deserve—from now on, I suppose, the legacy—and could make a big difference in moving us towards net zero, in productivity, in speed and in getting people to relocate. The truth is that once HS2 starts running, we will be able to get from London to Manchester in one hour and 10 minutes instead of two hours and 10 minutes, but it will still take nearly three hours to get to Swansea, so where will companies put their investment? In the case of Virgin, the answer is to take it out of Swansea and put it into Manchester. If we want to go to Staffordshire, it will take 45 minutes instead of one hour and 45 minutes, so on top of the historical inequalities I have mentioned, that will hammer Wales again.

The Minister asks, “Who will pay?” The way to pay is to invest in the productivity and future of Wales through moving towards a green future. We have talked about the windfall tax. Let us be straightforward: the big five oil companies have made excess profits of $2 trillion in the past few decades. They were making those operating profits above costs, and then Putin invades Ukraine and we have a price hike. They have done nothing to earn that windfall profit. It is our money, which was paid out of the pockets of the travelling public, and it should be given back.

In Spain, the people are getting free public transport; in Germany, it is €9 for a month. If we did that with the windfall tax, everyone could go to work for cheaper. We could get investment in green public transportation much more quickly, such as hydrogen and electric, and do something innovative. We could provide the background for pay settlements, such as the rail disputes. Instead of the National Union of Rail, Maritime and Transport Workers being told, “You can have 3% and 10,000 job cuts; what are you going to do about it?”—and, as we would expect, a strike is provoked—we could encourage everyone to go on public transport so that we do not need cuts in jobs. There might be a change to jobs, but there would be no cuts, and with more investment, we would not have to ask for so much. We can all agree to that.

[David T. C. Davies]

If that is such a good idea, why are the Welsh Labour Government not doing it in Wales? They have the power to do so.

[Caroline Nokes (in the Chair)]

Order. I gently remind the Member that this is a debate about the cost of living in Wales, not transport.

[Geraint Davies]

I know that, yes. It is not the Welsh Government’s decision: we do not have the money to do that, and it is not devolved. The Exchequer runs UK plc; we all know that. We do not charge the windfall tax. The Welsh Government are not in a position to introduce a windfall tax or nationalise the oil companies, sadly, although they have done something about rail.

[David T. C. Davies]

The Welsh Labour Government could raise tax to do that, if they wanted to.

[Geraint Davies]

I am not talking about raising taxes; I am talking about taking back the money that has been stolen from the travelling public by oil companies. They did nothing to earn that money: it was simply that Putin invaded Ukraine, and they said, “We’ll put the price up, take the money and fill our pockets.” The Government belatedly took a small share of that money, and now they are going to give 90% of it back to drill for more oil, when what they should be doing is investing in scaling up things like organic batteries. Swansea University has identified that the renewable energy from wind farms is only put into the grid at breakfast time and teatime, and is saying, “Let’s use that wind, create hydrogen, and put that hydrogen in the gas grid”—which takes up to 40% of hydrogen, as used to be the case for coal gas. That would reduce the carbon footprint.

[Caroline Nokes (in the Chair)]

Order. The debate is about the cost of living in Wales.

[Geraint Davies]

I am talking about Wales.

[Caroline Nokes (in the Chair)]

Hydrogen is stretching my tolerance slightly.

[Geraint Davies]

It is permissible on a Wales-only basis, and that is what Swansea University suggests we do. Obviously, we would have to work in co-operation with the UK Government to do that, but the idea would be to put that gas into the grid, or put the hydrogen into cylinders and send it to Ceredigion in place of the oil, so that people in rural environments would have a lower carbon footprint and a lower energy bill.

Whether it is those innovations or whether it is the tidal lagoon, there is no shortage of ideas; what there is a shortage of is Government focus on greening the economy and powering us up in a sustainable way. Instead, they just go to their mates—the oil barons—who say, “You’ve had to do this windfall tax. Give us 90% back to drill for more oil and destroy the environment.” Look at the temperature outside! It is absolutely disgraceful. The Government would not even help us with the tidal lagoon. That is not going to stop, is it? Of course, they said, “We are not helping.” That does not make any sense, even though it will go on for 100 years. The council and the Welsh Government have had to deal with it on their own.

We need a Government who care about people and stopping them starving. People may have heard of Professor Amartya Sen, a Nobel prize-winning economist who had the joy of teaching me on one occasion. He wrote “Poverty and Famines”, and found that famines were not a function of food shortages, but a function of high prices, low wages and some food logistics. He was not writing about the UK at the time, but that is precisely what we are now finding in the UK. We see pockets of starvation. We should stop that. The Government are empowered to stop it and they should, whether by indexing social security and universal credit, increasing rent, investing in green technologies, or stopping obeying everything the oil barons say. I will leave it there.

[Caroline Nokes (in the Chair)]

I call Jamie Stone—to speak on Wales!

--- Later in debate ---

[David T. C. Davies]

I do not know whether the First Minister was at those meetings, but I imagine that somebody from the Welsh Government was. Does the hon. Lady know whether the First Minister was there, or did the First Minister send a representative? I do not know, but it would be interesting to find out, because the point is valid: the First Minister of Wales should have enough confidence in his Cabinet Ministers to know that they can go along and represent the Welsh Government at Cobra meetings, just as the UK Prime Minister does. Anyway, let us not go down that—

[Geraint Davies]

Will the Minister give way?

[David T. C. Davies]

Okay. I am only one page into my speech, but why not? The hon. Gentleman was honourable enough to give way.

[Geraint Davies]

The Minister’s basic proposition is that this cost of living crisis is some sort of global issue. Will he accept that the issue is about the level of underlying resilience before these global shocks occur? If the rate of growth under the Labour party had continued thereafter, according to the Institute for Fiscal Studies, the average wage would be something like £13,000 better, so we would be in a much better place to take the shocks. Instead, we are impoverished by the Minister’s party.

[Caroline Nokes (in the Chair)]

Order. I remind hon. Members and the Minister that they should stick to the question.

Energy (Oil and Gas) Profits Levy Bill

Geraint Davies Excerpts

Committee stage
Monday 11th July 2022 Commons Chamber

[Craig Mackinlay (South Thanet) (Con)]

I was asked on 26 May by one of the main newspapers what I thought about this proposal of a windfall tax, on the back of what Labour had proposed some time before. I gave this fairly high-octane statement:

“Whichever way you look at it, a 65% tax rate applied to an industry that we need to encourage to help us through our energy policy mess seems topsy-turvy.

Higher taxes can never mean lower prices.”

And this was the statement that caused some alarm and was widely reported:

“All in all, I’m disappointed, embarrassed and appalled that a Conservative Chancellor could come up with this tripe.”

With the change of Chancellor, I had hoped that we would have quietly disposed of the Bill and not progressed to Second Reading. It should sensibly have been scrapped, but although the former Chancellor has gone, the Chief Secretary to the Treasury, my right hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke), is still here and presented the Bill this afternoon. I fully understand public disquiet about the supranormal profits that have been earned by the oil and gas industry over the period. The hon. Member for Ealing North (James Murray), who speaks from the Labour Front Bench, has made those points, which form the backbone of some of Labour’s new clauses.

The comments of various chief executives of the oil and gas industry—calling their profits “cash machines” and all that—were particularly unhelpful; they did not do themselves too many favours. Such companies lost similar amounts of money during covid, when, as we all recall, the gas and oil price completely collapsed. Owing to storage issues, there were a few days when oil was trading at a negative rate, which was rather bizarre; I wish I had had a few barrels to fill at the time.

We already did some rather strange things in years past. Under the Finance (No. 2) Act 2017, we restricted the carry-forward of losses. There is an allowance of £5 million, but the amount of profit that can be relieved with carried-forward losses is restricted to 50% on the rest. We have created a tax regime whereby we are happy to take the profits and tax them, but we are not willing appropriately to relieve the losses, and I am not sure that any of Labour’s new clauses would address that.

I have had discussions with various Front Benchers prior to today. Labour has objected to many parts of the Bill, because in its analysis of life—shadow Ministers have given quite a lot away— anything less than taking 100% of everything is a loss of tax. I am not sure that it was quite what the hon. Member for Ealing North intended to say, but he clearly suggested that that is Labour’s view of tax: it is necessary to take the lot, as anything less is a sort of tax give-back.

[Geraint Davies (Swansea West) (Lab/Co-op)]

The hon. Member may know that over the last few decades, the five biggest oil companies have made $2 trillion of profit, and the profit that they have been making is over the normal operational costs. What we have now, thanks to Putin’s war, is a massive price hike. That windfall profit is literally that—the companies have done nothing to earn it; they have simply stolen money from the pockets of people using transport and filling their cars. Is the hon. Member saying that that theft should simply be kept by the oil companies, which have done nothing other than exploit an illegal war? What sort of statement is that?

[Craig Mackinlay]

The hon. Gentleman has merely clarified what I have been trying to say; yes, of course there were supranormal profits on the back of Ukraine war and coming out of covid, when the entire planet was getting its factories back up and running and life was returning to normal. I had hoped I was making the clear point that there were substantial losses by similar companies in years past. Given the hon. Gentleman’s analysis, I assume that grain wholesalers would face a similar tax from Labour. Semiconductor manufacturers supplying their goods from South Korea would similarly, through artificial means, have earnt good profits at this time. It seems that the Labour party would definitely want to tax everybody on anything that it considered to be an inappropriate amount of profit, whatever that might be.

I have a number of objections to the levy. Labour’s new clauses 7 and 8 go some way to clarifying a little of what I am saying, although I will not support them tonight. Let me turn to the relevant North sea businesses that will be caught by the levy. Since 1 January 2002, we have had the ringfenced corporation tax at 30%—more than our current headline rate of corporation tax. The supplementary charge, which goes on top of that, has been up and down over the years. It commenced on 17 April 2002 and peaked during the coalition period—very relevantly, between 24 March 2011 and 31 December 2014 —at 32%. Of course, the then Department for Business, Innovation and Skills was held by the Liberal Democrats in the coalition, so that gives us a little insight as to what they think of tax: it is generally a high one.

We had a 62% tax during that period, but immediately prior to this legislation the supplementary charge had been down to 10%. We were bobbling along with massive profits and were taking 40% of the total to the Treasury. Whichever way I look at it, I see that as a goodly rate of tax. However, under clause 1, which has just been outlined by the Financial Secretary to the Treasury, my right hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer), this new energy profits levy is 25%.

Let me be very clear about my objections: a 65% tax rate is excessive in any tax regime. We are asking the self-same companies to go all out—“Please go all out!”—for more oil and gas in the North sea at this time of energy crisis, energy insecurity and very high prices. Why have they not, thus far, explored those parts of the North sea that we are now asking them to explore? It is because they are more complicated, deeper and more hostile environments. The profits derived from those tougher locations—the higher hanging fruit, rather than the lower hanging fruits—will be less, as the costs are higher.

I am aware of what I perceive as the tax nudge, but I am afraid that it is a little bit like Baldrick’s cunning plan. We are trying to nudge companies—this is about the only good thing about the Bill—by saying, “You make the right investments to get more oil and gas out of the North sea that we desperately need, and we will give you a very substantial tax relief.” And that tax relief is substantial, at 91.25%. I am afraid that the Chief Secretary to the Treasury has let the cat out of the bag; if that is the Baldrick cunning plan, which I can see the benefit of, how can we have estimated £5 billion as the amount of tax to be raised? That cunning plan is not going to work fully; many companies will not take the option of relieving the variety of taxes that are now before them, they will not invest, and we will be taking £5 billion out of the industry.

We are not only asking the companies to undertake new investment in the North sea. We are asking them to undertake some rather fresh thinking and research, with unknown outcomes, on the net zero pathway. I know for a fact that BP is doing a lot of work in this field—its people have been in one of the dining rooms of this House—and good luck to it, but as has been highlighted by the Labour Front Benchers, there is nothing in the Bill that nudges such investment in the net zero field.

“Profit” is not a dirty word. Profits pay our salaries, every salary of every civil servant, and every single pension in this country; they are all on the back of profits. “Profit” is a good word—a word that makes the world turn. Another objection I have to the levy is that the self-same companies, which are earning good profits, are the backbone of many blue chip investments that can be found in practically every pension fund in the land, because they are good dividend payers. Millions of pensioners rely on those dividends—a long and usual flow that can be relied on year in, year out. By the Government taking the extra 25%, those dividend flows will have to be lessened. We cannot take another 25% out of a profit and expect the dividends to flow at the same rate.

--- Later in debate ---

[Caroline Lucas]

It is a pleasure to follow the hon. Member for Leeds East (Richard Burgon), whose new clause 1 I am happy to support. I rise to speak in favour of new clauses 8 to 10 tabled in my name.

First, new clause 8 would require the Government to produce an assessment of the revenue that would be generated if the level of taxation on oil and gas companies were permanently raised to the global average of 70%. That is 5% higher than the total level of taxation with the addition of the Government’s levy, but it would be permanent.

I know the new Chancellor may be disinclined to increase taxation on the oil and gas industry, given that he has benefited so handsomely from it in the past, previously earning £1.3 million from his executive position at Gulf Keystone Petroleum, including a whopping £285,000 settlement payment when he stepped down from that role in 2018 after becoming a Minister. However, it is important to understand that the level of taxation that this new clause proposes on oil and gas would simply bring the UK into line with countries such as Angola and Trinidad and is backed by 63% of the public. By way of comparison, it may be interesting to note that the UK’s North sea neighbour, Norway, has a taxation rate of 78%, and that does not seem to have done it any harm. I therefore hope that the Government will recognise that this is a very reasonable amendment that it should be easy for them to support.

The reason I am proposing a permanent taxation level is that the UK currently has the lowest tax take in the world from an offshore oil and gas regime. That is not a badge of honour; it should be a badge of shame. Indeed, Norway’s tax take from a barrel of oil in 2019 was over 10 times the equivalent here in the UK. The amendment would simply require the Government to assess the impact of ending that shameful state of affairs. Greenpeace estimates that a tax at that level would generate an additional £13.4 billion for the Exchequer in comparison with the status quo—money that, in addition to providing immediate support to households to cope with the cost of living scandal, could be used to invest in much-needed energy efficiency, quite literally insulating households from escalating costs.

To date, the Government have spent £37 billion on short-term financial support. Although that support is of course very welcome, gas prices are likely to remain high for several years, and a more long-term approach is necessary, especially when the CEO of Ofgem is warning that the number of households in fuel poverty could reach 12 million in October when the energy price cap rises again. The think-tank E3G estimates that the average household with an energy performance certificate of D or lower will be paying what it calls an inefficiency penalty of £916 per year for adequate heating compared with households with an EPC of C or higher. Investment to kick-start a local-authority-led, street-by-street home insulation programme would save cash-strapped families money not just this year but every year. It would also rectify a glaring omission in the Government’s approach so far, with the Climate Change Committee saying clearly in its 2022 progress report to Parliament:

“Given soaring energy bills, there is a shocking gap in policy for better insulated homes.”

New clause 9 would require the Government to produce an assessment of how much revenue would be generated by the energy profits levy if the investment allowance were removed. I also support the Labour Front-Bench amendment that would simply delete the clause on the investment allowance, which is nothing less than a scandal. As the Chancellor and his team very well know, it will come at huge cost to the taxpayer. Analysis by the New Economics Foundation suggests that the investment allowance will cost £1.9 billion a year because any subsidised oil and gas projects will not start to return a profit until after 2025—the date of the sunset clause in the Bill.

[Geraint Davies]

I very much support what the hon. Lady is saying. Is she aware that in Germany for three months in succession people are being offered a €9 a month pass that can be used on all public transport, thereby shifting people on to public transport, reducing energy costs, encouraging environmental green investment, and stopping our addiction to fossil fuels? Does she think that a higher tax could help us to do that and put us on a more sustainable route to a green future?

[Caroline Lucas]

I am grateful to the hon. Gentleman for his intervention, particularly since it helpfully highlights a party policy of the Greens, who were, as he knows, in coalition Government in Germany. It has absolutely been their policy to introduce those kinds of incentives, and they are being massively taken up because they are incredibly popular.

I was talking about the investment allowance and just how egregious it is. The Institute for Fiscal Studies says that investing £100 in the North sea now will cost companies just £8.75, with the public picking up the remaining investment costs in the form of the forgone windfall tax. What is more, there is a chance that this new subsidy could lead to the development of otherwise economically unviable projects, becoming stranded assets of little or no economic value. Oil and gas companies are benefiting from that right now. For example, according to analysis by Rystad Energy, Shell, which recorded quarterly profits of over £7 billion earlier this year, will pay £210 million less in windfall tax for investment in the newly approved Jackdaw gas field.

The investment allowance also significantly reduces the amount of revenue generated, which is why I can only assume that the Treasury believes that its levy will raise only £5 billion in its first 12 months, especially since oil and gas company profits are expected to reach £11.6 billion this year, with BP’s chief executive describing the company as a “cash machine”. Let us remember that, as other hon. Members have outlined, these profits are not earned; they are a consequence of high global gas prices fuelled by Russia’s illegal invasion and war in Ukraine, and must be urgently redistributed to provide vital support to struggling families. Will the Government now publish their full impact assessment? Will they accept this crucial amendment so that we can have clarity over the cost of their perverse proposal?

The subsidy in the Bill is unfortunately entirely consistent with the Government’s approach to subsidising the fossil fuel sector overall. While they refuse to acknowledge that tax reliefs are indeed subsidies and prefer to use the very narrow International Energy Agency definition of a subsidy, Ministers and colleagues will know well that there are much wider definitions in use, including that developed by the World Trade Organisation, which would very definitely include the investment allowance. If the Government go ahead with this subsidy, it will come on top of countless other tax reliefs from which the sector benefits, including those for exploration for new fields, for R&D, and for decommissioning. The latter, for decommissioning, has an especially egregious element in the form of decommissioning relief deeds that guarantee future tax reliefs for oil and gas companies at a given rate. Imagine any other sector being guaranteed tax reliefs in perpetuity with future Governments unable to make changes to that! Companies should pay decommissioning costs, with decommissioning plans required to ensure a just transition for workers. That is the only fair approach. The measures in the Bill will add to the decommissioning tax relief burden faced by the public purse going forward, to say nothing of the impact on fossil fuel extraction.

[Geraint Davies]

The hon. Lady will be interested to know that people in Swansea University are looking at using the energy from wind farms that is not used by the grid off-peak to create hydrogen that can be put in the gas pipes to dilute the gas to reduce the carbon footprint of everyday gas. Would it not be better to put the money into those sorts of green investments rather than digging more and more holes to destroy the planet?

[Caroline Lucas]

Again, I am grateful to the hon. Gentleman. Those are precisely the kinds of forward-looking policies that we need rather than the backward-looking, dinosaur policies that seem to think that digging out more and more fossil fuels is the way forward.

Economic Update

Geraint Davies Excerpts

Thursday 3rd February 2022 Commons Chamber

[Rishi Sunak]

My hon. Friend makes an excellent point, which he also made the other day in Treasury questions, when we committed to looking at how best we could take up his suggestions. I think I am right in saying—the Secretary of State for Business, Energy and Industrial Strategy, my right hon. Friend the Member for Spelthorne (Kwasi Kwarteng) will correct me if I am wrong—that the warm home discount is already moving to a more automatic system for that rebate for those on pension credit, but we will of course take his suggestions on board and figure out how best to improve what we do.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Each week, the Prime Minister tells us that there are 420,000 more people in work than there were before the pandemic, yet the Office for National Statistics tells us that there are 506,000 fewer people in work than before the pandemic. The reason for that, as the Chancellor knows, is that the Prime Minister excludes the self-employed. Will the Chancellor correct the record to show that there are in fact half a million fewer people in work, and explain why, in the circumstances, he is imposing a massive national insurance tax on jobs?

[Rishi Sunak]

If the hon. Gentleman looks at the remarks I made earlier, he will see that I was clear that there are 400,000 more people on payroll, and that is the right use of that statistic. It is obviously harder to track those in self-employment because we have real-time information numbers from HMRC for those on payroll. We are proud of our track record on jobs. Unemployment in this country was forecast to reach 12%, with millions of people unemployed, but unemployment has now fallen for almost 10 straight months. It is almost back to the record lows we saw pre-pandemic, and we have record job vacancies and record low redundancies. That is all evidence that our plan for jobs is working.

Oral Answers to Questions

Geraint Davies Excerpts

Tuesday 1st February 2022 Commons Chamber

[Mr Clarke]

My hon. Friend has campaigned consistently on this theme. I would certainly be very happy to have further discussions with him about it. It is worth noting, and celebrating, the fact that the proportion of people who are in low-paid work is actually at its lowest since records began in 1997.

[Geraint Davies (Swansea West) (Lab/Co-op)]

The Trussell Trust finds that three out of four referrals are disabled people, and the Office for National Statistics finds that people who work online at home are more likely to work longer and not retire early, particularly if they are disabled. So will the Chancellor, the Treasury and the Minister look at the idea of promoting working from home after the pandemic, to help enable people with disabilities and other people to be more productive, and at the same time target more support for those in greatest need, as we have found from the Trussell Trust?

[Mr Clarke]

I thank the hon. Gentleman for his question, and for the spirit in which he asks it. Over the course of the spending review we are investing £1 billion in disability-related programmes, and that is an aspect that I am happy to look at further. More broadly, the Government as a whole spend £58 billion a year on wider disability support, so we certainly take that area very seriously.

Downing Street Parties: Police Investigation

Geraint Davies Excerpts

Tuesday 25th January 2022 Commons Chamber

[Michael Ellis]

My hon. Friend makes his point powerfully and eloquently.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Given that the police investigated and intervened on several parties across London on 20 May, can the Paymaster General explain why they did not intervene when enormous amounts of booze were being trundled into No. 10 with enormous amounts of noise? Does that make him fear some sort of fudging of the investigation? Perhaps another police force should intervene.

[Michael Ellis]

I am sorry that the hon. Gentleman chooses to criticise the Metropolitan police; I do not think that has the support of the House. I ask him to accept that the position is that the Metropolitan police and the public servants who work in Government work hard, including during a period of major crisis for the country, in the public service. They are devoted to their work and they seek to serve the public in the best way they can. Assumptions ought not to be made of police or civil service impropriety. The matter is subject to investigation and I ask him to accept the default position that persons are innocent unless otherwise proved—that is how it works.

Downing Street Garden Event

Geraint Davies Excerpts

Tuesday 11th January 2022 Commons Chamber

[Michael Ellis]

I can only offer my condolences to the hon. Lady’s constituent for their terrible loss, and I offer those condolences through her to her constituent.

[Geraint Davies (Swansea West) (Lab/Co-op)]

At the time of the No.10 Downing Street party, people in Swansea, Wales, could have faced fines between £60 and £1,920 for holding similar events. Does that not show the respect that the Welsh Labour Government have for the public health of their citizens in contrast to the contempt that the Prime Minister has for the public health of citizens here? Given that he must know whether he was at the party, why will he not simply say that? Why should we wait for an inquiry to find out what he already knows? Why is he hiding the truth?

[Michael Ellis]

It would be inappropriate to make a running commentary on an investigation that is in progress. We will continue to await the result of the investigations undertaken by Sue Gray.