Tax Avoidance

Jonathan Edwards Excerpts

Wednesday 11th February 2015 Commons Chamber

[Nia Griffith (Llanelli) (Lab)]

Nobody likes paying tax, but we all want our services, such as the NHS, to be there when we need them. Above all, we want fairness. We have an expectation that we should all pay our taxes, wherever we are. We want the same standards to be applied to all. It is damaging for honest businesses to face competition from corporations that are not paying the tax that they owe. Horrifying revelations about HSBC have been made this week. Instead of its clients being encouraged to pay the tax that they owed, they were being issued with credit cards to enable them to spend the money without it being identified. That is utterly shameful behaviour on the part of the individuals and the banks, and how many more are there like them?

Cheating the Inland Revenue is never acceptable, but it is particularly galling when councillors up and down the country are agonising over how to manage their severely reduced budgets, and having to decide whether to cut help for special needs children or help for the elderly, for example. My own indignation at the offshoring of the public money being used to pay private finance initiative debts led me to introduce a private Member’s Bill on the issue. In it, I tried to clamp down on that activity so that our money would not go offshore through those contracts. Furthermore, as my hon. Friend the Member for Glasgow Central (Anas Sarwar) said, the amount of money that is lost to developing countries through companies offshoring accounts and therefore not paying their tax in those countries is three times the global aid budget.

I am very concerned by the Government’s record to date. The amount of tax that is owed and has not been collected has risen from £31 billion to £34 billion in the past three years. The Government were told about HSBC back in 2010, but nearly five years later only one of the 1,100 people involved in the tax irregularities has been prosecuted. The Prime Minister promised that he would lead on transparency in tax havens, but to date not one overseas territory or Crown dependency has produced a publicly accessible central register. The Government’s Swiss tax deal has raised less than a third of what the Chancellor said it would raise. In the 2012 autumn statement, he said that it would raise £3.12 billion, but the latest HMRC figures show that it has raised only £873 million.

On the record, Labour has been praised in the Financial Times for our measures against tax avoidance. During the 13 years of the Labour Government, we produced 10 times the income that the four years of this coalition Government have produced. We have a good record on this, but we can never be complacent. That is why we are making it clear that we would do a lot more to tackle tax avoidance. We would make tax avoidance and tax evasion a priority.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The Opposition motion does not mention the need adequately to resource HMRC. Could that be because, as George Monbiot said in 2010, HMRC was “hacked to bits” under the previous UK Labour Government?

[Nia Griffith]

We believe it is important to resource HMRC properly, and we would like to see it much better resourced than it is at present. We have seen cuts recently that appear to involve getting rid of very skilled people and putting much less skilled people in their place. We would certainly want to reverse that situation.

The Minister mentioned people being caught up in the general anti-abuse rule. However, we will not get anywhere if we do not have proper penalties to impose on such people. We would put proper penalties in place to ensure that any new ideas that people might dream up could be dealt with effectively. We also want to close the loopholes that allow hedge funds to try to avoid stamp duty, and those that let companies move profits out of the UK to avoid corporation tax.

Also, very importantly, we would scrap the Government’s shares for rights scheme. It amounts to immoral blackmail to ask workers to give up hard-won fundamental rights, and it is proving expensive because of the amount of HMRC inspectors’ time required to deal with the scheme. Paul Johnson of the Institute for Fiscal Studies has said of the shares for rights scheme that the

“government is trumpeting a new tax policy that looks like it will foster a whole new avoidance industry. Its own fiscal watchdog seems to suggest that the policy could cost a staggering £1 billion a year, and that a large portion of that could arise from ‘tax planning’”.

I hope we will hear a commitment from the Minister to scrap the scheme. I also hope that the Government parties will take seriously our suggestions and include them in their manifestos, because we need to take a really good joint approach to these matters. I do not believe that the Government have carried on the work that we successfully set up. Their record is poor, and we need to see them putting in a great deal more effort to crack down on tax avoidance.

Oral Answers to Questions

Jonathan Edwards Excerpts

Tuesday 27th January 2015 Commons Chamber

[Mr Osborne]

I am well aware of the economic potential of the Brierfield Mill development and when I met my hon. Friend in Nelson recently we talked about those benefits with local businesses. He is a champion of that development and it is extraordinary that the Lancashire LEP and, in particular, Lancashire county council have not promoted the project. He is promoting the project because he is a champion of his constituency and I will happily meet him to see how we can progress the Brierfield Mill project and bring more jobs to the Pendle constituency.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The Centre for Cities recently reported that for every 12 new net jobs created in the south-east of England, only one is created in the rest of the UK. What is the Chancellor doing to address that two-tier economy?

[Mr Osborne]

The hon. Gentleman says it is a two-tier economy, but youth unemployment is down by 45% in his constituency and unemployment down by 31%. I agree that the Labour Government in the Welsh Assembly are doing damaging things to the Welsh economy, but thankfully the UK Government are promoting Wales and the Welsh economy and, as a result, we are seeing jobs being created. I am happy to continue to come forward with policies that support Wales and its economic development.

Charter for Budget Responsibility

Jonathan Edwards Excerpts

Tuesday 13th January 2015 Commons Chamber

[Mr Robinson]

I beg his pardon—the Chancellor, soon to be shadow Chancellor.

It is worth thinking briefly about why we are having this debate at all. Like my right hon. Friend the Member for Morley and Outwood (Ed Balls), I do not often agree with the TaxPayers Alliance, but on this I think the TPA has got it dead right. Mr Jonathan Isaby, the chief executive, says:

“This is a meaningless political gimmick of the most transparent kind, and one that serves only to remind taxpayers”—

of this Government’s failure. We will come to that in a minute, along with what happened under the Labour Government all those years ago. What the Chancellor always fails to mention is what happened on black Friday, when the Prime Minister, no less, was a senior adviser to the Treasury. That was only a few years before the period on which the Chancellor dwells with such delight, thinking it indicative of future events. What he is doing is meaningless.

The TaxPayers Alliance statement continues:

“This…serves only to remind taxpayers how dramatically the Chancellor has missed his own original targets.”

I could not agree more. The TPA says that

“Mr Osborne was right to call this legislative pantomime ‘vacuous’”—

and that is about what it is. Today, the right hon. Gentleman tried to turn this into a political, general election-type of debate—way ahead of the date of course—and to step up the temperature, but, quite simply, it backfired. The shadow Chancellor—and some of the Chancellor’s own Back Benchers—turned the tables on him. Much though the right hon. and learned Member for Rushcliffe, the former Chancellor, might try to make a case for the Government’s policy, the case simply does not stack up.

We will deal with unemployment in a moment, because that is very important. What single major target in the Government’s 2010 plan have they actually met? I know targets or aims—whatever one calls them—are difficult. The bigger the entity one tries to budget for and forecast, the bigger the difficulties get; we all know that. Some are hit and some are missed, but this Chancellor has missed every single target since 2010. Growth—apart from unemployment, which we will come back to—[Interruption.] All right, let us deal with it.

Why is it that, the unemployment target having been hit, tax receipts are so low? It is because all other parts of economic policy have failed and the Chancellor does not want to face up to it. My right hon. Friend the shadow Chancellor gave the figures. Why are tax receipts so below what the Chancellor forecast, despite doing well on employment? It is because we have, despite what he says, a low-skill, low-wage economy. That is why tax receipts are much less than we would expect at this stage in the economic cycle. That is his failure, yet again.

Exports have failed. Growth has failed. The budget deficit has failed. Borrowing has failed. It is staggering: the Chancellor is borrowing £220 billion more than he forecast. He said he would eliminate the deficit, but what has he actually achieved? The deficit is still running at almost £100 billion a year. These are mind-boggling sums and it is a mind-boggling failure by the Chancellor that he has given us the opportunity today to debate. I hope he is regretting it. We are certainly enjoying it.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I agree with much of the hon. Gentleman’s argument, which chimes with my economic critique, but can he explain why this evening Labour Members will be voting with the Tories in favour of the motion and wedding themselves to more Tory austerity?

[Mr Robinson]

I have told the hon. Gentleman exactly why:

“This is a political gimmick of the most transparent kind”.

The Chancellor wants us to fall for his political gimmick. We are voting for it because we are not going to fall into the silly trap that he has tried to lay for us. It is pathetic. He could do much better and has done in the past. Today, he has done very badly and been caught out, and he should regret it.

There is a serious point, to which the right hon. and learned Gentleman the former Chancellor alluded when he talked about the underlying rate of growth of the economy. That has been with us for as long as I have been in the House, and indeed way before, when I was a researcher with the Labour party back in the 1960s. [Interruption.] We are not going there; the Chancellor can relax. The whole ill-fated national plan was based on the idea of upping the underlying rate of growth—the productive rate of growth—of the economy. That is still with us, even now, and this Chancellor has done nothing, but nothing, about it. That is what we are debating today: his failure as Chancellor, not that of any past failure of any previous Government. If he wants to go back, let us go back to his own Prime Minister and the black Friday disaster on which his own Prime Minister advised.

For us, this is about the future. We are fighting the next election and we will fight it on our plans. Why will the Chancellor not have them costed by the OBR? We do not need him to cost them at the Treasury. We have an independent body, which we set up and we supported, as we support the charter motion today. Why will the Chancellor not have our plans vetted? Why is he scared? It is because he knows they will be proven to be well costed, as the Institute for Fiscal Studies has already said.

--- Later in debate ---

[Jonathan Edwards]

Is it not the case that we are living in very uncertain times in terms of the global economy? As the right hon. and learned Member for Rushcliffe (Mr Clarke) said, we could have a Greek exit from the eurozone in a matter of weeks, with all the turmoil that would create for the eurozone, and the direct impact that would have on the wider UK economy. With that in mind, would it not be more advisable and wiser to have a more flexible approach to fiscal policy?

[Stewart Hosie]

That is absolutely right. I will answer that question directly. Instead of the provisions in the charter, we should be tackling the deficit reduction and the debt reduction in a different way. It should not be a fixed-term approach; it should be a principles-based approach based on the medium term. It has been proven to work in New Zealand, and I want to refer to the way in which it goes about that. It says that the first principle should be about reducing debt to a prudent level, where the Government of the day specify what is or is not prudent, depending on the circumstances that they face—precisely the point that my hon. Friend made. The second principle should be that once debt is reduced, the Government should maintain a balanced budget over the medium to long term. That would not prevent any Government from implementing the steps they believe are necessary to achieve the long-term objective of having a prudent level of deficit, but it would mean that it would happen, on average, over the medium to long term, rather than arbitrarily specifying one cycle or one Parliament.

The third principle says that the Government should achieve and maintain a level of net worth that provides a buffer against unforeseen future factors. The fourth principle calls on the Government to manage fiscal risks prudently, and the fifth is that the Government must pursue policies consistent with a reasonable degree of predictability about the level and stability of tax rates. That is incredibly important, because the tax system, tax rates and tax certainty, which have not yet been mentioned today, are a vital component of fiscal stability and fiscal responsibility. In the sense that we have seen tax yields reduce, it is all the more important to get that bit right.

--- Later in debate ---

[Danny Alexander]

I am going to make some progress. The shadow Chancellor should be aware, because this is a very serious business, that if his party has a majority his first Budget will be judged by the OBR against achieving this goal in the financial year 2017-18. So unless he is telling us now that it is his deliberate intention to fail this test, he will have to set out between now and the election how he will find some £30 billion of deficit reduction. This is immensely serious and every Opposition Member should weigh that up before deciding which Lobby to vote in.

[Jonathan Edwards]

Following today’s vote these targets will be set in stone for the next Parliament, so does the Chief Secretary think that if they are missed in the next Parliament there should be ministerial resignations?

[Danny Alexander]

Each Government have to account for their own economic policy in their own way. I am proud that we have put in place a plan that has got the deficit down by half and, more importantly, got us the best economic growth in the European Union and the strongest record of job creation—Opposition parties are notoriously silent about that.

Let us put this matter into some sort of context. While we have been busy cutting the deficit, the shadow Chancellor and the Leader of the Opposition have spent their time marching their troops up and down the hill of deficit denial. If their votes today are to have any credibility, they will have to march them down that hill again. We have still not heard one word of acknowledgement for their role in the crash of 2008, let alone a word of apology.

By the end of this Parliament the Government will have halved the deficit as a percentage of GDP. That has meant facing up to reality and taking difficult decisions. This has been a process during which Labour voted against every measure that we have had to introduce to rescue the economy. There have been scores of votes on deficit reduction and, you guessed it, the Opposition voted against every one. So I say this to Labour: “Supporting this motion does not restore your credibility on the deficit. You have said your aim is to push out the time scale as far as possible. You are perfectly happy to borrow tens of billions of pounds more. That will mean more debt, more interest payments and the pain of rebalancing the books dragging on for years to come.”

Numerous contributions have been made to this debate, and I thank those who have spoken from the Conservative and Liberal Democrat Benches. We heard a wise contribution from the right hon. and learned Member for Rushcliffe (Mr Clarke), and excellent contributions from my hon. Friend the Member for Redcar (Ian Swales) and from the hon. Members for Hexham (Guy Opperman) and for Ipswich (Ben Gummer), in particular.

However, some Conservative Members have criticised me in this debate for the views I have taken on Conservative plans beyond 2017-18—the shadow Chief Secretary asked me about this, too. Let me send a note of warning to some of my Conservative colleagues. We formed the coalition to tackle the deficit in a timely manner. That is why we agree that the structural deficit must be eliminated by the end of 2017-18 and debt must fall as a share of GDP. Hitting that 2017-18 target will require further consolidation to the tune of some £30 billion, and to say that we can reach that figure by spending reductions alone, with some £12 billion coming from cuts to welfare, would be grossly unfair. It would hurt millions of families who are trying hard to make a success of their lives. Tax on the wealthy should and must play a significant part in how we finish the job in the next Parliament. But our real concern, and where we differ, is on what happens after that mandate is met. As a country we should not be wedded to austerity for austerity’s sake. People in this country supported our coalition approach because it has been necessary and successful in turning the economy around, but they will not support an ideological drive for an ever smaller state.

Stamp Duty Land Tax Bill

Jonathan Edwards Excerpts

Monday 12th January 2015 Commons Chamber

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your Chairmanship, Mrs Riordan, and to debate the Bill.

Clause 1 amends section 55 of the Finance Act 2003 to change the basis of calculation for stamp duty land tax on residential property transactions, and provide a new table of rates and thresholds that apply to those transactions. It also introduces the schedule that makes the consequential changes to SDLT, and to the method of calculating the amount of tax due when certain reliefs are claimed. As right hon. and hon. Members will be aware, the measure came into force through a resolution under the Provisional Collection of Taxes Act 1968 for transactions whose effective date—usually the date on which the purchase contract is completed—is on or after 4 December 2014.

Let me briefly remind the House why we have introduced this important and comprehensive reform to SDLT on residential property. In essence, the stamp duty system on residential property as it previously stood was flawed and widely criticised, and it created an enormous hike in taxes at certain thresholds. Someone paying £250,000 for a house would pay £2,500 in stamp duty, but if they paid £250,001, they would pay £7,500—three times as much. Inevitably that created peaks in transactions at those thresholds and dead zones above them, and that big distortion affected a significant number of properties. We have got rid of the inefficient and distorted old system and replaced it with a fairer new system that cuts SDLT for 98% of those who pay it. No buyer of a property under £937,500 will pay more SDLT than they would have done before 4 December. We have provided a calculator on the HMRC website so that people can work out how much tax they will pay, and I am happy to confirm that to date it has been used more than 1.25 million times.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

As the Minister points out, this change will result in savings for the vast majority of people purchasing a home. What assessment has he made of the impact on house price inflation as a result of the changes?

[Mr Gauke]

There may be a slight impact on house prices, but we must put that in context. Many factors determine house prices, and on the evidence before us our view is that the changes will not have a significant impact on the overall level of house prices. They are likely to have a bigger impact on removing some of those dead zones and distortions in the housing market, which is beneficial in creating a more efficient and effective housing market.

The reform has been welcomed by right hon. and hon. Members in all parts of the House and by outside bodies, including the Council of Mortgage Lenders, the Institute of Directors and the Institute for Fiscal Studies. Jonathan Isaby, from the TaxPayers Alliance, called it:

“an early Christmas present for young people looking to get on the housing ladder.”

Barnett Formula

Jonathan Edwards Excerpts

Tuesday 16th December 2014 Westminster Hall

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your chairmanship this afternoon, Sir Alan. I congratulate my hon. Friend the Member for Milton Keynes South (Iain Stewart) on securing this debate and setting out his case in a characteristically thoughtful and analytical way. He brings great knowledge and expertise to the matter. I also thank other hon. Members for their contributions to this short debate, the timing of which is very appropriate. Given the momentous referendum in Scotland not that long ago and the Smith commission’s subsequent report, this subject has never been more topical. Furthermore, hon. Members will have seen that the Government have published a Command Paper today looking at the options for devolution in England. The paper acknowledges that the treatment of tax and spending decisions that impact on funding to the devolved Administrations will need to be considered in any solution.

Since its introduction over three decades ago, the Barnett formula has proved to be a durable and robust method of calculating changes to the block grants for the devolved Administrations, providing population-based shares of comparable UK Departments’ changes in spending. The leaders of the three main UK parties have confirmed that the Barnett formula will continue, and the House of Lords report in 2009, as we heard, recognised advantages such as simplicity, stability and the absence of ring-fencing. However, we also recognise the concerns expressed about the formula and we welcome all views on its continued implementation.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The vow has been made to the people of Scotland that the Barnett formula will be preserved and that Barnett funding will be preserved at its current level. Does the Minister not agree with my analysis, therefore, that a new benchmark has been set for what we would term fair funding? Whereas before the argument was for some sort of needs-based formula, the argument is now about making sure that the people of Wales, for instance, are not disadvantaged compared with the people of Scotland in terms of public funding per head.

[Mr Gauke]

Let me turn to the issue of fairness for all parts of the United Kingdom, including for Wales—I assure the hon. Gentleman that I will get to that eventually. As my hon. Friend the Member for Milton Keynes South has mentioned, there is a perception, particularly in parts of England, that Scotland is overfunded because it offers generous policies on university tuition fees, for example. However, I must emphasise that devolved Administrations do not receive any additional funding for those policies. They accommodate them within existing budgets by prioritising those policies over others—for example, by not protecting school spending during this Parliament, as we have in England.

One of the purposes of devolution is to allow the devolved Administrations to make different policy choices. That was set out in 1997 in the statement of principles, which states:

“The key to these arrangements is Block budgets which the devolved administrations… will be free to deploy…in response to local priorities.”

In contrast, commentators in Scotland, Wales and Northern Ireland tend to be concerned about the Barnett squeeze convergence property of the Barnett formula, whereby the percentage changes in devolved Administration spending are lower than in England. However, the Barnett formula itself does not change the budgets of the devolved Administrations disproportionately to England’s: an extra pound per head in England means an extra pound per head in the rest of the UK. The so-called Barnett squeeze reflects the higher levels of spending per head in Scotland, Wales and Northern Ireland that have existed over many years, before and since devolution in the 1990s.

I know that some hon. Members consider Wales to be relatively underfunded as its spending has converged towards the level in England. In fact, spending per head there is 11% above England’s and has more than doubled in cash terms since devolution. Wales also benefits from large EU structural fund spending, having been awarded £1.9 billion from 2007 to 2013 and a similar amount for 2014 to 2020.

However, we recognise that there are concerns about relative levels of funding for Wales; that is why we have established a bilateral process to consider that in advance of each spending review. The most recent assessment, before the 2013 spending round, determined that convergence was not forecast to occur through to 2015-16 and that the existing level of Welsh funding was within the range suggested by the Holtham commission. The Government have now further agreed with the Welsh Government to review that process in the light of the tax and borrowing powers contained in the Wales Bill.

Stamp Duty Land Tax

Jonathan Edwards Excerpts

Thursday 4th December 2014 Commons Chamber

[Mrs Anne Main (St Albans) (Con)]

I am delighted to speak in this debate and am pleased that the Treasury has been persuaded of the need to do this and to find a way of doing it, which was the crucial point. I know that there is no great pot of money out there to throw around, but this measure is vital for young people struggling to get on the housing ladder and for people across the country. Having looked at the average house price in the UK, I know that it will help many families in many constituencies, including my own. If I was being very greedy, I would have said that I would have liked the bands to have been moved up, but I shall rest happy with the fact that we have now got rid of the hated slab structure that caused what I called zombie prices, which no family ever paid. Nobody paid £251,000 for a property, because it incurred an enormous jump in the tax they had to pay.

I believe that one of the reasons why the Help to Buy scheme was not taken up well inside St Albans was that our average house price is so high compared with that in the rest of the country. I found one property at the time that was under £125,000, and that was a studio. Barely any properties came under £250,000. If people cannot save up a deposit, how on earth will they afford to save the tax as well?

This measure is hugely welcome. I am sorry to say to my hon. Friend the Financial Secretary that Lori, who served me my coffee this morning in Lori’s Café, said that her new pin-up is now the Chancellor, because he will save her thousands of pounds when she moves into her retirement bungalow early next year. I said that I would give Lori’s good wishes to the Chancellor, because she has had a happy Christmas present from him.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I share the hon. Lady’s sentiment that this seems to be a very progressive measure, but is she not slightly concerned that the result might be increased house price inflation?

[Mrs Main]

I think that house prices will even out. If there are more transactions and people put house prices up, there will be house price inflation, but I believe that the Government are trying to tackle that by having a big house building programme. The measure will stop the pressure on people who fall around the bands. People have been told that they cannot charge a certain amount for their house, even if they have put a conservatory on it or improved their kitchen. Some have not made those improvements because they would have been pressed into a different band that would have incurred a large amount of tax.

One point that has not been mentioned so far is the possible knock-on effect on other industries. People were telling me that they were reluctant to put in double glazing, to build conservatories or to do any improvements to their houses, that they were struggling to find enough money to buy furniture as well as to pay the deposit because they had to save for the tax, which they could not roll up into their mortgage if they were first-time buyers, and that they were struggling with the multiples. People were telling me that they were struggling with the concept of the high fees that they would have to pay and worrying how on earth they would buy anything else to do with their property. I think that people selling home improvements, bathrooms, kitchens, carpets and so on will suddenly find that people who were expecting to pay a large tax bill have a little bit extra in their pocket, thanks to the Treasury, that they can afford to use to improve their house. They will say that it is worth their moving house, as they will not have the deterrent. This will free up the market and there will be a lot of knock-on benefits.

We have to be mindful of house price inflation, because it excludes a lot of people from the market, but I am absolutely certain that in my area the majority of people who will benefit will be young first-time buyers who are desperately trying to save that awful combination of a very large deposit, solicitors’ legal fees and a large bung to the taxman. I am truly grateful that the Treasury was persuaded of that argument.

I have crunched a few numbers, and I know that somebody asked whether the Treasury would do this. In St Albans, a young couple buying their first flat would have paid an average of £8,132 in the stamp duty levy and they will now pay £4,597. That is a large chunk of money when people are starting out in life. Similarly, in a terraced property they would save just over £2,000, in a semi-detached property nearly £5,000 and in a detached four-bedroom property nearly £2,500. At every level of average house prices, people will save thousands of pounds. Many young people, unfortunately, are having to try to rely on the bank of mum and dad. There will be quite a lot of relieved mums and dads who have been digging deep and helping with these heavy burdens who will be grateful about the measure.

I raised this issue with the Prime Minister in April and asked whether he would use his good offices to influence the Treasury on the question of places like St Albans, with barely one house worth less than £250,000. I thank the Prime Minister if he did that.

I accept that people higher up the ladder will not find this good news. In a high-value area such as mine, people will say that if they were to move up from their £1.5 million house or even to move down to a £1 million house, they will pay higher stamp duty. As I said, there is no golden pot of money out there to throw around. I hope that coming in to the next general election we as a party will say that we are acting responsibly and that we have looked at where help is most needed, which is where it is being delivered. Unfortunately, there must be a bit of give in the system somewhere and, unfortunately for the people affected, the give in this case is at the higher end of the market.

I would like to think that stamp duty was originally meant to target higher-value houses and was never meant to catch the people it is catching, including, in my constituency, young people starting out on the ladder and people on the lower income scales. Although I regret that some people will find the measure not to their liking, especially just before Christmas, the majority of people trying to get on the housing ladder—in my constituency, the figure is something like 97%—will find it a huge bonus. The people who sell double glazing, carpets or kitchen and bathroom improvements whose small businesses have been struggling as people have not been making the investments that would push them over the threshold will, I hope, find that people are now making those investments.

I wholeheartedly welcome the measure and the only Scrooge-like bit that I would add at the end is, as colleagues have mentioned, to ask that we keep an eye on the drag. I would not like to think that other people would soon be sucked in to the wrong bands. I say the wrong bands, because I think at the heart of the Treasury’s proposal is a wish to deliver home ownership to lower income families, young families and people starting out while expecting those with the broadest shoulders to pay a bit more. I welcome these changes.

Financial Conduct Authority Redress Scheme

Jonathan Edwards Excerpts

Thursday 4th December 2014 Commons Chamber

[Paul Farrelly]

It is indeed a disgrace. RBS has form not only outside the House, but inside it. The Chair of the Treasury Committee recently said that the bank had misled it. He said:

“If this is how RBS deals with a parliamentary committee, how much can customers and regulators rely on it to be straightforward with them?”

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The hon. Gentleman makes an important point on refinancing. One of the main difficulties that my constituents, Mr and Mrs Bartels, got into was that they were unable to refinance their mortgages as a result of the interest rate swap on their current mortgage, which led to the demise of their business. That is not addressed in the redress scheme.

[Paul Farrelly]

Given the cash flow difficulties of firms such as DK and penal interest rate payments, they have problems financing their work in progress and stock. DK had to retrench, through which jobs were lost. Fortunately, it is now back on its feet and successful again, but it is allowing me to share its experience because so many other businesses are afraid of sharing theirs, for different reasons.

By September last year, when the FCA replied to my follow-up letter, in which I reiterated those fears, Christina Sinclair had gone—she had joined a bank as a senior member of compliance, in the latest twist in the regulator merry-go-round. The reply was from her successor, Andrew Giles, who, I believe, is still the FCA’s acting director of retail banking and therefore responsible for the scheme. His response to what we might call the fear factor was as follows:

“If having submitted a complaint to RBS, DKM has evidence of the bank attempting to penalize the business, DKM should send it to us… We would consider this in the context of our wider work in this area and in particular in relations to our ongoing supervision of RBS. Unfortunately”—

here is the clincher—

“due to confidentiality restrictions, we would not be able to say how we have used the information provided.”

What a great backbone stiffener that is for a small businesses. It is as useful as a chocolate fire guard, as we say in the potteries. Yet again, the FCA, as a regulator, is letting down businesses such as DK.

Mr Giles also said that the review did not stop the likes of DK going through the courts. Having been let down by the regulators, and having been rebuffed after asking RBS directly for redress, that was the only option available. DK considered it again and again, but decided not to go through the courts. It is no longer an option, because the statute of limitations on this sorry saga started six years ago and has just run out. The reality was that DK faced a possible legal bill of £250,000 and possibly twice that if it lost to RBS. Like many small businesses, it simply could not afford the costs and risks of going to court.

I shall conclude with a few remarks on what DK and we would like to happen. One key thing is for the FCA to review its scheme for redress from banks. As a regulator, with Government backing, it should push through changes. DK wants to be able to appeal to an independent assessor against the finding that it was a sophisticated customer, just as banks were able to do under their get-out. When I pressed that with the FCA last year, Mr Giles said that, had that been allowed from the beginning, it would have slowed the process down and led to lots of small businesses not being compensated so quickly. We have seen great progress over the past year, so that argument holds no water today, and certainly not if the process completes in June 2015. It is not an argument against the regulator or the Government acting more effectively in pursuing the mis-selling of such damaging products.

As far as RBS and customers such as DK are concerned, the Government could cut through directly, because RBS was bailed out by the taxpayer after its folly and perfidy and is still owned by the taxpayer. All the major banks have been tainted by that scandal, but, as the FCA figures show, RBS was by far the worst offender. Of the 15,400 sales at redress offer stage at the end of September, 7,300—nearly half—belonged to RBS. That is just the number of businesses who were admitted and not excluded from the scheme, not the size of their exposure.

That suggests wholesale pumping of those toxic products down the RBS sales pipeline. The Government should address that as the majority owner of the bank. They should force the bank to have fully independent handling of complaints from customers such as DK that have been excluded from the scheme, in the interests of businesses, in the interests of a thorough clearing of the stables and in the interests of the future of RBS and therefore of the taxpayer when it is finally sold off.

My final thought is on consistency and the different attitudes of banks to the review. Given the scale of RBS’s participation in the scandal, the Government should satisfy themselves, before RBS is sold off, that they are reserving the costs of its mis-selling in a way that reflects the reality of its involvement.

UK Acorn Finance (Mortgages)

Jonathan Edwards Excerpts

Tuesday 11th November 2014 Westminster Hall

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

It is a great pleasure, Mr Turner, to see you in the Chair and to serve under your able chairmanship.

I preface my comments by saying that, as a member of the legal profession, I am not given to making serious allegations about professional people; in fact, over the past 23 years, I might have done that twice, so I am not a serial offender in that regard. However, what I shall detail today is, to my way of thinking, one of the worst scandals that I have come across in all those years.

I am concerned about the Williams family—a farming family from Cwm Pennant, Garndolbenmaen, in my constituency. The husband inherited the farm in 1996 and subsequently transferred it into his name and that of his wife, with whom he had been working on the farm since 1980. In late 2009, they were introduced to Desmond Phillips of UK Acorn Finance Ltd by a Mr Peter Baskerville, a financial adviser. On 13 December 2010, a meeting was held at Mr Phillips’s office in Highbridge, Somerset; he then introduced them to a Mr Peter Williams, a solicitor who said that he would act for them. Their indebtedness at the time was approximately £650,000, of which £450,000 was owing to the Agricultural Mortgage Corporation plc at a favourable interest rate. After my constituents had made a complete financial disclosure, Mr Peter Williams, the solicitor, advised that he could not act for them after all as Mr Phillips was his client. That was curious.

On 13 January 2011, Mr and Mrs Williams had another meeting with Mr Phillips, again in Somerset. He introduced them to a Mr Thomas Brennan of Davies and Partners, solicitors. Mr Brennan said he would act for them; he was a close friend of Mr Peter Williams. After that meeting at Highbridge, a Mr Mark Sanders of Carver Knowles, on the instruction of Mr Desmond Phillips, valued the farm in north Wales at £2.2 million. Mr and Mrs Williams paid for that valuation. Mr Phillips then made numerous promises to them to provide additional funding, and on the basis of his promises they agreed to consolidate their borrowings with a mortgage advance from UK Acorn Finance Ltd. Initially, that was to be a short-term bridge for a few months, with the assurance that he—Mr Phillips—would thereafter transfer it to a cheaper lender. There were continual procrastination and delays from Phillips, and the transfer to a cheaper lender never happened. Instead, Mr and Mrs Williams had no choice other than a succession of massively expensive short-term bridging loans from UK Acorn Finance Ltd with no exit route other than the repossession of the farm.

On 22 April 2011, shortly after the charges on the farm were put in place in favour of the company, Mr Phillips and his daughter, Karen Phillips, visited the farm. Mr Phillips again promised additional funding, which never materialised. As a result, the farm was financially crippled, but Mr and Mrs Williams were assured that the mortgage would soon be transferred to a cheaper lender at 4% annual interest. That never happened—instead, they received notification shortly afterwards of repossession proceedings by UK Acorn Finance Ltd.

Mr and Mrs Williams were forced into a succession of short-term bridging loans of between three and six months with UK Acorn Finance Ltd, with enormous arrangement fees and interest costs resulting in a vicious spiral of unnecessary debt over which they had no control. Mr Phillips’s company was raking in all the money. UK Acorn Finance Ltd was owed in excess of £1.2 million with an increase of approximately £550,000 in two years. UK Acorn Finance Ltd has since repossessed the farm.

UK Acorn Finance Ltd always produced legal documentation for signing at the last minute and Mr and Mrs Williams signed it without legal representation or advice. The documents were sometimes driven up from Somerset to be signed and taken back there, Mr and Mrs Williams being told that time constraints made personal visits necessary to achieve the company’s deadlines.

Mr Phillips’s valuer subsequently reduced the value of the farm to £1.8 million. Mr and Mrs Williams were forced by Mr Phillips of UK Acorn Finance Ltd and his associates into enormous, spiralling mortgage debt. Peter Williams and his associate, the solicitor, knew from the outset that that would happen before their now obvious acts of conflict of interest—and, I believe, of conspiracy to defraud.

The true interest and cost of Mr Phillips’s actions have not been calculated, but they are clearly enormous. The reduction in the farm’s value from £2.2 million to £1.8 million, according to the valuer appointed by Mr Phillips—presumably to weaken the value ratio against the spiralling mortgage debt to UK Acorn Finance Ltd—and the manner in which the mortgage and financial affairs have been handled by Mr Phillips, his associates and lawyers, have clearly been reckless, if not, as I believe, fraudulent. Obviously, Mr and Mrs Williams’s credit rating is now in ruins.

In February 2011, Mr Phillips appointed a Mr N.R.C. Burd as the Law of Property Act 1925 receiver—by the way, Mr Burd appears quite often in such cases as the favoured receiver. Mr Peter Williams, then of solicitors Ebery Williams, acted for Mr Phillips, Mr Burd the receiver, Peter Baskerville and UK Acorn Farm Management Services Ltd, behind which stands Paul Johnson. My constituents were told by Mr Phillips that, although they had received no documentation from him, Williams’s company and solicitors had received £48,000. That was without their authority or consent. There were a few small, irregular payments to builders working on the farmhouse, who quickly withdrew their services because they were not being properly paid; Mr Phillips had given an assurance that he would make payments from money he held on their behalf. Mr Phillips has not accounted for a single penny. The total is believed to be in the region of £148,000, and none of that has been accounted for. The matter was reported to the police.

A Vivienne Williams, whose partner is Mr Peter Williams, the solicitor, now of Michelmores solicitors, previously of Burges Salmon, of Ebery Williams, of Wilsons Law and of Veale Wasbrough, still acts for Mr Phillips’s company, UK Acorn Finance Ltd and has succeeded in repossessing the farm and taking away Mr and Mrs Williams’s livelihood, their stock and their home. Everything they had on earth has gone.

Mr Peter Williams, of Burges Salmon and the various other establishments, does not stay long with a firm. I understand why. His normal modus operandi is one or all of the following in any particular case. The title deeds are split between the residential house and the land. There are separate mortgages on the house and the land and the property is then transferred into a limited company and mortgaged in the company’s name. The mortgage on the residential property then becomes a commercial transaction and is unregulated. All legal protection rights, including those of minor children, are removed by the above.

The house and land are then repossessed separately, devaluing in favour of purchasers who—believe it or not—are connected to the lender. On the way in, they value the property high to justify the payment of huge sums, which are clearly not sustainable and could not be paid back by the borrowers; on the way out, they undervalue it drastically, so that the person connected to the company can benefit.

The “business plan” in this case was prepared by Paul Johnson, who in reality was there to serve the key players: areas of weakness were exposed, particularly regarding cash flow, for exploitation by Peter Williams, Burges Salmon, UK Group and so on. As I said, a succession of short bridging loans in favour of UK Group was effected at a massive cost—an interest rate of 22%, at this time! Furthermore, fees of 9% were rolled up every six months, plus there were huge fees to solicitors and various agents. There was continual procrastination from them when it came to finding cheaper loans.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

My right hon. Friend is making a powerful case on his constituents’ behalf. In Talley in my constituency, there is a case that mirrors the structure of deception perpetrated against his constituents; it involves a company, associated with UK Acorn Finance, called UK Farm Finance Ltd. Does he share my concern that the farming community in particular is targeted and susceptible, because it is cash poor but asset rich? When the bridging loans mount up, people find that the position they are in quickly gets beyond their control.

[Mr Llwyd]

That is precisely the point. The farming community has been through a rather tortuous time in any event, in terms of income streams over the past five to seven years, so my hon. Friend’s point is absolutely correct. Farmers are more prone, but they are also in a worse position: unlike someone who loses a house and moves on, they lose absolutely everything. As I said, when they have inherited the property, as in Mr and Mrs Williams’s case, it is even sadder and worse.

Oral Answers to Questions

Jonathan Edwards Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Mr Osborne]

For the reasons that I have set out before—with the slower growth in Europe. This is extraordinary: all we get at Treasury questions and generally from the Labour party are requests for more spending and more borrowing, but now Labour Members seem to be complaining that we have not cut enough. Over the summer, we did our sums, we added up their summer spending spree and we found there had been £21 billion of Labour spending commitments in the past five or six weeks alone. That is another reminder of why it cannot be trusted with the British economy again.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

New research by the Inequality Briefing highlights the fact that nine of the 10 poorest regions in northern Europe are in the UK—these include the ones I represent in west Wales. The UK is also home to the richest region in northern Europe: inner London. What has happened to the long-term plan to geographically rebalance the UK economy?

[Mr Osborne]

The first thing I would say to the hon. Gentleman is that of course we need to tackle long-standing regional disparities in our country, and we are putting investment into Wales, including transport and infrastructure investment, to try to lift the economic performance of Wales. The broader point I make is that we need to bring the economic geography of our country closer together. That is an argument I have made about the north of England. The gap between the regions grew under the last Labour Government. By making the long-term investment under our long-term plan we hope to reduce the disparities under this Government.

Oral Answers to Questions

Jonathan Edwards Excerpts

Thursday 3rd July 2014 Commons Chamber

[Sajid Javid]

I can tell my hon. Friend that I will be more than happy to visit. I am sure that Mr Speaker has been a number of times himself. The Suffolk coast is indeed beautiful—it is a jewel in Britain—and everyone should be encouraged to visit. She will know that I cannot comment on any planning application that is taking place, but she will be pleased to know that the Government will continue to work hard to promote Suffolk through VisitEngland and other organisations. The wonderful Suffolk coastline featured in VisitEngland’s “Coastal Escapes” marketing campaign was funded by the regional growth fund.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The NATO summit in Newport provides an opportunity to promote Wales to the world, boosting tourism and the wider economy. What discussions are the UK Government having with the Welsh Government to ensure that the summit has a distinct Welsh flavour?

[Sajid Javid]

We work very closely with the Welsh Government on these issues. There is a lot to be gained from cross-co-operation, and a number of initiatives are in place.