Oral Answers to Questions

Jacob Rees-Mogg Excerpts

Tuesday 18th April 2017 Commons Chamber

[Mr Hammond]

As we have said on many previous occasions from this Dispatch Box, we recognise that alternative arrangements will have to be put in place. We will no longer be making large subscriptions—payments—into the European Union, but on the other side of the equation we will no longer be receiving some of the funding that we have been receiving for many years, including the structural funds. That places the opportunity back in the hands of this House—this Parliament—to decide how we should use our taxpayers’ funding to achieve the objectives of the UK Government and to achieve economic development in the way that is most appropriate for the UK.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

Does my right hon. Friend look forward to getting net £10 billion a year into the Exchequer, and does he note that the claims for tens of billions of euros from our friends in Brussels merely illustrate the financial incontinence on the continent?

[Mr Hammond]

Any Chancellor would always welcome any net tens of billions of pounds, or even any net billions of pounds, from pretty much any source whatsoever. In terms of the numbers bandied around in Brussels relating to the so-called exit charge, we should recognise them for what they are: an opening gambit in what will be a long and complicated negotiation—nothing more, nothing less.

Finance (No. 2) Bill

Jacob Rees-Mogg Excerpts

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[Peter Dowd]

If that is what the hon. Gentleman sees, I suggest that he needs to take off his rose-tinted spectacles.

We are all aware that the only Conservative idea for the shape of a post-Brexit economy is to turn our once pride-worthy economy into a bargain basement tax haven. That is what the Conservatives want. We have had seven years of slogans from this Government, but we still have no evidence that their negotiations on Europe amount to anything more than something written on the back of a fag packet. They are non-existent, and they have been non-existent for the two or three years since the announcement of the referendum, other than their preparation to sell us down the river to tax avoiders and dodgy dealers across the globe.

The Government make great claims on tackling tax avoidance in the Bill—we heard the Minister talk about this earlier—but it is a charter for tax avoiders, and no amount of smokescreens and bluffing can hide that fact. The Chancellor wants us to believe that measures to bring some non-doms into tax will really tackle the problem, but throughout the Bill we see measures to preserve the special status of non-doms and to privilege that group over domiciled taxpayers. Even the Government’s headline “deeming” measure is undermined because they have chosen to preserve the non-dom status of offshore trusts. How on earth is this going to get more taxes paid if non-doms are being forewarned that they can simply hide their money away in a trust and still keep it beyond the Revenue’s grasp? When is closing a loophole not closing a loophole? When it is hidden in a magic spreadsheet.

The Bill fails to introduce any meaningful measures to tackle tax avoidance and evasion, which even this Government admit are costing at least £36 billion a year. In short, this Finance Bill continues to push our country towards a low-tax and low-pay economy in which a small minority of the rich can get wealthier at the expense of everybody else.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

I would love this to be a low-tax economy, but is the hon. Gentleman aware that tax as a percentage of GDP is going to be at its highest level since Harold Wilson was Prime Minister?

[Peter Dowd]

I am grateful to the hon. Gentleman for bringing that to my attention. Let me put it like this: if we had a Labour Government, the percentage would be even higher.

The Finance Bill does nothing to fund the NHS, which is facing its worst ever crisis. As the former Secretary of State for Health, Lord Lansley, has said, the Government planned for five years of austerity, but having 10 years of it was neither planned for nor expected. That came from a man who wasted £3 billion on a top-down reorganisation of the NHS. By underfunding and overstretching the NHS, the Tories have pushed health services to the brink; that must be in everybody’s postbag.

--- Later in debate ---

[Nigel Mills]

Having a broader debate to raise people’s understanding that a diet cola is much healthier that a full-sugar cola for most people is helpful. I am not sure how much of an impact debates in this place or taxes on producers will have on people’s consumer decisions when they are in the supermarket, as those are probably based on price, promotion and their personal preferences or historical buying habits. However, the Government are right to tackle this issue.

Clause 108 seeks to tighten up the rules on VAT collection from fulfilment businesses. Globalisation has changed how businesses are structured so that people buy from them online. People then avoid paying VAT due in the UK, which is a big weakness. We have a generous turnover threshold. Most countries in Europe do not let people have their first £80,000 of turnover VAT-free—I believe the figure is now £83,000. It is right that we have that exemption, but we need to find ways of stopping people selling things on internet marketplaces and exploiting it, because there is a big revenue leak. This also makes it very hard for UK businesses resident here that are trying to comply with the rules to compete with those internet-based sales where people are not charging VAT on products on which they ought to be charging it. All the measures we can take to ensure that anyone trading here who turns over more than £80,000 has to charge VAT on the things they sell have to be right, and I look forward to seeing how those measures work and what more the Government can do on them.

Clause 120 deals with making tax digital, on which the Minister and I had an exchange earlier. I accept that we have to make tax more digital than it is and we have to get everybody filing returns online. I can see why the Government would want the information much earlier than they are getting it and would seek to remove the errors. Individuals and businesses do not want to make errors and they want to get their tax right. I am not sure how much we help them when we add 762 pages of Finance Bill every year and they have to try to work out how to comply with them. Making tax digital is the right thing to try to do, but I worry that if we rush the smallest businesses into it we will end up with the wrong outcome. I accept that businesses turning over more than £80,000 are probably already filing their VAT quarterly, doing monthly PAYE activities, presumably on a computer, and reporting those, and doing the same thing for auto-enrolment. Those businesses are probably already gathering, just about in the right format, all the information they need, and making these returns should not be unduly onerous for them. In that area, the advantages outweigh the downsides. However, I do worry about ending up with a perverse outcome.

[Mr Rees-Mogg]

My hon. Friend is slightly glossing over the problems for businesses. Many of them will be paying accountants to make the filings that they are already making and this will be a further cost to them, which will bear down particularly heavily on smaller businesses.

[Nigel Mills]

Yes, and I was coming to that point about the smaller businesses. I suspect that businesses that are submitting VAT returns have already gathered all their sales data and invoice data, and will have to gather all their payroll data for their PAYE reports, and so most of the stuff they need to do this reporting has already been gathered and looked at coherently. Small businesses may do that only once a year and employ an accountant to do it, so we run the real risk of going from having an annual return prepared by a qualified person who has looked through the information and made it coherent and accurate to having a quarterly statement that the individual tries to do themselves, ending up with much less accurate information being prepared than before. We need to be careful to avoid going from a relatively reliable annual return to an unreliable four-times-a-year situation and unintentionally increasing the errors that HMRC has to look at. Instead of doing this once a year and making sure they have got it right, the risk is that people may choose not to pay an accountant or be unable to afford an accountant to do this four times a year. So there is some merit in thinking about how we phase in this measure for the smallest businesses. We could make the compulsory date a few years further away and encourage people to choose to opt in if they feel they can comply. In that way they would gain advantages from knowing that their tax bill is right and will not be shocked when they get the statement back from HMRC. There are some advantages here, so if we sell this right, businesses will choose to sign up to it and the final compulsion after a few extra years will perhaps not be as big a shock.

--- Later in debate ---

[Stewart Hosie]

I am sure that the Scottish people will be delighted to hear that the hon. Lady thinks that somehow they do not pay taxes and that they are dependent on the largesse of ladies like her to fund our welfare system. We have had a very small amount of welfare devolved. If she wants to make such a contribution, she can read out the rest of the Whips’ briefing note when she catches your eye later, Mr Deputy Speaker. [Interruption.] The Tories can groan all they like, but they have called a snap election, and on the same day we are debating the Finance Bill.

In this Bill, the Minister wishes to reduce the dividend nil rate from 2018-19 from £5,000 to £2,000. I will listen carefully in the next 10 days or so to what the Government say about that. Perhaps they can prove that only very wealthy people benefit from that allowance and that it may be a reasonable change. Equally, it may be the case that many small and start-up business owners depend on that money to tide them over and that the measure will be nothing more than a tax on enterprise—a disincentive to start a business, to create jobs and to power local economies.

I did find it slightly jarring when the Minister explained that wealthy people could put lots more money in individual savings accounts. That is fantastic news for people who are already wealthy: they can save tax free. Let us juxtapose that with a change to the dividend nil rate from a modest £5,000 down to £2,000, which might act as a disincentive to people who genuinely want to start a business, while allowing already wealthy people to save tax free. That might be the kind of error we would have seen under the old fiscal charter and its requirement to run a permanent surplus quickly, almost irrespective of the economic conditions. However, the new fiscal charter is more flexible than the last one, which should make such a measure unnecessary. The Government are still targeting a surplus early in the next Parliament. Let us see how early it is in the next, next Parliament.

Again, without digressing too far, the numbers and the timescale for even a modest surplus within four or five years look precarious. The forecasts for a current account surplus are tiny, not even reaching 1.5% of GDP. If there is any external shock or capital flight if sterling suffers further devaluation, which is quite likely if the Brexit negotiations go wrong—again, highly possible—the figures could fall apart very quickly indeed.

At its heart, this is a Finance Bill delivered with the pretence that the hard Tory Brexit is not happening. It sits in splendid isolation from reality. We cannot assess whether it will assist with the challenges that lie ahead. We cannot even assess properly what the consequences of the limited measures in it will be, because the Office for Budget Responsibility told us about Brexit at the Budget:

“There is no meaningful basis for predicting the precise end-point of the negotiations as the basis for our forecast.”

In short, this Finance Bill, like the 2017 Budget, is effectively based on a central assumption that pretends that Brexit does not exist. That is a ridiculous thing to do, given that article 50 has already been triggered.

[Mr Rees-Mogg]

The hon. Gentleman quotes the OBR, which was one of the few forecasters that was responsible enough a year ago not to make wild assumptions about what Brexit would mean. Most of the other forecasters thought they knew what would happen and got it comprehensively wrong. It shows prudence, caution and common sense not to try to forecast that which is essentially unknowable.

[Stewart Hosie]

I think the hon. Gentleman has been on record attacking the OBR for its forecasts. If he has not, I apologise, but I am sure that many of his colleagues have. No one seriously suggested that on day one or in week one, month one or even year one, even before the negotiations were complete, Brexit would result in any kind of catastrophe, reduction in GDP or other such thing. The real danger is for the medium and long term. As the hon. Gentleman brings it up, let us remember what some of the forecasts said. The Treasury itself said that we could lose up to £66 billion from a hard Brexit, and that GDP could fall by about 10% if the UK reverted to World Trade Organisation rules, which echoed the Chair of the Treasury Committee and other assessments. The London School of Economics said:

“In the long run, reduced trade lowers productivity”—

a huge problem for the UK—which

“increases the cost of Brexit to a loss of between 6.5% and 9.5% of GDP.”

It put a range of figures on those costs of between £4,500 and £6,500 per household.

There are other assessments from the Fraser of Allander Institute, from the FTSE 500 senior executives and from the British Chambers of Commerce. The hon. Member for North East Somerset (Mr Rees-Mogg) may not believe those assessments. Some of them may not come to pass, but given that the warnings are very real and credible, one would have imagined that they would instruct a far bolder Finance Bill. That is the point that I was trying to make.

[Mr Rees-Mogg]

The point I was trying to make was that we have had incredibly wrong forecasts from all these illustrious bodies. The hon. Gentleman was only wrong on the OBR. I criticised lots and lots of bodies; the OBR was the one I singled out for not being so foolish as to make erroneous forecasts. The Treasury, the International Monetary Fund and the Bank of England all said that the day we left there would be Armageddon and we would have a punishment Budget. This turned out to be nonsense, and it is much wiser of the current Chancellor to avoid foolish speculation.

[Stewart Hosie]

I do not want foolish speculation; nor do I want rose-tinted spectacles or ostrich heads in sand. There are very credible warnings of what Brexit might deliver. If the Government fail to mitigate the risks, they fail the people, and that is incredibly important.

To be fair to the Chancellor, in terms of what mitigation measures he could take and has taken, last autumn he announced additional support for capital investment and research and development; and he has since reiterated some of his R and D statements and put some more flesh on the bones of investment. However, the figures from the last autumn statement show that public sector net investment falls in 2017-18, and presumably 2018-19, depending on what happens after the 8 June election. The figures announced only a few months ago for public sector gross investment show them falling again this year, compared with the forecast made last winter, and not increasing again until 2020 or beyond. We would argue that money should have been allocated, and the Finance Bill should have reflected this, to mitigate the damage that we and many others believe is likely as a result of a hard Tory Brexit.

Of course it is not all about Brexit. Nor is it about reminding the House—I will not do it today—of the failures and broken promises on debt, deficit and borrowing. It is not even about repeating the mistakes of the past on investment. We are now in such uncertain times that in order to protect jobs, to protect yield and to protect the current account, trade should be front and centre, but little was said about that today and there was nothing in the Finance Bill that would assist in that regard.

The Budget Red Book tells us already that the current account is in negative territory for the entire forecast period. The impact of net trade will be zero or a drag on GDP growth, without the impact of Brexit, for almost every year of the forecast period in the Budget. That is after a near 15% devaluation in sterling since the referendum. More should have been done, and it should have been done in this Finance Bill.

My hon. Friend the Member for East Lothian (George Kerevan) intervened earlier on how growth will be generated. It is forecast to be based on heroic levels of business investment after the uncertainty of Brexit ends, which we do not believe will be any time soon. It will be propped up by household consumption with a commensurate rise in household indebtedness; by central Government investment, which I welcome; and by fixed investment in private dwellings, but house price rises are forecast to be two or three times the rate of already rising inflation. That is not a balanced recovery, and there is nothing in the Finance Bill that would assist in balancing it.

However, the issue of trade is most worrying. The figures are clear, notwithstanding one quarter’s blip in either direction. The last full years for which we have figures saw the current account £80 billion in the red, and a deficit in the trade in goods of over £120 billion. Nothing in the Finance Bill today would assist businesses to trade in a way that would even begin to shrink or erode those deficits.

This is a thin debate today because of other announcements, so I will conclude by saying what I said at the start. We will oppose this Bill—not so much for what it contains as for what is missing. We will do so because, like the Budget that drives this Bill, it is wilfully blind to the damage that Brexit will do, and in our view it is a completely inadequate response to the challenges that the economy will face.

--- Later in debate ---

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I want to follow the hon. Member for Vale of Clwyd (Dr Davies) in addressing my remarks to part 3 of the Bill and the chargeable soft drinks levy.

I was struck by the Minister’s comments about the Government’s remarkable record on borrowing. I wonder whether she has had an opportunity to look at the work of Professor Richard Murphy of the University of London, who has done a rather extensive comparative study of Labour and Conservative Governments over a 70-year period, which shows quite clearly that Labour in office always, on average, borrows less than the Conservatives, and always pays back more while in office. That is not quite the impression that the Minister may have tried to convey.

[Mr Rees-Mogg]

That is because Labour always inherits a wonderful financial situation from the Conservatives and we always inherit a mess from it.

[Steve McCabe]

Yes, of course that is the hon. Gentleman’s belief. However, if we go back in history, I seem to recall Tory Chancellors singing in the bath as the pound collapsed and we were jettisoned from the ERM. I seem to recall crisis after crisis, including one Tory Chancellor who left a note saying, “I’m sorry I’ve made such a mess of it, old chap.” I do not think it is quite as the hon. Gentleman remembers. I would say that the Minister’s claims on borrowing are about as reliable as the Chancellor’s reputation for competence proved after the shambles of his Budget.

Like many others, I would like to know what bad news is coming down the line. Why is it, after five public refusals to call a general election—after assurance after assurance that there would be no election before 2020—that the Prime Minister now needs one? What does she know that the rest of us do not know? I suspect that what she knows is that the NHS is in chaos, our schools are in chaos, the Brexit talks are in chaos, and the economy is heading for the doldrums. That is what I suspect is happening. [Interruption.] I think the hon. Member for Peterborough (Mr Jackson) would like to rise and say that for the benefit of Hansard.

--- Later in debate ---

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

It is a great pleasure to follow the hon. Member for Birmingham, Selly Oak (Steve McCabe) and to join in this discussion on the great subject of sugar. While listening to my hon. Friend the Member for Vale of Clwyd (Dr Davies), who told us the extraordinary fact that an average five-year-old eats his own body weight in sugar during the course of a year, I considered my own children. I do not have a five-year-old—I have a six-year-old, a four-year-old and lots of others—but the six-year-old weighs 3 stone, which seems to me to be similar to the weight likely to apply to five-year-olds. That is 42 lb, or 672 oz, so if a five-year-old is eating his own body weight in sugar in a year, he is eating 1.84 oz of sugar a day, which is equivalent to 11 teaspoons of sugar. One thinks of the lines of Mary Poppins:

“Just a spoonful of sugar helps the medicine go down”,

and one wonders whether the medicine goes down even better after 11 spoonfuls of sugar.

In spite of thinking that 11 teaspoons of sugar is quite a lot, I am not in favour of sugar taxes, because I do not think it is the job of the Government to tell me how much sugar to give to my children. I think that is a matter for parents to decide for themselves, and the tax system should be there to raise the revenue the country needs to pay its way. The tax system is not there to tell us how to live our lives. There may be an exception with tobacco, but that is not really the case with alcohol, which is a matter of raising revenue. Our rates on alcohol work very well in raising revenue, as, incidentally, do those on tobacco, which is a serious generator of funds for the Treasury to pay its way.

I am sceptical about the proposed approach. I was struck by my hon. Friend’s comments that a lot of obesity is in fact genetic. If that is the case, we are penalising people who have a genetic propensity to obesity while it is fine for people like me.

[George Kerevan]

rose—

[Mr Rees-Mogg]

I give way to another hon. Gentleman for whom it is fine to eat lots of sugar.

[George Kerevan]

Indeed, I had a fine East Lothian Easter egg. Does the hon. Gentleman accept that the difficulty with the hands-off approach he suggests, leaving it entirely to the individual, is that there is a vast advertising industry that also influences consumer behaviour and that using a sin tax is a way of evening out that process?

[Mr Rees-Mogg]

There is indeed an advertising industry, but we live in a free country and people ought to be able to advertise products. We have a lot of misinformation, have we not? We now learn that fat is not as bad for people as it was said to be, and that people have put sugar into products from which they have removed the fat in order to make them taste nicer because fat-free products without sugar taste disgusting. Advice that turned out to be wrong has led to manufacturers doing things that then turn out to be unhealthy. I am suspicious of the advice that comes from Government and their ability to get it right. If they end up getting it wrong, force us to change our behaviour and tax us, we get the worst of all possible worlds.

A little bit of sugar does nobody any harm at all—only taking it to excess does so—and the only justification, which has indeed been made, is for children. However, I think that ignores the responsibility of parents, most of whom are responsible, and puts up the cost for responsible parents of giving their children what may, in many households, be an occasional treat rather than a regular habit. It is a tax that falls hardest on the poorest in society, who may occasionally be giving their children something that they like, because of the excesses of others. I do not really think that that is the job of the Government.

That leads me to the issue of hypothecated taxation. Ministers should write out 100 times a day, “Hypothecation is a bad idea.” That has been the Treasury orthodoxy for as long as there has been a Treasury. Hypothecated tax does not work because it produces the wrong amount of money for what it is seeking. We see that with the prospect of putting money from the sugar tax into schools. We now discover that not enough money is likely to come from the sugar tax to meet the obligations given to schools, and that money will therefore have to come out of general taxation.

If it were a good idea to put the money into schools in the first place, it ought to have come out of general taxation in the normal way. If it was not a good idea, but just a clever way of spending the money, taxpayers’ money should not have been used. If we get into the position that something is now being done that did not need to be done because it was promised as money from a tax that has not arisen, that is not a good way of carrying out Government policy. All hypothecation of taxation should be struck off: it simply leads to the wrong amounts.

That leads me to the broader point I want to make about this Finance Bill and the Budget that preceded it. It is very good news that an election has been called, because the Budget has become so hemmed in by the number of promises on taxation and revenue expenditure that have quite rightly been kept. Governments ought to keep their promises, and this Government have been absolutely rigorous in doing so, even ones that I do not like. For instance, I am not in favour of the 0.7% going on overseas aid, which I think has been a wasteful and extravagant promise when money is needed elsewhere. However, the justification was that it was in our manifesto, and in manifestos parties make a pact with the electorate that they ought to continue with except under the most extraordinary circumstances that have not arisen.

Such an approach has led to very many areas of expenditure being fixed, while taxation has been limited at the same time. The deficit has been brought down to a third of what it was when this Government came in—a very substantial achievement, of which this Government and their predecessor ought to be proud—but it has become very hard to take that any further because of the encapsulating commitments that are limiting the Chancellor’s freedom of action. That is why the Finance Bill, for all that it has 700 pages, will not lead to a great deal of fundamental reform. It is tweaking things at the edges—looking at little bits of money here and little bits there—rather than taking a fundamental or basic approach to our tax system.

Our tax system has become overly complex and, from the pressure of having to find little bits of money, it is becoming even more complex, which makes it difficult for taxpayers to pay the right amount of tax. We can see that more anti-avoidance legislation has come in to stop avoidance, because we have overcomplicated the tax system in the first place and a corrective measure has therefore had to be taken to try to prevent revenue from seeping away. A good example is the discussions we are having about perceived employment as opposed to self-employment. The Government were extremely proud of their achievement in making self-employment easier, but a constituent who came to see me explained that the £3,000 national insurance contributions exemption for small businesses had led to all the people working for him having to become individual companies, whereby it cost £3,000 a year less to pay them than if they were directly employed or were employed through one subsidiary company.

Very good ideas come into individual Budgets—particular tax breaks to encourage particular forms of behaviour to lead to certain outcomes that the Government wish to see—but they then have to be corrected by anti-avoidance measures because they get taken and used in a way that was not intended under the initial legislation. That is why the election will be a great opportunity to stand on a platform of tax simplification, and I hope we will achieve the sort of majority that will help to push that through. To achieve tax simplification, it will be necessary to ensure that avoidance is removed at source, rather than by anti-avoidance measures. That means taking away some of the existing exemptions and incentives that encourage people to set up more complex systems than they need to minimise the amount of tax they pay.

I am a defender of people taking such an approach. If Parliament legislates for tax to be collected in a certain way, with certain exemptions and thresholds, the individual taxpayer is completely and legitimately entitled to use them to their fullest extent. The approach is the fault not of the taxpayer, but of Parliament for putting exemptions into or leaving them in legislation. We should always be very careful to distinguish avoidance from evasion. Evasion is straightforwardly criminal—not paying the amount of tax that is, by law, due. Avoidance is looking at the tax system and saying, “I do not owe that tax, and I do not have to pay it because Parliament has not legislated for me to pay it.” As individual taxpayers, we are all entitled, as are all our constituents, to pay the tax Parliament requires, not a penny less or a penny more. If we had a system that was simpler overall, that would be hugely beneficial.

There is a lot about anti-avoidance in the Finance Bill, including the new rules for non-doms, about which I would be very careful. We live in a world where some very rich people want to come to the United Kingdom, and when they are here they employ people, spend money and pay taxes. We have a system that has barely changed since the days of Pitt the Younger—I cannot say I remember them, but I wish I did—and that broadly unchanged system was actually very beneficial for our economy because it brought into this country wealthy individuals who then provided economic activity. It is absolutely right to ensure that people who are obviously domiciled here in all normal senses of the word should be seen as being domiciled here, but we do not want such a difficult regime that people who might come here and contribute to our economy feel that they cannot do so.

[Jane Ellison]

I want to give my hon. Friend a degree of reassurance. A new measure in the regime advanced as part of the non-doms reforms will make it easier for anyone to invest in the real economy—business investment —which I hope he will welcome. I entirely take his point that we want to make sure that people can come to this country from anywhere and invest in the real economy.

[Mr Rees-Mogg]

Absolutely. That is an important part of the reforms, but there has perhaps been a tone—more from the previous Chancellor than from the current Chancellor—that the non-doms were using the system. A lot of them could actually go anywhere in the world, but they come here because of the great virtues of investing in the UK: we have clear rights of property; we have an effective rule of law; and we have had simple regulations that have allowed them to be here. However, we have now increased the charges on them and increased their eligibility for certain taxes, and I think we should be very cautious about that because one never knows, with these sorts of things, where the tipping point will come. It may be that the annual charges applied to non-doms seem quite small compared with their wealth, but when we consider that they have families—the charges have to be multiplied for the wife, the number of children and grandparents, or whoever—we may find that the charges become quite high. The people bringing such wealth into the country have enormous mobility: they can go elsewhere. I know that standing up for non-doms six weeks before an election is not necessarily going to be a great rallying call for North East Somerset, but ultimately I think good economics leads to good politics rather than the other way around. A lot of what was done with regard to non-doms was much more about politics and perception than the contribution non-doms make to this country. In the context of Brexit, we want to show that we are genuinely open to the rest of the world. We want people to come here to invest and to spend their money, because that is so important to our long-term economic prosperity.

There is a broad challenge with this Finance Bill, as there will be with its successor which will no doubt come. I have a feeling that this will be one of those happy years where we get more than one Finance Bill. Finance Bill debates are particularly enjoyable parliamentary occasions because they have no time limit. The hon. Member for Aberdeen North (Kirsty Blackman) said that we might go right through the night and not be able to have our debate tomorrow. I look forward to that happening at some point in the future, but I have a feeling it is not going to happen today. Finance Bill debates are the best debates because of their fluidity and flexibility.

When we get to the second Finance Bill, a fundamental choice will still have to be made. This relates to the answer we had from the hon. Member for Bootle (Peter Dowd) on the Opposition Front Bench. There is an absolutely key point at the heart of this Finance Bill, as there will be at the heart of any new Finance Bill. When I intervened on him and said that the tax rate as a percentage of GDP was at its highest since the days of Harold Wilson, his answer to me was that under Labour it would be even higher.

[Peter Dowd]

May we just have clarity on this? I did not say that. The hon. Gentleman brought it to my attention that it was high under Harold Wilson and I made the point that yes it was.

[Mr Rees-Mogg]

I look forward to reading the characteristically accurate transcript Hansard will have for us tomorrow. The great thing about Hansard is that it allows us to correct our grammar—indeed, it often corrects it for us—but it does not allow us to correct the sense, so we will see what was said precisely.

That is the choice. If the hon. Gentleman now wishes to move away from that choice I think that is telling: with an election approaching Labour Members are nervous about it, but the Labour party—the socialists—remains the party of high taxation. The Conservative Government have had to increase taxation because of the enormous deficit left by the spendthrifts of the last Labour Government who almost bankrupted the country. We would probably have gone to the International Monetary Fund at the time if it had had any money left, but it was bailing out Greece and everywhere else so it did not have much for us by the time the Conservatives came in. Through hard work, control of expenditure and, I am sorry to say, some tax rises, the deficit has been brought under control. That is the fundamental achievement of this Government.

As we go into an election, it is the really big picture that matters. It will give such a clear and forthright choice to the British people. Do they want to continue to be governed by people who recognise that it is their money—the money of the individual taxpayer—of which the Government must take as little as possible to finance that which they are required to do? Or are we going to go back to the days of socialist tax and spend, with a huge increase in the deficit to finance spending programmes and tax increases that are even higher than those in the days of Harold Wilson? It was, of course, Denis Healey who said that he would squeeze the rich until the pips squeaked. That was his approach to taxation. Do we, by dutiful, sensible and prudent management of the economy, get things back under control where, with proper reforms, we can lower the tax burden?

[Dr Paul Monaghan (Caithness, Sutherland and Easter Ross) (SNP)]

In that context, how does the hon. Gentleman explain a national debt of close to £2 trillion?

--- Later in debate ---

[Mr Rees-Mogg]

I would explain the national debt of approaching £2 trillion because of the place where we started. It is very interesting that when the previous Chancellor, my right hon. Friend the Member for Tatton (Mr Osborne), started reducing the deficit he was told by Opposition Members, “Too far, too fast!” They chanted it like a mantra as he stood at the Dispatch Box nobly defending his policies. In fact, he went at the right pace to ensure that the Budget deficit came under control, while at the same time the economy was not unduly affected by the reductions in expenditure and increases in taxes that had to be made. It was a first-class balancing act by my right hon. Friend and that is why the deficit is at £2 trillion.

[Jonathan Reynolds]

I am loth to give the hon. Gentleman further exposure, but if that strategy was as successful as he believes, why did it not meet its own objectives and we are still discussing the deficit and the very large amount of national debt today?

[Mr Rees-Mogg]

It has succeeded. We have the fastest growing economy in the G7. For all the stuff we heard a year ago, the economy has carried on motoring ahead. The economy has done pretty well every year now since 2010. That is the success of the economic strategy that the Government followed. The deficit is about a third of what it was in nominal terms, but as a percentage of GDP it is now within the normal bounds of deficits.

[Jonathan Reynolds]

I may be falling into my own trap, but I remember listening to the hon. Gentleman’s speeches in the previous Parliament when he said that if the deficit was at this level, going on from 2010, that would be a disaster. Now he is saying it is a huge achievement. Can he not understand why the lack of humility makes one cynical about the content of his speeches?

[Mr Rees-Mogg]

I do apologise for a lack of humility. I shall try to do better in that regard. I am, however, flattered that the hon. Gentleman remembers my speeches from years ago. I admire his attention to the debates in this House. The point I was making then was that a deficit of £150 billion a year, or 10% or 11% of GDP, was completely unsustainable. It is now down to about £50 billion and about 3.5% or 4% of GDP. It is at a manageable level. That is the achievement of the previous Chancellor and the current Chancellor.

[Rebecca Pow]

Is not one of the fundamental reasons why the economy is in safe hands with those of us on the Conservative Benches that Conservatives have an understanding of the importance of business? My hon. Friend is still in business. Unless one understands how business works and what makes it tick, we cannot raise the revenues necessary to pay for what we need in this country.

[Mr Rees-Mogg]

My hon. Friend comes from Somerset and her parents are constituents of mine. For both those reasons, she is invariably right and on this occasion particularly so. There is no money tree. It has to come from the success of businesses. It is a matter of balance. The hon. Member for Stalybridge and Hyde (Jonathan Reynolds) wishes to get away from that balance, but it had to be done at the right rate to ensure the least economic problems as taxes were raised and expenditure cut. That has been achieved.

[Peter Dowd]

If the long-term economic plan was such a wonderful strategy, why did the former Chancellor and the current Chancellor keep missing their targets?

[Mr Rees-Mogg]

Targets are based on forecasts and forecasts have variables within them that even the wonderful, or not always wonderful, boffins cannot get absolutely right. What matters is not the precision of the forecast, but the broad trend of the economy. We have had consistent economic growth. We have the highest employment on record. This is an enormous achievement. As I said a moment ago, we have the fastest growing G7 economy.

[George Kerevan]

I cannot let the hon. Gentleman continue with his analysis of the previous Chancellor’s single plan for the economy. In the first two years of the previous Chancellor’s reign, from 2010 to 2012, there was a very rapid move to austerity—tax rises and cuts in spending. Growth slowed precipitously and by 2012 the Chancellor reversed his policy. In fact, he got the Treasury and the Bank of England to print money and pump it into the housing market, so there was a change in policy. The original austerity did not work.

[Mr Rees-Mogg]

I do not agree with that analysis. My analysis is that the austerity allowed for a looser monetary policy which had beneficial consequences, that between 2010 and 2012 it was essential to operate a very tight fiscal policy to permit exactly the type of monetary policy to which the hon. Gentleman has referred, and that it would not have been possible to maintain the confidence of the markets if we had operated a loose fiscal policy and a loose monetary policy during those two years. The lack of economic growth during that period ties in with the considerable problems—the severe crisis—experienced by the eurozone and other economies.

On this occasion, I do not agree with the hon. Gentleman’s analysis of what went wrong, although I often do agree with him. I see a continuity in the policy of my right hon. Friend the Member for Tatton. However, although no time limit has been imposed this evening, I do not feel that I should go on forever. Many Members wish to speak, and others want to have their dinner. Let me end by reiterating that we face a great choice: between the higher taxes proposed by the hon. Member for Bootle and the opportunity for lower taxes, sound economic growth and prosperity. I know you are independent, Madam Deputy Speaker, but vote Conservative.

--- Later in debate ---

[George Kerevan]

I am happy to agree with that point. The weakness of the euro is that across Europe it has locked the German supply chain into an artificially low exchange rate. On the back of that, Germany has generated a massive trade surplus, which it is not redistributing. That is undermining the whole European economy. I perfectly accept that. I was not arguing that the German economy is perfect; rather, I am suggesting that it is too simplistic to link the headline level of corporation tax with the performance of the economy, because we can find all sorts of examples that go the other way.

My real criticism, which I still direct to the Minister, is that the growth that the Conservative Government have trumpeted as their success is based on the shifting sands of consumer debt, which has now reached a level that cannot be sustained, so we need something else. We definitely do need to increase the level of industrial investment, and that requires a different set of fiscal tools in order to encourage consumer saving and recycle that consumer saving into industrial investment. That is the whole weakness that underlies the Finance Bill: it is a set of small measures based on the assumption that the economy will go on growing because consumers will go on spending. If they do not, the whole rationale of the Finance Bill falls apart.

I will now briefly move on to the second pillar, and the second strategic weakness, of the Finance Bill. In order to maintain the level of consumer spending, this Government have had to pass a series of pieces of legislation to bind their own hands when it came to raising taxes on consumers. If we do that, we then have to find money from somewhere else. Therefore, although this Bill contains a series of small tax rises here and there, in the aggregate what is happening is that this Government are being forced to start distorting the entire tax system because they have no other way to go but to invent new stealth taxes to maintain the level of income to Government.

The Clerks to the Treasury Committee came up with a rather interesting example on probate—the tax, if tax it be, on the probating of wills. The proposal for the levy on probating added to the cut in inheritance tax results in an anomaly. Where a father and mother leave a house to their children that is worth, let us say, £1 million and one penny, the inheritance tax is tiny—it works out at 40p—but the probate that has to be paid is £8,000. So in effect, cutting inheritance tax and replacing it with a probate levy gets us back to where we started. We can see that once we start down that road, we will go on increasing the levy on probate simply as a revenue earner.

That is not just happening with the tax on probate; it is happening in a whole series of small tax changes. By legislating to put a lock on income tax and other taxes, we end up having to raise revenue in a series of anomalous and distorting ways, and that makes the Finance Bill even more complicated.

[Mr Rees-Mogg]

Does the hon. Gentleman share my concern that the difficulty with doing this through charges is that they come through in a statutory instrument, whereas new taxes go through a much fuller parliamentary procedure? We should all be concerned about taxes that do not see the full rigour of parliamentary scrutiny.

[George Kerevan]

I could not agree more, and I look forward to the hon. Gentleman taking that up in the 1922 Committee—as I am sure he has.

If we run through a whole series of the provisions in the Bill for raising taxation, we see this creeping distortion of the tax system, such as the tax-free allowance on dividend incomes being cut from £5,000 to £2,000 to raise £800 million, which is a substantial, chunky sum. We can see where the tax-free allowance on dividend income is going to go. As for VAT on mobile phones used outside the EU, I can pretty well guarantee that if this Government are returned, the moment we are out of the EU that roaming tax will go on to our phone bill when we are taking our holiday in the 27 member states.

The insurance premium tax is one of the worst means that this Government have tried simply to increase revenue. They keep raising it year by year, so the increase of 20% proposed in the November autumn statement is simply a revenue-raising tax—there is no rationale other than simply to raise money. In terms of the insurance premium tax, there is a whole series of insurance forms not yet covered by the tax, so one can quickly see a future Chancellor saying, “Well, let’s put the insurance premium tax on reinsurance, or on buying shipping and aircraft. Why shouldn’t an airline pay insurance premium tax on buying an aircraft?” Rather than using the core taxes like income tax, we will end up with a series of distorting taxes, including the rise in spirit duty and the tax on whisky in the March Budget. I presume the Chancellor said to himself, “Well, with the significant fall in the value of the pound, there will be a gain in terms of export prices, so we can afford to claw some of that back as a tax,” but it is not strategic to the needs of the industry; it is simply a revenue-raising power.

What is wrong with the Bill as it stands? It misunderstands the nature of where the economy is and makes no allowance for the fact that consumer spending is about to decelerate, and it introduces a whole raft of new taxes, or increases in stealth taxes, which are fundamentally a change in direction and a distortion of economic processes.

I hope that when we come back after 8 June for a second bite of the cherry with a second Finance Bill, the Government might, should this Government be returned, be willing to look at some of these matters.

Class 4 National Insurance Contributions

Jacob Rees-Mogg Excerpts

Wednesday 15th March 2017 Commons Chamber

[Mr Hammond]

I am grateful to the hon. Lady for her comments. It is important to separate the two issues involved: the substantive underlying issue about the way in which national insurance contributions and entitlement to contributory benefit work, and the equally important but separate issue of the way in which manifesto commitments work. The review that we will conduct will look specifically at the differences between the self-employed and the employed, and the access of the self-employed to contributory benefits, so her suggestion is beyond the scope of that particular piece of work. However, as she especially will be aware, all these things are routinely reviewed by the Treasury in the run-up to fiscal events.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

May I thank my right hon. Friend for his wisdom in being open to changing his mind, which shows the serious-mindedness of Her Majesty’s Government; and for his propriety in telling this House first and doing it himself, not sending someone else on his behalf? May I also commend him for his singular achievement of converting a number of desiccated socialists to support for lower taxation?

[Mr Hammond]

I am grateful to my hon. Friend, but what I see on the Opposition Benches these days is very often not so much desiccated socialists as dedicated opportunists.

Value Added Taxation

Jacob Rees-Mogg Excerpts

Tuesday 21st February 2017 General Committees

[The Chair]

Before we begin, it may be helpful to remind Members of the procedure in European Committees. The whole proceeding must conclude no later than two and a half hours after we start. First, I shall call a member of the European Scrutiny Committee to make a brief statement about why the Committee decided to refer these documents for debate. Secondly, I shall call the Minister to make a statement, followed by questions for up to an hour, though I have some discretion to extend that if there is an appetite to do so. Thirdly, the Committee will debate the Government motion, and I will put the question on the motion when debate or the time available is exhausted, whichever comes first.

I understand that the hon. Member for North East Somerset would like to make a brief explanatory statement about the decision to bring the documents to the Committee.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

It is a great pleasure to serve under your chairmanship, Mr Davies. It may be helpful to the Committee if I take a few minutes to explain the background to this document and why, nearly a year ago, the European Scrutiny Committee recommended it for debate.

The EU has a common system of value added taxation, governed principally by the 2006 VAT directive. The VAT directive, in its present and earlier versions, is meant to be a temporary arrangement, pending member states’ agreement on a permanent and definitive VAT system. The Commission has accepted that the existing system contributes to VAT fraud in cross-border trading.

Following extensive consultations begun in late 2010, the Commission published in April 2016—it works very swiftly—an action plan to establish a

“VAT area that is fit for purpose in the 21st century.”

It sets the direction of travel the Commission envisages for VAT and presents a set of ideas for wider EU debate under four headings: “Recent and ongoing policy initiatives”, “Urgent measures to tackle the VAT gap”—that is the difference between expected revenue and revenue actually collected, a significant part of which results from fraud—“Medium term measure to tackle the VAT gap” and “Towards a modernised rates policy”.

The European Scrutiny Committee has considered the document twice. In April 2016, it said that the document might prove to be the catalyst for the EU finally achieving a definitive VAT system. Accordingly, we recommended that it be debated in this Committee and that Members might wish to explore whether such a VAT system is indeed now in prospect in the foreseeable future; what difficulties for other member states the Government see in agreement on a definitive system; the extent to which the existing regime has contributed to cross-border fraud and the extent to which the proposal might remedy that; and what difficulties there may be for the UK in reaching such an agreement.

When we reconsidered the matter in November 2016, we deplored the Government’s inexcusable failure to schedule this debate in a timely manner. However, we also added further matters that Members might wish to explore in this debate, which include: details of the Council conclusions on the action plan and their implications for the UK; what the prospects are now for implementation of the Commission’s undertaking in relation to zero rating of sanitary products; and to what extent the Government expect there to be continued UK and EU harmonisation of VAT rules post-Brexit. I look forward to hearing contributions on those issues in the debate and to the Minister’s response.

[The Chair]

I call the Minister to make an opening statement. I remind colleagues that interventions are not allowed during a statement.

--- Later in debate ---

[Mr Rees-Mogg]

May I take it from the answer given to the hon. Member for Stretford and Urmston that there is at least the possibility that we will get back duty free when we have left the European Union? It would be a wonderful gift to the British people and would increase their joy when they travel.

[Jane Ellison]

It seems unusual for a Government Minister to draw attention to the fact that she did not answer a question, but since I did not answer that question, I made no such speculation or comment. As I have said, all these matters are for the negotiations ahead and a range of different outcomes are possible.

[Mr Rees-Mogg]

I merely asked if it were possible, and the answer, being answerless, indicates that it must at least be possible.

[Jane Ellison]

I will reflect and try to understand what was just said.

Oral Answers to Questions

Jacob Rees-Mogg Excerpts

Tuesday 29th November 2016 Commons Chamber

[Simon Kirby]

We want to see the economy benefit every part of the UK. It is interesting to note that there are almost 1 million new businesses in our country since 2010, and I note the Prime Minister’s announcement at the CBI conference about the new patient capital review, which will be interesting, I am sure.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

Does my hon. Friend agree that Brexit is essentially a red herring for SMEs in this context, that what matters is that the Government create the right conditions for businesses to do business and that the banks are in a sufficiently capitalised position to lend money?

[Simon Kirby]

I agree absolutely with my hon. Friend. It is about creating an economic environment in which businesses can grow and thrive. The British economy is strong and will continue to be strong as we prepare for our departure from the EU.

Autumn Statement

Jacob Rees-Mogg Excerpts

Wednesday 23rd November 2016 Commons Chamber

[Mr Hammond]

I did not, because to do so would be to give away our negotiating cards in what will be a very complex negotiation. With respect to the hon. Lady, even if I or the Prime Minister set out precisely our objectives, our tactics and our strategy for the negotiations, that will not remove the uncertainty because the outcome will depend on the negotiation itself. As the Prime Minister has said, a negotiation is a process of give and take between the parties to get to a mutually acceptable outcome, and that is what will be embarked upon.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

May I congratulate the Chancellor on his excellent statement? I draw his attention to page 96 of the OBR report, which sets out the assumptions in relation to Brexit. It seems to me that there are two problems with those assumptions. First, they assume that we will apply tariffs on the same basis as we do inside the European Union, which the Chancellor will know he will be able to remove. Secondly, they are particularly gloomy on the prospects for financial services. Might we be able to take a slightly more optimistic tone and, with the freedoms that we have outside the customs union and the single market, be able to solve the productivity problem?

[Mr Hammond]

As my hon. Friend will know, the OBR is mandated to report by Parliament and I am mandated to respond on behalf of the Government to the OBR’s findings. It is an independent body. It does receive representations, and I suggest that my hon. Friend makes his concerns known to the OBR.

Outsourcing and Tax Credits

Jacob Rees-Mogg Excerpts

Friday 4th November 2016 Commons Chamber

[Simon Kirby]

Compensation is available where error has occurred. That has been made very clear. The hon. Gentleman asks whether I am prepared to apologise; I think this is now the third time I have done so. If people have not received the high-level customer service to which they are entitled and if mistakes have been made, I do apologise. I also say, however, that this is a necessary part of government and there are lessons to be learned. We will all make better decisions as we go forward. We will have to wait for the independent NAO report. That has all been said before.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

May I commend my hon. Friend for his balanced and reasoned responses today? The Opposition seem to think that everything done by the state works perfectly and that whenever it is outsourced it may go wrong. I think they forget that, over the years, HMRC has had quite a few internal problems of its own—failing to answer the telephone and the chaotic initial introduction of tax credits, for example. It is absolutely right to look to securing savings through outsourcing to the private sector throughout Government Departments where it is the right thing to do.

[Simon Kirby]

As ever, my hon. Friend makes a valuable point and worthwhile contribution. He is right that there have been mistakes and lessons to be learned over a large number of years in a number of different Departments. What is important is that we get the balance right, pay the money that people—often the most vulnerable in society—are owed, while at the same time protecting the taxpayer from unnecessary overpayment, error and fraud.

EU Draft Budget 2017

Jacob Rees-Mogg Excerpts

Monday 31st October 2016 General Committees

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

It is a pleasure to serve under your chairmanship for the first time in a European Committee, Ms Buck. I will take a few minutes to explain the background to the documents and the reason why the European Scrutiny Committee recommended them for debate.

The draft budget sets out the Commission’s proposals for EU expenditure in 2017. It is the first stage in the process of establishing the EU’s budget for the following year and provides the basis for negotiations between the two arms of budgetary authority: the Council and the European Parliament. The Economic and Financial Affairs Council agreed its first reading position on the draft budget on 12 September; the European Parliament reached its first reading position on 25/26 October. A conciliation committee is to be convened to meet with the aim of reaching agreement on the 2017 budget by 17 November. This agreement will be subject to separate approval by both the Council and the European Parliament, after which the budget for 2017 will be deemed to have been adopted.

In addition to the draft budget, this year there are three other documents relevant to this debate. These concern the EU solidarity fund, which releases emergency financial aid following a major disaster in a member state or candidate country; the flexibility instrument, which provides funding in a given financial year for clearly identified expenses that could not be covered by one or more budget headings without exceeding their expenditure ceilings; and the contingency margin, a mechanism to react to unforeseen circumstances as a last resort instrument, which allows for a maximum 0.03% of EU gross national income to be redeployed between budget headings. The three draft decisions would mobilise the EU solidarity fund, the flexibility instrument and the contingency margin for sums included in the draft budget.

We suggest that among the matters that Members might explore are: how the UK’s proposed exit from the EU affects its interests in relation to EU expenditure and revenues in 2017; the degree of support the Government are receiving from other member states for a disciplined approach to next year’s EU budget; whether the Government are satisfied with the proposed margins below multiannual financial framework ceilings; whether there are any particular programme expenditure proposals that cause the Government concern; the significance for budgetary discipline of the proposed mobilisation of the EU solidarity fund, the flexibility instrument and the contingency margin; and to what extent the use of the flexibility instrument and the contingency margin to help address the challenges of migration, refugee and security crises might involve the UK in justice and home affairs expenditure—for example, in relation to Frontex, for which we should not be liable.

It is the custom of the European Scrutiny Committee to recommend the draft budget for debate before the Council concludes its first reading. Regrettably, this debate is taking place long after the Council’s first reading was agreed.

Finally, in a press release of 26 October, the Council set out the issues where the Council and Parliament disagreed: the Parliament wants the level of commitments in 2017 to be way above the multiannual financial framework expenditure ceilings; the Parliament wants the level of payments for 2017 to be above the estimated needs; the Parliament wishes to reopen the agreement on financing the European fund for strategic investments, which the Council considers would reduce the EU’s financial leeway for meeting unexpected needs for research and other future-orientated expenditure; the Parliament wishes for its own staff reductions to be lower than the 5% reduction by 2017 already agreed; and there is disagreement on the scope of the conciliation talks themselves, which should be limited to the 2017 budget.

[The Chair]

I call the Minister to make an opening statement. I remind the Committee that interventions are not allowed during the statement.

--- Later in debate ---

[Mr Gauke]

I fear that the hon. Gentleman wants to take me down a path that is a little way away from the motion in front of us. We are in new circumstances. The determination of the Government is to ensure that we deliver the best possible outcome for the British people in the negotiations with the European Union and in our relationship with the EU and other parts of the world, post-Brexit. That is our focus.

[Mr Rees-Mogg]

I was going to sit quietly for once, but the questioning has gone along a certain line. May I remind the Chief Secretary to the Treasury that the Chancellor, in front of the Treasury Committee, said that the reports before 23 June no longer applied, because their assumptions were out of date already? We therefore do not have to work on the maxim of gloom and nonsense that came from the Treasury at that point, and can look to the broad sunlit uplands. One thing we can be certain of is that once we leave, we will no longer have to pay into the budget, will not be part of the multiannual financial framework, and will not have to have these debates any more.

House of Lords Reform and Size of the House of Commons

Jacob Rees-Mogg Excerpts

Wednesday 19th October 2016 Commons Chamber

[Pete Wishart]

Absolutely, and we have an increasing population. I still do not know the Government’s case for the reduction in the number of MPs—well, I think I know why they decided to reduce the number of MPs. I think it was an attempt to stuff the Labour party, but the Labour party does not need any favours, help or assistance in that regard. It seems to be doing a pretty good job of that on its own.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

The hon. Gentleman is being very unfair on that point. I think that the decision was made to reduce the number of MPs because in 2010, when the policy came forward, there was a great deal of public feeling that MPs had become too expensive. It was a response to the national mood at the time.

[Pete Wishart]

Of course there is a national mood in favour of such a cut. If we were to ask any member of the public whether they would like to see the size of Parliament and Government reduced—I am sure I will find this when I go back to my constituency at the weekend—they would say, “Yes, of course.” My point, and I believe that the hon. Gentleman might respect this, is that we seem to be reducing the number of elected Members but letting the other place grow exponentially. That is the key point. I am beginning to get the sense that the public are starting to look at what we have got down the corridor and deciding that we have to do this. Enough is enough.

--- Later in debate ---

[Michael Ellis]

The appointment of Ministers is ultimately a matter for the Prime Minister and I am certainly not going to comment on that. Ministerial numbers must reflect what the Prime Minister of the day feels she or he needs for the Government to work effectively.

[Mr Rees-Mogg]

On the number of Ministers, the maximum is set by legislation. It is not purely in the gift of the Prime Minister.

[Michael Ellis]

I recognise that—the Ministerial and Other Salaries Act 1975, I think—but that relates to the maximum, not the minimum. However, the appointment of Ministers is a matter for the Prime Minister.

There are many different views on what form the House of Lords should take and we have heard some of them this afternoon. Without consensus, as I have said, there is no practical possibility of taking such reform forward, and this was clear from the attempted passage of the House of Lords Reform Bill in 2012. It was withdrawn not for lack of commitment from the Government, but because there was no overall agreement about what that reform should look like. When there are so many pressing constitutional reforms, not least devolving more powers to Scotland and Wales and delivering all that is necessary for the UK’s exit from the European Union, it is on those subjects that we should focus our attention in this Parliament. It would not be right to distract from or derail important reforms elsewhere by making House of Lords reform a priority. That is why we do not support the motion.

--- Later in debate ---

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

Thank you, Mr Deputy Speaker. It is an enormous pleasure to follow the hon. Member for West Dunbartonshire (Martin Docherty-Hughes), who expressed himself with such vim and vigour.

The motion tabled by the hon. Member for Perth and North Perthshire (Pete Wishart) is an important motion and a proper subject for us to debate. It is something that we have been debating for hundreds of years. The earliest debate I can find for deciding to limit the House of Lords is in 1719, and we will all remember that the Parliament Act 1911 states that it is a temporary measure until a more democratic means of choosing an upper House can be found.

These problems are not new, and there are serious problems with the House of Lords. I do not think anyone would try to pretend otherwise. It is not by any means perfect and its imperfection is partly in its size, partly in its unaccountability and partly, as the hon. Member for Perth and North Perthshire so rightly said, in its Liberal Democrats. I do not say that as a cheap shot against the Liberal Democrats, though those are perfectly fun. I say it because the very large number of Lib Dems who are there, who are abusing their position in the Lords to thwart the will of the elected Government, have made a real problem for the Government and for the democratic legitimacy of the House of Lords. There are unquestionably problems, but what is the solution?

What we have considered in previous Parliaments is a democratically elected upper House. That sounds very sensible in theory, but there is a fundamental problem for us in this House that if we have a democratically elected House of Lords, its powers will be equal to ours. Even if the letter of the law allows us to overrule the Lords, that will soon cease to be a political reality. A democratically elected House of Lords challenges the Commons, and if a democratically elected House of Lords is on a different electoral system, it might even claim a higher validity than we have and therefore the right to overrule us. Then we would probably have a gridlocked system like that in the United States, with the two Houses being unable to co-operate and an inability to govern and to get legislation through.

[Mr Jackson]

Does my hon. Friend agree that the Liberal Democrats were complicit in the failure of their once-in-a-generation opportunity for House of Lords reform by bringing forward a ludicrous proposal for a 15-year non-renewable mandate, which would have challenged the authority and mandate of this House?

[Mr Rees-Mogg]

That was part of the problem. The other problem was that they were quite unwilling to set out what they would do between the conventions that both Houses have. If those conventions are legislated for, who is to determine whether the conventions are followed? Would that be the courts, and then would the courts interfere in Parliament? Or would the conventions be decided by consensus between the two Houses? In that case we would be back to the gridlock that I was warning about.

That is why the problem has not been solved. There is not a good democratic solution unless we are willing to downgrade the House of Commons, which I personally would be very much against doing. With our constituency-based relationship we have a wonderful system of democracy through this House. The hon. Member for Wansbeck (Ian Lavery) made a very powerful speech, but I disagree with him in thinking that the reform to constituencies is gerrymandering. It really is not. It is getting the numbers to be equal, which is a proper thing to do.

It would be wrong to fight the next general election on the electoral roll from 2000. That needs to be updated, and although the later the date the better—so I am not unsympathetic to the call to move it on two years later— that is not practical. It cannot be done on the absolutely last electoral roll, but by doing it every five years, we ensure that there is continuity in updating and a regular fairness in the size of the constituencies. I disagree with the hon. Gentleman on that point and think it is important, through that constituency link, to defend the primacy of this House, which is the democratic House.

That is why I am less worried than the hon. Member for Perth and North Perthshire about the failures of the House of Lords. Ultimately we are in charge. We can use the 1911 Parliament Act. We may decide to use that to do something on statutory instruments if the House of Lords challenges the Government on their democratically mandated implementation of policy. The democratic right overrides the undemocratic element. That gives me certainty and security that the nation is not becoming the People’s Republic of China, Lesotho or whatever other random examples have been brought up, because they do not have that democratic underpinning. Therefore, the size of the House of Lords is just a problem that we will have to live with.

In 1719, the main reason for opposing a limit on the numbers in the House of Lords was that a limit would make the Members who were already there more powerful because their power could not be diluted by adding more peers. That remains true today, because the one great authority this Chamber still retains over the House of Lords, via the Prime Minister, is not so much the 1911 Act, but the threat of creating many more peers, which was, of course, threatened in 1832 and in 1911—on both occasions to ensure the democratic will could prevail. We must maintain the ability to do that, even while recognising that the House of Lords is too big and has problems. However, this needs to be an evolutionary reform, which I would happily go into, Mr Deputy Speaker, but on another occasion.

Small Charitable Donations and Childcare Payments Bill

Jacob Rees-Mogg Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 11th October 2016 Commons Chamber

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

Will my hon. Friend give way?

[Rebecca Pow]

Of course I will give way to another hon. Friend from the west country.

[Mr Rees-Mogg]

While my hon. Friend is on about sport, may the Bill not help Somerset win the county championship for the first time ever, after coming second this year? Would that not be a real triumph after Yorkshire and Middlesex stitched it up?

[Rebecca Pow]

I know that my hon. Friend was down at the county ground not very long ago, because I had so many comments about the fact that he had been there. I am sorry that I missed him, because I was down there every day of that championship. I am not sure that Somerset is allowed to collect on the streets with buckets, but smaller sporting charities would be very much helped by the new enabling measures in the Bill.