Draft Financial Services and Markets act 2000 (Ring-fenced Bodies, core activities, excluded activities and prohibitions) (Amendment) Order 2016

Jonathan Reynolds Excerpts

Monday 24th October 2016 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Sir Roger. I thank the Minister for his opening comments.

As we have heard, the draft order will make several changes to the ring-fence regime that is due to come into force in January 2019. As a result of the structural changes that the banks have begun to implement ahead of the regime’s introduction, the Treasury has suggested that a number of technical issues have become apparent that, if not rectified, could undermine the regime’s effectiveness. Any moves to fix legislative error and confusion are of course welcome. In fact, it is clear to the Opposition that there is an urgent need for consolidated legislation in this regulatory area.

Even commercial providers will not provide a complete, up-to-date version of the Financial Services and Markets Act 2000 and its successor legislation and statutory instruments. As such, it is very difficult indeed for practitioners to know exactly what the law currently is. Leaving it all in such a piecemeal mess—there has been legislation in 2012, 2013, 2014 and 2015 to make detailed amendments to already detailed provisions—is unacceptable and causes confusion for everyone involved. Will the Minister confirm whether the Government have plans to rectify the situation?

I notice that there is no regulatory impact assessment for the draft order, although the explanatory memorandum states that the Treasury will prepare a “validation impact assessment” for at least one of the changes: specifically, the removal of the qualifying declaration process. As my Front-Bench colleague in the other place has pointed out, surely it would have been wise to produce an assessment before the policy was introduced, or at least before the order was laid. The Government have until January 2019 to get this matter right, so why is it being rushed through and the correct assessment procedure not being followed? When will the validation impact assessment be published?

I have several questions for the Minister on the specifics of the regulation, in order to clarify the intent and purpose of some of the changes outlined. In particular, the Opposition are today seeking categorical assurances from the Government that the draft order does not contain any measures that could potentially allow different types of activity to slip past or weaken the protection of the ring fence. There is potentially a problem in that the Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014 sets out exceptions to the prohibition on excluded activities that cannot be conducted by retail banks. Can the Minister confirm that no provision in the draft order could potentially provide a way around the general principle that there must be separation between different types of entity?

As hon. Members will be aware, the Financial Services and Markets Act 2000 works by providing general principles, for example the section 19 prohibition on conducting financial services without authorisation from the Financial Conduct Authority, and then having secondary legislation, for example the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, lay out the exceptions from that general rule. I therefore seek clarification that this regulation does not excuse the banks and others from being bound by the general principles in the statute.

I have specific concerns about the measures in article 2 to amend the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014 to make new provision regarding the identification of qualifying organisations. Instead of a relevant organisation being required to give a “qualifying organisation declaration” to a UK deposit taker before it may be considered a qualifying organisation, it is proposed, as the Minister outlined, that a UK deposit taker may determine that an organisation is a qualifying organisation without that organisation having to give any such declaration. However, other regulations—for example, the prospectus regulations in securities law—make plain the sorts of information, or at the very least the categories of information, that must be established.

In comparison, these provisions seem worryingly loose and quite unclear. If the test of a good rule is whether we can know when it has been broken, how will we know when a bank has breached that proposed new rule? Why should a bank be making a decision about the status of an entity where that entity is not yet prepared to provide a balance sheet? Does this apply only to new companies—for example, a new subsidiary, in which case the parent should know the capital being assigned to it—or to companies that are unknown to the bank? If the latter is the case, why is it dealing with them for this purpose? Whether or not an organisation was part of the same group as a qualifying organisation would surely be a matter of fact. In what circumstances will banks be dealing with any entity where that is not clear?

More fundamentally, Labour is concerned about whether any ring fence will actually be able to protect the system, consumers and other financial institutions against the failure of an entity that cannot then find the money to pay back or transfer back whatever is owed to a protected entity. There are genuine, legitimate and serious questions about whether a ring fence, which allows transactions between group companies, is really any protection at all. The retail bank could still be funding the speculations by the investment bank even if the contracts purport to create a right to be repaid for the retail bank. As soon as a crisis strikes, debts will simply not be repaid, and there will be no money in the system to make repayment in full because investment banks will not hoard cash; instead, they will spend it and use it as leverage to borrow more money to speculate with.

As we continue to discover, there is much confusion about what falls on either side of the ring fence. That lack of clarity makes regulation very difficult. However, Labour Members are very clear that never again should we hand the dice back to the gamblers. We know that people and society want and need banks in which they can safely deposit their money and savings and that lend responsibly and provide credit to finance investment growth across the country. People deserve a much more holistic approach than the piecemeal approach that we have seen so far to legislation. What is required is an unswerving commitment to transform the sector and ensure responsible financing.

We will always support financial services where they deliver a clear benefit to the whole community, but we should all recognise that the level of anger that still exists following the financial crisis must be responded to. Getting the ring fence right is a key part of addressing that anger. I would be grateful to the Minister for his response today to the points I have raised.

Finance Bill

Jonathan Reynolds Excerpts

Tuesday 6th September 2016 Commons Chamber

[Fiona Bruce (Congleton) (Con)]

I rise to support new clauses 2 and 3, the social justice arguments for which, in support of some of the most vulnerable individuals and families in our society, have been so eloquently and comprehensively set out by my hon. Friend the Member for Enfield, Southgate (Mr Burrowes) that, although I had prepared speeches on both new clauses, there is no need for me to take up the House’s time to echo what he has already said. I therefore simply put on record my full support for what he said, and I ask to be identified with his remarks.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I rise to support amendment 141, which is in my name and those of my hon. and right hon. Friends. I am extremely grateful to Mr Speaker for selecting my amendment, and I would also like to place on the record my thanks to the Public Bill Office, whose advice and help on the matter have been greatly appreciated by me and my office.

I hope that the amendment will find agreement on both sides of the House, and I hope that the Government will not oppose it. The amendment would establish a very small tax exemption for residual cash balances that remain in an employee share incentive plan when an employee leaves such a plan. A residual cash balance is a sum of money, insufficient on its own to buy a single share that month, which would usually be carried over to the next month but which has to be refunded if an employee leaves the scheme. I propose that that balance, capped at a maximum of £10, would instead be donated to charity. That would have the added advantage of reducing costly and burdensome processing by company payroll departments.

Share incentive plans are a good and tax-efficient way to save for the future, and many employees take them up. I believe we should encourage employee share ownership. When an employee leaves a share investment plan, there is commonly a cash residual amount remaining in the account; often, it is just a few pence or a few pounds. When the employee chooses to leave the plan—that is mandatory if the participant leaves the company’s employment—the cash residual can no longer be carried forward. Under the current system, any remaining cash held in the plan when the employee leaves the plan is required to be processed, via the employer’s payroll, to apply national insurance contributions and income tax via PAYE and to pay the net balance to the employee. This process typically costs between £2 and £9, but provides little benefit to the individual receiving such a small amount.

Furthermore, the benefit to the Exchequer is far less than the total cost to companies of administering these payments, with companies paying almost twice as much to process the payments as the Treasury actually receives. To put that into numbers for the ease of Members in the Chamber, it is estimated that the administration costs for companies are between £400,000 and £500,000, while the benefit to the Treasury is just £200,000. If amendment 141 was accepted, charities and good causes would benefit by about £360,000, on top of the savings that companies would make.

There is a precedent for such a change. There are already examples of situations in which HMRC has agreed to individual exemptions to share incentive plan providers, which are currently based on specific requests assessed case by case. There is an appetite for this change among share investment plan providers and HMRC. Amendment 141 would be only a very small change to this Bill compared with what it covers, but it is one that could bring benefits both to companies and to charities and good causes, while at the same time supporting share investment plans by removing a costly and bureaucratic part of the system. The amendment would also help to simplify the tax system and encourage more charitable giving, both of which are stated priorities for this Government and would be priorities for any Government.

I was very pleased and heartened yesterday when the Government accepted amendment 145 in the name of my right hon. Friend the Member for Don Valley (Caroline Flint). I sincerely hope that the Minister will accept this amendment and that we can achieve the same result today. If she does not say she will accept it, I will seek to divide the House, but I can genuinely see no reason why the Government would not want the amendment to be agreed to.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

It is a great pleasure to follow the hon. Member for Stalybridge and Hyde (Jonathan Reynolds). I rise to support new clause 3, to which I have added my name. I, too, agree with everything said by my hon. Friend the Member for Enfield, Southgate (Mr Burrowes). I cannot promise to be quite as brief as my hon. Friend the Member for Congleton (Fiona Bruce), because I wish to add one or two remarks of my own.

The fundamental problem is that family breakdown costs a staggering £47 billion per annum, according to the latest figures. Quite apart from the consequential social dislocation and pain that it causes, it is also undermining the British economy. Of huge importance is the fact that most breakdowns do not arise from divorce, but from the ending of relationships in which the couples concerned have not made to each other the public, exclusive and legal commitment that is marriage. Where they do make such a commitment, their relationships —not surprisingly—are far more likely to be stable.

In this context, there remains a massive public policy imperative to ask whether we are doing anything to make marriage less accessible than in other similarly developed countries. We are unusual in this country in having failed until recently to recognise marriage in our income tax system. The solution initially proposed was for a full transferable allowance, but in the event a transferable allowance of only 10% was enacted. A statistic that has already been mentioned but bears repeating is that the tax burden on one-earner married couples with two children on the average wage is 25% greater than the OECD average. The allowance is not making marriage more accessible in a meaningful way. In this context, it is no surprise that the take-up of the allowance has been so low, although the Minister welcomed the fact that the figure is moving in the right direction.

In going forward, two things could be done. First, if it is not possible in the short term to have a full transferable allowance, we should at least ensure that some married families on the basic rate receive a meaningful transferable allowance. Given that the research is so clear that child development is greatly enhanced by the presence of both mother and father in the family home and given the fact that the public policy benefits of marriage are so well developed, a full transferable allowance for married couples with children under five might be a good place to start.

Secondly, perhaps in the slightly longer term we could work towards the full transferable allowance for married couples generally. Of course that would not be cheap, but it would be considerably cheaper than the current cost of £47 billion. It would promote choice by removing obstacles to marriage. As has been pointed out, it is very much about promoting the life chances agenda. I look forward to the Minister saying one or two more words about this matter in her closing remarks.

--- Later in debate ---

[Jane Ellison]

The hon. Lady referred to the issues that we have debated this afternoon as a “rag-bag”, but I think that is a bit unkind. I prefer to describe the debate as a smorgasbord of wide-ranging issues and thoughtful speeches. I shall not repeat my opening remarks, but I shall try to add something to each of the areas where it is relevant to do so, in no particular order.

I thank the hon. Member for Ilford North (Wes Streeting), who is no longer in his place, for welcoming the fact that the Chancellor is looking at the issue of distribution analysis, as he said he would in his letter to the Select Committee Chairman. We will comment further on that in due course. As a result, the hon. Gentleman decided not to press new clause 19 to a vote. [Interruption.] Ah, the hon. Member for Wolverhampton South West (Rob Marris) has returned to his place just as I was about to be nice about him. He must instinctively have known that I was going to thank him for his wide-ranging contribution to the debate. He presented me with some fair challenges as a new Minister. He also made some interesting points about tax simplification. I am due to have a meeting with the Office of Tax Simplification shortly, and he has certainly given me food for thought for my agenda. I reiterate that the Bill will put the OTS on a statutory footing, which I believe indicates the seriousness with which we take its work.

This has been a probing debate. My hon. Friend the Member for Enfield, Southgate (Mr Burrowes) is now on Select Committee duties and therefore unable to return to his place in the Chamber, but he made an interesting contribution on an issue that I know all too well—that of high-strength alcohol. This is something that needs to be looked at in the round, but I can assure him, given my three years in the job that I did before this one, that I take the matter very seriously. He was also generous enough to note, correctly, that the Department of Health has had a good deal of success, working with manufacturers, in reducing the number of very high-strength products on the market. I also note the discussion that took place about silver linings, in which varying views were expressed. I am sure that we will give further thought to these matters in due course. My hon. Friend the Member for Congleton (Fiona Bruce) and others also stressed the matter of the cost to society of some of those products.

My hon. Friend the Member for Enfield, Southgate also talked about the marriage allowance. I want it to be clear that the Government’s focus is on delivering the existing policy, but I did mention in my introductory remarks that a quarter of those who benefit are households with children. We do not want to create a two-track marriage system within the allowance, but the Government are none the less committed to helping low-income households and those with young children through a wide range of other policies including, for example, tax-free childcare and the new national living wage.

I want to add that the online application process for the marriage allowance takes only seven minutes. I call upon the hon. Member for Strangford (Jim Shannon) and my hon. Friends the Members for Congleton and for Enfield, Southgate and others who have an interest in this matter to assist us and promote it. I found in some of my summer recess meetings with groups in my constituency that awareness of the marriage allowance is low. It is of real benefit to lower-income married couples and all Members can contribute to promoting awareness and take up of it. None the less, I reassure all colleagues—my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) also spoke about this—that I will continue to look closely at take-up with HMRC. I also suggest that promoting the personal tax account is another good way of promoting the take-up of the allowance, because when appropriate people take up a personal tax account they can get a nudge to apply. I reiterate that HMRC will receive the millionth application next month, putting us on course to meet the OBR’s revised forecast for take-up this year.

I have already mentioned the seriousness with which we take the Office of Tax Simplification, but it is worth noting that the recommendations led to the introduction of cash-based accounting for tax. One million self-employed individuals took that up in the first year alone, so those recommendations were important.

I appreciate the intention behind amendment 141 tabled by the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), but I said that the Government feel that the change would add additional complexity; I do not think he agrees with that. We have received no indication that fewer companies are making use of share incentive plans due to the administrative cost mentioned by the Opposition, but we will keep that under review. To tease out why our views differ on how the scheme might work and why the Government feel that the idea needs further development, if the hon. Gentleman is willing not to press the amendment, I am happy to meet him to discuss the matter and to understand why he feels that way.

[Jonathan Reynolds]

I thank the Minister for those comments. I have a small sense of frustration as I believe that nearly every Conservative Member—indeed, all Members—would back the change on its merits, but I understand that Ministers have limited room for manoeuvre at the Dispatch Box, so I will accept that offer in good faith and will not press the amendment.

[Jane Ellison]

I thank the hon. Gentleman for that and look forward to our meeting.

Several Members spoke about new clause 15, including my right hon. Friend the Member for Wokingham (John Redwood) and the hon. Member for Salford and Eccles, and I reiterate that nothing would be achieved that is not already achieved by the Government’s tax lock. The reduced rate of 5% has applied to installations of energy-saving materials since 2001 and that rate remains in place and unchanged. As for the wider issues about European Union VAT and excise systems, we are considering a range of issues as we look to exit the European Union.

On new clause 19, as I said, we feel that the tax lock, for which we have already legislated, actually goes further by preventing the use of secondary legislation, about which the hon. Member for Salford and Eccles was worried.

Turning to new clause 18, I will repeat to the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) what I said in my opening remarks: the Government do not expect the measure to have a large impact on rents due to the small proportion of the housing market affected—around one in five individual landlords.

On the SNP’s new clause 8 and the points made about the changes to dividend tax, I reiterate that the way in which such changes affect small and microbusinesses cannot be looked at in isolation. The Government take the concerns of microbusinesses incredibly seriously—I met the Federation of Small Businesses only last week, for example. As for listening to the concerns of microbusinesses, I point hon. Members to the changes made to the Government’s “Making Tax Digital” consultation documents as evidence of our sensitivity to such concerns and we look to respond to them when we can. It is important to note that we believe the dividend tax is still progressive overall, and individuals with higher incomes will still pay a higher rate of tax on their dividends.

On the wider changes to small businesses and microbusinesses, I point the hon. Gentleman to Budget 2016 in particular, as it is introducing the biggest ever business rate reduction, worth £6.7 billion. It has yet to come into force, but it will make a very significant difference to a very large number of microbusinesses across all our constituencies.

Lastly, I hope to answer the highly technical point made by the hon. Member for Salford and Eccles, as well as the point made by the hon. Member for Foyle (Mark Durkan). Government new clause 9 will exempt from income tax supplementary payments that mitigate tax-exempt benefits paid by the Northern Ireland Executive. Any supplementary payments that mitigate tax benefits will themselves be taxable. As a result, all supplementary payments will be taxed in the same manner as the benefits they are mitigating, to ensure fairness and consistency with the tax system. I was asked whether the power being taken in this Finance Bill would be used more widely. No, the power being taken in this Bill will be restricted to only allowing for the tax status of the Northern Ireland supplementary payments to be established in regulations. Full welfare devolution has always been part of Northern Ireland’s devolution settlement. I hope that adds some clarity.

This has been a wide-ranging debate. We have touched on some good issues and found some common ground. The measures in this Finance Bill will benefit working people, boost UK businesses, and take on tax evasion and avoidance. In the days we have spent on Report, and during the Bill’s earlier stages, we have debated many aspects of it thoroughly, and on Third Reading the House will have a final opportunity to consider the Bill as a whole. At that point, I will set out the main reforms for which the Bill legislates, but I hope that this afternoon’s discussion has been helpful and that my responses to points have helped the various Members who raised them.

Question put and agreed to.

New clause 9 accordingly read a Second time, and added to the Bill.

New Clause 8

Review of changes to tax on dividend income

‘(1) The Chancellor of the Exchequer must commission a review of how the changes to the tax on dividend income implemented by this Act affect directors of micro-business companies, to include—

(a) the impacts across the distribution of such directors’ net income;

(b) the impact on company failure rates; and

(c) options for amending the law to minimise the impact on such directors who are on low incomes.

(2) The Chancellor must lay a report of the review before both Houses of Parliament within six months of the passing of this Act.”—(Philip Boswell.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Oral Answers to Questions

Jonathan Reynolds Excerpts

Tuesday 19th July 2016 Commons Chamber

[Mr Gauke]

It was not just the money—I also rattled off the numbers. I would be delighted to provide the hon. Lady with details of the projects that have been delivered, with, as I say, 300 infrastructure schemes delivered in the west midlands and 240 infrastructure schemes delivered in the north-west. Accountability depends on the specific nature of the schemes. Clearly, over the past six years we have delivered on infrastructure, but there is more to do and we are determined to do it.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

One of the absurdities of the previous Chancellor’s tenure was the fiscal rule that forbade borrowing money for infrastructure investment even when the return on that investment would have grossly exceeded the cost of the borrowing. Instead, the former Chancellor ended up borrowing billions to compensate for low growth and the cost of failure. That orthodoxy was strongly challenged in the Conservative leadership election, so will we now see a more rational approach from this Chancellor’s team?

[Mr Gauke]

As my right hon. Friend the Chancellor has made clear, and as, indeed, the previous Chancellor made clear, in circumstances where there is a projection of growth less than 1% over a 12-month period, that fiscal rule does not apply. The fact is that we inherited a very high deficit, and we have shown very strong determination over the past six years to bring that deficit down. As we face the challenges that we now face in terms of Brexit, had we not taken the tough decisions on public spending over the past six years, we would be in a much more vulnerable position than we are now.

The Economy and Work

Jonathan Reynolds Excerpts

Thursday 26th May 2016 Commons Chamber

[Chris White (Warwick and Leamington) (Con)]

In the Most Gracious Speech, Her Majesty spoke of the Government’s intention to support the northern powerhouse. I welcome support for the regions and the regeneration of local economies across the country, but I particularly welcome the recognition of the importance of manufacturing to that regeneration. My constituency and the midlands have strong manufacturing traditions, and I look forward to hearing more details about the midlands engine, and not least about the £250 million investment fund. Our region has been significant in the economic recovery, and we have 96,000 more businesses than we had in 2010.

Although the economy has moved in a positive direction in recent years, particularly in terms of falling unemployment, we should not be complacent about the manufacturing sector. In that spirit, I call for the creation of an industrial strategy.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Hear, hear.

[Chris White]

Thank you. There is a clear need to boost exports, and the Government’s target to reach £1 trillion-worth of exports by 2020 is ambitious. An industrial strategy would boost confidence for investors through greater stability in the system and clear direction from the Government, as well as allowing the Government to be held to account over the period to which the strategy applies. For a Minister to come to the House annually and to be scrutinised on cross-departmental support for such a vital part of our economy can only be to everyone’s benefit.

I turn to the make-up of the strategy. A central, cohesive and comprehensive document could shape clear objectives for the sector, outlining steps that the Government intend to take to provide a framework for industry to grow. In addition, there could be a clear statement from the Cabinet Office, acting across Departments, along with annual reports to Parliament detailing supportive measures taken in the interests of manufacturing.

This Government, and perhaps any Government, typically respond well to objectives and targets that give clear focus and consistency, such as a target of 3 million new apprenticeship starts by 2020. An industrial strategy would encompass a wide range of policy areas: apprenticeships, higher education, Catapult centres, innovation and the supply chain. We need to ensure that Departments do not operate in silos, and that our whole system works in harmony, so I would add energy policy, smarter procurement, access to finance and infrastructure. Implementing a strategy would be a major step forward, considering that the manufacturing sector is less able than others to respond to circumstances quickly. A long-term vision is, therefore, essential, and it will encourage investment in the UK.

Looking ahead, we will need to compete internationally in innovation. The reshoring of production must be a central aspect of our approach, and I see innovation as key to that aim. We can help innovation to flourish in the UK by supporting through-life engineering services and improving the availability, predictability and reliability of complex engineering products to deliver the lowest possible whole-life cycle cost. Initiatives such as high-value manufacturing catapults, Industry 4.0 and TES were not even on the table in 2010. I would add, however, that no matter how attractive an industrial strategy might be, we must make sure that we start with a long-term economic plan.

--- Later in debate ---

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I must confess I thought the Queen’s Speech was fairly awful. It was not awful in its individual proposals on things such as prison reform or bus regulation, all of which have some merit. It was certainly not awful because of the delivery of it by Her Majesty the Queen, who even sounded reasonably excited by the news of a forthcoming state visit from the Colombians—something we can all get behind. It was awful because it lacked any sense of big thinking and any grand design for the state of our nation. As a constituency MP I see so many challenges and so many things I want to change that listening to the modest list of measures we heard last week only left me frustrated.

What makes me so impatient about those shortcomings is that I believe that with better leadership and a better Government, we could do so much better. We are a country where the divide between the very affluent and everyone else is too great, and where owning a home, having a decent job and being able to have a good family life are increasingly unattainable for too many people. Eight years after the financial crisis, our economy is still too dependent on the financial services sector, house prices and consumer spending, and is still too reliant on London and the south-east. There are obscene levels of extreme poverty and destitution, and homelessness is almost back to 1980s levels.

We have an ageing population, but core public services such the NHS and social care simply do not have enough money. Our welfare system is not fit for purpose; it gives too little support to many people while creating welfare dependency in a small group of others. We have chronic skills shortages in several major industries; that in turn fuels record immigration levels. Our lack of any kind of industrial policy has left several key sectors such as steel facing the abyss.

Some parts of our economy are overtaxed, particularly through the outdated business rates system, and other parts do not pay the tax they should. I could go on, because nothing in this Queen’s Speech made me feel as if our Government are considering these problems; in fact, nothing in it made me feel that the Government have a desire to do anything more than try to hold the Conservative party together over the next 12 months.

[Suella Fernandes]

I note the hon. Gentleman’s criticism of the Queen’s Speech. Does he share the same opinion about Labour’s future as that written by a member of his party, which said that Labour lacks credibility on the economy?

[Jonathan Reynolds]

I am grateful to the hon. Lady for the extra time, and I will come on to those wider criticisms.

In some respects the Queen’s Speech was frankly dishonest. Whatever one’s view of the necessity of austerity, or the success of the Government’s deficit reduction programme, it is simply not true to say that public services are being reformed to help the hardest to reach—they are being reformed to remove them from the hardest to reach. It is also not true to say some of the deepest social problems in society are being tackled when some—homelessness, for example—are clearly getting worse. In Greater Manchester, one of the most dynamic parts of England, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) has said, an entire community of people are now living in tents in Manchester city centre. That is not what success looks like. I am all for measuring life chances better, but we do not need a new set of indicators to understand that taking money from people who have serious disabilities—as the Government have repeatedly tried to do—will make their lives harder, not better.

If I were writing the Queen’s Speech, I would ask for it to include three things. First—this was echoed by the hon. Member for Warwick and Leamington (Chris White)—we need a formal industrial strategy in the UK that is focused on making British industry as globally competitive as it can be. Secondly, we need a royal commission on the welfare state, to consider what will be required in an age of rapid technological change and digital self-employment. Thirdly, we need serious democratic reform, so that future Queen’s Speeches are much better than this one.

The tail-end of the Queen’s Speech contained a miserly reference to the supremacy of the Commons. If the Government do not want to lose so much legislation in the Lords, they should try to make better legislation. I do not believe the Lords to be the hotbed of democratic socialism that Ministers seek to portray. This Queen’s Speech was not a programme to transform our nation or tackle our biggest problems. It was all filler and no killer—a pick ‘n’ mix of pet projects; a holding card until the next Conservative leadership contest reveals that party’s true direction. Britain deserves a legislative programme that engages our public, ignites our economy, and inspires our future. Britain deserves a lot better than this.

Oral Answers to Questions

Jonathan Reynolds Excerpts

Tuesday 19th April 2016 Commons Chamber

[Neil Gray (Airdrie and Shotts) (SNP)]

5. What his policy is on requiring multinational companies to disclose to the public the profits they hold in tax havens (a) in British overseas territories and Crown dependencies and (b) elsewhere.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

7. What steps he has taken to reduce the number of tax havens worldwide.

[Tommy Sheppard (Edinburgh East) (SNP)]

12. What his policy is on requiring multinational companies to disclose to the public the profits they hold in tax havens (a) in British overseas territories and Crown dependencies and (b) elsewhere.

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[Mr Osborne]

We have published more detail on the tax gap than the previous Government and we have shown that it is at one of its lowest levels in our history. This Government have collected £26 billion more than was being collected by a Labour Government in extra compliance.

[Jonathan Reynolds]

Tax havens are merely a symptom of a much wider problem, which is that too often the wrong values are at the heart of our financial system. There is too much greed. There is insufficient reciprocity. There is still too great a disconnection between the real economy and the needs of our society. Eight years on from the financial crisis, what is the Chancellor’s genuine assessment of how much has changed for the better?

[Mr Osborne]

That is a perfectly reasonable question, and it was well put. A huge amount has changed. There is much tougher regulation of the financial system, and we have better regulators. Banks are more on the case of bad action in their areas, but it is true that more needs to be done to create a proper culture in the banking system in which they treat customers fairly and seek to do the right thing. That is happening, and the banks that do it will get rewards from customers in the marketplace. Like other professions, the industry is seeking to improve its standards of conduct.

Budget Resolutions and Economic Situation

Jonathan Reynolds Excerpts

Wednesday 16th March 2016 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is a pleasure to be called to speak on the first day of the Budget. Every Budget debate in which I have spoken since 2010 has had one overriding theme, which is that the Chancellor has turned up to tell us that he has failed to meet his own targets. He has then had to mask that failure as best he can. This Budget is a particularly vivid example of that. Growth has been downgraded this year, next year and every year. That is the top-line message from this Budget.

Much is always made of the claim from the Chancellor, which is repeated by Conservative Back Benchers, that the UK has the fastest growing economy in western Europe. As my hon. Friend the Member for Bolton South East (Yasmin Qureshi) said, however, the International Monetary Fund tells us that economies of the USA, Spain and Ireland are all forecast to grow faster than ours this year. I know that we are all worried about Donald Trump, but we still have to consider the US a major western economy, at least for now.

Our deficit is just below 4%, or £74 billion a year, and debt is not falling as a percentage of GDP; it is rising. So the Chancellor has broken his fiscal rule on debt almost immediately after we had the row about it. He has done that after already breaking his rule on welfare spending just after we had the row about that. The obvious conclusion is: so what? This surely proves that those rules are fairly absurd. At the very least, it proves that they are all about politics and not much about economics—which, to be honest, is a fairly apt description of the Chancellor himself. From the figures that we have had so far, the Budget appears to add up as a result of a £3.5 billion cut being made to Government Departments by 2020. However, as no details have been given, that is a purely illusory budgeting cut.

The remaining fiscal rule—that we must hit a surplus by 2019-20—seems fairly ludicrous. Indeed, it seems already to have unravelled. The Chancellor appears to be saying that he will borrow £40 billion more until 2018-19 and then, as if by magic, he will borrow £30 billion less the following year. Already it appears that most of that is a result of messing around with the accounting figures relating to the receipts of corporation tax. Frankly, if a Labour Chancellor had made such a claim in a Budget, they would have been destroyed in the papers the following day. This Chancellor deserves no less.

When we are discussing debt and the deficit, I always like to remind Conservative Members—or at least the ones who turn up on the first day of the Budget—that Harold Macmillan, Edward Heath, Margaret Thatcher and many other Conservative Prime Ministers all ran deficits. It is a fallacy that the Conservatives run surpluses while in office. In fact, the surpluses that we have had since the war have usually been under Labour Governments —although frankly that was by chance. There is nothing wrong with the principle of running a deficit so long as our creditworthiness is such that our interest payments are manageable and that the return on our investment is greater than the cost of borrowing.

That brings me to the set of sensible fiscal rules proposed by the shadow Chancellor, which are to balance day-to-day spending over a period of time while retaining the freedom to invest in our economy to make it more prosperous. They do seem like the same fiscal rules we had at the election, but let us pass over that. Considering all aspects of our economy, transport and energy in particular, the need for substantial investment in order to sharpen our competitiveness is undeniable. From what I see in my constituency surgeries, the situation regarding funding for social care is as dire as it could be. The cut in employment and support allowance to fund this Budget’s giveaways is unconscionable, even for Conservative Members, to tolerate. My local council’s budget has essentially halved since 2010, and I cannot believe that the declining percentage of GDP that we are spending on the NHS is sustainable with an ageing population.

It is, however, not all bad. I welcome the Chancellor’s pro-EU tone. Looking at the challenges he set out, who on earth would add greater uncertainty in these conditions? The sugar tax is interesting, but it feels like a distraction when compared with the top-line economic news. Small business assistance is also welcome, but, as the income from business rates has already been devolved to local authorities, is that not a further cut in funding for public services? We need more detail on that.

Returning to investment, the Government really do not have an energy policy. They have a project in Hinkley Point C that will never be brought online in time. Nuclear power is essential, but the project will not do us much good because of the incredible underlying economics. The Government have undermined renewables and abolished carbon capture and storage for UK, which is incredibly short-sighted. They should be looking to cut UK energy consumption radically through energy efficiency measures, which are readily available and do not need to be invented and which, frankly, just need Government funding. We could then further protect energy prices for industry to ensure that manufacturing is still strong and to reduce our emissions. We could also reduce bills. It would require a much less burdensome amount of new capacity to be brought online. All that requires investment, which could strengthen our economy and help to reduce debt.

On transport, I like many of the things that the Conservative Government have tried to bring online, but such infrastructure clearly requires funding and fiscal rules to proceed. Under this Government’s tenure, infrastructure spending as a proportion of GDP has declined starkly, but I want the projects to go ahead and if the Government are serious too, they must provide the necessary fiscal framework. I am particularly pleased about the money that will allow the trans-Pennine tunnel scoping study to go ahead, because the project would not only massively reduce congestion in my area, but bring about enormous economic benefits by linking greater Manchester with south Yorkshire in a way that is mutually beneficial for both economies.

To conclude, I want a Government who not only believe in public services and public infrastructure and honestly and genuinely care about inequality, poverty and life chances, but understand markets and how to foster innovation and appreciate the contribution that business can make. That would be a real long-term economic plan, but it is clear that it is not available from this Government. I hope that the Opposition will be able to offer the alternative that the country sorely needs.

Enterprise Bill [Lords]

Jonathan Reynolds Excerpts

Wednesday 9th March 2016 Commons Chamber

[Mr Speaker]

I appeal to colleagues to have regard to each other’s interests. We do not keep a formal list on Report, but I suspect there will be intense interest in these exchanges, so colleagues should look after the interests of each other.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Thank you, Mr Speaker. I will certainly endeavour to do so.

I rise in support of the amendment in the name of the hon. Member for Enfield, Southgate (Mr Burrowes), to which I have added my name, as have many other hon. Members on both sides of the House. I am completely opposed to any changes to Sunday trading regulations, whether it is their extension or their devolution to local councils. I am sceptical of what benefits, if any, it would bring to our economy but, more importantly, my concern lies with retail workers and my desire to keep Sunday special.

As a Greater Manchester MP, I am a huge supporter of devolution, particularly to a city as great as ours. However, to me the measure does not feel like beneficial devolution; rather, it feels like a dishonest manoeuvre from a Government who seem obsessed with introducing the policy even though there appears to be no public demand for it. I also have concerns about how the Government have gone about the process, in particular their flawed consultation, which I will address.

I am happy to declare an interest, in that I am an USDAW-sponsored MP, which I am particularly proud of. USDAW has led from the front in this campaign, representing the concerns of ordinary retail workers and ensuring that their voice is heard.

Lots of good, strong arguments were put forward in the excellent speech from the hon. Member for Enfield, Southgate. I, too, intend to focus my speech on the family and faith aspects of Sundays but, first, I want to express my serious concerns about how the Government have gone about attempting to introduce the change. I believe it is at best mischievous and at worst a borderline fantasy when the Government say that the Bill in itself will not enact any changes to Sunday trading regulations, but leave that open to local councils to decide. They know as well as all hon. Members do that the measure will result in extended opening hours on Sundays. As soon as one council does it, neighbouring councils will soon fall, one after another, until extended hours are uniform.

[Mr Alan Mak (Havant) (Con)]

Will the hon. Gentleman give way?

[Jonathan Reynolds]

I will not give way because of the time constraints.

The Government should stop insulting the intelligence of the House and treat the clause as what it is: an explicit attempt to extend Sunday trading hours. I believe that devolution should be used to give councils the powers that they want and need. It should not be a way for the Government to abdicate responsibility for changes that they do not want to be blamed for, when they feel that the changes they intend to make will be unpopular and controversial. If the Government want to extend Sunday trading regulations, they should have the courage to introduce explicit legislation, so that Members of the House can have a proper debate and scrutinise the proposals. Instead, the Government have chosen to hide behind the veneer of devolution.

[Huw Merriman (Bexhill and Battle) (Con)]

I have been a district councillor for the past eight years. Facing a constant slew of demands on what district councillors must do is uninspiring. I would advocate the policy as a measure that will get more people into local government. They will have the optionality to decide. [Laughter.] Hon. Members may laugh, but that would occur.

[Jonathan Reynolds]

I admire the attempt to get more people involved in local government by giving councillors more power—all hon. Members would celebrate that—but my point to the hon. Gentleman is this is not real power. It is an attempt to introduce a national liberalisation through the back-door veneer of devolution.

Another disappointment in the process was the Government’s consultation, which hon. Members have mentioned. It has been described to me on numerous occasions as a whitewash. The consultation concludes that the majority of responses were in favour of the proposal to devolve the power, yet in answer to a written parliamentary question to me on Monday, the Minister could not tell me how many of the 7,000-plus responses were against the proposal. How can the Government conclude that the majority of respondents were in favour of the proposal when they cannot even give the House the numbers? I was very disappointed with that answer. It should not be beyond the capabilities of the Department for Business, Innovation and Skills to work out how many respondents are for or against a Government proposal. I hope the Minister will be able to rectify that from the Dispatch Box and provide some much needed transparency.

My fundamental opposition to the clause comes from a passionate desire to keep Sunday special. When Sunday trading rules were relaxed during the Olympics, we were promised that it would be a temporary measure only, and yet here we are not even four years later with this proposal in front of us. The proposal ignores the wishes of retail staff. A staggering 91% of retail workers in larger stores do not want an extension of trading hours on a Sunday. To them, Sunday is a special day, much as it is in my household. I have four young children and two dogs, so I cannot claim that my Sundays are particularly restful or peaceful, but they are special—a time for the whole family to spend together. That should be the same for retail workers, more than half of whom already feel pressured to work Sundays.

[Chris Philp (Croydon South) (Con)]

I share the hon. Gentleman’s desire to keep Sunday special, but is that not a matter of personal choice for him and for me individually, and not something for Parliament to impose by legislation?

[Jonathan Reynolds]

If the hon. Gentleman approaches this with good intentions, I advise him to talk to some of the retail workers in his constituency to see how they feel about the autonomy they have to decide whether they get to work longer Sundays or not. It is worth pointing out that none of us debating this in the House has to work Sundays if we do not want to.

The current regulations are a good compromise. Shops can trade on Sundays and staff can work if they want. At the same time, Sunday remains a special day, different from any other day of the week. Retail workers can spend some time with their families.

I do not believe the business case for changing Sunday trading regulations stacks up. Retailers already do very well on Sunday, with lots of footfall during a relatively short time window, which makes for more effective trading. The measure will also have a negative effect on smaller shops and retailers that are not subject to the regulations. Their businesses will suffer. In the most recent example of relaxation of Sunday trading—during the Olympics—retail sales actually declined.

As well as declaring my interest as an USDAW-sponsored MP, I am likewise very comfortable declaring my interest as a practising Christian. Understandably, that forms part of my opposition to any changes to Sunday trading, which I know I share with Members on both sides of the House. Of course, we live in a diverse country—I am extremely glad that we do so—but we should recognise that Christianity is the largest religion in this country. For Christians such as myself, Sunday is a special day. Sunday is when my family and I attend church, and the opportunity to do so should not be denied to people who have to work Sundays, whether in the morning or the evening.

[Mr Gavin Shuker (Luton South) (Lab/Co-op)]

Like my hon. Friend, I will be part of the holy alliance trying to keep Sundays special. For people of a Christian ethos, this is not necessarily about the promotion of church; it is about a deep-rooted sense of who we believe people to be. We are created with the ability to rest as well as to work. Also, our choices have an impact on other people’s choices. The freedom we seek to exercise for ourselves is paid for by other people.

[Jonathan Reynolds]

I endorse those points entirely, although it is worth noting that church attendance in many UK cities, even here in metropolitan London, is steadily rising.

The Government have a responsibility to listen to faith groups on this issue, but they have failed to do so. The changes will place additional pressure on workers and families on what is still a traditional day of rest, a day of religious worship and a day to spend quality time with family members and close friends. For faith, for family and for the rights of many retail workers up and down this country, I will be voting for the amendment. I urge the House to show the courage required today to defeat the Government on this issue.

[The Minister for Housing and Planning (Brandon Lewis)]

I appreciate being called early in the debate, and I hope I can help by outlining our thinking and the journey the Government want to take on this issue.

It is important that we recall why this measure on Sunday trading hours is before the House. The laws on trading in England and Wales were last updated in 1994—back when the only time we heard of Amazon was when we talked about the river, and back when our high streets faced no external pressures. The internet is liberating and changing the way we live and work, but the pressures on our high streets are rising, and the internet plays a part in that. Our measures will help them by giving local councils the right to expand Sunday trading.

Short Money and Policy Development Grant

Jonathan Reynolds Excerpts

Thursday 11th February 2016 Commons Chamber

[John Penrose]

I can go broader than that. I can promise that the proposed cuts are the same as those being applied to all non-protected Departments right the way across the Government. This is not picking on any particular area at all. This is the standard cut, which every other Department that has not been protected has had to deal with. That is an important point to get across to the rest of the country.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

The number of Government political advisers is up to nearly 100. The number of political advisers on the highest pay grade is up 150%. The Prime Minister’s reportable salaries have increased by 51% and the Chancellor’s reportable political salaries have increased by 277%. When the Minister told us, just minutes ago, that the Government were tightening their belt on their political budget, did he deliberately mislead the House?

[Mr Speaker]

Order. I think understand what the hon. Gentleman was driving at, but it is wholly disorderly to deliberately mislead the House. The notion that somebody might do so should not be put to a Minister. The hon. Gentleman is extremely felicitous of phrase and I feel sure he can find another way to convey the thrust of what he wishes to communicate to the Minister. I very politely now invite him to do so.

[Jonathan Reynolds]

It appears that the facts contradict the Minister, so I just wonder if he made an inadvertent mistake in the statement he has made to us today.

[Mr Speaker]

Very dextrous.

Energy BILL [ Lords ] (Fifth sitting)

Jonathan Reynolds Excerpts

Tuesday 2nd February 2016 Public Bill Committees

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

I am excited to hear the question of the hon. Member for Southampton, Test. I had not anticipated that it would be that, simply on the grounds that, as I, my right hon. Friend the Secretary of State and many Members in Committee and on Second Reading have made absolutely clear, our manifesto commitment was to end subsidies for onshore wind early. I therefore say philosophically to the hon. Gentleman that, had we meant new subsidies we would have said “new subsidy schemes”, which is the interpretation I think he wants to put on our manifesto commitment.

Let me be clear: the Government were elected with a clear manifesto commitment to end new subsidies for onshore wind and to ensure that local people have the final say on where onshore wind is built. I hope that hon. Members will accept that it is for the Government to agree what their manifesto commitments are. We have gone to great lengths to assure all hon. Members that what we meant was to close the subsidy early; we are not referring to new subsidy schemes. Had we meant schemes, we would have said schemes.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I am curious about the relationship between the two parts of the Conservative pledge that the hon. Lady has just described—ending subsidy early but also making sure that local people have the final say on projects. Of course, the wording of the amendment means that those two positions are contradictory, because any local project that receives planning consent before 18 June under the proposed grace period could not go ahead. In other words, people have approved certain projects, but they will not go ahead because of the narrowness of the grace period in the amendment. Are those two positions not contradictory?

[Andrea Leadsom]

I welcome the hon. Gentleman. I think this is the first sitting of the Committee that he has been able to attend and it is good to see him here. He will appreciate that grace periods have to be set and a line has to be drawn somewhere. We have tried to accommodate the need for investor certainty and to be fair both to the businesses building onshore wind and to the consumers who are paying for them. We will get on to that in due course.

The first part of our manifesto commitment is now well on its way: clause 79, together with supporting secondary legislation, will ensure that the Secretary of State is no longer the primary decision maker for any onshore wind applications in England and Wales. New planning guidance for England, issued by my right hon. Friend the Minister for Communities and Local Government, complements this change by ensuring that local people have the final say on new onshore wind planning applications.

It is imperative that we deliver the second part of our manifesto commitment—to end new subsidies for onshore wind—to protect consumer bills and manage spending under the levy control framework. These amendments will ensure that we do exactly that by reinstating the provisions that were removed in the other place. We are committed to delivering our manifesto commitment while protecting investor confidence. It is my view that these provisions, including our grace period proposals, strike a fair balance between the public interest—including protecting consumer bills and ensuring the right mix of energy—and the interests of onshore wind developers and the wider industry.

At the end of April 2015, there were already 490 operational onshore wind farms in the UK, with an installed capacity of more than 8 GW—enough to power the equivalent of more than 4.5 million homes when the wind is blowing. That significant achievement was made possible only by providing consumer-funded subsidies. The Government estimate that in 2015-16, £850 million of support will go towards funding onshore wind across the UK, of which about £520 million, or approximately 60%, will fund Scottish onshore wind farms.

Recent levy control framework forecasts indicate that spending on low-carbon generation in 2020 will be £9.1 billion in 2012 prices. The Government previously set a limit of £7.6 billion, so the current forecast is already £1.5 billion above that, and additional costs would need to be met through increases to consumer energy bills. As my right hon. Friend the Secretary of State for Energy and Climate Change said on 18 January,

“New, clean technologies will be sustainable at the scale we need only if they are cheap enough.”—[Official Report, 18 January 2016; Vol. 604, c. 1152.]

When costs come down, as they have for onshore wind and solar, consumer-funded support should, too.

Let me reassure all Committee members that we already have enough onshore wind in the pipeline to meet the projected 11 to 13 GW needed to meet our ambition of generating 30% of electricity from renewables by 2020. That 11 to 13 GW is the deployment range clearly set out in the electricity market reform delivery plan. It is our best estimate of what we need to meet our 2020 targets, compared with what we can afford under our low-carbon spending cap.

--- Later in debate ---

[Andrea Leadsom]

I guess that the hon. Gentleman makes the reasonable point that one could be traded for another, but the object of our renewables policy is not merely to avoid getting fined by the EU. I am quite sure that he does not mean to imply that that is the case. The idea is to decarbonise the UK economy. Yes, we could decide to take one route only and therefore not worry about other sectors such as transport and heat, but I am quite sure that the hon. Gentleman is not seriously suggesting that. Even if he were, it is absolutely still the case for the renewables sector that if we continue to offer generous billpayer subsidies, costs to consumers will continue to rise.

The policy was well thought through and had deployment ranges that forecast the achievement that we sought against our legally binding targets. We believe that we are in a position to meet the target with onshore wind. Simply saying, “We should carry on with it because we can do more than we set out to do,” is not a way to run anything, so I cannot agree with the hon. Gentleman that it would make sense to continue with subsidies at the expense of billpayers. This is not free money. We frequently discuss in the Chamber the problem of people being in fuel poverty and those are the people who will have to keep paying for subsidies if we choose to deploy beyond the level that we have already set for ourselves.

[Jonathan Reynolds]

The Minister’s representation of the points is incorrect. The argument is not that we are doing well and should therefore do more; it is that there is an overall renewables target for the UK that comprises certain percentages of electricity, heat and transport and we are nowhere near the heat or transport targets. If we are doing better on electricity, doing more is essential in order to hit our legally binding target. It is not about voluntarily doing more; it is about recognising that there will have to be compensation in other sectors if we are behind on heat and transport, which is a fact under our EU target.

[Andrea Leadsom]

I remind the hon. Gentleman that, in making progress towards our 2020 renewables target of 15%, we have surpassed our interim target for 2013 and 2014 with an average 6.3% of final energy consumption coming from renewable sources over those two years against a target of 5.4%. The contribution of renewables to energy generation is increasing across heat, electricity and transport. Heat from renewable sources increased by 4.6% during 2014. As hon. Members have pointed out, a record 19.1% of electricity generation came from renewables in 2014. Renewable biofuels for transport also rose by 14% during 2014.

I can again say to the Committee that we have targets for each of our energy sectors, and it is simply not realistic to say that just because onshore wind benefits from a generous subsidy and other projects could come forward, we should change our deployment target aspirations, putting the ensuing costs on to consumers’ bills at a time when we are already comfortably meeting our targets.

--- Later in debate ---

[Chris Heaton-Harris]

There are communities out there now that are directly affected by amplitude modulation from wind turbines. I can cite Cotton farm in South Cambridgeshire. That constituency is on the border between two local authorities, both of which have passed motions in the council chamber and written to the Government asking for stronger guidance on these points.

Noise is monitored on a regular basis by a set-up in the community to scientific standards. When an onshore scheme is mooted, noise readings are taken using the same equipment, verified by a third party. Because we can predict when amplitude modulation is likely to occur—it depends on atmospheric conditions, meteorological patterns and wind speed—and can see all those factors happening in front of us, we can predict where the noise will fall. The developer can therefore be asked to shut the turbines down so that they do not cause harm, as has happened in Cotton farm a couple of times. I can absolutely see myself campaigning with other communities up and down the country to ensure that the amplitude modulation from turbines that are already up does not cause undue concern in local communities.

Initially, 10 or 15 years ago, the equipment required to set these up was very expensive. Now, it can be done for about £3,000. Most communities, and certainly a number of developers, could afford that, which would possibly take this problem away. I am trying to make the point to the hon. Member for Norwich South that there are, as my nan would say, many ways of skinning a cat.

The Government have been particularly slow to implement these provisions. I would like them to go further. I am pretty sure I could get together a decent-sized political caucus to do that. If we seriously intend to argue against part of the Bill falling under the auspices of the Salisbury doctrine, and if we are going down the line of dancing on the head of a pin over these issues, the consequences further down the line for this industry will be a lot worse than if we accepted that the Government had a clear manifesto pledge that they are effecting today.

[Jonathan Reynolds]

It is a pleasure, Mr Bailey, to be on the Committee. I had not intended to make a speech about the group of amendments but, as ever, Government Members’ contributions have led me to get to my feet. Many of their arguments have not been robust enough; many of the positions advanced have, quite frankly, been flawed and deserve further attention.

My starting point is that anyone considering the needs of our energy system right now has to admit that the most pressing priority is to ensure that our credentials for investability are maintained and strengthened. Our energy system requires billions and billions of pounds of investment, partly because so much of our generating capacity is going off line in the next few years, at the end of its natural life; partly because the capacity market has not worked as well as was hoped in incentivising new gas; partly because Hinkley C is in as much trouble as it was always going to be—we do not know whether it will ever be there when we need it—and also because we need to take coal out of the system, as a clear priority shared by all political parties. The need, therefore, to ensure that our energy structure is an attractive jurisdiction in which to invest must absolutely be maintained.

Much of the argument that has been advanced has been about the changes to onshore wind being clearly signposted in the Tory manifesto—indeed, demanded by the windy caucus, which is a wonderful new term to add to our political discourse. I do not dispute that; ideological opposition to onshore wind has been a part of the modern Conservative party for some time. I do not disagree with the legitimacy of the move any more than I disagree with the legitimacy of all the other bad things the Conservative Government are doing to the UK, but my point is that there is surely a duty on the Government to ensure that the decision is taken in such a way as not to damage the UK’s overall credentials as a jurisdiction in which to invest.

[Oliver Dowden]

The hon. Gentleman says that he accepts the legitimacy of the Government’s pursuing the measure, given that it was in the Conservative manifesto. Does he therefore accept the illegitimacy of Members of the House of Lords—Labour and Liberal Democrat Members who lost the general election—seeking to remove the provisions from the Bill, against the will of the electorate, as expressed less than a year ago?

[Jonathan Reynolds]

The hon. Gentleman essentially asks whether I agree with the illegitimacy of parliamentary democracy, and I have to tell him that I am afraid I do not.

[Oliver Dowden]

Does the hon. Gentleman not accept the Salisbury convention, which is that if something is contained in a party’s manifesto and that party wins a majority, the other place should respect the will of the elected Chamber?

[Jonathan Reynolds]

That is not what I believe has happened; indeed, a small section of my comments will address that. I believe that two positions are advanced in the Conservative manifesto and the Bill: one is that the RO should close early for onshore wind and the other is that local communities should have the final say in the projects. When I get on to that section I will tell the hon. Gentleman why I believe that those two objectives are in competition and have led to contradictions in the Bill.

Our electricity system figures for the past 24 hours show that wind has contributed something like 14% of our overall electricity need, which is just 1% less than our traditional coal-generating capacity. The issue is not, therefore, insignificant. It is hugely important; right now, wind is keeping the lights on.

[Chris Heaton-Harris]

I do not want to be pedantic and I hope that the hon. Gentleman takes this point in the way in which it is meant. On Second Reading, we did not have Storm Henry passing through and wind was therefore producing just about 1% of our energy. At any one time, the figure flexes between 0% and, I believe, up to 18%, but it always needs gas turbines churning in the background as a back-up.

[Jonathan Reynolds]

We are straying a bit beyond the narrow remit of the Bill, but the point is an important one. On Second Reading—the hon. Gentleman and I were there—the overall figure was 5%, not 1%. It was 1% at the specific moment that the hon. Gentleman spoke—I will give him that—but in that 24-hour period it was running at about a quarter of the energy produced by our entire nuclear fleet, which is not a small contribution.

I recommend that all hon. Members take the time to go to National Grid’s control centre to see the multitude of different generating assets that can be turned on, or brought off the system, as required to keep the system in balance. That is not done as a short-term response to the current level of wind. National Grid’s weather planning system tells it exactly what it will need on certain days, and it is tremendously effective. I do not agree with the simplistic point that every megawatt of wind energy will have to have a corresponding megawatt of traditional gas generating capacity to back it up. Frankly, the people who are skilled at running our entire network do not tell me that that is the case, and I am willing to believe them given how successful they are at running the overall system.

[Rishi Sunak]

The hon. Gentleman is well versed in these matters, so can he point me in the right direction? My understanding is that Ofgem gives guidance to the grid about ensuring system security and ensuring that there is enough capacity at peak times of the day. Ofgem’s recommendation is that wind is considered to have the equivalent firm capacity of 20% of a thermal plant. That Ofgem recommendation clearly states that wind is not as efficient as a thermal plant, and when it is considering system security, there must be back-up. Does he disagree with Ofgem on that point?

[Jonathan Reynolds]

The hon. Gentleman is making a different point from his colleague, but for every generating asset on the system there will be a corresponding back-up percentage. Some of the greatest intermittency problems come from routine cases where things such as nuclear generating assets have to be taken off line for maintenance. All those decisions therefore have a corresponding back-up ratio, which is nothing new. One of the most frustrating things in debates about energy with the modern Conservative party is that a certain set of arguments is often applied to the renewable asset that is currently not in vogue in the Conservative party—there is a pretence that all the complexities of the energy system, whether it is strike payments or back-up capacity, only apply to things such as onshore wind, but obviously they apply to every generating asset.

[Rishi Sunak]

Looking at the numbers, does the hon. Gentleman at least agree that most other generating capacity back-ups are in the 80% to 90% range and that wind is an outlier, and considerably lower, at 20%? Is it at least true that wind is considerably less reliable than those other forms of generation?

[Jonathan Reynolds]

I do not agree at all.

[Dr Whitehead]

My hon. Friend might like to think about two points. First, the relative capacity margin of different forms of energy takes into account theoretical running time relative to downtime, and other factors, and therefore the figures should not be remotely near 80% or 90%. Secondly, will he speculate for a moment on the question of ramping down and ramping up? Wind is particularly good at that as far as balancing the system is concerned.

[Jonathan Reynolds]

Absolutely. There is an obsession in the Conservative party with onshore wind, and often with other types of renewables, too. Arguments are applied to onshore wind that are often illogical. I simply ask hon. Members to spend some time going to see how the system is run and how all these issues apply to different assets on the grid. If they did that, some of their fears might be allayed.

[Andrea Leadsom]

The hon. Gentleman is being extraordinarily patronising. I have been to see National Grid operations. Does he have the app through which the National Grid provides real-time data? During Second Reading, 1% of our electricity was supplied by wind. Does he not accept that there are times when the wind is simply not blowing? Furthermore, does he agree that, although it is true that, in its balancing, National Grid considers the forecast for outage times, for planned outages and for wind, those forecasts are often wrong? Does he accept that it is therefore not possible to be absolutely certain how much electricity wind will contribute at any one time? He must surely accept that.

[Jonathan Reynolds]

I accept that sometimes the wind does not blow—that is a reasonable point. On Second Reading, the figure was 5%, not 1%, as I said to the hon. Member for Daventry, if we take the 24-hour period in which the Bill had its Second Reading. I simply say that all generating assets have intermittency problems and require back-up. If we look at many other countries across the world, we are not the only country with an onshore wind contribution to our electricity system. Every other country in the world is investing in this in large numbers. The Minister sometimes has to respond to her own Back Benchers when they are being unfair when talking about onshore wind. Some issues are not being treated reasonably by the Government and by Conservative Back Benchers.

--- Later in debate ---

[Philip Boswell]

The hon. Gentleman makes a good point. Moreover from his excellent point, the sunk costs incurred, for example, on Twentyshilling Hill, currently sit at £3.5 million plus further commitments and the sunk costs incurred on Binn Eco Park wind farm currently sit at £1.5 million. That needs to be considered.

[Jonathan Reynolds]

Some interesting points are being raised, which the Government would do well to treat fairly.

The Minister mentioned the overperformance of onshore wind and our 2020 renewables target. I must stress this point clearly: there is a legally binding overall 2020 renewables target, but it is made up of a road map of targets for electricity, heat and transport, which are not binding but form our contribution to the overall renewables target. The target is for 30% of electricity generation, 12% of heat generation and 10% of transport to be renewable by 2020. When conceding that point, the Minister said that the problem is that the subsidies required for electricity and things such as onshore wind are such that we could not possibly try to overperform and that, frankly, we are not hitting our heat and transport targets.

If the Minister is worried about the impact of electricity subsidies on billpayers, she must get the briefing on how we will hit the heat target. To do so through the renewable heat incentive alone would require a budget in excess of the entire budget for the Department of Energy and Climate Change. The Minister will not save money by cutting back on this important area. She will almost certainly incur a much bigger liability for the taxpayer unless she can tell us that we are on track for our heat and transport targets, but we all know that we are not.

The Bill is needed to legislate for the Conservative party’s manifesto position, but the Government should recognise the UK’s pressing situation regarding investability. There are anomalies in the way that the Government’s objectives have been drawn up in the Bill and it is reasonable to correct them at this stage. Most of all, this group of amendments strikes the right balance between the Government’s objectives, investability and the national interest. I hope that the amendments will be considered properly.

[Simon Hoare]

It is a pleasure to serve under your chairmanship, Mr Bailey.

I was slightly anxious when my hon. Friend the Member for Daventry began his remarks with a clear US feel in talking about caucuses and the like. The Committee will know that today is groundhog day in the United States and listening to some of the speeches of Opposition Members, it did feel a bit like groundhog day today. Google is good for some things. [Interruption.] Trump that, as my hon. Friend says.

My heart sank when listening to an erudite but certainly groundhog day speech from the hon. Member for Norwich South, with all those surveys where this association says that and that association says the other, while 37% do such and such. As we all know, surveys can be made to say all sorts of things. “Bears prefer woods to bathrooms,” says one survey, “Turkeys don’t endorse Christmas as an annual event,” says another. The one survey that the Opposition parties seemed to neglect was the survey at the general election. That was a survey in which the British people said very clearly, among other things––particularly, though not exclusively, in rural England––that enough was enough. The survey at the ballot box demonstrated that this is an incredibly popular policy.

I have a fundamental support for how the Government are proposing to tackle the issue. My hon. Friend the Member for Daventry alluded to it. It would have been entirely within the purview of the Department––had it so wished, based on the election result––to say, “There we are. We’ve won. Any form of financial support or subsidy is going. You’ve got 12 hours to prepare and that’s it.” [Interruption.] For an Opposition Member to say that something the Government might do is very stupid takes a little brass neck. The hon. Member for Stalybridge and Hyde exhorted us all to take front and centre our duties to ensure that the investment markets had confidence in Britain. I look forward to the leaked transcripts of parliamentary Labour party meetings where he makes those points to his leader and the shadow Chancellor because I am not entirely sure that their policies do much to support confidence for investment in UK plc.

The stance that the Government have taken is to have a realistic timeframe whereby the industry, which must have been the most myopic ostrich if it did not see this coming, has time to rethink existing plans and, if it so wishes, seek alternative funding from the market. It is indicative that the Opposition say that this sector must always be subsidised. When David Davies of Llandinam literally sold the family silver––and almost the shoes on his feet––to pay the workers who were digging for coal in the south Wales valleys because he realised that there would be a market for coal to fuel the industrial revolution of which we were on the cusp, I doubt he sat down and thought, “Do you know what? I just wish there was a Government subsidy to support me doing this.” No, he realised that there was a market opportunity with profit attached to it and he went and did it. He did not need a subsidy and I do not believe wind should have one.

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[Simon Hoare]

No, I do not, with the greatest of respect. I can recall in my own commercial career working on a project for at least 11 years, where the client had spent somewhere in the region of £8.2 million propounding a planning proposal and still was not in sight of securing a consent. This is the point that I make. If someone is in the commercial development sector—the energy sector or whatever—there are risks attached.

[Jonathan Reynolds]

There is a point that has to be stressed here. Onshore wind developers are not arguing against the closure of the RO. They are not arguing for anything that might be unreasonable in terms of the risks that they knew were involved in the planning system. They are asking for the Government’s promises on sunk costs to be honoured. That is what the group of amendments does. They are not about demanding subsidy for ever or about asking for compensation for reasonable risks that were known to be there. It is about the Government honouring their promise on sunk costs.

[Simon Hoare]

I hear what the hon. Gentleman says. He obviously has a little more faith—I will be charitable and say faith—because I am not entirely convinced that any sector that is so sated by subsidy would ever turn round at any point and say, “Do you know what? Now is a really good time to end the subsidy.” There will always be a reason. We heard it from the solar sector: “Give us another 10 more years because we are on the cusp of doing something quite exciting with storage batteries.” Why they did not think about that when the sector was nascent, I do not know. People who receive a subsidy will always find an argument for the maintenance of the status quo.

The hon. Member for Southampton, Test, who leads for the Opposition, is about to burst a blood vessel unless I let him in. Having listened to him for the past two and a half days, I am loth to do so, but of course I will let him in.

--- Later in debate ---

[Andrea Leadsom]

I thank all members of the Committee for what has been an entertaining, informative and feisty discussion. Hon. Members of all parties share the desire to see fairness, so I take on board the comments of the hon. Member for Southampton, Test about grace periods. We have looked at them carefully. He will have heard my hon. Friends the Members for North Dorset and for Daventry saying that we could have come in on 6 May and said, “Right, you’ve got 12 hours,” but we were absolutely determined to have a measured response, and 18 June was roughly five or six weeks. We consulted widely. Although it was not a formal consultation, I can provide Members with a link—I do not have it to hand—to some of the feedback in the consultation with industry, which was carefully done to ensure that we got the balance right.

I congratulate my hon. Friend the Member for Daventry, who has done so much work. I like the 101 dalmatians. I would have been one of them, but I think I was probably Cruella de Vil. I was certainly one of the signatories to his letter, and as his neighbour in Northamptonshire, I was very much aware of the grave concern of communities who felt that they were not being listened to. It was a great pleasure for me, as a new Minister in the Department, to be able to implement our manifesto pledge. Both my hon. Friend and I can assure Members that this is exactly what we meant by it. All colleagues on the Government Benches understand that closing the RO early was a clear manifesto commitment—no ifs, no buts.

I also congratulate my hon. Friend on his excellent work on amplitude modulation. He came and talked to me about it with a number of experts. We are determined to address and find a solution to the problem. He reminds me frequently that I need to come back to him with an answer, but the Department is taking independent advice on the matter. We hope to make some progress on that.

The hon. Member for Stalybridge and Hyde raised a number of points that I welcomed. He talked about fairness to investors and sunk costs. Equally, he must recognise that we, as the Government, must manage the potential upside risk of deploying up to a further 7 GW and more of onshore wind, which we know is in the planning system. As I said earlier, our deployment range in our electricity market reform estimation was between 11 and 13 GW of wind, and we believe that we will still be able to be within that range.

Developers build risk into their decision making. Even before the changes were introduced, there was never a guarantee that the projects will build out. There are all sorts of risks involving planning permission— access to grid and issues with military radar. There are all sorts of reasons why projects do not come to fruition. Equally, the Government have been clear that our absolute No. 1 priority is energy security, and then decarbonising at the lowest possible cost to consumers. That means that we need to get the balance right between the costs on bills and our decarbonisation targets, to which we remain absolutely committed.

[Jonathan Reynolds]

Of course there are risks in any field that must be built in, but our point is that the greater those risks—and the Government are making those risks greater—and the higher the cost of capital, the less investment will come to the UK. It is as straightforward as that.

[Andrea Leadsom]

I am sure, then, that the hon. Gentleman will be delighted about our commitment to further deployment of offshore wind and to the new nuclear programme, both of which are a low-carbon future for the UK. Targets for decarbonisation and new gas, and a big decarbonisation away from coal and into gas, are the bridge to a low-carbon future. I am sure that he will welcome the certainty that we have given investors with that, and the opportunity for UK plc to get more jobs, more growth and more business in the supply chain as a result of our changes in policy.

I will come specifically to the amendments tabled by the hon. Member for Coatbridge, Chryston and Bellshill, whom I thank for his excellent portrayal of the intention behind them. I hope to give him some reassurance on some of those points. My hon. Friend the Member for North Dorset is absolutely right to point out that the survey of the ballot box, which is the best survey, has entirely supported our policy on wind. He raised the question of appeals and judicial reviews. The appeals process is still in place for onshore wind. However, any appeal in England on a decision taken after 18 June will need to take into account the clear statement made by the Secretary of State for Communities and Local Government on 18 June, which sets out the new considerations to be applied to proposals so that local people have the final say on wind farm applications, fulfilling the commitment made in the Conservative election manifesto. Importantly, it also makes it clear that planning permission should be granted only if the development site has the support of the local community and that it can be demonstrated that any planning impacts identified by affected local communities have been fully addressed. My hon. Friend is right to raise that point and I hope he is reassured.

Oral Answers to Questions

Jonathan Reynolds Excerpts

Tuesday 19th January 2016 Commons Chamber

[Damian Hinds]

UKTI has an ambition to increase the number of exporting businesses by 100,000. There are a number of aspects to that: moving to more direct support as well as advice; learning from some of the leading export promotion agencies in the world; and, as my right hon. Friend the Chief Secretary was saying just now, making sure that we leverage existing Government relationships with firms and sectors through a whole-of-government approach to supporting exports.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

19. The slump in manufacturing exports at the end of last year has to be proof that the UK economy is still too dependent on consumer spending to drive growth, and the Government must stop being so complacent and so self-congratulatory in sessions such as this. With the risk of Brexit this year only making things worse, what are they going to do to expand manufacturing exports?

[Damian Hinds]

Exports are a challenge; there has been a long-term change in the UK’s share of world trade, the majority of it coming before 2010. On the hon. Gentleman’s point about investment expenditure and consumption expenditure, business investment has grown by two and a half times that of consumption since 2010.