RBS Global Restructuring Group and SMEs

Stewart Hosie Excerpts

Thursday 18th January 2018 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

This is clearly an important debate, as evidenced by the testimonies that many Members have from their constituencies about RBS GRG. But it goes far wider than that, because RBS was not alone in facing allegations of mis-selling, of treating companies badly at the height of the banking crisis and of poor redress since. I am sure that many Members will have had cases of Clydesdale’s tailored business loan mis-selling, where redress has not yet been made and constituents may have lost their homes, businesses and livelihoods as a result. It is also the case—this adds to our frustrations and those of our constituents—that some products were regulated and others were not and that some customers were deemed to be “sophisticated investors” while others were not. In short, there was an opaque regulatory environment that may have been sufficient in the good times, but most certainly was not when the money ran out and the banks were at their most stressed.

All the banks came under scrutiny, but much of the focus, understandably, was on RBS because it had such a large market share; because, by some measures, it was the largest bank in the world; and, not least, because of the allegations surrounding the treatment of businesses after they entered the bank’s GRG. I will not describe the genesis of the products that people bought, as the hon. Member for Norwich South (Clive Lewis) did that well. I simply say that, when businesses wished to extract themselves, sometimes their only way of escape was to pay substantial sums, larger than any capital ever borrowed, but as they were distressed themselves as the economy downturned, that was not possible, and so, in the case of RBS, they went to GRG. One would have thought, as many have said, that this was to help businesses to recover, but few did. To be fair, some of those businesses are likely to have failed anyway, while others were potentially viable, and referral to GRG may have caused some difficulties. But the key point is that some definitely experienced actions that were likely to have resulted in material financial distress.

One of the many reasons this was able to happen is that in some cases commercial lending was not regulated. To be fair to RBS, it did work with the FCA and it has implemented the complaints review. It also trained the team under Sir William Blackburne, who was honest in saying that outcomes were not being delivered quickly. However, all that remedial work, some of which was very good, is undermined by the swirling belief that refuses to go away that businesses referred to GRG were cash-poor but asset-rich, and artificial default events were engineered. In short, the businesses were asset-stripped.

These allegations are made all the more persuasive by the fact that, as we now know, GRG had a commercial objective and was part of “project dash for cash”; and by what we have seen since the Treasury Committee published the “Just Hit Budget!” memo and the memo from 2008-09.

I fully support the motion. I want to end because time is short. The memo from RBS GRG said that a customer should transfer to GRG if a significant deterioration in any aspect of their activity had happened, where a breach of covenant was likely but had not happened, or where they may miss a contractual payment to anyone. So even businesses that stuck to the terms of the RBS agreement could be referred to GRG. That was completely wrong.

Paradise Papers

Stewart Hosie Excerpts

Monday 6th November 2017 Commons Chamber

[Mel Stride]

I thank my hon. Friend for his question, which I take to be directed at me, Mr Speaker. It is of course for the Labour party to account for any situation in which its headquarters may or may not be owned by an overseas trust.

[Stewart Hosie (Dundee East) (SNP)]

It may well be that sheltering from our tax authorities sums of money greater than the GDP of many countries is not illegal, but does the Minister agree that that is precisely the problem? Does he also agree that the Paradise papers revelations, and the massive sums involved, now offer no hiding place for those who would deny a public register of beneficial ownership of funds and trusts, as well as businesses?

This tax avoidance is a driver of global inequality that runs to the very top of business, politics, entertainment and the establishment, in many countries, but these papers also shine a light on the hidden ownership of large corporations by foreign state institutions and individuals. To allow the public, customers and small investors to know who is really behind the most trusted of brands, will the Government now throw their weight behind not just local but global transparency on the beneficial ownership of businesses through offshore trusts, funds, and other opaque devices?

[Mel Stride]

The hon. Gentleman will know that this Government have been at the forefront of clamping down on international tax avoidance, evasion and non-compliance through the OECD’s base erosion and profit shifting project, which we have been in the vanguard of, and through the work on common reporting standards that we have been introducing among our Crown dependencies and overseas territories. He will find that we are no slouches when it comes to grappling with the items that he raises.

Finance Bill

Stewart Hosie Excerpts

Tuesday 31st October 2017 Commons Chamber

[Kirsty Blackman]

I am delighted to be in the Chamber to talk about the second of the three Finance Bills we will have this year. When the Chancellor stood up and said we would move to having fewer fiscal events a year, I am not sure that this is what he had in mind. I am particularly excited about the third one, which will be coming along soon, and I really hope that it takes account of Brexit because the Government’s Finance Bills have so far failed to do so. I hope we will have a Budget that takes account of the economic shock that will happen as a result of Brexit, puts in place the infrastructure spend that we particularly need and makes it clear that we should stay in the single market.

On our specific concerns about this Finance Bill— I saw you getting a bit edgy, Mr Deputy Speaker, but I will get on to it—I agree with Labour Front Benchers that there have been a number of missed opportunities, and we still have concerns. We have previously mentioned these concerns, but they bear repeating because this place is good like that.

The first issue is VAT on police and fire services. This Finance Bill should have taken the opportunity to remove the VAT paid by Scottish police and fire services. We have made this case time and again and we will continue to do so. I hope that the Chancellor will listen and make changes in the Budget. We would like the VAT that police and fire services have paid to be paid back, and we would like the VAT bill to be got rid of in the future. There is a precedent for doing so—other organisations do not have a VAT bill—and we will carry on making this case very strongly.

[Stewart Hosie (Dundee East) (SNP)]

My hon. Friend makes the interesting point that this is not simply about making a change for the future, but about repaying the money that has been overpaid for some years. Will she re-emphasise to the UK Government the message that we are not simply looking for such a change, but want paid back that which should never have been paid in the first place?

[Kirsty Blackman]

That is absolutely the case, and I thank my hon. Friend for highlighting this point. It is very important that the Government recognise that Scottish police and fire services never needed to pay this money and that they give us back the overpayments that have been made. Frontline police and fire services are losing out as a result of those organisations having to pay VAT.

I have a couple of other points specifically about the Bill. We have already raised the issues involving termination payments, which Labour Front Benchers did a very good job of highlighting. I am very concerned about the impact on vulnerable people and those who have lost their jobs and about the fact that this £430 million tax take for the Treasury means there is £430 million less for people who are made redundant.

I say again that I am pleased by the moves the Minister has made in relation to changing the implementation and phasing in of digital reporting. I appreciate his making it clear that tax measures put in place by the Treasury and implemented by HMRC are constantly under review. My concern is that even though it is said that these things are constantly under review—that is always said during the passage of Finance Bills—there is very little evidence of any reviews actually happening. Certainly, the majority of the reviews that do take place are not made public, so we cannot see the impact of those tax measures. I have done some digging and asked the Library about these matters, but as I say, very few of the reviews have been made public. It would therefore be good if the things the Minister has said will be under constant review were actually under constant review and if that could be shared with Members across the House and not just, for example, people working within HMRC.

I gather that the changes to elections for removing fields from petroleum revenue tax have widely been welcomed by the industry. In two successive Finance Bills, successive Chancellors have committed to changing the tax regime for decommissioning assets, so that it will be easier to transfer late-life assets to a new clearing in the market, which is very important in maximising the economic recovery of the North sea fields. I say again that Chancellors have promised that twice, yet action has not been forthcoming.

The Chancellor has said that the results of the review will be in the Budget. I do not want him to back away from the commitment that he has made. It is very important for the oil industry, not just in Aberdeen and the north-east of Scotland, but for the hundreds of thousands of people who are employed in the industry across the United Kingdom. It is very important that it does happen to maintain confidence in the industry. We have had a period in which things have not been great in the industry. Confidence is beginning to build again and this change would make a huge difference.

Something that we voted against in Committee and that we disagree with is the change to the dividend nil rate. It is being reduced from £5,000 to £2,000. The SNP has argued against that not only because it is the wrong way to go, but because it is being brought in too quickly. People who have set up a small business or become self-employed in the recent past may not know that this change will be coming in and hitting them very shortly, so they will not have built it into their business plan. I am concerned not that it will reduce entrepreneurship, but that it will affect people who have made finely balanced financial decisions about the future fairly soon. We raised those concerns in Committee. For me, this is the worst proposal in the Finance Bill—the one that I disagree with the most and that I would argue against the most strongly.

I have made the key point that the Bill ignores Brexit. I agree with those on the Labour Front Bench that the Bill ignores productivity. Every day, more statistics come out and more issues are raised about the lack of productivity growth in the UK and the ripples that that causes. The Conservatives keep saying how great it is that we have so many people in employment. The problem is that those people are not getting wage rises that even keep pace with inflation. People are getting poorer, even though they are working hard, sometimes in low-paid jobs, simply because wages are not keeping pace with inflation. That is a big concern for us.

When she came to office, the Prime Minister was very clear that she would try to do things for people who are just about managing. Over the past year or so, it has become clear that life for those people has been getting significantly worse. I would like this year’s Budget to take account of that, to take account of the fact that austerity has failed and to take account of the fact that people are poorer as a result of this Government’s policies and make moves to change that.

Question put, That the Bill be now read the Third time.

Finance Bill

Stewart Hosie Excerpts

Tuesday 12th September 2017 Commons Chamber

[Mel Stride]

I thank my hon. Friend for those observations, which I am sure the House has duly noted.

Let me now deal with termination payments, an issue on which the Opposition divided the House last week. The current rules are unclear and complicated. Some payments are taxed as earnings, some are only taxed above £30,000, and others are completely exempt from tax and national insurance contributions. Although most employers use the current rules as intended, the present system allows some to ignore those rules and deliberately manipulate their payments to minimise their tax by exploiting the differential tax treatment. That is clearly not fair. The Bill makes the rules simpler and fairer by recommending that we exempt the first £30,000 of termination payments from tax, while tightening the rules in respect of what is rightly included within such payments.

In last week’s debate, some Members raised concerns that the Government would be taxing compensation that is paid to employees when it is proved that they have been discriminated against—for example, after an employment tribunal. I am happy to reassure them. All compensation awards caused by proven discrimination against someone in employment will remain completely exempt from tax. All that the Bill does in the way of change is close the obvious loophole that enables an employer to treat part of a termination payment, as opposed to a tribunal award, as an “injury to feelings” in order to benefit from the tax exemption. It is HMRC’s longstanding position that if an employee claims a tax exemption for injury, it must have actually impaired that employee’s ability to work, and the Bill simply reconfirms that position.

Members also raised concerns that the Government intended to reduce the tax-free amount from £30,000. The Bill makes no such provision. If there were ever any desire to reduce the tax-free amount, it would be subject to a statutory instrument and the affirmative procedure, so the House would have to expressly approve any such proposal.

We also need to ensure that the taxation of different ways of working is sustainable, so that we have the funds to invest in the public services on which we all rely. It is therefore important that this tax treatment is fair between different individuals. The Office for Budget Responsibility has highlighted the fiscal risks arising from the growing number of people working through companies. Such individuals can pay themselves in dividends, and, in so doing, can pay significantly less tax than employees and the self-employed, although in many cases their economic activities are broadly the same. Part of the reason for that difference is the entitlement to a £5,000 dividend allowance, which is available in addition to the income tax personal allowance that the Government introduced at £11,500 in April.

Reducing this allowance to £2,000 will help to reduce the differential in tax treatment and help remove some of the working distortions to which I have referred. It will also ensure that support for investors is more effectively targeted: a £2,000 dividend allowance will ensure that around 80% of general investors continue to receive dividend income tax-free. The less well-off will be protected, with those general investors who are affected having investment portfolios worth around £100,000 on average, putting them in the top 10% of wealthiest households in the country. So the Bill will make our tax system fairer in a number of ways.

[Stewart Hosie (Dundee East) (SNP)]

The Financial Secretary uses the example of someone who works through a company, and compares that with a wealthy investor with a large portfolio. The concern many of us have is for the small businessperson—the owner-proprietor—with a start-up business earning a very modest wage who relies on the £5,000 tax-free dividend in order to make ends meet. What consideration has he given in that regard?

[Mel Stride]

There are other considerations that the hon. Gentleman should focus on when he looks at individuals setting up in business, and there are many successful entrepreneurs throughout our country. We are the party and Government who have reduced taxation on business. It used to be 28% under the last Government and we have brought it down now to 19% and it will be further reduced to 17% over time. So the hon. Gentleman should look at this in the round, and I persist in my point that we need to look at the different tax consequences of the different models—an individual going into business on their own, whether as a sole trader or partner, or in an incorporated structure—to make sure we do not have people effectively just using one model for no other reason than the tax advantages thereof.

--- Later in debate ---

[Mel Stride]

My hon. Friend is entirely right. The amount of onshore corporation tax that we took in the last financial year is close to £50 billion—50% more than in 2010. As we have brought taxes down, the tax revenue take has increased. We can draw only one corollary from all this: if the Labour party gets its way and starts to put those rates up again, some of that tax take might be damaged.

[Stewart Hosie]

The Minister just prayed in aid the new penalties for the enablers of tax avoidance, which I welcome. This Bill is riddled with retrospective legislation, which I hope he will say more about later, but will the Minister explain to the House why those new penalties do not kick in until after the Bill receives Royal Assent when there is retrospectivity all over the place in the rest of the legislation?

[Mel Stride]

I believe that that is due to an element of convention, but I am happy to speak to the hon. Gentleman after the debate. We have already clamped down on those who generate such schemes, and we are clearly clamping down on those who use and seek to benefit from them. The third thing is that we will now be actively clamping down on those who enable those schemes through their advice along the way, and they will face penalties of up to the entire amount that they have charged for their services. That is just another example of this Government’s determination to leave absolutely no stone unturned when it comes to clamping down on tax avoidance, evasion and non-compliance.

--- Later in debate ---

[Kirsty Blackman]

It frankly does not matter what the inflation figures there were. What matters is that people here are feeling the squeeze, that people here are finding that things are more expensive, and that people here are finding that their wages have not gone up. That is the concern; that is what we are discussing here.

On the subject of investing, our programme for government in Scotland involves creating a national investment bank to support economic growth and to invest in business research and development. We hope to channel finance where it can do the most good. The Government here have the national productivity investment fund. We are still not entirely clear where all that money will be spent and how it will be spent, and I look forward to seeing what will happen. I hope that the UK Government can look at similar measures to the ones the Scottish Government are looking at in relation to the Scottish national investment bank, which will ensure that investment and economic growth are in the right places.

[Stewart Hosie]

Would it not be better for this Government, instead of allocating spending into the next Parliament, to spend that money now and invest in something like a national investment bank so that they and other bodies will have the ability to mitigate the damage a hard Brexit will cause?

[Kirsty Blackman]

I agree with my colleague. Given the uncertainty that businesses are facing and their concerns, now is the time to make those decisions and to try to raise the confidence of businesses. This is a real issue, and one that the Government have dodged.

When we debated the Ways and Means resolutions, I mentioned the proposals on museums and galleries, which are in clause 21. I raised the fact that the Value Added Tax (Refund of Tax to Museums and Galleries) (Amendment) Order 2017 has not, as far as I am aware, been laid yet. On 17 July, in response to a written question from my hon. Friend the Member for Glasgow Central (Alison Thewliss), the Government said that that would happen as soon as possible, but as far as I am aware the motion has not yet been tabled. If the Minister gets the chance later, I would very much appreciate it if he said when he does plan to lay the order, because that would be very useful for museums and galleries.

--- Later in debate ---

[Mr Mark Harper (Forest of Dean) (Con)]

I am very grateful to be called to speak by you, Madam Deputy Speaker, particularly since we worked so well together in a previous incarnation. I am pleased to be speaking in this debate with you in the Chair.

It is a great pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman), who speaks for the SNP. She referred to the recent general election. I completely agree that while it did not go as well as we would have hoped, it did not go terribly well for her own party. I, for one, am very pleased to be joined on these Benches by a number of excellent Scottish Conservative colleagues. It might surprise her to know that I am equally pleased to be joined in this House by some Labour colleagues who are of a Unionist nature. The one very important thing that came out of the general election was that we strengthen the United Kingdom and the bonds that bring us together, whichever political party people are from, and weaken the forces of nationalism trying to break our country apart.

[Stewart Hosie]

Obviously this has very little to do with the Finance Bill, but for the sake of completeness, the right hon. Gentleman might want to remind the House that the Scottish National party won the election in Scotland with a majority, which is something that the Tories do not have. As for nationalism, I think he should perhaps look in the mirror and reflect on his British nationalism before he casts aspersions on anybody else.

[Mr Harper]

I was not casting aspersions. I was simply reminding everybody that the Scottish nationalists—that is what they are; they are a nationalist party—want to break up the United Kingdom, and I was simply congratulating my colleagues from Scottish constituencies on helping to strengthen our United Kingdom.

--- Later in debate ---

[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to follow the hon. Member for Braintree (James Cleverly), with whom I agree entirely on the support that small, digitally enabled microbusinesses need to compete with the large, global, mention-no-names fulfilment operations. I hope he is right that the Bill delivers the support that smaller businesses need.

It is also a pleasure to follow the hon. Member for Liverpool, Walton (Dan Carden). It is appropriate that he made his maiden speech in such an important debate. Having known him for some years before he was elected, I very much hope and expect that he will use his undoubted talents to change Labour policy so that it no longer supports 70% of the Tories’ cuts and instead backs a genuine alternative to austerity. I am sure that in future debates he will be happy to intervene on me, as I will on him.

I agree with my hon. Friend the Member for Aberdeen North (Kirsty Blackman) that we cannot support the Finance Bill tonight as it is derived from the last Tory Budget. She made it clear that, as many will remember, the Budget confirmed austerity and, in our opinion, woefully failed to mitigate the likely impact of the hard Tory Brexit that now lies before us—a hard Tory Brexit that at its heart, as we have heard confirmed this week, also represents a power grab on Scottish powers and the powers of other devolved nations.

My hon. Friend is also right to raise the issues of prices rising faster than wages, the impact of the continuing public sector pay cap and, most shockingly, the 10-year real-terms fall in the incomes of people who actually work, which speaks volumes for the lack of priority the UK Government are giving to those who put in a shift, 9 to 5, five days a week or more. Those people are substantially less well off now than they were prior to the downturn.

Like all Finance Bills, this one contains particular measures that would be very welcome if they stood alone—I will say a little about some of those measures today—and some that are less welcome. I will mainly concentrate on inconsistencies in the commencement of certain measures, the absence of guidance from HMRC in certain circumstances and an apparent increase in the amount of retrospective legislation. Let me give some examples to demonstrate all those things.

The provision of tax relief for pensions advice in clause 3 is welcome, as is the mirroring provision in clause 4 of tax relief for other necessary legal advice. I, like the rest of the SNP, certainly welcome the extension of the existing reliefs in those areas, but I see from the explanatory notes that the commencement of both clauses is retrospective, being from 6 April 2017. I have no issue with that on those provisions, except that I am not sure retrospective legislation is a good thing in principle.

It is equally sensible, as part of the process of tax simplification, to make changes, in clause 6, to the process of PAYE settlement agreements. They will not have effect until next year, and I have no problem with that. The explanatory notes state that the new regime will be “a largely automated process” and, again, that is probably sensible, but the commencement date for that largely automated process does not fit well with the recent changes announced for the implementation of a fully digital tax system, which has been put back until 2019. Indeed, the explanatory notes for clause 62 state:

“Regulations providing for digital record keeping cannot come into force before 1 April 2019.”

I hope that the people who undertake to go digital quickly do not suddenly find that they fall foul of regulation and guidance issued the following year. Given that this measure is expected to be in place in six months’ time, will the Minister tell us whether the promised strengthened HMRC guidelines will be available to businesses? When will that happen?

As has been mentioned in earlier speeches, a deal of attention has been paid to clause 15, which deals with business investment relief, and, in particular, the ability of partnerships, previously excluded from BIR, to now be eligible if they carry out commercial trades in their own right. I just wonder what the scale of those commercial trades will have to be for an application to be able to be made for BIR. Will it be one, two or 10 trades? Will it be half of the turnover? A little clarity on that would be very helpful. The Minister might want to explain further why those changes have been proposed, given that I was not aware of any particular demand from partnerships to have BIR associated with them in the first place. The clause is also retrospective, having effect for investments made after April this year.

Clause 26, dealing with the elections in relation to assets appropriated to trading stock, applies for appropriations made since 8 March this year. Clause 38, dealing with the first-year allowance for expenditure on electric vehicle plug-in points, has been in effect since 23 November 2016. Clause 19, relating to losses and the counteraction of avoidance arrangements, applies to all losses on or after 1 April this year, whereas changes to reference property losses, in certain circumstances, came into effect on 13 July this year.

I have given a handful of examples, some to be welcomed and others the subject of debate, where we have in one Bill retrospective commencement dates of 23 November 2016, 8 March 2017, 6 April 2017 and 13 July 2017. That demonstrates the serious issue of the level of retrospective tax law in the UK. The Bill also contains future implementation dates for 2018-19, which is inconsistent with other measures the legislation is supposed to complement and support. That quick glance allows us to understand perfectly well the criticism that the tax code is not only too long but far, far too complex.

I alluded earlier to the fact that one measure is not being implemented retrospectively: clause 65 and schedule 16, dealing with penalties for enablers of defeated tax avoidance. Of all the measures that any reasonable person might have assumed could—indeed, should—have been made retrospective, surely it should be the penalties for those the legislation says design, market or facilitate abusive tax avoidance. But no: lo and behold, the new penalties will not come into effect until after the Bill receives Royal Assent. The Minister prayed in aid HMRC’s efforts to clamp down and raise more money by tackling tax avoidance and abusive tax evasion. I very much welcome that, so I find it odd that given the measures in the Bill that are subject to retrospectivity, the penalties for the enablers of defeated tax avoidance are not.

I wish to raise three other small matters. First, the explanatory notes for clause 62, on digital reporting and record keeping for VAT, say that for those who are unable to use digital tools because of, for example, their geographical location—I assume that that means the absence of sufficiently fast broadband—alternatives will be provided. Will the Government guarantee that that means we will keep the current manual system and that there will be no unnecessary change and complexity?

The second matter relates to the Government’s failure to explain what Brexit really means—other than Brexit, as the soundbite goes. Clause 21 and schedule 6 cover relief for the production of museum and gallery exhibitions, as mentioned by my hon. Friend the Member for Glasgow Central (Alison Thewliss). The explanatory notes tell us that at least 25% of the qualifying expenditure must come from the European economic area. I know that the EEA is different from the EU, but as the UK withdraws from the EU will the Minister clarify whether, if all the qualifying expenditure is spent in the UK, that will apply as it would had it been spent elsewhere in the EEA?

Finally, I make no apologies for returning to clause 8 and the change to the income charged at the dividend nil rate, from £5,000 to £2,000 in 2018. To some extent this relates to the point made by the hon. Member for Braintree about small and microbusinesses, which start up and begin to just about make a profit, but from which the owner-proprietor earns barely the minimum wage, let alone the living wage, while their company grows. Many such people use that £5,000 tax-free dividend to make ends meet. I understood what the Minister said earlier about those who actually work for a third party but are nominally self-employed, and indeed about those with substantial share portfolios, for whom some extra tax-free money is simply a bonus, but surely to goodness the legislation can be drafted in such a way that it does not penalise or appear to act as a disincentive for those who wish to start a business, by taxing what might be the first modest dividend that that business might ever have had. I hope that, even at this late stage, the Government will look again and table some sensible amendments to ensure that the change captures the tax revenue from those from whom the Minister wants to see it captured but does not act as a disincentive to those who wish to start a business.

That was a gentle canter through some technical matters; I am happy to leave the broad-brush stuff to my hon. Friend the Member for Aberdeen North.

Summer Adjournment

Stewart Hosie Excerpts

Thursday 20th July 2017 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to serve under your chairmanship in this summer Adjournment debate, Madam Deputy Speaker. As everyone else has, I wish colleagues and staff all the best for the recess. Of course, many of our colleagues—and their staff—who lost their seats might not have quite such a happy summer, as they face in some cases quite uncertain circumstances. I wish to say a little about the arrangements for non-returning MPs and their staff, and I hope it will command support from both sides of the House.

Before I do, though, I have always taken the view that an MP’s salary should be broadly in line with comparable professions and sufficient to meet the needs of living in two places—including in London, which is one of the most expensive cities in the world—but it should not be so high as to be the prime motivator for anyone seeking to become an MP. By and large, I believe, the current salary does that. The office allowance and travel arrangements are absolutely appropriate, and the allowance for staff should be sufficient to employ the correct number of caseworkers and other staff in our constituency offices. Again, since IPSA has given a rather generous increase to the staff allowance, that has most certainly been achieved.

Of course, the advent of the Fixed-term Parliaments Act 2011 has, or rather should have, provided more certainty for people seeking election or to work for an MP when they give up careers, professions and trades to do that. It is also worth noting that the recent salary increase for MPs was combined with changes to the MP pension scheme and the removal of the old resettlement allowance. At face value that is all fair and reasonable and, for the most part, it is. The reality of how easily the terms of the Act were overturned casts a bit of a shadow over what happens in practice, particularly for those who lose their seats, in the event of a short Parliament.

Irrespective of the expectation of a five-year term for Members and staff, the reality in the last Parliament was that many MPs’ staff members were entitled to precisely nothing—zero—by way of redundancy because they were employed for less than two years. That was inevitable, given that the Parliament itself was barely two years old. That simply cannot be right. As one non-returning MP put it:

"My own staff position seems to be typical; I have five in my team of whom four are to be paid no redundancy at all. This is because they worked less than two years (in some cases missing the cut by only a few weeks.)…Many staff members gave up jobs, others gave up homes and moved to London, and some took out mortgages”

on the basis of a five-year contract made in good faith. They are now made redundant on terms that he says

“would disgrace the most unscrupulous private corporation.”

Indeed, were there to be another election before 2019, which is certainly not inconceivable, any staff employed by a new MP of any party elected for the first time this June would likewise be entitled to absolutely nothing if the MP lost his or her seat. I would suggest, and I hope that this would command support, that at the very least in future redundancy should be paid to staff as per the contract, in the circumstances of a short Parliament, as if the members of staff had been employed for five years, particularly as the circumstances of a short Parliament are outwith the control of the staff, outwith the control of Members—and, given what we now know, were outwith even the knowledge of half the Cabinet when the Prime Minister called the election.

Likewise, the decision to call an election within the five-year timescale has left a number of non-returning MPs in a very difficult position, with many new ones being entitled to less than £3,000. Although IPSA is right to try to put things on a par with other workplaces, where we have ended up with the terms of redundancy for MPs appears to bear absolutely no relation to any professional contract I have ever seen.

To put into some kind of context the combination of circumstances in which ex-MPs and their staff find themselves, I can tell the House what two have told me. One said:

“we are now trying to support staff who are receiving no help from IPSA—while not being paid ourselves to do so”.

He hopes that consideration can be given to finding the means to provide additional support to staff. Another said that he would not

“abandon my staff and former constituents, nor walk away from my responsibilities. But, it seems, that I am expected to manage my staff as their boss full time until the 8th August entirely unpaid. That cannot be right or fair.”

I am not arguing for a return to the old resettlement allowance regime, but the current situation must be changed. I believe it needs to be changed not just to help those who lost their seats in practical terms but to address a more difficult issue. If this situation continues and there is a series of short Parliaments leaving people in this position, massive limits will be placed on those choosing to stand for election or to work here. The huge strides all the parties have made to ensure that Parliament more accurately reflects society could be reversed, and that goes for staff as well as Members. If it is clear to those who might wish to come here that MPs who lose their seats after a short Parliament will come away with less than one month’s salary and their staff, in some cases, will come away with literally nothing at all, the only people who might seek election will be the independently wealthy or the kind of zealots who would do it for nothing. Nothing, but nothing, could be more different to society than a Parliament of MPs and staff drawn from such narrow groups.

Urgent action needs to be taken to ensure that staff redundancy is paid on the basis of a five-year contract, irrespective of how long a Parliament lasts, and MPs need to have a comparable professional termination package based on length of service but with a minimum safety net, not merely a few weeks’ salary. Let me repeat that I am not calling for the re-introduction of the old resettlement allowance, but the prospect of surrendering one’s career or trade to enter Parliament, losing one’s seat when it is not one’s fault and then being presented with less than one month’s salary will be a massive disincentive to others who would seek to do this public service. IPSA needs to be flexible.

Finally, a winding-up allowance of around £50,000 or so is available to each MP, but it appears from non-returned colleagues that there are huge restrictions on how that can be used. My judgment is that, with little imagination, IPSA could easily pay staff redundancy for those who serve less than two years in the event of a short Parliament. I am talking about a modest termination package to allow ex-MPs to fulfil their obligations to those staff and to adjust to life outside Parliament without any significant increase to the funds that IPSA already sets aside. This is not special pleading; it is a matter that can and will affect all parties. It is something that we must review and repair quickly, given that the fixed nature of our parliamentary terms is rather less robust than many of us had expected.