Oral Answers to Questions

Debate between Andrea Leadsom and David Mowat

Thursday 14th July 2016 Commons Chamber

[Andrea Leadsom]

My right hon. Friend is right to point out the importance of keeping costs down while we decarbonise. The Department has always made it clear that every opportunity to decarbonise at the lowest cost to consumers will be taken. It is my view that leaving the EU will enable us to do that to an even greater extent than we have in the past.

[David Mowat (Warrington South) (Con)]

Since 1990 the UK has decreased emissions by a third more than the EU average. We have now set a target for 2030 that implies a decrease of about double that which the EU put into the Paris INDCs—intended nationally determined contributions. Does the Minister agree that the real concern about Brexit might be that we will no longer be able to influence the EU to make more progress in decarbonisation?

[Andrea Leadsom]

I am entirely clear: European countries remain our friends and great allies, and we will continue to work with them. Leaving the European Union does not mean that we are suddenly leaving Europe in any sense, so it is my expectation and anticipation that we will remain closely aligned on global issues such as climate change, and that we will continue to play a leading role in the world’s attempts to tackle that great threat.

Oral Answers to Questions

Debate between Andrea Leadsom and David Mowat

Thursday 11th February 2016 Commons Chamber

[Andrea Leadsom]

I agree with the hon. Gentleman up to a point. What is essential for the UK right now is that new homes get built. That is our absolute priority; people are in desperate need of more homes being built. I can assure him that since April 2014 builders have had to consider the use of renewables in all their designs, and I am pleased that during the previous Parliament the energy standard for new buildings was improved by 30%.

[David Mowat (Warrington South) (Con)]

7. What representations she has received from her international counterparts on the proposed closure of the UK’s coal-fired power stations by 2025.

Oral Answers to Questions

Debate between Andrea Leadsom and David Mowat

Thursday 7th January 2016 Commons Chamber

[Andrea Leadsom]

Projects such as Gunfleet Sands, just off the coast of the hon. Gentleman’s constituency, provide enough clean electricity for over 100,000 homes following hundreds of millions of pounds invested by the developer, much of which was spent locally. I am sure he will have welcomed that. As we have made clear, however, we have to get the right balance between supporting newer technologies such as offshore wind and being tough on subsidies to keep bills as low as possible. We will always be working towards making technologies subsidy-free.

[David Mowat (Warrington South) (Con)]

By far and away the dominant source globally of low-carbon electricity is nuclear power. In the EU, a third of electricity comes from that source and China has approximately 50 stations under construction. We also need small modular reactors. Will the Minister set out what her plans are in that regard and how the UK can provide leadership?

Oral Answers to Questions

Debate between Andrea Leadsom and David Mowat

Thursday 19th November 2015 Commons Chamber

[David Mowat (Warrington South) (Con)]

Far and away the dominant zero-carbon technology, in the United Kingdom and globally, is nuclear power. I welcomed the earlier announcement that we were working on six new stations in the UK, but an emerging technology involving small modular reactors is causing a great deal of excitement, and could make a big difference. Does the Minister expect the UK to play a part in that?

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

I am grateful to my hon. Friend for raising this issue. The UK gave up its ability to design and export nuclear reactors some years ago, and we are currently at the forefront of looking at new nuclear technology, including small modular reactors. I recently met representatives of the Nuclear Innovation and Research Advisory Board to discuss some of their exciting ideas, and, subject to the spending review, I think we shall be hearing more about them.

Oral Answers to Questions

Debate between Andrea Leadsom and David Mowat

Thursday 25th June 2015 Commons Chamber

[David Mowat (Warrington South) (Con)]

Last year there was a considerable increase in the amount of electricity produced from nuclear globally, but that was not the case in the UK. Do Ministers agree that it is extremely important that we make progress not just on Hinkley Point C, but on Sizewell, Wylfa and other stations, if we are going to come close to meeting our climate change obligations?

[Andrea Leadsom]

My hon. Friend is exactly right. About 19% of our electricity needs today come from old nuclear, much of which is due to shut down in the next decade, so it is vital that the Government set out a single, coherent energy policy that gets us to where we need to be: keeping the lights on, powering the economy with cleaner energy and making sure that people pay less for their bills. New nuclear is a vital part of the UK’s energy mix and we are absolutely committed to bringing it forward.

Bankers’ Bonuses and the Banking Industry

Debate between Andrea Leadsom and David Mowat

Wednesday 25th February 2015 Commons Chamber

[Andrea Leadsom]

I am very grateful to the hon. Lady for giving me the opportunity to say that for the last 10 years of my career at Invesco Perpetual, I was responsible for writing a quantitative bonus scheme that measured the performance of fund managers over three, five and 10 years according to the performance of the team, the business and the individual, which involved clawbacks, as appropriate. I started that work in 1999 and finished it in 2009, so I can say with confidence that I did my bit on remuneration.

What have the Government done that we are so proud of? First, we have brought down the quantum of bonuses. City bonuses are now a fifth of what they were under Labour. The banks that were bailed out by the taxpayer have been a key focus for the Government, so let me inform the House about what is happening with bonuses at RBS. We will ensure that the total bonus pool comes down again, both in total and per head. That will continue the reductions that made last year’s bonuses more than two-thirds lower than those in 2009. The bonus pool at the investment bank will come down too in total and per head. We are continuing to restrict cash bonuses to £2,000, and no executive director will receive a bonus.

Let me also tell the House what is happening at Lloyds. This week, we announced that we are getting back another half a billion pounds for taxpayers—money that they had to put in. We can do that because since the crisis Lloyds has gone from failure to being a strong, profitable bank that is helping to drive the UK recovery and is contributing £230 million a year through the bank levy. We will ensure that Lloyds sees its bonus pool reduce this year and we are continuing to restrict cash bonuses to £2,000.

Let us compare that with the Labour party, which presided over a system that paid Fred Goodwin a cash bonus of £2.9 million in 2007. It is now calling for a 10-year clawback on bonuses—once again asking us to clear up the mess that it left—and has spent its bank tax proposal 10 times over.

The Government have made the link between bonuses and performance crystal clear. Bankers should be in no doubt that their bonuses are at risk should misbehaviour occur. Under this Government, highly paid bankers and those who are liable for big decisions have their bonuses deferred over at least three years, and at least 60% must be deferred for senior managers. Bonuses are now clearly linked to the performance of banks, since 50% of any bonus must be paid in shares or similar instruments. Deferred bonuses can be subject to cancellation in the future. Since the start of this year, bonuses can be clawed back up to seven years after they are paid out when misconduct or serious performance issues come to light. Guaranteed bonuses, which were commonplace under the previous Government, are banned in all but the most exceptional circumstances.

We have taken the lead in ensuring that there is transparency in senior executives’ pay arrangements. We have ensured that all the top 15 banks have signed up to the strengthened code of practice, which is a notable improvement on the two that had signed up when Labour left office. Our reforms to company law mean that shareholders are guaranteed a binding vote on pay policy.

We are not stopping there. The Parliamentary Commission on Banking Standards, which was attended so ably by my hon. Friend the Member for Wyre Forest (Mark Garnier), made strong recommendations on bankers’ pay.

[David Mowat]

The Minister is right to say that the level of bonuses has reduced hugely in the past few years. However, does she agree that the real issue with banking is not the bonus level, but the level of absolute remuneration, which the Labour party’s policy does not address? Why does she think banks require so many people to earn more than £1 million a year, in a way that oil companies and pharmaceutical companies do not? The issue is the absolute level of remuneration.

[Andrea Leadsom]

Philosophically, I agree entirely with my hon. Friend. Many people across the country will agree that the absolute level of remuneration in financial services needs to be clearly justified. Although the Conservative party truly believes that wealth creation, which creates jobs, tax revenue for the Exchequer and growth for our economy, should be properly remunerated, we want to give as much power as possible to shareholders to ensure that they can take decisions that make it absolutely clear that remuneration should reflect the contribution of the individual, and not just some norm in the industry.

We have agreed with the recommendations of the Parliamentary Commission on Banking Standards and asked the financial services regulators to look into implementing them, in particular the extension of clawback to 10 years when an investigation into an individual is ongoing and the extension of deferral to seven years for senior managers, which is a significant increase from the current three years. The regulators are due to publish final rules in response to the consultation shortly. I am sure that hon. Members will agree that we want to keep our independent regulators independent, so that they act in the best interests of our economy and not in the interests of a political party.

Diverted Profits Tax

Debate between Andrea Leadsom and David Mowat

Wednesday 7th January 2015 Westminster Hall

[Andrea Leadsom]

The hon. Gentleman makes a good point; nevertheless, the UK is at the forefront of driving the international effort to tackle these problems—these weaknesses—in international tax laws that are very out of date. The UK is certainly doing its bit.

In line with the BEPS action plan, in September 2014 the OECD’s first set of outputs from the BEPS project were fully endorsed by the G20 Finance Ministers at their Cairns summit. In a global economy in which goods and services flow freely between countries, international co-operation, as the hon. Gentleman points out, is the only way to tackle the challenge of tax avoidance. Measures taken in Britain will not deal with the problem on their own; we must have global tax rules, too. That is why, under our Prime Minister, we have been pushing, through the G8, the G20 and the OECD, for global solutions.

[David Mowat]

Of course, that has to be the right answer, but does the Minister really believe that countries such as Luxembourg and the Republic of Ireland, which derive a considerable amount of GDP from a tax evasion strategy, will contribute to any such global effort when it is so important to their standard of living?

[Andrea Leadsom]

I am grateful to all hon. Members for the points they are making about other tax jurisdictions. What the UK can do is lead the international effort and focus on what we can do to ensure that the UK’s tax base is not eroded. Therefore, although these other points are extremely important, hon. Members will realise that I cannot influence directly the tax laws that Luxembourg undertakes for itself, other than through the contribution the Government make to the international effort to put pressure on different jurisdictions.

The Chancellor announced, in the autumn statement 2014, UK action on two of the internationally agreed 2014 outputs of the BEPS project. I know that the hon. Member for Redcar supports the UK’s introducing legislation to implement the G20-OECD agreed model for country-by-country reporting, which will require multinational companies to provide tax authorities with high-level information on profit, corporation tax paid and certain indicators of economic activity for risk assessment. Draft legislation for the Finance Bill 2015 was published on 10 December 2014, with a tax information and impact note and an explanatory note.

Furthermore, a consultation document on the UK plans for implementing the G20-OECD agreed rules for neutralising hybrid mismatch arrangements—another point raised by the hon. Gentleman—was published at the autumn statement. The new rules will tackle a tax avoidance technique used by multinationals to exploit differences between countries’ tax rules to avoid paying tax in either country, or to obtain more tax relief against profits than they are entitled to.

However, the Government have gone further still. The hon. Member for Birmingham, Ladywood asked whether that was instead of BEPS or because we feel that BEPS will not work, but no, not at all—this is in addition. The Government have gone further to tackle tax avoidance by multinational companies operating here in the UK and to strengthen our defences against the erosion of the UK tax base. That is entirely complementary to the BEPS process. Where companies in the UK are going to extraordinary lengths to avoid paying their fair share of tax, we will act to prevent that. That is why the Government have introduced the new diverted profits tax—to counter the use of aggressive tax planning by large multinationals to avoid paying tax in the UK on profits that have been generated from economic activity here in the UK.

The diverted profits tax will be applied using a rate of 25% from 1 April 2015. The measure is targeted at contrived arrangements used to shift profits away from the UK in a manner that ensures they go untaxed or largely untaxed. The measure is designed to counter the erosion of the UK tax base as a result of complex structures that circumvent the international tax rules on permanent establishment and transfer pricing.

For example, some multinationals have gone for aggressive tax planning that involves quite complicated arrangements, such as the so-called “double Irish”—a point raised by the hon. Member for Strangford (Jim Shannon) and my hon. Friend the Member for Amber Valley—using group companies in other countries as conduits to route expenditure to tax havens so that profits from UK activity goes untaxed.

Specifically, the diverted profits tax applies in two situations. The first is where a foreign company carries out activities in the UK in connection with the supply of goods or services to UK customers in such a way that it avoids creating a permanent establishment, and the main purpose of that arrangement is to avoid UK tax, or a tax mismatch is secured such that the total tax derived from UK activities is significantly reduced. The second situation is where a UK company, or a foreign company with a UK permanent establishment, creates a tax mismatch by using transactions or entities that lack economic substance.

If a multinational company is found to be using those contrived arrangements to avoid tax in the UK, HMRC will issue a notice that requires the diverted profits tax to be paid up front. The legislation provides for a review period of up to 12 months, within which the multinational company will have the opportunity, among other things, to demonstrate that it was not liable for the charge or to provide information to HMRC to show that the level of disallowance of intra-group expenditure in computing the charge is wrong on normal transfer pricing principles. The measure is designed to complement our transfer pricing arrangements.

Private Finance Initiative

Debate between Andrea Leadsom and David Mowat

Thursday 23rd June 2011 Westminster Hall

[Andrea Leadsom]

I am sure that, privately, you might be interested Mrs Main, but thank you for keeping me in order.

What you—[Hon. Members: “One!”]—or rather not you, Mrs Main, but an LEA wanting to build a school, would need would be to have the entire specification for the school for the subsequent 25 years up front. That is clearly impossible, and the banks make their money by charging enormous arrangement fees and ongoing charges as schools change their requirements. That is how the money continues to come in from those projects.

[David Mowat (Warrington South) (Con)]

The point that I believe is at issue is procurement failure. To take the example of the hockey pitch, if it is built 2 feet too short, that is a procurement failure. It is not necessarily a specification issue—there are such words as “fit for purpose”. The real issue with all the stuff we are talking about is that the public sector is incapable of procuring projects of such complexity. That is what happens, and that is why so much money is made in change requests. It is not principally to do with financing.

[Andrea Leadsom]

My hon. Friend makes a good point, and many of the problems arising from PFI have happened because the private sector saw the public sector coming. There have been all sorts of issues with poor public procurement, and where two PCTs in neighbouring counties have both commissioned a hospital, one has not learned the lessons of the other. Everyone comes at the thing afresh, and they all have the same problems and run into the same weaknesses. Nevertheless, there is an inherent lack of flexibility built into the projects, which cannot be overcome. It is therefore incredibly important to consider that the PFI on its own, even if it were the cheapest option, and even though it does not at the moment have an impact on our national debt picture, has an inherent weakness in its structure.

The other massive weakness in the structure, which has been exacerbated since the financial crisis, is the cost. As my hon. Friend the Member for Hereford and South Herefordshire said, the reality now, with Government gilts at about 3% to 4% long term, is that direct Government procurement would be much cheaper than a bank trying to fund a project itself over five to 25 years and make a profit, where the net cost to the taxpayer ends up at 8% or 9%. There is an enormous difference between the costs of direct procurement and PFI procurement. That is exacerbated by the financial crisis, and makes things almost unaffordable. We must begin to look at alternatives.

I want to float an idea that I have been trying to put to Ministers—and will be doing in the near future. That is the possibility that the green investment bank could provide some necessary competition to the PFI market. As I said earlier, there is a serious lack of competition. The Treasury Committee heard from PFI providers that often they bid only for perhaps one in three deals. Since there are only six or seven major PFI providers, that means there are probably only two, or at most three, serious bidders for any deal; that suggests an enormous lack of competition.

However, we are now thinking about the green investment bank—a brand new idea for this country, whose time has come. That bank will be looking to fund many of the low-carbon, high-tech and potentially economic infrastructure projects of the future, such as offshore wind farms—I shall not talk about railways, but others might; hon. Members will appreciate my personal sensitivity there. Offshore wind farms, roads and all the rest require long-term financing. That is a big challenge, and the green investment bank could address it.

High-Speed Rail

Debate between Andrea Leadsom and David Mowat

Thursday 31st March 2011 Westminster Hall

[Andrea Leadsom]

Yes, indeed. There have been plenty of anecdotal reports from low-cost airlines suggesting that they would welcome the opportunity to put on more cheap long-haul flights.

I plan to challenge four aspects of the case for HS2: the business case, the environmental case, the claims about job creation and the potential for regeneration. I am a firm believer that one cannot attack something without providing an alternative. I will therefore also discuss a viable alternative to HS2. I have based my challenges on phase 1 of HS2, in spite of the fact, unfortunately, that the consultation incorporates the entire Y-shaped project. There is too little detail on the assumptions underlying phase 2 to be able to assess the figures properly. I also need to point out that the original business case, written by Atkins for the Department for Transport in March 2010, was updated last month. The new business case is considerably less attractive than the old one.

I will deal first with the business case for HS2. HS2 Ltd claims a net benefit ratio, which includes the wider economic impacts, of 2. That means that for every pound spent, there will be £2 of benefit. That is about the minimum return that could be expected from a rail project—the bar for roads projects is significantly higher. Even that modest claim, however, makes enormous assumptions. Specifically, one of the core and somewhat ludicrous assumptions is that all the time spent on a train journey is wasted, and therefore that every minute of a train journey that is saved can be given a value in pounds—the number of minutes saved, multiplied by the earnings of an individual. That would not matter so much except that the journey time savings account for more than 50% of the £20 billion of total economic benefit claimed for the project. I urge the Department for Transport to look again closely at that point.

[David Mowat]

On the first point, the ratio of 2 is for the London to Birmingham link. As my hon. Friend will know, the ratio is 2.6 for the link to Manchester and to Leeds. Including the wider economic benefits, it is 2.6. I have the business case for Crossrail, which my hon. Friend may have had the chance to have a look at. The business case in that is 1.87. The final point that my hon. Friend might wish to consider is the idle time point, which is very important.

[Mr Charles Walker (in the Chair)]

Order. We have had too many questions.

Rail Investment

Debate between Andrea Leadsom and David Mowat

Thursday 17th February 2011 Westminster Hall

[Andrea Leadsom]

I am grateful to the hon. Gentleman for that point. He is right—high-speed rail has to go in a straight line and it is much more expensive to create that, which greatly limits the number of stops. I have heard it said that the line needs to go from London to Birmingham for the purpose of speed and to solve the north-south divide. I agree with those hon. Members who have said that that alone will not solve the north-south divide and that other decisions will need to be taken. We need to consider the whole of Britain. From the point of view of many constituencies along the way between London and Birmingham, if the line were to be made viable with interim stops, so that there were some sharing of the benefit, it would be more attractive.

[David Mowat (Warrington South) (Con)]

No one would claim that high-speed rail on its own could solve the north-south divide. I do not think that anyone in the Chamber, including my right hon. Friend the Minister, would attempt to do that. However, will my hon. Friend admit that the creation of 40,000 jobs—that is KPMG’s estimate—in the north-west, north-east and Yorkshire as a result of high-speed rail would contribute to it? She said that other projects could be equally effective in helping to solve the north-south divide. Perhaps she will say which of those she would put her money on. Finally, three or four hon. Members have made the point that incremental improvements in rail are very effective in the short term. That is correct, but we cannot just make incremental improvements for ever—at some point, the Government have to call it.

[Andrea Leadsom]

I thank my hon. Friend for his intervention. However, I am not of the old USSR view that we should just do public project after public project for the sake of creating jobs. There needs to be a clear rationale for having the high-speed line in the first place. Any project needs to stand on its own merits and not be done just because it creates jobs, so I do not agree with my hon. Friend in that respect.

I have seen evidence—I hope that the Minister will comment on it—that the west coast main line, through incremental improvements that would not cause disruption, could come very close to providing the same increase in capacity as HS2. My central point is that that would be a much cheaper and less disruptive alternative means of achieving the same improvements in our rail infrastructure.