Business Rates

Lord Swire Excerpts

Wednesday 13th June 2018 Westminster Hall

[Sir Hugo Swire (East Devon) (Con)]

I congratulate the hon. Member for York Central (Rachael Maskell) on securing this important debate. Anyone looking into this Chamber from outside will be surprised by the lack of Members taking part in this debate on an important issue—a non-political issue, almost, that affects all of us and our high streets all over the country. Perhaps Members feel that there is no point in rehearsing the arguments because they will not change anyone’s mind and the Government will do nothing. I know better than that because I consider the Financial Secretary to the Treasury, my right hon. Friend the Member for Central Devon (Mel Stride), to be a personal friend of mine, as well as a neighbouring Member of Parliament in Devon. I know he cares as passionately about his high streets in Crediton and elsewhere as I do about mine in Exmouth, Budleigh Salterton and Sidmouth.

The hon. Member for York Central made extremely good points and I wholly concur with her. I went with a company I am no longer involved with to the Valuation Office Agency, and it was a truly horrible experience—we saw overwhelmingly underpowered officials there. I know it is an arm’s-length body, but I urge my right hon. Friend the Minister to look at the VOA and some of the decisions that it makes, because it is crippling some of our companies. The onus seems to be on the companies to disprove what the VOA asserts, which can leave companies paying outrageously high rates for many months when in fact they and the VOA know that in the end they will get a rate rebate.

My right hon. Friend—unlike many others in the House, unfortunately—comes from a business background. He is a successful businessman, so his sympathies lie naturally with the business community. We face what I described in a public meeting I had in Sidmouth a couple of weeks ago as an unhappy coincidence: an unhappy coincidence of people’s behavioural patterns when purchasing goods. I am a living example. Without making a gender-based remark—well actually, I am going to make a gender-based remark—I think the majority of men probably shop more online; I certainly do the majority of my shopping online. There is a gravitation towards that, coupled with the issue of business rates and the perfectly hideous decisions by successive Governments to be too loose in granting planning permission to out-of-town megastores. That has not been mentioned so far this morning, but it is also partly responsible for the desecration of many of our high streets.

We should not be Luddites. We cannot turn the clock back. We should remember that many mews houses were used for horses 100 years ago, but they are now converted and life moves on. Patterns change and the pattern of life accelerates, so we should move with the times. Interestingly, a recent report showed that the loss of shops on the high street is actually less than the public’s perception. None the less, it is a major issue.

I pay tribute to the dogged determination of a local reporter, Beth Sharp of the Sidmouth Herald, who, along with Alistair Handyside, who does so much for tourism in the south-west and rightly got recognised in the Queen’s birthday honours list, helped organise a very good meeting I went to with some of the retailers in Sidmouth. It is clear that the unhappy coincidence of events is having a negative effect. A hotelier at the meeting, Mark Seward, said that his rates have increased by 244% in a decade—they are now £17,000 a month. That is what he has to make before he pays any of his suppliers and before he pays the living wage to his employees. Before he does anything he has to pay money straight out.

It seems to me that we have not moved with the times. I had an interesting meeting with the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the hon. Member for Rossendale and Darwen (Jake Berry), the other day. We talked about what new initiatives might come from the Government in relation to our high streets. The accepted wisdom now is that the Mary Portas review addressed some of the problems, but did not go far enough, and we now need to look at things in a different way. There are things that we can do.

In the meeting in Sidmouth, I gave an example. Some time ago I went to a shop in Sidmouth that sells kitchen utensils. I said, “How is business?”, and the shopkeeper said, “It’s terrible. Business is terrible,” so I asked why. I said, “Surely when it rains all the tourists come in here.” He said, “Yes, all the tourists come in here. Historically, they would have come in here, looked at all our kitchen utensils and thought they were marvellous. Then they would spend a little more time here. They would buy and then go home with these wonderful things.” He said, “Now they come in out of the rain and look at all the stock. They see something they like—a nice kitchen utensil to better stir their concoctions at home—and what do they do? They whip out their iPhone, take a photograph of it and then go home and buy it online.” The shopkeeper said, “I am becoming a shop front for these products that I have had to buy anyway, which are now being bought online and undercutting me.” He has to pay the rates and Amazon or eBay do not, or not on the same scale, and that seems to be the kernel of the problem.

Then there is an issue where we have to tread carefully. I am very proud of some of the charities that I am involved with. I am vice-president of the West of England School and College for those with little or no sight—WESC—based in Exeter. I opened its charity shop in Sidmouth and I am proud that it can raise money in that way. We would all support charity shops. The problem is that charity shops now often sell new stock. Historically, charity shops sold things that we gave them. As a charity shop, it does not pay rates. Now they sell brand-new products often totally identical to those in the shop next door, but they can afford to charge less because they do not pay any rates. As part of a wider review we have to look seriously at charity shops. Perhaps the number of charity shops should be fixed at a certain percentage or perhaps there should be other ways of making sure they do not compete with those who are still obliged to pay rates.

There are practical things that the Minister and the Government can do. First, business rates are easy to collect, but they are no longer fit for purpose because of the changes in shopping behaviour. I agree with the hon. Member for York Central that we have to get smarter in how we tax online retailers. That is extraordinarily difficult, whether we call them tax avoiders or tax evaders—there is more than a semantic difference there. The point is that they are dominating the virtual high street, and it is manifestly unfair that there is no levy or taxation on them.

If we could come up with some smart way of taxing such people, we could either do away with business rates for or seriously support high street retailers; the issue is not just about keeping shops open in our town centres, but what the community looks like. We have already suffered from identikit high streets, where every other shop is now a coffee shop. I am pleased to say that in Sidmouth and some of my other towns, such as Budleigh Salterton, there are still individual retailers. That is the way forward. Towns have to rediscover local retailers and offer something other than multiple chains. Clearly we need to look at finding a way of applying a levy to online retailers.

Secondly—this has been done in towns and cities up and down the country—we need to look at how we can shrink the retail space. We have to accept that we will not turn the clock back on how people shop. Very often the retail side of a town is too big for the town’s needs. We need to look at how we can shrink the retail part of a conurbation, which has been done successfully in some places.

On the back of that, we need to look at planning and how we can make it much easier to convert former retail premises to residential premises. It is my contention that if we made some shops residential again, we could have starter homes and bring young families into the town. That would mean that there was a night-time community, which would in turn give birth to other things, such as 24-hour retailers, wholesalers or cafés. That would bring people back into the heart of town centres. That seems to me to be a way forward.

We also need to look at the thorny issue of parking. Very often, towns were designed not for cars, but for the old horse and cart. We need to be smarter about how we get people in and out of towns and how they can park. There needs to be much greater flexibility—perhaps two hours’ free parking. Again, that is a problem for district councils, because that is one of the ways they raise money. We need to look at that as well.

We need to get much tougher with our planning regarding huge, out-of-town, American-style shopping conurbations, which I personally think despoil the countryside in an American-style way. We need to find a way to make it more attractive for huge retailers to come into our towns. That can be done without having a huge, hideous store. It can be done very cleverly, and has been up and down the country. We should be aware that big high street retailers such as Marks & Spencer are changing their entire shopping policy not through choice, but for survival. They are closing their stores down and doing more online because that is the prevailing mood. If that does not underline the issues and challenges, nothing else will.

This combination of things is hugely important: shrinking the size of the town; making it easier for premises to become residential; helping councils to allow people to come into the town and to park; looking at taxing the online retailers; and looking again at the rating system. Changes in the 2017 spring Budget meant that businesses with a rateable value of less than £15,000 would not pay the levy, but based on the way it is calculated, bigger stores have to pay.

I will say one final thing to the Minister. We cannot turn the clock back. The Portas review went so far. We now have to act very quickly to ensure that we preserve and enhance our high streets in the way that I have set out. Another issue, which we get the whole time, is that people hate having services taken away from them. What used to be our post bags, and are now our email inboxes, are highly active if something is being taken away from the local community—if the local shop, library or bank is going to close.

It is perfectly clear to me that more banks will close up and down the country as we move towards cryptocurrency, blockchain and so forth. The whole way of doing banking is going to change. We cannot stand in the way of that and say, “We must have the same services we’ve always had.” That will be a commercial choice made, quite properly, by commercial banks. More and more banks will vacate the high street. In turn, that will give birth to other things so that people can do their financial transactions. I do not know what that will look like, but something will replace them.

Given that we know that that is coming down the line, we have to act now to pre-empt it. I very much hope that the Minister will, with his Treasury colleagues, fulfil what we said in the manifesto we would do, and speak to other Ministers about having a wholesale review based on the Portas review, looking at how we can preserve our high street and help struggling businesses.

If it goes on like this, frankly there will not be any retailers at all; they will just close one after the other. I do not wish to be alarmist. As I say, the figures are not as bad as people think, but certainly in Sidmouth we have lost two or three in the last few weeks, and are set to lose more. The fact is that no one is replacing them. We need to be cleverer, and think in a lateral way to ensure that, yes, we tax people properly, but that businesses grow and remain accessible to our residents.

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[The Financial Secretary to the Treasury (Mel Stride)]

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

I congratulate the hon. Member for York Central (Rachael Maskell) both on securing the debate and on the tenacious approach she has rightly taken to the extremely important matter of business rates. I thank her for her comprehensive contribution, and in particular for the examples she gave of high street businesses—I think we all recognise that many face considerable challenges. I also thank the various other speakers, who raised numerous points. I intend to pick up on as many as I can, but I would of course be happy to engage with Members outside the Chamber on any that I omit.

I thank my right hon. and gallant Friend the Member for East Devon (Sir Hugo Swire) for his kind remarks about the amount that I care about this issue and for referencing my business background. I fully appreciate what a struggle it is in the business world, even when times are extremely good. It is never easy to go out and employ people, to generate wealth and to have a successful business. I also appreciate that business rates are one of those taxes that businesses simply cannot avoid—they are paid irrespective of profitability, which of course has particular consequences in some cases.

We need to put this debate in context. A number of Members said that business rates are an issue but are not the totality of the pressures that our high streets face. We heard much about the challenges of online marketplaces and of the planning system—when there is a change of use of businesses that reside on our high streets, for instance—and my right hon. and gallant Friend raised the issue of parking. Myriad issues impinge on this space, and I think we are all seeking to ensure that taxes right across the system are competitive, that there is fairness among those who are expected to pay them, and that they are collected, so that we minimise tax avoidance at every stage.

That brings me to the comments by the hon. Member for York Central about possible alternatives to the current rating system. She mentioned a tax on revenue or on profitability. As soon we started to tax revenue, we would run into the problem that businesses that were not profitable still had a turnover. For example, a new entrant on the high street that we all wanted to thrive may get throttled by the kind of approach that she suggests. If we went for a tax on profits, there would be the potential for profit shifting. If there were a particular regime in one area, businesses may move profits around between multiple enterprises to reduce their overall tax.

The hon. Member for Sheffield South East (Mr Betts) recognised that. He made the important point that business rates have a distinct advantage when it comes to avoidance, because buildings cannot be shifted around in the way that it might be possible to shift other metrics. He also raised the 100% business rates retention pilots and expressed hope that we would pursue that measure. We will pursue it with vigour. I am watching it very closely in Devon, where the pilot scheme is also operating. I very much look forward to catching up with the report of the Housing, Communities and Local Government Committee, which he chairs.

My hon. Friend the Member for St Ives (Derek Thomas) raised the issue of second homes being designated as businesses because they are holiday lets. We are engaged with the VOA to ensure that no abuse occurs in those circumstances. He will be aware that certain criteria have to be met for individuals or companies to treat properties in that way. I am happy to engage with him outside the Chamber on that issue, because he raised one or two interesting points. He also raised the issue of different businesses paying different rates and gave an example of two businesses right next door to each other. He and I have discussed that, and I look forward to looking in greater detail with him at the examples that I know he will come forward with.

The hon. Member for High Peak (Ruth George) raised a point about pubs and suggested that information being made available to the public might drive crime. I am certainly prepared to look at that. I imagine that those who are out to raid the premises of pubs have other measures by which they might be able to discern whether a lot of cash is being taken—how many people are in there drinking on a Friday night, for example—but I am certainly happy to speak to her about that. She also raised the way pub rates are calculated. They are valued by the VOA using the fair maintainable trade method, which has been agreed with the British Beer and Pub Association.

Let me point out the numerous things that the Government have done on business rates to support businesses. In 2016, we announced around £9 billion of relief on business rates. We made the 100% small business relief permanent, which took 600,000 businesses out of rates altogether. We increased the threshold for the standard multiplier, removing 250,000 businesses from the higher rate of business rates. Of course, we were able to do that only because of our prudent stewardship of the economy, which has allowed us the space to provide that relief to the business community.

I have limited time, but I will dwell for a moment on the online business threat, which a number of hon. Members rightly raised. There is a growing number of online businesses in this space, and an increasing number of purchases are happening through online companies. It is important to make the point up front that when we refer to some of those companies paying relatively small amounts of tax compared with high street operations, we are talking not about tax avoidance but about whether the way the international tax regime operates is appropriate or functional for the 21st century. It is not. We need to find different ways of taxing online platforms, whether they are search engines, social media platforms that generate revenue, or online marketplaces, where significant value generation occurs through the relationship between users based in the UK and the platform itself.

[Sir Hugo Swire]

It is reassuring to hear the Minister say that we need to look at ways of taxing those rather more mobile forms of purchasing online. Will he say whether there is a team in the Treasury doing that, and when it is likely to report?

[Mel Stride]

There is indeed. I am personally engaged in that matter, which has been taken up at the OECD and the European Union. They have both produced interim reports on the issue and suggested that we might look multilaterally at some kind of revenue-based taxation, albeit—to get back to the problem of revenue-based tax—we do not want to choke off new entrants to the marketplace, which may be loss-making, so there may have to be some de minimis thresholds associated with that formula. We are actively pursuing that on a multilateral basis with countries in those two institutions. I discussed exactly this issue with Finance Ministers from OECD countries at the ministerial meeting of the OECD in Paris last week. We have made it clear that, although it would be most beneficial to move multilaterally with other countries, we will make a unilateral move if we need to.

I am conscious that we are down to the last minute and I would like to give the hon. Member for York Central an opportunity to respond, so I will draw my remarks to a conclusion.

Customs and Borders

Lord Swire Excerpts

Thursday 26th April 2018 Commons Chamber

[Yvette Cooper]

The hon. Lady is right. It raises huge questions about the rule of law, about how the system would be enforced, and about how it could operate in a sensible and fair way without being opened up to challenge from other areas.

Crucially, the technology approach relies on cameras. I have no doubt that part of the response at Dover will be the introduction of new automated number plate recognition and other such mechanisms. As I said to the Prime Minister before Christmas, cameras are infrastructure. If we add a whole load of cameras to the Northern Ireland border, we will still be creating the infrastructure and—crucially—the targets that the police fear will become a focus for dissident groups who want to disrupt the peace process. That, I understand, is why everyone, including the Government, has concluded that cameras at the Northern Ireland border are not a sensible solution and should not be part of our approach.

[Sir Hugo Swire (East Devon) (Con)]

I am listening closely to what the right hon. Lady is saying, but there are already cameras for number plate recognition at all the ports on the UK mainland, recording traffic to and from the island of Ireland.

[Yvette Cooper]

The right hon. Gentleman will be aware that the concern relates to what happens around the border between Northern Ireland and the Irish Republic, and the introduction of new infrastructure at that border, especially such symbolic infrastructure, and especially anything that would increase the sense of there being targets for dissident organisations. We do not want them to become more active and have more to focus on.

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[Kate Hoey]

No, he was not at all. The problem is that people think of a hard border as big cameras, lights, structures and so on. I remember those, as does my hon. Friend the Member for North Down (Lady Hermon); we all remember what that looked like. No one is talking about having that again, but some people are using it as a way to change the fact that the people of this country voted to leave the EU, the single market and the customs union.

[Sir Hugo Swire]

Will the hon. Lady give way?

[Anna Soubry]

Will the hon. Lady give way?

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[Sir Hugo Swire (East Devon) (Con)]

As we head towards our departure from the European Union in just under a year, I believe that our future trading arrangements are more important than ever. As deputy chairman of the Commonwealth Enterprise and Investment Council, I was involved in last week’s Commonwealth business forum, before the Commonwealth Heads of Government meeting, which was an important event for discussing trade, especially in the light of Brexit. Last year, my right hon. Friend the Secretary of State for International Trade hosted the first ever Commonwealth Trade Ministers’ meeting, and last week the Prime Minister and Secretary of State announced £1.5 billion worth of commercial deals.

According to World Economics, the Commonwealth economy is bigger than that of the current eurozone, while intra-Commonwealth trade has grown faster than the global average over the past 10 years. I fundamentally believe that the diversity of the Commonwealth is a strength in itself, with half of the top 20 global emerging cities within the group. There are 2.4 billion people in the Commonwealth, of which more than 60% are under the age of 29. It is worth remembering, in terms of opportunity for British business, that the middle class of India alone is bigger than that of Europe.

Even the European Commission has conceded that 90% of global economic growth in the next 10 to 15 years is expected to be generated outside of Europe. The Commonwealth’s largest members account for a quarter of the G20 and a fifth of all global trade, meaning that millions of jobs are directly affected through trade between these countries. Since the EU referendum, the Foreign and Commonwealth Office and the Department for International Trade have been building links with the rest of the world, which is a positive step towards higher levels of economic growth. That leadership will place the UK in as strong a position as possible when we eventually leave the EU.

So why should we avoid remaining in a customs union with the EU? The answer is very simple and it is borne out by the facts. The Government have set out to ensure that we are a truly global Britain. As we have heard, remaining inside a customs union with the EU would prevent the UK from committing to that agenda and striking lucrative free trade agreements with countries across the world. Recent data from the World Bank show that the EU27’s share of world GDP has fallen from 25% to 18% in the last 10 years alone. I simply cannot understand why some colleagues would prefer to remain within a customs union with a bloc that is declining in its share of global trade.

It is in the EU’s interests not to impose tariffs and barriers to trade, especially as EU members continue to sell more goods to the UK than we do to them. That point is particularly pertinent when stood next to the fact that the proportion of our exports going to the EU27 has fallen from 54% to 43% in the last decade alone, at a time when our trade with the Commonwealth has increased.

Membership of a customs union restricts a country’s right to trade freely with third countries. Free trade agreements are not, I concede, easy to negotiate, as we saw with the comprehensive economic trade agreement between the EU and Canada. Many of us remember the Belgian region of Wallonia almost unilaterally collapsing that painstakingly negotiated free trade agreement. I for one am not prepared to allow future growth in the UK to be hobbled by a regional Government in another EU country. The possibility of being forced to wait for regional Parliaments in 27 other EU countries to ratify a free trade agreement is wholly unacceptable in today’s world.

I would like for a moment, as a former Northern Ireland Minister, to pause and think about Northern Ireland, which was one of the reasons I voted to remain. I agree with the hon. Member for Vauxhall (Kate Hoey) that we cannot allow the tail to wag the dog, and I very much hope that the Minister for Foreign Affairs in Dublin will in future work collaboratively with both the UK Government and the EU to resolve this. We do not want a hard border, and I am pleased that the Prime Minister has been clear that it would be unacceptable to break up the UK’s common market by having a customs and regulatory border down the Irish sea. We share the same policy goals even if they are achieved by different means.

The British people voted to leave the European Union on 23 June 2016. As someone who campaigned and voted to remain, I was naturally disappointed with the result. However, it is up to us, as representatives, to respect and implement the wishes of the public. I do not believe it is feasible or credible that, when the British people voted to leave the European Union, they did so in the hope that we would remain within the customs union, and I simply do not buy into the idea that people did not know what they were voting for. I find that argument incredibly condescending.

Treasury

Lord Swire Excerpts

Thursday 1st March 2018 Ministerial Corrections

The following is an extract from an answer given by the Chancellor of the Exchequer to the right hon. Member for East Devon (Sir Hugo Swire) during Topical Questions to Treasury Ministers on 27 February 2018:

[Sir Hugo Swire]

Reducing tourism VAT to 5% after we leave the European Union would create an extra 121,000 jobs and £4.6 billion in revenue to the Treasury over 10 years. It would be a great boost not only to our great cities, but to our great coastal towns, such as Exmouth, Sidmouth and Budleigh Salterton in my East Devon constituency. Will the Chancellor commit to looking again at this issue as we leave the EU?

[Mr Hammond]

My right hon. Friend is nothing if not persistent and consistent. I cannot remember how many times he has raised this issue. There have been numerous requests for new VAT reliefs since the referendum, some of which are currently not permitted under EU law. We have calculated that if we were to grant all the VAT relief requests that we have received, that would come to more than £38 billion a year. On VAT and tourism, the Government have received representations on this issue, and we are looking again at the case for change. We have issued a call for evidence on the impact of VAT and air passenger duty on tourism in Northern Ireland, and we will certainly keep this issue under careful review. [Official Report, 27 February 2018, Vol. 636, c. 678.]

Letter of correction from Mr Hammond:

An error has been identified in the Oral Answer given to the right hon. Member for East Devon (Sir Hugo Swire) at Treasury Topical Questions on 27 February 2018. The correct answer should have been:

Oral Answers to Questions

Lord Swire Excerpts

Tuesday 27th February 2018 Commons Chamber

[Mr Speaker]

I am sure he will read that with some anxiety.

[Sir Hugo Swire (East Devon) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

My principal responsibility is to ensure economic stability and the continued prosperity of the British people, and I will do so by building on the plans set out in the autumn Budget. This Government are determined to meet the important challenges we face and to seize the opportunities ahead as we create an economy fit for the future. Our balanced approach to the public finances enables us to give households and businesses support in the near term and to invest in the future of this country, while also being fair to the next generation by reducing a national debt that remains far too large.

[Sir Hugo Swire]

Reducing tourism VAT to 5% after we leave the European Union would create an extra 121,000 jobs and £4.6 billion in revenue to the Treasury over 10 years. It would be a great boost not only to our great cities, but to our great coastal towns, such as Exmouth, Sidmouth and Budleigh Salterton in my East Devon constituency. Will the Chancellor commit to looking again at this issue as we leave the EU?

[Mr Hammond]

My right hon. Friend is nothing if not persistent and consistent. I cannot remember how many times he has raised this issue. There have been numerous requests for new VAT reliefs since the referendum, some of which are currently not permitted under EU law. We have calculated that if we were to grant all the VAT relief requests that we have received, that would come to more than £38 billion a year. The Government have received representations on VAT and tourism, and we are looking again at the case for change.[Official Report, 1 March 2018, Vol. 636, c. 6MC.] We have issued a call for evidence on the impact of VAT and air passenger duty on tourism in Northern Ireland, and we will certainly keep this issue under careful review.

Oral Answers to Questions

Lord Swire Excerpts

Tuesday 16th January 2018 Commons Chamber

[Mr Hammond]

The rates for people under 25 were increased in the Budget by the biggest amount ever—[Interruption.] Look, of course we would all like to see high rates of employment and high rates of pay across all age groups in the economy, but for young people, the most important thing—the Low Pay Commission highlights this fact—is that they get into work, because if they are in work when they are young, they are more likely to remain in sustainable work throughout their lifetime, and that must be the priority.

[Sir Hugo Swire (East Devon) (Con)]

3. What recent discussions he has had with the airline industry on air passenger duty.

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

Her Majesty’s Treasury regularly engages with the airline industry on air passenger duty. At the autumn Budget, we froze 2019-20 APD rates at 2018-19 levels for all short-haul passengers and for long-haul economy passengers. That provided a freeze for 95% of passengers.

[Sir Hugo Swire]

May I congratulate my hon. Friend on his appointment? He has done extremely well.

Airlines such as Flybe, which is based at Exeter airport in my constituency, undertake a disproportionate number of domestic flights. As my hon. Friend will be aware, domestic flights, unlike international ones, are currently hit twice by APD—at both take-off and landing. Treasury officials, of course, will tell a new Minister that any change is impossible and hide behind EU rules, but as we exit the EU, will my hon. Friend look at addressing that anomaly?

[Robert Jenrick]

I am grateful to my right hon. Friend for his kind remarks. I pay tribute to my predecessor, my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones), who was well regarded across the House.

As my right hon. Friend says, the Government are unable to exempt the return leg of a domestic flight. Of course, as we leave the European Union that could change, and the Treasury will keep the issue under consideration. We certainly recognise the economic significance of regional airports such as my right hon. Friend’s in Exeter. For that reason, we have kept short-haul rates frozen since 2012. In 2015, of course, we took the significant step of exempting children.

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[Mr Hammond]

The answer to that is the £6 billion of additional money that we put in at the Budget. I am glad that the hon. Gentleman raised St Peter’s Hospital in my constituency, because that gives me the opportunity to make an important point. As other Members will know, whatever the media say about the NHS in general, when one speaks to one’s own constituents about their experience in their local hospital, it is invariably good and they invariably have nothing but praise for the service that they receive from our excellent national health service.

[Sir Hugo Swire (East Devon) (Con)]

T8. The cost of the backlog of repairs to our historic buildings is now estimated to stand at an alarming £1.3 billion, in large part because of the changes to VAT levied on repairs. Will my right hon. Friend show that, as a Conservative, he genuinely believes in conservation and that something will be left standing for future generations to enjoy?

[The Financial Secretary to the Treasury (Mel Stride)]

I certainly agree with my right hon. Friend’s assertion of the importance of our heritage, which was recognised when last year the Department for Digital, Culture, Media and Sport gave grants of more than £140 million in that respect. On VAT relief for repairs to historic buildings, the situation that currently pertains to EU regulations is that if we were to make changes or reductions, we would have to apply them to all buildings in the UK, at onerous cost, but that is something we can look into as and when we leave the EU.

Tax Avoidance and Evasion

Lord Swire Excerpts

Tuesday 14th November 2017 Commons Chamber

[Mr Mitchell]

The hon. Gentleman cannot get away with such a narrow, partisan comment. Britain was the first G8 country to stand by its commitment to the poorest people in the world, and we are very proud that it was this Government who did it.

The highly respected Africa Progress Panel, in a recent study on the Democratic Republic of the Congo, made it clear that stolen funds and stolen taxes cost that country £1.5 billion, which is more than it spends on health and education. It is a deep irony that some of the world’s poorest people live on top of some of the richest real estate, as is clear in the DRC. Credible World Bank studies make it clear that the money stolen from the people of Africa through unpaid taxes or concealment dwarfs all the foreign direct investment and international development money that flows into Africa each year.

[Sir Hugo Swire (East Devon) (Con)]

We know a lot of that money ends up not in the overseas territories but in places like Dubai. Does my right hon. Friend agree that we also need to engage with other partners around the world, particularly in places like Dubai, where a lot of this money is to be found?

[Mr Mitchell]

My right hon. Friend makes a good point; the key point on all of this is transparency and openness. Let all these matters be published in the way they are published through the open register in Britain. That is the way in which we make progress.

We look to the Government to advance this agenda, probably in the Finance Bill. We hope that those on the Treasury Bench will hear clearly the will of the House on this matter today and that progress will indeed now be made.

Finance Bill

Lord Swire Excerpts

Tuesday 12th September 2017 Commons Chamber

[Robert Jenrick (Newark) (Con)]

It is a pleasure to speak in the finance debate today on an important set of measures that will take the economy and the public finances forward in the right direction. Like other Members who have spoken today, I wish that the Finance Bill were shorter, given the relatively small number of measures, and that the effort that had begun under the last Chancellor, George Osborne, with the Office of Tax Simplification could continue and bear fruit. Budgets are becoming too complicated and too long, and the tax code ever longer, leaving small and medium-sized businesses struggling to cope with compliance. Even our largest companies spend far too much time in their board meetings discussing compliance and far too little time on innovation and how to move forward.

I am inspired by Paul Ryan in the United States, who suggested creating a tax return on a postcard for 95% of American citizens, and I would like us to move in that direction. In truth, no Chancellor since Nigel Lawson has taken tax simplification seriously. He was the last Chancellor to say that one in, one out should be our policy for creating new taxes. Perhaps that is something that we could take forward as we gain complete control over our own laws as we leave the European Union.

There are three points that I wish to make. First, following on from my hon. Friend the Member for Harborough (Neil O'Brien), I would like to say a few words about our record on tax evasion and avoidance. There is a lot of misinformation about, and much needs to be said about how successful the Government’s record really has been in this area. There has been a breakdown of trust. This is a question of trust, and the antidote to mistrust is not moralising or phoney outrage, but credible action, and that is what the Government have set out to do since 2010.

When we came to power in 2010, the tax gap was rising in almost every area, particularly in corporate taxes. Today, in almost every area, it has fallen dramatically. Corporate taxes for large companies have fallen by 50%, and for small companies by 40%. In house ownership, stamp duty has fallen by 40%. These are significant achievements. They have been hard won by measures such as the ones in this Budget—I am talking about complex measures produced by Treasury officials who have gone to a great deal of trouble to work out how these falls can be achieved in a way that would simply never have happened under the last Labour Government. We have elevated the issue internationally—from David Cameron raising it and making it the centrepiece of the G8 summit to other opportunities—so that the UK is perceived internationally as a world leader in the area.

When the all-party parliamentary corporate governance group brought Leo Strine, the chief secretary of the Supreme Court of Delaware—the jurisdiction in which 90% of US companies are registered—to speak in the House of Commons, he said that there is no way that the state of Delaware would implement any of the major measures that we have. He particularly mentioned the most significant achievement: the creation of the world’s first public beneficial register of ownership. That was a significant step forward. There were legitimate arguments against it, including the invasion of privacy, but the Government took it forward none the less. It is a real achievement, which, like the state of Delaware, no other country—certainly not our major international competitors—is looking to implement. We have the general anti-avoidance legislation. We were also the leaders in the base erosion and profit shifting project under the previous Chancellor, as we are under the current one.

The results are stark, with major decreases in the tax gap of up to 50%. Had the tax gap continued on the trajectory left by the last Labour Government, it would be £47 billion and the public purse would be £11 billion the poorer. Instead, it is at its lowest ever level and is one of the lowest in the world. The way in which we report the tax gap is certainly one of the most transparent and best documented of any major country. That is a tribute to HMRC, the Treasury and successive Chancellors. We should be proud of that record and not spread misinformation that things are getting worse. As we now see internationally, the UK truly is leading the world as a result of these changes.

My second brief point is a more direct one about the Labour party and its approach not just to the Finance Bill, but more generally. The Labour party is asking the public to worship a false god. Labour says that taxing our businesses and entrepreneurs much more will result in a higher tax yield. That is not true. The richest 1% of this country pay 27% of all the income tax collected. The richest 5% pay 45%. Until the eve of Gordon Brown’s defeat in 2010, even he resisted raising the top rate of tax. He knew about getting our richest and most successful businesses and entrepreneurs to shoulder the greatest share of the burden, which they did—their share of tax rose under Labour as it has under the Conservatives—but it was precisely his hunger for more tax to spend and more money for the Treasury that led him to refuse to raise the top rate of income tax and to increase corporation taxes further.

We only have to look back within my lifetime to see the wealth creation unleashed when Nigel Lawson reduced the top rate to 40%. The Government then profited by taking a smaller slice of a much greater pie. The system that the Conservatives left to Labour in 1997 was more progressive and redistributive than the system that we inherited back in 1979 from Callaghan and Healey. In 1978-79, the top 1% of the population paid 11% of taxes, and the top 5% paid 25%. When we left office in 1997, the top 1% paid 21% of income tax—almost twice as much—and the top 5% paid 40%. The lowest 50% of the population saw the amount of tax they paid in that era fall from 20% to 11%. Lower tax rates mean higher tax yields. Higher taxes on the better off or on business for purely political reasons will not lead to a fairer tax system, even by the left’s own definition.

This is the paradox: to get people and businesses to pay a higher share of tax, we usually have to lower their tax rate, and so it has been with corporation tax in our experience in the last seven years. UK corporation tax receipts have surged to a record high during the last financial year, as the main rate has fallen from 30% in 2008 to 19% today. By reducing the rate and by having a Government with a credible economic policy, we have shown that the UK is open for business, and we have attracted international businesses from around the world that wish to open their headquarters and move a greater share of their operations here. Now, with heightened uncertainty over Brexit and a possible net outflow of businesses and investment, we need this policy more than ever.

Higher taxes on companies and individuals and their homes, as proposed under a Labour Government, will mean lower tax receipts and less redistribution.

[Sir Hugo Swire (East Devon) (Con)]

Does my hon. Friend agree that, at a time where there is uncertainty in the business community, not least because of Brexit, talking about raising corporation tax and taxation generally, as the Opposition are doing, is a mammoth disincentive for companies thinking of relocating and growing their business here at this dangerous time?

[Robert Jenrick]

My right hon. Friend makes exactly the point I have been advancing: not only is the approach the Opposition are taking counterintuitive, because the evidence suggests that higher corporation tax will yield less money for our public services and fewer opportunities to redistribute taxes to the most vulnerable in society, but it will send a signal that Britain is no longer open for business, which is exactly the opposite signal from the one we want to be sending to the world at this time. The point is that that is being done by the Labour party, against the evidence and for purely party political, ideological reasons.

Margaret Thatcher once said that the left would

“rather that the poor were poorer, provided that the rich were less rich.”—[Official Report, 22 November 1990; Vol. 181, c. 448.]

Today’s Labour Members would rather that there was less money for public services, less wealth and less opportunity, so long as they could claim that they were punishing the wealthy from the comfort of their Islington townhouses.

The public should be under no illusions: the Labour party’s economic plans will not bring in the tax receipts it claims they will, will not fund the commitments it claims to make, including on tuition fees, and will pose a real risk to public services. The only tax receipts that we can be certain will increase under a Labour Government led by the right hon. Member for Islington North (Jeremy Corbyn) will be the air passenger duties levied on the businessmen and women—the entrepreneurs and innovators —stampeding to leave the country after the next general election.

[Robert Jenrick]

I could not agree more with my right hon. and learned Friend.

The evidence I have tried to bring forward shows that under Conservative Governments—both from 1979 to 1997, and from 2010 to the present day—the money spent on public services increased dramatically while those Governments have been able to take more tax receipts from the wealthiest in society by applying a sensible, credible economic policy and not. purely ideologically, seeking to increase taxes on the rich and our business community, which is counterproductive for everybody concerned.

In closing, I want to make a simple point about Brexit and the state of the economy. The only way Brexit can be a success is if Britain charts a course towards economic liberalism. Our survival and our success outside the European Union entail Britain becoming more competitive. We must open up markets. We must find ways of building competitive advantages, of reducing and deregulating wherever possible, of getting inward investment into the country and of embracing free trade. That means encouraging enterprise above all else.

[Sir Hugo Swire]

My hon. Friend is making some extremely good points, but the one thing he has not mentioned, which we have to address as a matter of urgency, is productivity.

[Robert Jenrick]

I quite agree. Productivity is the great challenge for us. Part of making sure we are a productive society is making ourselves the most competitive society we can be. That means being willing to embrace free enterprise, to reward success, and to lower corporation taxes––perhaps even our personal taxes as well. Doing that will require the most careful management of the public finances. It will mean real, continued effort to live within our means so that our children and grandchildren can continue to deregulate, to drive competitive advantages and to have lower taxes for their companies and businesses, unshackled from the incredible burden of paying off our national debt.

We will be somewhat more exposed to the world and to globalisation when we leave the European Union—less shielded from those economic forces—so we will need to lean into the free market to secure our future. That will mean a close regard to our competitiveness and the way that we are perceived by the rest of the world. It will mean a managed but liberal immigration policy that seeks to attract the most highly skilled people that we need—a focus on who they are and the skills they bring, not necessarily on how many—and a tone that welcomes people into this country rather than repelling them.

That requires something of everybody in this House. It requires from the Conservative party a tone on immigration that shows to the world that we are open and welcoming to the best and the brightest and an approach that embraces economic liberalism, not the interventionism that we have strayed into in recent months and years. For the Labour party, it means recognising that heirloom hard-left policies will not cut it in that environment. Labour’s refusal to accept that Britain’s future lies in economic liberalism will not work. It will set Britain up to fail, and to fail badly.

Oral Answers to Questions

Lord Swire Excerpts

Tuesday 28th February 2017 Commons Chamber

[Jane Ellison]

No.

[Sir Hugo Swire (East Devon) (Con)]

There is, however, an emerging consensus that we need to better integrate our social care and health system. We already have the better care fund and the Chancellor’s prudent management of the economy, but if he has any wriggle room in the forthcoming Budget may I ask him whether we can have some transitional relief for social care until we can work out the best model?

[Jane Ellison]

The Government have been very clear on a number of occasions that we recognise the pressures in the system and additional money has been made available through the social care precept. We are well aware of the pressures in the system and, as my right hon. Friend says, the long-term need for more integration—the Chief Secretary has already referred to the better care fund—but his point is well made.

Amendment of the Law

Lord Swire Excerpts

Wednesday 21st March 2012 Commons Chamber

[Naomi Long (Belfast East) (Alliance)]

I start by confessing that I find the Budget quite disappointing, not because I had huge expectations of it at the beginning but more because some of the more disappointing things that have been widely trailed in recent days are indeed in it.

I start with a partial welcome, however, for the increase in the personal allowance, because I believe that it will lift a significant number of low-income families out of paying tax. I qualify my welcome only because, as a means of tackling in-work poverty, it is a broad-brush measure that will benefit the wealthy as well as the poor.

When I consider the changes to tax credits and other in-work benefits that have been announced in recent weeks, I believe that all may not be as it seems when it comes to who will be most affected. Other Members have highlighted that point by referring to those on the lowest incomes, such as those in part-time, minimum-wage employment.

Beyond that, I look to what will create employment for people in Northern Ireland. Although it is a good thing to lift people in low-income employment out of paying taxes, it is a better thing to lift people into higher-wage, better-paid jobs and give them opportunities to succeed.

A couple of measures that would help the Northern Ireland economy significantly have been talked about for some time, and I want to consider them briefly. My concern is that the Budget lacks what I would call regional sensitivity, for want of a better phrase. One of the significant burdens that businesses in Northern Ireland face, and which has an impact on leisure and tourism as well as on business travel within the UK, is air passenger duty. We have raised that many times with the Government, and to be fair and give credit where it is due, there have been some significant and positive interventions in the case of long-haul flights.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

indicated assent.

[Naomi Long]

I see the Minister of State nodding vigorously and looking bemused that I should raise the matter today, but I do so for this reason: although the intervention on long-haul flights was welcome and positive, and although I know the Government have recommitted to the devolution of the matter to the Northern Ireland Assembly, which is welcome, I confess that I hoped the Treasury might take some action on the level of short-haul APD. That has an impact on what we pay for regional flights within the UK and places a premium on our connectivity, particularly with the south-east, which the Government reinforced in today’s Budget as the primary income generator for the UK.

In addition, businesses in Northern Ireland and local consumers are challenged by the double payment of APD on flights to other short-haul destinations. That occurs when people have to pass through one of the hub airports here in London but not on a through connection, owing to limited access to direct flights and through carriers. I hoped that the Government would take the opportunity to attract new tourism and grow business, but it appears that APD is simply to rise as planned in April.

Many Members have highlighted the impact of fuel costs on both families and businesses, and the distortion that it causes in the cost environment for businesses in regions such as the one that I represent. Fuel prices there are high, and transport costs make up a higher proportion of business costs than elsewhere because businesses are more rural and remote. Today, there has been little new for those businesses and families, beyond the reiteration of a promise about the fuel duty stabiliser. I hope that it is possible to implement that as a matter of urgency, but I also hoped for something slightly more on fuel duty.

I want to consider corporation tax, which we have been discussing at length and for some time from a Northern Ireland perspective. That has been mentioned today in the context of the main corporation tax rate. I listened carefully to the Chancellor when he extolled the virtues of the changes he would make. He mentioned all those he foresaw as our significant competitors, but not the nearest competitor—which will still have a significant advantage over us even at the end of the period when the main rate of corporation tax reduces to 22%—of those of us who reside in Northern Ireland: the Irish Republic. It has significantly lower corporation tax and is a direct competitor with businesses in my region, particularly those around the border. The announcement on corporation tax will affect very few businesses in Northern Ireland. Most pay the lower rate of around 20% and I do not believe that they will be affected, although I am prepared to be corrected if my assessment is wrong.

I want briefly to reflect on regionalisation of civil service pay and national agreements, which is more for deliberation in Committee than a formal part of decision making at this point, but it nevertheless causes me some concern. I believe that it could be a slippery slope. It presents risks through a brain drain from the Northern Ireland economy, and that is a significant challenge. It is also contrary to the stated UK Government policy of rebalancing the UK economy and reflecting the importance of the regions. Only three regions contribute positively to the UK economy; the other nine are essentially net recipients from the Treasury. As someone who lives in one of those regions, I would like the economy to be rebalanced so that we no longer rely on subvention but can make our way, and, as the Chancellor described, work our way out of the situation. However, it is difficult to do that if the general direction of travel inhibits wage increases and competition and has a negative impact. It is as though people in Northern Ireland doing the same job as people elsewhere are somehow worth less. That is a very bad place to start.

Although it is true that public sector salaries in some areas can rise above private sector pay, particularly in the current climate during a recession, we must remember that, not so long ago, private sector salaries well outstripped the public sector in the same regions. Indeed, the public sector had to pay a premium to attract talented individuals during the boom. We need to be cautious about making decisions based on current circumstances that could have long-term consequences. The policy could also reduce work incentives. People say that it may create competition and attract people into the private sector, and I understand that, but the difficulty is that, with a contracting public sector, there is no competition for jobs in that sense. We therefore need to be cautious.

I have to say that I see the reduction of the 50p rate of tax as simply a major giveaway to the wealthiest in our society. I understand the points that have made about property tax, but if the Government want to simplify taxation, there are better ways of doing it than through that reduction. It sends out the wrong message to people who are suffering and finding it difficult to make ends meet. Tax avoidance has also in effect been simplified because for someone who earns a lot and does not invest it in property, it has been a good day.

I want to highlight some positive aspects briefly. I welcome the fact that Belfast has been included among the cities that will benefit from ultra-fast broadband and wi-fi connectivity. That electronic connectivity is hugely important for us, particularly in the light of the issues that I raised about APD and transport costs. I hope that, when it comes to other cities bidding to gain from that pot, Northern Ireland will get its fair share. I want to share my pleasure at the notion of support for the creative industries. Film and television, for example, are growth industries in Northern Ireland. I would welcome their expansion, particularly in my constituency—“Game of Thrones” was filmed in the Paint Hall in Belfast.

Finally, I make a plea to the Treasury in respect of creating a UK centre for aerodynamics to open in 2012-13. I hope that it will be a genuinely UK centre. We have a number of aeronautical industries in my constituency, including Bombardier, Thales and others. Based on those and the neighbouring aeronautical engineering department in Queen’s university in Belfast South, I hope that Belfast can be competitively considered as a potential home for that UK centre.

My concern is that the Budget will be viewed by many as a Budget mainly for the rich, and perhaps mainly for the south-east. I urge the Treasury to look at how it can ensure that that is not the outworking for individuals’ lives. The Chancellor needs to be seen as a Chancellor for all of the UK, and not a Chancellor just for those who are wealthy or who live in the south-east.