Financial Exclusion: Access to Cash

Lee Rowley Excerpts

Tuesday 21st May 2019 Westminster Hall

[Lee Rowley (North East Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship, Sir Henry. I draw attention to my declaration in the Register of Members’ Financial Interests. I am also the chair or vice-chair of various all-party parliamentary groups that are pertinent to this debate and discussion. I congratulate the hon. Member for Feltham and Heston (Seema Malhotra) on securing this debate on a hugely important issue that needs greater consideration than it has had in this place. The issue affects us all, as we have outlined already, and I am sure Members will continue to do so.

In my part of the world, our local newspaper the Derbyshire Times reported only last week that the number of ATMs available in my constituency has reduced by 20% over the past couple of years, from 137 to 111. We have had the usual bank branch closures and changes. We lost another branch in Dronfield just a few months ago. That was the Royal Bank of Scotland. We have lost our Lloyds branch in Clay Cross, and we continue to see reductions in ATMs and the like.

We have to deal with those challenges, however, rather than just moaning about them. There is a conundrum in front of us. People’s habits are changing, as is how people want to bank. The numbers of people going into bank branches and using cash are decreasing. Cash is now being used in three in 10 transactions—10 years ago, it was six in 10—and that number will reduce further. We have to find a way to balance the challenges that have been rightly articulated by Members this morning with recognising that we cannot and will not stop progress.

We also have to recognise that there is a cost to the provision of cash. That cost may not be obvious to consumers, but it is built into the infrastructure and the costs of financial services already. Essentially, we are dealing with a classic long-tail problem. We have early adopters. The majority of the market and a majority of consumers can deal with this issue and are happy to do so, but we rightly identify a group of vulnerable people and customers who we need to ensure are supported. Those consumers live in my constituency, as they do in everyone else’s.

In the brief time I have available, I will make a couple of points and a couple of suggestions for things to consider or where it might be useful for the debate to go next. We should be careful about explicit legislation, but I agree that there may be a case for it in certain places. We should celebrate, as the hon. Lady outlined, alternative forms of saving and lending, such as credit unions, which I am personally very supportive of. If there is an argument for legislating, it may be around equalising the premium in accessing cash and the poverty premium that goes on top for vulnerable people in accessing various things. We should foster competition and celebrate those institutions and building societies, such as Metro Bank, that are expanding their networks. We should also look at how we expand the number of bank accounts available for people.

UK as a Financial Services Hub

Lee Rowley Excerpts

Wednesday 6th February 2019 Westminster Hall

[Lee Rowley (North East Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Stringer. I congratulate my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) on securing this debate; in my view, we do not talk enough about financial services in this place.

Although financial services are unfashionable and often a thing of derision, the blunt reality, as we have heard today, is that even 10 years after the financial crisis, the industry contributes a staggering £70 billion to our Exchequer. Whether or not we like banks, insurance companies and asset managers, the ultimate point is that they pay for a lot of our public services, and we should focus more on what they are doing and how we can ensure that they do more in this country.

This is important for me on a personal level, because before I came to this place, I worked in financial services, both in London and across the country, for the best part of 10 years. I was glad to see the regional nature and significance of financial services brought home in this debate. For most of the past 15 years, I was technically based about 30 minutes north of here, near Euston station, but I spent probably 60% of my time with my teams in Sheffield, Leeds, Bootle, Manchester, Leicester and elsewhere. I was on the road all the time. In places such as Bootle, which are not necessarily associated with financial services, we find a substantial number of people employed in these kinds of industries, which are major anchor employers for many of those communities.

We Brits like to be very cynical about things such as financial services. We like to say that they are not working for us, that they do not deliver for us and that there are huge problems—and to some extent there are. I am absolutely apoplectic with rage about what the Royal Bank of Scotland has done in closing down a bank branch in my major town, Dronfield, a few weeks ago. I understand the economic challenges of a retail network, but people have a right to be angry about the way that RBS did it; there was a lack of conversation and real engagement with constituents.

When we put aside all that, the reality is that the industry has been highly successful. and highly important to our country—though I do not dispute its controversial nature—and we must ensure that it remains so. Those are not just words. This industry gives people in North East Derbyshire the opportunity to set up their own business by giving them access to the financing that my hon. Friend the Member for Hitchin and Harpenden talked about. It allows people to own their home—the new houses that are being bought in North East Derbyshire—and ensures that small and medium-sized enterprises in my constituency have the opportunity to grow.

I will touch briefly on Brexit. I come from a different position from my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) on this. I want a deal, too, but I want a good deal. It is incumbent on us to accept that there are circumstances in which we may have to go to a no-deal position. We cannot accept just any deal, or we might as well have not bothered with the last two years and simply accepted what the EU gave us the day after 2016.

I am the chairman of the all-party parliamentary group on alternative lending and vice-chair of the APPG for challenger banks and building societies. More importantly, I am doing a fellowship with a fantastic institution, the Industry and Parliament Trust, going around a number of banks and talking about the future of banking. Although there will be issues, and we do not want to create problems with business models unless we have to, I believe that the level of preparation in this industry is high, and the understanding of what needs to be done is good. We may have to accept no deal in certain circumstances, although I hope we will not; it will be down to EU intransigence if we do.

My point, in the brief time I have left, is that Brexit is not the big thing for this industry. We in this place are obsessed with Brexit in a way that I think is incredibly unhealthy and that will only get worse in the next few weeks. The actual challenges for this industry are much broader than Brexit. They are about FinTech, and how we ensure that we increase the number of people operating in FinTech here and that this remains a fantastic place to work. They are about artificial intelligence and how we incorporate it into financial services in the long term. They are about regulation. I have a particular interest in capital regulation, having worked in risk for the last two years before I came here, and I simply do not understand some of the directions we are going in on capital regulation. I cannot explain all that in 45 seconds, but I am sure there will be another time to discuss that.

There are key challenges around disintermediation and how we ensure that banking as a whole gets closer to customers. We will have a huge problem with insurance in the coming decade; insurance is based on a model in which we pool risk, on the basis that we do not fully understand the customer base we are serving. As we get more and more knowledgeable, from a data perspective, about individuals, the pooling of risk becomes a conceptual challenge that we will have to get through. We have a huge problem with customer services. Often in banking and financial services, people feel done to, rather than done with. We have to work with the industry to understand why that is.

I am conscious that my time is short, but ultimately I agree with my hon. Friends that this is an important area that needs more debate. We need to ensure that we develop our country, so that more banks, insurance companies and asset managers are investing here, and staying here longer, to create the wealth that we all know is vital for our public services.

Balanced Budget Rule

Lee Rowley Excerpts

Wednesday 23rd January 2019 Westminster Hall

[Lee Rowley (North East Derbyshire) (Con)]

I beg to move,

That this House has considered the balanced budget rule.

It is a pleasure to serve under your chairmanship, Mr Stringer. I am extremely pleased to have secured this debate to consider an issue that has slipped down the agenda in recent years, namely that of fiscal responsibility and the actions the state can take in order to uphold and, in some cases, guarantee it.

I am delighted to see so many right hon. Members and hon. Members here today. It is packed to the rafters and standing room only, which demonstrates the level of interest in the subject. I hope that, by holding such debates in Westminster Hall, and by dragging so many hon. Members to them to volunteer contributions, we can slowly raise this important issue back up the agenda and draw attention to it.

The particular issue I want to discuss is the principle of the United Kingdom adopting a balanced budget rule as a way to improve its finances, and the underlying responsibility of Members in this place to ensure that the country pays its way in the future. The idea, which though simple is not universally liked, is that over an appointed period, within an agreed timeline, Governments should follow the novel concept of living within their means and not spend more than they can afford. Crucially, that commitment goes beyond words and there should be consequences if there is a failure to adhere to it.

To some, that is dramatic news; to others, such as myself, it just makes sense that Governments should not seek to balance the books on the back of the nation’s children and grandchildren. The principle of the never-never is, with appropriate structuring, just as apt for the Exchequer as it is for the average household in towns such as Dronfield, Eckington, Clay Cross and Killamarsh in my North East Derbyshire consistency.

It was James Madison, one of the US founding fathers, who said in 1790 that he went

“on the principle that a Public Debt is a Public curse.”

We would do well to take heed of such sentiments.

I have prepared a long speech, because I did not think that so many Members would be here. Before I begin, I will frame the discussion to ensure that the next few minutes can be constructive and useful. The debate could easily, quickly and seamlessly descend into the usual tit-for-tat and back-and-forth on the current state of our national finances, who got us to where we are and why we are there. I am sure that that may happen during the debate. I will say a few words about that in a moment, but I hope we will not dwell on it too much. The idea is to take a broader and longer-term look at where we are, and how we ensure that we leave our country safer, more secure and more resilient than we found it. That resilience should stretch to the nation’s finances as much as it does to its borders and national security.

I declare this debate, in so far as I am able, a Brexit-free zone. That is not because Brexit will not have repercussions or implications for the issue at hand, because it blatantly will, given that the Government’s deficit elimination target has been revised in recent years. I hope my hon. Friend the Member for Southport (Damien Moore) will still have a speech to make after those comments. This debate is about a time beyond Brexit, if we can possibly imagine such a nirvana, and about the day when headlines talk about police, health and education again, rather than backstops, Juncker and tariffs. I have been in this place less than two years, and I would say that at least 90% of what we talk about is Brexit. It sucks the oxygen out of the room, and I say that as committed Brexiteer. It also looks likely to continue to do so for much of the next year, so I hope that for the next few minutes we can try to avoid it.

My proposition is simple: that the United Kingdom considers over the long term the adoption of the balanced budget rule, set in statute, which requires Government to spend only as much as they raise, over a set agreed period, and that there will be consequences if they fail to do that. That would not be an aim or an ambition, but a hard rule, which would be flexible only inasmuch as anything can be flexible when it is set down in law. To be provocative, if we were so minded we might even consider tying any attempt to change future legislation—presumably by a spendthrift Government eager to give out sweeties or goodies to buy votes—to a referendum of the people themselves, given that we have become so adept at referendums in recent years. That would certainly focus minds.

What is the point of legislating on this issue? First, we should all have a moral problem with excessive Government debt. The United Kingdom’s general Government gross debt in September 2018 was, according to the Office for National Statistics, about £1.8 trillion, which is equivalent to about 85% of our country’s GDP. Last year we borrowed, and therefore added to that figure, about £40 billion. In the last couple of decades, our debt as a proportion of GDP has risen from approximately 40% to more than 80%. Those may be just numbers, but they have real-life and real-world implications.

I acknowledge the challenges that the Government have had in trying to get the country’s deficit under control. My party remains resolutely of the view that the Administration prior to 2010 both mismanaged the country’s finances and failed to prepare for the inevitable recession, which could not be avoided given that mere mortals cannot abolish the cycle of boom and bust, and given the well-recited failure to mend the roof when the sun was shining. I support the Government’s deficit strategy and the work they continue to do to manage it down. It has proved a difficult issue to resolve, but we should acknowledge the important milestone that we hit this year, which is that debt as a proportion of GDP is falling for the first time in many years.

Even with the acknowledgement of the good work that has been and continues to be done, the reality is that we are going to run a deficit for a good number of years to come. Even when we eliminate that deficit, which I hope will be as soon as possible, we are merely returning to a place that stops us piling on any more problems for our children and grandchildren, without really having a way to cut down the problem that has already been created in absolute terms. What is the long-term strategy for cutting that debt pile in absolute rather than relative terms? How do we avoid the current position becoming the baseline and the place we start from when the next recession comes? That place would, by default, reduce our firepower to deal with those hard times.

It is worth dwelling on the moral case for not running a deficit and for keeping debt low. The debt that we run up, for whatever good or bad reason, needs to be paid back, and if we cannot pay it back, we need to service it or pay for it. That limits the headroom of future generations to make decisions about what they spend their taxes on, because some of their taxes will go on servicing the debt. It mandates that spending that benefits one generation will be dealt with by another, which is an intergenerational unfairness that we should reflect on much more deeply than we do today, as ever-eager politicians dream up another opportunity to spend.

Reducing our firepower or fiscal space in the event of a recession is the worst kind of lack of planning, and one that will hamstring our ability to pull ourselves out of those recessions, when they inevitably come. As Ryan Bourne of the Cato Institute pointed out in his excellent recent paper on the subject, at least some of the literature that has reviewed the issue highlights that when Government debt gets too high for too long, it tends to reduce growth rates overall, meaning less economic activity, less growth and less prosperity in the long run. [Interruption.]

[Graham Stringer (in the Chair)]

Order. There is a Division in the House. We will recommence in 15 minutes.

--- Later in debate ---

[Graham Stringer (in the Chair)]

Sorry about that. I had been told there was definitely a second vote, which there clearly was not. I call Mr Lee Rowley.

[Lee Rowley]

Before we went to vote I was talking about the moral case for low debt and ensuring that the servicing of that debt was as minimal as possible, to retain and support our ability to ensure economic activity in the future. It was not for nothing that Herbert Hoover intoned sarcastically:

“Blessed are the young, for they shall inherit the national debt.”

In this context, perhaps we can bestow a few less blessings on them in the future.

Putting aside the morality of debt, the key issue, which should drive all politicians regarding the accretion of Government debt, is the year-on-year cost of servicing and holding it, as mentioned earlier. The proponents of unfunded spending may highlight how the markets are not that concerned with relatively high borrowing so long as it can be funded. That may be the case. Let us hope, for all of our sakes, that we do not enter a period of high interest rates in the coming decades when national debt is to be rolled over.

The opportunity cost of that funding, on an ongoing basis, is much less understood in this place than in public discourse. It comprises a tax, year on year, on today’s generation for yesterday’s spending. Unlike the total debt to GDP ratio, which has oscillated wildly in the last century due to wartime spending, the cost of servicing the UK’s debt has been on an upward trajectory for the last century. Adjusted for inflation, the cost of servicing that debt has risen from an average of £12 billion per annum between 1900 and 1960 to nearly £30 billion at the turn of the 21st century. Since 2009, that average has hit £43 billion every year. In total, since 1900 the UK has spent something like £2.5 trillion just on servicing its debt. About half of that has been spent since I was born—I still like to think of myself as being relatively young.

The bad news is not likely to stop there. With the continuing running of deficits until well into the 2020s, the annual cost of servicing that debt is projected by the Office for Budget Responsibility to hit more than £50 billion by the start of the next decade. In this Parliament alone, debt servicing costs are projected to be about a quarter of a trillion pounds over the five years. The sums are huge and growing. They represent a significant opportunity cost to the UK as a whole.

[Alex Chalk (Cheltenham) (Con)]

My hon. Friend is making a powerful point. To put it into sharp focus, does he share my concern that the annual cost of servicing the United Kingdom’s national debt is more than we spend on schools? As a matter of morality, we need to keep debt under control so that we can truly allocate resources where they are most valued.

[Lee Rowley]

I could not concur more with my hon. Friend, as I will address in my next paragraph. Putting this into context, about 8% of all current Government spending is diverted towards debt servicing. In 2015, that made interest payments the joint fourth largest proportion of spending by the UK after health and welfare, and on a par with defence. Spending on education, the police and transport pales in comparison with the budget allocated to debt interest. That budget could be used, as my hon. Friend has just outlined, for myriad other more socially useful activities, such as paying for a hospital to be built every four days, or for approximately 2,500 nurses, police or teachers to be hired every day throughout the year. For those of us with a more centre-right political outlook, the £45 billion spent on interest costs in 2015 could even have been used to reduce the size of the state through tax cuts, perhaps as large as 8% or 9% in the standard rate of income tax. If the populace actually knew that such a significant chunk of the taxes they paid every year was being used to pay for spending chalked up 20, 30 or 50 years ago, would they be content doing the same or worse for their children, given the sacrifices and opportunity costs involved?

We know what the problem is, so why do we not just do something about it? Why do we need a legislative solution for this issue? The problem is that we as a country are not that good at stopping adding to our debt. Our Labour friends—who have temporarily deserted the Chamber—have a tendency to spend money without a huge amount of regard for the implications. My party usually ends up having to clean up the mess. Even on my side, there are not insignificant number of people who cannot resist the temptation to spend when it comes down to it.

Our parliamentary system and representative democracy are excellent at pushing the cause of individual spending requirements, many of which, I do not contest, are no doubt noble. Yet there are few people who will exercise proper restraint or promote proper fiscal responsibility to ensure that all of these myriad pots of money are truly paid for. It is always tomorrow’s problem. Mañana, mañana, as they say. The numbers show just that: over the last century, the United Kingdom has consistently increased its national debt and its deficit spending. Both in absolute terms and as a proportion of GDP, the UK’s debt burden has grown significantly since the turn of the 20th century. The recent political consensus in the UK demonstrated a clear disregard—if we are honest—for the consequences of deficit spending.

Prior to the second world war, deficit spending tended to be closely correlated with war and national defence. In more than half the years between 1900 and 1939, the UK ran an absolute surplus, including during much of the late 1920s, during economic crisis. Since 1945, however, the achievement of a surplus in the UK’s national spending has been relatively rare. Only 13 out of 71 years saw the deficit being reduced, and on only two separate occasions—the late 1980s and the late 1990s—has the UK run surpluses for more than a couple of years at a time.

If all that sounds like one long criticism, it is not intended that way. It is just a statement of fact. Whether poverty or plenty, feast or famine, there is one almost universal constant: the Government spend more than they take in. That is not unique to the United Kingdom, but a feature of western democracy: red ink reigns supreme. The main variable in western liberal democracies is whether they overspend by a little or a lot. France has never run a Government surplus as a proportion of GDP since the 1970s, nor has Italy. The United States has managed to do so only once since 1960. Even Canada, one of the more enlightened in tackling public debt, has only managed to run surpluses in less than one third of financial years since the 1970s. The Maastricht protocol on excessive debt procedure says that countries should not exceed a 3% borrowing ceiling. Just think on that for a moment: there is a protocol that automatically sets an expectation of overspending—just that it is not excessive. And we wonder why debt has significantly increased in most western democracies over the past 30 years. There is an urgent requirement, over the long term, to address this inherent deficit bias in democracies.

The idea that we need to take more drastic legislative solutions is not that new; it is just that we have never properly applied it to national spending before. Sure, the Government have their charter of budget responsibility and an equivalent office creating the data and watching what is happening. Yet the charter requires people only to identify that they are changing policy. It does not really hold people to account or limit them.

[Jim Shannon (Strangford) (DUP)]

On changing policy, I am very aware of where we are at this moment in time. Does the hon. Gentleman agree that a post-Brexit economy will provide an incredible opportunity to expand and invest, that the Government must be prepared to invest in our own people, and that if we must borrow to do so, it must be done in a reasonable and controlled fashion? As he has said, we must be prepared to back our own people. I hope that the Minister will respond positively and say that he will ensure that there will be Government investment in our businesses. That is very important.

[Lee Rowley]

I completely agree that we have a big job to do after Brexit, in terms of ensuring that our infrastructure works and that our country is well prepared for the future and has the necessary flexibility to take the opportunities that will come our way in the coming decades. If, from a Government perspective, we need to spend in order to do that, we should do so. I am not here to disregard Government spending—it is a force for good. However, it has to be done properly, it must have a clear outcome and we have to pay for it.

--- Later in debate ---

On resuming—

[Lee Rowley]

I was talking about how legislative solutions are applied, what is already in place and the charter for budget responsibility. My point was that in non-financial areas of Government activity, we are happy to bind ourselves to long-term targets, because there is the political will. The most obvious instance in recent years was the Climate Change Act 2008, which created an explicit legal requirement for future Governments to reduce greenhouse gases by 80%. If a political consensus can be built for protecting the country against such a danger to our children, why cannot the same be done to prevent economic problems for future decades?

That is where a balanced budget rule could really make a difference, with a legislative requirement to balance our budget over a period, minimising the growth of the debt to be left for following generations to deal with. It is not all that innovative. The OECD estimates that about 100 countries have some kind of fiscal limiting framework. Those can be voluntary or compulsory, and they vary in strictness and the degree to which they are adhered to. None is perfect, but it is at least arguable that over time the focus on fiscal rectitude focuses minds and attention on delivering better outcomes.

Perhaps the most obvious example of a budget rule, and the best known, is Chile’s. In the 2000s, Chile adopted a rule requiring structural surpluses to be run, so that the national debt could be reduced significantly. Broadly, under the structure it created, an estimate was made of the country’s economic potential over future years, and spending was allowed only to match the anticipated growth and revenue.

What was the result? There was a sharp reduction in net debt, surpluses as high as 8% in the years leading up to the economic crisis, and the upgrading of the country’s credit rating. Admittedly, some of that was possibly because of the commodity boom. None the less, the rule permitting appropriate balance to be given to both revenue and spending was important. Even today, after the rule has been challenged and battered a bit more through experience and difficulty, Chile’s debt remains significantly below that of many other countries. It is about 20% of GDP, rather than the 80% that we are grappling with.

Switzerland is another example where a legislative solution has focused minds and improved overall fiscal discipline. The Swiss “debt brake” was introduced in 2001, having been approved in a referendum—something that that country is wont to use for important national policy questions. Integration into the national constitution followed. There is a requirement for structural balanced budgets, through the capping of annual spending with tax revenues, plus or minus some flexibility. Again, the change had a significant impact. A nation whose debtto GDP ratio had significantly increased—from around 15% of GDP in the early 1990s to 45% at the time of the referendum—saw a rapid reduction over the succeeding years. Debt to GDP is now about 25%, and is projected to fall.

Switzerland and Chile are not alone. Sweden is another country that learned from overspending, this time in the 1990s, and it has been relatively successful at maintaining surpluses. The Germans have introduced in their constitution a cap of 0.35% on structural deficits. It is not exactly a surplus, but it is a way to prevent large consistent deficits. Other examples that the OECD has highlighted include Argentina, Belgium, Denmark, Estonia, Hong Kong and the Netherlands, although their arrangements vary with respect to their legislative teeth and their success. Even the French, who have not been able to balance a budget for decades, have made tentative steps in that direction, with the transposition of their fiscal compact in 2012. The fact that that has not gone anywhere is a topic for another conversation, but at least they were moving in that direction for a time.

Of course, legislation is not the only solution, and it does not necessarily guarantee a positive outcome against politicians determined to get around it. The United States’ periodic fights over the debt ceiling—a mechanism that was designed to stop overspending—always have one outcome. In the 1980s, the attempts in the States to balance the federal budget under the Gramm-Rudman-Hollings Act, through mandatory sequesters—automatic cuts in spending in the event that politicians could not agree a budget that would fit—were unsuccessful, as resets and changes occurred when the going got tough. Nothing is infallible if we do not want it to be. Creative accounting, redefinition of spending as investment or capital, direct appeals and canny political manoeuvring can all undermine fiscal responsibility if politicians want that to happen.

I do not argue that a balanced budget rule would be a panacea. In Chile in recent years, there have been issues when estimates have not been realised and projections have been undershot. Switzerland also exempts elements of spending, such as social services, from the rules. If people want to get around this stuff they will, and no Parliament can truly bind the hands of a future one. Yet the idea of fiscal responsibility being formally codified beyond aspirations that can be amended by mere ministerial statements creates an impetus and a legal framework that focuses the political mind and public discourse on ensuring that we do something as basic as spending only as much as we raise.

What kinds of solutions should we consider? That depends on the political will and the desire to focus on the issue at hand. First, it is right to fix our immediate problem and finish the job of eliminating the deficit. I support what the Government are doing about that and want to give them gentle encouragement to accelerate it where possible. That is the first step. There is the potential to legislate in the future once we have reached a surplus, or perhaps even when the point is reached at which the deficit is relatively small, which we are starting to get to.

There are various options. We could try to act voluntarily. That, to some extent, is what we have done already, and it is absolutely better than nothing, but we can in truth see that that approach has shortcomings—for some of which there are good reasons. I shall not provide a running commentary on Government policy, which, as I have said, has been positive overall. Plans are moved, for good and bad reasons. The conveyor belt of politicians calling for more spending and pushing their own hobbyhorses—holding Westminster Hall debates—continues. Many such ideas have merit and value, but we have effectively created a pressure cooker in Parliaments such as ours, with a desire just to ask for more and do more, and seek out new ways to spend money on fixes. When one parliamentarian does it, others follow suit. We remain addicted to spending and voluntarism goes only so far.

How, then, can we formalise the approach I am outlining? We could, as happens in the United States, make it a formal requirement to vote on increasing debt when it approaches established ceilings, or when there is a question of its exceeding them. The Government debt is fixed and capped and politicians have to make a clear decision in front of their electorate to change it. That is useful but probably, as in the US, it would not focus the minds of politicians too much. Often people’s eyes glaze over when they see big numbers. That is one of the reasons why my party should stop trying to win the public services spending arms race with the spendthrifts on the Opposition Benches and focus instead on what the money is actually doing to improve outcomes. A debt ceiling has limitations, but it would send a clear signal.

Taking things further, we could establish a simple balanced budget rule that we would not spend more than we took in over a defined year or over the course of a few years. That could be done through adept forward estimating or by linking spending to the trajectory of past revenue growth. The Government would have a formal responsibility not to overspend, and to set out their plans clearly, on a short-term basis, showing how they intended to avoid overspending. In some ways, that would be the simplest solution—a clear understandable position and a clear understandable requirement to ensure that the budget is balanced. It might also improve public understanding of and support for the proposal.

Such rules, however, are often clunky and inflexible. Absolute requirements to budget on an annual or near-annual basis will significantly reduce headroom and the flexibility to deal with short-term shocks and recessions when there is at least an arguable case for fiscal stimulus in certain circumstances. That is probably one reason why such strict rules do not apply in many places around the world.

Alternatively, we could think about a more flexible approach that achieves the overall objectives, but that relies more heavily on estimating being correct, and on the Government not delaying hard decisions through a lack of political will. The requirement to balance a budget over an economic cycle would seem a strong starting point, although identifying the start and end point of that cycle will be difficult and reliant on guesswork that would no doubt not be correct in a number of cases.

Flexibility could be introduced through various mechanisms. For example, the Swiss debt brake accepts that at times the Government will need to amend their approach due to external factors. To accommodate that, it applies a model of debits and credits, so if a Government fail to achieve a balanced budget in one year, they carry over that failure to another year through a fiscal debit that needs to be made up. Similarly, fiscal credits can be built up in a bank in readiness for future problems. To avoid future debts being run up too heavily, once debits exceed 6% of total Government spending, an automatic requirement kicks in to eliminate them within three years. An exceptional rule also applies so that in times of genuine emergency or need, both Houses of the Swiss Parliament can approve spending on an exceptional basis that breaks the rules. Even then, however, the Swiss have found a way to accommodate that, and automatic amortisation of that exceptional spending must be dealt with within six years.

The challenge of the Swiss model is its relative complexity—try explaining that down the pub after a few pints or during hustings at the next election—but its beauty is that bygones cannot be bygones, which is often the flaw in attempts to regulate deficit spending and debt growth. If Chile gets its estimates wrong, it tries harder next time. If the Swiss get them wrong, they have to find a way to compensate, and all the while the cost of servicing debt remains low and does not threaten the financial health of the next generation.

Despite Brexit sucking the oxygen out of the room, and despite the challenges that the UK faces in the coming years—including from that B-word—we have to make a choice. The Government have been consistent and clear that they believe in fiscal responsibility and discipline. We have had success in restoring the UK’s financial health after such difficult times 10 years ago, and the trajectory continues—albeit a little slowly for my liking—to get us back to balance. Nevertheless, we need to talk about what we do when we get there. As some politicians occasionally point out, dealing with the deficit does not mean that we have dealt with the debt, and the conversation needs to move on to that.

Balanced budgets, fiscal rules and the promotion of fiscal discipline will be the weapons and constraints—perhaps we could call them the backstops—for when the next generation of politicians, whoever they are, are tempted to spend, spend and spend again. Indeed, some of the current generation are quite tempted to do that at the moment. Having balanced budget rules and the codification of fiscal discipline is one way to do that. It is not a perfect solution, but the status quo is far from perfect in this regard. Perhaps as a nation we should start to think more about how we create frameworks for future success, and how we address the fundamental challenge in western democracies of celebrating the money we want to spend—whether necessary and virtuous, or inefficient and virtue signalling—while not paying sufficient attention to the cost of it all. We cannot and must not keep spending today on the backs of our kids and grandkids tomorrow. If politicians are not willing voluntarily to adopt restraint, perhaps it is time to harden our resolve.

--- Later in debate ---

[Peter Dowd]

The hon. Gentleman is spot on. I do not want to misquote the Secretary of State for Transport, but when East Coast went bottoms up he said that that just proved that the market works. That is the sort of economic approach that the Tories take to our country.

Let me go through the three criteria one by one. We are a party that, first, takes seriously the mantle of being guardians of a sustainable economy. We fully costed our election promises in our grey book, “Funding Britain’s Future”. The Conservative party, by contrast, gave no costings whatever in its manifesto. As the shadow Chancellor said, the only numbers in the Conservative party manifesto were the page numbers.

Meanwhile, Carl Emmerson of the Institute for Fiscal Studies said in his election briefing that Labour’s

“forward-looking target for current budget has much to commend it”.

The IFS also estimated that we would have met our deficit target with £21 billion to spare, and that we would meet our debt target.

Secondly, we recognise that Government spending is not something to be scared of, or to have a phobia about, and that some economic metrics do not fully capture the benefits of the gradual build-up of public assets, as the hon. Member for Dundee East mentioned. That is why we distinguish between day-to-day spend and investment in our fiscal credibility rule, because investment is a different kind of Government activity that contributes to a stock of public assets, providing benefits over time. A country is not a house, or an individual who has a lifetime; it goes on, as we know, for a long time. Comparing us to a household might be a soundbite, but it is economic fantasy.

[Lee Rowley]

Given the hon. Gentleman’s point about us binding our hands, can he explain why, in 2006, I think, his sister party in Chile not only determined that it was going to adopt the kind of policies that he just described, but codified them into law?

[Peter Dowd]

I am not here to explain what sister parties anywhere do. I could quote sister parties for the Tories all over the place. The hon. Gentleman should be careful what he is wishing for when he starts to make those sorts of comparisons.

The Conservatives have been unable to appreciate this point in their words and in their actions: the Government’s fiscal target of cutting borrowing to less than 2% of GDP by 2021 does not exclude investment, or distinguish between spending and investment. In so doing, the Government overlook, and undervalue, the special character of investment. They do that time after time.

Their austerity programme, the mythical end date of which was in 2018—previously, it was before that—was more a signal of the Government’s failure than of any actual shift in approach. It has done lasting damage to our economy and society, and has left us with rough sleeping up by 169% since 2010, stagnant wage growth—the worst since Napoleonic times—and few examples of public infrastructure being patiently built up and supported.

The third aspect is flexibility when thinking about sound economic policy. The Tories’ austerity programme arises from, as the hon. Member for North East Derbyshire has reaffirmed today, a rigid ideological belief—not always reflected in practice, I have to say—that a smaller state is always better, notwithstanding good evidence of the state’s entrepreneurial capacity and the human costs of austerity. Such rigidity in approach is something that we have avoided in our fiscal credibility rule.

The zero bound knockout that we proposed, which would allow the Bank of England to change course in times of impending crisis when interest rates can do only so much, shows our willingness to adjust economic policy frameworks in the light of circumstances. Any sensible Government would do that—not bind themselves into a failed ideology and process. That knockout is informed by lessons learned after the global financial crisis—lessons that the Conservative party seems incapable of learning—when it became clear that continual cutting of interest rates was having little impact on spending habits and aggregate demand.

More was needed from fiscal policy, and that zero bound knockout—the fourth element of the fiscal credibility rule—acknowledges that that will sometimes be the case. Professor Simon Wren-Lewis writes that if that part of the rule

“had been in operation in 2010, we would have seen further stimulus in this and perhaps subsequent years, leading to a much quicker recovery from the GFC.”

Wren-Lewis describes that part of the rule—the part that allows a reversion to expansionary fiscal policy in times of crisis—as the part that makes the rule

“unique, and brings it up to date with current macroeconomic thinking.”

--- Later in debate ---

[Lee Rowley]

I thank everyone who came to the debate—word clearly got out and everyone came in towards the end to hear its quality. I thank my hon. Friend the Member for Cheltenham (Alex Chalk), the hon. Members for Strangford (Jim Shannon), for Dundee East (Stewart Hosie), for Motherwell and Wishaw (Marion Fellows) and for Bootle (Peter Dowd), and my hon. Friend the Member for Southport (Damien Moore) for their contributions.

I will end with a few points. First, I say to the hon. Member for Bootle, whose constituency I have the greatest affection for, having spent most of the decade before I joined this place working there, that it is possible to conflate austerity with this discussion, but the point was to go one step further and say that, whatever the political decisions we choose to make—we can have a debate about that—we should pay for them at the same time. Some of the people I have respected the most in fiscal and financial terms over the past 30 years have been social democrat and Labour Chancellors, including Roger Douglas in New Zealand and Michelle Bachelet in Chile, which, as I have said, codified a rule.

Secondly, in my view there is nothing ideological to living within one’s own means, over an appropriate cycle and with appropriate stabilisers and appropriate flexibility. The hon. Member for Dundee East is absolutely right to say that there is no absolute answer, but I know what the answer is not. It is not continually increasing debts, running a deficit continually or semi-continually in the long run, with the costs of servicing that debt approaching and about to exceed £50 billion. If that is the passion of youth, I apologise, but perhaps when we meet again to talk about this issue—and I hope we do—and we figure it out, the hon. Gentleman might nominate us all for the Nobel peace prize.

Question put and agreed to.

Resolved,

That this House has considered the balanced budget rule.

European Union (Withdrawal) Act

Lee Rowley Excerpts

Thursday 6th December 2018 Commons Chamber

[Lee Rowley (North East Derbyshire) (Con)]

Mr Speaker, if you had said to me that, a year and a half after I was first elected, I would be standing in this place in order to rebel against my Government I would have been extremely surprised. It is testament to the problem that we have in front of us today and the gravity of the issues with which we are dealing that that is exactly what I intend to do on Tuesday.

We have a decision to make. There is too much calculation in this place—too much overthinking. We are obsessing about single commas when entire paragraphs do not work. This deal does not work from a trade perspective; it does not work from a law perspective; it does not work from a backstop perspective; and it does not work from a money perspective, and I cannot support it.

Like so many of my colleagues in this place today, I have nothing but admiration for what the Prime Minister has done over the past two and a half years to try to get us to this place today, but hard work is not an end point in itself, resilience is not an output and stamina is not a strategy. We must understand the proposition that is in front of us, and that proposition, in its current form, is very wanting.

One of my very close friends in this place, who is not here right at this moment, said to me a few days ago, “I did not come to this place to make my constituents poorer.” Neither did I, so we can both agree on that prospectus. But when we move all the facile, nonsensical debate about estimates out of the way, some of which has been touched on in a largely good-natured debate today, we are actually talking about what is good for our country in the long term—the next five, 10, 15 and 20 years.

I do not want to make my country poorer, but I know what will make it poorer: the inability to sign meaningful trade deals. It is the inability to be flexible and take advantage of the global growth outside the European Union. I know another way that my country will be poorer if this deal goes through. It will be poorer from a democratic perspective. I represent a constituency that voted 63% to leave, and I cannot go back to my constituents in Clay Cross, Killamarsh, Eckington and all the other villages that voted overwhelmingly to leave and say that this deal delivers Brexit. It does not.

I disagree with this deal. I disagree with it because of where we have come from, because it is a failure of negotiation. I disagree with it because of where we are, because it is a failure of nerve. I disagree with it because of where we are going; it is a failure of ambition. Stop this deal. Stop this discussion. Have confidence in our country, move us out from the shadow we are under and understand that we have a much brighter future if we want to grasp it.

Oral Answers to Questions

Lee Rowley Excerpts

Tuesday 6th November 2018 Commons Chamber

[John Glen]

I agree wholeheartedly with that characterisation of the risks associated with the Opposition ever getting into power. The enormous increases in taxes for businesses would hit consumers and be appalling for the state of the economy.

[Lee Rowley (North East Derbyshire) (Con)]

5. What steps he is taking to increase productivity in the economy.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The Budget set out the next steps in our plan to raise productivity and to grow the economy. That included increasing the national productivity investment fund to more than £37 billion to fund the largest sustained investment in our national infrastructure since the 1970s.

[Lee Rowley]

With that very increase in infrastructure funding to £37 billion, what opportunities are there in places such as North East Derbyshire to invest in regeneration and communities?

[Robert Jenrick]

The plans set out in the Budget were designed exactly for parts of the country such as my hon. Friend’s constituency. The £28.8 billion national roads fund will provide the largest ever investment in our strategic roads, and more money for potholes and pinch points. The future high streets fund will enable small towns across the country, including in the midlands, to be transformed and become thriving communities once more.

Freeports

Lee Rowley Excerpts

Thursday 11th October 2018 Westminster Hall

[Lee Rowley (North East Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hanson, and thank you for the opportunity to contribute.

I congratulate my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke), and other hon. Members present, on being the driving force behind this debate, to which it is a pleasure to contribute. In the year and a half that my hon. Friend the Member for Middlesbrough South and East Cleveland and I have been in Parliament, he has been a doughty campaigner on this issue, and has sent me and other new MPs many letters, pieces of information and general perorations telling us about the wonderful opportunity of freeports. I am grateful to have the opportunity to agree with him officially and on the record.

I came here to listen as much as to speak, because this is an area of interest to me but not one that I know a huge amount about. Some of the speeches have been incredibly useful in helping somebody who is new to the subject understand it. People may ask why a Member of Parliament for one of the most landlocked constituencies in the country—roughly 70 miles away from either coast—is talking about freeports, and while other Members have been speaking, I have been trying to work out a way in which I could make a connection. I attended Transport questions earlier, and we received the extremely good news that the go-ahead has been given for the regeneration and connection of the final stretch of the 250-year-old Chesterfield canal, which links to the River Trent at Stockwith, near the constituency of my hon. Friend the Member for Cleethorpes (Martin Vickers), before reaching the North sea at Hull. The canal was threatened for years and years because of the potential for High Speed 2 to rip it up. Hopefully, we can push for a freeport at the end of the Chesterfield canal at some point in the next couple of decades, when that regeneration occurs.

The real reason I am here is that it is so pleasing to see a debate in this place about the power and the opportunity that economic capitalism and liberalism could unleash on populations such as those in the constituencies of the hon. Members who have spoken, before spreading to other constituencies like my own. In the year and a half that I have been here, I have looked over the Order Paper every single day. Often, it seems to be a never ending set of requests for more activity and more intervention, and for more to be done by the state. Sometimes, it is incumbent upon Members to stand back and realise that some of the wider powers and bigger forces that actually improve lives in this country can only act when we let government get out of the way and let people and commerce thrive in the way that freeports would allow if instituted properly, as my hon. Friends have outlined. I am extremely pleased that we are all agreeing that the forces of liberalism and capitalism—much-maligned in recent years—have the power to do good, make our areas richer, put money in people’s pockets and drive our country forward.

Secondly, I want to speak about the opportunities arising from Brexit, which have already been touched on. It is so refreshing to be in a debate in which we do not necessarily talk much about Brexit—although I am going to touch on it in a moment—but about the opportunities that it can bring. This being one of the first debates in the new term, I hope that it is a turning point, and that we can now look beyond Brexit rather than being completely consumed by the seemingly interminable process of it, which I fear will require us to go through significant time, energy and tears yet.

I concur with my hon. Friends the Members for Cleethorpes, for Middlesbrough South and East Cleveland, and for Hornchurch and Upminster (Julia Lopez), that if we are to leave the EU—we are leaving; my constituents voted 63% to leave—we need to leave in a way that gives us the most flexibility, the most opportunity and the most ability to innovate in the coming months, years and decades. That is the prize and the opportunity that our country needs to grasp. If we do not do that—if we fall between two stools and fail to recognise that we have the power to stand on our own two feet independently, while remaining hugely friendly with our European friends and allies—we will not be delivering the Brexit that people voted for in 2016 and, more importantly, we will not be obtaining the opportunities or the value that could come from Brexit. I wholeheartedly endorse the comments made by my hon. Friends: Chequers in its current form does not work and it does not give us the opportunities we have been talking about today, and I will not support it if it is put to a vote in the House.

The third reason for my speech is that this is an opportunity for us to innovate, to change, to look at how our regulations do or not work, and to boost our commerce. The most nimble and most independent countries will thrive in the next few decades, and innovations such as freeports offer us the opportunity to do so. As my hon. Friend the Member for Middlesbrough South and East Cleveland outlined, examples such as Jebel Ali in the United Arab Emirates, which has 140,000 people working there and receives nearly a fifth of all direct investment in the UAE, demonstrates the kind of opportunities that we may be able to grasp if we take them.

There are also manufacturing opportunities. My constituency is an old manufacturing area, as well as an old mining area, and it still has a significant amount of manufacturing. If freeports can contribute in any way to bringing back some manufacturing, with a focus on high-skill manufacturing, building on what we have, we should all welcome that.

In summary, I am still trying to work out how to get a freeport 70 miles away from a coast. I will continue to think that through at my leisure. Divergence is sometimes an opportunity, as this is. I hope that we, as a Government and a country, will take up such opportunities, because if we do we can be extremely successful in the years to come.

[David Hanson (in the Chair)]

We have an abundance of time for the Front-Bench speakers, so there is no need for them to restrict themselves to the normal 10 minutes each.

--- Later in debate ---

[Judith Cummins]

I will come on to the importance of defining what is a freeport. A 2011 review of special economic zones by the World Bank suggested that many such models had become white elephants, with the cost of revenue lost to the Exchequer outweighing the benefits. At the same time, The Economist reported that they create distortions in economies and that many fail, leaving a long trail of failed zones that either never got going, were poorly run or in which investors gladly took tax breaks without producing substantial employment or export earnings.

Reports have repeatedly surfaced from free enterprise or free trade zones around the world that demonstrate lax enforcement of labour laws. Polish workers have been sacked for an illegal strike against poor working conditions at a business located in a special economic zone. There are similar examples in China, Cambodia and elsewhere. The European Parliament’s director general for external policies found that often in such zones

“the governance of labour rights may differ from the rest of the country and fall below international legal standards”.

If the Government are considering such a model, will they tell us how they intend to ensure that workers’ rights are protected and enforced? Will the Minister tell us what discussions he has had with trade unions?

Serious concerns have been raised about how a combination of tax incentives and relaxed monitoring and supervision, even by competent regulators, has resulted in a reduction in finance and trade controls and enforcement, creating opportunities for money laundering and the financing of terrorism. The intergovernmental Financial Action Task Force raised precisely those concerns in the inaugural review of free trade zones in 2015. It noted that

“the same characteristics that make FTZs attractive to legitimate business also attract abuse by illicit actors”.

The Financial Action Task Force also noted that FTZs have been used in the transport and production of weapons of mass destruction.

[Lee Rowley]

I am grateful to the hon. Lady for outlining all the potential issues, but does that mean we should not have freeports because those things may happen?

[Judith Cummins]

I said at the beginning of my speech that this is a timely debate, because these things need to be said. However, until we get the deal we cannot rule anything in or out, because the devil is always in the detail.

The United Kingdom must not be allowed to become a bargain basement tax haven off the coast of Europe. That includes not allowing any schemes that would allow the abuse of workers’ rights, financial checks, export licencing regimes or money laundering checks. Although we recognise the various calls for a freeport review from industry groups, from the Key Cities group to the British Ports Association and the British Hospitality Association, we must note that it is only one aspect of their much larger call for coastal communities to have a strategy to ensure that investment and growth are facilitated across the UK. That includes investing in transport and infrastructure and improving port connectivity.

Today’s debate must not be used to mask failures by this Government: a failure to bring forward any coherent proposal for our future trading relationship with the EU; a failure to give our exporters any clarity about what their future trade environment looks like; a failure to adequately prepare for Brexit at our ports; a failure to properly invest in transport infrastructure; and a failure to develop any coherent plan to support economic growth and investment in our coastal communities.

I look forward to the Minister’s response to the points that other hon. Members and I have raised. My hon. Friend the Member for Redcar (Anna Turley) spoke eloquently of her local community; she shared her ambition for a freeport to unleash the economic potential in her area. All Members spoke about the importance of defining what we mean when we speak about freeports and the importance of rebalancing our economy. Crucially, I urge the Minister to commit today to consult properly with all Members of Parliament who represent potentially affected areas, because they deserve to be heard.

Office for Budget Responsibility

Lee Rowley Excerpts

Tuesday 24th July 2018 Westminster Hall

[Lee Rowley (North East Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate my hon. Friend the Member for Ochil and South Perthshire (Luke Graham) on securing this important debate; the relatively small number of Members in the Chamber is disproportionate to its impact, and I know our colleagues are desperate to be here and talk about these things. This is one of the most interesting and important debates the House has had in the last few weeks, in either Chamber, because underneath its surface is a series of questions that we as politicians, on both the Opposition and the Government Benches, have about what we want the debate to be around finance, fiscal policy and monetary policy in the coming years, and how we ensure that that is underpinned with a series of structures that make those debates useful and helpful for those who seek to understand and, eventually, vote on them.

I welcome the main thrust of what my hon. Friend talked about in trying to ensure that the Office for Budget Responsibility—the structure that we have in place already—could be expanded, so that it gave an understanding and indication of the costings of the myriad Bills that are introduced, whoever puts them forward, in the white heat of an election campaign, however difficult that is. That would give the electorate an opportunity to stand back—if done correctly and appropriately—and understand what people and parties were suggesting, and how responsible and, in some cases, irresponsible, those parties were being about our future financial and economic health. We have seen, over several decades, across the world, an increasing move to independent structures, whether independent central banks or independent fiscal watchdogs. I think this is a natural extension of that trend, which I would welcome.

I have both non-partisan and partisan points to make, so I will get the non-partisan ones out of the way first, before the hon. Member for Oxford East (Anneliese Dodds) intervenes on me, as I am sure she probably will. These things are important for having an educated democracy. To understand where we are going as a country, how much we are spending and the opportunities that we are putting forward for our communities, the public have to have the information so as to understand the different choices being placed before them. It is an excellent idea to give people the tools to understand the implications of the policies that are being made—with the caveats, which I will come to and which my hon. Friend has explained.

We have myriad policies that sound brilliant in isolation, and it seems they should have been implemented decades ago. In isolation, that makes the Government look as if they have been mean or not cared about certain areas. There are often reasons, however, why policies are not implemented. There are reasons things are not necessarily a good idea, even though they look good on paper. There are opportunity costs to decisions that are made. If we can have a discussion about economics and implications, we will be stronger as a democracy.

That discussion must necessarily accept that the world is complicated. In politics, there is a tendency to simplify discussions, particularly about finance and fiscal policy, to a point where they become meaningless. We talk about billions, gaps and black holes in finances without understanding the economic implications and realities of the assumptions underneath them. Wherever we are on the ideological spectrum, it is important to improve the quality of debate about our finances and about where the Government—whoever is in government—seek to take them in future.

I welcome the proposal from that non-partisan perspective and from a partisan perspective, because if it had been in place in 2017, it would have blown apart the Labour manifesto, which was the biggest work of political fiction and fantasy I have seen in my lifetime. I say that not to annoy the hon. Member for Oxford East, but on the basis that on 12 May 2017 the Institute for Fiscal Studies said:

“This manifesto cannot be summed up in mere numbers.”

It also said that the tax measures were “highly uncertain”, that key elements of it were not explained, and that there was an inherent contradiction in borrowing more and seeking to reduce debt. I know that there is a way to do that, but the quantum of debt that the Labour party manifesto suggested was entirely unrealistic. If the Labour party had got in, and if I were not here today as one of the six Members of Parliament who gained a seat from it, we would be in a problematic economic and fiscal position.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I will do the large-scale demolition later, but I will ask the hon. Gentleman one question now: where were the costings in his party’s manifesto?

[Lee Rowley]

No one assumes that the 2017 election was perfect on both sides. I accept the principle of what the hon. Lady says to some extent: we did not have a good economic debate in the 2017 election, and I hope proposals such as this will improve the quality and standard of future debates.

My underlying point, which is partisan but not party political, is that I am extremely concerned about the level of debt that western democracies have taken on over several decades—that is one of the reasons I am in politics. That debt is storing up huge challenges for our children and grandchildren in the coming decades.

Speaking about debt has gone out of fashion in the last couple of years; it has not been a central part of our discourse, as it was when we had a large deficit several years ago. It is a credit to the Government that that deficit has been brought down, but it has not been eliminated. On a daily basis, we still add costs and create debt for our children and the people who will be here in 30 years’ time. Although debt is less than it was eight years ago, we should never forget that it is still significant. Between 2002 and 2014, debt as a proportion of GDP rose in every western democracy in the G7. In some cases, that rise was minimal, but in others it was extremely large. Western democracies have a debt addiction that will be problematic in the long term.

As a country, we have moved from paying £30 billion annually in interest payments to paying nearly £50 billion in recent years, and that will only increase. The problem with paying £50 billion is that some of the conversations that we have here every week—about how much money we should put into the health service, the education system or welfare—would be much easier if we were not spending 8% of our budget on debt repayments to financial institutions elsewhere in the world, just so we can hold money that we spent many years ago and that cannot have any benefit today.

That £50 billion is the equivalent of building a hospital every four days, of employing thousands of nurses, doctors and other people in the public sector, or of significant cuts to income tax. The problem is that if we, as a representative western democracy, do not arrest our continued debt addiction, in 20, 30 or 40 years’ time, the figure will be £75 billion or £80 billion in real terms.

Many people have suggested that extending the remit for independent fiscal watchdogs, as my hon. Friend the Member for Ochil and South Perthshire has proposed, does not work, because it is ultimately impossible to model some of the underlying implications as there is an inevitable political bias in the assumptions that will be utilised to assess the activities, and because they might not be truly independent.

My hon. Friend also talked about the situation in 2014-2015, when the former shadow Chancellor suggested that the Office for Budget Responsibility look at Labour’s manifesto costings, but it did not have the capacity to do that. Those are all interesting points, and probably worthy of debates in themselves, but we have to decide whether we want to improve the quality of debate on financial and economic policies—and I do. The extension of the OBR’s remit would be a positive step in that direction.

Those watchdogs work and are useful, as my hon. Friend showed by talking about the Congressional Budget Office in America and institutions in several other countries around the world. I will point to two examples from Australia, where I have family; I am particularly interested in the political machinations there.

In 2007, the Liberal party, which I would closely ascribe to if I were in Australia, was moving out of office and the centre-left party was coming in under Kevin Rudd. In the heat of that election campaign, there was a big debate between John Howard, the Prime Minister, and Kevin Rudd, who would become Prime Minister, about financial and economic costings. The centre-right Government were trying to splurge to win an unprecedented fifth term in office, so they proposed approximately double the increase in spending that the centre left proposed.

I would naturally support my Liberal friends in Australia, but they were not proposing the right policies at the right time, and in doing so, they were not recognising the challenges of an overheating economy. Australia’s independent watchdog came along and said that the proposals would cause problems, which gave the mantle of economic credibility to the Labor party—something that is rarely done across the world.

Kevin Rudd is not a natural fellow traveller for me, but his biography says that

“barely 10 days out from voting day…we had won the all-important battle for fiscal credibility…the political dividends were reaped not only from a slew of Australian financial and economic commentators but from the international credit rating agencies too. Fitch stated that Australia would retain its AAA credit rating if Labor was elected”.

That is an example of why this kind of policy, and this kind of proposal, is really important.

If we fast-forward to the 2013 Australian election, Kevin Rudd was at the end of his second term as Prime Minister and was seeking to splurge to stay in office. In the white heat of the election campaign, his party put out a number of scare stories about why the incoming coalition Government were going to cut loads of things, cause huge economic problems and really affect the economy—the kind of thing that we hear quite regularly. The Australian published a book called “Triumph and Demise” by Paul Kelly, an eminent journalist in Australia, in which he said:

“In the second-last week of the campaign, the heads of Treasury and Finance issued a statement repudiating Labor’s claims”

on the costings of the coalition—the opposition. He continued:

“It was an unprecedented event, the biggest story of the campaign and a humiliation for Rudd as prime minister. Rudd had over-reached and been repudiated by his own advisers. The symbolism of a dying, dysfunctional and dishonest government was irresistible.”

I would not particularly like to have been in John Howard’s or Kevin Rudd’s shoes, but that demonstrates that if we get structures right and have an independent watchdog that can look and say, “This doesn’t work. This is wrong. These numbers are obscured,” that can improve the quality of debate and focus people on the underlying questions that are being asked.

However, that will only ever be useful if we, as politicians, and the country at large, recognise that statistics are not necessarily the be all and end all, that there is a wider context to be gained from them, and that we need to treat them with caution, as my hon. Friend outlined. But in principle, the extension of the OBR’s remit is extremely important. Although I recognise that there are challenges, if we are looking to take steps to improve the quality of debate—both within this place and without, in the wider community—we should seriously consider ideas such as this, which I welcome strongly.

Five-year Land Supply

Lee Rowley Excerpts

Wednesday 4th July 2018 Westminster Hall

[Lee Rowley (North East Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship, Sir Christopher. I, too, congratulate my hon. Friend the Member for South Suffolk (James Cartlidge) on securing the debate. The problem is countrywide and it affects North East Derbyshire. At times, this debate has seemed like a self-help group where we all put our concerns and difficulties on the table.

We are experiencing similar difficulties in my constituency, because a council has abjectly failed to discharge its responsibilities over several years—more than a decade. Just as my hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) described, that will bring about a plan loaded with too high a number of houses to be built in my part of the world. At the same time, because the five-year housing land supply has only just been put in place, it has caused a significant number of speculative planning developments to be submitted in places that are inappropriate under the plan and objectively inappropriate for people who live in the area and know it best.

Over the past couple of years, North East Derbyshire has experienced 11 separate planning applications in areas that the local plan would not allow to be developed under any other circumstances. Those applications are for more than 1,300 homes. Given that our district has to build only 6,600 homes over a 15 to 20-year timeframe, 1,300 homes that should not have been applied for in the first place represent a significant increase in the number of houses that are needed. The area in the bottom half of my constituency is already slated to take 3,000 new houses that local residents have accepted and, in some ways, embraced, so this is not about nimbyism. It is about houses being built in the wrong place because councils are failing to put in place the right plans and failing to discharge their responsibilities. As a result, we are seeing the loss of greenfield sites and other places where houses would otherwise be considered completely inappropriate.

I draw hon. Members’ attention to two problems with the five-year housing land supply. The first is methodology. My hon. Friend the Member for Elmet and Rothwell made the point about over-inflated numbers. In the same way, my district council did not get the target figure of 280 houses a year right in the first place, and it is now about to replace that with a figure of 332 houses a year, which will further undermine local residents’ confidence that our planning system knows what it is doing.

Despite not having the correct top-line figure, when the council assesses the deliverability of the planning permissions that have been put in place, it talks to the developers themselves, so the developers get a second opportunity to say whether they will build in places where they already have planning permission. That retards the overall five-year housing land supply and gives developers more opportunity to get housing planning permissions through. That methodology is a huge problem.

The second problem is competence. The political leadership in my local council has been thoroughly incompetent in ensuring that North East Derbyshire is protected from inappropriate and speculative housing developments. The authority monitoring report, which my hon. Friend the Member for Henley (John Howell) outlined to some extent, is a publication that appears and disappears at will. The 2014 version appeared a year late—a full year after the council decided it had a 2.15-year housing land supply. The 2015 version did not even appear, and was just amalgamated into a 2015 and 2016 report. Again, that appeared nine months after the number was calculated.

We did not know what our housing land supply was until a special report was taken to the council in October. I am pretty sure, because I spent some of last summer trying to calculate it, that the council knew many months beforehand that it had hit the five-year housing land supply, but it chose not to report or announce it until October. When some planning applications went through, including one on Fanny Avenue, Killamarsh, it was stated that the absence of a five-year housing land supply was at least partly why they were approved.

My council is clearly completely failing, not just on the plan as a whole, but on the five-year housing land supply, and as a result I have to go and talk to residents in Wingerworth, Old Tupton, Ashover, Killamarsh and North Wingfield, where another 250 houses have just been put on a site that should not be developed on, and never has been, because the plan is not in place. That is unacceptable. I support the Government’s localism angle, and I accept that it works in principle, but when councils do not discharge their responsibilities, we reach the point that North East Derbyshire has got to. A huge number of houses are being built, potentially in the wrong places, and the only way to stop them is a huge amount of heartache and angst and huge numbers of planning inquiries.

[Alec Shelbrooke]

On the point about councils’ incompetence, Leeds City Council has been heard to say that it simply cannot be bothered to reassess the numbers. It has now moved to a position of saying, “We will assess the numbers after the site allocations plan.” If it reduces the numbers, it makes it even easier to build on the green belt and greenfield land.

[Lee Rowley]

My hon. Friend makes a correct and important point.

The only way that we can have any semblance of control over the planning system is by extraordinary displays of public opposition to applications that should never have gone through in the first place. Hundreds of hours of residents’ time are lost on many meetings that should not have to happen. Hundreds of thousands of pounds are allocated to planning inquiries that should never have started. All of that retards confidence in a planning system that is quite rightly trying to deliver the houses we need in this country for the long term. I understand that this is a challenging area, and hon. Members from both sides of the House have outlined why, but when councils do not discharge their responsibilities, we get to the place that North East Derbyshire has got to, which totally undermines the trust and belief that councils and the planning system can deliver.

Financial Services

Lee Rowley Excerpts

Thursday 26th April 2018 Westminster Hall

[Lee Rowley (North East Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship, Sir David. I am grateful for the opportunity to speak. I should at the outset disclose my interests—both directly, in the Register of Members’ Financial Interests, and as co-chair and member of a number of all-party parliamentary groups. My background is also relevant. I have worked in financial services for the best part of the last 15 years, including in the weeks before the general election was unexpectedly called, having taken a new job in insurance and so having to review that rather quickly just after Easter last year.

I thank my hon. Friend the Member for Chelmsford (Vicky Ford) for co-ordinating the debate and for speaking so comprehensively and lucidly in outlining the challenges and opportunities for the sector. I will not go over them at length, because she covered many of them so incredibly well.

I welcome the debate for a number of reasons, the first being that financial services are important for the economy as a whole. My hon. Friend explained that in a lot of detail. This sector accounts for 11% of GDP and a significant number of jobs across the country. Those jobs are not just in London. When I was working in financial services, I spent as much time in Manchester, Glasgow, Edinburgh, Sheffield and Leeds as I did in London. That demonstrates the number of jobs involved and the importance of regional centres for financial services as a whole and for our economy, both regionally and nationally.

Financial services are important for the economy as a whole, but also for people. Financial services are the vehicle—the driver—for ensuring that people and businesses can get out there and do as they wish, and can work hard, achieve and get on. Credit is a fact of life. Credit opens up those opportunities and helps to realise the ambitions of people, businesses and organisations.

I particularly believe that financial services are important for social mobility. I have a history degree, so I did not necessarily expect to get into financial services. I come from a relatively working-class background in Derbyshire. I was at a report launch at Rolls-Royce in my county—not my constituency—a couple of weeks ago, and the report talked about the importance of IT for social mobility. My social mobility was through IT in financial services, and I know so many people—ex-colleagues and friends in the sector—who have also experienced social mobility as a result of what banking, insurance, asset management and wealth management offered them. Credit makes the world go round, and we need to ensure that that is at the heart of our strategy as a country and for our economy as a whole.

The challenge, of course, is to lift the discussion out of the framework of the 2008 financial crisis, important as that was, and out of the entirely sterile and cartoonish debate that it falls into at points. I was working in financial services at the time, and there is no doubt that in 2008 a significant amount of bad behaviour was going on, extremely bad practice was occurring—illegal practice was occurring—and the regulations were not appropriate. The debate is not about too much or too little regulation; it is about the appropriateness of the regulations. The capital ratios had got too low, and we got into a place that was significantly problematic. We do not want to go there again.

I make my comments on the basis that all of that is accepted. We also have to recognise that we are now in 2018. The financial crisis was 10 years ago—a decade ago. Nearly a third of my life has taken place since it occurred. We have to stop having the debate about what happened in 2008 and start having the debate about what will happen in 2018 and 2028.

We have not yet heard the comments from the Opposition Front Bench. I know the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) as a very thoughtful speaker. I have had the pleasure of listening to him in numerous debates over the months that I have been in this place. However, there is a sterility to the debate on this subject. I am sure he will not contribute to that—or at least I hope he will not—so long as his speech has not been given to him direct from Labour central office.

We have to ensure that we stop talking solely, important as these things are, about how all bankers are bad, the high remuneration is terrible and IT failures are very problematic—that is probably not the best argument to make this week, given all the TSB customers who have been so badly affected and with whom I sympathise hugely. I hope that Mr Pester sorts out the problems as quickly as possible and does not just send us apology emails, which he seems to have sent us this morning. I accept that some bankers were bad and remuneration was too high, but we have to bring the debate on, move it forward and look at the challenges that are coming, not those that are behind us.

In that regard, the first points that I want to make are about the opportunities that we have. My hon. Friend talked extensively about the challenges and the opportunities that are coming with Brexit, and I wholeheartedly endorse many of the statements that she made. Like her, I think that the continuity point is crucial. The Government are working extremely hard on that point. Everyone I talk to in the sector ultimately boils the point about contract continuity down to the ultimate essence, which is that it is highly likely that we will all find a way through this. Actually, it will be almost impossible not to find a way through it, given the meshing together of the EU nation states and the United Kingdom in terms of the contracts that are cross-border. If we do not, we get ourselves into a really tricky place. Ultimately, many of the discussions have, underneath, a tremendous political element, not an economic element. The Government are working very hard on that. They have been completely up front and straightforward about it and are working to ensure early resolution of the problems.

We cannot get ourselves into a place where we are novating or rewriting millions and millions of contracts. I am sure that the lawyers would be delighted, but I am not sure that even the combined might of the European and the UK legal sectors could rewrite all the contracts, even if they wanted to.

I understand that there is significant precedence for what I am referring to, including from 1999, when the euro came in and there was an effective grandfathering of contracts that had gone before. I wish we could get to that place as soon as possible, because people are spending a significant amount of money on preparations that could usefully be spent elsewhere. I strongly encourage the European Union not to play politics in this area and to accept that it is important that there be clarity as soon as possible.

The same principle goes for recognition of the continuity of the ability to book into the United Kingdom. I accept that there is a commercial and economic discussion in the European Union about wanting to develop its own systems, approaches and financial centres, but the reality is that London is central to most of what happens in Europe from a capital perspective and a booking perspective at the moment, particularly in terms of underlying the instruments of risk that come with many of the larger contracts, especially on the commercial side. I hope that the European Union is not playing politics from that angle as well. The reality is that there is no point in making these decisions and agreeing them at five to midnight, as is the wont of the EU in many of its negotiating positions. We have to try to get clarity now. The Government are working on that; I hope that Brussels is doing the same.

I have had the opportunity over the past few months to do a fellowship from the Industry and Parliament Trust on the future of financial services. I have been to a number of different financial services organisations now—I was with UK Finance on Monday. As a country, we have a number of opportunities in financial services over the coming years and a number of interesting questions about where we want the sector to go. I will touch on a few of those, as my hon. Friend did.

First, we have to get the regulatory framework correct. Much progress has been made in the past 10 years on this, and my hon. Friend referred to that. The Prudential Regulation Authority, the Financial Conduct Authority and the Financial Services Authority do a good job generally on many of these areas. Andrew Bailey is highly respected for that and rightly so. However, it is incumbent on us to raise the quality and interest of debate in this House. I agree with my hon. Friend that Thursday is perhaps not the best time to do these debates—I am sure that if we held this debate on another day, we would have more hon. Members here. However, from a Back-Bench perspective, we cannot outsource decisions and discussions on regulation to the PRA and Andrew Bailey on the basis that they know what they are doing; we have to have those discussions and debates here, because there are political angles to them. I know that the Government are intricately involved in that, but as Back Benchers and Members of this place, we have to get involved as well.

We have a huge opportunity with FinTech. That is a truism, which everybody knows, but we have a particular opportunity because, compared with some of the larger countries, we have a relatively contained group of people who are highly switched on, mobile, flexible and connected, and with whom we can do an incredible amount of work as a country, to test some of the innovations that will be coming through the FinTech sector in the next five to 10 years. We should see the UK as an incubator, as I know the Government do. We should be supportive of what FinTech offers, to transform society as a whole, not just for those at the top. FinTech should be seen as an opportunity to support everybody who experiences financial services and who may be more vulnerable and to transform their experience. Some of the things that have been done, particularly around the regulatory sandbox, are very impressive. I spoke to colleagues in America just a few months ago, and they are very complimentary of what the sandbox is achieving. I hope we can continue to replicate—to create and perpetuate—that environment, which supports FinTech and FinTech development.

Competition is a long-standing and challenging area. We have done much in the last few years, including around account switching, to make the process of markets more flexible. Customers seem to have an inherent stickiness in terms of being willing to transfer banks. We have to do some further work on that. I tried to change my bank account on Monday. I went into an unnamed company and I was told that it would take an hour to change my bank account. While I think it is perfectly legitimate—I am not trying to seek Government control over these processes—the sector needs to reflect on the challenges and barriers that it puts up, to ensure that flexibility can be created within the industry. We need to encourage greater competition. The challenger banks are doing incredibly well, but we need to ensure that there is greater flexibility and competition as a whole.

Within that, we have to ensure, and not forget, the importance of mutuals. I declare an interest: I was employed by a mutual—Co-op Insurance—for all of six weeks before the election. Mutuals are incredibly important to the future of our financial sector. They do great work; they often explain what they are doing and their mission better than some of the larger players in the sector. We should welcome how mutuals work in this country, across both business and personal banking. We should support them in their endeavours, particularly by looking at the barriers to entry for new mutuals coming into the sector. It is important that, just as we have new challenger banks, we should have new mutuals, also keeping the existing players honest and on their game.

There is a significant opportunity for automation and artificial intelligence in this industry. A significant amount of attention is going on that. I was working on some of those elements last year in the private sector. However, banks and financial services organisations need to recognise that opportunities for automation and artificial intelligence are not just about cost reduction and cost drivers; they are an opportunity to put the customer at the heart of processes. I mean that in an actual way; this is not just lip service. My constituents tell me about their frustration, which I share, that they find banks faceless and financial services companies unwilling to engage. We have to get away from that “computer says no” mentality. I hope some of the opportunities around automation will be about not just cost reduction, but customer service improvement.

My hon. Friend talked extensively about the importance of cyber-security, data handling and risk as a whole. I wholeheartedly support that. In particular, we need to see open banking as an opportunity, but we need to recognise that, through application programming interfaces, we are opening new challenges and domains where security can be challenged. We do not want banks to have created firewalls and frameworks to prevent cyber-events, only for those cyber-events to be transferred elsewhere as a result of open banking. Catastrophic data losses need to be avoided—that is obvious—but if they are not and we do not have that at the centre of our minds, we could get into a difficult position.

We also need to recognise that data handling, and the changes around big data, machine learning and the like, which are coming into the sector, will change the way in which the economic models of banks and insurance work. Insurance is effectively about pooled risk, but it is also about making an assessment of risk. When we can interrogate the levels of data coming into the sector, we move away from the necessity of pooling risk based on a series of avatars about what people aged 35 and 40 tend to do. We can make a decision on actuality: what people actually do and what they have actually done. That is creating a more perfect market, where risk is priced closer to the challenges, but it also creates a series of ethical questions about how we use that data. The hon. Member for Bristol North West (Darren Jones) and I—under the auspices of the Parliamentary Internet, Communications and Technology Forum, which he co-chairs—are launching an investigation into the ethics of technology and artificial intelligence. I encourage hon. Members who are interested in that to get involved.

Finally, one of the most important points for my constituents regarding financial services is vulnerable customers and branches. My hon. Friend spoke about branch closures in her constituency. I have similar examples. A branch closed in Clay Cross—a town in my constituency—just a number of months ago. There were serious concerns from local residents about that. We have to see financial services, and the challenges and opportunities they present, as a way to address some of these things. There is a clear move for the majority of people in the country towards digital banking—that is to be welcomed—but there will always be a group of people who are unable to be engaged through that process. We need to ensure processes are in place to engage them.

I welcome the developments around post office openings in recent years, but I wonder whether the sector as a whole is really thinking through the opportunities it has. For example, nobody in the sector has been able to give me a clear answer as to why some form of shared service in local towns is not possible—why banks cannot inherently share the infrastructure of branches so that a customer might walk into the space between four physical walls, but have four different banks in that space, sharing the overheads, costs and all the challenges, which they say are the reasons for their leaving these important towns in the first place. I hope that banks and other financial services will reflect on other opportunities than just the post office.

In conclusion, there are many opportunities for financial services in the coming years. It is crucial that we recognise the importance of financial services to the economy as a whole. I hope that, as a country, we can grasp those opportunities and recognise the importance of credit in our society every moment of every day. If we do that, we can hopefully ensure that our country continues to thrive in the years to come.

Digital Taxation

Lee Rowley Excerpts

Tuesday 27th March 2018 Westminster Hall

[Lee Rowley (North East Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship, Dame Cheryl. I am grateful for the opportunity to speak. Like my hon. Friend the Member for Witney (Robert Courts), I congratulate my hon. Friend the Member for Harborough (Neil O’Brien) on securing this vital and incredibly timely debate on an issue that we talk about in this Chamber and beyond.

An important principle that needs to be established is that of a level playing field on taxation as a whole across commerce. If we do not ensure that people have confidence in that, legitimate questions can be and are asked about how markets work, whether they are effective and whether the Government are regulating them properly.

Before I talk about the specific issue before us, it is important to recognise the huge benefit that the development of the internet has brought over the past 20 or 30 years. It is something of a truism to say this, but we have an entirely epoch-changing set of opportunities before us because of what the internet offers us and what e-commerce hopes to drive. We have been able to make more perfect—I use that phrase advisedly—markets in terms of reduced barriers to entry. We are able to serve customers in an easier, more timely and more convenient way. We can ensure that people have the things that they want, and that we respond to the combined views of people, as demonstrated via the mechanism of the market. In the United Kingdom, 1.5 million people are employed in e-commerce businesses directly, and a vast supply chain and vast group of people support those industries indirectly. It is important to recognise and acknowledge the benefits that the internet has brought over the past 15 or 20 years—within our lifetimes—to the country as a whole and to the world in general.

However, the principle that my hon. Friend advances is absolutely right. We must have a taxation system that is fair, notwithstanding the huge benefits that have been brought to society by the internet over the past 15 or 20 years. I completely agree with the statement in the Government’s paper that failure to find the right system undermines the fairness, sustainability and public acceptability of the corporate tax system, which we need to avoid at all costs.

I therefore welcome the review of taxation and what the Government are doing to look at the matter in more detail. I acknowledge and recognise the challenge—my hon. Friend outlined that better and more comprehensively than I could ever hope to do it. The Government are right to have an open mind on many aspects. It is right that they will have an open discussion with those who are interested, and to set out that, of necessity, they are likely to look at both short and longer-term solutions.

Underneath, there is an inherent tension and problem, which is how we define user-created values. I think I accept the principle that taxation should be based on value creation as a whole, but how we define that and whether we create a system that is incredibly complicated in order to be able to tax it is something on which the debate and discussion has a long way to go. It is good to see the Government are approaching the matter in that open way.

I also think we have to get away from some of the tendencies over the past five years or so on corporate tax to shout loudly as a collective political class about corporate tax, rather than doing some of the hard spade work. That is exactly what the paper suggests and what many hon. Members are debating. It is no good shouting at companies in Select Committees when they are obeying the letter of the law, even if they are not obeying the spirit. Let us change the law so that that does not need to be done. I say that as someone who has just joined one of those Committees and will probably be shouting at people over the coming months and years as a result.

I understand why that happens, but I am similarly sceptical of gifts, benevolence and contributions to the Exchequer for no apparent reason, much as I understand the principle. That kind of approach is not one that we should perpetuate over the long term if we want to create the stable taxation system that attracts companies, promotes economic growth and supports development on all sides.

I therefore welcome the discussion. I welcome the willingness to review and to do so in such an open way. I agree with many of the points that have been made, particularly in the introduction. I would just like to broaden the subject slightly and make two additional points.

This is a symptom of a much wider challenge in capitalism, corporation tax and taxation in general. We are entering an era of internationalisation with regard to many of the challenges. That has been evident for a number of years, but has come increasingly to the fore over the past decade or so. I am thinking of the cross-border challenges that my hon. Friend outlined. What the OECD has done to date is a good start—the principles it has outlined are positive—but there appear to be limited opportunities to move that forward in the short term. We have to encourage supranational organisations to take on these knotty problems and look more closely at how they can solve them over the long term. If we do not have the institutions that can support the regulation of things such as tax, we will lose the confidence of populaces that rely on us to ensure that taxation is taken. We can debate in this Chamber how big or small that taxation should be, but we have to ensure that the framework is there in the first instance to support it.

There is a much wider conversation to be had, not just about taxation but about the approaches within the sphere of the internet, and how it has commercialised over the past 20 years or so. That is probably a debate for another time, but I hope you will allow me to spend just 30 seconds on it, Dame Cheryl.

I separate out entirely the many hundreds of thousands, or millions, of companies that use the internet to deliver services daily in a cheaper, and a more efficient and effective way. I welcome and celebrate them as an excellent example of how capitalism works, but a very small number of very large companies at the top of the tree have created what are essentially monopolies. They have essentially taken over whole swathes of industries. Some of them have created those industries, and all credit to them. Many of them have become very rich in doing so, or the people behind them have. But they have essentially annexed an individual industry. In any other area of commerce, we would call them out for what they are. They are monopolies or oligopolies. If someone has 90% of the search engine market, they are a monopoly. If they have 100% of the social media market, they are a monopoly. If they have 47% of the e-commerce market in the United Kingdom, they are a monopoly.

We can debate the definition of monopoly, but there are monopolistic companies at the top of these industries, and we have to think in the longer term about how we address that. If we do not do so, we will lose the confidence of people that we can regulate effectively. Either they have become so embedded that they are ultimately the infrastructure—they are the pipes upon which things run—and should be regulated accordingly, or we have to look at how we can stop monopolistic practices. The first duty of those of us who are pro-free market and pro-capitalist is to avoid corporatism and monopolistic practices at the top. Perhaps that is a debate for another time, but it is important for the wider point about how we tax, because of the activities of those companies. The reasons why we tax them in the first place derive from some of the things that they do—some of the practices and some of the monopolistic instincts that, for good or otherwise, have grown up over the past decade or so.

I therefore very much welcome the debate. I again thank my hon. Friend the Member for Harborough for introducing it and for giving us the opportunity. I look forward to the Government’s response in relation to the paper.