Business Rates Reduction Services

Kevin Hollinrake Excerpts

Wednesday 26th May 2021 Westminster Hall

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I beg to move,

That this House has considered regulation of business rates reduction services.

It is an absolute pleasure to speak under your chairmanship, Mr Hollobone. I must first draw the House’s attention to my entry in the Register of Members’ Financial Interests. I am delighted to have the opportunity to talk about this issue. This debate is obviously the most important event happening in Parliament at 9.30 this morning—no doubt we will not be distracted by anything else that is going on.

This is a very simple issue. It relates primarily to one single company, and I can describe these people as no better than a group of con men, who prey on unsuspecting business people, usually very small SMEs—small and medium-sized enterprises—and con them into signing a very unfair contract, which often is completed after the event, after they have met with the business person. The contract that they tie them into, which is a very long-term contract, effectively diverts tens of thousands of pounds intended to be Government support, Treasury support, to SMEs—usually smaller businesses—from them and into their own bank account. The company that I am speaking about specifically is called RVA Surveyors. This is a company in Manchester run by a gentleman called Stephan Hughes.

The support, of course, is small business rates relief, which is supposed to be there for small businesses; indeed, it is the relief granted by the Treasury to help people through the covid crisis. About half of this support has been diverted from the businesses concerned into the relevant business, RVA Surveyors, and there is not even a service provided. It is a simple letter that is required; all these people do is send a simple letter to the local authority and that effectively diverts the relief.

Dozens of cases are known to Members of this House. I think that 13 different Members of Parliament supported a letter that I wrote to my right hon. Friend the Secretary of State and to the Insolvency Service. They include the hon. Member for Walthamstow (Stella Creasy), whom I am delighted to see here today, but also other Members who have expressed keen support for this debate, including my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst) and my right hon. Friend the Member for Tunbridge Wells (Greg Clark), who is detained at other proceedings this morning.

Dozens of cases are known to Members of this House, but according to RVA’s own website, RVA has about 10,000 clients around the UK, so I think it is safe to assume that hundreds, if not thousands, of businesses have effectively been defrauded in this way. I can describe these people, RVA Surveyors, in no better terms than by saying that they are shysters, carpetbaggers, parasites. It is a simple con trick that they carry out, and this happened to one of my constituents, which is how my attention was drawn to this particular issue. My constituent, Jude Carter, who owns Dreams Hair & Beauty Salon in Hunmanby, is a small businessperson.

Imagine how it is when someone is busy trying to set up a business. These people use a freedom of information request to find out which premises qualify for small business rates relief and which are not currently getting that relief. They then call on that particular business. The businessperson is setting up the business, painting the walls, furnishing the place, getting ready for the first days of trading, and those people come in and say, “We can save you lots of money—just sign this form and we will reduce your business rates.”

There are many business rates reduction specialists that offer a perfectly bona fide service. They will measure the premises, argue with the Valuation Office Agency, reduce the business rates and provide a service for which they quite rightly should be paid. They provide fair terms for that reduction, and both the business owner and the rates reduction specialists then benefit from that reduction in business rates. That is a perfectly reasonable service to offer.

This is entirely different, because the small business rates relief is almost automatically provided for that business. All that business needs to do is notify the council that they are the occupant, that they qualify for small business rates relief, and it will be automatically applied. It is a simple, standard letter. The measure is automatically applied and the rates relief from the Government is automatically provided. Anything up to around £6,000 or £7,000 a year in small business rates relief will be provided to that business.

However, some business owners are not aware that it is automatically provided. Those people go in and tell them, “We can reduce your rates bill—sign here.” They offer a very long-term contract. In Jude Carter’s case, she signed a 12-year contract, and she believes that the contract was amended after the event to become a longer-term contract. It was for a much shorter term, but they changed it.

Jude Carter’s premises had rateable value of £6,300 a year, which means, using the multiplier, that she should be paying around £3,000 a year. Small business rates relief applies, so there should be no rates at all for a small business owner occupying those premises. RVA just writes to the council and that small business rates relief is then applied, so Mrs Carter pays no rates. Some £3,000 have been saved with a single standard letter, and the contract says that Mrs Carter owes RVA 52% of that saving. For one standard letter, for 12 years, she is paying 52% of the saving from which she benefits. Typically, over that 12-year contract, £18,000 has been diverted. The Treasury wants that money to go to Mrs Carter to help her run her business, to keep her in business, but it is being diverted to RVA. It is simply, absolutely wrong.

As I say, contracts are tampered with. Mrs Carter has tried to get out of the contract, she has tried not paying the contract, but RVA has used many dubious tactics to harass her into paying. They ring the premises and speak to her or her staff, to say that the bills are overdue, which causes some distress within the business itself. Nobody wants to think that their business cannot pay its bills, so time and again, Mrs Carter has to pay the bill, despite the fact that there is absolutely no service being provided for that extortionate amount of money.

It is usually the very smallest businesses that fall prey to those tactics—and there are many cynical tactics that are employed. Those people forge signatures. There was one court case presided over by Deputy District Judge Lynds in Clerkenwell and Shoreditch County Court. That case, involving Stephen Snell, has been reported and Judge Lynds dismissed RVA’s claims. RVA will take people to court to enforce contracts. For reasons I shall come on to explain, they are perfectly enforceable contracts—that is, if they have not been forged. However, in this case, it was determined that RVA’s representative had forged a signature. The judge stated:

Ordinarily I would not come anywhere close to make an assessment of these signatures but it’s plain to me”

that the signature did not bear any resemblance to Mr Snell’s signature, and he kicked the case out. There is therefore demonstrable evidence of fraudulent activity by that company. It uses other tactics as well. It completes contracts after the event, as I believe it did with Mrs Carter, and it changes them to extend the length of the contract or the percentage that it charges. When it charges 45% plus VAT, that adds up to just over 50% of the benefit received.

The company resorts to harassing owners and their staff, and there is evidence that it lies to the Valuation Office Agency when it assesses premises. It works on a damages-based agreement. According to the law, a reason for the charges has to be provided, but the company provides no reason, so it is debatable whether the contracts should be enforceable in law. Nevertheless, the courts generally enforce the contracts and make the small business pay the amount on the contract.

We are aware of most of these cases because of a very good campaign by Andrew Penman, who writes for the Daily Mirror. He has covered many of these cases time and again and has highlighted RVA’s dubious tactics. A surveyor called Steven Simon is helping my constituent, Jude Carter, with her case. Sadly, the company gets away with such tactics time and again, and the courts rule that the small business has to pay because a contract is enforceable. Even though the contract is patently unfair, the Consumer Rights Act 2015, which makes provision for unfair contracts, does not apply to SMEs, so once a business—even a very small business that probably has all the hallmarks of a consumer—has signed a contract, it is enforceable, however unfair it is.

The only way to tackle the company and to try to challenge the contracts—closing the company would be the most desired outcome—is through the Insolvency Service. I wrote to the Department for Business, Energy and Industrial Strategy. I know my right hon. Friend the Minister will say that perhaps BEIS has a greater jurisdiction over this than the Treasury, and I wrote to BEIS about this. My right hon. Friend the Business Secretary wrote back and said that the Insolvency Service could deal with these situations where there is clear evidence of corporate abuse, fraud, scams and sharp practice. The Insolvency Service wrote to me and said that it did not see the hallmarks of that in my case, which astounds me. There is clear evidence of corporate abuse, fraud, scams and sharp practice.

I should say that RVA Surveyors is not the only organisation involved in sharp practice. There are others, such as SJ Associates. A simple solution would be to extend the consumer protection laws in the Consumer Rights Act to include microbusinesses. There is a precedent for that because microbusinesses were, for example, covered under the Financial Ombudsman Service, and that has now been extended to larger small businesses. In addition, the Financial Ombudsman Service has jurisdiction over some elements of utility contracts between microbusinesses and utility providers. There is a precedent for extending the laws for microbusinesses, which would resolve the problem, because the court would be able to look at the contracts, see that they are patently unfair and strike them out.

Another way to solve the problem would be to reform business rates completely. I have talked to my right hon. Friend the Minister about that on numerous occasions. I believe that business rates as they were first constructed are no longer fit for purpose. Businesses no longer trade only or primarily from high street premises. The business world has moved on. Business rates, based on property, were once seen as the right way to tax businesses, but I do not feel that it is the right way now. The Treasury is looking at this matter, and I know there is another review. In the recent consultation, three solutions were proposed: some kind of land value tax; an online sales tax; and an increase in VAT. The latter would be a much better option than the current business rates system or an online sales tax.

The difficulty with an online sales tax is that it would create more complexity by adding another tax to an already very complex tax system. An online sales tax also assumes that businesses trade one way or the other —online or through retail premises—when actually many trade in at least three ways: online, through high street premises and click and collect. An online sales tax would therefore require a business to think about how it sold a product, whether click and collect, online or through the high street, which would add complexity. An online sales tax also assumes that retail is the only sector affected by the move to online shopping, but that is far from the case.

Due to the opportunities of online activity, there are many new competitors in various sectors, not least the restaurant sector, which sees more and more competition from dark kitchens using Deliveroo, Just Eat and others for deliveries. In my business world—I am in the estate agency business, as you know, Mr Hollobone—we have seen new online competition, too. An online sales tax may look from that retail perspective as if new competition is only for retail in the high street, but that is not the case.

A much simpler way of levelling the playing field between online businesses and high street or premises-based businesses is a simple increase in VAT. It would affect everyone in the same way and, if we increased VAT by about 4p in the pound, we could scrap business rates altogether. Perhaps we could look at the VAT threshold as well, which can be a barrier to some businesses growing. With that, there would be no need for rates and therefore no need for rates relief, no need for rates reductions and no need for the Valuation Office Agency and many of the rates specialists, who could move into the productive economy and do something far more constructive than, say, two surveyors arguing about the rates on a particular property. It would settle the issue once and for all in Parliament and create that fair and level playing field for all businesses. The best thing is that there would be none of the reprobates from RVA, because there would be no business for it to try to hijack, moving rates relief from a business to its own bank account.

That is one way of solving the problem—but we need to solve the problem. It cannot be right that we leave these smallest of businesses at the mercy of complete charlatans such as RVA. I therefore urge my right hon. Friend the Minister to do what he can to persuade the Department for Business, Energy and Industrial Strategy to get the Insolvency Service to look at this, close down RVA and ensure that the relief that he has directed from the taxpayer to small and medium-sized enterprises ends up where he intended.

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[Kevin Hollinrake]

May I associate myself with the hon. Gentleman’s words? Brian was a great man—a great man who did much work for many businesses that could not fight for themselves, in the battle against larger banks. He did a tremendous job, in his inimitable way. He was humble. It was never for himself. It was always, as the hon. Gentleman says, for the underdog, fighting an almost impossible battle. He had many a great success in that regard.

[Jim Shannon]

I thank the hon. Gentleman for his intervention. His words resonate with my own. The family will be greatly encouraged by our comments.

It is a pleasure to follow the hon. Member for Walthamstow (Stella Creasy) and her reasoned and valuable contribution—a well-thought-out contribution, which we wholeheartedly support. She referred to cross-party support. I hope my comments today will add cross-party support to the two previous speakers.

I understand that the regulations for business rates relief are handled in a different way in Northern Ireland than here on the mainland, and in Scotland, but the issues are the same. The ten-minute rule Bill regarding business rates means that we perhaps can and should take a UK-wide, holistic view of this matter.

I read with great interest the comments that highlight the belief that business rates were designed for a bygone era, where business went hand-in-hand with high street premises. The way we shop is now changing forever and the coronavirus has exacerbated those changes. Online sales now account for 33% of all retail sales, compared with 20% only a year ago.

I have been very impressed with my local council in my constituency of Strangford, which is working with businesses on the high street to retain their presence while they enter online forums. I have seen businesses, many of which were only able to open last week in Northern Ireland, come to terms with the new click-and-collect era and other ways of doing business. As we have watched businesses roll with gut-wrenching punches, it has highlighted to me that perhaps we, too, in this place, must advocate for change that makes sense in the post-covid world, where we are today. I see the wisdom, as I have seen many times in the past, of the rationale of the hon. Member for Thirsk and Malton. I am interested to hear more and learn more of the outworking of the proposals that I have heard from my respected colleague and friend, as well as of those from the hon. Member for Walthamstow.

When I read the Library briefing for today’s debate, I was dismayed but not shocked at the companies seeking to take advantage of struggling businesses who are appealing the rates. The scams were wide-ranging and intricate, and it is clear that the current system leaves itself open for the kinds of abuses that both hon. Members refer to—yet another indicator that something needs to change, and change soon. The FSB contacted and asked me to put on record, as others have done, that they believe business rate companies should be licensed to access business rates records on behalf of businesses. There would be a low barrier to access, but a condition of the license would be to ban cowboy practices. The hon. Gentleman for Thirsk and Malton’s introduction used a lot of descriptive nouns for them without using any bad language, which I thought was quite good and I really relate to that. We could probably think of other things which would be unparliamentary and not appropriate. Nonetheless, it illustrates how we all feel.

While recent business rates reductions during the pandemic were welcome, too many businesses find themselves with an unexpected bill from these companies. Their predatory payment tactics mean that where Government policy reduced the bill to nil, these companies claim the reduction as part of their work, and charge year on year. Many businesses end up with a bill for £1,000 plus, when the only change has been as a result of Government policy. The Government does it, and they do it because that is their job. These guys come along and charge for it, when the Government does all the work. It reminds me of the cuckoo. We all know what the cuckoo does—he jumps into the nest of another bird, eats all the food that the parents give and has nothing to do with the parent birds. These are cuckoo companies and in my opinion deliver something that is totally wrong. Too often the conditions are hidden in the trading terms and conditions.

I welcome the schemes in England, such as extra targeted support packages for businesses and relief for retail, hospitality and leisure businesses, and the corresponding help in Northern Ireland. I put on record my thanks to the Minister and the Government—my Government—for all they have done to help businesses in the constituency of Strangford, and across the whole of the United Kingdom of Great Britain and Northern Ireland. They have kept those businesses afloat and we thank them for it. However, the fact of the matter is that businesses will need ongoing help. Rather than further complex and detailed schemes, now is the time to overview and change the entire system, as the hon. Gentleman for Thirsk and Malton referred to in his introduction. There must be a genuine review of how we can support businesses to survive, maintain a presence, and importantly continue with job creation. I believe we will get a bounce whenever we come out of lockdown, but we need to continue that bounce right through into the months and years ahead. When it comes to business, we have to play the long game, investing in small businesses, and knowing that in the end we will recoup every penny that has been outlaid when jobs continue and taxes are paid in manageable amounts to keep the business open and viable.

In conclusion, I believe the suggestions of the hon. Member for Thirsk and Malton are useful in moving forward, and I join him and the hon. Member for Walthamstow in asking the Government to put serious thought and manpower behind making this change for the good of business, our economy, and consequently, the quality of life throughout the whole of the United Kingdom of Great Britain and Northern Ireland.

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[Kevin Hollinrake]

I thank all hon. Members for their support in this debate. Everybody made very well thought through comments. I particularly thank the Minister. There is no doubt that this issue has arisen as an unintended consequence of the generous targeted support from the Treasury for small businesses. Very small businesses, generally, are then subject to predatory behaviour from the rip-off merchants, as has been mentioned by various hon. Members today. In the case of Jude Carter, the contract will divert £18,000—which the Treasury intended to give to her in taxpayer support—from her to RVA. That is simply unacceptable. In many cases—hopefully not in Jude Carter’s case—that would be a matter of life or death for a business of that size; £18,000 is a huge amount of money over 12 years.

Clearly, this is a scam. It is disappointing that the Insolvency Service has chosen not to investigate. It did write back to me, saying that, despite the fact that it does have jurisdiction over scams of this nature, it found no grounds on which to take further action within its powers. It is very surprising that the Insolvency Service will not act in this clear case of abuse by a business of other businesses. It has the power to close down this business. It has the power to strike off directors. I hope it will listen to the debate and act. It has decided to look at the issue again—it recently wrote to me asking for more information about hon. Members who have such cases—so I really do hope it will act.

I appreciate the comments from my right hon. Friend the Minister. This is a specific case, but there are other cases of predatory behaviour inflicted on microbusinesses. I am very heartened to hear what he said. There is a good case for extending the Consumer Rights Act 2015 to cover microbusinesses, which would resolve this problem, because I am sure that these contracts would be struck out by the court on the basis of the very unfair terms. I think there will be other contracts, under which small businesses are subjected to unfair behaviour to persuade them to sign, where the courts could intervene to prevent that behaviour from happening in the future.

I thank all hon. Members for their contributions to the debate, and I hope we can make more progress.

Question put and agreed to.

Resolved,

That this House has considered regulation of business rates reduction services.

Better Jobs and a Fair Deal at Work

Kevin Hollinrake Excerpts

Wednesday 12th May 2021 Commons Chamber

[Rishi Sunak]

The kickstart scheme has now created almost 200,000 job placements for young people in record time, given that the scheme was only announced in July last year and operational in autumn. Its ramp-up compares very favourably with the future jobs fund, which preceded it, and with which the hon. Member will be familiar. Now that the economy is reopening, many more young people can start those placements over the coming months. I commend all people both at the Department for Work and Pensions and at the thousands of companies involved for their participation in a scheme that will transform the opportunities of young people up and down the country.

With regard to apprenticeships, we already have an incentive for employers to take on apprentices. In the crisis, the Government introduced a £3,000 hiring subsidy for small and medium-sized businesses to take on a new apprentice—a significant 35% subsidy, I think, of an apprentice at the apprenticeship median wage. It also pays for 95% of all training costs for apprentices employed by SMEs, as well as improving the quality of those apprenticeships. I agree with the hon. Gentleman that apprenticeships are important, but we took action in July last year.

To help people of all ages to get back into work, we have doubled the number of work coaches in jobcentres and provided over £3.5 billion to help people to search for work or retrain, and we are launching the restart programme, with £2.9 billion to provide intensive support to over 1 million people who are long-term unemployed. This Queen’s Speech goes even further to turbocharge our economic recovery and get people into decent, well-paid jobs. The plan set out in the Queen’s Speech creates more jobs, and jobs where people live. The levelling up White Paper will set out bold new interventions to improve livelihoods and opportunities. We are strengthening the Union with record investment in new infrastructure, such as road, railways and broadband. We are turning Britain into a science superpower, with our plan for growth making this country the best place in the world for inventors, innovators and engineers.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

First, may I wish the Chancellor a very happy birthday? The scale of his ambition on levelling up is absolutely right, but the scale of the challenge is also huge. The economic gap between London and the south-east and the north-east, in relative terms, is as great as it was between East Germany and West Germany prior to reunification, and it took 30 years to narrow that gap. Does he agree that it will take more than one Parliament and more than the significant investment he has already committed to truly to level up this country?

[Rishi Sunak]

I thank my hon. Friend for his warm words, and I agree with him. This is the task that this Government will meet head-on, and it is right that it needs to be an ambitious goal that we set ourselves to meet. Like him, I share an eagerness to get on with it and keep going—and he will know, like me, that we are already doing it. Indeed, we are making the most of our new-found Brexit freedoms to launch freeports, for example, creating jobs and growth in innovative new industries in places such as Teesside, which both he and I know very well.

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[Rachel Reeves (Leeds West) (Lab)]

I am proud to open today’s debate on behalf of the Opposition. I am conscious that one of the basic tenets of qualification for Government is to be trusted by the public with their money. If we do not meet that test, then none of our ambitions and none of the changes we seek can come to pass, so let me make one thing clear at the start: it is a test that I intend to meet.

The recovery from the pandemic represents a crucial moment for Britain. This really is not the time for just wallpapering over the cracks; instead, we must match the scale of the moment that faces our people and also our planet. We need a Government who back Britain, and that means an ambitious and bold plan for good jobs. We must end the insecurity and lack of opportunity that there is in our economy for far too many, and seize this moment to create a brighter future for people in all parts of our United Kingdom.

This last year has been like no other. Families have given up so much; so many have lost loved ones. Coronavirus has shone a spotlight on what matters to all of us—our families and friends, our communities, our health and our security. After a decade of Conservative government, our public services were underfunded and underprepared for the pandemic that came—a shortfall of intensive care beds; unfilled vacancies in our NHS; a fragmented and underfunded social care system; and personal protective equipment stockpiles run down, despite all the warnings. This Government have allowed the public square to become degraded, and we all now know the cost of that.

Meanwhile, the failure to increase statutory sick pay in the middle of a deadly pandemic put far too many low-paid families in the impossible position of having to decide whether to go to work and put food on their table or to self-isolate and protect public health. The Government could and should have done so much more for those people.

The truth is that for too many people wages have stalled over the past decade; household debt is rising and too many people live pay cheque to pay cheque. And many of those people do the crucial everyday jobs that keep our economy running and our public services going. They have been overlooked and undervalued. The Government have done nothing for them and nor does this Queen’s Speech.

Instead, £2 billion of public contracts have been awarded to companies with close links to the Conservative party. We are led to believe that this is all one massive coincidence that they got those contracts. How did it happen? Who knows? The Government are taking the public for fools. What taxpayers deserve is for their money to be used to best effect, not for it to be squandered on contracts that do not deliver or used to line the pockets of friends and donors of the Conservative party.

The Government say they want value for money, but they have failed to claw back the millions of pounds wasted on contracts that did not deliver for the NHS and did not deliver for taxpayers either.

[Kevin Hollinrake]

The hon. Lady talked about people with connections to the Conservative party trying to get their favoured contractors to the front of the queue. Does she remember emailing me in the Cabinet Office to ask for one of her constituency companies to get to the head of the queue for exactly the same purpose?

[Rachel Reeves]

The job of a constituency MP, as the hon. Gentleman—a good constituency MP himself—knows, is to look out for our constituents. But I was not pocketing the money: I was not giving contracts to donors of my party, and I was not giving my local pub landlord a contract. Maybe our local pub landlords are really good at delivering contracts for the NHS, even though they have no track record of that—or maybe this one was a mate of a Conservative party Cabinet Minister.

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[Kevin Hollinrake]

On a point of order, Madam Deputy Speaker. The hon. Lady seems to be accusing Members of this House of personally pocketing money. Will you ask her to explain exactly what evidence she has in that regard?

[Madam Deputy Speaker (Dame Rosie Winterton)]

That is not really a point of order; it is part of the debate, and I do not want the debate to descend into points of order. I am sure that if the shadow Chancellor of the Exchequer feels she needs to say anything further in response to the hon. Gentleman, she will do so.

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[Stephen Flynn]

We can, of course, take that wider question to the Scottish public in a second independence referendum. I am sure that the hon Lady, whose party was roundly destroyed in the elections last year, will back up that support for independence.

I was talking about climate change and its importance in the context of the north-east of Scotland. That investment is important when it comes to securing jobs. The Scottish Government have one hand tied behind their back when it comes to energy, because it is this UK Treasury that has coined in in excess of £350 billion of oil and gas revenues over the decade, and it is this UK Treasury that has a responsibility now to act and to ensure that the north-east of Scotland is protected.

It is not just a case of making sure that there are job opportunities for those whose jobs have gone or whose jobs are now at risk because of the transition that will be made; it is also about protecting those who are currently in employment. If someone is in employment and they look at the Queen’s Speech, they will be asking, “Where is it— where is the Employment Bill that was promised? Where is the protection of workers’ rights?” More than that, they will be asking, “Where is the action that this Government are intending to take when it comes to fire and rehire?” We heard warm words once again from the Chancellor, but my hon. Friend the Member for Paisley and Renfrewshire North (Gavin Newlands) has had a Bill before the House for many months now seeking to outlaw the practice of fire and rehire. Where has the Government’s support for that Bill been? They could end that practice and they could end it now, but, of course, they have chosen not to do so. They are not interested in protecting people’s employment rights.

There is one group who deserve to have their rights protected more than any other moving forward and who deserve to have jobs and opportunities and that is our young people. Although there has not been much agreement on a lot of what I have said so far today—that is an understatement—I think that we can all agree that young people have been perhaps the hardest hit by the pandemic. We should not forget, of course, that it is not just the pandemic that is before them. Many people are still feeling the difficulties of the global financial crash of 2008. They are the same people who have had their ability to live, work and study in the European Union taken away from them. These are the people who deserve our support. In Scotland, we are seeking to support them from the earliest of ages.

We are going to ensure that young people have the freedom to go to university without paying any money. In stark contrast to the Conservatives, we are going to make sure that our young people are fed with free school meals. We are going to make sure that the digital divide is ended for our young people, as they are going to have the opportunity to have a free laptop or iPad, all in contrast to the UK Government, and of course we are introducing a jobs guarantee to ensure that every 16 to 24-year-old in Scotland has the opportunity to go to university or college—

[Kevin Hollinrake]

Of course, jobs depend on economic growth under the stewardship of the SNP. Over the past eight years, average UK GDP growth has been 2% a year, and in Scotland it has been 1.2%. What is the hon. Gentleman going to do about driving the Scottish economy to grow more quickly?

[Stephen Flynn]

I appreciate we are not allowed to use prompts in the Chamber, but I refer the hon. Gentleman to page 4 of the SNP’s manifesto, which I am sure he has read. It outlines exactly the next steps as we build back.

Our young people deserve our support, and they have our support in Scotland. More than anything, our young people deserve not just investment but a right to define their own future. We know that in Scotland our young people back independence in their droves. They deserve the right to choose their own future. The people of Scotland deserve the right to choose their own future, and they will have that choice.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to follow the hon. Member for Easington (Grahame Morris). I totally agree with him that levelling up has to be very much about better jobs and a fairer deal at work.

The scale of the challenge of levelling up is huge. As I said in my intervention on the Chancellor, the economic disparity in productivity and economic output per capita between the north-east and London and the south-east is, in relative terms, as large as it was between East Germany and West Germany prior to reunification. It took 30 years and $2 trillion in investment and incentives for businesses to narrow that gap, and it is still not fully narrowed.

The other lesson from Germany is that this cannot be done just by public sector spending; the private sector has to invest too. According to Andy Haldane, the chief economist at the Bank of England, there is an economic gap: overall economic activity per capita is £45,000 in London and the south-east, and £18,000 in the north-east. That leads, of course, to a gap in prosperity, which is what levelling up has to be about. Average wages are £41,000 in London and the south-east, and £28,000 in the north-east.

This is a huge challenge. It is great that the Government have a real ambition and the right scale of ambition. The good news is that this is not a zero-sum game. If we get the whole economy firing on all cylinders, the very fact that household consumption accounts for 58% of overall spending in our economy means that it will be a self-fulfilling prophecy: when all areas become more prosperous, there will be more spending—more economic activity. That has to be good for everyone.

The Government have made a historic start, not just in the amount of money they are spending—they have pledged to spend £600 billion on infrastructure over the five years of this Parliament, a 50-year high; the highest public sector net investment in the past five decades—but in where they will spend it. In the past, the Green Book has allocated expenditure principally where the well-paid jobs are. Creating 100 new jobs in London and the south-east, at £41,000 each, will mean a much better return in terms of value for money than creating 100 jobs in the north-east, so obviously, the Green Book has always prioritised investment in London and the south-east.

The Government have quite rightly changed that; strategic objectives are now part of the equation of where money is spent. I very much welcome that. It is critical to this discussion. The Government have also promised to change where we invest in infrastructure for housing through the housing infrastructure fund, on pretty much the same basis. That is a really good start in terms of public sector investment in infrastructure—roads, railways and other things.

The Government are also moving jobs around the country, with the UK infrastructure bank coming to Leeds and Treasury North to Darlington, and the Cabinet Office going to Glasgow. That just shows what we can do with public sector moneys in terms of levelling up. Of course, there is also the huge green investment that the Government are going to make with taxpayers’ money.

The key thing, though—we must learn the lesson from Germany—is that this cannot be about one Parliament. It cannot be subject to electoral cycles; it has to be a much longer strategic investment. This has to happen over 30 years—and, as I said, it cannot just be about public sector investment.

Mark Littlewood, the director general of the Institute of Economic Affairs, wrote a very interesting article about this in The Times. He asked, if this is all about infrastructure—if prosperity is about connectivity, in terms of roads and railways—why is Doncaster not more prosperous? The shadow Secretary of State, the right hon. Member for Doncaster North (Edward Miliband), will no doubt reflect on that. Why is Doncaster not more prosperous? It is very well connected. We need the private sector to invest alongside; that is the key thing. We can do that through devolution and get our excellent metro mayors, from either side of the political divide, to attract more private sector investment in their areas. It would help tremendously to have greater tax incentives in some of these areas to attract foreign direct investment. We do not have a regional policy for foreign direct investment. That would help tremendously. Enhancements of things such as the enterprise investment schemes for those regions, which would encourage private investors to invest in their region, could have a transformational effect on the public sector investing in those areas. Finally, regional mutual banks could have a transformative effect on local investment by connecting investors with SMEs in the regions that need investment.

[Madam Deputy Speaker (Dame Eleanor Laing)]

After the next speaker, the time limit will reduce to four minutes, but with five minutes, I call Caroline Lucas.

--- Later in debate ---

[Mr Toby Perkins (Chesterfield) (Lab)]

It is very interesting to follow the hon. Member for Clacton (Giles Watling), who appears to have made it all the way from Clacton to Portcullis House but not quite managed to get over the final 200 yards, which is quite an interesting metaphor for the Government’s Queen’s Speech. It promises so much, as the Government have over the last 11 years, yet, as is so often the case, there is less to it than originally meets the eye.

This is an entirely incoherent Government, and, most importantly, it is a Government who do not do what they say and who do not mean what they say. We had the stunning statistic from the hon. Member for Thirsk and Malton (Kevin Hollinrake)—I thought this was very interesting—that the gap between London and the south and the north of England is bigger than the gap between West Germany and East Germany before unification. What a stunning demonstration of the failure of the northern powerhouse, which we were all told to celebrate seven or eight years ago.

[Kevin Hollinrake]

The point is that we need to put political differences aside on this issue. Decades of underinvestment have brought us here. The hon. Gentleman is trying to make a cheap political point, but that is not at all what I was saying.

[Mr Perkins]

I am making a political point because we have had a Conservative Government for 11 years and I see videos on television showing people who have decided to vote Conservative because they are fed up about the health service or about ports closing, not realising that it is the policies of a Conservative Government, which Government Members have been voting for all these years, that have caused these problems.

When we look at what is in front of us, we see, for example, the lifetime skills guarantee. The lifetime skills guarantee existed under a Labour Government. In 2013, this Government got rid of it and now they want us to celebrate their bringing back, in a less ambitious form, exactly what existed previously under Labour. We have the apprenticeships levy. Since the introduction of the apprenticeships levy, apprenticeship numbers have fallen. We have a Prime Minister who, two years ago, stood on the steps of Downing Street and said, “On social care, trust me—I’ve got a plan.” The reality is that he is now coming back and saying, “Well, let’s have a chat about it because I’d like to work together on it.” The reality is that this Government have said one thing and done another.

The Government are talking about a revolution in skills. We have had 11 years of funding cuts. We have had cuts to adult education of over 50%. They are absolutely monumental, and now the Government have the audacity to stand there and suggest that they are the way that we solve the skills crisis. Hon. Members have spoken in this debate about the productivity gap between Britain and some of our European competitors. When we have had the cuts that we have seen to work-based learning and adult education—not just to funding, but to the numbers—and the impact that the introduction of the trebling of tuition fees has had on work-based learning and on people bettering themselves, is it any wonder that we have this productivity failure in front of us?

The Queen’s Speech talks about infrastructure. HS2 is an important infrastructure project, which was envisaged under the Labour Government. Never before has there been a Government spending as much money as they are on HS2 yet simultaneously looking so unenthusiastic and so incompetent in delivering it. I firmly believe in HS2 but I wish that we had a Government who believed in it as much as I do, and they are the ones actually spending the money.

The Government have abandoned smaller businesses. The Queen’s Speech talks about increasing the amount of trade that we do with the Gulf, Africa and the Indo-Pacific. I entirely agree with that, but the reality is that we have a large market on our doorsteps and the current arrangements that we have as a result of Brexit prevent small manufacturers from being able to trade with those companies. Companies in the UK say to me that if they do not have enough for an entire lorryload to export, it is impossible for them to do so. Recently, Sir David Frost, the architect of the UK-Northern Ireland protocol, said that the protocol is not “sustainable for long”. This is a Government who in every regard are telling us one thing, failing to deliver, and then coming back and suggesting that they are the solution to the very problems they have created.

Small businesses have been left in a very difficult situation. We have seen the number of apprenticeships that small businesses are able to get involved in completely reduced as a result of the complexity of the apprenticeships system. Many small businesses have really struggled through the pandemic because their directors were excluded from the self-employment support scheme.

The self-employment scheme was great for those who qualified, but the reality is that there were many people in many sectors who carried on working right through the pandemic and were also able to pocket a very generous pay-out from the Government, but there were also 3 million people who, for a variety of different reasons, were excluded. The Government spent huge amounts of money on a scheme that missed many people for different reasons, and which simultaneously gave a huge amount of money to some people who were gratefully able to receive it, but who, it could be argued, were not necessarily the right people.

We have a Government who do not mean what they say and who do not deliver what they say they will. This Queen’s Speech is an incoherent example of all their failings.

Oral Answers to Questions

Kevin Hollinrake Excerpts

Tuesday 27th April 2021 Commons Chamber

[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

What steps his Department is taking to support businesses during the covid-19 outbreak.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

What steps his Department is taking to support businesses affected by the covid-19 outbreak.

[The Economic Secretary to the Treasury (John Glen)]

Throughout the pandemic, the Government have sought to support businesses across the UK. To do this, we have put in place a package of economic support for businesses and individuals worth £352 billion since the start of the pandemic. The Office for Budget Responsibility and the Bank of England have highlighted that without this intervention the UK economy would be significantly worse than it is today.

--- Later in debate ---

[John Glen]

My hon. Friend brings a great deal of expertise and experience to this matter. The Government have committed to over £16 billion in business rates support for eligible retail, hospitality and leisure property since April last year. When combined with small business rates relief, this means that three quarters of a million retail, hospitality and leisure properties in England will pay no business rates for the 15 months from 1 April last year. The Government are, however, undertaking a fundamental review of the business rates system and have invited stakeholders to contribute their views and ideas for reform. I know that my hon. Friend will also be very pleased to see the £16.9 million of business grants that his constituents have received.

[Kevin Hollinrake]

Warren Buffett once said:

“What we learn from history is that people don’t learn from history.”

With a 50% rise in the number of companies in significant financial distress, to prevent repeating the historical mistakes of post the last financial crisis, inflicting all that scandalous treatment on SMEs, will my hon. Friend consider working with the banks to extend the very fair and sensible provisions of the pay as you grow scheme and bounce bank loans, and also transfer that into CBILS—coronavirus business interruption loan scheme—loans?

[John Glen]

The Treasury has, as my hon. Friend will know, amended the CBILS rules to allow lenders to extend loan terms from six to a maximum of 10 years, and that would assist borrowers in that repayment. CBILS term extension will be offered at the discretion of lenders, unlike pay as you grow options for bounce back loans, because they are different in terms of the guarantees that the Government have offered. Extensions are limited to those borrowers that lenders assess are in difficulty and will benefit from that extension, and only for the duration required. That customised approach, as I am sure he would understand given his vast business experience, is appropriate given the nature and scale of that different intervention.

Financial Services Bill

Kevin Hollinrake Excerpts

Monday 26th April 2021 Commons Chamber

[John Glen]

I thank the hon. Gentleman, as ever, for his contribution. I will go on to explain the situation of the remaining 125,000 individuals who could be categorised in that way, the actions that we have taken to date and what we will continue to look for. If that category can move without Government intervention, they are not “prisoners”.

Of the remaining 125,000 who cannot switch, 70,000 are in arrears and therefore could not secure a new deal even if they were in the active market. Those borrowers need to work with their lender to agree an appropriate repayment plan. The remaining 55,000 who are with inactive lenders and are up to date with their payments but who cannot switch are paying on average only 0.4 percentage points more than similar borrowers on reversion rates with active lenders—those with similar characteristics. The reason these borrowers are unable to switch is not that their mortgage is with an inactive firm but that they do not meet the risk appetite of lenders. They may, for example, have a combination of high loan-to-values, be on interest-only mortgages with no plan for repayment, or have higher levels of unsecured debts, non-standard sources of income or poor credit history. Similar borrowers in the active market are also typically unlikely to be offered deals with new lenders.

As I have set out previously, the Government and FCA have undertaken significant work in this area to create additional options that make switching into the active market easier for some borrowers. In particular, the modified affordability assessment allows active mortgage lenders to waive the normal affordability checks for borrowers with inactive lenders who meet certain criteria—for example, not being in arrears and not wishing to borrow more.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I know that the problem the Minister is trying to solve is not of his making. The problem originated when the affordability rules were changed pursuant to the financial crisis. The affordability rules were waived for people with their existing lenders who wanted to move from one fixed-rate deal, when it terminated, to the next one. Those with inactive lenders who are in the same situation cannot do that because those products are simply not available. That is one of the key problems that we have not solved yet. I would appreciate his continued efforts to work with us on this particular issue.

[John Glen]

I thank my hon. Friend, who, without equal in this House, has done so much to champion mortgage prisoners. I hope he will carry on working with us as we continue to improve our understanding and the quality of the data that could underpin further interventions.

I can reaffirm to the House today that my own, and this Government’s, commitment is as strong as it ever has been to finding further solutions that do not provide false hope to borrowers, but I am afraid that amendment 8 represents neither a proportionate nor practical response on this complex issue. I will address the two sections of the amendment in turn. First, the amendment seeks to cap the standard variable rate, or SVR, that inactive firms charge borrowers. This would be an unprecedented intervention in the mortgage market and is a completely disproportionate approach when the data shows that the 55,000 borrowers to which I referred pay on average 0.4 percentage points more than similar borrowers in the active market. Such drastic Government intervention should not be undertaken lightly, as it could have significant impacts above and beyond the effect that the amendment seeks.

That cap would be deeply unfair to borrowers in the active market who are in arrears or unable to secure a new fixed-rate deal, because the cap would not include them. Let us consider two hypothetical borrowers. The first borrower took out their mortgage prior to the financial crisis when, as my hon. Friend said, there were looser affordability requirements. They borrowed, in some cases, 125% of the property’s value, avoiding the need to save a deposit. Shortly after, their lender failed and had to be nationalised. The second borrower took out their mortgage following the financial crisis, when there were stricter affordability requirements. They saved a deposit of 5% or perhaps even 10%, and then were able to buy their home. Let us say that both those borrowers lost their jobs and now work in lower-paid jobs. They live in an area where property prices have not grown as much as they would have liked. Both try to keep up with their repayments, but ultimately fall into arrears, with the result that neither can easily access new deals. Neither of those borrowers has done anything wrong, and both deserve support from their lender and the wider financial system, but the Government cannot possibly agree with the idea that one should be supported by an unprecedented market intervention of this kind, and the other not. Both adhered to the prevailing conditions at the time.

I am also concerned that any cap on standard variable rates, including one only applicable to inactive lenders, would have unintended consequences for financial stability. The London School of Economics agreed and did not recommend a cap, noting that it could cause market harm. It would restrict lenders’ ability to vary rates in line with market conditions—the ability to vary SVRs allows lenders to re-price products to reflect changes to the cost of doing business—and could therefore create risks with significant implications for financial stability.

The second part of the amendment would require new fixed-rate deals to be offered to borrowers with inactive lenders, although it is unclear how that is to be achieved. Lending remains a commercial decision based on a variety of factors and it would not be right for the Government to compel lenders to provideproducts for specific groups. If the amendment is intended to require the current holders of these mortgages to offer new products, that would require firms that do not currently have the lending expertise, systems or regulatory permissions necessary to offer new mortgage products to do so. However, in opposing the amendment, I reiterate once again my commitment to continue to find further practical and proportionate options for affected borrowers, supported by facts and evidence, as I have over the past three years. Equally, I do not want to give false assurances, or false hope, for the sake of political expediency, especially when it is likely that there is a limit to what further action the Government can take to support such borrowers.

[Kevin Hollinrake]

Could we agree a basic principle that identical borrowers—the Minister uses the example of two similar borrowers in similar situations—should be treated exactly the same? One should not be treated better than the other. Will he agree to a principle that, if a person is a UK borrower and is in the same financial situation as others, whether they are with an active lender or an inactive lender, the treatment of those individuals should be the same: the options should be the same; the deals should be the same.

--- Later in debate ---

[Seema Malhotra (Feltham and Heston) (Lab/Co-op) [V]]

I start by paying tribute to Rachel Neale and the UK Mortgage Prisoners group for their incredible resilience and the way that they have worked for the last two years with the all-party parliamentary group on mortgage prisoners, which I co-chair, to help to get a pragmatic solution to the problems that we know they face. I also pay tribute to my constituent Mohammed Masood, who first brought this issue to my attention after his family’s own experience—a situation that, after so many years, is still ongoing.

I am grateful for the opportunity to speak in support of Lords amendment 8, which would provide immediate relief to up to 250,000 mortgage prisoners—the FCA’s estimate—by capping standard variable rates and ensuring that they could access fixed-rate deals. The arguments for that were made powerfully and movingly in the other place, and indeed by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) from the Front Bench tonight.

The Minister said that he wants to be guided by the facts. I thank him for his commitment to addressing this issue, but perhaps I can share some other data and another interpretation of the same facts to show why I and others believe that the solution proposed in Lords amendment 8 would indeed be both proportionate and practical.

The 250,000 mortgage prisoners took out their mortgages prior to the financial crisis with fully regulated high street banks such as Northern Rock. They were then kept trapped on high standard variable rates before being sold to mortgage loan sharks such as Cerberus, Tulip and Heliodor. The amendment would apply a cap on the standard variable rate for mortgage prisoners with inactive lenders and unregulated entities and ensure that they can access fixed-rate deals. It would be a targeted intervention that would have no impact on the wider market of active lenders, such as the main high street banks, which compete to offer their existing customers new deals.

The margins on these Northern Rock mortgages increased significantly after the financial crisis. As interest rates available to those at active lenders fell, the Government kept mortgage prisoners on high SVRs and then sold them off to inactive lenders and vulture funds, who also kept them on high SVRs. Prior to the financial crisis, the gap between the Northern Rock SVR and the base rate was 2.09%. Since 2009, it has been 4.29% above the base rate.

When the Government sold on the loans, they gave some of the purchasers, such as Tulip Mortgages, complete discretion on interest rate policy after 12 months. Protections for later packages of mortgages sold required only that the SVR be kept at the level of the third highest of a basket of 15 SVRs, which was higher than the current rate charged to mortgage prisoners. If mortgage prisoners were entitled to new deals on the same basis as other customers, the average rate they would be paying would be 1.8% below the level of the proposed SVR cap of 2.1%.

The Minister suggested that the SVRs paid by mortgage prisoners are just 0.4% higher than SVRs at other lenders. As I said on Report, our case studies, which include nurses, teachers, members of the armed forces and small business people, tell another story. It is inappropriate to compare the rates that borrowers with inactive lenders are currently paying with those paid by SVR customers at other active lenders. If mortgage prisoners were with an active lender and up to date with payments, they would have access to a product transfer, giving them a lower fixed rate.

The Treasury has said that the amendment cannot be supported because it would not be fair to borrowers in the active market, but more than 75% of borrowers in the active market move off the SVR within six months as they are able to access a new deal. Mortgage prisoners have been stuck on high SVRs for more than 10 years. Their mortgages were sold by the Government without their consent and without the proper protections. People trapped on these high interest rates do not have much chance to reduce the amount they owe. When their mortgage finishes when they are in their 60s or 70s, these mortgage loan sharks often put pressure on them to sell and threaten to repossess their home.

The FCA and the Government claim to have helped mortgage prisoners by changing the rules on affordability tests, but there has been very slow take-up of those new flexibilities. The FCA’s cost-benefit analysis, published when the rules were proposed, estimated that somewhere between 2,000 and 14,000 mortgage prisoners would switch using the new rules. The APPG has received reports from campaign groups that only 40 mortgage prisoners have been able to switch so far.

Mortgage prisoners have been neglected for more than 10 years. Families have been destroyed and homes have been lost. While the Minister commissions yet another review, every month mortgage prisoners struggle to make their monthly payment due to high interest rates. The delays will mean that more homes will be lost. As the consumer champion Martin Lewis has said, an SVR cap on closed-book mortgages

“would provide immediate emergency relief to those most at risk of financial ruin. No one should underestimate the threat to wellbeing and even lives if this doesn’t happen, and happen soon.”

We welcome support for the amendment from Martin Lewis and from Surviving Economic Abuse.

The Government have the option of coming up with an alternative proposal to provide the relief that mortgage prisoners so desperately need. So far, they have failed to do so. That is why I hope that all colleagues will support Lords amendment 8 tonight.

[Kevin Hollinrake]

I rise to speak to amendment 8. I listened carefully to the Minister’s comments, and he has engaged across the House very frequently on this issue. I know this challenge is not of his making. It is not even of this Government’s making, but it is the responsibility of the Government of the day to solve it, because it is a problem of a Government’s making—indeed, it is of a Conservative Government’s, or coalition Government’s making. We are duty-bound to find a solution.

We have heard some very good speeches, including some very fine points about markets and intervention in markets. I am somebody who absolutely believes in markets. The markets have revolutionised my life and I have seen them revolutionise many others—how much wealth they create, how many jobs and opportunities they create, and what a great job they do for consumers in driving down prices and driving up service. But there is no market here. This is an extreme example of market failure. Inactive lenders do not set their SVRs based on recruitment of new customers, which is what should happen in a marketplace. It is not defensible to say, “We cannot intervene in this way in terms of an SVR cap because it is an intervention in markets.” The two things are not compatible.

Finance (No. 2) Bill

Kevin Hollinrake Excerpts

Committee stage & Committee of the Whole House (Day 2)
Tuesday 20th April 2021 Commons Chamber

To sum up, the amendments we have suggested would improve the Bill, although they would not make it a good Bill—there are still far too many omissions and weaknesses in the Government’s proposals for tax avoidance prevention. However, because of the way the Bill has been put together, and because of the procedures in the House, it would not be competent to move further amendments at this stage. The SNP will continue to hold the Government’s feet to the fire until we get to the day when everybody who makes money from running a business in the United Kingdom pays their fair share of tax to pay for the essential services that all of us enjoy.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak in this part of the debate, and I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

It was probably 15 years after we set up our business that our own accountants came to us—we were making reasonable profits by then—and suggested that we take advantage of a tax avoidance measure, and a pretty aggressive one in our view. This was not a particularly unusual accountants—it had a decent reputation locally— but so much money potentially runs through these schemes that some promoters inevitably see an opportunity for themselves.

I must tell the House that we told our adviser that we did not want to take part in such a scheme, and there were two reasons: we believed that people should pay their tax—that we should all pay a fair amount of tax—but also that any person who takes up such measures should be afraid that HMRC will one day come along and say, “Those measures were not appropriate.” By that time, a lot of the money that they think they have saved has gone out in costs to promoters and the rest of it, and they are left with a huge bill.

Had the person who promoted that scheme to us—our accountant—thought that he would potentially end up on jail, I do not think he would have come to us and told us about it. This was a reputable local person, and perhaps he did not even think that tax avoidance at that point was fraud. Nevertheless, it certainly can be fraud, and in many cases it is. If we are willing to hold people to account, ultimately through a criminal prosecution—as HMRC can, of course, as the Minister pointed out earlier—there would be a lot less of this kind of promotion and a lot fewer of these activities.

Before I talk in more detail about that, I want to tackle some of the shadow Minister’s points. It is a little churlish not to recognise the steps that the Government have taken since 2010. There have been 150 measures to tackle tax avoidance; that was at a cost of £2 billion to the taxpayer, but it brought in £250 billion in contributions to our public services. Of course, the Minister said that we need to go further, but it is wrong to simply say that the Government are not doing enough. Some of those measures, such as the digital services tax and the diverted profits tax, are very significant internationally.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

I acknowledge the point that the hon. Gentleman makes and the amount of money brought into the Revenue by the measures, but is he not also conscious that the sheer number of different measures has, for many taxpayers, added to the complexity? We have one of the most complex tax regimes in the world and that complexity often catches people unawares, and costs them lots of money and sometimes their businesses and their homes.

[Kevin Hollinrake]

I absolutely accept that our tax system is very complex, and I have proposed a number of measures on the Floor of this House to try to simplify it. For example, abolishing business rates and replacing them with an increase in VAT would simplify the tax system, instead of having an online sales tax. However, in terms of this debate I do not think it is the complexity of the issues that catches people out. We can see that 99% of tax avoidance schemes in the UK involve disguised remuneration—these are very contrived schemes. We should look at amendment 77 carefully. As to whether it is unfair on a person who is a promoter of what I would say is an extremely contrived tax avoidance measure, I am not totally sold that that should be a problem.

One of the biggest problems we have is faith in the system. This Government have done a huge amount to reduce the tax gap, which is at a record low of 4.7%, but if there is a £20 billion tax gap from fraud, the person in the street might reasonably say, “Why should I pay my tax?” This creates an incentive then for people to look at ways of avoiding tax. As to whether tax avoidance is fraud, the Government’s own call for evidence last month says clearly:

“The Government recognises that the design of arrangements that are sold as avoidance schemes may in fact enable fraud.”

So there is a good case for being able to take these further measures, as the Government are doing through stop notices, further civil penalties and stopping individuals hiding behind corporate structures.

The trouble is that, as we see in many areas, not least the banking sector, which I am pretty active in through my work in the all-party group on fair business banking, these kinds of organisations see a fine—a civil penalty—as a cost of doing business; the real deterrent for people is a criminal penalty. One of the best examples of this is to be found in a completely different sector, with the personal liability for a director in the construction industry. As soon as that personal liability came in and there was the potential for someone to go to jail if they did not make sure their sites were safe or they did not put measures in place, there was a huge decrease in the number of injuries and fatal incidents in the workplace in construction. That speaks to the point that if there are real criminal sanctions that we are willing to take forward and people think that that is going to happen, this promotion of avoidance schemes will start to drop significantly.

We probably have better resourced areas in terms of the prosecution of avoidance; I believe there are about three and a half times this number of people in the Department for Work and Pensions looking at benefit fraud, despite the fact that it is a much lower level of fraud—the level of benefit fraud is about 10% of that seen by HMRC. A beefing up of the resources in HMRC is therefore something we should consider. We have seen very famous schemes. I believe the Ingenious film scheme cost the taxpayer £1.6 billion, but not a single promoter has been held to account for it. We need more resources, but we should also look at legislation. This country does not have a great record on prosecuting serious fraud. There are a number of examples where the Serious Fraud Office has failed to make charges stick—I think, for example, of cases involving Tesco and Barclays. That is why the SFO wants to bring in more legislation, which the Government have agreed to do, to create a corporate offence of failing to prevent economic crime. This would be a personal sanction on the directors of a corporation that failed to do that. Of course, in banking we now have the senior managers regime that the Financial Conduct Authority put in place following some of the scandals there, when nobody was held to account for the disgraceful abuse of both consumers and businesses through the past couple of decades in the sector. The excellent Minister might say that amendment 77 is not the right vehicle for this, but some beefing up of the legislation to make it easier to prosecute fraud—criminal activity—is something that we should seriously consider.

[Christine Jardine (Edinburgh West) (LD) [V]]

It is a pleasure to take part in this debate and to follow the hon. Member for Thirsk and Malton (Kevin Hollinrake).

I welcome the action that the Government are finally taking against the promoters of tax-avoidance schemes. My Liberal Democrat colleagues and I will be supporting new clause 29, which would require the Government to review the impact of provisions relating to tax avoidance and publish regular reports that set out the findings. We will also support amendment 77, which would cause the promoters of abusive tax-avoidance schemes to be treated as acting dishonestly for the purposes of criminal prosecution for tax offences, without dishonesty having to be proved separately by the prosecution. We believe that the measures we are considering are what the Government should have been doing earlier. The promoters of abusive tax-avoidance schemes have deprived the public purse of millions of pounds and defrauded countless people who thought that their services and the advice offered were legitimate.

The action being taken now comes too late for so many victims of these schemes who had no intention to do anything unlawful or to evade taxes and have already been unfairly penalised. Liberal Democrats are committed to clamping down on tax avoidance, but the retrospective nature of the loan charge is causing uncertainty and financial hardship to ordinary working families, most of whom acted in good faith. Thousands of IT support professionals, social workers, teachers, cleaners and nurses—all of whom acted in good faith, based on professional financial advice that what they were doing was legal—now face immense pressure, which is impacting on their mental health and causing serious financial hardship, which will only be magnified by the economic consequences of covid-19.

Meanwhile, online tech giants and international corporations have been avoiding tax for years but have not been clamped down on in the same way, even internationally. With the load charge, the Government are going after nurses and teachers. Like many other right hon. and hon. Members in this place, I have a number of constituents who find themselves in exactly the position that I have described, facing retrospective taxation since HMRC changed its rules in 2017. One constituent whom I have been representing has attempted to correspond with HMRC on anomalies in the settlement agreement policies, but to no avail. Although he is categorised as fully compliant and not liable for the loan charge and pre-2010 loans, he is not being refunded any settlements that include pre-2010 amounts. The fully compliant are not benefiting from the pre-2010 amendments, while other categories are.

As I have said, we undoubtedly need to clamp down on tax avoidance—the deliberate evasion of taxes—but we should be clamping down on those who promoted it, not on those who took advice believing that it was lawful. The Chancellor must also go further than his recent decision merely to limit, in the Budget, the retrospective element of the charge to 2010; he must end the retrospective application of the rules altogether so that nobody who fell victim to such schemes before 2017 should be unfairly penalised. The Government must also further re-examine IR35.

I shall end my speech there, but it is important that we recognise that the steps that we must back today should have come before us much earlier.

--- Later in debate ---

[Catherine West]

How delightful it is to see you in the Chair, Ms McDonagh. I am very pleased to speak to amendment 77 and new clause 29, and to have listened to the excellent speech by my hon. Friend the Member for Ealing North (James Murray). I pay tribute to Members from across the parties who have stood up for those who have been so badly affected by the loan charge scandal, and I was particularly pleased to hear my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) speaking so eloquently on Radio 4 on Sunday evening. We are getting these important messages across.

I also wanted to pay tribute to the important work that is being done by the all-party parliamentary group on anti-corruption and responsible tax, led by the right hon. Member for Sutton Coldfield (Mr Mitchell) and my right hon. Friend the Member for Barking (Dame Margaret Hodge), on simplifying things and making the basics better, for example by improving the Companies House regulations. I understand that some of that is coming forward shortly, but the general picture is that things are quite slow.

It was lovely to listen to the hon. Member for Burnley (Antony Higginbotham) speaking about the importance of taxation. Once upon a time, I am sure that would have been quite a tricky topic for certain Conservative Members to talk about, but there is a new wind blowing. It is great to hear President Biden talking about the global minimum corporate tax level and the importance of an online sales tax, and even to hear our own Government leading the charge across Europe on the importance of introducing a digital sales tax and simplifying things to bring in the important public funds that we all need to keep our society going.

The scale of tax offences is clear, with a recent TaxWatch report finding that between 2009 and 2019, the UK prosecuted 23 times as many people for benefits offences as for tax offences—that theme has been echoed in today’s speeches—despite the fact that the value of tax fraud is nine times higher than that of benefit fraud. We know that American research has shown that for every $1 the Internal Revenue Service invests, it gets back $10 of benefit for the public purse, and I wonder what the consultation the Treasury ran said about incentivising officers based in HMRC so that the more money brought back, the more colleagues come on board to help them in their important work.

We know that a lot of this work is about priorities, and we need to prioritise criminal prosecutions so that there is not a decrease in taxation, as there has been of 39% since 2015. We need to look at the balance of the DWP employing 3.5 times more staff in compliance than HMRC. We know that we have to improve that balance, because quite simply there is much more money to be found in illicit finance and among tax avoiders than from those eking out a living on universal credit or personal independence payments.

The Minister will I am sure make it clear in his remarks that the Bill is intended to tackle some of these issues and to amend that imbalance, and I look forward to hearing that. However, I make the case for quicker progress so that we can move forward as fast as possible, particularly given the fact that, as the hon. Member for Burnley mentioned, the furlough scheme and some of the other schemes are quite expensive, and therefore the need to find more in this way from tax evasion is ever more pressing.

I want briefly to mention the importance of the provisions on freeports and the corporation tax super deduction, which do not appear to come with sufficient tax avoidance and evasion safeguards. I hope that during the debate—perhaps not right at this instant, but over the course of today—we will get some reassurances on that matter. In March, the Financial Secretary was unable to say how many additional staff HMRC plans to recruit to deal with taxation, duty, excise and customs issues pertaining solely to freeports, but I hope that that information is forthcoming. Given the attention and focus the Government gave to these announcements, we would have expected them to get the basics right, but we still have some questions that are outstanding.

While the Government are bringing forward—perhaps deliberately, some of us would say—a weak set of measures in the Finance Bill, other tools that we need to tackle evasion and avoidance, such as the draft Register of Overseas Entities Bill, could well sit gathering dust, since they were initially announced quite some time ago. Will the Minister use today as an opportunity to outline his views on that particular Bill?

On the question of illicit money, do not forget that our own Intelligence and Security Committee called London a “laundromat” for illicit and dark finances, often coming from Russia. I would hope that the Minister will redouble his efforts to understand how to clamp down on the facilitation of those finances through the UK financial system. We would have expected such a description of our capital city to force action from the Government, but we are still waiting to see exactly who owns some of the foreign companies buying up British property. Can someone still walk in and purchase a £1 million property in cash, and does the Minister believe such a way of purchasing expensive properties in London is appropriate?

[Kevin Hollinrake]

I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests. Is the hon. Member aware that there are very strict requirements for people involved in the property market to check the identity and the source of funds of those she has just described?

[Catherine West]

I thank the hon. Member, and it is always lovely to have an accountant in the room. If there are some improvements, we are very grateful for them.

--- Later in debate ---

[Jesse Norman]

HMRC is addressing these issues. That is why this Bill has so many measures in it that are focused on the disclosure of tax avoidance schemes, toughening up that regime and improving the regime against the promoters of tax avoidance. But let me say to the hon. Lady that I thought her remark was dripping with condescension towards the ordinary taxpayers of this country. The fact of the matter is that people, from whatever walk of life, are perfectly competent—they do not need to be patronised by Labour Members of Parliament—at working out when something looks too good to be true. That is why so many—such a high percentage; well over 90% of people—do manage to work out what is too good to be true and behave on that basis. To suspect otherwise, when HMRC is absolutely working as hard as it can to make sure that the truth is out there and well understood, and is closing down opportunities for misleading advertising, in a recent initiative with the Advertising Standards Authority and a whole host of other things, is completely wrong.

I am grateful to my hon. Friend the Member for Burnley (Antony Higginbotham) for what I thought was a very robust and thoughtful contribution. He is absolutely right to highlight that HMRC has not been slow in this area. He was right to pick up the point about VAT on online platforms, but, of course, that is merely the tip of the iceberg. The hon. Member for Ealing North (James Murray) somehow suggested that we were failing to tackle this issue. The tax gap, as he pointed out, is 4.7%—a historic low. Let me remind the House and him of some of the actions that the Government have taken—leadership on base erosion and profit shifting over many years, the diverted profits tax, the corporate interest restriction, the tax charge on offshore receipts, hybrid mismatch rules, our new digital services tax.

[Kevin Hollinrake]

I very much welcome the digital services tax, which is there to try to make sure that everybody pays their fair share, as the Minister said in his opening remarks. Having said that, it does not apply to Amazon’s direct sales on that platform. It applies only to third-party merchants, so there is not that much of a level playing field between those two different cohorts. Will he look at that in future?

[Jesse Norman]

Brilliantly, my hon. Friend has intervened just before I was about to mention that we are consulting on an online sales tax, which is a parallel initiative. Indeed, the digital services tax includes the introduction of a new basis for tax—that is, UK user content. That itself is a flag to the energy and innovation that the Government are seeking to bring to this issue, and I thank him for his comments.

The hon. Member for Ealing North asked about the beneficial ownership registry on overseas companies that own or buy property in the UK. As he will know, the Government published a draft Bill. It has gone through prelegislative scrutiny. The process has, for reasons that the House will not need any reminding of or highlighting, been somewhat interrupted over the past year, but the Government plan to introduce the Bill in due course, so I reassure him on that point.

The hon. Gentleman raised the question about minimum corporate taxation. He should know that the Government have been, as I said, in the international vanguard in trying to drive change on base erosion and profit shifting, and processes of international tax agreement through the OECD. We were also in the vanguard of delivering the creation, originally, of the G20 commitments for a comprehensive global solution to this issue, based on two pillars, and we are leading the way, during our G7 presidency, on this issue, as the Chancellor has made clear. So we absolutely welcome the renewed commitment that the US Administration have made in this area, which we think is a very important change.

Finally, I turn to the important amendment 77, which was tabled by my right hon. Friend the Member for Sutton Coldfield and the right hon. Member for Barking (Dame Margaret Hodge). My right hon. Friend was right to highlight the importance of eternal vigilance—I absolutely share his view on that—and he was right, as the right hon. Lady was, to talk about the ever-shifting and evolving ways in which some of the malefactors in this area are ceasing to operate, and, of course, that is true. However, if I may say so, he erred in suggesting that the penalty on the enablers—that is to say, a sum equal to the gross fees to be collected in relation—was in any sense modest or small. It is one of the largest charges in the tax system, and because it is a gross fee, it is of course charged on the total amount of income. It is therefore income on which the promoter will have to recognise all their costs, and indeed any profit and any tax they may have paid, so it is actually a fairly formidable penalty.

Finance (No. 2) Bill

Kevin Hollinrake Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I beg to move,

That this House declines to give a Second Reading to the Finance (No. 2) Bill because it derives from a Budget that failed to guarantee a pay rise for NHS workers after their unparalleled service over the last year; because it undermines the country’s economic recovery, targeting household finances by freezing income tax allowances before increasing the rate of corporation tax; because it does nothing to mitigate the effect on family finances of the sharp council tax rise in April; because it contains measures connected with a cut to social security later in the year; and because it fails to set out the ambitious plan for jobs and growth that is needed to help the country emerge strongly from the worst economic crisis of any major economy.

May I start by extending my deepest sympathies to Her Majesty the Queen and the royal family at this sad time? His Royal Highness the Duke of Edinburgh devoted his life to public service and, crucially, to his role as a supportive husband. My thoughts are particularly with the Queen as she mourns the loss of someone who has been at her side, or just behind her, for 73 years.

As this is my first time physically in the Chamber for well over a year, I would also like to put on record my thanks to Mr Speaker, the Deputy Speakers and the Speaker’s Office for doing so much to help all Members, particularly those of us like me with relevant medical circumstances, to take part virtually throughout the pandemic. Now, having recently had my second jab and having spoken to my doctor, I am glad to be here in person to speak today to this important Bill.

Like millions of others in this country, I feel so grateful to be benefiting from the brilliance of our NHS and GP staff, scientists, lab technicians, nurses and volunteers, but we know that the health crisis of covid-19 is very far from over and that the harm to jobs and the economy resulting from the outbreak is even further from being over. On the Chancellor’s watch, our country is enduring the worst economic crisis of any major economy, yet in his and the Government’s plan we lack the ambitious, confident modern approach we need to emerge from this crisis stronger.



The Budget in March and this Finance Bill should have been an opportunity to pull out all the stops to get the economy going. The Chancellor should have focused resolutely on supporting families, securing jobs and backing small businesses. The Government should have used this opportunity to make sure we invest in solutions to the problems that we have struggled with as a country for so long, from social care to the climate emergency and the housing crisis.

There are many missed opportunities in this Bill and the recent Budget to take on some of the big challenges to which our country is begging for a solution. Take high streets, for example. We are all acutely aware of the severe difficulties that high streets are facing because of covid and how well online delivery-based businesses have done during lockdown. We know that for years, high street businesses have struggled with business rates, while tech giants have paid very little tax by comparison, and we know that the outbreak has made that imbalance far worse. Now should have been the time to at the very least level the tax playing field for high street businesses and online firms, yet there was nothing on that in this Budget, no decisions were taken on the Government’s new tax day, and the Finance Bill is silent on this crucially important issue. That is just one example of how the Government have missed opportunities to support and shape our country for the better.

Instead, so much of what the Government have done will make the problems we face worse. This Government have the wrong priorities and the wrong values, and their Ministers are following failed approaches from the past that now lack much, if any, of the wider support they may once have claimed for them.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I agree with the hon. Gentleman that we need to level the playing field between high street businesses and online businesses. That is a very tricky thing to do, particularly when talking about business rates. What is his solution to that?

[James Murray]

I am very glad to have the hon. Gentleman’s support for our push for a solution. As he knows, the Government have been promising for some time to come forward with proposals on business rates, but we have nothing. We had the new tax day, when we were supposed to hear lots of announcements—nothing. We want to see something to help high streets, and we have not had anything. We need the Government to step up and offer a solution to the problem, which has bedevilled high streets for so long.

[Kevin Hollinrake]

rose—

[James Murray]

I will make a bit of progress.

High streets are just one example of how the Government have missed those opportunities. Ministers have shown that they simply do not have it within themselves to offer solutions to the challenge we face.

First and most immediately, the Government are taking money from people’s pockets. Families in all their many forms are the target of tax rises from this Government. People will suffer and our economy will stall if families see money taken from them when they need it most. It is unfair and economically illiterate, yet it is exactly what this Government are doing. Half the country will pay more next year, thanks to the provisions in this Bill to freeze income tax personal allowances.

At the same time, the Bill does nothing to stop the sharp council tax rise that the Government are forcing councils to implement right now. It supports the Chancellor’s plan to cut £20 a week from social security this autumn for some of those who need that help most. It tells us everything we need to know about the Government’s priorities: they raise taxes and cut help for families immediately and without a second thought, years before an increase in corporation tax. At the same time, they are letting some of the world’s biggest companies stop paying tax altogether.

If that was not bad enough, the Government are also choosing in this year of all years to take money from the pockets of NHS workers. We now know how hollow those claps on the doorsteps of No. 10 and No. 11 must have echoed around Downing Street. The Government are cutting NHS workers’ pay. Ministers are breaking their promises, and the Conservatives are showing how little they have learned from the awful experience of the last year.

If we add that NHS workers’ pay cut to the personal allowance freeze, the council tax hike and the cut to universal credit, the scale of the impact of the Government’s decisions becomes clear. To give an example, a newly qualified nurse living with their partner and two children in rented accommodation will lose more than £1,100 a year. Rather than supporting families out of this crisis, the Government are prioritising tax breaks for tech giants.

That tax break is being handed to big businesses through the so-called super deduction—the £25 billion tax break for companies that the Chancellor and the Minister say represents

“the biggest two-year business tax cut in modern British history”,

and that forms our second key concern about this Bill. As the chief executive of the Resolution Foundation has made clear, investment incentives have been abused for tax avoidance purposes in the past, yet the Government have failed to say or do anything to address widespread concerns that the super deduction is open to fraud and abuse. Economists from the Institute for Fiscal Studies have said that the super deduction will

“create a risk of tax avoidance and even potentially fraud as companies essentially try to find ways to dress things up as plant and machinery investment”,

yet the Chancellor has done nothing to counter suggestions from industry consultants that the deduction could be used for luxury items, including jacuzzis.

The Government have also failed to address environmental concerns. With the deduction giving firms an incentive to buy new rather than existing assets, the Exchequer Secretary to the Treasury was recently unable to guarantee that the super deduction would be used to support green development. The Chancellor himself has seemed confused about the overall impact of the deduction, recently claiming that, as well as bringing investment forward,

“it will also increase the amount of investment”.—[Official Report, 9 March 2021; Vol. 690, c. 641.]

That claim comes despite the Office for Budget Responsibility revealing a week earlier that cumulative business investment over the next five years will be £8 billion lower following the Chancellor’s announcement of his new scheme than had been projected before.

Particularly with a tax cut of this size, it is crucial that we understand who it is helping and what it will achieve. The truth is, as we know, that companies can already benefit from the annual investment allowance, a 100% tax break on investment up to £1 million, which the Bill extends to the end of this year. The Treasury Committee concluded in its report “Tax after coronavirus” that the annual investment allowance

“appears well targeted to promote growth in small and medium-sized enterprises.”

With the existing allowance apparently well targeted at the growth of small and medium-sized businesses, and with such businesses standing to benefit only marginally from the new super deduction, we are left with an inescapable conclusion: the main beneficiaries of the Chancellor’s new scheme will be the big firms that need help least. No wonder TaxWatch has nicknamed this the “Amazon tax cut”—a giveaway from the Chancellor that could wipe out Amazon UK’s tax bill entirely.

--- Later in debate ---

[James Murray]

The hon. Gentleman is right to draw attention to the fact that the Bill does everything for the big businesses that need the help most but does not do what is necessary to protect small and medium-sized businesses. I am sure that the Ministers present heard his points, and I hope that the Exchequer Secretary will respond to them in her closing speech.

Aside from all the concerns about the super deduction—from its potential for fraud, abuse and misuse to the fact that it offers to wipe out Amazon’s UK tax bill—the fact that the Government’s only national policy for growth and investment relies almost entirely on this tax break brings us to our third key concern about the Bill and the profound lack of ambition in the Government’s approach. There is simply no plan from the Government to make sure that we invest in what is needed for the future. The Bill follows a Budget of cuts. The OBR has confirmed that the Government will cut departmental resource spending plans by £15 billion a year from 2022-23 onward, and rather than bringing forward capital spending to invest in the green recovery that we need now, the Government have cut capital plans for this year by half a billion pounds.

Far from charting a course for the future, the Bill lacks any mention of a plan to tackle the big problems that we have faced in this country for a decade or more and that have in so many cases been brought into sharp focus by the covid outbreak. It is clear that over the past decade under this Government, our country’s social care system has been underfunded, with its workers chronically underpaid. Our country’s response to climate change has stubbornly lacked the urgency, ambition and scale that it needs. Our country’s answer to the housing crisis has been left to developers and speculators, leaving an entire generation let down and left behind. Investing in better social care, new green infrastructure and the council housing that we need would create jobs, improve lives and finally start to tackle the problems that our country needs to resolve.

The Conservatives have had more than 10 years to stand up to the challenges I have outlined, yet they have failed to do so. With the recent Budget and this Bill, they have proved themselves again unable or unwilling to do so. The Government’s whole approach is being exposed as one of failure rooted in the past and an inability to rise to the future. In fact, Conservative Ministers are continuing on the course that began in 2010—one that brought us a decade in which UK growth was below the average of all major economies and business investment fell to the lowest rate in the G7.

Our country’s economy will be £300 billion smaller in 2026 than was forecast at the start of the previous decade. At times during that decade, Ministers may have benefited from some international cover for their misguided and harmful choice of cuts rather than investing in growth in response to the financial crisis, but no more: a new international consensus has rapidly been gaining strength. As the International Monetary Fund’s head of fiscal policy said, our Government and others should use fiscal policy to beat covid and to stimulate our economies by reducing unemployment and restoring economic growth. That focus on growth, investment and jobs is at the heart of the approach set out by the shadow Chancellor, my hon. Friend the Member for Oxford East (Anneliese Dodds). Our framework will meet the challenges of our times—it is a responsible approach in which a balanced current budget over the economic cycle would never prevent us from protecting people and businesses during a crisis or making critical investments in our future.

As the Bill progresses through the House, we will look at the detail in respect of the points I have outlined so far, as well as on other measures in the Bill such as those relating to freeports. We want to see good jobs and economic growth in every part of the country, irrespective of whether an area has a freeport. We need long-term, locally led investment in every region and nation, and freeports will in no way compensate for Ministers’ inexplicable decision to scrap their industrial strategy and disband their industrial council just when we need a long-term plan to support our critical industries. Furthermore, with freeports elsewhere in the world having become magnets for organised crime, tax evasion and smuggling, we fear that at a time when HMRC is already overstretched Britain is not well placed to manage such risks.

In Committee, we will challenge the Government over their approach to tax avoidance and tax evasion more widely, following up our long-standing concerns that Treasury Ministers continue to drag their feet on tackling these problems. Although the Bill contains measures to tackle the promoters of tax avoidance and change the system of penalties, there is a clear sense that those measures are extremely limited in scope, rather than the comprehensive action that we need. Indeed, those changes are not even included in the Budget report costings, suggesting that their financial impact must be minimal.

We will use the next stage of consideration of the Bill to go through the detail of the measures it contains that seek to address the problem of plastic pollution and to increase the use of recycled content. The principle of a plastic packaging tax is one that we support, and because we want it to be as effective as possible we will ask Ministers to consider the detail of its operation in Committee. Overall, however, we cannot support this Finance Bill. The Bill, and the Budget that it follows, should have seized the opportunity to help people who are struggling now; to invest in good new jobs in every part of the country; and to be ambitious in finally getting to grips with social care, housing and other challenges that our country has faced for so long without solving. In fact, rather than supporting families out of this crisis and setting an ambitious plan for the future, the Government are prioritising tax breaks for tech giants.

If this Bill had been presented by Conservative Ministers 10 years ago, it would have been the wrong solution then; a decade later, their approach has not changed but the rest of the world has moved on. No longer will they find allies for their approach in international institutions, and the politics of the United States shows that the consensus around the world is shifting. The Government are out of step with economic reality. They are taking decisions that will push up taxes for people across our country while helping Amazon to reduce its tax bill. They are choosing to cut NHS workers’ pay while failing to fix our system of social care, and they are deciding to continue a decade of cuts to public services when we urgently need to invest in the future.

[Kevin Hollinrake]

Will the hon. Gentleman give way?

[James Murray]

I have only a few moments. The hon. Gentleman may speak later.

We will vote for our amendment and against the Bill, to make it clear to people in our country that we understand that people need to be spared the Bill’s tax rises; that Amazon does not need any favours; that NHS workers deserve our support, that we need good new jobs in every region in the nation; that the economy will grow only through responsible investment; and that we need to fix social care, the climate emergency and the housing crisis. Above all, people in our country need a Government who are on their side, and it is absolutely clear from the choices that the Bill and their Budget make, and the problems that they choose to ignore, that this Government fail that test.

--- Later in debate ---

[George Freeman]

I thank the Financial Secretary for pointing that out. I am tempted to remind everyone that the former Chancellor of the Exchequer and then Prime Minister sold the gold at a record low and various other things, but I shall not be distracted—I simply record that—and focus on this Budget. I will not list all the measures in it, but I want to highlight one or two that the people of Mid Norfolk and I particularly welcome and then highlight three points that we need to think about as we seek to drive a powerful recovery.

I particularly welcome the measures in the Budget for the self-employed, who, in the first part of covid last year, were hit hard. Many of them were living at risk, hand to mouth and on each month’s proceeds, without the stability of a company behind them.

There is also the support for apprenticeships and traineeships. In Norfolk, when the furlough ends, we are expecting to see between 30,000 and 50,000 unemployed. The Government have rightly moved quickly to make sure that a very powerful skills and training pathway package is in place, so that people who have left old jobs that have not survived this accelerated crisis—it has accelerated much of the challenge on the high street—can quickly find jobs in the new economy that we are creating.

I want to highlight the £700 million package for the arts, culture and sport. In particular, we need to support the artists and creative people at the heart of those industries, not just the buildings. It is that genius—that creativity—which is so key to the British instinctive creative spirit, that we need to support. Rather too many of our great artists are working in all sorts of jobs and seeing their artistic careers disappear. We need to make sure that we keep them busy and get them back to work.

On levelling up, I highlight the Government’s phenomenal package of support, rightly making the crisis not just a moment to prop up the pre-covid economy but to drive growth out. The 45 town deals and the eight freeports are genuinely transformational for places such as Teesside that have been left behind by successive Labour Governments, who ought to have been representing them better. There is the move of the UK infrastructure bank to Leeds, the levelling-up fund, the community renewal fund, the Help to Grow for SMEs, the future fund and the substantial commitment to net zero and the green infrastructure that we need for a proper recovery. This was a Budget not just to repair the damage of covid, but to lay the foundations for a more sustainable and sustained economic recovery, creating jobs and opportunities for generations to come. I welcome it particularly for that reason.

That financial package is allied with the extraordinary success of the UK life sciences community, and perhaps at this point I could, as a former life sciences Minister, pay tribute to its extraordinary work. In particular, there are the scientists at Oxford and AstraZeneca, to whom we owe so much, and in Norfolk, there is the work of the Norwich Research Park and the Quadram Institute, which has done pioneering work in some of the genetic sequencing. At the same time, I welcome the work of the vaccine taskforce, led by the redoubtable Kate Bingham, with whom I know the Financial Secretary has a strong working relationship. I am tempted to channel my inner William Hague and remember the time when he commended Yorkshire for having more gold medals in the 2012 Olympics than France. In fact, he went further, saying that Mrs Brownlee had won more gold medals than France in those Olympics, and I do not think any couple has done more for the UK health economy than the Financial Secretary and the head of the vaccine taskforce.

I genuinely believe that this package is responsible, responsive and lays the foundations for a resilient set of public finances. The challenge now is to get the growth that we need from the private sector to build a really sustainable recovery, and I want to turn to that and make three key points. First, if we are really to escape debt—the debt legacy from the crash in 2007-08 and the debt legacy from covid—and to build a clean, green, smart economy, we need not just to get back to ticking over with 2% to 3% growth; to get to 4%, 5% or 6% growth, we will have to be able to host, or incubate, economies growing at 100% a year. That is the key to growth in this economy. We cannot escape debt by building over the whole of the south of England or building over any last rural area around Cambridge. To support growth, we have to make sure that we grow the economies that will grow our economy, building back better one local economy at a time and one sectoral economy at a time. To avoid the boom and bust of the City, housing and retail cycles that have left us in this state, the Treasury is absolutely right to commit to the deep infrastructure investment for tomorrow’s growth sectors. I am delighted that after my short period in the wilderness, the Prime Minister has asked me back to lead his taskforce on innovation, growth and regulatory reform to look at where, as we come out of covid and seek to lay the foundations for this recovery, free from the European Union’s regulatory frameworks but still able to trade with its market, we may be able to strike a blow for bold innovation and regulation for innovation.

I want to highlight some sectors that are growing spectacularly and that, if we were to invest strategically, would help to grow our national economy in the same way. The broader bioscience sector includes not just pharmaceuticals but the bioeconomy sector of food, medicine and energy, and, in particular, areas where those three support each other. In Norfolk I recently sat in a Lotus built at Hethel Engineering Centre that was powered by a Formula 1 low-carbon biofuel made by genetically modified bugs breaking down agricultural waste. That is what I mean by bioscience and the bioeconomy. In this century, it is biology and bioscience that will drive growth globally, just as physics did in the last century and chemistry in the one before. We are a phenomenal powerhouse in the biosciences, and if we invest in that, support it and commercialise it better, we will grow the industries of tomorrow.

Similarly, in nutraceuticals, where pharmaceuticals meet food and nutrition, there is a whole range of new crops that support growth and crops that are drought resistant and disease resistant, such as crops we export to Africa to help drive sustainable development. In biosecurity, and plant, animal and human health, we share much of the genomic sequence with most of the animals that we rely on in our agricultural system. There are huge opportunities for us to breed out susceptibility to disease and traits that will lead to huge suffering. There is a huge opportunity to harness genomics for the benefit of animal welfare, as well as progressive agriculture, in artificial intelligence, in immunotherapy, in space, in biofuels, in carbon capture and storage, and in biodiversity investment. These are huge sectors that this country is poised to grow into substantial industries, creating jobs and opportunities for tomorrow. If we get the regulatory regime for this right, which Brexit gives us an opportunity to do, and, as the Treasury is doing, we invest in the deep infrastructure and create the right commercial environment, I genuinely think that this is a moment when we could unleash a new cycle of growth, so that we look back at this, yes, as a crisis, but also as an opportunity, such that future generations will thank us for getting us off the boom and bust cycle of over-reliance on short-termism, the City, housing and retail booms, and laying the foundations for serious global growth based on technology transfer.

Secondly, from the perspective of rural Mid Norfolk—not 40 miles from Cambridge but at times feeling like 100 miles, or 100 years, from it—the small towns are fundamental. That is why I welcome so much the 45 town deals in the Budget. I hugely welcome all of them and the work that is being done. However, it is vital that as the Treasury launches these funds, we also think about how we can make it easier for the places and communities that have often been left behind because they do not have the resources of a metro Mayor or the big capacity to access multiple Government funds. Somewhere in the mix is a role for what I might call local regeneration corporations—small, fleet of foot, locally place-based public-private partnerships with powers to access money for multiple funds and deploy them over a five or 10-year plan to drive transformational local change and to pull in private finance alongside public. They would have the powers to do some compulsory purchase, to move in quickly and regenerate land left fallow after covid, to embrace some of the opportunities of land value capture and tax increment financing, and to raise infrastructure bonds and finance. Many investors around the world would love to contribute to and have a stake in this British recovery. Many places around our country will not be able to access on their own sufficient finance from the Treasury. We need to make it easy for them to drive local engines of growth that will go on in decades to come, in a similar way to the successes of the London Docklands Development Corporation, the Tyne and Wear Development Corporation and the County Durham development corporation in the ’80s and ’90s, which were so transformational.

[Kevin Hollinrake]

My hon. Friend makes a very good point about regional economies. On engines for growth, does he think that regional mutual banks might be part of the solution? They are very effective in places such as Germany and the US, focusing on regions, making sure that SMEs get lending into the productive parts of our economy. Would he look at that as part of his remit on regulatory reform?

[George Freeman]

With pleasure, and I can go further. My hon. Friend is typically astute and on the money—absolutely. It is true that in the pension funds of this country, we invest remarkably little in equities, remarkably little in small company finance and remarkably little in our own infrastructure. I am not for a minute suggesting that Norfolk County Council should put all of its money into the Cambridge to Norwich railway, although I think it would be quite a good investment, but it would be an awful lot better than finding it had quite a lot in the Iceland bank during the crash, where we lost a lot of money. There needs to be a reasonable balance. I think a lot of people in this country would quite enjoy having a stake in their own infrastructure.

People have season tickets. What about also having a share in the mutual railway company and a share in infrastructure that they are helping to fund and that they rely on? That is part of the revolution of place-based capitalism—one might even call it stakeholder capitalism, if one were on the Opposition Benches. We can call it what we want, but it is about giving people a stake in their own economic destiny.

The third area that I wanted to highlight is the importance of global markets. If we are really going to become an innovation nation, home to these incredibly exciting technologies that will drive tomorrow’s growth, we need to make sure we are better connected to those emerging markets around the world, which are growing at 10% or 20%. As the Foresight report highlighted, global population growth means that by 2050, we are going to have to double food production globally on the same land area, with half as much water and energy. That is a phenomenal global grand challenge, but it is one that this country is well positioned to respond to, with our historic strengths in agricultural science and technology and the biosciences I have talked about.

The real trick is how to link our leadership and innovation and commercialisation in the City to global markets. I suggest that our liberation through Brexit from the European trading structure, challenging though it is in many ways, does create an opportunity for us to embrace variable tariffs. Imagine if you will for a moment saying to countries in Africa, “Look, we are not going to charge you 40% on food tariffs, like the European Union—that is immoral. We will reduce it to 5% or 10%, but 0% is only for those who are growing and producing at the most responsible and progressive standards—the very highest standards of animal welfare and food quality. We will help you to do that by exporting the technologies that we have developed here using our aid budget.”

With those commitments to growth and local places, and to globalisation, this is an opportunity, given what the Treasury has done, to make this crisis a genuine moment to unlock a new cycle of growth for the benefit of this country and generations to come.

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[Bim Afolami]

I welcome that intervention. Opposition Members have also been saying, “This is only going to benefit the big companies, and the poor small companies won’t benefit.” First, it does benefit all companies if they qualify. The smaller companies already have the annual investment allowance, which is continuing and has been welcomed by everybody, including by them. And—whisper it—big companies are important for our productivity too! Big companies employ lots of people, so it would be negligent of the Government to say, “We are not going to bring forward a measure that will help our economy because it might benefit big employers that employ thousands of our constituents.”

[Kevin Hollinrake]

May I add another point to my hon. Friend’s list of positives? Lots of the money spent because of the super deduction will be spent in the supply chain, thereby helping SMEs.

[Bim Afolami]

Indeed. I am having too much fun on the super deduction—I will talk about the Help to Grow scheme in a moment—so I shall finish on it. The super deduction is not something that the Chancellor just thought up as something that it might be a good idea to try; it is backed by fundamental economic analysis by people as eminent as Andy Haldane, the chief economist of the Bank of England, who I saw today has been appointed chief executive of the Royal Society of Arts. He is an incredibly able guy who has done a huge amount of work and thinking on this issue and is one of the many economists who have talked about investment being a key problem for our economy.

That brings me to the second key thing that the Budget will do for productivity: the Help to Grow scheme. So much of what we talk about in this place is the big numbers—the massive infrastructure projects, the huge budgets for the public services and all of that, which is all very important—but specific measures for small and medium-sized businesses often do not reach the Floor of the House. They are either hyper-localised in one’s constituency or they appear to be too big and too macro. The Help to Grow scheme could be really important, because it does two things that will directly help small and medium-sized businesses such as the family business that my wife runs, which employs five people, and hundreds of thousands of other companies like that.

First, the Help to Grow scheme helps to deal with our economic difficulty—pointed out by Andy Haldane, among others—which is that in most areas of the economy and of the country, we have an incredibly well-performing top 10% of highly innovative, successful companies, and we have our poorest-performing companies, and the gap between those two groups is greater than it is among all our competitors. That gap is around 80% larger in the United Kingdom compared with France and Germany. That is a significant economic difficulty for us. The question is: why is that the case?

The Bank of England’s analysis points out two key things among lots of different things. The first is technology adoption. In effect, the most successful, innovative companies adopt the newest technology and use it well, and the companies at the bottom end do not. The Government are trying to address that diffusing of knowledge throughout the economy and throughout different regions with the Help to Grow scheme. How? The Government are providing grants and assistance for productivity-enhancing software for companies in every single sector and the ability for them to get online help and advice on what technology to adopt. That could make a huge difference to hundreds of thousands of businesses all around the country and should be welcomed by everybody in this House.

The second aspect of our productivity difficulty is management and our utilisation of human capital—that is, the people who work in businesses up and down the country. How are we dealing with that? The Chancellor has an MBA from one of the best MBA schools—if not the best—in the world, Stamford, and went on to have a very successful career in finance. Not everybody will be able to do that or has the time and ability to do that, but everybody—right down to the small companies in each of our constituencies—can get huge benefit from access to high-quality management training provided by the very good local business schools up and down the country. The Help to Grow scheme gives the individual managers and owners of SMEs the ability to access that sort of knowledge, which is the sort of knowledge that most people running SMEs do not get.

If we combine that improved management capability—by the way, the Bank of England has identified that management capability is poorer in this country than it is in our competitors—with the adoption of technology, we have a ready-made mix of policies directly targeted to improve the most difficult aspects of our productivity problem. I do not know whether Help to Grow will deal with everything—I suspect it will not—but it will make a big difference, and it is a shame that so few Opposition Members have managed to understand and see the depth of seriousness of the Chancellor’s approach in that regard. That really needs to be brought out.

I shall finish—[Interruption.] Yes, I know I should finish. Hanging over us today is not just as an unusually cold April but the spectre of inflation potentially coming back in the next year, two, three or four years. There are many people warning about this from all over the world. If inflation does come back to whatever degree, interest rates may need to go up in future. If interest rates do go up, lest the House forgets, the need for fiscal responsibility will not have gone away. Small rises in interest rates do not just affect households trying to get mortgages or businesses trying to expand or to get debt; they also affect the Government hugely. Underpinning the Chancellor’s approach across everything I have said and lots of other things that have been talked about is a core understanding that fiscal responsibility matters. This Finance Bill helps to keep that in check, reminds the House of that, puts us on the right course and deals with our productivity problems, and I welcome its Second Reading.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to follow my right hon. Friend the Member for Wokingham (John Redwood). My comments relate to the small and medium-sized enterprises that he was talking about so passionately. The sage of Omaha, the great Warren Buffett, once said that what we learn from history is that we do not learn from history. I particularly want to look at what happened to the SMEs after the last recession—the global financial crisis. It was the five years following 2008 that were so destructive for SMEs, and I am very keen to ensure that we do not make the same mistakes again. I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

I was interested in the comments of the shadow Minister, the hon. Member for Ealing North (James Murray). On tax avoidance, he must never have heard about the diverted profits tax or the digital services tax; they are very key measures. One thing about the DST that should be looked at—perhaps he will join the calls for this to be looked at as well—is that direct sales of Amazon are not covered by the digital services tax. That gives Amazon a competitive advantage over the other sellers on its platform, which cannot be right.

The Government are consulting on business rates reform and have three ideas: a land value tax; an online sales tax; or VAT. I strongly urge the Minister to consider VAT as a replacement for business rates, which I advocated in my ten-minute rule Bill.

The shadow Minister talked about social care a lot. He mentioned many problems, but did not come up with any solutions. One solution that I have advocated long and hard in this place is a German-style social care premium, which, hopefully, will feature in the Green or White Paper that is due to come forward shortly.

The Government have included many things in this Bill for SMEs. A typical SME is very grateful for the support that it has received from the Treasury, which has done a tremendous job in concert with its various agencies, introducing the job retention scheme, VAT discounts, and rates grants, particularly rates discount.

The Government have also introduced some very good loan schemes. I speak as co-chair of the all-party group on fair business banking. A very wise commentator said at the start of those loan schemes that the Government would not lend £1 billion using those loan schemes; some £75 billion later, we can see the success of those schemes. That, of course, has led to an unprecedented level of debt among SMEs in this country, which is what I am particularly worried about. On top of that are the new loan schemes coming from the recovery loans, which will be more difficult for SMEs to access. Unlike the other schemes, there is a forward-looking viability test, which will be challenging. Either way, it will mean that many SMEs are carrying lots of debt, which they will struggle to service over the next few months and years.

Furthermore, what will happen when the Government pull those schemes and let the banks go on their own in terms of lending? After the last crisis, banks were not very good at lending to the SME community from their own resources—bank lending to SMEs reduced by 25% between 2008 and 2013, just at a time when SMEs needed it. In Germany, where there is a high proliferation of regional mutual banks, which take a much more patient approach to SMEs, lending went up by 20% from those bodies. A policy that we should really push in this country is decentralising our business banking system, so that, rather than 80% of lending coming from large banks, we move towards a more regional, mutual, not-for profit system of banking, which would have a transformative effect in terms of lending to the productive economy.

The key thing in terms of making sure that SMEs are treated fairly is in the forbearance process. When businesses hit trouble, they need to be treated fairly and consistently. The Government did absolutely the right thing with bounce back loans. They set up a framework for how it would work, which lets SMEs take 12 months interest free, or payment free. They can take another six months of no payments whatsoever, and then another 18 months of interest only. They can also extend the loan to 10 years from the standard six years, which more than halves the payments on bounce back loans, which is great, without getting into any credit problem with their bank.

Similar measures do not apply to coronavirus business interruption loans or the larger scheme, CLBILS. That leaves businesses on their own. I urge the Government to work with the banking system to ensure that businesses of all shapes and sizes that have accessed these loans to help them through the crisis have these forbearance measures at their disposal without them having to go cap in hand to the bank. We know that banks are not very good in these situations when their money is at risk. Their shareholders need returns. We need support for SMEs.

Personal guarantees are also an issue, which will come as a surprise to many. I have put personal guarantees up for my business lending most of my life. If someone puts up a personal guarantee, most people think the bank will go to the business first, look at the business assets and realise those before it goes to personal assets. That is not the case—it does not have to do that. It can go straight to personal assets. The Lending Standards Board put in place a policy that banks should look at business assets first before going to personal assets, which has now been dropped from its regulations or guidance. I would very much like to see that brought back in, particularly at this time.

Thankfully, there is now dispute resolution in the form of the Financial Ombudsman Service and the Business Banking Resolution Service. All businesses with a turnover of up to £10 million will get access to free dispute resolution, which should mitigate some issues, but there are concerns nevertheless. I urge the Treasury to look at this point and make sure that businesses are treated fairly over the next few years in the fallout of this crisis.

Contingencies Fund (No. 2) Bill

Kevin Hollinrake Excerpts

Committee of the whole House & Committee stage
Thursday 11th March 2021 Commons Chamber

[Anthony Browne]

I agree, and I welcome the points that the hon. Lady makes. I did say in my speech on Second Reading that I welcome the fact that the Labour party have this new-found interest in value for money, because I absolutely believe that taxpayers’ money is not the Government’s money. It is taxpayers’ money and it should be treated as such. As I said earlier, we have sufficient mechanisms for accountability and transparency. We do not need this new clause, and I will not support it.

[Kevin Hollinrake (Thirsk and Malton) (Con) [V]]

I would like to speak to new clause 1. First, I am grateful to the Financial Secretary for putting the record straight. It was a reflection of the fact that there was no Opposition Minister on duty. It is suboptimal to have an Opposition Minister speaking by video link: Members have no opportunity to challenge some of his statements, many of which I thought were absolutely out of order. You are obviously the judge of that, Chair, but to call Ministers corrupt, as other Members have in this debate, or to accuse them of cronyism, is basically bringing this House into disrepute.

Yet again, we have the Opposition’s obsession that everything public sector is good and everything private sector is bad. It is simply outrageous. It goes back to that sturdy horse analogy. It is pulling the whole wagon, whether it be vaccine companies or indeed our GPs. Our GPs have done a wonderful job disseminating the vaccine to so many people, and it is heart-warming to go to those centres and see that. GPs are private practices. The health service has never been totally public sector, and we should recognise that. We should recognise the benefits that the private sector brings, just as the public sector clearly brings huge benefits, too.

I agree with my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) that this new clause would simply bring an unnecessary added layer of bureaucracy. I absolutely support the need for accountability and the proper assessment of where taxpayers’ money is spent—we absolutely must be responsible about that—but I do not know where it would end under the new clause, because much of the money that we have provided to deal with the coronavirus crisis has been provided through the private sector, not least the loans through the banks. The hon. Member for Luton North (Sarah Owen) seemed to think that there were no checks on that process, which is clearly not the case. Banks go through a lot of checks, even when the Government are guaranteeing loans, so that is simply not correct.

Contingencies Fund (No. 2) Bill

Kevin Hollinrake Excerpts

2nd reading
Thursday 11th March 2021 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con) [V]]

Accounts mean accountability. Every set of accounts needs contingency lines—sometimes quite annoyingly, in my experience—but this crisis has shown the importance of having a contingency fund.

I agree with my right hon. Friend the Minister: the Government have acted swiftly, decisively and with a great deal of flexibility in respect of the schemes they have rolled out. Almost every businessperson I speak to in my constituency is supportive of what the Government have done in this regard. It is not just the Government who have acted swiftly and decisively; bodies such as Her Majesty’s Revenue and Customs have done a tremendous job in getting some of the grant aid out to businesses, and we should be grateful for those efforts.

When I listened to the shadow Minister, the hon. Member for Ealing North (James Murray)—who I do not think is even in his place at the moment—all I got was a deep suspicion of the private sector. It was quite astounding. It was reminiscent of that great Churchill quote:

“Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon.”

I just do not understand why the private sector is still anathema to Labour, even though it has been responsible for so many things in this crisis, not least the development of the vaccine, the first of which, the Pfizer vaccine, was rolled out without any public support whatsoever.

Things such as bounce back loans and coronavirus business interruption loans have all been delivered by the private sector, through the banks. As I am sure you recognise, Mr Deputy Speaker, I am not shy of criticising the banks, but this year they have done a tremendous job in getting the money out to businesses, yet we see no recognition from those on the Opposition Front Bench of what the private sector has done throughout this crisis.

All the money that flows through the contingencies fund will of course be accounted for and the Government will be held to account for the related spending. It is important that the Opposition should also be held to account for their spending. I find it quite astounding that the shadow Minister talks about value for money; I have sat through so many debates over the past five years in which Labour has called time and again for more spending via pensions, social security, health services and social care—whatever—despite our spending challenges and without any assessment of value for money. Labour just wants that money to be spent without any consequence or accountability. That cannot be right and the shadow Minister’s claim about value for money was quite laughable. Every bit of spending has to have somebody to pay for it, and that is, of course, the taxpayer, which is why we have to be careful and judicious with Government or public money. It comes from the taxpayer.

Most recently, Labour has been calling for a greater increase than 1% for nurses. Who is not sympathetic to that? But I do not hear Labour saying what pay rise it would give or how it would pay for it. It is surely a responsibility of any responsible party that wants to be in government to say how it would pay for things.

Finally, I think the hon. Member for Brent Central (Dawn Butler) was quite disgraceful in some of her comments. I may be wrong, Mr Deputy Speaker, but I thought she described Ministers as corrupt. I think that is something you might look at, because it is entirely inappropriate and entirely inaccurate. I am very much looking forward to talking more in Committee about procurement and why the Opposition are wrong again.

Government's Management of the Economy

Kevin Hollinrake Excerpts

Tuesday 23rd February 2021 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con) [V]]

I find this a somewhat surprising choice for an Opposition day debate, in that the Opposition—by anybody’s judgment, really—have a terrible record on the economy, and the shadow Chancellor gave no indication as to why it would be different this time. The motion says that

“the last decade of UK economic policy weakened the foundations of this country’s economy”.

That just makes no sense. Labour Members seem to point to the global financial crisis as the reason for the disastrous end to their management of the economy, yet that is a rewriting of history.

The reality is that in 1997 the then Chancellor, Ken Clarke, passed on a Goldilocks economy to Tony Blair and Gordon Brown. The Labour Government, to get elected, had said that they would continue with our spending plans, and they did—for four years. After that, of course, they reverted to type and started to spend. For seven years, there was a growing deficit. It was a much bigger deficit than we had last year with the rise of this crisis; that was in the good times. Huge issues—not all caused by the Labour Government—then left a £153 billion annual deficit.

The shadow Chancellor said that she was somewhat surprised that the debt had grown over the last decade. Well, what did she expect and what alternatives might she have put forward? It takes time to get that kind of deficit down, unless the Government hugely cut spending or massively put up taxes; yet she offered no solutions, just criticism. Anybody can stand on the sidelines and criticise. What I expected to hear from the shadow Chancellor was some indication of what a Labour Government would actually do, how they would manage these problems, and how they would manage future tax or spending policy. The only indication we have is a recent article in the New Statesman, which says that the shadow Chancellor’s fiscal approach will be “strikingly similar” to that of her predecessor, the right hon. Member for Hayes and Harlington (John McDonnell). Not many people will be reassured by that.

The reality is that even pre-covid, this country was facing some huge problems. Owing to our demographics—our ageing population and the smaller number of children per household—the debt is going to fall on fewer and fewer people. The debt is going to grow if we do not change our tax policy to—would you believe it—314% of GDP by 2060. We need an honest conversation about taxation, and we need to do things differently. We need to look differently at the funding of things such as social care, healthcare and pensions. I particularly recommend looking at an adult social care premium to pay for social care. We need sensible, honest economics.

Financial Services Bill

Kevin Hollinrake Excerpts

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 13th January 2021 Commons Chamber

[John Glen]

I thank the hon. Gentleman for his point. It really does stray beyond the provisions of this particular amendment. He makes an important point, but it is not one that I can address at this point. I would be very happy to write to him to answer his question more appropriately.

I shall now turn to the remaining amendments in my name, which ensure that the powers that the Prudential Regulation Authority and the Financial Conduct Authority have over holding companies function as intended. Amendments 25, 26 and 27 enable the PRA and the FCA to make rules directly over holding companies to void employment contracts and require recovery of remuneration paid to individuals when rules prohibiting them from being paid in a certain way are breached. This is important because, as a result of the measures brought forward in this Bill, responsibility for ensuring compliance with a banking or investment group’s capital requirements is moving from its operating companies to its holding company. This amendment ensures that the regulator can enforce breaches of the rules at the level at which they are set.

Amendments 15, 28, 29, 30 and 31 are a set of relatively small amendments that ensure that the PRA has the full suite of enforcement tools at its disposal for the supervisory regime over holding companies. Amendment 24 is a technical drafting point. Amendments 22 and 23 are clarificatory amendments, which are necessary to ensure that the investment firm’s prudential regime applies to the correct set of firms and does not have extraterritorial effect. I know that this is an important point for my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami). I thank him for his work on this and hope that he will welcome these amendments.

I shall now turn to the other amendments that have been tabled by Members of this House. First, there are a number of amendments that relate to criminality and money laundering. New clause 4 and new clause 30 would create a new criminal offence for FCA-regulated persons of facilitating and of failing to prevent economic crime. This is an important and complex topic, so I will seek to address it in detail.

The Government have taken significant action to improve corporate governance and culture in the financial services industry. We introduced the new senior managers and certification regime, which enables the FCA more easily to take action against the responsible senior manager where there has been a failure in a firm’s financial crime systems and controls. Separately, the Government have recently strengthened the anti-money laundering requirements on financial services firms.

In 2017, the Government issued a call for evidence on whether corporate liability law for economic crime needed to be reformed. Unfortunately, the findings were inconclusive and, as a result, the Government have tasked the Law Commission to conduct an expert review on this issue to report by the end of this year. That will ensure a more comprehensive understanding of any issues with current economic crime law, as well as the implications of any potential options if reform is considered necessary. Before any broader new “failure to prevent” defence for economic crime is introduced, there needs to be strong evidence to support it, as there was when similar bribery and tax evasion offences introduced in 2010 and 2017 respectively took place. A new offence will also need to be designed rigorously, with specific consideration given to how it sits alongside associated criminal and regulatory regimes and to the potential impacts on business.

The proposed new offences in this amendment would lead to a discrepancy in treatment between FCA-regulated businesses and other businesses under criminal law. The 2017 call for evidence did not provide any evidence to suggest financial services businesses should be specifically targeted with a new offence. Indeed, many of the examples provided related to businesses in other sectors.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

In terms of the corporate offence of failing to prevent economic crime, the Minister asked for evidence on that, but there is a wealth of evidence that the FCA is not holding either corporations or individuals to account for some egregious behaviour, particularly in the banking system and many other parts of corporate life. We are seeing fraud, but £9 billion of fines in the US in a 10-year period and only £260 million in the UK. Is that not proof alone that we need legislation in this area?

[John Glen]

It is easy to point to headline differences in rates of fines, but it is quite different to intervene with a new piece of legislation that is fit for purpose. That is why I am absolutely clear that the call for evidence this year will gather that evidence—I am sure that my hon. Friend will be keen to submit his evidence to that—and, in due course, we will look at it and examine what the implications are. However, I am not suggesting from the Dispatch Box that everything is perfect with respect to regulation, and of course, there are regulatory failures from time to time and criminal activity. The question is what the most appropriate legislative response is.

I turn to new clause 14, which would add a requirement for the Government to report on the effect of clause 31 on tax revenues. This does not reflect the effect of the provision that we have included in the Bill. The Bill provision merely ensures the continuation of, and the ability to vary in future, the original powers assigned to Her Majesty’s Revenue and Customs with respect to registration of overseas trusts. It does not make any change to taxes.

Similarly, it is not necessary to introduce a report on the impact on money laundering of clause 31, as proposed by new clause 19. Existing legislation already requires the Treasury to carry out a review of its existing provisions within money-laundering regulations and publish a report setting out the conclusions of its review by June 2022. This wider review will provide a more meaningful evaluation than the one envisaged in the amendment.

Amendment 7 raises a very important issue. This amendment would require the FCA to “have regard” to the promotion of ethical investments with reference to findings of genocide by the High Court and the International Court of Justice when making rules for the investment firm prudential regime. While I am extremely sympathetic to the issue raised by Members on both sides of the House, including the hon. Member for Bethnal Green and Bow (Rushanara Ali) and my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), this Bill is not the right place to address the issue. This amendment would require the FCA to make political choices about whether to associate itself and its rules with countries that are guilty of genocide or ethnic cleansing. These important decisions on UK foreign policy are for Government to take and not an independent financial services regulator.

I will now address a number of amendments that seek to bring new activities—

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New clause 25 seeks to cap the interest rates paid by mortgage prisoners. Data from the FCA suggests that a narrow majority of borrowers with inactive lenders pay less than 3.5% interest. Compared with those with similar lending characteristics, consumers with inactive lenders only pay marginally more—about 0.4 %–than those with an active lender. Capping standard variable rates on mortgages with inactive lenders would represent a significant intervention into the market, potentially having an impact on financial stability, as it would restrict lenders’ ability to vary prices in line with market conditions. I believe that such an intervention would be disproportionate, and potentially counterproductive.

[Kevin Hollinrake]

Yesterday I was looking at a document written by a former lead analyst in that very market—someone who used to work for PIMCO. He very clearly sets out that the proposed change would have a transformational effect on tens of thousands of mortgage prisoners who will not be helped by any other measure that could be put in place. He says quite clearly:

“Introducing an SVR cap on closed, non-lending books would not disrupt the residential mortgage-backed security market”.

That is a direct contradiction of my hon. Friend’s position.

[John Glen]

Indeed, Martin Lewis, who does some excellent work in this regard and whom I met on this topic recently, looked at this very matter—he commissioned some work from the London School of Economics to look into it—and recommended that we should not take this cap on the SVR. There will always be a variety of views, but I have set out very clearly why I think this is the right position.

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The amendments essentially seek to remove the defence of ignorance when it comes to corporate crime. The truth is that we have already legislated to remove that defence in other areas. Such a defence would be regarded as completely bogus and illegitimate when it comes, for example, to tax evasion or bribery. We would not let directors and senior managers plead ignorance in those circumstances.

[Kevin Hollinrake]

The right hon. Gentleman is speaking to an important amendment that not only allows for corporate prosecution but allows for a person who is registered with the FCA to be prosecuted. Is that not a critical point? Unless we start holding individuals to account for these wrongdoings, we will never stamp out these corporate failures and this corporate abuse.

[Mr McFadden]

The hon. Gentleman makes a very strong point, and it is why we believe these are strong amendments. We should do this because it is right in itself, and it is an important signal to send about financial services in this post-Brexit world. We do not want to send a signal that we are going for relative weakness in anti-fraud and anti-money laundering laws. Instead, the signal should be that we insist on the strongest possible measures.

New clause 21 seeks to establish a duty of care. This is a long-running debate, and we tabled a similar amendment in Committee. The new clause is intended to make companies ask not just whether their products are legal but whether they are right and are in the consumer’s interest.

New clauses 25 and 26 seek to address the plight of mortgage prisoners. These are people who are stuck on very high standard variable rates and have no ability to switch. All I would ask is, if the Minister cannot accept these amendments, will he continue to work on this issue to try to help these people who are trapped, through no fault of their own, on very uncompetitive rates? He mentioned 3% or 4%, which is much higher than is available in a mortgage environment where the base rate is 0.1%. That can mean paying thousands of pounds more per year, depending on the size of the mortgage, so this is a real material difference for people.

We have a global financial sector in this country that, if properly regulated and paying its way, is a huge asset to the people of this country. We want it to be innovative and successful, but we also want to ensure the public are properly protected against risks if things go wrong. That is the spirit in which we tabled these amendments, and it is the spirit in which we have approached the Bill throughout. I hope the Minister will consider that when it comes to the votes in a couple of hours’ time.

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[Christine Jardine (Edinburgh West) (LD) [V]]

It is an honour to follow the hon. Member for Hitchin and Harpenden (Bim Afolami) in this Report stage debate and to speak on a Bill that is of so much importance at this juncture for our economy and the circumstances that we face. The sector that it deals with is so important, and it cannot be overstated. The financial services sector is vital to our recovery, not just because of the jobs it provides and the tax that it contributes to the Exchequer, but because of the number of people, families and communities in this country whose future wellbeing depends on a well-regulated and successful financial services sector.

The Liberal Democrats, my own party, have tabled two amendments—new clauses 22 and 23, both of which address the issue of debt repayment and recovery, but at this stage we shall not be pressing them to a Division, so I prefer not to discuss them. Instead I shall discuss the amendments that we will be supporting, specifically new clause 7, tabled by the hon. Member for Walthamstow (Stella Creasy), of which I am one of the signatories. As I alluded to, our support is recognition of the need to act now to create an environment that enables our economy and the people at the heart of it to recover as quickly and as financially painlessly as possible. The scale of the potential problem that awaits us as we emerge from the current crisis is frightening for businesses and for households. The most recent research from StepChange estimates that more than 3 million people are in arrears and priority debts, and potentially 6 million people—more than the population of Scotland—are behind on household bills. For those people, that creates stress, financial hardship and sleepless nights worrying about how to feed their children.

We should have no truck with any company or organisation that in any way exploits the difficulties that covid has created. That is why I put my name forward as a co-sponsor of new clause 7, which would bring the non-interest-bearing elements of buy now, pay later lending and similar services under the regulatory ambit of the FCA. We need to act now, before we have another scandal. Such companies facilitate overspending online and costs appear lower than they actually are. One in four shoppers used such companies in the run-up to Christmas. More people are being furloughed and made redundant, so even if something seems affordable now, it might not be in future, either for the country or for individuals.

In the past year, we have heard much about the crossroads at which our economy, and indeed the country, stands. Our financial services sector was worth £132 billion to the UK economy in 2018 and had more than 1 million jobs. It has suffered. It is worth 7% of our economy. In my city of Edinburgh, we have the second-largest financial services sector in the UK and the global financial centres index ranks it as 13th in the world. The scale of what we are facing cannot be underestimated, which is why the Bill should be amended as I suggest.

[Kevin Hollinrake]

I very much appreciate the efforts that the Minister is making to try to tighten up in many areas. We are on the same page about many different aspects of the measures that we are talking about. Looking at the Bill from afar and taking a helicopter view, for decades, we have been willing to preside over a system that I would describe as financial feudalism. Some people live by a completely different set of rules and are not held to account properly by the rules that are in place. Unless we start to put measures in place that hold individuals to account for some of that egregious behaviour, we will not stamp it out.

That behaviour undermines the faith in the very system that we believe in—the free market system. We cannot simply hold our hands up and say, “It’s the bankers again,” or, “It’s the money launderers again.” We have to tackle those issues and put measures in place to do that. We did with the Bribery Act 2010, which was effective in giving individuals a corporate responsibility to stamp out bribery. Again, the Government acted on tax evasion in 2017.

There are still other areas, however, where we allow people to steal, defraud, launder and lie. That is not to say that there are not some good people in our financial institutions, and there are some very good bankers, but we need to hold individuals to account for things such as LIBOR, foreign exchange rigging, and the disgraceful scandal at HBOS and the Royal Bank of Scotland, where only one individual has been held to account with a directorial ban. As I have said before, over a similar period of time, between 2008 and 2018, there were £9 billion of criminal and corporate fines in the US, but £260 million in the UK.

I am glad that the Government support the principles behind new clause 4 and will bring their own measures forward. It is absolutely vital that that is not just kicking things into the long grass and that those measures are brought forward quickly so that we can hold individuals to account for failing to prevent corporate fraud and money laundering.

The key thing that I will talk about in my last 54 seconds is mortgage prisoners. Again, the fact that we let people’s mortgages be sold to vulture funds in the first place is because we do not have proper regulatory oversight and we do not lean on them as the FCA can on regulated firms. The promises that were made to Lord McFall and others were simply not carried through.

New clause 25 in particular is a nuclear option. I am not a person who would like to cap anything—the market should deliver those solutions—but we do not have a proper solution for the many people who are trapped on very expensive rates. The evidence that we have says that it would not affect the marketplace of residential mortgage-backed securities, about which the Minister is concerned; that it would be highly effective; that we could define it for a certain cohort; and that it would relieve hundreds of thousands of people from dire financial straits overnight. I ask him to look at that again.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I am going to be very strict in making sure that Members stick to the three-minute limit from now on.