Co-operative and Mutual Businesses

Steve Baker Excerpts

Thursday 27th June 2019 Commons Chamber

[Mr Steve Baker (Wycombe) (Con)]

It is a great pleasure and a privilege to follow the lead of the hon. Member for Harrow West (Gareth Thomas). I sometimes disappoint him in other matters, but I salute his work on furthering the co-operative movement.

I will never forget the moment when I fell in love with the principles and ideas of the co-operative and mutual movement. Shortly after my election, I had been encouraged to study a book called “Working-Class Patients and the Medical Establishment” by David Green, who now runs the Civitas think-tank, and the moment that I mention came when I read this quote—I hope that Members will forgive the old-fashioned language—taken from the Oddfellows Magazine on the eve of the passage of the National Insurance Act 1911:

“Working men are awakening to the fact that this is a subtle attempt to take from the class to which they belong the administration of the great voluntary organisations which they have built up for themselves, and to hand over the future control to the paid servants of the governing class… This is not liberty; this is not development of self-government, but a new form of autocracy and tyranny not less but the more dangerous because it is benevolent in its intentions.”

That speaks to the kind of radicalism that the hon. Member for Huddersfield (Mr Sheerman) introduced to the debate. Perhaps it is a spirit too radical for our age, but it is pretty obvious that, in so many countries around the world, there is a crisis of political economy and a lack of faith not only in the institutions of government but in the institutions of market economy. I am grateful to see Opposition Members nodding, and in that spirit we need to recapture some of that radicalism. It is about free individuals in society standing up not only for themselves but against entrenched interests and entrenched power better to serve their families and their communities. That was the moment when I realised, as a free market Conservative, that I perhaps had something to learn from the traditions of the left.

What is it that make co-operatives different? A briefing supplied by Co-operatives UK states:

“What makes co-ops different is how they allow people to democratically own and control the things that really make a difference—like capital, organisation and scale—so that these create real value for people and planet. They are one of the best tools we have for applying social responsibility, solidarity and democracy in a market setting.”

Perhaps it is that language of solidarity and democracy in the market that frightens off some of my Conservative colleagues, which I very much regret.

The Rochdale principles of the movement’s founding pioneers talk of open membership; democratic control— one person, one vote—not based on share ownership; distribution of surplus in proportion to trade, which is economic participation; payment of limited interest on capital; political and religious neutrality; cash trading, so that people do not get into credit trouble on the basics; and the promotion of education.

Those principles have of course been refined by the International Co-operative Alliance to open and voluntary membership; democratic governance; limited return on equity; surplus belonging to members; the education of members and the public in co-operative principles—my goodness, we could do with more of that; and co-operation between co-operatives.

If we accept, and I am afraid that today it is a question of if, that prices, profit and loss are the only way to co-ordinate a global society of billions of people, and if we accept that we must live in a free market society to best serve one another, it is time to look at civil society—that great panoply of institutions between the individual and the state—and ask how that inclusive spirit of free enterprise shared by mutuals and co-operatives can help to rebuild people’s faith not only in a market economy but in government. We therefore need to recapture the Rochdale principles, and I encourage my colleagues on the Treasury Bench to think carefully about how a Conservative Government can stand for some of these principles in a market economy.

[Mr Sheerman]

The hon. Gentleman and I are bitter opponents over the UK’s future in Europe, but we sometimes put that to one side. We are working together on a new initiative called FairLife—he knows I agree with the Rochdale principles—to open up the system so that people know they are getting a fair deal on financial services, just as they know they are buying ethical products through Fairtrade.

[Mr Baker]

I always enjoy my moments of agreement with the hon. Gentleman, and of course regret those moments when we disagree. Hopefully I will persuade him one day of the correctness of my cause in that other matter.

Co-operatives and mutuals, throughout the history of society, have played a really important role in standing against tyranny and monopoly power, whether it was the Rochdale pioneers providing good-quality food for themselves, their families and their children or, as I discovered in my research, the African-American communities that used co-ops and mutuals during the despicable Jim Crow era to provide aid to one another when they were denied it by the state, whether through unjust laws or extra-legally. I am advised that the Mondragon co-operatives were founded in the Basque country partly as a response to the oppression of Franco.

More recently, Taxiapp allows drivers in London to fight back against the competition of Uber. Of course, farmers co-operate through co-operatives in a way that should be expanded.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

Is the hon. Gentleman aware of the fantastic work of Drive, the new taxi co-operative in Cardiff? In Wales we call on Drive to take us somewhere, which is exactly what it does. The co-operative is a response to some of the practices of the private-hire sector, the influence of Uber and others. It is doing fantastic work, supported by the Wales Co-operative Centre.

[Mr Baker]

I am grateful to the hon. Gentleman for that, as I was not aware of Drive—I shall certainly Google it after this debate.

We need to ask ourselves why, given all the benefits of co-operatives and mutuals, they have not advanced further. They flourish, but why have they not advanced further? I was reflecting on why the Thatcher Government of my youth did not understand the great value that could come through inclusive free market participation with co-ops. They never got as far as embracing mutuality. That language of “solidarity” and “democratic participation” perhaps frightens off Conservatives. For too long, we have been afraid of some of these ideas of the left, and a more communitarian and voluntarist Conservative party should be embracing this idea of equality and market participation, not exclusively but as an important component of our society. I once heard the term “a parastatal”, and I wonder whether the idea of an enormous “The Co-op”—that enormous group of co-operatives—frightened off Conservative Governments in the past. I am encouraged that the “Open Public Services” White Paper of the coalition years makes provision for more mutuality in public services. I very much hope that when we get past our current distractions we might return to some of those ideas.

It has been suggested to me that one reason the Thatcher Government were not very good at embracing co-operatives was the preceding Labour Government’s failed attempts in the ’70s to turn failing companies into co-ops or co-op-like entities. Although I philosophically really embrace the hon. Member for Harrow West’s ideas about turning RBS into a co-op, and he and I have previously discussed the idea of Channel 4 becoming a co-op—

[Mr Sheerman]

rose—

[Mr Baker]

I will just finish the point. Enormous sums of capital are involved, particularly in relation to banks, so I have some misgivings that we might repeat the errors of the past. With that, I, of course, accept the hon. Gentleman’s help.

[Mr Sheerman]

Let me help the hon. Gentleman on the history, because I knew Margaret Thatcher and her attitude to co-ops. We have to remember that she was the daughter of a small shopkeeper and traditionally saw the Co-op as the great competitor. She had an old-fashioned view of co-ops and what they meant, and she would never shop in one; there was a tradition that those on the radical side did not shop in co-ops, because they were the competition. I hope that that bit of history adds to his knowledge.

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[Mr Baker]

Of course I did know that, but the hon. Gentleman has certainly added colour to my understanding of the idea that we are all prisoners of where we come from, and perhaps that was one of the reasons. Now is the time we can have a renewal in our understanding of what can be achieved. Today, as the hon. Member for Harrow West set out, co-operatives are extremely important. They give an opportunity for people to gain control and agency over local economies, whether in land trusts or in other areas—we have mentioned public services. I will never forget listening to a young woman talking highly entrepreneurially about how a social care co-operative was working. It was remarkable to listen to the degree of ownership that lady felt. In other circumstances, she might have been doing “just” the valuable work of practically caring for a person, but in addition she felt really engaged in the operation of the business. That is an entirely noble thing. It is part of the process of becoming what it is to be human—to be really engaged like that in how these businesses run.

I wish to bring a few matters to the Government’s attention, and again this comes from Co-operatives UK. These are a few of the barriers out there and some policy options, which I would like the Government to consider. Co-operatives UK suggests:

“Fertile conditions for co-op formation are often absent”

because, for example, there is a shortage of

“social capital and limited devolution of economic power and funding to the community level.”

Going back to the 1911 Act, I wonder whether this is a part of a broader trend over 100 or more years, and whether we need to make sure that social capital and the devolution of economic power facilitate mutual and co-ops. Co-operatives UK then cites:

“Established cultures and norms of behaviour”,

with people sometimes “culturally disinclined to co-operate”. We need to think of ways we can encourage people to join in co-operatives.

There is, of course, a lack of awareness, practical understanding and good advice about this, which, I am sorry to say, we can witness on my side of the House today; too few Conservatives understand the role of co-operatives and mutuals. We could do more, as a Government, to explain to people the role of mutual and co-ops in a free society. Co-op frameworks are not as user-friendly as they should be, and we have heard some examples of that.

Of course, I support what the hon. Member for Harrow West said about building societies and extending capitalisation opportunities to other co-ops. I remember opposing the demutualisation of building societies as a young man. I did not really know why at the time; it just seemed instinctively wrong not to have that plurality. Our corporate frameworks and governance arrangements should be friendlier to co-ops. Members have touched on financing challenges, and they are generally part of the operating environment.

The proposals from Co-operatives UK include:

“Rather than giving all the funding and power to LEPs”—

local enterprise partnerships, in England—

“government could commit 25 per cent of the new UK Shared Prosperity Fund for community economic development”.

The Government should certainly consider that, along with encouraging LEPs to look seriously at the role of co-ops in their local communities through local industrial strategies.

Co-operatives UK proposes that there should be a social-investment tax relief, suggesting that we should:

“Use the current review of Social Investment Tax Relief to make it more supportive of Community Shares, by making community investment in land and real estate, housing development, sustainable agriculture and renewable energy eligible.”

It also suggests employee ownership tax support and help for co-ops with making tax digital, which is something of a curse on a number of small businesses.

I have reservations about the idea of dormant assets being used to support co-ops. My concern is related not to co-ops, but to the idea that dormant assets are someone’s property. We should be a little cautious there, but Co-operatives UK has made that recommendation. It also proposes legal reform to ensure that we bring things up to date and support co-ops in the law.

At this time of great political turmoil, not only in the UK but in France, Germany, Italy, Spain, Greece and the USA, we need to think extremely seriously about the institutions that we have and how to make them flourish. A great and wise defender of the liberal market order once wrote:

“Society is co-operation; it is community in action.”

I very much hope that, through the kind of collaboration we see in the House today, we might one day educate Members of Parliament and the public as to what that idea of society as co-operation really means, and through doing that reinvigorate our society and better fit it for the future.

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[Mr Bailey]

I thank my hon. Friend for that example, which underlines the point I am making. Given that these local government structures, and the policies that they are adopting, are in their infancy, it demonstrates the potential that might be available in those areas for other local government structures to actively promote co-operation.

[Mr Baker]

I should have intervened earlier, but I wanted to check something before I put it on the record. A few moments ago, the hon. Gentleman pleaded for updated legislation, pointing out that the industrial and provident society legislation is out of date. I remind the Minister, who I can see is listening very closely to his speech, that in 2010 we promised a co-operatives Bill, but then, when it came forward, it was just a consolidation Bill—a tidying up exercise. I was very disappointed by that, as I expect the hon. Gentleman was. Let me say gently to my hon. Friend the Minister that if we do promise a Bill again, we really must make sure that it is a meaningful Bill that brings the legislation up to date.

[Mr Bailey]

I thank the hon. Gentleman for that prompt to the Minister. Hopefully it is even more effective coming from his side of the House than from mine.

I will conclude by making one or two general observations. First, we have an economy where a huge number of people feel alienated or not engaged with the world of work that is controlling so much of their life. When there is so much international investment—welcome though it is, and sometimes deployed very effectively—that means that decision making and huge swathes of our economy are often centred in offshore countries or very far removed from the control of the company’s employees.

For the past 10 years, we have suffered from low productivity. It is an issue that does not seem to get any better. In terms of taxation and public expenditure, there are still huge swathes of the economy where the companies involved are not paying an appropriate level of taxation. It is interesting to note that the co-op movement pays more in taxes to the Government than a whole range of high-tech companies, including Google and Amazon. Developing the mutual sector would at least ensure that as these companies grow, they are paying the sort of taxation returns to the Government that would more than pay for any help they had had from Government.

I do not claim that the co-operative and mutual movement is a silver bullet for all these problems, but their performance in terms of both longevity—there are far higher survival rates among new co-operatives than other businesses—and worker satisfaction means that there is a strong case for far more proactive Government involvement and support. To take up the point made by the hon. Member for Wycombe (Mr Baker), I hope the Government will look at introducing a co-operatives Bill that will actively deliver on the ground.

2019 Loan Charge

Steve Baker Excerpts

Tuesday 20th November 2018 Westminster Hall

[Mr Steve Baker (Wycombe) (Con)]

I beg to move,

That this House has considered the effect of the 2019 loan charge.

I will take a moment to say how glad I am to serve once again under your chairmanship from the Back Benches, Mr Walker.

It is right that everyone, both individuals and corporations, should pay the correct amount of tax, and I welcome the Government’s commitment to a fairer tax system. I was pleased to see that the UK’s tax gap has fallen to a record low of 5.7% in recent months.

I should start by explaining what the loan charge is. The gov.uk website explains:

“Loan schemes—otherwise known as ‘disguised remuneration’ schemes—are used to avoid paying Income Tax and National Insurance.”

The loan charge was announced at the 2016 Budget. The policy ensures that users of tax avoidance loan schemes pay their share of tax and is expected to protect £3.2 billion for the UK’s vital public services. The website also says:

“The loan charge works by adding together all outstanding loans and taxing them as income in one year.”

Therein lies the difficulty, and the fundamental cause of the impact on individuals and families.

In 2005, my right hon. Friend the Chancellor said:

“Certainty and transparency are the hallmarks of a fair, effective and competitive tax system. A taxpayer is entitled to know with certainty…what he may or may not do in planning his tax affairs.”—[Official Report, 7 June 2005; Vol. 434, c. 1139.]

That is why I object to retrospective legislation that undermines the rule of law.

The introduction of the 2019 loan charge has been beset by challenges, confusion and complications. Over 100 MPs have signed early-day motion 1239 calling on the Government to significantly revise this piece of legislation. I am glad we are meeting today in this well-attended debate to consider the impact of the loan charge.

In the 2016 Budget, the Government announced that they would introduce legislation to tackle disguised remuneration schemes. Statutory provision was included in the Finance (No. 2) Act 2017, with further provisions included in the Finance Bill introduced after the autumn Budget last November, now the Finance Act 2018. The Government say they will protect £3.2 billion by taking action to tackle both historic and continued use of these schemes. That is a not inconsiderable sum. It will include a new charge on loans paid through disguised remuneration schemes that have not been taxed and are still outstanding on 5 April 2019.

Her Majesty’s Revenue and Customs states that the schemes affected by the 2019 loan charge were not and never have been legal. However, that is disputed by the Loan Charge Action Group. I refer to a letter by the Chancellor of the 19th of this month, published today on the Treasury Committee website. The Chancellor writes:

“Finally, I would like to clarify my comments to the Committee in reference to the use of disguised remuneration (DR) schemes which I described as ‘tax evasion’. I should have said ‘tax avoidance,’ and that in the Government’s view, tax was always due.”

That is a very important distinction, because evasion is illegal, while avoidance is an undesirable and unintended use of Parliament’s legislation. In drawing that distinction and correcting the record to say “avoidance”, the Chancellor has made an important concession.

[Julian Knight (Solihull) (Con)]

My hon. Friend is making an interesting speech, and I congratulate him on securing this important debate. As a former personal finance editor before entering this place, I used to have many inquiries from readers about these schemes as they were offered to them. My advice was always, “Steer clear, because eventually the price will be paid.” Does he agree that there is a role for regulators to look at the poor and potentially dangerous advice given by accountants about these schemes?

[Mr Baker]

It is my intention in my concluding remarks to stridently condemn the promoters of these schemes, who have ended up luring people into misery through what they have done.

Before closing with this letter, I want to mention that the Chancellor also wrote:

“It is not normal, or indeed reasonable, to be paid in loans that are not repaid in practice. It is not fair to the vast majority of taxpayers who pay their taxes in full and on time for anyone to benefit from contrived avoidance of this sort and that is why this government has legislated the charge on DR loans.”

I agree with the Chancellor that it is not normal or reasonable, but I make it very clear that I place the blame on the promoters of these schemes.

HMRC initially expected 40,000 people to be affected, although in a recent parliamentary question, my right hon. Friend the Financial Secretary to the Treasury gave a new figure of 50,000. HMRC’s impact note stated:

“The government anticipates that some of these individuals will become insolvent as a result.”

The Loan Charge Action Group suggests that the loan charge will end up affecting probably upwards of 100,000 people and their families.

The hon. Member for Eastbourne (Stephen Lloyd) has tabled an EDM criticising the measure, arguing that

“retrospectively taxing something that was technically allowed at the time, is unfair”.

Of course, I would agree. HMRC has argued that the loan charge is a new tax on a new source, and described it as retroactive rather than retrospective. I would like the Minister, if he can, to explain both terms and any difference that the Treasury is implying.

[Sir Edward Davey (Kingston and Surbiton) (LD)]

The hon. Gentleman deserves a lot of credit for bringing this issue to the House. Does he agree that we should be working cross-party ahead of the Report stage of this year’s Finance Bill to put together a new clause that deals with the problem, under which any loan charge would come into effect only after Royal Assent of the Finance (No. 2) Act 2017?

[Mr Baker]

I certainly agree with the right hon. Gentleman that there is a job of work to be done across parties to uphold the rule of law, in particular the principle that legislation should not apply retrospectively. That is a subject on which I have made speeches over the years. We end up in a hideous cycle of undesired action, in particular to avoid taxation, followed by the injustice of retrospective action to protect other taxpayers and the misery that causes to large numbers of people. It must be brought to an end, but underpinning that we must be committed to the rule of law.

[Dr Julian Lewis (New Forest East) (Con)]

I am grateful to my hon. Friend for bringing this debate to the Chamber. Can I ask him about retrospection? My constituent, Alan Williams FCA, points out that HMRC already had sufficient power to recover tax from individuals, so it is rather its own convenience and its unwillingness to apply its existing powers that have led to this legislation. My constituent Andy Pocock points out that in his case, he has procedures under the existing legislation whereby he is allowed to appeal, but all that will be cut off retrospectively by the new legislation and he will not have a chance to fight and defend his corner.

[Mr Baker]

One of Parliament’s duties is to restrain the Executive and ensure that their powers are reasonable. We should look carefully at the subject that my right hon. Friend has just raised. It is important that HMRC treats people in a decent and civilised way, and certainly more powers ought not to be taken than are strictly necessary.

[Mr Mark Prisk (Hertford and Stortford) (Con)]

My hon. Friend is to be congratulated on securing a debate on this subject. One of the iniquities, in addition to the issue of retrospectivity, is that at least four of the constituents who have been to see me have said that they were told by their companies that unless they signed these new forms of contractual relationships, they would not continue to work for those companies. Given that, should not HMRC be pursuing the companies and not the individuals?

[Mr Baker]

I entirely agree with my hon. Friend. Toward the end of my remarks I will come on to the solutions that I propose, but I entirely agree with him that if any company insisted on people engaging in these arrangements it certainly should share the responsibility for what they did.

[Teresa Pearce (Erith and Thamesmead) (Lab)]

Will the hon. Gentleman give way?

[Mr Baker]

I will take one or two more interventions, and then I will move on. It is not quite like being a Minister, but very nearly.

[Teresa Pearce]

The hon. Gentleman is being very generous with his time and I thank him for securing this debate. On that last point, my constituent was a civil servant for 37 years. In 2010, his team was TUPE-ed from the Ministry of Defence to Hewlett-Packard. He retired in 2013. In 2014, they asked him back to oversee a Ministry of Defence contract, but refused to take him back on pay-as-you-earn and said they would only do it through one of these vehicles. Should my constituent not have had some comfort from the fact that this was an MOD contract? Surely the Government and Government Departments should look at who they are contracting with, to ensure that a man such as this, in his retirement years, is not stung by this charge?

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[Mr Baker]

I obviously cannot comment on individual circumstances. However, this is a good opportunity to draw a distinction between taking people on as contractors and insisting that they join schemes that could end up with their using disguised remuneration arrangements. On the one hand, contracting is a legitimate way of going about business; on the other, engaging in disguised remuneration schemes—an aggressive form of tax avoidance—is not desirable.

[Mr John Hayes (South Holland and The Deepings) (Con)]

My hon. Friend is doing a sterling job of raising this matter in this place. On that basis, will he challenge the Minister on how many firms have been investigated, how many promoters have been pursued and prosecuted, and how many of those had some connection to Government contracts or payments?

[Mr Baker]

I join my right hon. Friend’s call for the Minister to set that out, which my hon. Friend the Minister will have heard. I will now make some progress.

The Loan Charge Action Group says that the human impact of receiving a bill for up to 10 years’ worth of tax will have a catastrophic effect on individuals and their families. On whom among us would it not have a catastrophic effect? It goes on to say that we are looking at thousands of bankruptcies, family break-ups and suicide attempts, as well as mental illness, unemployment, loss of abode and more. That is a catalogue of human suffering and misery.

HMRC’s impact assessment of the measure says:

“This package is not expected to have a material impact on family formation, stability or breakdown.”

However, that looks at aggregates, not the impact on individuals, which it seems to me is a common mistake of Government. As a Conservative, I wish to focus first and foremost on the individual, not the collective.

I will foreshorten my remarks, given the interventions I have taken. One specific complaint is the lack of warning. A freedom of information request revealed that HMRC has issued about 23,000 loan charge awareness letters, which were only issued from the second quarter of 2018. HMRC says that 50,000 individuals may be affected, so many will be unaware of the impending charge. The Loan Charge Action Group points out that the opportunities to settle new tax affairs with HMRC ahead of the charge were similarly not widely publicised, nor was the deadline of 31 May 2018, leaving people in a terrible fix, although I understand that the deadline has been quietly dropped.

The Loan Charge Action Group suggests that historical users of schemes who left many years ago are probably completely ignorant of this new legislation and will only hear of it after receiving a large bill some time in 2020. This is a dreadful risk, which the Government should forestall.

I am keen to conclude, so I will come to some solutions that I ask the Minister to consider. As I outlined in a letter to the Chancellor in September, there should be clarity about what DOTAS—disclosure of tax avoidance schemes—registration means. There should be a legally mandated text accompanying every advertisement of a DOTAS-registered scheme that explains that the purpose of registration is to enable HMRC to identify tax liabilities and to recover them when such schemes are proven not to work. It does not imply any kind of legitimacy, and registration with HMRC is not for the purpose of endorsing the schemes. When HMRC becomes aware that a taxpayer has subscribed to a DOTAS-registered scheme, it should contact the taxpayer and make them aware that registration has the purpose of enforcement and does not convey legitimacy. HMRC must take into account people’s circumstances, and the threat of insolvency should never be used as a kind of extrajudicial punishment.

[Dr Phillip Lee (Bracknell) (Con)]

On treating individuals fairly, it is pretty evident that the people who have been selling these questionable products are not being pursued in the way that they should be. In view of that, does my hon. Friend agree that the Government should start looking at mitigation, so that certain individuals—I know of a couple in my constituency—are not bankrupted by this whole sorry affair?

[Mr Baker]

The Minister will have heard my hon. Friend’s point, which I endorse.

The loan charge should apply from Royal Assent onwards. In other words, it should be prospective—a case I have made many times—not retroactive or retrospective. HMRC should be more proactive in advising that such schemes are likely to end in tax charges in the future, and perhaps far into the future. More steps should be taken against promoters and introducers of such schemes. They are the ones profiting from this misery. Finally, the issue of employment status and IR35 requires action at last, to bring the uncertainty to an end.

[Joseph Johnson (Orpington) (Con)]

My hon. Friend wants further action taken against the promoters of these schemes. Does he agree that we also need to take action against the Queen’s counsel who peddled rinky-dink advice that encouraged many of our constituents—including some of mine—to participate in these schemes, in the belief that a QC’s opinion rendered them beyond the reach of HMRC?

[Mr Baker]

My hon. Friend makes a very good point. I hesitate to trespass far beyond my expertise, but I make the point that it is often thought that the opinion of a QC determines the truth. That is not the case. QCs and barristers argue among themselves in court, and the court determines the facts. I am often struck by people relying on the opinions of lawyers when what they actually need is the judgment of a court.

[Alex Chalk (Cheltenham) (Con)]

On the judgment of courts, does my hon. Friend share my concern that individuals are sometimes effectively left without a remedy, because the person who gave them that advice so many years ago no longer continues to trade? There is then effectively no remedy for the individual and no ability for them to claw back their significant losses.

[Mr Baker]

My hon. Friend raises an important point. In concluding my remarks, I shall allow what he says to stand.

I really think that it is perfectly natural for people to want to pay less tax, but I would be failing in my duty if I did not say to all those paying attention to the debate that, when something seems too good to be true, it probably is. We ought not ever to allow ourselves to be lured into schemes that offer absurdly low rates of tax. However, I save my strident condemnation for the promoters of these schemes, who, in their advertisements, seek to persuade people that this is legitimate activity and to create the impression that DOTAS registration conveys some kind of legitimacy or endorsement by the state. That is an outrage, because of course it encourages people to participate. These promoters are, frankly, wicked. It is a great evil to encourage people into these schemes and to leave them in misery afterwards.

Finally, we must insist on the rule of law. Notwithstanding the wicked conduct of promoters, the greater wickedness in the end is to undermine the rule of law—the certainty that comes from someone knowing that if their actions were lawful at the time they were carried out, they will not subsequently be challenged through retrospective legislation. I feel most strongly about that, as I have throughout my time in Parliament. I urge the Government, whatever evils have been done by the promoters of these schemes, to abandon the practice of retrospective legislation.

[Several hon. Members rose—]

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[Sir Edward Davey (Kingston and Surbiton) (LD)]

This House has the chance and the opportunity to put this wrong right. As the hon. Member for Poplar and Limehouse (Jim Fitzpatrick) said at the end of his speech, there will be a Report stage to the current Finance Bill. It will come to the Floor of the House and we—every Member here today of whatever party, whoever signed the early-day motion—have the power to come together, cross-party, and pass a new clause to right this wrong. Frankly, words in a Westminster Hall debate and signatures on an EDM mean nothing unless we are prepared to go through the Lobby to vote this tyrannous legislation down. Constituents, the Loan Charge Action Group and all the people affected will expect their Members of Parliament to vote and act and not simply talk. Today gives us a platform to make sure we send a powerful message to Treasury Ministers that this is a catalyst for the action that was not taken two years ago, but will be taken, I believe, when we get to the Report stage of the Finance Bill.

As has been said by the hon. Member for Wycombe (Mr Baker), there is a fundamental principle here that he and I can agree on: the rule of law. When we talk about British values, about which he and I agree, the rule of law is something the Department for Education says should be taught in every school up and down our country. Well, this is the test. Either Members of Parliament believe in the rule of law and what our children are taught, or they do not. When we vote on the new clause in the Finance Bill, as I am sure we will be asked to, we will see whether we really do believe in the rule of law.

[Mr Baker]

As one liberal to another, it is a delight to agree with the right hon. Gentleman. I hope members of the public will not think I am engaging in too much levity if I say that some of us are engaged in enough rebellion already. I should be very grateful indeed if the Government tabled their own amendment to deal with this matter, so that we do not find ourselves engaged in any sort of rebellion on the Finance Bill.

[Sir Edward Davey]

It was a pleasure to allow that intervention. I have no objection to the way in which the wrong is righted, as long as it is righted properly. If we stick to the principle of the rule of law, as I said in my intervention on the hon. Gentleman, ending retrospection in this tax change means that any charge prior to Royal Assent of the Finance (No. 2) Act 2017 must end. There can be no charges before Royal Assent of that Act; otherwise we are in the area of retrospection.

Like other colleagues, I have had constituents contacting me. Sixteen have contacted me directly, and in my experience that means there are many more out there who have not contacted me. I will read from just one, from Mr Garry Taylor, who talks about the “devastating consequences” that will destroy the finances of “me and my family”. I do not know about other colleagues, but I have had people almost in tears in my surgery over a tax matter, which has never happened before in 20 years.

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[Mr Baker]

I am grateful to everyone who has come to the debate and participated. The debate has overwhelmingly avoided straying into the partisan, for which I am grateful. I listened carefully to all the speeches and I do not think anyone stood up and sided with those who think it is legitimate to be paid through loans that have been made with no intention of repayment—no one stood on that side of the argument. What we have seen is how people have been drawn, or even driven, into such schemes, and that is the heart of the injustice.

We have heard stories of human suffering that would melt any heart, which brings us on to the heart of the matter—the rule of law. Once again, my hon. Friend the Minister has earned my admiration, because he seems to get all the Treasury’s toughest gigs. I sometimes wonder whether he should have been promoted to the Department for Exiting the European Union for a little break.

[John Glen]

No thanks.

[Mr Baker]

He will have heard the response of people present when he explained that the measure is not retrospective, and I really hope that the Treasury goes away, looks at the measure again and eliminates retrospection. When people have acted in good faith under advice and end up subject to injustice, we must uphold the principle of the rule of law. Some might then say that they had got away with it, but sometimes we have to say, “While we don’t stand on their side and we accept that it was not Parliament’s intent, we respect that there is a price to be paid for upholding the rule of law so that in the end we can preserve human liberty and justice.”

Motion lapsed (Standing Order No. 10(6)).

Business Banking Fraud

Steve Baker Excerpts

Tuesday 9th October 2018 Westminster Hall

[Mr Wragg]

My hon. Friend is absolutely correct about the role of GRG.

Following the cases of, at times, blatant mistreatment and fraud, which we saw consistently and across the board, there is either a lack of willingness or lack of capability from our investigative bodies, both civil and criminal, to pursue complaints. Instead, the victims of mistreatment and fraud are left to go round in circles making a series of fruitless complaints. The complaints are either made directly to the institutions that defrauded them in the first place, which have a vested interest not to investigate properly—as was the case with my constituent and the Royal Bank of Scotland—or referred to a series of industry-led trade bodies or the Financial Conduct Authority, which does not take on individual cases. It is simply not good enough.

The only successful prosecution for fraud thus far has been that of HBOS in Reading. That was not down to the actions of our regulator or the Serious Fraud Office relentlessly pursuing the truth to bring the perpetrators to justice. Indeed, the bank—first as HBOS and then as Lloyds, after the takeover—insisted there was no fraud, despite there being a victim with losses in the hundreds of millions of pounds.

[Mr Steve Baker (Wycombe) (Con)]

I want to put on record my personal admiration for the police and crime commissioner for Thames Valley, Anthony Stansfeld, who personally saw to it that the fraud was prosecuted.

I hope that my hon. Friend will agree that the current situation is not good enough. If the state is to fulfil its duty to protect the public from fraud, it will be necessary for the Government to find the money to equip the authorities to prosecute fraud cases without funds coming out of individual PCCs’ budgets.

[Mr Wragg]

My hon. Friend hits the nail on the head. I pay tribute to the police and crime commissioner, but I also wish to pay tribute to a couple of people who I believe are here in the Gallery today. Instead of the authorities investigating, it was left to a couple of music producers from Cambridge, Paul and Nikki Turner, to crack the case. I hope they are here in Parliament. They are still fighting for compensation for other victims of the crime.

European Affairs

Steve Baker Excerpts

Thursday 15th March 2018 Commons Chamber

[The Parliamentary Under-Secretary of State for Exiting the European Union (Mr Steve Baker)]

I am grateful for the opportunity to respond to today’s debate, and I thank all right hon. and hon. Members who have taken part. I have very much enjoyed closely following the debate and the valuable contributions that have been made, and I am sorry that I will not be able to acknowledge them all in the eight minutes that remain.

I want to acknowledge the range of advice that the Government have been given, from my right hon. Friend the Member for Wokingham (John Redwood), who made a strong case for no deal, to my right hon. Friend the Member for Broxtowe (Anna Soubry), who made a strong argument for the customs union and EFTA, to which I will return in a moment. I was also grateful to my hon. Friend the Member for Clacton (Giles Watling) for representing his constituents by supporting the Prime Minister’s centre ground position.

The Prime Minister has been very clear that the UK will leave the EU on 29 March 2019, a date that is fixed as a matter of international and UK law under the article 50 process. That position respects the vote of the people in the referendum on 23 June 2016 to leave the EU, and there will not be a second referendum. As the Prime Minister set out in her Mansion House speech, our decision to leave the EU does not mark an ending; it marks a new beginning for our relationship with our European allies. We want the closest possible partnership. It is pragmatic common sense that we should work together to deliver the best outcome for both sides, and that is what we are doing.

I want to take a little time to talk about some of the solutions that have been proposed in relation to off-the-shelf models. As we have emphasised, we do not want an off-the-shelf solution or an existing model; we want the greatest possible tariff-free and barrier-free trade with our European neighbours, as well as to negotiate our own free trade agreements around the world, particularly in relation to our comparative advantage in services.

We want to ensure that UK companies have the maximum freedom to trade with and operate in European markets, and we want to let European businesses do the same in the UK. But we have always said that we are not looking for a Norway-style deal or a Canada-style deal. There is no point starting from scratch as we build our new relationship, because, unlike a country such as Canada, we start from the position of already having the same rules and regulations as the EU. Seeking a Norway-style agreement based on participation in the EEA agreement would not pass the first test that the Prime Minister set out for our future economic partnership with the EU. It would deliver control of neither our borders, nor our laws.

On borders, remaining in the EEA agreement would mean that we had to continue to accept all four freedoms of the single market, including freedom of movement. On laws, continued participation in the EEA agreement would mean the UK having to adopt at home, automatically and in their entirety, new EU rules, over which in future we will have little influence and no vote. This would not deliver the British people’s desire to have more direct control over the decisions that affect their daily lives.

Membership of EFTA, in and of itself, does not deliver any market access to the EU; it is a trading bloc between four European countries, Switzerland, Norway, Iceland and Liechtenstein. Three of those countries participate in the EU’s single market through the EEA agreement, while Switzerland participates in some areas through a series of bilateral agreements with the EU. Therefore, joining EFTA does not say anything about our future economic partnership with the EU. Although we want to maintain our deep and historical relationships with the EFTA states, the UK is in many ways different from those countries. Our population is about 65 million, whereas the EFTA states together comprise about 14 million people. In 2015, the EFTA bloc’s collective GDP amounted to £710 billion, which compares with the UK’s £1.9 trillion. So the UK’s participation in EFTA would fundamentally change the nature of that group and would not be an appropriate model for our future relationship with the EU or with those countries.

[Anna Soubry]

I was making the case for the single market and the EEA, and I am sure the Minister would agree that that is not an extreme position to hold.

[Mr Baker]

I listened carefully to the words my right hon. Friend used and I am sure the record will show that she referred to EFTA, but I am glad she has clarified that, in saying she supports EFTA, she means EFTA as an EEA member. But I stand by the remarks I just made. I hope she will not mind my saying to her gently that from the perspective of many who want to leave the EU, saying that we want to solve the problems of leaving the EU by staying in the EU’s internal market, with all that that entails for non-member states, and staying within the EU’s customs union, so that we have to accept the EU’s common commercial policy, appears to suggest that we must solve the problems of the EU by, de facto, staying within it. That is how it comes across to many people who wish sincerely to leave the EU. I did listen carefully to her—[Interruption.] The hon. Member for Nottingham East (Mr Leslie) mentions transition, and of course we have set out the case for the implementation period.

I must press on, because I want particularly to pick up a point relating to borders and migration.

[Heidi Alexander]

Will the Minister give way?

[Mr Baker]

I want to make this point, but if I have time, I will give way to the hon. Lady. Remaining in the EEA agreement would mean having to continue to accept all four freedoms of the single market, including freedom of movement. Although it is true that Liechtenstein has unique arrangements on the movement of people, the UK is in many respects different from Liechtenstein, a country whose population is less than almost every UK constituency. We can safely anticipate that this exemption afforded to a micro-state would not be afforded to the UK.

I very much regret that, with only two minutes to go, I will have dramatically to shorten my speech. On the customs union, Turkey’s customs union with the UK does not cover certain sectors that would be vital to the UK economy and it does not guarantee frictionless trade across the whole economy, because of course a customs union alone does not solve some of the—[Interruption.] Opposition Front Benchers are saying that this is not what they are looking for. They are looking to be in the customs union and remain harmonised with the regulations of the EU—that is the implication of their position. The implication of their position is that they do not wish to leave the EU. They want the EU to control our tariffs. They would be happy for it to control our laws. They would be happy to accept free movement. This is not what people voted for.

We must not lose sight of our ultimate aim to build a new comprehensive partnership that sees us stay the closest of friends and allies. As the Prime Minister has set out, our vision is of a UK that is a champion of free trade, based on a high standard, thriving as a global Britain which forges a bold and ambitious comprehensive economic partnership with our neighbours in the EU and reaches out beyond to foster trade agreements with nations across the globe. As we approach this March Economic Council, both sides in these negotiations have agreed that we want a common fight against terrorism and crime; we want participation and co-operation on research, innovation, culture and education; we want to avoid the absurdities of the interruption of flights; and we want a trade agreement covering all sectors, with zero tariffs on goods and addressing services. We shall succeed.

Question put and agreed to.

Resolved,

That this House has considered European Affairs.