Non-Domestic Rating (Multipliers and Private Schools) Bill

Andrew George Excerpts

2nd reading
Monday 25th November 2024 Commons Chamber

[James Murray]

Let me remind the hon. Gentleman that, around the difficult decision that we had to take on employer national insurance contributions, we provided explicit protection for small businesses by more than doubling the employment allowance from £5,000 to £10,500, which will benefit hundreds of thousands of small businesses across the country. I suggest that he talks to businesses in his constituency about that.

We are not shying away from the fact that difficult decisions were taken in the Budget, but he might also consult the plans that were left in operation by the previous Government in July. If we had pursued those plans, and if we had not taken any action on business rates, the retail, hospitality and leisure relief would have ended entirely next April. The cliff edge looming next April would have seen it go down to zero. We have extended it, despite the tough fiscal circumstances, for another year at 40%. That is a reasonable way forward while we put in place these permanent reforms.

As I mentioned, the measures in the Bill to level the playing field for high streets are the beginning of our efforts to transform the system of business rates. Our ambition to go further is set out in the paper published alongside the Budget, “Transforming business rates”. That paper sets out the Government’s priority areas for further reform to support investment and make the system fairer. It invites businesses and industry representatives to work with us on designing the best possible system for the future.

I am grateful to all those businesses and representative bodies that I have spoken with in the last few weeks for their engagement already. We will consider what more the Government should do to incentivise investment and growth, including by looking at the efficacy of improvement relief and empty property relief, the impact of losing small business rate relief on expanding businesses, and the cliff edges within the current system.

[Andrew George (St Ives) (LD)]

If the Minister is looking for other methods by which public finances could be effectively deployed, will he look carefully at the last decade, during which small business rate relief has been used by second home owners to flip their properties to business rating and pay nothing at all? In Cornwall alone, that has resulted in over £500 million of taxpayers’ money being paid out to wealthy second home owners through covid aid and the small business rate relief. Will he look at how wealthy people have been incentivised to use that method to their advantage? Will he ensure that we have a much fairer system that puts first homes before second homes?

[James Murray]

The hon. Gentleman raises a crucial point about ensuring that the tax system is fair and that it supports the behaviour that we seek to incentivise.

That leads me neatly to my next point. As part of the discussion paper on transforming business rates, we have committed to consulting on adopting a general anti-avoidance rule for business rates in England. Although that might not necessarily address the exact problem the hon. Gentleman highlights, it speaks to the general issue of avoidance in relation to business rates.

We will also look at how the burden adjusts with the economic cycle, and we will assess the merit of a further increase in the frequency of re-evaluations. I look forward to working closely with businesses and representative organisations to deliver a business rates system that is fit for the 21st century, and that work begins today with the powers in this Bill to deliver our permanent tax cut for high streets.

As I said earlier, the tough decisions that the Chancellor set out in the Budget to deliver economic stability and fix the public finances enable us to give businesses the confidence they need to invest, and to get public services back on their feet. One public service that is crucial to breaking down barriers to opportunity is the education system, which is why the Government have prioritised ensuring that every child has access to the high-quality education that they deserve.

--- Later in debate ---

[Daisy Cooper (St Albans) (LD)]

The Great British high street is on life support. Many bricks-and-mortar businesses are barely surviving and, where they are, it is often against the odds. Changes in our trading relationship with Europe, the covid-19 pandemic, energy prices, the cost of living and the Conservatives’ disastrous mini-Budget have all taken their toll, but for years one measure has stifled high street businesses more than any other: the broken business rates system.

The business rates system is unfair on companies, bad for our local communities and damaging to our national economy. It penalises manufacturers when they invest to become more productive and energy-efficient. It leaves pubs and restaurants with disproportionately high tax bills and it puts bricks-and-mortar shops at an unfair disadvantage compared with online retail giants. In too many places pubs, restaurants and shops are being forced to close, taking with them jobs, opportunities and treasured community spaces, and consumers are seeing the cost of this unfair tax passed on to them.

More broadly, this outdated system inhibits business investment, job creation and economic growth, holding back our national economy, yet for too long it has been allowed to continue. In their 2019 manifesto, the previous Conservative Government promised a fundamental review of business rates to ease the tax burden on smaller businesses. Yet in 2022, when I challenged the then Chancellor, the right hon. Member for Godalming and Ash (Jeremy Hunt), on his personal commitment to making that happen, he admitted in this place that it was

“Another of the promises I now vainly wish I had not made”.—[Official Report, 17 October 2022; Vol. 720, c. 430.]

Businesses are tired of being treated with such cynicism and of relying on a patchwork of last-minute temporary reliefs. They cannot plan, they cannot invest and they cannot grow. They are crying out for fundamental reform and a new, fairer system. Before this autumn Budget, Liberal Democrats called on the Chancellor to reform business rates completely, with a new system, and to do so no later than April 2026. We believe the new system should be based on our Liberal Democrat calls for a commercial landowner levy—a bold move that would deliver a real shot in the arm for our high streets.

Instead of pursuing fundamental reform, instead of fair reform, this Bill is just more tinkering. Rates relief has been a sticking plaster—but, boy, is that plaster being ripped off in April, with a big reduction in relief. Many small businesses now say that the increase in business rates, combined with the increase in national insurance contributions, will be too much for them to absorb.

[Andrew George]

My hon. Friend is making an excellent case. Along with the point I made in my previous intervention about the opportunity for abuse under the rates relief system, particularly by holiday homes, does she accept that the methodology used by the current rating system for parking spaces in out-of-town retail outlets such as supermarkets hands a massive advantage to those supermarkets in comparison with town centre shops, and that we need a rating system that actually levies a rate on that benefit at a level that ensures an even playing field?

[Daisy Cooper]

My hon. Friend is absolutely right that this broken business rates system is unfair in many ways and it is the big giants, online or otherwise, that are getting an easier ride.

The Bill fails to address many other problems with business rates. For example, it does nothing to support businesses outside the three sectors of retail, hospitality and leisure, meaning it excludes key sectors such as manufacturing that are particularly negatively affected by the current system. It does not address the £51,000 cliff edge. Properties with a value over that threshold are not eligible for the small business multiplier, even though they are small businesses, and with rates relief going down, business rates bills for small businesses will go up. From next April, business rates relief for retail, hospitality and leisure will be cut from 75% to 40% and this Bill does nothing to avert that blow.

The Minister said he wants to rebalance business rates. I welcome that direction of travel, if it turns out to be true, but in the absence of an impact assessment, I am particularly worried about unintended consequences. I say this in the spirit of constructive opposition: it appears as though the Government are moving from a system of temporary relief to a lower multiplier. At the moment, a small business enjoys 75% business rates relief, but a very large chain has its relief capped at £100,000. If I have understood it correctly, independent shops will see their relief drop from 75% to 40%, while big chains such as pubcos and supermarkets may see their relief uncapped, which could give them a tax reduction of tens of millions of pounds. I would be grateful if the Minister wrote to me to share some modelling to reassure me that that is not going to happen and that we will not see independent businesses inadvertently subsidising big chain stores and multinationals.

The impact of the Government’s changes to business rates will have a massive effect on small businesses in my constituency. The oldest pub in Britain—or so they claim—Ye Olde Fighting Cocks, will see a whopping increase of £30,000 per year in its business rates alone. The Save St Albans Pubs campaign says that even an average pub in St Albans, with a rateable value of £100,000, will face an additional £19,000 in its business rates bill from April. If we assume that an average pub makes 30p profit per pint, each of those pubs would need to sell an extra 60,000 pints a year, or almost 1,200 pints extra a week—and that is before factoring in the increase in national insurance contributions.

Other low-margin, large-premises businesses, such as children’s soft play activity centres, will also lose out under these changes. DJ’s Play runs much-loved indoor play centres across Hertfordshire, which exist in large warehouse-style premises. The buildings are large, but the profit margins are not. DJ’s Play and many others like it provide a valuable and enriching educational experience for children, but they too will struggle to keep their heads above water.

The Liberal Democrats are also opposed to the Bill because it would levy a tax on education by removing the business rates exemption for private schools that are charities. We are opposed in principle to the taxation of education, because it is a public good. We believe that parents must be given choice when it comes to their children’s education. Many families feel that, whether due to bullying, SEND provision, mental health issues or other factors, the state system cannot meet their child’s needs.

Oral Answers to Questions

Andrew George Excerpts

Tuesday 3rd September 2024 Commons Chamber

[Darren Jones]

I thank my hon. Friend for her follow-up question and welcome her to her place. As she knows from the Chancellor and the Deputy Prime Minister, this Government take seriously our target to deliver 1.5 million new homes, and we will look at each and every opportunity across the country to do so. That includes making improvements to the system of developer contributions for community benefit to support the delivery of affordable housing and local infrastructure.

[Andrew George (St Ives) (LD)]

The Minister knows that the planning system is built on the ability to make millionaires at the stroke of a pen as a result of passing planning permission, which does not necessarily result in developments that are in the best interests of a local community. Surely there is more that the Government can do to ensure that we tip the planning system towards meeting need, rather than greed.

[Darren Jones]

The issue of so-called hope value was referenced in the Labour party’s manifesto, and the Government will set out further detail in due course.

Economy, Welfare and Public Services

Andrew George Excerpts

Monday 22nd July 2024 Commons Chamber

[Rachel Reeves]

I enjoyed campaigning for my hon. Friend in York Outer, and it is great to see him in his place today. Stability means a tough set of fiscal rules, but it also means spending public money wisely, as he says. The last Government hiked taxes while allowing waste and inefficiency to spiral out of control. At no time was that more evident than during the pandemic, especially when it came to personal protective equipment. The former Prime Minister, when he was Chancellor, signed cheque after cheque after cheque for billions of pounds-worth of contracts that did not deliver for the NHS when it needed it—that is simply unacceptable.

Today, I can announce that I am beginning the process of appointing a covid corruption commissioner to get back what is owed to the British people. That money, which is today in the hands of fraudsters, belongs in our public services, and we want it back. The commissioner will report to me, working with the Secretary of State for Health and Social Care, and their report will be presented to Parliament for all Members to see. I will not tolerate waste. I will treat taxpayers’ money with respect and return stability to our public finances.

The second Bill I will speak to is the national wealth fund Bill. We know that economic stability is vital for investors and for business—the small business looking to grow; the global business looking to expand in the UK; the entrepreneur looking to take their first steps. To support them, stability must sit alongside investment.

[Andrew George (St Ives) (LD)]

On the effective use of public funds, is the Chancellor aware not only of the alleged corruption in the way that covid aid was distributed, but of the large number of tax loopholes in this economy? For example, in Cornwall, over £500 million of taxpayers’ money was handed out to holiday home owners not only through covid aid but through the small business rate relief scheme and other tax loopholes. At the same time, only a third of that amount has gone into social housing for first-time users. Will she look at the whole issue of parity in the way public funds are used, to support people who need housing?

[Rachel Reeves]

I welcome the hon. Member back to this place. I enjoyed sparring with him in my early days in Parliament, and it is great to see him back in the House. He is absolutely right that we need to get value for money for all tax incentives. I will ensure that the Treasury and the Ministry of Housing, Communities and Local Government look at the changes that he suggests.

The last Government’s record on investment was dismal. We now sit behind every single member of the G7 when it comes to business investment as a share of GDP. That is not an abstract economic problem. Weak investment holds back productivity and hurts living standards; it leaves households poorer and wages lower.

The King’s Speech deals directly with the need to unlock private investment through a new national wealth fund Bill. That will be supported by an injection of capital, part funded by an increase to the windfall tax on oil and gas giants. It will make transformative investments in industries of the future, such as carbon capture and storage, and green hydrogen. It will mobilise billions of pounds-worth of additional private sector investment in our industrial heartlands and coastal communities while generating a return for taxpayers. The national wealth fund will work with local partners including mayors, as well as the devolved Administrations in Scotland, Wales and Northern Ireland, to develop an investment offer that meets the needs of all our nations and regions. It will simplify a complex landscape of support for businesses today, aligning key institutions such as the UK Infrastructure Bank and the British Business Bank under the one banner of the national wealth fund.

Housing Need (Treasury Assistance)

Andrew George Excerpts

Wednesday 17th December 2014 Westminster Hall

[Andrew George (St Ives) (LD)]

It is a great pleasure to serve under your chairmanship, Mr Sanders. I am delighted to have secured this opportunity to introduce a debate on assistance from Her Majesty’s Treasury for people in housing need, because without question the most pressing and chronic problem in areas such as mine is the lack of affordable homes for the thousands of local families who are inadequately housed or housed in properties with extortionate rental charges.

My area and others are characterised by a very significant mismatch between earnings levels and house prices. There is a large and growing market for second homes, investment homes and retirement homes. Of course, over the years there has not just been the 50% council tax discount for second home owners, which was introduced in the early 1990s; other incentives are available that encourage, that are a further stimulus for, the purchase of second homes especially and investment properties in areas such as mine. For example, people can take massive advantage of small business rate relief if they are letting their properties in the local holiday market, while also of course using them for their own use; and by shifting from council tax to business rates, they can end up paying absolutely nothing in terms of their contribution. That is a further and often hidden stimulus for the purchase of second homes.

I have undertaken surveys of estate agents across my constituency on three occasions, and we have found that over time it has become the case that somewhere between four and six times as many properties are sold to second home buyers as to first-time buyers. That is a very significant and quite shocking statistic. It shows what is going on in markets such as mine. I am not saying that that is happening in the rest of the country, but it is certainly happening in constituencies such as mine, which are very attractive for second home purchases.

There is a rather macho obsession with building homes as the sole, two-dimensional solution to our housing problems, but that does not work. Cornwall has been one of the fastest growing places in the United Kingdom in the past 40 to 50 years, so we have done exactly what successive Governments have encouraged us to do; we are certainly not nimbys. However, although the housing stock has significantly more than doubled in that period, the housing problems of local people have become significantly worse, so we know that simply building thousands of houses is not in itself the answer. We need to do something a little smarter to target those who are in particular housing need in areas such as mine.

I want to address myself to the need to find constructive solutions that would work in areas such as mine. First, I acknowledge and congratulate the Government on some of the things that they are doing. Since 2010, whether there has been new money or a replication of old money or a continuation of programmes that the previous Government had engaged in, we have seen various things happen. We have seen the affordable homes programme, the affordable homes guarantees programme, the trial of direct Government provision—a new delivery model—the affordable rent to buy scheme, which was introduced in 2013, and the new homes bonus, on which an announcement was made yesterday about the latest tranche of money going to local authorities. Of course, that is not just to build houses, but for other economic purposes. However, it certainly provides a stimulus to encourage planning permissions for developments. We have seen the growing places fund, the Get Britain Building fund, the builders finance fund, the estate regeneration fund, the single local growth fund and public land schemes, which have been announced over the years.

In terms of home ownership initiatives, the Government first tried, in 2011, the First Buy scheme, which was closed in March 2013. That was overtaken by the Help to Buy scheme, a very welcome initiative. It replaced the First Buy scheme and is widening the criteria for eligibility by increasing the maximum home value up to £600,000, so it is not just for first-time buyers, but for those looking to move up the ladder. There is the NewBuy Guarantee scheme and the Help to Buy: mortgage guarantee scheme. There is the right to buy and, in a moment, I will come on to shared ownership.

In the private rented sector, there is the Build to Rent fund and the private rented sector guarantee scheme. Then there are other schemes, such as real estate investment trust schemes and self-build and custom-build schemes; and two elements of the recent autumn statement were on the subject of shared ownership.

Obviously, all those schemes and all the things that will provide a stimulus and assistance, which might be targeted at the groups that I am talking about, are welcome, but whether they are sufficient and will help in areas such as mine, only time will tell. I will be making a suggestion today about what we need to do in areas such as mine. I am not saying that this needs to happen across the country, but it certainly needs to in areas with a significant mismatch between earnings levels and house prices and extortionate private rents, and that are characterised by a social rented sector that is significantly smaller than that in many urban areas. Less than 10% of the stock in my area is social rented accommodation.

We need to construct a new lower rung on the housing ladder. The lowest rung on the housing ladder is out of reach for the vast majority of people, who, in other circumstances—perhaps decades ago or in other parts of the country—would consider it reasonable for them to expect to be able to move into home ownership by the time they leave their parental home. I am talking about teachers and nurses—people in stable professions who simply cannot get into the housing market. It is those people whom I particularly want to help—those who have an expectation, a reasonable aspiration, of moving into home ownership, but who simply cannot and are then locked into the extortionate private rented market.

[Mr Mark Williams (Ceredigion) (LD)]

I apologise for missing the start of my hon. Friend’s speech. He mentions key workers. I represent a rural area, albeit in Wales. I suspect that it is out of the ambit of much of what he is saying, but one problem that we are having now is the difficulty of keeping key workers in west Wales—I am thinking of the health service and teachers—for exactly the reasons that he has identified. Does he agree? Is that a concern in west Cornwall, too?

[Andrew George]

That is absolutely right. As I said, this issue is not unique to west Cornwall and the Isles of Scilly. The Isles of Scilly has a particular market that is different from that in other areas: it is more like a London market than a rural market. Nevertheless, as my hon. Friend rightly says, this issue is so significant in many parts of the country. It is without question the most significant social challenge that we face. The Government can and should do more, and I hope to encourage them to do so.

I said that we need to construct a new lower rung on the housing ladder. There are problems with shared ownership accommodation. First, there is not enough of it; there is not an effective market. There are only two lenders lending to those purchasing shared ownership accommodation—Nationwide and Halifax—and those lenders are extremely circumspect and apprehensive. They look at these schemes on a case-by-case basis and are extremely cautious, particularly at the point of resale, which is often a significant discouragement to the development of the shared ownership market—that new lower rung on the housing ladder.

Also, occupants tell me that they have to pay near market rents on the remainder, the share of the property that they do not own, and they feel that they are not rewarded for maintaining the property or for any improvements and investments. The cost and burden of maintaining or improving the capital value of the property is not shared with the housing association or registered social landlord that owns the other part of the property. The home owner’s share of the property is often less affordable by the time of sale, and the sale process is often over-long and legally complex.

I note that in the autumn statement the Chancellor announced that the Government would extend the stamp duty land tax multiple dwelling relief to include lease and lease-back arrangements with housing associations on shared ownership properties, with a view to increasing investment in shared ownership. The National Housing Federation has welcomed the measure as something that may be of assistance. Lowering the stamp duty land tax on multiple purchases of property from 4% to 1% may get institutional investors into the market. That can only be welcomed, and it must be kept under review. In addition, I note that the Government intend to work with housing associations, lenders and the regulator to identify and lift barriers to extending shared ownership, which will include consultation on options for streamlining the process for selling on shared ownership properties. I welcome that initiative to work with those associations and others to find a way forward.

I think I have described reasonably well some of the current problems with the development of the shared ownership market. However, the National Housing Federation welcomes the Government’s proposals. I hope that the dialogue will be constructive and that the Government will keep an open mind about the kinds of tools that could be brought into play to enable a significant scaling up of activity in the sector.

When it comes to solutions, my constructive proposal is to ask the Government to act not necessarily as a funder but as a guarantor. The Government—brilliantly, in my view—established the green investment bank. In the same way, I suggest that rather than spending money that they cannot recoup, they should establish an affordable homes fund or intermediate housing fund. Such funding could be revolved to provide the necessary liquidity and confidence among lenders to enable shared ownership schemes to get off the ground, and to facilitate the resale process for such properties. I strongly encourage the Government to look seriously at that proposal.

I am looking forward to hearing from the Minister in a moment, and I have sent her a proposal for the establishment of an intermediate housing fund, on which I have worked with the National Housing Federation. I am not precious about the details of that proposal, but I hope that this Government, the next Government or some other Government—I do not think that this is a party political issue; surely, people across all parties can see the logic and the common sense in this—will consider the concept of such a fund, which would not only benefit the kind of people whom I described earlier, but would be facilitated and enabled by registered social landlords and community land trusts.

Under my proposal, the intermediate housing fund would be administered by the Homes and Communities Agency, although it does not necessarily need to be. It could be an independent body similar to the green investment bank. It would encourage a lending environment that would enable the liquidity necessary to take schemes forward. I believe that it would be a real game changer in the sector and that it would enable progress to be made. I have asked housing associations why they do not engage and buy back properties when people find it really difficult to sell them on, and the housing associations have told me that to do so would count against their contingent liability and restrict their ability to develop new schemes. For various reasons, it would be far better to set up an intermediate housing fund to facilitate such a solution.

The Minister will not be surprised to hear that my question to her is a simple one. Taking into account all that I have described, including the problems and my congratulations to the Government on their work so far, I believe that my proposal is the most significant way of taking the matter forward. Therefore, will the Government look carefully at extending the tools available to develop and scale up shared ownership and other intermediate housing products as an essential solution in areas, such as my constituency, which have high house prices and low wages?

[The Exchequer Secretary to the Treasury (Priti Patel)]

It is a pleasure to serve under your chairmanship for the second debate this morning, Mr Sanders. I congratulate the hon. Member for St Ives (Andrew George) on securing the debate. He recognised the importance and significance of housing need and housing pressure, while acknowledging the work that the Government have done in the area. Hon. Members come up against many pressures and concerns in their constituencies regarding the affordability of home ownership. There is no doubt that that has been a challenge for the Government. We are addressing the need and introducing schemes through which we can do something about it, and we are engaging with and listening to communities around the country, and with hon. Members such as the hon. Gentleman, on solutions.

The Government are absolutely committed to making the aspiration of home ownership a reality for as many households as possible. Across the country, there is a problem with demand for housing, which has consistently outstripped supply. It was interesting to hear the hon. Gentleman mention that, in his constituency, the demand for second homes is outstripping supply, which is changing the marketplace and having an impact on the ability of first-time home buyers to get on the housing ladder. It is our role as a Government to do what we can to help households that are struggling to get on the housing ladder.

The rate of home ownership in the United Kingdom has fallen from its 2003 peak of 70% to about 65%. We are committed to ensuring that future generations get to experience the benefits of owning their own home in the same way as their parents’ generation did, which is why we have taken clear steps to increase housing supply, build more affordable housing and help people to afford a home without relying on parents and other family members for financial support. The hon. Gentleman has spoken about the reform of planning laws to unlock more housing supply, and that is exactly what the Government are doing. The autumn statement package contained specific commitments to release land with a capacity of up to 150,000 homes, and to introduce new measures to support up to 133,000 new homes, including affordable homes. Affordable homes are the key to this debate. The hon. Member for Ceredigion (Mr Williams) mentioned key workers in his intervention, and they are important. It is incumbent on the Government to ensure that we address key workers’ need when it comes to affordable homes and changes to planning. Key workers support our front-line public services, and it is essential that we have the right kind of housing support for them.

Our policies are bearing fruit. Planning approvals and housing starts are at the highest level for six years. Construction activity, as we see across the country, is really gathering pace and has expanded at the fastest rate for 10 years. We have the national infrastructure plan, which is incredibly important to support housing demand. That contains further measures this year for specific new developments to transform communities through housing in Bicester, Ebbsfleet and Northstowe in Cambridgeshire. Alongside that, billions of pounds of public money—some £4.5 billion during this spending review and more than £5 billion to 2020—is being invested in providing new affordable homes. Almost 217,000 new homes have been delivered by the Government since April 2010, and a further 275,000 will be provided in the five years from April 2015 to 2020. Again, it is about delivering affordable homes in this and the next Parliament.

Under the previous Government, there was a net reduction in social rented homes from 1997 to 2010. That is why, as the hon. Member for St Ives rightly highlighted, we are helping housing associations to access funding. In the 2012 housing package, we introduced a £10 billion housing debt guarantee, which enabled private organisations to access cheaper debt funding to deliver homes for private and affordable rent. We also announced up to £3.5 billion for affordable housing. Our delivery partner, Affordable Housing Finance, issued its first bond to raise funding under the new scheme in May, which was priced at 3.76%—the lowest-priced bond in the history of the affordable housing sector. More than £1 billion of debt has now been guaranteed.

Last week, the Government announced that we have awarded the licence for the private rented sector housing guarantee scheme, which will help create a new market for institutional investment in the private rented sector. All those things help support the Government’s aim of expanding the provision of rented housing, which will help the wider economy by delivering an economic boost and increasing choice. It will also improve housing quality for tenants. Although I do not have time to speak about improving housing stock, it is a key issue for tenants in affordable homes.

We remain committed to establishing shared ownership as a route to home ownership and making it more attractive to households and investors. We will consult on streamlining the process for selling on shared ownership properties. In the autumn statement, we announced that we will extend the scope of stamp duty, which the hon. Gentleman mentioned. Stamp duty is incredibly important, as it affects first-time buyers’ ability to get on the housing ladder. Our scheme is a vital means of supporting home ownership, and it will also cut the cost of property purchasing for up to 98% of buyers.

Building more homes is a priority. The hon. Gentleman mentioned the Help to Buy scheme, which has helped more than 66,000 households to complete mortgages—more than 30,000 have been helped by the mortgage guarantee scheme and 36,000 have been helped by the equity loan scheme. The vast majority of those people—81%—are first-time buyers, which is to be supported and commended. Importantly, more than 94% of all completions are outside London. We are doing everything we can to support the market outside London in constituencies such as the hon. Gentleman’s and rural constituencies, where access to home ownership and new homes has been challenging.

[Andrew George]

I appreciate what the Minister is saying. Having mentioned shared ownership, Help to Buy and other related schemes, she is coming to the nub of the issue. We must extend the logic of those schemes to the intermediate housing sector. There is still a large cohort of aspiring professional people and others who simply do not have the opportunity to get into the housing market without Government help.

[Priti Patel]

The hon. Gentleman makes a valid point. He is absolutely right.

On Monday, the Prime Minister launched a new scheme that will offer 100,000 first-time buyers new homes at a 20% discount. That enabling factor is a crucial part of our major push to help people get on the housing ladder. The Government have a role to play in enabling ownership.

In addition to our changes to the planning system, we are freeing up underused or unviable brownfield land. There are many aspects of the housing debate that we could discuss, including planning and turning around land that is not being used in a viable way. We must free up underused and unviable brownfield land from planning costs and levies in return for below market value sale prices for the homes that are built on those sites.

On the hon. Gentleman’s point, I have said that shared ownership is an integral part of the affordable homes programme. His private Member’s Bill seeks to expand the provision of intermediate housing. I assure him that the Government are committed to intermediate housing, and we are always looking at what more we can do to assist, enable and support people.

[Andrew George]

An earlier draft of my Affordable Homes Bill, which I have shared with the Minister, included a proposal to establish an intermediate housing fund, although I had to remove it because I could not get sufficient political support for it. In my conversations with the National Housing Federation, it estimated that the kind of fund that would be sufficient to facilitate that sector is in the region of half a billion pounds. However, that would be an investment fund, not funding that is lost.

[Priti Patel]

I welcome the hon. Gentleman’s thoughtful points in this debate.

Housing is a challenging issue, as we have discussed in the short time available. The Government are working assiduously to do many things. I have spoken about the many measures that the Government have undertaken to help the housing market. We are seeing great trends, positive improvements and growth in access to affordable housing. We are providing assistance to aspiring home owners and giving them the opportunity to get on the housing ladder.

[Andrew George]

This is my final intervention before the Minister concludes. I had discussions with the National Housing Federation, community land trusts and others when I was developing my proposal. As the Government are consulting on how to develop the shared ownership model, will the Minister or one of her colleagues meet me and representatives from the National Housing Federation and community land trusts to see whether we can take these ideas forward?

[Priti Patel]

I thank the hon. Gentleman for the opportunity to respond to that point. The Government are putting in place many reforms and measures. Again, I thank the hon. Gentleman for his contribution to this debate. Either I or one of my colleagues will discuss this matter further with him to see what else we can do.

I assure the hon. Gentleman and the House that the Government are committed to supporting aspiring home owners—we are doing a great deal in that area— and helping home ownership. We take a continued and significant interest in this area, and we will continue to take a wide range of action.

Oral Answers to Questions

Andrew George Excerpts

Tuesday 29th April 2014 Commons Chamber

[Mr Osborne]

This Government have taken action against tax avoidance that the last Government never dreamed of taking. We have increased the resources for tackling avoidance and evasion. I will tell the House something else: we do not preside over a tax system in which cleaners pay higher tax rates than the people they work for. That was the tax system that the Labour party voted for, and we have got rid of it.

[Andrew George (St Ives) (LD)]

T5. I thank my right hon. Friend the Chief Secretary to the Treasury for visiting Cornwall last week, when he will have been impressed by the resourcefulness and enterprise in the Cornish economy. Will he make sure that those charged with managing the Cornwall EU structural fund programme are granted the appropriate delegated powers of intermediate body status in future?

[The Chief Secretary to the Treasury (Danny Alexander)]

I was indeed impressed, and also convinced by the strong support from the Cornish businesses I met for the policies the Government are putting in place to secure the long-term future of the British economy. Having announced on that visit the Government’s recognition for the Cornish identity, values and culture under the European convention, it would seem odd not to take seriously the request that there should be a degree of autonomy in the management of the European structural funds programme. I urge my hon. Friend to work with the local enterprise partnership to make that case strongly to the Government, as part of the growth deal process.

Business Lending

Andrew George Excerpts

Tuesday 8th April 2014 Westminster Hall

[Andrew George (St Ives) (LD)]

It is a great pleasure to have secured this important debate, Mrs Riordan. The issue has been pressing for many businesses in my constituency, and it has been raised on a number of occasions by me and by others in the House because of concern about the change of relationship between businesses and what used to be trusted advisers and supporters in banks. Now that relationship has changed—I hope not irrevocably, but many people fear that it is irrevocable—because of the way in which banks have treated small businesses in recent years.

Banks should be business-friendly, but the evidence is that they have behaved like parasites and engaged in sharp practice by mis-selling complex interest rate hedging products or hidden swaps that they will have known were massively to the detriment of the small businesses that they flogged them to. Instead of doing what small businesses do well and what the Government, those on the Government Benches and others who support the Government want businesses to do, which is to grow the economy and create jobs, thousands of small businesses have been held back and others put out of business altogether. But their being put out of business suits the banks in these circumstances, because every company that they lend to and that they can drive into administration has assets that they can sell and becomes a company that, conveniently, cannot seek redress from the bank, particularly in the current climate.

[Mr Mark Williams (Ceredigion) (LD)]

I congratulate my hon. Friend on securing the debate. In his analysis of this problem, is he of the view that the banks were clearly targeting specific businesses—asset-rich businesses? I ask that because my experience in my constituency is that the hotel sector, people owning property, property management companies and, above all else, the farming sector were really hard hit, particularly in the sales of unregulated tailored business loans.

[Andrew George]

My hon. Friend makes a very acute point. It does seem to me that in the many cases that I have taken up—no doubt he has done the same in his constituency—there were these rather dodgy business loans and, of course, the swap agreements embedded in them. That is the critical thing. There do appear to be very significant assets within the businesses themselves, and no doubt that will have guided the banks as to which businesses to offer the loans to.

I gave my hon. Friend the Minister at least some notice of the areas that I would be covering. In particular, I would like to ask her how the Financial Conduct Authority can justify the exclusion of at least one third of the companies that were being looked at and that were mis-sold these products because they are deemed by the FCA to be “sophisticated”. What was the basis for that—in my view, it was an arbitrary basis—and how can it be challenged?

What view do the Government take of the reasonable claim, in my view, by companies to which the mis-selling of these products has caused detriment that they could seek redress for “consequential loss”? It is suggested that some banks are seeking to reinterpret the law in this area, so that it is difficult for those companies to pursue consequential loss.

What happens to those businesses that were in effect forced into administration or liquidation by the mis-selling? At present, they appear to have no redress at all. Surely that cannot be right. I hope that the Government will encourage the FCA at least to have that matter looked at again.

Does the FCA review and redress process take into account or exclude the matter of “ongoing facilities” provided by the banks—the ongoing facilities that are made available through the banks?

Will the Government now authorise an inquiry into the sale of all hidden swaps—the tailored business loans, the embedded swaps and so on—sold to small and medium-sized enterprises by the banks since about 2001? That is when this pattern of activity was identified.

This is a separate but no doubt related point. What assistance is there for entrepreneurs who are trying to secure a mortgage, or even complete a rent check, for a home now that the self-certification system has been scrapped? Many small businesses and, in particular, new businesses that are starting up—we want to encourage people in those businesses—cannot secure a loan to advance their business.

I fully appreciate that the Government have made significant strides in recent years with the establishment of the business bank, the enterprise finance guarantee scheme, the enterprise capital fund, funding for lending, the growth accelerator and many other initiatives, which have been significant and helpful to the business sector. I certainly hope that those will prove to be a success in the months and years ahead. My primary focus today, however, is that we still have a legacy of a problem, which ought to be erased from the business lending environment. I hope that when the FCA completes its review process, it will ensure that the banks engaged in such shoddy practices are brought to book as quickly as possible, so that the companies that have suffered detriment may resolve their redress equally quickly.

Inevitably, I come at the problem from the perspective of my constituency, so I probably need to paint a picture of the west Cornwall and Isles of Scilly constituency of St Ives. Not only is it the most attractive constituency in the country, but it has a large number of very small businesses. There are no major companies—no car plants, refineries, major manufacturers or head offices of multinational companies, as there are in many other constituencies—and there are instead about 7,000 enterprises. That figure depends on how we define a small business, but certainly includes sole traders and medium-sized enterprises. They are multifaceted and many-talented businesses; they not only throw pots and manage satellites, but engage in basket weaving and international website design, and they include hoteliers, caterers, bakers, farmers, fishermen and fishmongers.

In order to be successful, as well as having to work extremely hard, the people in those businesses often have to have many other talents, such as in marketing, customer care, bookkeeping, or IT and other skills. Few of them, however, are financially sophisticated. Most of them used to assume that they could trust the bank of which they had loyally been a customer, in many cases for decades, before they were mis-sold those products. Surely banks are there to help. Do banks not have a shared interest in businesses succeeding? Surely banks would not engage in sharp practice or sell a small business something that they knew it would regret. I am afraid to say, however, that I and many other Members have seen that that is simply not the case.

The banking sector seriously let down small businesses and completely demolished any of the trust that used to be fundamental to the relationship between them and their banks. Would the banks do the same to Tesco, BP or Unilever? Of course they would not, and we know that they would not; they are simply taking advantage of small businesses. The banks know that small businesses do not have the sophistication, and that they can run rings around them, bullying them into the kind of agreements that put some of the businesses out of business and left many of them struggling to survive. I have taken up many cases, as other MPs have done, and my eyes have been opened to the shady dealing.

Colin Phillips of the Coasters tea shop in St Ives, for example, was recently put out of business by that bank practice. He saw his business sold from underneath him, without any consultation, after he was mis-sold a loan by Clydesdale bank more than five years ago. There are many other examples, which I could name, as well as some I cannot name. They have been devastated and damaged by the banks in that way. One company, Seasalt Ltd, was started in Penzance in my constituency in 1981 by Don Chadwick and is now run by his three sons, Leigh, David and Neil. It is a successful UK company. It is the first business ever to have its clothing certified by the Soil Association and it has won the Queen’s award for sustainable development, making it the first fashion company to do so. It has been very successful, it has won many awards and it is growing.

However, Seasalt could have grown a great deal more. It entered into a five-year interest rate swap agreement for £805,000 in April 2008 with HSBC. I am told by Leigh Chadwick that the company did not have a choice about the swap; it was a condition of the loan that it took the “interest rate protection.” The bank failed to make proper inquiries to ascertain the company’s level of knowledge and understanding of the risk inherent in the IRSA. The company was led to believe that interest rates were going to rise. Although the company had never previously taken a fixed-rate loan, the owners wrongly thought that HSBC, its trusted banking partner for 17 years, was acting in their mutual interest; otherwise, the owners thought, why would it be making a swap agreement a condition of a loan?

At the time, there was significant equity in the business—that relates to the point that my hon. Friend the Member for Ceredigion (Mr Williams) made—and the company also had access to additional external funding. The swap agreement was unnecessary and the bank’s motive for making it a condition of the loan was profit, not risk mitigation. The cost of breaking the swap was never explained or illustrated. The bank knew that there was a possibility that the loan could be repaid early, and yet it of course made it difficult for the company’s owners to do so. It confirmed in writing that there would not be any early prepayment or early termination costs, which was wrong. The bank failed to disclose that the IRSA created a contingent liability that would affect the company’s credit line. The IRSA had a detrimental effect on the company.

The company complained in 2012, but HSBC has done its utmost to fight its claim, despite the strength of the company’s case. While the company is preoccupied with trying to get proper and just redress, it is of course not focusing on growing its business and creating jobs. It is an appalling waste of money for UK business, given that the Financial Services Authority found that 90% of the swaps had been mis-sold.

[Mr Mark Williams]

My hon. Friend gets to the nub of the issue affecting businesses that are within the Government’s redress scheme. The Financial Conduct Authority’s redress scheme is very welcome and it has led to resolution of some cases. However, I have constituents who have been waiting for more than a year now to have resolution. As he says, that puts a huge amount of pressure on their businesses, let alone the tailored business loans—the embedded swap products—that are not being considered yet.

[Andrew George]

I am sure that the Minister heard my hon. Friend’s comment and will take it into account in her response.

The fact is that Seasalt is still waiting for its interest swap issue to be resolved, more than 21 months since it lodged a complaint about it. HSBC has done its best, first, to resist the redress process and then to slow it down, although the company’s owners have been told that the matter will be reviewed by the end of next month.

This issue has unquestionably cost thousands of jobs. In the case of Seasalt alone, it has estimated that the cost to it is 20 jobs, which it could have created if it were not for the impact that this swap has had on a company of its size; we are not talking about a very large company. Not unreasonably, Leigh Chadwick asked me:

“When will criminal proceedings be brought…?”

The Tomlinson inquiry suggested that in some cases this matter should be a criminal matter. As Leigh asks:

“When will criminal proceedings be brought against the bankers who have perpetrated this fraud?”

Equally reasonably, Leigh makes the point that this issue needs to be related to the issue of bankers’ bonuses. He fails to understand how a business—particularly one that is, after all, taxpayer-funded—can continue to pay huge bonuses when it is making losses. He says that he is sure that the bank would baulk at renewing Seasalt’s facilities if it made a loss but started paying its owners huge bonuses in the process.

I fear that the process of establishing a decent relationship between businesses and banks may have changed irrevocably. Seasalt has said that instead of banks being trusted advisers to SMEs, their relationship is like that with an untrustworthy supplier. The Government, the FCA and other regulating authorities should look at whether the regulations need to be significantly stepped up. What are the Government doing to stop banks side-stepping the EU bonus caps? What steps are the Government taking to increase the FCA’s power and to ensure that it acts in the best interests of SMEs and customers, and not the service providers?

I could describe many other cases, but the Minister needs time to respond. I mentioned the difficulty that many small businesses in my constituency, particularly new businesses, face because of removal of the self-certification scheme for those seeking a mortgage. It seems wrong that businesses that are employing people cannot get a mortgage when their employees can. I hope that the Minister will look at that.

The relationship has clearly broken down. The banks have behaved very irresponsibly with sharp practices like parasites on small businesses. I hope that the Government will take the bull by the horns and ensure that the FCA drives the review process and that we get satisfaction for our small businesses.

[The Economic Secretary to the Treasury (Nicky Morgan)]

It is a pleasure to serve under your chairmanship this afternoon, Mrs Riordan. I thank the hon. Member for St Ives (Andrew George) for securing this debate. I am grateful for the opportunity to discuss this important issue. I know from previous debates that it is of great concern to hon. Members of all parties.

Towards the end of his speech, the hon. Gentleman mentioned the wider issue of the relationship between banks and customers. I hope he will understand that, if I do not tackle that broader subject, it is because I have only 12 minutes to deal with the matters he has raised. I am sure he will be able to apply for a further debate in this Chamber to explore those themes, but I have taken note of what he said.

The hon. Gentleman made a strong case on behalf of all the businesses in his constituency and others that have suffered from mis-selling. He referred to 7,000 small enterprises in his constituency, and I would like to start by assuring him that from the very beginning this Government have been clear that the mis-selling of financial products is unacceptable. We take extremely seriously the abuse that has taken place, and we are determined that any wrongs that have been inflicted on businesses should be righted.

Hon. Members will know that the Financial Conduct Authority’s review process was the subject of a Back-Bench debate on 24 October 2013 and focused on the speed of the review. The hon. Gentleman mentioned that in relation to a particular company in his constituency. My colleague, the Financial Secretary, noted that although the Government shared the disappointment at the progress that had been made then, we were confident that the review process would provide the correct level of redress for affected businesses.

I am pleased to say that considerable progress has been made during the intervening five months. All cases are now under review and almost half a billion pounds has now been paid to more than 3,400 small and medium-sized enterprises. I hope hon. Members agree that that is positive news and shows that the review is working.

It is worth noting that the majority of banks in the review will also now make an initial redress payment to businesses and then discuss consequential losses separately. I will return to consequential loss, which the hon. Gentleman mentioned. That will help those small businesses that have been at the wrong end of mis-selling to get back the money they badly need. I know from companies in my constituency that have approached me that cash and cash flow are tremendously important.

The FCA has published each bank’s projections for when it expects to finish the review process. All banks are expected to finish the review by June 2014, which is the month after next, with a number likely to finish before that date. I can assure the hon. Gentleman that Treasury Ministers and officials will continue to track progress closely against those projections.

The hon. Gentleman voiced concerns about the large number of businesses that have been assessed as “sophisticated” and therefore fall outside the scheme. The Government have been absolutely clear that businesses that lacked the necessary skills and knowledge to fully understand the risks of these products should receive appropriate redress. However, as the Financial Secretary made clear last year, we do not agree that all businesses should have access to the review. There needs to be a defined cut-off point where more sophisticated businesses take responsibility for understanding the products they purchase. There will have been organisations that took one of these products with a full understanding of the risks involved if interest rates fell. It is not for the Government to perform due diligence for such large sophisticated businesses. Any such action would weaken incentives for businesses to act sensibly when purchasing financial instruments, and I would be concerned that we could open the floodgates to any businesses that lost out from a financial transaction.

[Andrew George]

I am grateful for the Minister’s comments on that, but will there be an opportunity for appeal for those businesses? There will be circumstances in which businesses can show that this unregulated financial product was mis-sold and that they were misled through how the banks sold the product to them.

[Nicky Morgan]

As I understand it, the FCA has amended the sophistication test in the past few months. It started off with a broad test under the Companies Acts, and that has been refined. From a constituency case, I know that it is possible to ask the FCA to reconsider whether a business should be deemed to be “sophisticated”, but the FCA will ultimately make the judgment. Some push-back is possible, and there needs to be a defined cut-off point so that the right businesses are within the scope of the review.

I reiterate that the Government take extremely seriously the abuse that has taken place in many cases, and we are determined that any wrongs inflicted on businesses should be put right. I want a quick solution to the mis-selling of interest rate hedging products to allow the businesses to continue to operate and to contribute to the ongoing recovery of the UK economy.

The hon. Gentleman asked some specific questions. If I do not get to the end of them, the Financial Secretary or I will write to him on them. The hon. Gentleman asked about consequential loss and some banks, as he mentioned, seeking to reinterpret the law on it. Banks are required, where there is mis-selling, to provide fair and reasonable redress, and that means putting the customer back in the position they would have been in had the regulatory failings not occurred. That includes any consequential loss. The FCA has published guidance on consequential loss.

The hon. Gentleman asked what happens to businesses that are effectively forced into administration or liquidation by mis-selling. My understanding is that the FCA has confirmed that in those cases the administrator will take part in the review on behalf of the business. The business directors will be given plenty of opportunity to put their case on the sale of the hedging product. He asked about ongoing facilities, and I will have to write to him on that matter, because we have to check. I will return at the end to the self-certification regime, because it is slightly outside the scope of the debate.

[Andrew George]

I am grateful to the Minister for giving way once again. With those companies that go into administration, the administrator is in many cases acting on behalf of the creditors, including the bank. I cannot see how the administrator can in any sense represent the interests of the company seeking redress.

[Nicky Morgan]

The hon. Gentleman has raised an interesting point. At the end of the day, the administrator is there to get a fair deal for everybody. The directors of the business are given an opportunity to put their case on the sale of the hedging product to the FCA. The directors of the business, even if the business has gone into administration, will be able to put their case. In my business experience, in most cases, the administrator acts to get as much back for the business and the creditors as they can.

I turn briefly to embedded loans and hidden swaps, which the hon. Gentleman and the hon. Member for Ceredigion (Mr Williams) raised. The hon. Member for St Ives mentioned the difficulty faced by his constituent Mr Phillips and the Coasters company in relation to a fixed-rate loan, and I am sorry to hear about the problems that that caused. As the hon. Member for Ceredigion said, the FCA does not have regulatory powers over business loans, so its supervised review can cover only interest rate hedging products that were agreed separately from a business loan. The Treasury has secured a voluntary agreement through the British Bankers Association that banks will provide the same level of disclosure for features of fixed-rate loans, such as break costs, as for regulated interest rate hedging products. Most importantly, the banks will now ensure that break costs are fully explained and that worked examples are provided.

On self-certification, the hon. Member for St Ives asked about assistance for entrepreneurs who are trying to secure a mortgage. The Financial Services Authority conducted a wholesale review of mortgage regulation in the UK, the “Mortgage Market Review”, which was published in October 2012. The rules are to be implemented by the FCA before the end of this month, and as a result, lenders will not be able to offer self-certified or fast-track mortgages from 26 April. However, the FCA recognises that lenders should have flexibility to decide what evidence of income they can accept from self-employed customers, so it will be for individual lenders to decide what evidence they require as proof of income. I am sure that the hon. Gentleman appreciates that the new rules are being introduced in the context of wanting to ensure that we have stronger mortgage lending practices to avoid the problems that we have encountered in the past, which were caused by people borrowing more than perhaps they should have done.

On lending to small businesses, as the hon. Gentleman mentioned, the Government are determined to support small businesses and improve access to finance. The funding for lending scheme has provided incentives to banks and building societies to boost their lending to the real economy. Since the introduction of that scheme, bank funding costs have fallen to historic lows. As the hon. Gentleman said, there has to be confidence between businesses and their banks. That is why the major high street banks have put in place an independent appeals process that allows any business with a turnover of up to £25 million that is declined any form of lending to appeal against that decision, for any reason, to the participating bank concerned. Results show that, in the two years for which the appeals process has been running, in 40% of cases in which a decline was appealed against, a lending agreement with which both parties were satisfied was subsequently reached.

The Government announced in the Budget that the first results of a major new survey into how banks perform for small businesses will be published by the Federation of Small Businesses and the British Chambers of Commerce next month. Banks will be able to use the results to measure their progress towards becoming better banks for small businesses everywhere. The Government are very focused on that. We welcome that review, because we want to provide UK small businesses with a clear and credible way to judge how their bank compares with its competitors. We want Britain’s banks to do more to put Britain’s small businesses at the top of their priority list.

Hon. Members may know that the Government announced a package of measures designed to improve competition in the SME lending market, which included consultation on proposals to require banks to share more information on their SME customers with other lenders through credit reference agencies, levelling the playing field for challenger and non-bank lenders. Finally, the Government announced in the Budget that we would consult on whether to legislate to require SME lenders to release details of businesses that they reject for loans, so that alternative providers can discuss other options with them.

I am aware of the time, so I will conclude. I thank the hon. Member for St Ives for bringing this important issue to the House. I assure him that the matter continues to receive the highest level of attention from the Treasury and from Ministers more widely.

Question put and agreed to.

Oral Answers to Questions

Andrew George Excerpts

Tuesday 25th June 2013 Commons Chamber

[Greg Clark]

The channel is not very far from my hon. Friend’s constituency, so it is possible to look across. He will know that the UK cut its structural deficit by more than any other G7 country over the past three years, whereas Labour racked up the largest structural deficit in the G7. The shadow Chancellor confirmed on Sunday that he would borrow more money in 2013, 2014 and 2015. Labour says it has a new policy, but it is the old policy—to borrow more and to go further into debt.

[Andrew George (St Ives) (LD)]

10. What progress he has made on implementing the housing market measures announced in Budget 2013.

[The Economic Secretary to the Treasury (Sajid Javid)]

The Government have made excellent progress in implementing the measures. For example, the Help to Buy equity loan scheme has helped 4,000 individuals and families reserve a new build home already and the Help to Buy mortgage guarantee scheme will be in place by January 2014.

[Andrew George]

In high house price and low wage areas such as mine, where four times more properties are sold to second home buyers than to first-time buyers, intermediate market solutions—shared equity and affordable homes with section 106 planning restrictions—are often the only way for local families to get a toe on the housing ladder, yet the equity loan scheme does not have the rules to enable them to take advantage of it. Will the Government reconsider the rules to help local people in such circumstances?

[Sajid Javid]

My hon. Friend is right to raise that issue. He will have upmost in his mind the fact that under Labour, house building fell to its lowest levels since the 1920s. The Government are supporting hard-working households who have saved but who do not have a large deposit from the bank of mum and dad to help in buying their own home. The Help to Buy equity loan scheme he mentioned will help 74,000 families and has already helped 4,000. My hon. Friend will be pleased to know that 20% of the £1.8 billion of additional funding we have promised for affordable homes will go to shared ownership.

amendment of the law

Andrew George Excerpts

Monday 25th March 2013 Commons Chamber

[Andrew George (St Ives) (LD)]

It is, of course, a pleasure to follow the hon. Member for Bradford West (George Galloway). His speech was an oratorical interlude that demonstrated his perspective on the world and suited his style: blacks, whites and no greys. Although he denies practising yah-boo politics, I am afraid to say that that was pretty much what we heard.

Today, we are concentrating primarily on housing, and I want to make a constructive contribution on the narrow issue of developing the construction industry, trying to kick-start the economy in the process and meeting desperate housing need. I welcome any intervention by the Government, including the Budget announcement on the promotion of home ownership for those seeking, in many cases in desperate circumstances, to get their first toe-hold on the housing ladder. In particular, I want to look at the special circumstances faced by many people living in rural areas.

My own part of the world is, of course, west Cornwall and the Isles of Scilly. Cornwall as a whole has seen the number of houses double in the past 40 years, yet housing problems for local people have become significantly worse. What we have learned in Cornwall applies to many other parts of the country that are attractive to wealthy people—we have many such places in Cornwall—who can afford second homes. On its own, building houses is not the problem. In places that are highly desirable to those with large wallets, something more sophisticated is required than merely heaving in a load more houses and turning the place into a developers’ paradise. There is a big mismatch between earnings levels and house prices in our area.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Gentleman’s area, like mine, has a number of second homes on coastal development routes. Does he agree that we need the Government to plug this massive loophole, so that people do not take advantage of what appears to be there at the moment and build large buy-to-let properties with a significant subsidy from the public purse?

[Andrew George]

I entirely agree. As the Government introduce their proposals, I hope that they will discount any chance of the loan guarantee being used to support the purchase of second homes, and that it will go only to families that otherwise would not be able to buy a first home of their own. After I was first elected in 1997, I campaigned against the policy that had been introduced by the Conservative Government of providing a 50% council tax discount for second homes. In that case, hundreds of millions of pounds were being used every year to subsidise the wealthy buying second homes, when thousands of local families could not afford their first. This Government are finishing off the job. I persuaded the previous Labour Government to remove as much as they possibly could of the second home council tax discount, and that was the right step forward.

Before I was elected to this House, I worked with housing associations and others to find a way of constructing a new lower rung on the housing ladder through shared equity and shared ownership schemes. The rural exceptions policy allowed exceptions to be made on the edges of villages and towns, where planning permission would not normally be granted, to meet local housing need. It allowed the schemes to go ahead and meant that the development price of land was significantly lower than would have been the case if they had been given unfettered permission to develop the land and build properties at prices that local people could not afford. The exceptions approach and shared ownership were clearly the way forward. The problem was that in rural areas only two lenders, Nationwide and Halifax, were prepared to put money into shared ownership developments.

A lot of lenders question whether they are prepared to put their money in and support local families who are trying to get on to the housing ladder. Such properties do not result in the level of default—the amount is 0.45% in shared ownership as a whole, which is significantly less than that for rural housing stock—that a lot of lenders pretend. If the Government are looking at ways to tighten the definition and develop their loan guarantee scheme so that it will apply to families who desperately need help, I urge them to look at the shared ownership sector. They should find ways to enable the situation to come to life, but not just on the first, initial purchase; they should try to ensure that on the second and subsequent purchase they can facilitate and work with housing associations so that these families can move on. The lack of confidence that this market can have a life of its own is holding it back.

I hope the Government will look at ways of having, in effect, a rural housing investment bank through this measure, and I hope that they will see this as a constructive contribution to the debate.

Tax Fairness

Andrew George Excerpts

Tuesday 12th March 2013 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right to raise that point in the context of the changes we have made to our corporate tax system. In 2009 KPMG commissioned a survey of tax professionals, asking them to name the three most competitive countries. The UK was nominated by just 16% of respondents. In 2012 KPMG undertook the same survey and the UK was nominated by 72% of respondents. That is a dramatic change, which we are proud of, and it will help our economy grow. We have also had the courage to reduce the 50p rate, which will help our competitiveness, too.

[Andrew George (St Ives) (LD)]

One thing we do know is that mansions cannot emigrate if the tax rate goes up. Earlier my hon. Friend the Minister said that the problem with the mansion tax is that it becomes a home tax. Does he agree that the council tax is also a home tax, and may I understand from what he has been saying that the Conservatives are coming round to the Liberal Democrat view that we should consider introducing a local income tax as an alternative for financing local authorities?

[Mr Gauke]

No, I think my hon. Friend would be wrong to reach that conclusion from what I have said. There is an interesting debate on the balance between property and income taxes, however, and I note his suggestion in that context.

May I now return to the topic of the 50p rate, as I know the hon. Member for Nottingham East likes to focus on it? The Opposition may think that in this day and age 50p is the least the wealthy should pay in income tax. I want to put to them the question raised earlier by my hon. Friend the Member for West Worcestershire (Harriett Baldwin). In less than four weeks the 50p rate will have gone. The additional rate will be 45p. Will Labour seek to reverse that? I am happy to take an intervention on this point. Will Labour seek to reverse that after the next election?

Cornwall (Government Funding)

Andrew George Excerpts

Tuesday 18th December 2012 Westminster Hall

[Dan Rogerson]

I am grateful to the Minister for giving way again. He is being extremely generous, as was the Treasury with the project that he describes, although I have to acknowledge that half the costs will be funded locally, through local authorities. That is an excellent example of what he was talking about earlier: £30 million is coming from central Government and £30 million from local government. He also raised the issue of fuel duty. Again, I welcome the Government’s decision on that. I understand that they are also having discussions with the European Union in relation to what it has done for islands, such as the Isles of Scilly in the constituency of my hon. Friend the Member for St Ives (Andrew George), and whether rural parts of mainland Britain could also benefit from a further reduction—

[Andrew George (St Ives) (LD)]

Of 5p.

[Dan Rogerson]

A 5p reduction. That would have a huge impact, particularly on small businesses in my constituency. I urge the Minister to redouble his efforts to secure that.

[Mr Gauke]

My hon. Friend is right to say that we are having further discussions with the European Commission about that. Obviously, we will update the House as soon as we are able to do so. However, I do not want to leave the A30 just yet—not a comment that people often make. The scheme to which I referred, and for which I know my hon. Friend has campaigned long and hard, will relieve congestion and improve journey times. It will also attract business growth and inward investment to Cornwall by improving links to the rest of England. The Government welcome the commitment from Cornwall council, to which my hon. Friend alluded, to deliver and part-fund the scheme on behalf of the Secretary of State. Its drive in taking the scheme forward demonstrates how much of a priority it is to the council and to Cornwall generally. Work on the scheme is set to start in 2014-15, subject to the completion of planning processes and funding agreements, and the road is due to be open to traffic in 2016. I am sure that it will bring real benefits to the area.

My hon. Friend may feel that my contribution took a long time to reach Cornwall, and I am sure that is a feeling that many motorists will at times sympathise with. However, it is important for us to look at the national context of spending and the impacts that decisions made at that level will have in each region. I hope that my comments have been useful in laying out the Government’s position.

[Andrew George]

I know that my hon. Friend the Member for North Cornwall (Dan Rogerson) raised, while I was still in Committee, the issue of health funding and the principle of parity. Cornwall has received more than £200 million less over a six-year period than the Government themselves have said it should receive—than its target funding. I know that the Minister has deferred to each Department when he has answered questions on these issues, but as for his opinion, does he think that such a distance between what is allocated and what the Government say that a local area should get is acceptable?

[Mr Gauke]

Of course, as a Government, we are committed to ensuring that there is a fair funding system. As a constituency MP, representing a Hertfordshire seat, I know that often one can look at particular areas, including health funding, where there are disparities between what one might expect—what one might see as the right amount for one’s area—and the national average, and that can be deeply frustrating for Members for Parliament and for our constituents. My hon. Friend the Member for St Ives (Andrew George) makes the case well for Cornwall. Of course, as a Government, through all Departments, including the Treasury, we will look at what we can do to ensure that we have a funding system that is fair.

I am conscious of the time, so I will conclude. I congratulate my hon. Friend the Member for North Cornwall on securing the debate, on his work in relation to the A30, and on raising the points that he has raised today. Of course, as a Government, we want to ensure that we have a fair funding formula, whether that be for health, education or local government. That is something that we recognise across Government, including in the Treasury. On the specific issue of damping that my hon. Friend raised, I think that more information will be available to him very shortly.