Economic Update

Lord Brady of Altrincham Excerpts

Monday 11th January 2021 Commons Chamber

[Rishi Sunak]

We have in fact put in place payments to financially support those who need help when they are asked to stay at home, and they are available up to £500. As we have now reduced over time the period of self-isolation, the real value of those payments has actually increased, in some cases by 20%, 30% or 40%, depending on when people were contacted. More generally, throughout this crisis the Government have always made sure that we look after the most vulnerable. That is clear in the measures that we have taken and clear in the data that was published over the summer showing that those on the lowest incomes have had their situation protected the most by this compassionate Conservative Government.

[Sir Graham Brady (Altrincham and Sale West) (Con)]

In normal times, a successful British aviation sector supports 1 million jobs in this country. Will the Chancellor look urgently at what can be done best to ensure a rapid recovery for the sector heading into the summer? In particular, as he prepares his Budget, will he look at whether it makes sense for us to have one of the highest levels of air passenger duty anywhere in the world?

[Rishi Sunak]

I thank my right hon. Friend for his question. He is right to passionately champion both our aviation and aerospace sectors, which are critical to our economy. I am grateful for the help that he gave in helping to design a test-to-release policy for quarantining arrivals, but also in campaigning for business rates relief for airports—up to £8 million per airport, which is benefiting dozens of our regional airports up and down the country. I will bear in mind his suggested measures for forthcoming Budgets, but, like him, I want to see our industry return to its strength.

Public Health Restrictions: Government Economic Support

Lord Brady of Altrincham Excerpts

Tuesday 13th October 2020 Commons Chamber

[Steve Barclay]

The right hon. Gentleman speaks to an important issue, which was at the heart of the job support scheme’s design: recognising businesses that are not in closure, but which have difficulty bringing people back full time. The scheme provides support. The employer pays the first third, and the remaining amount is split three ways, with the Government supporting. Additionally, there is the wider package of measures, including support to local authorities to get better compliance, which is in the interests of businesses. The £1 billion to local authorities, the £500 million for local test and trace services, the business loans and the tax deferrals are all targeted at the sector that the right hon. Gentleman is talking about: businesses that can still trade and are not closed, but which do face further pressure. The winter plan sets out that support.

[Sir Graham Brady (Altrincham and Sale West) (Con)]

Care homes across the country are struggling to survive, and the areas with greater restrictions are particularly dealing with unprecedented levels of vacancies. What are the Government doing to support those vacancies and prevent the forced closure of care homes, which would in turn lead to many thousands of vulnerable people being rehoused or moved out across the community?

Economic Update

Lord Brady of Altrincham Excerpts

Wednesday 8th July 2020 Commons Chamber

[Rishi Sunak]

I will not repeat my comments on an ever-extending furlough scheme. I do not think that that is the right thing to do. With regard to grants, we provided grants—£10,000 or £25,000—specifically to businesses in the retail, hospitality and tourism sector, and that is why those businesses did not necessarily have to use loans if they did not want to. They received that support early in this crisis, because we acknowledged the particular difficulty that they would face. The hon. Gentleman referred to the VAT cut, which was one of the significant asks—if not the significant ask—from industry, but there is also the “eat out to help out” discount that will drive tons of businesses and protect millions of jobs.

[Sir Graham Brady (Altrincham and Sale West) (Con)]

The Chancellor spoke about finding a new balance between safety and normality. Is it not time to look at moving away from the guidance that people should work from home if possible towards guidance that they should go to work if it is safe to do so? May I also urge him to reflect over the summer on whether a cut or suspension of air passenger duty would be the best way to get the aviation sector back to health for next year?

[Rishi Sunak]

My hon. Friend, as always, champions the aviation industry. He is right to do so, and, as he knows, we are committed to a review of aerospace taxation, so I will certainly bear that in mind. With regard to the guidance, I share with him an impatience to get our lives back to normal. I know what a difference it will make, not just to those businesses, but to all the ancillary businesses that are used to office workers being in their offices. That is something that we should hopefully look to address in the coming weeks and months as we progressively move back to a new normal.

Finance Bill

Lord Brady of Altrincham Excerpts

Report stage & Report: 2nd sitting & Report: 2nd sitting: House of Commons
Thursday 2nd July 2020 Commons Chamber

[Wes Streeting]

I am delighted that the Minister asked that question, because I am about to lay out, in full, the record of the previous Labour Government. According to the London School of Economics and its Centre for Analysis of Social Exclusion, by the end of the new Labour Government’s period in office, child poverty and pensioner poverty had fallen considerably, in circumstances where child poverty would have risen without those reforms, and pensioner poverty would have fallen less far. In terms of absolute poverty, child poverty fell by more than 2 million from 1997-98 to 2009-10, and pensioner poverty fell by almost 3 million in the same period. In terms of relative poverty, child poverty fell by 800,000 between 1997-98 and 2009-10, and the number of pensioners in relative poverty fell by more than 1 million in the same period.

That Labour Government oversaw an £18 billion annual increase in spending on social security for families with children, as well as an £11 billion rise in payments for pensioners by 2010. Those rises were supported by other anti-poverty policies, including Sure Start, the national minimum wage, increased childcare support, and increases in education spending, which rose from £56 billion in 1996-97, to £103 billion in 2009-10—a real-terms increase of 83%. The last Labour Government pretty much eradicated homelessness and made ending insecure housing a priority, reducing the number of households in priority need of housing from 135,000 in 2003-04 to just 40,000 in 2009. They pursued the decent homes standard to boot, ensuring that children were growing up in far better conditions than I did. That is a record to be proud of—a record of a Government who got their priorities right.

It took a celebrity footballer to get this Government to do the right thing on something as basic as ensuring that children who would otherwise have gone hungry were fed this summer. It is not just that the Government do not have their head in the right place; they do not have their heart in the right place either. Unfortunately, we cannot rely on Marcus Rashford being on speed dial to get the Prime Minister to do the right thing on every occasion, and we cannot rely on the Chancellor to do the right thing on every occasion either. That is why it is important, as we have laid out in new clause 29, that we ensure that what counts is what is measured.

New clause 29 would require the Chancellor to conduct a review of the impact of this Bill—no doubt, very soon, this Act—on poverty in the United Kingdom. As with the Government’s environmental ambitions, I doubt that this Bill will move the dial on poverty much, if at all.

The Government’s own Social Mobility Commission has asked for the Office for Budget Responsibility to conduct assessments of all the fiscal statements that it usually does, but this time to look at child poverty and anti-poverty measures in particular. I urge Ministers to look carefully at this issue again. We raised it in Committee and were not successful in persuading the Minister of the case then, but I hope that we can persuade him of the case now. If Treasury Ministers and officials know that the OBR will be looking at those numbers in the same way that it does the other numbers in its assessments of Government fiscal events, perhaps it will concentrate the minds of people in the Treasury to get their priorities right.

Next week, the Chancellor will be coming before the House to deliver an economic update. After the Prime Minister’s statement this week, I think he needs to do a lot better than his apparent boss did when making a speech that was trailed as a new deal. It was not a new deal. Its ambitions were modest and much of the content was re-announcement. It certainly was not a green new deal. Perhaps when the Chancellor here next week, he can do the opposite of the Prime Minister. The Prime Minister over-promised and under-delivered. Given the way in which the economic update has been trailed, perhaps the Chancellor can under-promise and over-deliver next week, because he has a golden opportunity in the wake of this crisis to think seriously and substantially about the way in which our economy works and whose interests it serves.

I hope that when he comes forward next week, he does so with the full Budget that the shadow Chancellor has called for—a back-to-work Budget that is focused on jobs, jobs, jobs, that can actually tackle the gross inequalities and injustices of our society, and that puts us back on track to eradicate child poverty within a generation and to eradicate poverty for everyone because, for all the challenges of the last decade and all the challenges that we are living through now, this remains one of the wealthiest countries in the world.

This also happens to be a great country that is full of opportunities for so many people—in education, industry, arts, science and imagination—but those opportunities are not available to everyone. That should keep Ministers awake at night. It keeps me awake at night. But having listened to our Prime Minister only weeks ago in this Chamber, when it comes to tackling child poverty in this country, I do wonder whether his heart is really in it at all.

[Sir Graham Brady (Altrincham and Sale West) (Con)]

I am grateful for the opportunity to speak to new clause 30, which stands in my name, that of my right hon. Friend the Member for Maidenhead (Mrs May) and of a former aviation Minister, as well as of other Members who understand the crucial role of the aviation sector in bringing a very large amount of employment and prosperity to our constituents—in my case I represent an area immediately adjacent to Manchester airport, and my right hon. Friend has many constituents who work at Heathrow airport—and the wider impact of the aviation sector on the British economy and the way it drives growth and opportunity in our country.

The deficiencies of air passenger duty are well known, and this is an argument that has gone on for many years. It was introduced originally under the guise of being an environmental duty or tax. In fact, it has simply been a way of driving revenue. It is, by now, the highest tax of its sort anywhere in the world. In normal times, it is a drag on the development of new routes and connections around the world and a particular problem for regional airports, which find it harder to establish those new, especially long haul routes. Crucially, air passenger duty takes no account whatever of emissions or the environmental impact of an aircraft, a class of aircraft or a flight.

New clause 30 seeks to ensure that a review should be held—and held quickly, to be published within three months, by 1 October—of the likely effect of changes in air passenger duty rates on the aviation sector. The Bill as it stands only provides the capacity for Ministers to increase rates of air passenger duty, but it is critical that we look wider than that at the possible benefits that could come from reductions or a suspension. That is particularly important, of course, in the context of the covid-19 pandemic and the Government’s response to it.

The House will know that the aviation sector, along with hospitality and leisure, is among the hardest hit sectors of all. The effect on aviation has been exacerbated by Foreign Office guidance, which still advises against all but essential overseas travel, and in the past few weeks or so by the implementation of a blanket quarantine proposal, a policy which I hope will come to an end in the very near future with the announcement of a large list of so-called air bridges, which I think the industry expects might take place tomorrow.

The effect over the last few months of both the pandemic itself and policy in relation to the pandemic has been chilling for the aviation sector. The House is well aware of the very large number of jobs that have already been lost in the aviation sector in recent weeks and months, and there is little doubt it will take a long time for aviation to come back to the state of health that it previously enjoyed. While this is by way of a probing new clause, I say to the Minister on the Treasury Bench that the real purpose of it perhaps is simply to flag the importance of this issue prior to the fiscal event or the statement that will be made next week by the Chancellor. I am sure the Minister is well aware of the principle set out by Colbert, who said:

“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

The danger at the moment is that far from being an easy source of revenue for Government, air passenger duty, if it remains unreformed in the coming weeks and months, risks killing the goose rather than allowing the Government to extract the feathers.



I hope that the Chancellor will, before his statement, look seriously at the case for a temporary reduction or suspension of air passenger duty to assist the aviation sector to get back to where it should be. This is an opportunity to see the wider economic benefits that could come by achieving greater connectivity for our aviation sector, and particularly for regional airports. It would also be an opportunity to look at whether at the end of such a period of suspension an improved regime might be introduced that seeks to reward more sustainable aviation rather than simply to extract revenue for each passenger who flies.

Economic Outlook and Furlough Scheme Changes

Lord Brady of Altrincham Excerpts

Tuesday 16th June 2020 Commons Chamber

[Mr Speaker]

Unfortunately, Jamie Stone is not audible, so I call Sir Graham Brady.

[Sir Graham Brady (Altrincham and Sale West) (Con)]

As businesses get back to work, there is a cap on the number of employees who can be furloughed. Would it not make more sense to cap the number of hours or the total cost to the Treasury for each firm instead?

[Jesse Norman]

I thank my hon. Friend for his question. Let me reflect upon it.

Covid-19

Lord Brady of Altrincham Excerpts

Monday 11th May 2020 Commons Chamber

[Sir Graham Brady (Altrincham and Sale West) (Con)]

It is a pleasure to speak in this important debate. Last time I spoke on this subject in the House, I called on the Government to start moving away from an excessive dependence on arbitrary rules, and to recognise that the public have played an important role in the progress so far, by demonstrating responsibility and complying voluntarily. My key call was that we should take that as a reason to move towards trusting people more, and an expectation that we can rely more on common sense and people’s own sense of responsibility. I am therefore delighted to see the new change of emphasis and new messaging, which I think is an important move back towards trusting people and relying on the common sense and responsibility that we have seen so far. The revised guidance to start the process of getting people back to work is also welcome, although it has to be said that it is really a restatement of the original guidance. It has always been the Government’s position that work should continue, but that people should work at home where possible.

It is important that we are seeing a shift, however, towards more encouragement to get people out to work and more freedom for people to engage in outdoor pursuits that are essentially safe. Angling, tennis, bowls and walks in the country will all bring hope and make people healthier in the future. As that happens, there is more responsibility for all of us—for employers to ensure that workplaces are as safe as they can be, for providers of public transport to make sure that transport is clean and that people can be as distant as possible, and for all of us to take sensible precautions through handwashing, distancing and, where appropriate, face-covering.

The aviation industry is a subject of enormous importance to my constituents, as we are so close to Manchester airport. That sector has been hit harder than any and is likely, because of its nature, to suffer pain and damage for longer than most other sectors. We have already seen thousands of jobs go in the aviation sector. The news of the proposed 14-day quarantine period for returning passengers is a hammer blow for the industry and threatens many more hundreds of thousands of jobs. If it looks like more than a temporary and selective measure, the result will be devastation for the industry and for the many jobs that depend on it.

Many questions need to be answered about the quarantine proposal, such as what medical and scientific advice underlies it and why it should be in place for all or nearly all countries, apart from, apparently, France and the common travel area, including Ireland. Surely, at least, it should not apply to lower-risk countries with lower rates of infection or no infection, even if it has to apply to others.

As airlines and airports start to plan for a return to travel, I call on the Government to explore, as a matter of urgency, a testing regime that might be used instead, so that somebody could be tested shortly before flying and come straight through, or be tested at the airport on arrival and get an expedited test result. If that can be done, it will bring some hope to those beleaguered industries and the many thousands of people who work in them.

The Economy

Lord Brady of Altrincham Excerpts

Monday 27th April 2020 Commons Chamber

[Rishi Sunak]

Different countries have done things in very different ways. The hon. Gentleman talked about the US; the US has no equivalent of our furlough scheme, which is probably the most significant economic intervention that we have put in place—it was up and running four weeks after I announced it and is already, as we speak, getting money to businesses to pay wages. He talked about other European countries; there is a range. We have now issued more CBILS loans than the equivalent scheme in Germany.

[Sir Graham Brady (Altrincham and Sale West) (Con)]

As we look ahead to a gradual lifting of restrictions on business in the coming weeks, will my right hon. Friend look for common-sense opportunities, such as allowing open-air markets to trade in the same way as supermarkets? Will he also look at changes to the furlough scheme to help it accommodate a gradual return to work?

[Rishi Sunak]

I thank my hon. Friend for his thoughtful comments. I know he has put a lot of personal time and energy into thinking about these things, and I welcome his engagement with me. He makes very interesting suggestions. As the Prime Minister said this morning, there will be gradual refinements to the social and economic restrictions, and my hon. Friend is right to highlight that that is exactly how the process will work, whether that is the restrictions or, indeed, how we remove some of the economic interventions that we have put in place.

Finance Bill

Lord Brady of Altrincham Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution
Monday 27th April 2020 Commons Chamber

[Sir Graham Brady (Altrincham and Sale West) (Con)]

We meet for this debate about 10 days before the end of the extended period of lockdown, and we want this process to continue to succeed. The number of new cases has started to fall, the number of hospital admissions is coming down and, while the tragic death toll remains too high, it looks as though that is falling, too. We want that to carry on, but if we want the public to continue to engage in this battle, as they have done magnificently, we need to offer them hope and a light at the end of the tunnel.

We need to look ahead to the point where more people return to work and more businesses operate. An extraordinarily difficult political judgment faces the Government: the need to balance the recovery of the economy and the protection of jobs with the need for common-sense measures for hygiene and distancing, which might continue as people get back to work and business gets moving again.

The only thing from the 11 March Budget that I want to mention is the one-year extension to the IR35 changes. The Minister said that that time would be used well, and that research would be conducted into the impact on the public sector before the change was extended to the private sector. I hope that Ministers will also take the opportunity to look at whether more could be done to achieve proper clarity of definition between contractors and employees, and at the ill-defined status of worker, which causes considerable confusion.

Moving to more recent financial measures, I warmly congratulate the Chancellor on the bounce-back loan. It is a sensible compromise between protecting against potential high levels of fraud—by introducing the limit of £50,000, or 25% of turnover—and meeting the need to get money out quickly. I commend the Government for listening to calls for changes to achieve that. All measures should be focused on getting the economy moving again once it is judged that the acute phase of the crisis has passed.

I have a couple of specific points to mention. A number of Members have made the point that although the job retention scheme has been hugely successful, it is inflexible. As we look towards the phase during which people will gradually return to work, it would be immensely helpful if it was possible to furlough an employee for part of the week, rather than the whole of it, to assist a gradual return to work.

The small business and hospitality grants are extremely beneficial to small businesses, but some have found themselves excluded. I refer particularly to those that operate in shared premises, paying rent and not paying their business rates directly. It is manifestly and especially unfair for small cafés and restaurants that have been required to cease trading yet find themselves specifically excluded by the technical terms of the grant regime.

Finally, I turn to the aviation sector. My constituency is adjacent to Manchester airport, which is directly or indirectly the source of the greater number of jobs in my constituency. We all know that the aviation sector is facing perhaps the greatest problems of any in the current crisis, and they look like going on for longer, so will the Minister ensure that he and his colleagues do everything possible to look ahead at how the aviation sector can be supported through recovery? In my remaining half minute, I leave with him the suggestion that it might be a good time to consider a holiday, as it were, for air passenger duty, by cancelling it for a 12-month period.

Self-employed Persons: Financial Support

Lord Brady of Altrincham Excerpts

Tuesday 24th March 2020 Commons Chamber

[Steve Barclay]

The right hon. Gentleman is right to emphasise the importance of timing and speed in this regard. He spoke about how that can be targeted and the fact that there are many very deserving causes within the population, but it is probably useful to draw the House’s attention to the fact that one in 10 of those who are self-employed are over state pension age. Over two in 10, according to the 2017-18 figures, were earning less than £2,000, which suggests that it was not their main source of income. Between one and a half and two out of 10 are already on universal credit. Some remainders will be quite well paid, such as law partners and so on, and some will be in employment and returning self-employment tax forms for part of their income in addition to their employment. The point is that the population itself is complex and we need to ensure that the measures are targeted correctly.

The right hon. Gentleman raised the mechanism. One of the themes that has informed the Treasury’s approach is this: what is operationally deliverable? That is one of the things we are working through. For example, HMRC does not hold people’s bank accounts, which is why the support the package for those in employment was through the PAYE—pay-as-you-earn—system. As my right hon. Friend the Chancellor set out at Treasury questions, tax data is one and a half years old. Those are the issues we are working through. The right hon. Gentleman is absolutely right that urgency is important—that is why the Chancellor is engaged on this—but we are seeking to target a complex population.

[Sir Graham Brady (Altrincham and Sale West) (Con)]

Recognising the complexity of solving this problem, can my right hon. Friend give some indication of how quickly we can expect to have at least an interim solution in place for those who are desperate for help and desperate for clarity at this point?

[Steve Barclay]

For some within this population—not all—there will be some solution already through the £5 million loan that is available as of yesterday. That will not cover the entirety of this population, but, in accordance with the business needs of some who are self-employed, there is support. For some of the population—again, by no means all—there will be some relief through some of the measures the Chancellor set out on property and business rate relief, but part of the complexity of the target population is that different measures work for different groups. That is part of what my right hon. Friend the Chancellor is working through, but I recognise the point my hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady) and others have raised. We do recognise the importance of timing on this issue.

Saville Products Ltd and HMRC

Lord Brady of Altrincham Excerpts

Tuesday 2nd July 2013 Westminster Hall

[Mr Graham Brady (Altrincham and Sale West) (Con)]

I am grateful for the opportunity to have this short debate in Westminster Hall. I am pleased to serve under your chairmanship, Mr Crausby, and am delighted to see the Exchequer Secretary in his place to reply. He has been unfailingly courteous and helpful in dealing with this case, as is his usual practice. He finds himself in his current ministerial position towards the end of what has been a 12-year process, and will therefore respond to a debate about events for which, mostly, he carries no responsibility.

The debate concerns the case of my constituents, Mr and Mrs Nelson. They are an impressive entrepreneurial and professional couple who took over a business in Ashton-under-Lyne some 15 years ago and who, for much of the past 12 years, have been forced to endure an oppressive investigation by Her Majesty’s Revenue and Customs. They have had to fight against an unjustified tax charge and to struggle ultimately for proper redress and compensation. As so much attention is now paid to big corporations and the efforts they sometimes make to reduce their tax bills, it is particularly timely to consider the injustice that has been faced by the Nelsons and their small to medium-sized engineering company, Saville Products Ltd. As I have said, the company is located in the Ashton-under-Lyne constituency, and I place on record my constituents’ gratitude—and mine—for the unstinting support of the hon. Member for Ashton-under-Lyne (David Heyes), and of their Trafford ward councillor, John Lamb.

The story begins in 2001, with an investigation into my constituents’ business, and then personal, tax affairs, which went on for five years and ended only when the Nelsons sought the personal intervention of David Hartnett, the then chief executive of HMRC. It might help if I gave a brief summary of the case, and the difficulties that Mr and Mrs Nelson have faced over the years, in the words of Mr Nelson himself, who wrote to me for that purpose:

“HMRC demanded information within an unreasonable timescale with the threat of penalties. In order to comply, we had to spend an inordinate amount of time, under pressure, to the direct detriment of the company. HMRC threatened us with penalties to try to bully us into paying tax we knew we did not owe. HMRC have since admitted this. HMRC deceived us by asking us to settle an amount we did not owe in order to bring the investigation to an end. They failed to inform us, and we only found out later from the company’s accountant, that had we agreed to their demands they would have applied that sum to tax bills issued for each of the six previous years and 2 years into the future. This would have bankrupted the company.”

According to Mr Nelson, the HMRC investigator’s

“attitude towards us was vindictive and we believed he was waging a vendetta against us because we had the temerity to stand up to his bullying tactics. We refused to sign inaccurate meeting notes on two occasions…The inspector…made a telephone call to the company’s accountant at 8.00 am one morning, slandering and discrediting me and trying to elicit information to which he was not entitled.”

Mr Nelson’s report goes on the state that HMRC

“inisted that the Nelsons had to provide information about the disposal of two cars they had sold, one of which had belonged to one of their daughters. It transpired from the Ombudsman’s report that this information was already in the possession of”

the inspector,

“and that he neither told us he was seeking the information nor informed us when he had obtained it. Private information about Mrs Nelson’s mother’s financial affairs was demanded by HMRC, causing distress to the family, when this information was not relevant or connected to the enquiry. Notes of a meeting between the Nelsons and the HMRC’s Area Director…were deliberately doctored to try to justify false accusations. We have the original notes as evidence…the HMRC Complaints Department promised to hold a meeting with us and then withdrew the offer…HMRC made us recreate all our personal records which had been lost at the Manchester tax office”

while in the possession of Revenue and Customs. The report states:

“This was an entire year’s personal financial information in minute detail and took us hundreds of hours but the Ombudsman’s report stated that HMRC had the powers to obtain this information themselves.”

Nevertheless, HMRC chose to demand it of my constituents.

Mr Nelson’s account continues:

“HMRC opened an investigation into our personal financial affairs without establishing that there was anything wrong in the company’s records”.

HMRC gave

“the wrong information on expenses claims and subsequently denied having done so even though there was documentary evidence to prove”

that that was the case. There was subsequently an apology for that action. Then,

“HMRC opened an investigation into another year (2003) and demanded a statement of affairs”

from the Nelsons, when there was still no justification

“for believing that there was anything wrong in the year already under investigation (2000). HMRC sent a barrage of 23 assessments shortly before Christmas in 2004, without justification”.

One has to assume that that was designed to cause worry and alarm. The Nelsons believed that the company would have been bankrupted had the demands been paid. HMRC claimed that it was the Nelsons’ choice

“to prolong the investigation by answering…questions ourselves but this was disingenuous as the company could not have afforded their fees and they had no knowledge of our personal tax affairs.”

The threat of a potential £70,000 tax bill in 2005 meant that Saville Products Ltd lost the opportunity to acquire its major competitor, Autogem, at what would have been a very attractive price.

“HMRC’s maladministration not only affected Saville’s business during 2001-6 because of the amount of time they had to devote to the investigation but also meant that we lost the chance to create a combined company that would have been worth £10 million. Incompetence and poor service from HMRC staff has resulted in major economic loss because we had to sort out the consequences. One example is that the inspector did not understand the Sage accounting system and therefore claimed that we had not put through hundreds of invoices (these were merely carriage costs, separately coded). Another example was the failure to understand the stock valuation.”

The Nelsons were accused of diverting takings, which they understood to be a criminal offence, and they felt that they were held to be guilty until proved innocent. They also reported that

“a cavalier attitude to our personal and company documents, even from Mr Hartnett, endangered our company’s security and reputation. Documents were sent to third parties, not marked private, sent through post and not properly parcelled.”

Throughout the process, an unpleasant and oppressive attitude was taken towards a small business and the family who owned and ran it, who were trying to make it into a successful company and employer. That is borne out by the Nelson’s accountants, who have stated that what happened had a significant effect on the business. Mr Speakman, a partner at Beever and Struthers accountants, wrote to the Parliamentary and Health Service Ombudsman in May 2009:

“What I can state categorically is that whilst the negotiations to purchase Autogem were going on, HMRC dismissed the appeal made by the Nelsons via the Regional Complaints Office and continued to make unreasonable demands on their time. Mr and Mrs Nelson told me that they could not risk proceeding with the purchase of Autogem whilst they had the uncertainty of a potentially ruinous tax bill hanging over them…The frustration of having to contend with HMRC’s repeated failure to look after their personal documents, the fact that they were never believed and that the onus of proof was always on them with the assumption of guilt rather than innocence, the threatening tactics when HMRC bombarded them with tax assessments and demands going back six years and forward two, all these aspects have had a devastating effect on Mr and Mrs Nelson. They are resilient characters but I know they have both suffered stress and disillusion as a result of this investigation.”

Mr Speakman went on to estimate the financial loss that the Nelsons have suffered as a result of the investigation at £2.5 million. From details that I do not have time to go into, that might be a conservative estimate.

In response to the Nelsons’ concerns and finding their complaints largely proved, the ombudsman recommended a significant—by the ombudsman’s standards —payment from HMRC in 2009. In a letter on 25 September 2009, Lesley Strathie, the then chief executive of HMRC, wrote:

“I fully accept that we handled the enquiry badly in a number of key respects. In particular, we failed to apply a proper level of management control which should have ensured that the investigation was concluded much sooner and I understand what an adverse impact this has had on your business and on you…personally.”

Beever and Struthers estimated the scale of that economic loss under the various heads of loss of income, loss in capital value, perpetuating loss of profits and loss of opportunity.

The ombudsman’s decision in 2009 stated:

“Overall, I uphold a significant part of Mr and Mrs Nelson’s complaint. Whilst I am not persuaded (despite Mr and Mrs Nelson’s strong claims to the contrary) that the objective evidence is sufficient for me to find that individual HMRC officers have been dishonest, I am satisfied that there have been significant specific flaws in HMRC’s handling of their enquiry into SF Ltd”

—Saville Fasteners Ltd. She continued:

“More importantly, however, I consider that HMRC’s management of the enquiry was seriously deficient, with little, or insufficient, regard being paid to the compliance cost of the enquiry or to proportionality. I uphold the aspect of Mr and Mrs Nelson’s complaint that HMRC’s internal complaints procedure failed them… I am satisfied that, if the enquiry had been conducted without flaw, it would have concluded very much sooner than it did. I consider that the unreasonable continuance of the enquiry amounted to serious maladministration which has caused Mr and Mrs Nelson significant distress and inconvenience, and diverted their attention away from their business at a critical time. However, I am not persuaded that the very substantial claim Mr and Mrs Nelson have made for economic loss has been made out.”

In response to further correspondence, the ombudsman wrote to the Nelsons in November 2010, stating that one point is

“that any estimate of economic loss based on a departure from a forward projection can only be speculative and a matter of opinion, rather than demonstrable fact. I agree. We can only make recommendations for compensation for financial loss on the basis of firm evidence, and not on the basis of speculation…I therefore consider that we were right to conclude that there was too great a level of uncertainty and contingency to recommend that HMRC compensate you for a specific amount of economic loss.

The alternative was for my Office to recommend what is called a consolatory payment in recognition that the way in which HMRC conducted the enquiry must have diverted your attention from running your business to a significant extent, and caused you considerable inconvenience and distress.”

Consolatory payments by Departments are generally modest and those by HMRC of more than £1,000 are comparatively unusual, so the fact that the ombudsman recommended a payment of £30,000 shows the scale of the wrongdoing and maladministration that she felt she had encountered. However, her terms of reference and her remit did not allow her to venture into realm of compensation for the specific economic loss.

Last September, the Minister kindly agreed to meet Mr and Mrs Nelson and me. Following that meeting, Mr Nelson wrote to me saying that, in 2006, Lesley Strathie

“wrote to us to acknowledge that we should be compensated for economic loss, yet more than 11 years after this pernicious investigation began we have still not been adequately compensated. Mr Hartnett himself told us that HMRC would pay whatever the Ombudsman instructed them to pay yet he knew full well that the Ombudsman did not have the authority to make an award for economic loss.”

He also drew attention to the fact that one of the officials at the meeting, Mr Norris, stated that HMRC would normally consider paying the cost of accountancy fees incurred in an investigation but, as Mr Nelson pointed out, when we obtained the minutes of that meeting at the Treasury, there was no reference to such a statement.

None the less, Mr Nelson obtained from Mr Speakman at Beever and Struthers an estimate of the cost in professional fees of the 3,000 hours that these small-business people were forced to devote to the defence of their business and reputation. A far lower figure than the £2.5 million for the estimated economic loss, which I have already mentioned, the estimated cost of what the professional fees would have been to mount the defence in the case is £279,000. In fact, the case was defended by Mr Nelson and his wife. Mr Nelson, who is a chartered accountant and had been a senior manager in a merchant bank, was well qualified to do that, but he had to devote a great deal of time to it.

In this brief debate, I have sought to highlight the plight of one SME, Saville Products Ltd, and its proprietors, at the hands of an oppressive and unjustified investigation into their tax affairs. The case has attracted sympathy from the Chair of the Treasury Committee, my hon. Friend the Member for Chichester (Mr Tyrie), the Chair of the Public Accounts Committee, the right hon. Member for Barking (Margaret Hodge), and the Chair of the Public Administration Committee, my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), in relation to the ombudsman’s powers. Mr Michael Izza, the chief executive of the Institute of Chartered Accountants in England and Wales, has raised concerns about it. The case has drawn an apology from HMRC and a damning report from the ombudsman.

Compensation of £20,000, plus accounting costs of £2,500, was increased by the ombudsman by 50% in recognition of the personal toll on my constituents, but at no point has the financial damage to the company been compensated. The company’s accountants have estimated that compensation at £2.5 million, which is probably a conservative estimate. Following our meeting at the Treasury, the company has instead looked for the cost in professional fees that would have been incurred.

In 16 years in the House, I have never brought the plight of a local business to the Floor in this way. I have done so because I regard the case as a manifest injustice—an unpleasant spectacle of a Department of State treating a small business with disdain. I hope that the Minister will reconsider the case for the sake of my constituents and their business and for the sake of other small and medium-sized businesses facing similar mistreatment.

A failure by HMRC to conduct a proper inquiry has been proved, a failure of HMRC’s internal complaints procedure has been proved, and a finding of enormous distress to my constituents has been proved. We have seen an SME that cannot afford to take the Goliath of HMRC to court and an ombudsman that does not have the power to make good economic loss. We rely on the Minister to reconsider the case.