Funding for Major Infrastructure Projects

Alistair Carmichael Excerpts

Wednesday 3rd May 2023 Westminster Hall

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is a pleasure to serve with you in the Chair, Mr Sharma. I congratulate my hon. Friend the Member for Bath (Wera Hobhouse) on securing today’s very timely debate. It strikes at many of the issues that we face in politics at the moment—issues that must be dealt with over something longer than the current electoral cycle. One of the failings of politics and the frustrations with Government that we have all experienced over the years is that we are all focused on the next four or five-yearly electoral event. For some infrastructure projects—we have touched on HS2, and I will speak about some that are closer to home for me than that will ever be—we need a more strategic approach.

When it is at its best, the Treasury is very good at doing the strategic, but often it becomes a bit hidebound by its own rules, and it lacks a little of the creativity that we require. For those of us in the northern isles, the most important infrastructure that we have is our transport infrastructure, in particular our ferries. We have the ferries that go between Orkney and Shetland and Scotland—or mainland Scotland, as some people like to call it—and the ferries that go between the different isles that make up Orkney and Shetland. What brings me to the Chamber today is the community discussion of those internal ferry services in recent years.

Earlier in the sitting, I was pleased to welcome the announcement of funding of £26 million for a replacement Fair Isle ferry—a significant amount of money, but that money is critical to preserving one of the smallest and most economically fragile communities to be found anywhere in these islands. The geography of Shetland is such that, apart from Fair Isle, Foula and others, the islands are pretty close together on a map. To our mind, it makes perfect sense for those islands to be joined not by ferry services, which are subject to weather delays, breakdowns and all the rest of it, but by a series of short tunnels—fixed links. In recent years, the debate on the islands has very much headed in that direction. We look with some envy at what our Nordic cousins in the Faroe Islands have done by linking their islands together and at the west of Norway, where parts of the mainland are linked by tunnel, as indeed are some of the smaller islands.

As a consequence of those discussions, which have been happening in the community for some time, my colleague Beatrice Wishart MSP and I set up a series of town hall meetings in the summer of last year. Obviously there are no towns, so they were not in town halls; they were in community halls and church halls in Fetlar, Unst, Yell, Whalsay, Out Skerries and Bressay. In an age in which we are always told that people are uninterested in politics and will not turn out for a public meeting, about 250 people from these small communities came out over the course of a week to offer their views on what fixed links could do for their communities.

A tiny number of people demurred, but the overwhelming consensus was that in our communities the construction of fixed links could be absolutely transformative for the design and delivery of public services. Keeping GPs based in an island community of a few hundred people is a big ask, for example. Then there is the creation and ongoing maintenance of schools in those communities, which are constantly shifting.

I was born and brought up in Islay; I grew up there in the ’60s, ’70s and early ’80s. In those days, one GP served our end of the island. If he went fishing for the day and someone had an accident, they had to wait until he came back from his fishing trip. In the 21st century, thankfully, that is not how the NHS works. We need a wider range of clinical practitioners, and people expect different standards from those practitioners. Maintaining public services of that sort in such communities becomes ever more difficult and challenging for us.

At every meeting we heard the same story. Overwhelmingly, the view was that young people wanted to stay in the outer isles in Shetland, but were forced to leave by the nature of the opportunities for employment, health and education for their family and were desperate to return. If these people stayed in our island communities, they would contribute to their economic growth. They would be able to found, run and grow businesses or maintain businesses that had been run by their family for generations, keeping children in the schools and keeping money going through local contractors into post offices, shops and all the rest of it.

For the bigger economic development projects, getting products from the outer isles to the market will always require at least one ferry service, but there is no reason it should need two. I think of businesses such as Cooke Aquaculture, which has a processing station in Mid Yell: it has to construct an entire staff rota on the availability of ferry services to get its product from Mid Yell down to Lerwick before it catches the ongoing ferry. That is how the infrastructure provided has a very direct impact on one of the most important food-producing businesses in my constituency.

[Wera Hobhouse]

I do not know too much about ferry services, but I think the point that my right hon. Friend is making is that we cannot just look at one product in isolation. The cost benefits are wider, in the round.

[Mr Carmichael]

Absolutely. I am horrified that, having been a colleague of mine, my hon. Friend says she does not know much about ferry services—she has clearly not been listening! However, the point she makes is a good one.

This is where Treasury rules and funding come into play. If we are looking at ferries, for example, we look for a pay-down over a 20-year or possibly 30-year period. A tunnel will be several times that, but Treasury rules constantly push people towards a like-for-like replacement. They seem to lack the flexibility and creativity necessary to provide the services that will maintain the economic and social viability of such communities in the longer term.

There is also a continuing role for EU—sorry, for Treasury—funding.

[Peter Grant (Glenrothes) (SNP)]

You were right the first time.

[Mr Carmichael]

Yes, I am always right the first time.

There is a continuing role for the Treasury in relation to funding, because a significant proportion of the ferries that we are now looking to replace were purchased and commissioned in the first place with a proportion of EU funding. That funding now sits with the Treasury, so although transport as a whole is devolved, there is still an obvious and strong role for the Treasury.

Following on from the Tunnel Vision roadshows that we ran in the summer of last year, as we suggested, communities set up tunnel action groups to decide how they could make the case. The case for a big infrastructure project like that, for a small community, is always that it should basically be designed by the community itself. I am happy to tell the House that the Unst and Yell tunnel action groups, working together, have already obtained pledges in the region of £100,000 towards the £200,000 that they think might be necessary to get the first stage of a feasibility study.

The project will have not just local strategic importance, but national significance. Unst will probably be the earliest and most effective—possibly the only—spaceport in the United Kingdom that is capable of doing vertical as opposed to horizontal launches. The people behind the SaxaVord spaceport in Unst tell me every week that that will be critical to their ability to exploit to the maximum the potential of the project in which they are investing.

There is also the question of the carbon cost. In the medium to long term, tunnels will always be much more carbon-efficient than ferries, with respect both to running costs and to ongoing replacements.

The Treasury has a pot of money that is currently set aside as a consequence of the wish of the last Prime Minister but one, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), to build a bridge from south-west Scotland to Northern Ireland. I can promise the Minister that there are none of the problems with unexploded ordnance that befell that particular project. The money still sits there in a ringfenced pot, so if the Minister wants to stand up and give me a commitment to fund tunnels for Shetland, I will be delighted to take it.

What we are looking for at the moment is a bit of willingness from the Treasury to engage with our community and allow us the opportunity to make the contribution to the rest of the United Kingdom that we have always made and that we know we can continue to make. Might the Minister agree to meet me and a delegation from the Shetland communities and the Shetland Islands Council to hear their intentions and hear what they want to do to make this happen? A small amount of Treasury money at this stage, to establish the case with scientific and technical rigour in a way that as a community we may be unable to do for ourselves, could be transformative in future.

[Several hon. Members rose—]

--- Later in debate ---

[Peter Grant (Glenrothes) (SNP)]

I am pleased to begin summing up the debate, and it is good to see you in the Chair, Mr Sharma. I commend the hon. Member for Bath (Wera Hobhouse) on her very well informed introduction to the debate. I heard her say that she did not win the ballot for this debate, but was asked to hold it later. That may be a lesson for us all: losing one vote does not prevent you from having another go later.

The hon. Member for Wimbledon (Stephen Hammond) gave a very interesting examination of the technical and organisational factors needed to get a project right, and to make sure that future projects go well. One thing that has struck me in this place is that when a big project goes wrong, nothing gets learned. If the Department of Health and Social Care has a project, the Department for Transport does not learn anything from the mistakes, so it makes exactly the same mistakes. We could fill a library with the things that we could learn from problems with Ministry of Defence contracting, for example. There does not seem to be any process for making sure that lessons learned are remembered and transferred across the whole organisation.

The right hon. Member for Orkney and Shetland (Mr Carmichael) gave a very interesting speech. I know a bit about Orkney and Shetland. I have not been to Shetland yet, but I have been to Orkney and hope to go back. He reminded us that we often think that a lot of the public are not interested in politics, but when they understand the impact that an issue will have on their life, they are interested. If the public are not interested, it is maybe more of a comment on politicians, who manage to turn the public off. It is certainly not the public’s problem if the way we do politics causes people to turn off.

I like the right hon. Member’s comments about the GP service on Islay, because several years ago two of my best friends spent two summers on the neighbouring island of Jura, providing cover for the only GP on the island; he was not allowed off the island unless he got cover. The right hon. Member reminded us that for a number of very remote communities in these islands, and sometimes for communities that are not all that remote, the realities of life can be very different from how they appear in this place, and possibly from the way they appear to Ministers or civil servants ensconced in their fancy buildings in Whitehall and around Westminster.

The right hon. Member mentioned the inflexibility of Treasury rules. I do not understand how we can possibly run a 25 to 30-year contract on an annual and cash-limited budget; it just cannot be done. It produces incentives to do stupid things. We have seen that with HS2. He also mentioned the very strong part that the EU played in the previous round of procuring ferries for the islands in his constituency. Yes, the Scottish Government have attracted, and probably deserve, criticism for their record on some of the ferry procurement that we have done in the past. Nobody gets it right all the time. Interestingly, the right hon. Member’s comment seems to show that the people who we were told were remote, unelected bureaucrats in Brussels could sometimes get closer to delivering what people in our communities wanted than the decision makers down here. Perhaps that is because the EU knew that it was sometimes remote, so it did not think that it knew what was best. Most of the funding programmes that it ran had to be managed by the Scottish Government, mostly in partnership with local authorities or other local organisations. Although not everybody agreed with every project that was approved, people could at least point to strong evidence that the project was born in the community and funded from elsewhere, rather than having been invented to fit a set of criteria that were often not relevant to the community in which the project was delivered.

[Mr Carmichael]

I bridle slightly at the hon. Gentleman’s use of “remote”. I am always being told that I live in a remote community, which means that I have to define the place I call home in relation to somewhere else. Surely the point is not about the distance between Brussels and the place where the projects were delivered; it is about understanding that the European Union enabled communities to do something for themselves. That is a very different model from the one in Edinburgh and London these days. Viewed from Shetland, both those places are pretty remote.

[Peter Grant]

I take the right hon. Member’s point. Let me clarify that I do not measure remoteness by how far people are from this place or anywhere else. It is arguable that parts of the right hon. Member’s constituency are more remote from each other than they need to be, because the infrastructure is not there, so a journey of a few miles can be a lot more difficult than it needs to be. The important point is that far too much infrastructure spending in Scotland is not done according to the priorities of the Scottish Government, local authorities, or the Scottish people. The fairy-tale vision of the former Prime Minister, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), of a bridge to Ireland is a good example of that. I have not heard anybody in my constituency or elsewhere in Scotland say that that was a priority.

Too many funded schemes in Scotland are the priority of somebody in London who holds no mandate whatsoever in my constituency or anywhere else in Scotland. The criteria are set by somebody in London, sometimes having invited comments from the devolved nations or local authorities; most of the time, they ignore any comments that come in. The allocation of money does not have any rational basis, or follow any measure of need or priority. For example, the UK Government promised that the shared prosperity fund would fully replace the EU structural funding that Scotland lost after we were dragged out of the European Union against our will. Over three years, we expected to get about £549 million in structural funding; through the shared prosperity fund, we are getting £212 million. We are losing £337 million, more than half of what we would have had.

Other Government investment schemes, such as levelling up, were supposed to be based on a prioritisation of need, but somehow that prioritisation of need meant that the Prime Minister’s constituency got more than the whole of Glasgow. Of course, Glasgow got nothing. The Prime Minister’s constituency got exactly the same as mine, which is one of the most seriously deprived areas in the United Kingdom. The towns fund was the same. On the face of it, that fund was based on some kind of objective assessment of need, but everybody knows that it was more about who the sitting MP was, or which party hoped they might win the seat at the next election. The way that the criteria are set is not in the interests of the communities that the fund is supposed to serve. The funding allocation is not about need or what is right; it is about what suits the party of Government.

Almost 20 years ago, my very good friend and then fellow member of the council, Michael Woods, discovered that the then Labour administration in Fife Council had a secret plot to close the award-winning sports centre, the Fife sports institute in Glenrothes, and Kirkcaldy swimming pool. Thanks to Michael’s determination, that plan was abandoned. In 2007, Michael and I were both re-elected to the council, formed a joint administration with the Liberal Democrats, and immediately put in place plans to not demolish those two institutions, but replace them, and make them brand new. Six years after we were elected, we delivered a new sports centre in Glenrothes. Sadly, Michael did not live to see it happen, but the Michael Woods sports and leisure centre remembers that it would not be there had it not been for Michael. That is what can happen if we have the political leadership that knows what needs to be done, understands what communities need, and is prepared to deliver it. We had to devise a new delivery model to make the sports centre happen. I note the comment from the hon. Member for Wimbledon. If that delivery model had not worked, it would not have been the fault of the delivery model; it would have been our fault. It was our responsibility to set out a delivery mechanism that would work.

If we want to look at something on a bigger scale, in 2007, when the SNP was elected to the Scottish Government for the first time, it inherited a Forth Road bridge that was in danger of becoming unsafe and being closed. Some 10 years after, the SNP having inherited no plans whatsoever, the new Queensferry crossing was opened to the public. It was a £1.3 billion investment, let it be noted. The SNP did that without putting the albatross around their neck of a private finance initiative, and the crossing is toll-free, as are all the bridges, motorways and roads in Scotland.

Compare that with HS2. In 2009, the Government set their delivery company a budget of between £31 billion and £36 billion. By 2013, almost exactly 10 years ago, the National Audit Office was already warning about problems. We are now looking at a cost of somewhere between £72 billion and £98 billion. The cost of a single railway station at Euston has increased by £2.2 billion, and construction on that station has stopped for two years. How can one Government—or one series of Governments—get one project so catastrophically wrong so often, with no one being held to account?

Lack of accountability is a significant problem. We could ask what has happened to the 40 new hospitals; maybe some of them will happen, but there certainly will not be 40 of them. We seem to be living in a time when “a long-term investment strategy” means “to get us through the next election”. We are clearly living in a time when “priority areas of need” are marginal seats, and 40 new hospitals means, if we are lucky, half of that number—most of them will never be built. Partly due to covid and partly due to the self-inflicted damage of Brexit, construction project costs are rising, often faster than the official rate of inflation. Contractors and subcontractors are finding it harder and harder to recruit the skilled workers they need, because in that industry a lot of the skills are international. The market is global, and Britain is making itself a less attractive place for overseas workers to come to and work. That is not just because of Brexit, but because of how it has been seen to be implemented by the Government.

We need a complete change in the way that the Government allocate and manage the funding for their major infrastructure projects. The hon. Member for Bath was a fellow member of the Public Accounts Committee for a while; I have not seen any evidence, in the reports that come to the Committee, that lessons have been learned. I would love to be able to say that during my time on the Committee—or even in Parliament—I have seen evidence that this Government are becoming better at managing large-scale projects. I cannot say that; if anything, I would say that they are becoming worse.

We have a Government and a governing party that are becoming more inward looking, more concentrated on looking after their own interests, less willing to face up to the decisions that need to be taken, and, frankly, less caring about the impact on communities all over these islands of their failure to deliver the kind of infrastructure that a modern western democracy should be allowed to take for granted.

Finance (No. 2) Bill

Alistair Carmichael Excerpts

Committee of the whole House
Wednesday 19th April 2023 Commons Chamber

[James Cartlidge]

We have had strong support from public health groups for the differential duty, because the evidence shows that is healthier to drink in a social environment than privately. That is another significant benefit.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

rose—

[James Cartlidge]

This is a popular area of the debate. I give way.

[Mr Carmichael]

I think the Minister has a sound case in relation to what the Government have done on beer duty. What is less clear, however, is why they have chosen to treat spirits so differently. Spirits are also an important part of the on trade. What will the impact be on the spirits trade from the differential that the Minister has now baked into the duty system?

[James Cartlidge]

There are spirits that will benefit from the differential—not spirits served from what I think are called optics, but spirits served on tap. There are mixers served on tap that will benefit from a more generous differential duty. On spirits, I am more than happy to set out further detail when I respond to the relevant amendments, because I think they are specifically focused on Scotch whisky, and I understand the concerns there.

I just want to finish my point on our Brexit pubs guarantee. Just to underline what we are doing, we are giving pubs a new permanent competitive advantage. We are levelling the playing field against supermarkets. Following the difficult times that pubs have had with the pandemic and higher energy costs, that hopefully gives them a new narrative for their communities with more positive times to look forward to ahead. That is what we want for our pubs. As my right hon. Friend the Member for Bexleyheath and Crayford (Sir David Evennett) said, they are so important for our communities and our economy. We continue to do everything possible to back the great British pub.

--- Later in debate ---

[The Chairman of Ways and Means (Dame Eleanor Laing)]

I call Alistair Carmichael.

[Mr Carmichael]

Thank you, Dame Eleanor. It is perhaps not a novelty to see you back in the Chair, but it is still a great pleasure none the less. I am delighted to serve with you in control.

I rise to speak to amendment 7, which stands in my name and those of my hon. Friends. In doing so, I should indicate at this stage that it is my intention to divide the Committee and establish opinion on it. The effect of amendment 7 would be to freeze the level of duty on the production of spirits. The Minister kept saying these are Scotch whisky amendments. He maybe knows me too well, but I would readily concede that many other spirits will be affected by this, and they are just as important. I think the hon. Member for Aberdeen North (Kirsty Blackman) will speak to her amendments, which do relate specifically to Scotch whisky, but I have had discussions with her, and she tells me that SNP Members are in fact minded to support our amendment, instead of pursuing their own. She will doubtless speak for herself, as she always does, later in the debate.

When we consider that 70% of the gin produced in this country is, in fact, produced in Scotland—my constituency has no fewer than four gin distilleries, and we find that situation replicated across Scotland—the impact of rises in duty are not just going to be felt by areas that produce Scotch whisky. We have also seen a number of distilleries appearing in recent times—a much smaller number, but it is significant none the less—producing rum. So it is important that we have a coherent strategy for the excise duty on these products. The difficulty I have with what I hear from the Treasury Minister is that it is difficult to discern exactly what the Government are trying to achieve in this Budget.

Scotch whisky in particular is very important to the UK as part of our manufacturing base. Indeed, it is an enormously important part of our export portfolio. It is also critical for many of the most economically fragile communities that can be found around the highlands and islands of Scotland. I was born and brought up on Islay, and people will know the importance of the whisky industry, and in recent years the growth of whisky tourism to that economy. In my constituency we have Highland Park and Scapa. Occasionally other interests are declared, but we still have only two producing distilleries. They are very important to our local community, not just in relation to the jobs they provide directly, but because of the spin-offs—the visitor centre, the merchandising, and the visitors that those distilleries bring to the community. Whisky tourism is enormously important, and it is it enormously important that the whisky industry has confidence that the Government are on their side. I am afraid that the signals we have seen from this Government in recent months have been, if I am to be kind to them, mixed at best.

The Chancellor was right to say in December that there would be a freeze on duty. We welcomed that, as I am sure did others. Three months later, to then turn around and whack a duty increase on spirits in the region of something just north of 10%, makes us wonder what the Government are trying to achieve. When I was Secretary of State for Scotland, along with Danny Alexander, who was Chief Secretary to the Treasury, we argued successfully for a 2% duty cut. In 2015, the Red Book of the day said that that would bring with it a reduction in the amount of duty received and revenue brought in, but in point of fact we brought in more revenue with a lower level of duty than had been the case before it was cut.

If we are trying to do something that will bring in more money to the Treasury, surely a duty freeze, at the very least, should be on offer. Indeed, Treasury data illustrates the point well, because a recent history of cuts and duty freezes has actually had a beneficial effect on revenue brought in. For some reason, we now seem determined to introduce a duty increase that will have an inflationary impact, and for some of the most economically fragile communities in the country that will have the effect of stymying growth.

The position laid out by the Minister on sales of beer was exceptionally interesting. He will be aware that spirits account for one third of the serves of alcohol consumed in this country, but less than one fifth of the units consumed. On the other hand, beer has 60% of the units consumed but accounts for less than 50% of the serves. It is clear that the effect of this measure will be inflationary and have a detrimental effect on the economic growth that we are all supposed to be pursuing.

The Chief Medical Officer tells us that we should safely consume 14 units per week—I think I have read this correctly—per week. If we are to consume 14 units of cider, we pay £1.13 in tax. If we consume 14 units of wine, we pay £3.36 in tax. But if we consume 14 units of spirits, we pay £4.06 in tax. To put it another way, Scotch whisky, and spirits as a whole, are taxed 256% higher than cider, and 16% higher than wine.

It was presumably for that reason that the Secretary of State for Scotland is reported in The Scotsman as having argued against it. This was not some source quoted as saying that, but the Secretary of State himself. He said that he was disappointed the Chancellor acted in the way he did. I think we can all very much share the disappointment of the Secretary of State for Scotland. For the avoidance of doubt, I did let him know that I would be referring to him in the course of my speech. Our real disappointment, however, is that, having publicly disagreed with the Government on the matter, I have a strong suspicion that if it is put to a Division he will be in the other Lobby. It is all very well to wring your hands, but if, when the moment comes and the Division bells ring, you are not prepared to do what you know is right for such an important industry in Scotland in so many of our communities, then I feel we are, as politicians, failing in our duty to our constituents and those whom we seek to serve.

We heard a lot from the Minister about the harmonisation of duties, but the House has heard the truth of the matter. The position in relation to on-sales consumption of beer will widen the gap. It simply makes no sense. If the Minister can answer no other question when he comes to respond, can he answer this: what strategy are the Government seeking to deliver by bringing forward a duty increase in excess of 10%? I do not see it. It flies in the face of the Treasury’s own data and contradicts it. It is difficult to understand what the purpose of it is, other than simply an attitude that says, “Well, you’ve had it good for a few years now, so we’re going to treat you differently and it’s time for you to take some of the pain.” An industry as important as the production of spirits deserves rather better consideration from the Treasury.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

I rise in support of my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), who speaks for my constituents as much as he does his own.

I want to make two simple points. First, the distilleries in my constituency—I could name them all, but I have done that before in this place—are part and parcel of each community in which they are based, and they are important to the people in those communities. They see them as their own. As my right hon. Friend said, the jobs they provide in some of the most sparsely populated and economically fragile parts of Scotland are absolutely crucial. Inver House, a company that owns two distilleries in my constituency, Balblair in Edderton and Old Pulteney in Wick, sponsors the Wick Gala each year. As something that epitomises the culture of Caithness, I would honestly recommend that all right hon. and hon. Members come to Wick and see the Wick Gala—it is something they will not forget. That company is a part of it and makes it happen, which is incredibly important. In my own home town of Tain, Glenmorangie, now owned by the French company Louis Vuitton, has for a number of years pretty well paid for the Tain highland games. Again, I say to Members: come see them and enjoy. So the distilleries are a part of the community and what they do is crucial for the community. It is about rural jobs in sparse areas.

The second point I want to make to those on the Treasury Bench is about levelling up. Those are not the words I would have chosen, but it is a good concept to take parts of the UK that have lost out in the race and bring them up—giving them a leg up—to be equal to the richer parts of the UK. By definition, the areas where there are distilleries are very often some of the more hard-up parts of the Scottish highlands and of Scotland. If Government Members want to go about levelling up, they need to get into the parts of Britain that need help.

[Mr Carmichael]

As my hon. Friend says, these are often some of the more hard-up areas of the country, but the truth of the matter is that down the years they have contributed enormously to the GDP of this country and they have the potential to do more. We are not looking for any special treatment. We are not looking for any favours or handouts. All we are looking for is a fair crack of the whip.

[Jamie Stone]

That is an extremely valuable point. I would bolt on to it that we have new distilleries starting up. In John O’Groats, there is a brand new one called 8 Doors. These enterprising local Caithness people have done it off their own bat. To get tourists to go to John O’Groats, we have 8 Doors, which has done it along the coast of Caithness. We have Wolfstone—I think I have that right.

[Mr Carmichael]

Wolfburn.

--- Later in debate ---

[Abena Oppong-Asare]

As I mentioned, we have consistently raised concerns about the Government’s U-turns on the issue. We have scrutinised them and put forward recommendations, which the hon. Member will hear us talk about in further detail in the Public Bill Committee.

It is important that today the Minister lays out what measures the Government will take to support the sectors most affected by the duty changes, as well as what consideration the Treasury has given to the potentially inflationary impact of the increases. The explanatory notes to the Bill state:

“The commencement of changes to approvals will be announced at a later date.”

Perhaps the Minister could give some certainty to businesses by fleshing out some further detail today.

Clause 50 and schedule 8 set out measures for a new draught relief that will provide a reduced rate of duty on qualifying draught products. Clause 51 sets out the requirement that qualifying draught products be under 8.5% ABV and be packaged in containers that hold at least 20 litres and are designed to connect to a dispensing system. Clause 52 sets out the rules on the repackaging of qualifying draught products. Decanting from 20-litre containers into smaller containers will be prohibited unless the products are to be consumed on the premises at which decanting takes place.

Labour supports these measures, which will support and protect the hospitality sector, but our analysis has found that more than 70,000 venues have had to reduce their opening hours because of energy bills. I have seen that in my constituency. These are businesses that enrich our communities and boost our high streets, but they are being let down by the Government and many of these changes will come far too late.

I note that the draught relief has been designed in a way that will exclude the wine sector. Can the Minister explain why? Will he let us know whether the Government will introduce any other measures to support British wine and spirit producers?

Clause 54 lays out measures to replace the small brewers relief with a small producer relief. Clause 55 specifies that eligible producers will be those whose products have an alcoholic strength of less than 8.5% ABV and who produce less than 4,500 hectolitres of alcohol per year. The remaining clauses and schedules lay out precise measures for calculating rates of relief.

Labour introduced the small brewers relief in 2002 and is proud of the effect that it has had by supporting small brewers and creating a vibrant UK beer scene. We therefore support the extension of relief to other producers, but I note that that may not occur under the new scheme, as British wine and spirit producers are largely excluded from these measures. Perhaps the Minister could lay out why the scheme has not been further extended.

In conclusion, Labour recognises the need to simplify the alcohol duty regime while striking a balance between supporting businesses and consumers, protecting public health and maintaining a source of revenue for the Exchequer.

[Mr Carmichael]

May I take up the point about small producers? Deerness distillery, in my constituency, is a family-owned business that is seeking to move into whisky production. Surely, as a small producer in a market dominated by big corporates, it should be given the same opportunity to grow as a brewer. Why, in principle, should there be any difference in their treatment?

[Abena Oppong-Asare]

We, too, are concerned about that, and I have met various stakeholders in the sector who have highlighted their concerns. I hope that the Minister will take the issue on board in his response.

We do not oppose the clauses and schedules, but we want answers to the questions that have been raised, and, most important, we want certainty for the businesses and consumers who have suffered over the past few months and years as a result of the constant chopping and changing that the country has seen from various Conservative Governments.

[James Cartlidge]

Before I turn to the very good speeches that we have heard during the current debate, let me clarify a point relating to our earlier debate on the electricity generator levy. I mistakenly said that “private wire” was included in the levy, when of course I meant to say that it was excluded.

Let me begin by saying that I welcome the support expressed by the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) for the clause relating to devolved welfare payments. As for alcohol duty, the right hon. Member for Orkney and Shetland (Mr Carmichael) may not recall the debate that he initiated in Westminster Hall in October 2017, when I was a mere Back Bencher, but I was the first Member to intervene on his speech. All the others were Scottish. I intervened because a leading company in my constituency produces the bottle tops for the whisky trade. That, along with the East Anglian grain that is sent up to Scotland from time to time to help support the sector, underlines the fact that this is a UK industry, and a UK export. We are all proud of Scotch whisky and the role that it plays in our economy. However, I must say this to the right hon. Gentleman, and also to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone), who spoke with his usual eloquence and conjured up wonderful images. I understand the importance of the Scotch whisky sector, and we have supported it—in nine of the last 10 Budgets, we have either frozen or cut the tax—but the key point is that not introducing the RPI-linked increase would have a significant cost.

[Mr Carmichael]

The Minister is making our case himself, so presumably he will be joining us in the Lobby—as, indeed, the Secretary of State for Scotland should be doing—or else accepting my amendment.

[James Cartlidge]

I had never thought of the right hon. Gentleman as a cheeky chappie, but for that brief moment, he almost was. Let me now address his amendment 7. The Scottish National party Members have, very nobly, effectively withdrawn their amendments to ride on the back of it, which is perfectly fair: they seek, ultimately, to arrive at roughly the same point, which could be described as the protection of spirits, and Scotch whisky in particular, from the RPI-linked increase.

The proposal in amendment 7 would cost an amount between £1.7 billion and £2 billion. An overall RPI freeze would cost £5 billion across the scorecard. We have, of course, supported freezes in the past, and it was I who announced the freeze back in December. Members may recall the reason for that freeze: in view of the August reform, we did not want the sector to go through two separate alcohol tax increases. We supported the industry, but it is expensive, and with the public finances as they are, we feel that the responsible option is to introduce the RPI-linked increase—which, after all, is not a real-terms increase—but, nevertheless, to bring in the differential duty to support our pubs.

[Mr Carmichael]

rose—

[James Cartlidge]

I will give way to the right hon. Gentleman, for the last time.

[Mr Carmichael]

The Minister needs to look at the actual data relating to the revenue brought in over these years of cuts and freezes, because the story that it tells is very different from the forecasts on which he relies. He should remember that in 2015 the forecast was for a 2% reduction, but in fact there was a 4% increase. When will the Government become a bit more realistic about the effect of their own policies in this area?

[James Cartlidge]

I have to disagree with the right hon. Gentleman’s use of the word “realistic”. I have met representatives of the Scotch Whisky Association, whom I greatly respect, and they have said to me that if we freeze the tax we get the revenue. Unfortunately, however, the Government have what I believe is the very important and successful policy of using an independent body, the Office for Budget Responsibility, which makes forecasts independently for Governments on the effects of fiscal measures. [Interruption.] I hear voices behind me saying that they are wrong. The point is that the OBR is not a collection of soothsayers employed to predict, entirely accurately, exactly what will happen in the future. With the greatest respect to everyone, if that was the case, I suspect they would spend rather more of their time looking at accountancy of the turf-related kind rather than trying to forecast the national accounts. The point is that this enables us to ground fiscal events in a forecast of where we are at that time and the fiscal costs at the time, therefore adding credibility to the decisions we make and avoiding the easy situation where we do not have to make the difficult trade-offs that households and businesses know that, in reality, we have to face. If we want to cut one tax, we have to find the money from somewhere else. It is a good discipline.

Finance (No. 2) Bill

Alistair Carmichael Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

[The Financial Secretary to the Treasury (Victoria Atkins)]

I beg to move, That the Bill be now read a Second time.

Before I start the debate, Mr Deputy Speaker, I should declare, to avoid any potential conflict or perception of conflict, that due to a family member’s financial interests, I have recused myself from making ministerial decisions on issues relating to the soft drinks industry levy, which will be dealt with more than amply by my hon. Friend the Exchequer Secretary.

I start the debate by paying tribute to Betty Boothroyd, a groundbreaking Speaker of this House who commanded the Chamber with wit, good humour and gravitas for eight years. She developed a number of subtle and perhaps not so subtle tactics to control a rowdy House, including, I understand, yawning to hint that a speech had outrun the patience of the House. I will try, Mr Deputy Speaker, not to cause you to yawn.

Since the last Finance Bill in the autumn, 10-year gilt rates have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked. The Office for Budget Responsibility now forecasts that we will meet the Prime Minister’s priorities to halve inflation, reduce debt and get the economy growing. We are on the right track.

At the Budget, my right hon. Friend the Chancellor delivered the next part of our plan: a Budget for growth. He was clear that this Government’s focus is not just on encouraging growth as we emerge out of the downturn, but on building long-term, fiscally sustainable and healthy growth with businesses and, importantly, communities.

The Finance (No. 2) Bill delivers on those commitments. It takes forward measures to support enterprise and grow the economy by encouraging business investment and helping to increase the number of people in work. It legislates for announcements made at previous fiscal events, which take advantage of our opportunities outside the EU and reinforce our commitment to financial stability and sound money. It implements the tax measures needed to continue improving and simplifying our tax system, to ensure that it is fit for purpose.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

On fiscal events, the Minister will be aware that there was dismay in the Scotch whisky industry at the decision not to reverse the double-digit duty hike previously announced, while introducing a freeze on duty for what the Chancellor called “warm ale”. How is that consistent with the Government’s previously stated policy of reforming spirit duty to support the Scotch whisky industry?

[Victoria Atkins]

I am grateful to the right hon. Gentleman for raising that issue. I understand his concerns, and I will go into a little more detail later about the reasoning behind the restructuring of alcohol levies. In the last 10 fiscal events before this one, the whisky industry benefited from either freezes or cuts in duties. The Bill will bring into place the new framework announced some time ago, including the health aspect of being able to differentiate the strength of alcohol used in products—something that I suspect the right hon. Gentleman will want to engage with in his speech.

Let me turn to the substance of the Bill, starting with the measures to support enterprise and economic growth. Those of us on the Government Benches know that a strong private sector will grow the economy, spread wealth and prosperity across the country, help to invest in public services and support the most vulnerable in society. We recognise that central to these ambitions is private sector investment, so we are lowering business taxes to incentivise investment and tackle the productivity gap. My right hon. Friend the Prime Minister put that at the heart of his economic strategy as Chancellor, when he introduced the super deduction for corporation tax.

The next step in encouraging business investment is the full expensing policy announced in the spring Budget. The Bill introduces full expensing for the next three years. That means that for every single pound that a company invests in qualifying plant or machinery, its taxes are cut by up to 25p. That will put more than £27 billion back into the economy over the next three years. It is a corporation tax cut worth £9 billion, which the OBR has said will increase investment by 3% for every year that it is in place. It will also make us the only major European country with full expensing, and will give us the joint most generous capital allowance regime of any advanced economy, making the UK capital allowances regime the most competitive in the OECD on a net present value basis, and securing the UK’s position as a global leader.

--- Later in debate ---

[Victoria Atkins]

I am extremely grateful to the right hon. Gentleman for his question, which I interpret to be about energy-saving materials. I ask him to watch this space. I know how keen he and his colleagues in Northern Ireland are to ensure that we are able to bring forward those measures. I was hoping he would ask me a question that would give me the opportunity to flag my love for Bushmills whiskey—in a healthy way—but sadly I have been denied that.

[Mr Carmichael]

On that point, will the Minister give way?

[Victoria Atkins]

Crikey—if the right hon. Gentleman asks me to list my favourite Scotch whisky, we could be here some time.

[Mr Carmichael]

I am well up for that challenge. We know that the Secretary of State for Scotland argued against the increase in duty. One wonders what it was that the Minister found so unattractive in that argument; perhaps we will now get some of the answer. I do not know whether the Minister regards it as a detail, but when will we see spirit duty reform? Can she give us a date?

[Victoria Atkins]

As the right hon. Gentleman knows, I am bound by collective responsibility, so I can neither confirm nor deny what the Secretary of State for Scotland may or may not have said. I do not know, but I certainly intend to continue to support the Scotch whisky industry. [Interruption.] My hon. Friend the Exchequer Secretary to the Treasury reminds me that the changes will be coming in in August. We want to work constructively with industry on this.

Another opportunity is in delivering a better connected country. As announced in the autumn Budget 2021, the Bill delivers a package of air passenger duty reforms that will bolster air connectivity across the UK through a 50% cut in domestic air passenger duty. Set at £6.50, the new domestic band will benefit more than 10 million passengers from April. The reforms will also align with UK environmental objectives by adding a new ultra-long-haul band, ensuring that those who fly furthest and have the greatest impact on emissions incur the greatest duty.

The Bill will also take forward measures to support sustainable public finances, helping to provide the stability and confidence that underpin the economy and supporting businesses and households across the country. Despite energy prices having come down since they reached historic heights after the invasion of Ukraine, we know that many families and businesses still feel the strain. The only sustainable solution to the link between the cost of gas and the price paid by customers for all electricity is to reform the energy market and reduce the reliance on gas generation, so as we announced at the autumn statement, the Government are now legislating for a tax on the extraordinary returns of electricity generators resulting from the spike in gas prices driven by Russia’s illegal war in Ukraine. It is forecast to raise approximately £14 billion over the next five years, to help to fund public services and interventions to support households and businesses with increased energy bills.

To further ensure that businesses pay their fair share of tax, the Government will also legislate to protect the UK tax base against aggressive tax planning by large multinational businesses, and to reinforce the competitiveness of the UK; I know that this is a matter of interest to several right hon. and hon. Friends. The Bill will implement OECD pillar two in the UK, which builds on the historic agreement of over 135 countries to a two-pillar solution to the tax challenges of a globalised and digital economy. The global minimum tax—pillar two, as it is called by those who speak accountancy language—will ensure that multinational enterprises pay a minimum 15% rate of tax in each jurisdiction in which they operate, meaning that those companies operating in the UK contribute their fair share to sustainable public finances.

Energy Trilemma

Alistair Carmichael Excerpts

Thursday 23rd March 2023 Commons Chamber

[Dame Andrea Leadsom (South Northamptonshire) (Con)]

I beg to move,

That this House has considered the matter of tackling the energy trilemma.

I am grateful to the Backbench Business Committee and to the many colleagues from across the parties who have supported today’s important debate on tackling the energy trilemma. It is perhaps the most critical issue facing us today. Putin’s invasion of Ukraine highlighted the extraordinary pressure on the energy systems of countries right across the world, and also demonstrated the crucial importance of energy sovereignty. For us in the UK, although the risk to security of supply remains low, the Russian invasion has demonstrated as never before the importance of balance in tackling the energy trilemma.

We can think of the energy trilemma as being a bit like a three-legged stool. Its three equally important legs are first, keeping the lights on; secondly, keeping the cost of energy bills down; and thirdly, decarbonising right across the world. If we are to sit comfortably on that stool, all three legs must be in balance, and be given equal consideration. Achieving that balance is by no means easy. As chairman of the 1922 Back-Bench committee on business, energy and industrial strategy, I have, along with my hon. Friend the Member for Stoke-on-Trent Central (Jo Gideon), who is vice-chairman of the committee and is here, the noble Lord Lilley, the vice-chairman of the committee from the other place, and other colleagues from across our two Houses, been looking in detail at the practical steps that need to be taken to meet this enormous challenge.

The Government are, I know, already working hard to tackle the energy trilemma, but while they already have a great deal in hand, a shove here and a push there could make a huge positive difference in very short order to consumers, businesses and our decarbonisation efforts. In our recent report, “Energy Market Reform: Tackling the energy trilemma,” our committee made 34 recommendations. They include unblocking renewables; cutting energy demand; improving the flexibility of energy pricing; looking at the future of the energy price guarantee; and creating a new energy Department in Whitehall. I was very pleased to see that the Prime Minister came to the same conclusion on that last point, and created the new Department for Energy Security and Net Zero. I sincerely hope that we will be as successful with our other 33 recommendations. I am keen to use this debate to make the case for them to Ministers.

There is no doubt that the UK has been a world leader in deploying renewable energy projects, coming from almost a standing start in 2010. By 2020, solar and wind produced nearly 30% of the UK’s electricity—a tenfold increase on 2010. The UK is proud to have almost half the world’s offshore-deployed wind, all created under successive Conservative Governments—a great record of commitment that we can point to. However, renewable energy projects face increasing bottlenecks, including delays in the planning system, delays to grid connections, shortages in supply chains and a creaking electricity market design. In addition, there is an increasing risk of skills shortages as the deployment of offshore wind ramps up this decade. To tackle these problems, the Government should consider a number of measures that should already be in hand.

First, we should speed up the planning system by straight away implementing the new national policy statement for renewables, which has been good to go since 2011, and which would provide much greater investability. In particular, the concern over developers reserving grid connections and allowing years to pass without using them means that vital housing and infrastructure projects cannot go ahead because they cannot get a grid connection.

Secondly, the Government should consider officially committing to the development of an offshore ring main for offshore wind. Some projects are already sharing infrastructure, but clear guidance from Government would speed that up and make it much more acceptable to communities who do not want the huge onshore infrastructure currently being pushed onto their beaches and sensitive onshore conservation areas.

Thirdly, the Government could immediately issue direction on where new power lines should be located. Overhead lines are much cheaper, but less acceptable to communities. Underground lines, on the other hand, are potentially six times more expensive. There is a lack of clarity on policy in this critical area, particularly because independent analysis has concluded that, to meet our 2030 targets for electrifying our energy system, the National Grid will need to build seven times as much infrastructure over just the next seven years as we have achieved in total over the last 32 years—a huge mountain to climb.

Fourthly, although there has been progress on floating offshore wind projects, the Government should take seriously the evidence that floating offshore wind on Britain’s west coast in particular could strengthen our energy security, improving electricity resources in Northern Ireland as well as providing a hedge against low wind speed around other parts of the British Isles.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

The right hon. Lady is making excellent points. She served as Energy Minister, I think, and I am reminded that the best part of 20 years ago one of her predecessors as Energy Minister, Brian Wilson, was promoting the case for an interconnector to go down the west coast of the United Kingdom and through the Irish sea. That did not happen, essentially because of concerns in Ofgem about the danger of stranded assets. I think her idea is a good one, but does she agree that in order to achieve it there will have to be a fundamental rethink about the way we regulate the industry?

[Dame Andrea Leadsom]

The right hon. Gentleman is absolutely right; of course regulation, safety and considering the impact of potential stranded assets are vital. I do not think there should be any fundamental objections to expanding the use of interconnectors, but I am talking specifically here about floating offshore wind, which has huge potential but is not yet being deployed in the UK.

Fifthly, the Government should stop paying offshore wind farms in Scotland to switch off when it is too windy, which is already costing bill payers billions a year. Instead, we should look at piloting local electricity pricing, encouraging producers to work with business and consumers to use more electricity when it is plentiful and to reduce usage or use stored energy when the wind stops. That could be valuable for everyone, from Scottish citizens accessing cheap electricity when the wind is blowing to Cornish residents doing likewise when the sun is shining. Local electricity pricing offers transformational change that would make much better sense of the successful deployment of so many renewables.

One key recommendation made by the 1922 BEIS committee is on how to make these projects more acceptable to local communities. Local referendums and local compensation caused a bit of a stir when we announced them, but the idea has a lot of merit. In short, the report recommends that any proposed onshore wind, solar or shale gas extraction project should be subject to a local referendum on the basis of a simple majority. Where 50% or more of those who vote are in favour, the project can then go to normal planning considerations, but without the prospect of being overturned for lack of local support.

In return for the community accepting that limit on individual objections, our report proposes that local residents should receive free or subsidised energy bills for the entire lifetime of the project. That would have the effect of not only encouraging local communities, but forcing developers to think twice before locating renewables too close to sensitive communities because of the impact on the financial viability of their project. At the same time, bearing in mind the need for an urgent increase in the amount of electricity infrastructure, the committee recommends that the National Grid should be encouraged to build new pylons alongside transport corridors, and that renewables developers should be encouraged to locate alongside them, resulting in cheaper grid connections.

The second area of investigation in our report was how to cut energy demand. Every unit of energy that is not used is one that does not have to be generated. That reduces carbon emissions, cuts the cost of energy to consumers and to businesses, and improves our energy security—a genuine triple win. Ever since the committee’s first report in April 2022, we have been recommending a wide range of energy-saving actions, and I will highlight just a few of them.

First, boiler installers should focus not only on safety, as they do at present, but on efficiency. Every boiler installation should provide only sufficient power to heat that particular home or business, and the temperature gauge should be set at the most efficient level.

Secondly, the completion of the smart meter roll-out should be prioritised and the move to half-hourly pricing brought forward, to put control in the hands of consumers through smart tariffs. They could then choose to wash clothes, cook or charge their car when energy is cheap. Likewise, businesses could plan their energy use around cheaper periods. That could have a big impact on flattening the overall daily peaks in energy demand, with massive benefit for energy security and cost. It would then make sense to regulate for white goods to be smart as standard, to automate the way in which customers take advantage of cheaper price windows.

Thirdly, the report proposes that the Government should bring forward enforcement of the new homes standards and expand the energy company obligation—ECO4—scheme to insulate more cold homes, which would offer far better value for taxpayers than our current policy of subsidising heating for draughty homes. We also recommend that an organisation modelled on Home Energy Scotland should be introduced in England to provide better advice and support to households.

An area in which the committee feels that Government policy has taken a wrong turn is the energy cap itself. It was a well-intentioned policy to stop customers being ripped off by their energy supplier if they did not switch provider often enough, but the current energy crisis has exposed major flaws in the operation of the cap. The cap is below the true cost of supplying energy, so almost all customers are now on capped tariffs in addition to extremely costly additional taxpayer subsidies. That has killed the market for switching between energy suppliers, and has exacerbated the bankruptcy rate of energy suppliers. The report recommends, first, a thorough review of the energy price cap; secondly, that the green levies on energy bills be permanently moved to general taxation to take away some of the regressive nature of levies on energy bills; and thirdly, that a more targeted system for energy bills be introduced. One specific proposal that is worthy of consideration is a cap for basic electricity usage per household, above which households are exposed to the full unsubsidised costs of energy.

Fourthly, our report recommends a new requirement for energy suppliers to offer long-term, fixed-price energy deals so that consumers and businesses have the budgeting certainty that so many achieve through taking out fixed-rate mortgages for their homes or buildings. Fifthly, energy regulator Ofgem must shoulder much of the blame for supplier failures. Financial regulation of energy suppliers has been far too weak. The Government should direct Ofgem to implement banking-style financial stability requirements to avoid a repeat of recent history, whereby an energy supplier can make money when energy costs are below the cap but goes bust if energy costs rise above the cap, leaving all bill payers to pick up the tab.

--- Later in debate ---

[Ian Blackford]

Actually, I agree with those comments from the professor and from the hon. Gentleman. When I have been in Aberdeen and been out looking at some of the offshore technology there, it has struck me that there is that transferability—if I may call it that—of skills from the oil and gas sector. Of course, we need to make that happen.

But what I would say is that, if Skilling is right—and I believe he is—the scale of the opportunity goes way beyond the jobs that we currently have in oil and gas. We need to make sure that we have the research and development and the innovation right across the supply chain, and that we are utilising not just our higher education sector, but the further education sector to deliver people with the appropriate skills to do this. That is an enormous opportunity. Out of that, there is an enormous opportunity to make sure that we have an industrial strategy that is fit for purpose as well. I would be delighted if we had these kinds of debates more often in this House—if we were actually having detailed discussions about how we do all this. What do we have to do to make the planning system work in a way that is respectful to local communities, but recognises the need and desire to move ahead?

[Mr Carmichael]

On the subject of planning and the delays that are associated with it, I have no doubt that the right hon. Gentleman is aware that, in Canada, the time from consent to installation for a tidal device is around three years, whereas in this country, it is seven or eight. It comes down to something as simple as the fact that we do all the different impact assessments and the rest of it sequentially, when with a bit of imagination and creativity, they could all be done side by side.

[Ian Blackford]

I agree. The right hon. Member has made an important point. Often, the question is: how do we make sure we are protecting the rights of stakeholders and the rights of communities, while being able to do things at pace? What we have been talking about highlights the potential loss of technological leadership, because if we cannot do these things, we will not get that investment. In that context, let me go to the side a little, because I want to talk about one of the subsets of the green industry that has enormous potential for us.

We heard a comment earlier about nuclear and the opportunity to provide baseload. I have mentioned this in the House on a number of occasions, and I do not apologise for doing so again: there is enormous opportunity in tidal, and that has been demonstrated with the success we have seen with a number of projects. I encourage everyone in the House to examine a peer-reviewed Royal Society report published just ahead of COP26. It highlighted the opportunity of developing 11.5 GW of energy from tidal. If we look at the projects already developed in the United Kingdom, we tend to find that as much as 80% of that supply chain has been generated domestically. A number of the companies doing that are supplying equipment to such countries as France and Canada, as has been mentioned. There is a real danger that unless we recognise the scale of the opportunity, we will lose that leadership.

I am delighted that in the last contracts for difference round, the UK Government put in place a ringfenced pot of £20 million for tidal. That got us off to a degree of a start in fulfilling that ambition laid out in the Royal Society report. It was not as much as I would have liked. For us to fulfil that potential, we need to provide as much as £50 million annually, but I regret that over the past few days we have seen that that ringfenced pot will be cut to £10 million. I say to the House that we run the risk of losing this industry, and I appeal to the Government to revisit this issue. We can provide that baseload from tidal, as an alternative to nuclear energy. If we are ambitious about getting to that kind of scale in tidal, ultimately we will be providing that baseload on a more affordable basis.

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[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I congratulate the right hon. Member for South Northamptonshire (Dame Andrea Leadsom) on bringing this subject to the House. Her metaphor of the three-legged stool is a very good one. If we can move away from the immediacy of the problems, this debate allows us a few minutes to think about the issue in a more strategic manner. The point about the three-legged stool is that it works as a stool only if it has all three legs. If we take away any one of the three legs—affordability, security or decarbonisation—the other two will not achieve their purpose. The debate is often frustrating and ill served by false, binary choices. The point about a “trilemma” is that the choices that have to be made are about the balance of the progress we make on the three heads of the challenge, as well as the different means by which we seek to achieve them.

For years, to my certain knowledge, the debate has been bedevilled by easy options, and that remains true about some parts of the debate today. I remain to be convinced about nuclear, either in its own right or as a source of baseload, but sceptics like me have to then ask, “Well, where does the baseload come from?” From my point of view, there are enormous opportunities from developments such as tidal energy, which I will come on to as it matters a lot to me and my constituency. There is also the issue of storage and, beyond that, the flattening of the curve through supply-side and demand-side management. Again, it is all about balance. There is no silver bullet here; there is no one technology, area or direction of travel that will solve all our difficulties.

The right hon. Member for South Northamptonshire also spoke about local involvement in planning decisions. There is one other item that I would commend to her in terms of managing these issues: local benefit. Communities that are to have a wind farm, for example, have the opportunity to see some money coming back directly to their community, which makes an enormous difference.

In my own parish, we have a development of five wind turbines that provides a fund, which is administered by the local community council. My student sons have both benefited from that fund in terms of support given to them during their years at university. The support provided by such funds is small but meaningful. If we are to change the way in which we generate energy, from it being produced in large amounts in a small number of places to a much more diffuse pattern of generation, we have to find different ways of doing that.

[Dame Andrea Leadsom]

The Back-Bench committee proposed that individual households living very close to a renewable project should have their energy bills subsidised or free for the duration of that project, so I agree with the right hon. Gentleman but I think it should be even more direct than just a pot, as is so often the case.

[Mr Carmichael]

Absolutely. We make progress on these things incrementally, so if we can get to that situation that would be music to my heart and to the hearts of my constituents.

In Orkney, we already generate more energy from renewables than we can use in our own community. However, as the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) observed earlier, because of the way in which the market is regulated and structured, we actually pay more for it. That is something that generates not just energy, but an enormous amount of resentment in the community as well.

[Ian Blackford]

I congratulate the right hon. Gentleman on the progress he is making. There is a real issue about the disbursement of these funds because they are becoming particularly meaningful; it is a hot topic at the moment in Skye. We need to reflect on the powers that often lie with developers to make the determination as to how that pot is disbursed. We will have to be very careful across Government, here in Westminster and in the devolved Administrations, about setting the principles that have to be followed. If not, we will end up in a situation in which communities will, quite frankly, not get the benefit to extent that they should. We need to have effective governance in all of this to make sure that people are protected properly.

[Mr Carmichael]

The right hon. Gentleman is absolutely right. With a commitment to the principle from the top, everything underneath tends to fall into place.

There is another aspect of community benefits in which we may have missed a trick in Scotland recently. Although we missed out on a sovereign wealth fund, apart from in Orkney and Shetland, in the 1970s, there would have been an opportunity to generate more of a sovereign wealth fund from offshore renewables in the ScotWind round. We missed the boat this time, but I hope we can make up for it in future.

In many ways, Orkney and Shetland demonstrates the energy transition issues and the trilemma in microcosm: we have long, dark, cold winters, we have poor-quality housing stock and we are off the mains gas grid, so we do not have the same opportunities for access to cheaper heating as other parts of the country. The affordability element therefore very much matters to us. We generate more electricity from renewables than we can use for ourselves, but because of how the market was regulated until recently, when we finally got consent for a cable to the Scottish mainland, we have not been able to maximise the benefits. It is galling that although we are leading the way in decarbonised energy production, we end up paying more because we are part of a market that is regulated for the UK as a whole and that relies too heavily on the wholesale price of gas, as we are now seeing.

Let me just vent parenthetically for a second or two about the energy company SSE and its occasional choice simply to stop paying people who are entitled to feed-in tariff payments. I always seem to have at least one such case on the go among my constituency casework. Just last week, I was able to secure eventual, long-overdue repayment from SSE of £72,000 to one farmer in my constituency. That was money that SSE owed him and there was absolutely no reason for it not to pay, but for arbitrary and unaccountable reasons it seems occasionally just to decide to stop paying people. To my mind, that is an abuse of the privilege that it has been given by successive Governments.

Orkney is home to the European Marine Energy Centre, which is just about to celebrate its 20th anniversary. It has been at the forefront of the development of tidal stream energy generation; no doubt it could now play a similar role in the development of floating offshore wind.

Like other hon. Members, I was delighted to see the ringfenced pot in the round 4 allocation, but I share the concerns of the right hon. Member for Ross, Skye and Lochaber. That is not just me speaking; the UK Marine Energy Council, RenewableUK and Scottish Renewables have all reacted badly, so I hope that the Department is already thinking about how to maximise the opportunities by getting some of the money back.

With the synergy between oil and gas, we have been at the forefront of the country’s energy needs for 40 years now, and the development of offshore renewables is the obvious next step. When I speak to apprentices, as I did during National Apprenticeship Week last month, they tell me that although they are starting apprenticeships in the oil and gas industry, they fully expect to have transitioned to something different by the end of their working lives.

For the past 40 years, my constituency has been home to the two largest oil terminals in western Europe: Flotta in Orkney and Sullom Voe in Shetland, which provide a visual demonstration of the just transition. EnQuest, the terminal operator at Sullom Voe, is now working on projects involving hydrogen, carbon capture, use and storage, and offshore electrification of production. It is a visual illustration of transition, but again it shows just how ill served we are by binary choices. All the time, we seem to be told, “You can have renewables or you can have hydrocarbons, but you can’t have both.” That is dangerous nonsense. We have allowed production of oil and gas on the UK continental shelf to decline in recent years, and it has been to our detriment. It was never put in these terms at the time, but I cannot think why anyone ever thought it would be a good idea to rely on Vladimir Putin for the purchase of our gas and Mohammed bin Salman for the production of our oil when we have a rich resource on our own doorstep. As we heard from the hon. Member for Banff and Buchan (David Duguid), the production of oil and gas in the North sea or to the west of Shetland is much less carbon-intensive than importing it from other parts of the world.

The point, surely, is this: it is not an either/or. There is no route to decarbonisation and achieving net zero other than one that goes through oil and gas production. I do not want to see the future generations of my constituents working in oil and gas. I do want to see them work in renewables, but I think that that will be much more likely if we take a long, hard, clear-eyed look at what happens in the future with oil and gas production on our own continental shelf.

There are many other things that we should be doing, such as managing supply and demand and increasing the amount of storage and smart grid—something that offers great opportunities for those who can turn on their washing machines at the other end of the country using their smartphones, although I suspect that it would be a bit more challenging for the members of the community who would benefit most from opportunities of that kind.

The right hon. Member for South Northamptonshire has done us a great service in initiating this timely debate. I hope that its strategic aspects have been heard and understood on the Treasury Bench, and will be acted on.

[Several hon. Members rose—]

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I, too, congratulate the right hon. Member for South Northamptonshire (Dame Andrea Leadsom) on securing the debate. I must admit that I did not realise when she secured the debate that I would effectively be responding to a Tory Back-Bench 1922 committee report. It comes as an even greater surprise to me that I agree with the recommendations she has raised. She did say that there were 30-odd recommendations, though. She did not go through them all—I thank her for that—but I suspect that I would find some among them that I disagree with.

As I say, I agree with the right hon. Lady on the points that she brought forward. We really do have to unlock renewables, and I agree about the need to reduce demand. One way to do that is to increase energy efficiency installations; the Government must really ramp up action on that. One thing I would say to the Minister is that I am now getting feedback that the roll-out through ECO4 is not going as quickly as suppliers would like it to go; they are already behind on progress this year, so maybe we need to look at ways to target the right homes for energy efficiency upgrading.

The right hon. Member for South Northamptonshire obviously took credit for the creation of the new stand-alone Department for Energy Security and Net Zero. I welcome that new Department; to be honest, it was long overdue, but at least it now seems to have the right priority within Government. I also completely agree about the number of grid upgrades that will be required. We need much better forward planning, and it was certainly an eye-opener when she said that we had seven times the amount of infrastructure still to be built. There is no doubt that Ofgem has failed on that. National Grid ESO confirmed two weeks ago to the Business, Energy and Industrial Strategy Committee that it paid £4 billion in constraint payments last year. That is effectively £4 billion wasted that could have gone towards grid upgrades, storage or other mechanisms, and it shows how Ofgem needs to get a grip on the issue and allow anticipatory investment.

We need to imagine what the grid will be required to look like in 2050 and start planning for that now. I am concerned at the piecemeal approach that has been taken; even when the grid has been upgraded, we are building in future constraints already instead of putting in the right capacity. That will cost more money in the long run and block renewables from coming online.

I must say I also welcome the right hon. Lady’s conversion to referendums. She will find that on the SNP side we completely agree with the need for referendums, and I look forward to her support on that matter. I was also glad to hear her compliment the independent advice body Home Energy Scotland, and it would be good to see a completely independent body set up in England to give free and impartial advice and help people to get the measures required.

It is no surprise that I agree with the points my right hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) made. He is right that the IPCC report highlights the urgency to take action now, before it is too late. He also highlighted the fact that investment is relocating to the United States where there is momentum because of the Inflation Reduction Act. Meanwhile, here we have the electricity generator levy, but no renewables investment allowance. We really need to look at some form of that. My right hon. Friend obviously mentioned the Skilling report, the opportunity potentially to scale up to 80 GW of green electricity generation in Scotland and how important that could be in a just transition, creating 300,000-plus new jobs.

I also agree with my right hon. Friend on tidal stream. I have been trying to highlight the issues with the funding pot announced for AR5—it is definitely not enough money, especially with inflationary pressures. MeyGen in the Pentland Firth is the biggest tidal stream site in the world, but it has confirmed that it now faces inflation pressures of +50% on the AR4 strike rate that it bid against. The only way that that project can grow is if it gets to scale up through a bigger proportion agreed in AR5, and for that there needs to be a much bigger budget. I am pleased to say that the Exchequer Secretary to the Treasury has agreed to meet me next week, and I will certainly make the case for at least £40 million, which is what I have been asking for.

In a real twist, I agreed with the points made by the hon. Member for Banff and Buchan (David Duguid). There is no doubt that we will still be using oil and gas in 2050 and will still need to utilise them as an asset. As he rightly said, Scotland is a net exporter of oil and gas. In fact, it supplied almost 50% of the UK’s gas consumption last year and 75% of the oil.

When we talk about energy security, though, we must be realistic and accept that, while even a lower percentage increase in production for the North sea increases energy security, that oil and gas can be traded on the international market and does not necessarily come directly into the UK market. There has been a 30% reduction in oil refinery capacity in the UK since 2010, so even a lot of the oil for use in end products here has to go abroad to be refined and then come back. The security issue is not quite straightforward, but I agree that that is an asset we must continue to utilise.

[Mr Carmichael]

Will the hon. Gentleman give way?

[Alan Brown]

It will need to be very brief.

[Mr Carmichael]

What view does the hon. Gentleman take, then, of the Scottish Government’s current consultation on presumption against future development?

[Alan Brown]

There is no harm in consulting. We need to look at that and have proper climate compatibility checks—I think that is the right way to go about it.

I agree with the hon. Member for Banff and Buchan about direct air capture, which could, of course, play a role as part of the wider Acorn cluster, but I repeat that, with £20 billion announced for carbon capture and storage, it is disappointing that we are still waiting to hear any firm commitments on Acorn. The Budget mentioned a possible track 1 expansion, so can the Minister advise me on whether Acorn might be included in that this year, or will it rely on track 2? If so, when will we hear an announcement about the track 2 process?

The right hon. Member for Orkney and Shetland (Mr Carmichael) rightly mentioned the fantastic EMEC facility. I urge the Government to come forward with funding to replace EU funding and keep EMEC going. He said that he was not too sure about nuclear. My views on nuclear are well known, but I repeat that I am completely against it. Hinkley is costing £33 billion; Sizewell C will cost something like £35 billion. Think what we could do with that money in energy storage, energy efficiency and even grid upgrades. That £35 billion is just a waste of money. Sizewell C will not be constructed for 12 to 15 years, and there is not even one successful EPR project in the world. SMRs are being promoted, but there is not even an approved SMR design in the UK. Rolls-Royce tells us that it will somehow get them up and running by 2029, but that is a fallacy when the regulator has not even approved the design yet. At £2 billion a time, SMRs are not exactly cheap, and that money could be better spent elsewhere.

The hon. Member for Crewe and Nantwich (Dr Mullan) made a good point about the potential for geothermal, and I agree with him. We have a lot of former mineworking areas in Scotland and other areas of the UK, and they could be a place to start on the potential for geothermal. It would be good to see Government support for that.

The hon. Member for North Devon (Selaine Saxby) mentioned community energy, an effective Local Electricity Bill, and amendments to the Energy Bill. Certainly, I have been a supporter of the Local Electricity Bill. I would be happy to consider that on a cross-party basis when the Energy Bill comes to the House of Commons.

The hon. Member for Stoke-on-Trent Central (Jo Gideon) mentioned intermittency issues. Yes, we need to deal with them, but that can be done with pumped-storage hydro, which my right hon. Friend the Member for Ross, Skye and Lochaber mentioned. All that is required to get Coire Glas over the finishing line for final investment and approval is a green cap and floor mechanism for revenue stabilisation. Some £1.5 billion will be fully funded by SSE Renewables—no subsidy or Government guarantees have been asked for; just the revenue stabilisation mechanism.

The right hon. Member for South Northamptonshire made a good analogy, which everyone picked up on, and I agree with her, but although we are calling it the energy trilemma, we also need to look at it as an opportunity —the opportunity that comes with decarbonisation, green energy, new jobs, just transition and by bringing bills down in the long run. We have to grasp that opportunity to have a truly green renewable energy grid supplying homes across the UK.

Cash Acceptance

Alistair Carmichael Excerpts

Monday 20th March 2023 Westminster Hall

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

It is a pleasure to serve under your chairmanship, Ms Bardell. I thank the hon. Member for Linlithgow and East Falkirk (Martyn Day) for his presentation of the topic.

I declare an interest: I am a member of the Consumer Council for Link, which runs the national network of free-to-use ATMs. It also assesses the impact of banking closures and looks at what should replace them, whether it is a banking hub such as the one in Cambuslang, which the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) mentioned, or one of the alternatives.

The hon. Member for North Ayrshire and Arran (Patricia Gibson) and I are often in this Chamber discussing this very topic. When we were first here, almost three years ago, I made the point then the issues are twofold: acceptance of cash and access to cash. There is no point accessing cash if it cannot be spent, as she said; but here is no point accepting it in the first place if no one has it to spend.

This debate is not really about acceptance of cash; that is a misnomer. It is about who pays for our cash system. Is it businesses? Retailers do not get to keep every penny if people pay by cash, and the extra costs associated with handling cash and with the cash system are passed on to consumers. The financial services sector —everyone boos it quite happily—passes the cost on to account holders. Fundamentally, the cost of our cash system always ends up back with the customer. Tinkering with the intermediaries handling the cash and introducing new rules, as some have advocated today, will not change that fact, even if it makes for some media-friendly, savvy headlines in the Daily Mail.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

The hon. Gentleman makes a very good point. Nothing in life is free; eventually, somebody has to pay for it. This trend has been driven by Governments of all colours for decades. The most significant move towards a cashless society was the Labour Government’s decision to prevent people from being able to access pensions at the post office by handing over a pension book, and insisting that all pensions go into bank accounts. There will have to be a different culture in Government before they have the authority to lecture banks.

[Paul Maynard]

I take the right hon. Gentleman’s point, but I am not lecturing the banks on the basis of being a politician. I apologise if my approach today is technocratic, but I am not seeking to be political. The Minister can explain what the Government are actually doing on this front.

We have all had substantial lobbying on this issue. My inbox has been full of press clippings, videos of the hon. Member for Linlithgow and East Falkirk and so on. I am a little troubled by the emphasis on the compulsory acceptance of cash, and particularly by the suggestion that we should adopt something like the Spanish legislation that limits card payments to a €30 minimum. If someone wants to spend less than €30, they cannot use a card. That seems to be the very opposite of payment choice, and the cost would be passed on to consumers through higher prices. The cost to retailers comes in the form of driving further to deposit the takings at the end of the day. If they have to drive a long distance, they might have to close earlier to get to the post office or bank before it closes. That means they forgo income, so they might have to raise their prices.

In my constituency, the signs in shops saying “No card payments under £3” or, “No card payments under £5” have disappeared since the pandemic. That is progress; it gives people more choice. New technology, such as handheld card readers, has made payments both easier and cheaper, although I recognise that the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) might intervene to say that broadband is still not good enough in many rural areas to make such things reliable, particularly in the tourism sector.

Before people out there start to shout at me, let me say that I certainly do not believe that cash should be killed off and that the future is entirely digital—far from it. People will always need cash, particularly the financially vulnerable and marginalised in society. My constituency of Blackpool North and Cleveleys has eight of the 10 poorest neighbourhoods in the country, and I know that some people rely on cash to manage their income. Some are nervous about using technology; they may struggle to remember their PIN or manage their personal finances. They may be among the 1.8 million people who are still unbanked, relying on a jam-jar approach and monitoring pots of money for bills, which cannot be done with a card.

I was troubled by some of the proposals briefed out ahead of this debate. One suggestion was that in return for requiring businesses to accept cash, certain denominations of coin would be done away with—giving with one hand while taking with the other. That fills me with dread. Another suggestion was requiring “exact-amount services”, which is a euphemism for “rounding up”—something priced at 33p would be priced at 35p, for example. That would make no sense in the midst of a cost of living crisis. There is no mandate for it from the public, and it has no legitimacy in the eyes of consumers or, indeed, retailers.

The Minister is here to tell us what the Government have done, but I will make brief reference to the legislation on access to cash, which is entirely welcome. I would love him to talk about free access to cash, but I bet he will not—he has been disappointing me on that front for some time, so I will not hold my breath. I am also a bit frustrated that the policy statement explaining how we will guarantee access to cash will not come out until we pass the legislation, so we cannot judge how spot on it is, but he may be listening to me on that.

I have not heard many people talk about the notion of cashback without purchase, something for which the Government have legislated. It solved a long-term problem known as the £3.22 issue. Someone may want to take out a precise amount of money—they might not want £10 or £20 because they are managing their finances. They cannot take £3.22 out of an ATM, but they can now take out that amount from their local PayPoint in the newsagent without having to make a purchase. It is life changing for many people in areas such as the one I represent, but all the vested interests in this debate hate talking about cashback without purchase. They do not want people to know about it. They would far rather that the most vulnerable people in my constituency went down to a pay-to-use ATM.

The banks have produced some fascinating research into why people in the most deprived parts of this country often go to a pay-to-use ATM, which may charge £2 or £2.50 to take out small amounts of money, when they are actually very near to a free-to-use ATM. Understanding that strange behaviour is a real challenge for the financial services sector, and it is something that I find frustrating about this entire debate.

I commend the work of the access to cash review and Natalie Ceeney, who has done so much on access in recent years. Like her and the group, I believe that banking hubs are the way forward, but I also know from Link’s work scrutinising the impact of bank closures that the introduction of a banking hub is not the only remedy to bank closures. I think of post offices, ATMs, and deposit-taking “reverse” ATMs. I was doing my own private secretary work, as a sort-of pretend Minister, by checking on my phone what happened in Holt when Barclays closed; I understand that an ATM is now going to be installed. When I checked Axminster, I found that its residents are getting a banking hub—I am not sure when, but congratulations on that. I am sure they have heard how good it was in Cambuslang.

Many campaigners ask, “Is this enough? Are we going far enough and fast enough? Why aren’t they all open now? Why doesn’t a banking hub open the moment the bank shuts its doors?” but 38 banking hubs and 38 more deposit-taking ATMs have been announced so far, which is a pretty good first step. I would love things to move faster—that might stop the Daily Mail campaigning against banking hubs—but they are a rather new concept and certain legalities need sorting out. Indeed, in one case, they are still trying to remove asbestos from the preferred location. People who thought that the moment a branch shut a banking hub would pop up as a like-for-like replacement misunderstood the situation.

Campaigners set the bar so high that I think they will not be satisfied until they have a maternity unit included in the hub, as well as everything else—they almost seem not to want to win this battle that they have been fighting for so long. We need to keep the pressure on those introducing the banking hubs; we need to ensure that the pace of their introduction accelerates and that these initial hurdles are overcome, but I do not think we should talk down the idea of banking hubs because somehow they are not perfect.

I wonder if the aspirations are too high. I listened carefully to the House of Lords debate on the Financial Services and Markets Bill, in the special way that the House of Lords does it. Their lordships suggested in one amendment an obligation on banking hubs to have a representative from every single bank. That just is not feasible. Digital-only banks, such as Monzo and First Direct, offer a better service to customers because they do not have the overheads of a physical network. We would wholly undermine their business model if we were to insist that banks like Monzo suddenly have to recruit someone to physically exist in a banking hub. That makes no sense at all.

What the banking hubs should be used for is digital training and addressing financial exclusion. Someone mentioned decimalisation—I think it was the hon. Member for Linlithgow and East Falkirk. To me, a more pertinent example is the switch from analogue to digital television and the emphasis, training and preparation that went into that process, so that no one was left unserved when analogue was switched off. People knew it was coming and were helped through that process. I am not saying that cash will ever be switched off, nor do I want it to be, but we could learn from that process how we walk and talk people through it.

I want to make two final points. One is around deposit-taking ATMs. This may sound like a rather anodyne and technocratic point—I suppose it is—but not all ATMs are equal. Members may have heard me refer earlier to the challenges retailers face in having to go much further to deposit their takings at the end of the day. A deposit-taking ATM is fundamental to solving that problem.

The post office is not always the solution. My post office in Cleveleys is tiny, despite it being a town of 16,000; people queue out the door even when there are no financial services activities, let alone every time a bank branch closes and they have to start using the post office again. I was speaking to the postmaster of the nearest post office to where I live. I have been hearing worrying tales that local businesses are struggling to deposit cash because the banks are putting limits on the amount a business can deposit in any one calendar year, to the point that some businesses are having to shut down, simply because they cannot deposit the cash takings at the end of the day. I tell the financial services sector and all those banks that normally monitor what I say in this place that I am not happy. I expect an email tomorrow morning from at least one of those banks that are obsessed with everything I say. This policy is a real deterrent.

I end on a note of agreement, though, with the UK Cash Supply Alliance. I know I have been giving them a bit of a hard time in the debate. This is the most technocratic issue imaginable, but it is the cost of the hardwiring of our cash system. The wholesale distribution of cash remains far too costly—£5 billion to the economy overall—and there is far too much duplication. We have not seen the radical reform I believe was needed when the Bank of England set up the wholesale distribution steering group to try to find an alternative model. I fear that some in the cash distribution sector are defending their commercial turf under the guise of protecting customer interests. That is simply not good enough.

I had a fascinating trip to Vaultex near Warrington several years ago. Vaultex is one of the cash-handling and cash-distribution centres that covers the north of England. All our bank notes come in and come out of the centre. I have never stood near so much money in my life. There is absolutely no chance of getting in or out with it—it even has a special roof that a helicopter cannot be landed on just to avoid any shenanigans—but what I saw there was duplication after duplication. Every bank required their bank notes to be counted, stored and separated in a specific way; there was no attempt to rationalise the process. I sat there thinking, “If only more banks could agree to handle their money in the same way, it would start to reduce this £5 billion cost.” I do not know how that is going. I gather there were proposals for a public utility model that would help to bring it all together to reduce the costs, but it is such an opaque process. The Bank of England does not update the minutes on its website for this wholesale distribution steering group, so I know very little about what is going on, which is frustrating.

Reducing that £5 billion cost is the answer to what we have been discussing today, making it cheaper and more affordable for small businesses to keep taking cash. If that does not happen, we will have a problem. The best way to protect the acceptance of cash is not by penalising consumers with higher costs or penalising retailers by forcing them to raise costs, but by addressing the reason why retailers choose not to accept cash in the first place, which is about cost and convenience. We should reduce the cost of wholesale distribution, and make depositing cash easier with more deposit-taking ATMs. If we do that, we will start to tackle the vested interests which have hovered ghoulishly over this debate for far too long.

Energy

Alistair Carmichael Excerpts

Tuesday 7th March 2023 Commons Chamber

[Amanda Solloway]

I thank the hon. Gentleman for that question. With his permission, I will get back to him with the answer.

The pass-through requirement regulations are an important part of the support package and of ensuring that support reaches those who need it. The alternative fuel payment and non-domestic alternative fuel payment pass-through schemes set out in the regulations take the same approach as other energy schemes, particularly the energy bills support scheme and the energy bill relief scheme. They make it mandatory for intermediaries to pass the financial benefit of the schemes through to end users, which is necessary because that benefit is being delivered through electricity suppliers. In some cases, a supplier will have a contract with an intermediary such as a landlord or a heat network rather than with the end user, so we need to ensure that the support that it provides to the intermediary is passed on to the end user in a fair way.

Let me clarify what I mean by “end user”. In the case of both the alternative fuel payment and the non-domestic alternative fuel payment, an end user is an individual who consumes energy and pays for its usage through an intermediary such as a landlord. We are talking about tenants of different types—they could be domestic tenants, businesses or any kind of organisation.

Like other energy schemes, the schemes set out in the regulations require that support be passed on in a “just and reasonable” way. The regulations have been drafted in that way to account for the many kinds of relationship between an intermediary and an end user. If we used a narrow definition of “just and reasonable”, we could run the risk of inadvertently excluding some intermediaries from the pass-through requirements.

The regulations also accommodate scenarios in which there are multiple end users to whom intermediaries pass on support. They make it clear when and how intermediaries should communicate with end users regarding the benefit that is being passed on.

Our approach to enforcement is consistent with the approach taken in other energy schemes, particularly the energy bills support scheme in Great Britain. If an intermediary does not pass on the benefit to a user who is entitled to it, that user will be able to pursue recovery of the benefit debt through civil proceedings. Should a court rule in the end user’s favour, the end user will be entitled to the payment plus interest at 2% above the Bank of England base rate.

The Government have published guidance on gov.uk to ensure that the requirements are clear to all parties. If necessary, there are also template letters that tenants can use to contact their landlords if they are concerned about their energy bills. The Government are working with a wide range of stakeholders to ensure that the pass-through regulations work for everybody in scope, including vulnerable people and vulnerable groups.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is apparent from my constituency casework that there are people who have already received the payment through their energy company, but who probably should not have. I ask the Minister to confirm on the Floor of the House what she has told me in correspondence:

“Government will not require customers to repay an Alternative Fuel Payment which they have received, even if they use electricity to heat their homes.”

[Amanda Solloway]

As the right hon. Gentleman will know, I am very new in post, so I will check that point before I respond, if I may.

The regulations are vital to ensuring that support reaches the people it is designed to help. They are essential to the effectiveness of the alternative fuel payment in GB and the non-domestic alternative fuel payment across the United Kingdom. They will ensure that intermediaries pass on the support to those who really need it: the households and non-domestic energy customers most vulnerable to high energy costs. With all those important reasons in mind, I commend the regulations to the House.

--- Later in debate ---

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I declare an interest, as my home is off grid. We are heated by an oil-based central heating system, and I have received the £200 alternative fuel payment from my energy company, Octopus Energy.

The Liberal Democrats support this scheme but, like others, we have very serious concerns about the way in which it has been constructed and implemented. I have liaised with the Minister through correspondence and at Business questions last week on the fact that a number of people whose homes are heated entirely by electricity should not, on my reading of the regulations, have been given the alternative fuel payment, but on the basis of the modelling used by the Department, they have been given it. Others in an identical situation will now have to make an application through the portal that went live yesterday. If the Government are to implement their own regulations, those applications will be refused. That will leave us in the manifestly unfair situation whereby, for two households in exactly the same situation, one will be in receipt of the £200 payment and the other will not. The Minister has already told me in correspondence that there are no plans to claw back payments that have been made. That being the case, what will be the remedy for those whose application through the portal is refused?

I look at the information that has been put into the public domain on the way in which tokens for people on prepayment meters can be paid out, and I look at the information that has been given to me by my own energy company, and they both say that the tokens can be redeemed through PayPoint. That is true, but they can also be obtained through the Post Office. Only a handful of the outer islands in my constituency have access to PayPoint, but people can go to their local post office. The information going to the end energy user should surely reflect that.

One business in Orkney brought to my attention today the fact that it will not, apparently, receive the payment because it changed its energy supplier at the start of the year. It will not get the payment from its new energy supplier or from its former one, which, again, appears to be a fundamental unfairness.

The issue relating to district heating schemes does not affect many communities, but it very much affects Lerwick, where Shetland Heat, Energy & Power provides a district heating scheme to many local households. It appears to us that they have been excluded from the scheme. Will the Minister explain to us, either now or in correspondence, why that should be the case?

The applications that are now having to be made by those who have not received their payment automatically are to be done through the portal. So will the Minister tell us how long it will take for those people to be given a decision? In the event that they are unhappy with the decision made, what will be their appeal process? It is matter of record that there is a significant overlap between homes that are off grid and those that have poor or no internet access. A number of vulnerable elderly people just do not use internet services at all, but there appears only to be an online application process. Will the Minister explain to the House why no offline process—no paper-based process—is in place for that small number of people who remain highly vulnerable?

Finally, I turn to the issue of those who rely on solid fuel—peat, coal or logs—for their heating. It is now apparent that they will have to provide receipts. Those can go back to September, but someone who has been buying coal at their shop, perhaps in a small bag, every week since goodness knows when will not have kept their receipts. How are those people, who have incurred the expense, going to get access to this important payment? It is arbitrary to say that solid fuel bought only after September will be eligible for reimbursement. I know a lot of people who will buy solid fuel in the summer months because it is at its cheapest then. What will be done to ensure that those people, who are now being told that they should have been keeping the receipts from their weekly shopping since September, are not going to be excluded?

Will the Minister tell us how many payments have already been made? How many people will now have to make an application through the portal? How many does the Department estimate will remain off grid but will not receive a payment under this scheme?

Economic Update

Alistair Carmichael Excerpts

Monday 17th October 2022 Commons Chamber

[Jeremy Hunt]

I am absolutely delighted to give that assurance. It is a fundamental part of the Conservative philosophy that economic opportunity should be evenly shared across the country, and we accept that it is not at the moment.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

The chief executive of the Scotch Whisky Association made the point this morning that, time after time, freezes in spirits duty have delivered more revenue to the Treasury, contrary to all the forecasts from the Treasury. The Chancellor will know that that is correct, so why does he think that it would be different this time?

[Jeremy Hunt]

I will happily take that piece of wisdom away to the Treasury and ask them to relook at the figures, but I do not think that it is likely that they would have advised me to take the measures I took today if that was the case. I will go and ask them to look at it again.

Midas Financial Solutions Collapse

Alistair Carmichael Excerpts

Tuesday 22nd March 2022 Westminster Hall

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I beg to move,

That this House has considered the matter of the people affected by the Midas Financial Solutions collapse.

It is a pleasure, as ever, to serve with you in the Chair, Mr Stringer, and I am grateful to the Backbench Business Committee for allowing time to bring the matter before the House. I do so for a number of reasons, some to do with the people directly affected by the collapse of Midas Financial Solutions, but also because the case brings to us bigger issues that require attention and, potentially at some point, reform.

Another reason for bringing the matter to the House is that I know from my constituency casework that, bad though the situation around Midas Financial Solutions is, it is far from the only case. I have another such constituency case, although I will not refer to it as criminal proceedings are still live and it would therefore be improper to do so. However, the position of those investors in Midas Financial Solutions Ltd who took the legal action against Sense, the principal of Midas Financial Solutions, remains highly unsatisfactory.

Related to that position, it appears to me that the workings of the Financial Conduct Authority, and before it the Financial Services Authority, require close parliamentary scrutiny, particularly the inability to focus on the needs of the consumer, rather than the various other professional parties that come within its ambit. It is worth reflecting that, in this case—which forced the FSA to act in 2014, although it had been aware of much of it beforehand—it took until 2020 and court action by 95 of the investors for the FCA to apologise in writing. That illustrates the obstruction that seems to lie at the heart of much of the complaint handling by the FCA.

Finally, there are issues around the future pattern and shape of regulation. The law as it stands leaves us, effectively, with two tiers of protection, and I suggest that that requires to be addressed.

Today’s debate is the latest junction in a road that has represented six years of casework for me. I have been consulted with, worked with constituents who have lost tens of thousands of pounds—some have lost hundreds of thousands of pounds—and engaged with people throughout the north-east of Scotland, as well as Orkney and Shetland, as Midas Financial Services Ltd was based in Aberdeen. The managing director was Alistair Greig, who was convicted of fraud involving £13,281,671.25. For his role in the fraud, he was sentenced to 14 years’ imprisonment, which was reduced on appeal to 10 years. The fraud ran from August 2001 to October 2014.

The pretence at the heart of the fraud—that money was being placed in short-term deposit schemes with Royal Bank of Scotland for fixed periods—was essentially fairly simple, but this turned out to be, bluntly, a Ponzi scheme. We are not focusing on RBS today, but I will mention in passing that one of my constituents rather dryly observed that throughout the scheme RBS had demonstrated a quite remarkable lack of curiosity. The prosecutor at the trial said that Greig had used the funds from Midas Financial Solutions (Scotland) Ltd

“as his own personal slush fund.”

My constituents would prefer not to be named, as Shetland is a small community and it is not difficult to work out who has lost sums of this sort. I have worked closely with the group that organised and corralled the 95 investors to raise legal proceedings, and I pay tribute not just to my constituents, who have been dogged in their pursuit of the action, but also Colin Stewart, who was one of the main actors in bringing the group together.

We have to bear in mind that the sums involved are massive—tens or hundreds of thousands of pounds—and represent life savings or perhaps an inheritance. These are not investment bankers in the City of London who are just taking a bit of punt with last year’s bonus. These are massive amounts of money to the people involved, and it is money that none of the people to whom I have spoken could afford to lose. One of my constituents remains £80,000 out of pocket to this day.

I pay handsome tribute to some of the legal practitioners involved. Robert Morfee was the solicitor when I first became involved, and more recently it has been Philippa Hann, who has prosecuted the case for her clients in a way that reflects very well on the best traditions of the legal profession. My constituents have been very fortunate to have her on their side.

Alistair Greig operated as an appointed representative, which is a term of art, of Sense Network Ltd, a network of financial advisers. As I said earlier, this was actually a Ponzi scheme operated by Alistair Greig. The true nature of the scheme was eventually exposed by a whistleblowing notice in August 2014, leading to enforcement action against Midas and Mr Greig by the Financial Conduct Authority in September 2014. That investigation revealed that 279 members of the public had contributed £12.8 million to the scheme, but that only £379,000 remained at that point.

Proceedings were taken by 95 claimants against Sense as the principal and supervisor of Midas. They were unsuccessful both at first instance and on appeal, on the basis that it was held that the obligations of Sense for its appointed representative were strictly limited to the exact terms set out in the appointed representative agreement between them, which included which product providers Midas could use. Where Midas used a different product provider, that was held to fall outside the responsibility of Sense, despite the fact that the claimants were not made aware of that nor could they have discovered it from any publicly available source.

I want to labour this point for a second, because it is material. The FCA, and before it the FSA, made it clear in everything it ever said to members of the public that they should check the status of the people with whom they were doing business—there are online registers available for ready inspection. However, the truth of the matter is that whether or not the actions of the appointed representative are covered, as they should be by having a principal such as Sense Ltd, is something that someone coming in off the street to invest their money cannot know. Indeed, that ran to the very heart of the difficulties faced by those who invested with Midas Financial Services.

It was also disclosed in the course of the court proceedings that there were good reasons for Sense, the Financial Services Authority and the Financial Conduct Authority to know that Alistair Greig was dishonest and was not fit and proper to be registered and authorised by them. In fact, it was revealed that the Yorkshire Building Society had found him to be selling mortgages under false pretences. The management of Sense Network was aware of that but allowed Mr Greig and his firm to continue as an appointed representative of Sense Network.

The effect of the court’s decision was to create a two-tier system of protection for UK investors. The court upheld that the private contract between the principal and the appointed representative, not the publicly available information on the FCA register, defines the business for which the principal is responsible. Even though the customer would not know what the arrangement is between the principal and the AR, that arrangement will govern the acts for which the principal is responsible. As a result, the customer will be in the dark and potentially at risk—more so than if they had done business with the principal directly. Where the advisor is not an appointed representative but is directly authorised by the FCA, the consumer will be protected in relation to the business that it is permitted to undertake and which is listed in the publicly available register. If Midas had been directly authorised, the claimants would have been protected.

The judgment is relevant to any appointed representative acting outside its private agreement with its principal. The fact that the investment in this case was a Ponzi scheme is irrelevant to the decision that the judge made and the consequences for the general public. Any client of an appointed representative advised in relation to anything that falls outwith the agreement with the principal will leave the client without protection entirely, without their knowledge. In the Midas case, obviously the staff at Midas did not inform the claimants that the advice fell outside the agreement with their principal. One wonders whether they would have even understood the significance of it had they done so. The judgment now leaves consumers at the mercy of unscrupulous ARs acting in breach of their private agreement with their principal, for which the principal avoids liability despite the law providing for it to seek damages from the AR for breach of that contract. The principal can take action against the appointed representative, but the customer—the consumer—cannot.

As well as taking the court action, the claimants took a complaint to the FCA about the failure of its predecessor, the Financial Services Authority, to take steps to prevent Mr Greig from operating in the financial services sector. The process for authorisation requires a test to ensure that those accessing the public are fit and proper individuals. The test requires honesty, competence and capability, together with financial soundness. The regulator had three opportunities to identify Mr Greig as dishonest and to remove him from the industry before he was able to defraud it. The regulator did not uphold the complaints in respect of the first two opportunities, but it did expect that it should have taken further steps.

The judgment of the complaints commissioner overseeing the work of the FCA, which was published on 27 May 2020, is significant, and I want to draw the House’s attention to two parts of it. The first relates to section 348 of the Financial Services and Markets Act 2000, which details the policy on sharing information. The commissioner states:

“I have queried the FCA’s position on this, and it has explained that, while the general criteria by which decisions were and are made are not covered by s348, explaining how they were applied to a particular case is likely to involve breaching s348 because it may disclose confidential information received by the FCA.”

The protection in section 348 is all about protection for the FCA and those who are authorised, not protection for consumers. That is what I suggest requires some attention. The commissioner concluded:

“The view of section 348 is problematic, because it makes it hard to understand why the regulator has made decisions, and can lead to an erosion in public confidence. In your”—

that is, the claimants’—

“response to my preliminary report, you argued that you ought to be able to see any unpublished policies applying at the time in order to be able to respond. I have considerable sympathy with your point of view, but the fact is that for regulatory reasons the FCA considers that detailed policies of this kind should not be published. I invite the FCA to consider whether it might be more open about the historic policies of the FSA, but that is as far as I can go.”

As far as I am aware, it has never made any such explanation.

In relation to the information provided by the Yorkshire Building Society, the commissioner is blunt:

“I recognise that you—and many others—might be surprised to learn that the FSA considered that reports suggesting mortgage fraud should not necessarily be followed up. I was surprised when I learned this. The fact that a major building society felt it necessary to remove advisers from its panels because of concerns about their integrity might be seen as a good reason for the regulator to make significant further inquiries.”

That was information that went to the FSA in 2008. It did not act then, and did not act when further information was given to it in 2012. As a consequence, the activities of Alistair Greig were allowed to continue unchecked for at least six years. When Greig’s activities were eventually exposed, legal action was taken. Although the complainants were unsuccessful, it was held that there was eligibility as—I have lost the term of art; as a collective investment scheme, which would open the door to compensation under the Financial Services Compensation Scheme.

Most of those who suffered loss as a consequence of the activities of Alistair Greig were able to avail themselves of that, and many have been compensated in full. The fact is, however, that that route only came to light as a consequence of the legal proceedings that were taken by Colin Stewart and the 94 other investors. They would never have been able to make that claim to the FSCS, but for the fact that they took the court case, even though that was ultimately unsuccessful. The 95 are still out of pocket to a collective tune of £2 million in legal fees. My constituent has been left with an £80,000 shortfall for the money he invested. It seems wrong to me that, even where the FCA is entitled to make ex gratia payments, for fairly opaque reasons in this case, it has refused to do so. I call on the FCA, and hope the Minister will also use his office to impress on it the unsatisfactory nature of that.

Quite apart from the legalities, if the FCA acted so badly and inadequately that it had to issue a letter of apology in June 2020 to the people who had invested, but will not do anything to make good the losses sustained by my constituents and others in exposing conduct, which the FCA should have exposed, something has gone badly wrong. It is in that sense that the House should now have an interest.

It is clear to me from my dealings with Midas and other cases that the regulation of the financial services sector is enormously complex—far too complex for people entering the sector in good faith, with no experience or understanding of how it works—and it is not consumer-friendly. It is focused on protecting those charged with its regulation and the bodies that are regulated, rather than the consumers, who will ultimately be left out of pocket when it all goes wrong. That is what has happened with Midas Financial Solutions, and that is something that the Government now need to consider with some urgency.

We have spoken elsewhere in the House about the attitude that fraud is somehow a victimless crime—it is not as direct as housebreaking or crimes of violence. My constituents who are tens of thousands of pounds of their savings and hard-earned cash out of pocket would not agree with the assessment that fraud is a victimless crime. We pay the Financial Conduct Authority a lot to regulate, and we deserve better.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

Just to clarify, the right hon. Gentleman said that the legal costs were nearly £2 million, whereas the figure I found was £1.5 million. Is he contesting the official figure or does he have further information?

[Mr Carmichael]

I was given the figure by my constituents—of course, it was a collective action. Even if it was £1.5 million, it is still chunky money in terms of being left out of pocket and it still hits particularly hard. There is the financial and also the emotional cost to those who had to take the action to make the FCA do its job.

[Tulip Siddiq]

I absolutely agree with the right hon. Gentleman: it is a chunky figure, regardless of whether it is £1.5 million or £2 million. I just wanted to clarify whether he had additional information that I had not received. I thank him for his answer.

[Mr Carmichael]

I have struggled this morning to resist the temptation to be drawn down into the weeds. I have had six years of dealing with this matter. The complexities, technicalities and minutiae are incredibly involved. I have learned more about the regulation of financial services than I would have believed possible or desirable, but the message for the House is fairly clear: the system is not working. It has left my constituents and others significantly out of pocket. But for the fact that they were prepared to take legal action, every one of the 279 investors would have been out of pocket. For that reason, the system requires further scrutiny by the Department.

Mr Stringer, I have taken rather longer than I intended. I await the Minister’s reply with interest.

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Stringer, for allowing me to speak on this issue. I congratulate the right hon. Member for Orkney and Shetland (Mr Carmichael) on bringing it forward. As always, he set the scene very well for his constituents, who have lost out, and he was passionate in asking for answers to the questions he put forward. It is pleasing to see the Minister in his place. He always comes with a positive attitude to these issues. He understands them well and we look forward to his response. Hopefully, he can address some of the issues we have.

It is also a pleasure to see the shadow Minister, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), in her place. Like others, I want to put on record my thanks to her for her hard work and endeavours to bring home her constituent, Nazanin Zaghari-Ratcliffe, and others. That campaign has been marvellous. We all admire the hon. Lady very much, and we see her perseverance. If she is adding her weight to this debate, I am sure that will be enough to push it over the line— no pressure on the Minister. Again, I thank her so much.

The case of Midas Financial Solutions is disturbing to the extreme. My heart goes out to all those hard-working people who trusted a financial adviser and have lost their money. That was very well illustrated by the right hon. Member for Orkney and Shetland. From a 22-year-old to two people who have died, there appear to be almost 200 victims. Some of them lost a few thousand, but that was all they had. Those people invested thinking that it would make their money last for their old age. Unfortunately, it did not. Others lost almost £500,000. I have a number of questions for the Minister, but one is whether the families of those who died get compensation?

The sheer scale of the Ponzi scheme is mind-boggling, yet the shortcomings and the evidential base are well documented. People are out of pocket. In debates on other issues, the Minister has tried hard to respond, but we need to ensure that the investors who are most out of pocket—I think 95 is the final figure—can be reimbursed. What can be done to ensure that lessons are learned from what we are bringing to the attention of the Minister and the Government?

When I read the background to the case, one thing became glaringly obvious: the FCA managed to wash its hands of the entire scheme until a judge in the civil case underlined the fact that this was truly an investment scheme and therefore should be accepted into the Financial Services Compensation Scheme. Why did it take a civil case to bring this within the FCA scheme remit? What steps do we need to take to ensure that this does not happen to anyone else and that people can access the scheme, which is designed to help, without having to fund a civil case? It is not always possible for ordinary folk who have already lost the bulk or all of their moneys to pursue a legal case. They must feel frustration; they look to the Government and the system to protect them and to ensure that their investments are okay, ever mindful that there are some in this world who would take advantage of people trying to build something for their future.

My next point runs on from that. It is grossly unfair that those 95 people must pay from their limited recoup to cover legal fees of £1.5 million—or perhaps £2 million, as the right hon. Gentleman said.

[Mr Carmichael]

I can actually give the hon. Gentleman the figure now: it is £1,903,619.92.

[Jim Shannon]

There we have it. The hon. Member for Hampstead and Kilburn and I now know that the figure is £1.9-odd million in legal fees. They will pay that out of the same amount as those who did not pay into the court case will receive. We can understand the frustration of those who paid for these things to be chased up, given that others have the advantage of not having paid. There is an anomaly. Some lost out, but the legal fees then follow. Surely, the public purse should have paid, rather than people who have already lost every penny of their savings.

The head of a regulated company unscrupulously and fraudulently stole millions of pounds to furnish his lavish lifestyle. His own wife has been instrumental in helping the victims, and that is one of the good things that has come out of this, but her husband stole from his customers. Why has the body set up specifically to look into these things been so behind the door in fulfilling its role? How can we ensure that this loophole is removed so that people have full help and assistance in future? There are lessons to be learned that we can use for the future. We need to ensure that people who invest in these pension schemes do not find themselves out of pocket when the time comes.

The background article I read in The Courier highlighted the fact that the warning signals regarding this man were ignored or overlooked by the FCA. If they had not been, that may have prevented more people from being duped. What is being done to prevent these things from ever being overlooked again? People want the assurance and the confidence when they invest that the company they are dealing with is safe and secure. What has been learned by the Government and the Minister? What legal measures will be put in place to ensure this does not happen again?

I conclude by thanking the right hon. Member for Orkney and Shetland for bringing the debate forward. It is important that these issues are debated in Westminster Hall or the main Chamber. The right hon. Gentleman has been involved in these issues on behalf of others in the past, and we have spoken in many debates together. Our job is always to illustrate examples where, unfortunately, things have gone wrong, but I respectfully say to the Minister that his job and that of the Government is to ensure that these things do not happen again.

Through the debate, we are seeking not only to get justice for the right hon. Gentleman’s constituents and hundreds of others who have lost out, but to ensure the Government close the gaps in support for victims and in the regulation of the system. What has been done legislatively to ensure this does not happen again? This failing has ruined the lives of hundreds of people, when it could have been prevented. It is turning some people’s comfortable retirement into purgatory, and we must address that now.

--- Later in debate ---

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

It is a privilege to serve under your chairmanship, Mr Stringer, and I join others in congratulating the right hon. Member for Orkney and Shetland (Mr Carmichael) on securing today’s debate.

Before I get into the matter at hand, I want to acknowledge the role that my opposite number, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), has played over the past six years in championing the case of her constituent, Nazanin Zaghari-Ratcliffe. We all have constituents in need, but the hon. Lady’s consistent advocacy has been very effective, and I want to pay tribute to her publicly.

In acknowledging that this is an extremely challenging case, which has caused great misery to many investors who were misled, I recognise, too, the broader context of a financial services sector that is a great success in this country. However, the debate and the points made in it have raised a number of issues that I want to respond to specifically. If hon. Members are patient, I will get into the mechanics of the authorised representative regime, how it is working and what lessons we learn from this.

Fraud is a crime that damages trust between individuals and across society—I would say it casts a shadow across the economy—and tackling it is a priority for the Government. Our efforts are focused on reducing vulnerabilities, catching the criminals responsible and supporting the victims of these despicable crimes. As the hon. Member for Strangford (Jim Shannon) said in his welcome remarks, those crimes cause considerable distress to individuals and have a catastrophic effect on families and communities.

We are working closely with industry regulators and consumer groups to consider additional legislative and non-legislative solutions. I will say more about that in a moment, but first I will set out the Government’s position on this specific case. As hon. Members no doubt appreciate, there are limits to what I can say, but Mr Alistair Greig perpetrated a large-scale fraud over several years, much of it accurately depicted by Members this morning. He lied to those who trusted him with their pensions and life savings, and caused enormous suffering.

Midas was founded by Mr Greig in 2006 and it carried on a financial advisory business based in Aberdeen. In 2007, it became an appointed representative of a firm called Sense Network Ltd, and the Treasury understands that much of its business was mortgage advice. Mr Greig used his senior position in the firm and its relationship with Sense to convince his clients that he was investing their hard-earned money in high street accounts with RBS.

I want to pick up the point made in passing by the right hon. Member for Orkney and Shetland on the culpability of RBS. In all these tragic cases, it is incumbent on all parties to examine their processes. I think the right hon. Gentleman mentioned that RBS had—

[Mr Carmichael]

A lack of curiosity.

[John Glen]

A lack of curiosity. I cannot know whether that is the case, but I say as a Minister that it is important that every business reflects on its responsibilities in cases of this sort.

Clearly, what Mr Greig said about where he was putting that money proved not to be the case. Instead, he was operating what we can all acknowledge was a Ponzi scheme. It went well beyond the scope of Midas’s appointed representative arrangement with Sense, the principal firm, and accepted deposits without proper authorisation. Instead of investing on behalf of clients who had trusted him with their savings, he transferred the money to his personal account and used it to fund the lavish lifestyle that has been spoken about this morning. His fraudulent activities were halted only when the Financial Conduct Authority intervened in 2014, following contact with a concerned investor. When the FCA became involved, the scheme included 279 members of the public, whose investments have not been repaid. They had paid £12.8 million and were owed a total of £13.6 million. Following the conclusion of a legal case involving some of the investors and Sense, the Financial Services Compensation Scheme declared Midas to be in default, following which the scheme was able to start accepting claims from investors and begin paying compensation to eligible claimants.

Although I am pleased that the scheme was uncovered and stopped by the FCA and that the FSCS has been able to compensate for a significant proportion of what was lost, I recognise that the scheme will have caused great pain to those involved, and I condemn unreservedly the actions of the man responsible. In seeking to understand the case, it is worth while for me to unpack the appointed representatives regime, which has been mentioned by the right hon. Member for Orkney and Shetland and others. It is the key policy area that is thrown into focus by this case.

As Members will know, under the UK’s regulatory approach to financial services, a firm must be authorised by either the FCA or the Prudential Regulation Authority in order to carry out a regulated activity. Authorised firms can also appoint other firms to act as appointed representatives for certain regulated activities, but it is worth noting that deposit taking, which Mr Greig was carrying out, is not an activity allowed under the regime, and I will say more about that in a while. In such relationships, the authorised principal firm must ensure that its appointed representatives are complying with all relevant regulatory requirements set out by the FCA. Mr Greig was a director of Midas Financial Solutions, which was a firm that was permitted to carry out the regulated activity of providing investment advice because it was an appointed representative of Sense Network, a financial advice firm that is authorised directly by the FCA.

The FCA’s investigation found that Mr Greig deliberately concealed his fraudulent operation from Sense Network, the firm that had regulatory responsibility for Midas. Unfortunately, all firms—whether directly authorised or appointed representatives—can be susceptible to individuals deliberately acting in a fraudulent manner, which is what happened. It was a shocking case of fraud. Greig was operating a scheme for which his firm was not authorised, and he hid the scheme from Sense Network.

[Mr Carmichael]

I have a question that I hope the Minister will answer in the next sentence or two. How would any individual investor know the extent of the authorisation and the relationship between the principal and the AR? This does not conform to any other aspect of the law of agency.

[John Glen]

I hope I am coming to that point. The right hon. Gentleman addresses the core point, which is about the comfort that the appointed representative regime provides to the consumer, and the Treasury and FCA are taking steps to ensure that use of the appointed representative regime is not open to abuse.

The relationship between a principal firm and the appointed representatives, including what regulated activities it covers, should be available to the public. That is now a regulatory requirement, and the FCA is taking steps to improve the information that is available to the public by clarifying what the appointed representative firm is authorised by the principal—in this case, Sense—to undertake and what it is therefore not authorised to undertake. That will give consumers clarity on what activities they can legitimately discuss with the appointed representative firm and ensure that they know there is regulatory oversight.

As we know, Sense was not found to be at fault in its role as a principal, as Mr Greig was acting outside the Sense-Midas agreement. The right hon. Member for Orkney and Shetland has spoken about the role of the principal, and the hon. Member for Hampstead and Kilburn asked what the Treasury is doing about this issue, following the Select Committee report last summer. We are undertaking a review of the appointed representative regime and examining how consumers are protected when dealing with an appointed representative and not directly with the authorised firm.

On 3 December, we published a call for evidence on the regime as a whole. At the same time, the FCA published a consultation paper on proposals that will strengthen the oversight that principals have over their appointed representatives, or ARs, and the information available to consumers on the FCA register when dealing with these firms. That call for evidence is essentially gathering information from interested parties and it closed a few weeks ago on 3 March. The Treasury and the FCA are working together to consider the responses, and to set out the next steps in due course and as urgently as we can.

I will also speak a little bit about the role of the FCA, which, as the House will be aware, is an independent regulator, and of the Financial Services Compensation Scheme. The FCA took steps to investigate Midas and Alistair Greig in relation to the activity of accepting deposits without the necessary authorisation and subsequently referred the matter to the police, who launched a successful criminal investigation. The FCA took civil action to stop the activity and obtain compensation for victims, securing agreements to repay over £1.3 million in October 2015. As a result of the proceedings, the FCA recovered approximately £380,000, which has been distributed to victims. Mr Greig was charged by Police Scotland and sentenced to 14 years in jail in April 2020 for fraud.

Although the FCA took action and the subsequent police action led to Mr Greig being prosecuted and sent to prison, I acknowledge the point made in the complaints commissioner’s report that the Financial Services Authority, which was the predecessor to the FCA, should have taken more action, more swiftly and more effectively. It is right, therefore, that the FCA, the successor organisation to the FSA, apologised for that.

Let me just say something about the Financial Services Compensation Scheme, which is the UK’s compensation scheme of last resort. It pays compensation to consumers when authorised financial firms fail and a relevant regulated activity has been undertaken. The FSCS carries out its compensation function within the rules set by the FCA and the PRA. The FSCS first became aware of claims against Midas in December 2019, when lawyers representing claimants approached the FSCS, and it declared the default in March 2020. By August 2020—so, just a few months later—it had processed 197 claims and paid out £9.6 million in compensation.

In order to aid investors claiming compensation, the FSCS, using data collected by the FCA, was able to pay compensation to 175 investors without those investors actually needing to make a claim. It also ran a media campaign targeting the Aberdeen area to ensure that all investors were aware that they could claim compensation from the FSCS, recognising the sensitivity with respect to named constituents that the right hon. Member for Orkney and Shetland mentioned.

On that note, I will take this opportunity to say that the FSCS is still accepting claims against Midas, so I encourage anyone who thinks that they may be eligible to get in touch with the FSCS. Some Midas investors brought a claim against Sense as Midas’s principal, which is the point the right hon. Member made, and I understand that some of those investors are disappointed that the compensation they received from the FSCS did not cover their legal costs.

As set out in the FCA’s rules, the FSCS covers losses suffered by a customer caused by the firm in connection with its regulated activities. It does not, however, extend to covering legal costs in pursuing a regulated firm, especially where the firm is not even a party to those legal proceedings.

[Mr Carmichael]

I am grateful to the Minister for giving way; I see that he is on the last sheet of his speech and I think that we are coming to the very heart of the matter here.

Access to the FSCS was only an option because of the action taken by the 95 against Sense. Quite apart from that, the FCA has a power to pay ex gratia payments. It has not done so, even though it has apologised for the shortcomings in the actions of the FSA. This point was considered by the Commissioner, who declined to order an ex gratia payment, drawing a parallel with damages and saying it would

“clearly undermine Parliament’s intention to provide the regulator with some protection”.

What is more important to the Government here? Is it providing the regulator with protection or the consumers with protection?

[John Glen]

The Government work closely with the FCA. As I have said, we are taking very seriously the implications of this case and the relationship between the principal and the appointed representative, as well as the apparent lack of clarity over what consumers know to be covered by that delegated authority of the principal to the appointed representative. The right hon. Gentleman is referring to the relationship between two entities: the FSA and the FCA. The FCA acknowledges the FSA’s prior failings to do the job as it should have. The right hon. Gentleman is asking me to comment on the eligibility of the victims to access the FCA compensation scheme, which is clearly something that is governed by its protocols. I hope we can learn from this very sad case that, going forward, we will bring more clarity to the appointed representative regime and more clarity to consumers. Of course, consumer care is important.

However, we also have to recognise that the FCA is responsible for around 51,000 authorised firms. Of course, the role of some of those authorised firms in acting as sponsors for appointed representatives needs examination: as I have set out, the Treasury and the FCA are undertaking that. It would be pretty impossible for every appointed representative to undergo the same sort of supervision as an authorised firm—that would expand the scale of the FCA’s responsibilities. We have to make sure that authorised firms’ responsibilities to their appointed representatives are more effective.

I think that I have expressed with clarity that this has been an extremely challenging case for everyone involved. I acknowledge unequivocally that Mr Greig’s fraudulent scheme will have caused great misery to the investors he misled, and it is absolutely right that he was brought to justice. I am pleased that so many of those who made losses have been compensated by the FSCS, and I hope they can now put it behind them.

The Government are not complacent about this. I have gone into some detail about the lessons that we need to learn. We will work alongside other financial authorities to counter fraud and ensure that cases such as these are prevented wherever possible and that, where they do occur, they are dealt with appropriately.

It will always be the case that the Government will need to work with regulators to create an environment that protects consumers while allowing firms to operate. What we have to do—and, since the new chief executive came in about 17 months ago, work has been going on urgently at the FCA to do this—is to undertake a transformation programme to allow the FCA to examine risks across the authorised firms and act more effectively than its predecessor organisation, the FSA, did in this particular case. I hope that is helpful to the House this morning.

[Mr Carmichael]

It is more than 20 years since I left legal practice, no doubt to the relief of many. The further I get from it, the clearer it becomes that we should never confuse law with justice. It seems that we have exposed some fairly fundamental points here today. The system of regulation has been inadequate, which is why the Government now speak about changing it. The actions of the Financial Conduct Authority—the body set up by Parliament to protect consumer interests—have been woefully inadequate; that is why it has apologised. The people who have paid the cost of the inadequacy in regulation and the conduct of the body set up by Parliament are not Parliament, the Financial Conduct Authority or the taxpayer, but the constituents who were defrauded in this way.

The intention of Parliament was clearly that people should be protected from this sort of behaviour and, if they were not protected, for there to be some compensation. The Financial Compensation Authority has wriggled like worms on the end of a hook for years over this, continuing to deny any responsibility or liability. I think that is wrong, and our constituents deserve better. The limited compensation that people have received was only given because of the actions taken by the 95 claimants. It strikes me that there are very strong parallels here with the sub-postmasters and sub-postmistresses who took legal action to expose the scandal around Horizon.

At the end of the day, it is a question of not only law or justice, but the culture and the relationship between the citizen and the state. I am afraid that, as things stand, the citizens are being short-changed by the state, and that is not something with which we as parliamentarians should be satisfied.

Question put and agreed to.

Resolved,

That this House has considered the matter of the people affected by the Midas Financial Solutions collapse.

Cost of Living Increases

Alistair Carmichael Excerpts

Wednesday 16th March 2022 Commons Chamber

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

The hon. Gentleman is right to draw attention to the price cap, but even before that consumers across the country are facing massive increases in the standing charges, something for which there should be no link to the cost of energy. It is reported that this is because we are having to fund the supplier of last resort as a consequence of the failure of the small energy companies; does the hon. Gentleman share my sense that it is wrong to expect consumers to pick up the tab for what is essentially a regulatory failure?

[Stephen Flynn]

I welcome the right hon. Gentleman’s intervention and he is absolutely right. The Minister for Energy, Clean Growth and Climate Change is present and I am sure he will address those remarks if he comes to the Dispatch Box later, as I see that he will.

It is not just the money towards the council tax rebate that the Government have put forward, of course, because they have gone so much further: they have given people a buy-back loan for their energy bills—buy now, pay later. That is the best they can do in this time of crisis, and of course that was predicated on the basis that energy prices would reduce over time but the situation has changed and many experts and analysts now suggest that is not going to happen. So the Government need to get real on this matter.

Rebated Fuel Rules: Construction Industry

Alistair Carmichael Excerpts

Wednesday 19th January 2022 Westminster Hall

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is a pleasure to serve with you in the Chair, Mr Bone. I congratulate the hon. Member for Upper Bann (Carla Lockhart) on securing today’s debate and putting her case so succinctly and clearly. This day, I suppose, was always going to come. The Treasury and HMRC have always hated the idea of red diesel, and they have come for it in different ways over the years. There was the removal of its use in pleasure boats some years ago; now we have the removal of the entitlement for its use in construction. The hon. Lady spoke about the crossover between construction and agriculture. That is a feature in my constituency and, I am sure, in many other rural parts of the country. That there are no good answers to her questions illustrates the lack of forethought and planning on the part of the Government.

I have been in correspondence with Government Ministers on this issue. The Minister who is here today wrote to me herself on 3 November, saying that the purpose of the changes was:

“Incentivising developers to bring forward alternatives to market sooner than if these tax changes were not made as affected businesses look to alternatives. In the short-term, and as the market for alternatives develops, the Government’s view is that taxing pollution and dangerous greenhouse gas emissions the same, regardless of whether the fuel is burnt on or off road, is fairer than allowing wide distortions to continue.”

What that essentially means is that the Government hope that this change will produce new technology. Again, the points made by the hon. Member for Upper Bann in relation to the position of the UK market were good ones and well made, but the Government will make this change anyway, because they do not like the “distortions” that the Minister referred to.

If the Government were consistent—I hesitate to say this, because I absolutely do not want this ever to happen—they would have looked at the position with regard to agriculture as well. They did not do so because they knew that the political consequences of that would have been too drastic and too dramatic.

What the Government are going at here is the easy target—the low-hanging fruit—at a time when the construction industry is facing a perfect storm, with all the consequences for the wider economy. The lack of availability of building materials at the moment is one of the major challenges facing the sector. If builders are able to get the materials they need, the cost of them is that much higher because the law of supply and demand comes into operation. Now, on top of that, we have a situation whereby builders will have to absorb, in their existing contracts, the extra cost of paying for the fuel duty, and in future contracts they will have to build in that cost and eventually pass it on to their customers, which will have a further inflationary impact. It will mean that many projects do not go ahead, because the already tight margin that many builders are operating on will simply not be viable any more. In that way, we see the consequences of this change moving down throughout the economy and becoming a vicious circle.

When the Minister responds to the debate, can she tell us how things are going? The purpose of this measure is apparently to encourage the development of new technologies. Where are these new technologies and when will they come to market? What assistance will be given to companies such as the small plant hire operator in Orkney I spoke to last week? He says that this measure will put his business under, because he operates something like four diggers and two dumper-trucks—that is the scale of his operation—and in addition he works as a subcontractor for most of the time, but the contractors will expect him to absorb these changes. By the time we get to April, what alternatives will there be for him? What will be the capital consequences for him if he invests in this new and apparently untried technology?

The hon. Member for Upper Bann spoke about this change creating a cliff edge, and she is absolutely right. It is a cliff edge over which the Government risk throwing an entire industry, for reasons—basically—of civil service prejudice and a dislike of exemptions. For a Government who are supposed to be motivated by business concerns, that is poor in the extreme, and I really hope that the Minister will come forward with something that is a bit more meaningful and substantial than what we have heard so far.

--- Later in debate ---

[Peter Grant (Glenrothes) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Bone. I congratulate the hon. Member for Upper Bann (Carla Lockhart) on securing the debate and her excellent opening speech. She has clearly spent a long time familiarising herself with the issue and getting the views of the people who really matter: those whose jobs and businesses are at risk if this goes wrong. There has been huge amount of agreement from all the speakers, which is what happens when we put a good bunch of Ulstermen and Scots together: agreement on most things, shall we say.

As has been said, Mr Bone, there is no argument about the principle. We want to reduce carbon emissions and the other air pollution that comes from almost all fossil fuel use. We would support anything that will achieve that, but there is nothing in the policy paper that the Government have produced about a long-term reduction in the use of fossil fuels, and the Exchequer impact, the tax take, sits at around £1.4 billion to £1.5 billion every year for the duration mentioned in the paper.

[Mr Carmichael]

On the subject of emissions reduction, there is a possibility that in fact we will see an increase in emissions. I have one company in Shetland that manufactures polystyrene boxes for use in aquaculture and fishing. It can manufacture their boxes in Shetland at the moment and sell them economically, but its competition on the Scottish mainland do so with mains gas. That company will lose its competitive advantage and polystyrene boxes will then have to be transported from the mainland to Shetland. The carbon consequences of that are just lunatic.

[Peter Grant]

I am not familiar with the details of the example that the right hon. Gentleman gives, but I have no reason to doubt that he has researched it as thoroughly as he researches everything else he says, either here or in the Chamber. There will be unintended consequences that the Government have not identified yet.

I have the privilege to serve on the Public Accounts Committee. One of our reports, a year or two ago, looked at what are termed environmental taxes. We raised concerns about how it is often difficult to see where the environmental impact of environmental taxes is being measured or monitored, or whether there is even any target impact when they are introduced. A lot of environmental taxes might be well intentioned to begin with, but they quickly become just another money-making scheme for the Treasury.

It appears quite clear to me that that is what this proposal is set out to be from the beginning. If it is not about making money, but about reducing fuel use and pollution from fuel, why does the policy paper tell us how much more money the Treasury will get out of it, but not the expected reduction over the next four years as a result of the tax? In answering, can the Minister tell us by how much the Government expect the use of diesel fuel to be reduced as a result of this measure? If he cannot give that answer, he should ditch this plan and bring it back for parliamentary approval when he can tell us what the environmental impacts are likely to be. The right hon. Member for Orkney and Shetland (Mr Carmichael) referred to a case where the proposal could actually increase fossil fuel use.

The hon. Member for Upper Bann pointed out that some of the Government’s own guidance tells us that, as a consequence of a fuel reduction scheme, people are supposed to flush more fuel down the drain than they were before. Every time they change from one use to another, they are supposed to flush out the fuel from the tank. A supplier who wants to switch from using white diesel to using red diesel instead is told to flush every trace of white diesel out of the tanks. What a waste of fuel from a system that is supposed to be about reducing fuel usage.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Helen Whately)]

It is a pleasure to serve under your chairmanship, Mr Bone, and I congratulate the hon. Member for Upper Bann (Carla Lockhart) on having secured this debate on the important changes we are making to the taxation of diesel, which take effect this April. Before I address the points raised by the hon. Member for Upper Bann and other hon. Members, I will briefly run through the reform we are introducing and the thinking behind it.

I hope it will not come as a surprise to hon. Members that the Government take their world-leading environmental commitments very seriously and are determined to achieve our climate change and environmental targets, including to improve the UK’s air quality. That is why, to help achieve net zero and improve air quality, the Chancellor announced back at Budget 2020 that the Government will reduce the entitlement to use so-called red diesel from April this year.

Red diesel is currently used for a wide variety of purposes, such as powering bulldozers and cranes in the construction industry, as well as in the refrigeration section of lorries, in off-grid heating and in agriculture. It accounts for around 15% of all the diesel used in the UK and, as such, is responsible for the production of nearly 14 million tonnes of carbon dioxide a year—that is nearly 3% of total UK emissions. I am therefore quite surprised to hear such opposition from hon. Members from the Scottish National party, the Liberal Democrats and Labour, as well as from hon. Members from Northern Ireland, considering the importance of tackling climate change and reducing emissions.

[Mr Carmichael]

Will the Minister give way?

[Helen Whately]

I will make a little more progress, and then I will be very happy to. I am keen to make sure I address hon. Members’ points, which I have listened to and noted down during the debate.

Despite diesel being one of the most polluting fuels that vehicles and machinery can use, red diesel benefits from a significant duty discount—a duty rate of around 11p compared with almost 68p per litre on standard diesel. That really is significant. As a consequence, businesses using red diesel pay far less for the harmful emissions they produce than individual car owners. The tax changes that we are introducing in April mean most current users of red diesel in the UK will instead be required to use diesel taxed at the standard fuel duty rate like motorists, which more fairly reflects the harmful impact of the emissions that are produced.

Importantly, the Government have also heard from developers of alternative technologies—cleaner alternatives to red diesel—that the low cost of running a diesel engine on red diesel currently acts as a barrier to entry for greener alternatives. This widespread use of red diesel is actually counterproductive in terms of our ambitions to tackle climate change, reduce emissions and reduce pollution overall.

--- Later in debate ---

[Helen Whately]

I will make some more progress. JCB developing its hydrogen-fuelled digger is one example, and Volvo is another example. So we are seeing the development of alternatives. This proposal is a really important part of ensuring that the incentives are there for these things to happen.

I will pick up on a few other points that hon. Members have made. The hon. Member for Upper Bann talked about the impact of covid on the construction sector. I heard the phrase “a perfect storm” from the right hon. Member for Orkney and Shetland (Mr Carmichael). I will say a couple of things. First, we looked at the cost implications, and that is why there have been some exemptions in very specific areas where we thought the taxation change might have a material impact on household costs. However, for the areas where the change is being introduced, the Government do not believe there is a material change in the ultimate prices to households. The cost of fuel is relatively small for most businesses—I recognise that that is not the case for all businesses.

The other issue, in the context of covid, and taking a step back, is that we have put in a £400 billion package of support for the economy throughout this pandemic. We have already provided £250 million to local authorities in England and recently provided an extra £100 million that local authorities will distribute to businesses affected by covid to support them through the difficult times that we recognise they are going through. The Barnett equivalents of those amounts will go to the devolved nations. So we are giving a huge amount of support to businesses throughout this pandemic—we are absolutely mindful of that. Given that that support is in place, that particular issue is not a reason not to continue with the very important commitments that we have made—and that other parties have supported—to transition to a greener economy.

[Mr Carmichael]

Will the Minister tell the House what reduction in emissions will be achieved as a consequence of this measure?