Air Passenger Duty

Anne Begg Excerpts

Thursday 1st November 2012 Commons Chamber

[Dame Anne Begg (Aberdeen South) (Lab)]

I support the motion in the name of the hon. Member for Witham (Priti Patel) and others. Aberdeen depends greatly on the airlines, and especially on connecting flights. If the hon. Lady thinks the situation is bad in Essex, she should consider what it must be like for my constituents. Her constituents—and others who live within easy reach of London—have some choice in how to get out of the country; they can travel by Eurostar, for instance. From Aberdeen, however, it is impossible to get out of the country without either flying or spending a very long time travelling.

APD’s great impact on my constituents’ lives is highlighted by the fact that I received more e-mails about the fair tax on flying campaign than any other MP. Although it is good that 800 or so constituents got in touch with me, I do not necessarily want to thank them, because I received half of those messages in a two-hour period one afternoon after British Airways sent out an e-mail to all its executive club members. I thought I was under cyber-attack because my computer went mad; it started constantly pinging. In all the years I have been an MP, this is the issue on which I have received the most e-mails.

Other Scottish Members have mentioned a report published today by York Aviation, which was commissioned by Scotland’s largest airports. Derek Provan, the managing director of Aberdeen airport, said:

“This report shows, quite simply, that APD is damaging Scotland. It is damaging our economy, our tourism potential and our ability as a nation to bounce back from the recession. It limits our opportunities for growth in the employment market, costing as much as £50 million in the process.

At Aberdeen Airport we run a real risk of losing around 200,000 passengers by 2016 through this damaging tax. Each recent increase in APD has had a dramatic impact upon what we, as airports, have achieved and could have achieved without APD. It is imperative that the UK government undertake a detailed and comprehensive review into APD with the utmost urgency, and at the very least freeze APD whilst that is taking place.”

So both Aberdeen airport and other airports in Scotland are being affected because of not only the level of APD, but its existence and the way it acts as a disincentive to those furthest from the hub airports.

[Mr MacNeil]

Does the hon. Lady agree with her colleague the hon. Member for Central Ayrshire (Mr Donohoe) that APD should be devolved to Scotland?

[Dame Anne Begg]

Whether or not APD is devolved to Scotland, the problem we face is the level of APD and the way it is operating. Just because a tax is devolved, does not necessarily mean it would be treated any differently in Scotland—

[Mr MacNeil]

I think it might be.

[Dame Anne Begg]

It might be, but it could be treated differently down here, too. The problem I have with devolving some of the taxation that the hon. Gentleman would want devolved is that, as we know, the Scottish Government have a huge hole in their budget. So in terms of their priorities and how they spend their money, there is a fear that they would see APD as an easy cash cow, as indeed the Westminster Government do. There is no guarantee that a devolved APD would be any different from the one we see here.

[Mr MacNeil]

rose—

[Dame Anne Begg]

Mr Deputy Speaker is shaking his head, so perhaps I should not allow the hon. Gentleman to come back in, because we are getting away from the points I wish to make.

Most people who fly out of Aberdeen connect to other routes. Although lots of the flights from Aberdeen go to other domestic destinations, many of the people on the planes—the ones that the right hon. Member for Gordon (Sir Malcolm Bruce) and I are on every week—come to London to connect on to another route. I would like there to be a lot more direct flights from Aberdeen, but that, like the debate on the devolved nature of APD, is an issue for another day.

At the moment, most people in Aberdeen who want to travel abroad have to connect through one of the major hubs. The Government are making it particularly difficult to make Heathrow attractive as that hub. It is important for the British economy that Heathrow remains the main hub and that it is through Heathrow that all the traffic going out of the UK is filtered. There are two main reasons why Heathrow is becoming less and less attractive. The first is the system of APD, as anybody connecting through Heathrow is inevitably caught one way or the other. If they have booked their flights in separate lots they get a double-whammy, and if they have a through-flight, they still end up paying APD. Secondly, it would be remiss of me if I did not mention that part of the reason for Heathrow’s unattractiveness is the congestion there because of the lack of a third runway. People in north-east Scotland strongly support the building of a third runway at Heathrow.

Those two things, put together, mean that people in Aberdeen, and possibly in Edinburgh and elsewhere, are more attracted to using other airports as the hub through which to transfer. For people from Aberdeen that means going through Schiphol or Paris—and Lufthansa now has flights on to Frankfurt. Those who book the different parts of their journey separately pay only one part of APD—they do not pay APD on their full flight. So financially that approach becomes much more attractive. The consequence is business loss not only for Heathrow but for the UK carriers, who are suffering the most. That is a real problem and a shame.

We know that there is often no option other than to fly out of Aberdeen. We do not have an electrified rail service north of Edinburgh and we do not—and probably will never—have high-speed rail. It might get to Manchester, it might get to Scotland, but it is unlikely ever to get as far as Aberdeen. It takes too long for us to get a train to the Eurotunnel, so many people are affected by the rise in APD. This does not just affect business travellers. Aberdeen airport survives because we have a very buoyant economy in the north-east of Scotland because of the offshore oil and gas industry, but that economy will not be enough to support the airport if the Government are intent in undermining much of that travel through the increase in APD.

Many business travellers come through Aberdeen and they want to be connected to the whole world, not just part of it. They want to be able to fly through Heathrow and go on to some of the emerging markets, which often also have oil and gas. That is why it is important that the Government should listen to this afternoon’s debate.

Public Service Pensions

Anne Begg Excerpts

Tuesday 20th December 2011 Commons Chamber

[Danny Alexander]

I think that there are 28 unions altogether, of which 26 have signed up to the agreement in principle, although it is fair to report that they now need to take the issues back to their members and executives. Unite has reserved its position in a number of areas, and the PCS has refused to sign up, which is deeply disappointing. In the teachers’ scheme, all the unions were present at the discussions and have agreed in principle, although four unions have asked to reserve their position pending sight of the technical annexes that will accompany the heads of agreement.

[Dame Anne Begg (Aberdeen South) (Lab)]

Has the Chief Secretary made an estimate of the number of people who will opt out of their pension scheme because of the increased contributions, leaving them with no pension cover whatever?

[Danny Alexander]

For anyone who wishes to have a pension, these are among the best pensions available. It would be right for people to stay in their pensions or to join them, and I hope that no Member of the House will encourage anyone to opt out of their pension on the basis of this agreement.

Public Service Pensions

Anne Begg Excerpts

Wednesday 2nd November 2011 Commons Chamber

[Danny Alexander]

If agreement is reached, they will. The arrangements that the hon. Lady describes are an important part of the discussions, but they depend on reaching a sustainable agreement on the future of public service pensions along the lines I have set out.

[Dame Anne Begg (Aberdeen South) (Lab)]

I look forward to studying the proposals, because with pensions the devil is always in the detail. I have spoken to public sector workers, and the two things that they are most concerned about—and which might have encouraged them to vote for strike action at the end of November—are the large increase in individual contributions, on top of what they already contribute, and the move from the retail prices index to the consumer prices index. I did not hear from the Chief Secretary’s statement whether those two things remain in place, which would be a disappointment to public sector workers.

[Danny Alexander]

Those two things do remain in place. I understood from a previous debate that the Opposition supported the switch from RPI to CPI. We are going ahead with the increase in member contributions, which, as Lord Hutton said in his interim report, is necessary to rebalance the substantial increase in costs over the past few decades, which have been borne almost entirely by the taxpayer. Around the table with the trade union negotiators, the main issues raised in recent weeks have been the accrual rate, the transitional arrangements and the guarantee that we are reaching a long-term settlement.

Global Economy

Anne Begg Excerpts

Thursday 11th August 2011 Commons Chamber

[Mr Osborne]

I would be very happy to look at that specific constituency case. Let me look into the details and get back to my hon. Friend with an answer, or meet him in person to discuss it.

[Dame Anne Begg (Aberdeen South) (Lab)]

The sluggish growth rate has led the Office for Budget Responsibility to now forecast even higher unemployment. More jobs are being lost in the economy than are being created. The Government’s own policies are adding to that, because they are putting new work obligations on to people who have been out of the work force for some time. While it is absolutely right that the Government help people to find jobs, not all of them will do so. It is very wrong that people who are doing all they can to find work and still have not done so will find they are facing the loss of their benefits. In light of the new growth figures, will the Chancellor speak to the Secretary of State for Work and Pensions, as the sanctions on these people should be lifted?

[Mr Osborne]

First, if I might correct the hon. Lady, the OBR is not forecasting rising unemployment over the Parliament; it is forecasting falling unemployment over the Parliament. I also remind her that half a million private sector jobs have been created over the last year. Let me deal directly with her point about social security. The welfare system is a poverty trap that is discouraging people from working. People on benefits face incredibly high marginal tax rates if they find work. That is why my right hon. Friend the Secretary of State for Work and Pensions is, with my full support, seeking major reform of the welfare system, so we incentivise people off benefits and into work. That is one of the most important reforms this Government are undertaking.

Oral Answers to Questions

Anne Begg Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point about the relationship between banks and their customers and the transparency of that relationship. That is why the British Bankers Association business taskforce has introduced a range of measures to look at the relationship between banks and their customers and we will continue to monitor that work. It is important that banks are transparent with their customers about the terms on which loans are offered.

[Dame Anne Begg (Aberdeen South) (Lab)]

My constituent Ashlea Hassan came to see me last week with her idea for setting up a small business. Despite having been told by every bank she has visited that she has an excellent business plan, a brilliant concept and enough equity in her house, not one of them is prepared to lend her the £40,000 she needs to set up her business. What advice does the Minister have for my constituent?

[Mr Hoban]

I would encourage the hon. Lady to suggest to her constituent that she pursue the appeal route that each bank has to enable businesses to appeal against lending decisions. That is a very transparent process that would, one hopes, reach the outcome that her constituent wants. The hon. Lady could also encourage her constituent to approach business angels for investment. We announced in the Budget a review of venture capital trusts and enterprise investment scheme reliefs to encourage more investors to commit more money to small and medium-sized enterprises.

Finance (No. 3) Bill

Anne Begg Excerpts

Tuesday 3rd May 2011 Commons Chamber

[Malcolm Bruce]

It certainly is. The United Kingdom continental shelf has the potential to supply up to 70% of our requirements for quite a few years ahead. It is a more secure source, geographically and practically, than other parts of the world where the politics are uncertain. Given a high oil price, the Government, the industry and the economy can all benefit if we get the balance right, and can all lose if we get the balance wrong. It seems to me that negotiation is the way forward.

Let me explain how the amendments address some of the industry’s specific concerns. On amendment 13, the Government stated in the Budget that they will reduce the supplementary charge back to 20% on a “staged and affordable basis”. That is a welcome approach, but it would be more welcome if the charge had also been raised on a staged and affordable basis, instead of having a sudden 22% step increase. The amendment therefore proposes a graduated levy, increasing by 1% for every $5 the oil price rises above the Government’s arbitrary set trigger price of $75, up to a maximum of 32%. I stress that these amendments express the proposals of myself and my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) as to how this could be done in a staged manner; they are not the amendments of the industry, although it is aware of them.

Amendment 14 sets up the basis for calculating the reference price. The Government seek to choose the spot price, but as I have said, few producers actually receive anything close to that. Indeed, it is not clear what calculations of what price the Treasury has made in determining its revenue projections. The amendment therefore proposes that there should be an independent mechanism for calculating a reference price, based on what producers actually receive. That would give predictability to the process and ensure that the tax base would adjust more smoothly when prices are volatile. I do not expect the Government to accept this proposal, but I hope they will accept that it is a constructive contribution to how an escalator could work both up and down, and in ways that would give the industry a lot more predictability than the Budget proposals as they stand.

[Dame Anne Begg (Aberdeen South) (Lab)]

I am very interested in what the right hon. Gentleman has to say, but would not what he is proposing have the opposite effect to what he has suggested, in that it will make things less predictable? The oil and gas price is already volatile, and to add in this extra unpredictability would make that 10 times worse.

[Malcolm Bruce]

No. I have listened carefully to the case Ministers have made, and it is important to acknowledge that Ministers are looking at a very high spot price and saying, “This is in excess of what the industry planned for, and there is a case that it should make a contribution to the economy.” I do not find that a totally unacceptable proposition, but I am concerned about it being introduced in a sudden bite from 20% to 32% and with no consultation or warning. What I am proposing is not an ideal; this is, perhaps, not where I would start from, but given where we are, it would be greatly preferable if it were to change in easily managed stages up and down, as that would enable the industry to predict where it would be and what level of taxes it would face. The alternative, which would not be very acceptable to the Treasury to pursue, is that it would go up on the basis of the $75 reference price to 32%. Are the Government really going to be comfortable, if the price falls to $69.95, to take it all off? I suspect not, and the industry suspects not. Even if the escalator up is not very well received by the Government, it is important that they try to ensure that it comes down on a predictable basis, because I think many in the industry feel it might never come down.

--- Later in debate ---

[Kerry McCarthy]

My hon. Friend makes an important point. The jobs being lost are in areas where there is little other employment. As he says, people in the area he represents have been affected by the decline in other traditional industries under the last Conservative Government. Now they are being hit by a double whammy with their jobs in the oil and gas sector being put at risk.

[Dame Anne Begg]

Does my hon. Friend agree that the best way to deal with the deficit is to grow the economy? The industry was growing and investing, but that growth and investment could be put at risk as a result of the measures.

[Kerry McCarthy]

Precisely. We come back to that time and again with this Government. They are looking at the very short term for quick revenue gain or political gain, not taking a longer-term approach. The point should not have to be made that if the Government want to encourage growth in the private sector, which they are always talking about, they need to encourage investment and have the right economic climate for that investment to take place. If the tax regime is not stable, that is put in jeopardy.

I accept that it may not be possible for the Government to consult widely on every tax policy. There is a balance to be struck between robust scrutiny and consultation and the Government’s freedom to act when necessary in the national interest, and consultation may flag up to certain companies that they ought to engage in tax avoidance measures, but in this case, the Government not only ditched their brand new tax policy framework, but went back on specific assurances to the oil industry.

The previous Government had formed a good working relationship with the industry, which may now be damaged. After a meeting in 2008 between the then Prime Minister and Chancellor and the oil and gas industry, the Government consulted with the industry to develop a package of new measures to revitalise investment in UK oil and gas reserves. Those were announced in the 2009 Budget and included the new field allowances and other incentives for companies to invest in the UK’s smaller and more difficult fields. Such close working together is vital to the stability of the tax system for North sea oil and gas. Unfortunately, it will become more difficult if the Government cannot restore trust with the industry.

Although it sounds hard to believe, as I said earlier, last year the Government created new golden rules for themselves to make tax policy more predictable, more stable, and more transparent. We can only conclude that the Government have ditched those rules altogether, just a year after taking office, because we cannot see how Treasury Ministers are

“committed to providing clarity and certainty on the future direction of tax policy.”

The industry body for the UK oil and gas industry agrees with us, saying that the measure has damaged the industry’s confidence and trust in the tax regime. I cannot see either how the Treasury still believes, as it said last year, without a hint of irony, that consultation is

“an integral feature of all policy making”,

which

“helps ensure that changes are well targeted and without unintended consequences, and that legislation is right first time.”

What happened to that statement of intent from the Government? Clause 7 is a perfect example of a policy for which there was no consultation. As a result, it is poorly targeted, has potentially serious unintended consequences for the industry, and is certainly not a policy that they got “right first time”, and all because the Government did not consult on their decision.

--- Later in debate ---

[Stewart Hosie]

I could not agree more. This is not just about Scotland, but about the entire UK continental shelf and the 440,000 people who are employed throughout the UK, including in East Anglia, off the north-west coast and elsewhere.

As I said—this is important—the warnings did not end a day or two after the Budget; they kept on coming. The most comprehensive analysis of the problem is in the 2011 international annual energy survey, which will be launched at the offshore technology conference in Houston, Texas this weekend. It is conducted by Maxwell Drummond, the industry employment specialist, which covers 100 international directors from all energy sectors. It says:

“the Coalition Government’s ‘supplementary charge’ on oil and gas production, projected to add an extra £2 billion to Treasury coffers, significantly and immediately impacted on global perceptions of the already challenging North Sea environment.”

If the international energy markets are warning of significant and immediate impacts, if there is a threat to tens of thousands of jobs, and if there is a threat to tens of billions of pounds of investment, the decision is clearly wrong.

[Dame Anne Begg]

Does the hon. Gentleman agree that because the UK continental shelf is now a mature province, many of the decisions on investment in the province are no longer taken in Scotland or London, but in Houston, Calgary or elsewhere in the world, and that the international perception of the tax regime is therefore crucial when such decisions are being made?

[Stewart Hosie]

That is absolutely right. I said when I intervened on the right hon. Member for Gordon that of course taxation needs to be sensitive to profitability, but that Ministers also need to understand that investment decisions are sensitive to tax and other costs. Although the field is mature, some of it is unexplored. If the perception is that it is expensive and that there is tax instability—which has been said—we will lose the ability not only to continue work in some of the mature fields, but to explore as yet untapped reserves, albeit in a mature sector.

As I have said, this is the most damaging measure in the Budget for economic growth. Although I respect the attempts to amend it and the tabling of amendments for the Government to discuss, we think that it is so damaging that we hope Mr Hoyle will be able to call on hon. Members from across the Committee to resist clause 7 very vigorously indeed.

--- Later in debate ---

[Mr Jones]

It does, and that leads us to the point about how we would arbitrate in disputes between different companies. My hon. Friend the Member for Aberdeen South (Dame Anne Begg) mentioned the fact that decisions on investment in oil and gas are not taken in this country, but in Houston, Calgary and other parts of the globe, so the North sea and exploration in this country is competing for investment from around the world. If companies have to jump through hoops to negotiate their individual tax liabilities before trying to put an appraisal together, I am sure that decision makers will go for the easier options so that they know what the return on investment will be, rather than the uncertainty that this has left us with.

[Dame Anne Begg]

If it is necessary to bring in all sorts of complicated extra things to mitigate the effects of a tax and make it appear fairer, surely the original tax is fundamentally flawed and should never have been introduced in the first place.

[Mr Kevan Jones]

My hon. Friend makes a very good point, and her point about investment will increasingly be thought of when making such decisions.

That brings us to the question of what the decision-making process was when coming up with this tax. We have already had the ludicrous situation whereby even a Minister who practically used to work for a gas company did not recognise the difference between gas and oil prices. In my experience as a Minister dealing with Treasury officials, I always thought that they knew what they were talking about, so I am surprised that the Treasury allowed this measure to get through, because everyone knows the difference between the prices of the two.

We have already seen the effects of that this week, with the possibility that Centrica might turn off investment in Morecambe bay, and I am sure that the Minister will be off the company’s Christmas card list next year unless she does something radical to change what has been proposed. That decision will not only mothball a gas field that would have provided this country with gas for years to come, but write it off.

What will we do instead? We will import gas, which does not make sense economically or for energy security, especially when we look at where the large concentrations of gas are in the world—the former Soviet Union, parts of the middle east and, lo and behold, north Africa. Any idiot can work out that even Morecambe bay, and possibly Blackpool on a rowdy Saturday night, is more peaceful than north Africa or parts of the former Soviet Union, so it is important that we take seriously the comments of companies such as Centrica, which have invested over many years and not just in oil and gas fields but, as my hon. Friend the Member for Blaydon said, in new technologies.

It is a dirty industry, but it is also a leader in new technologies, such as robotics and drilling, and, owing to the difficulty of extracting oil and gas from parts of the North sea, we have been able to develop new techniques that are now used throughout the world. That is why many UK companies are leaders not only in this country, but throughout the world.

It has also become increasingly clear that the tax rate will have a real effect on the economy of north-east England. I accept that hon. Members who represent Scottish constituencies feel passionately about the issue, but the measure will have a dramatic effect in the north-east, too. The Conservative part of the coalition tells us that we in the north-east should grow the private sector, but the oil and gas industry is a very vibrant part of the private sector. Indeed, my hon. Friend has already mentioned the sub-sea sector, which supports 10,000 jobs and 380 firms in the north-east.

--- Later in debate ---

[Justine Greening]

Realistically, it is not always possible to discuss rate changes with the industries concerned. It is not done as a matter of course, but the point about working with the industry to ensure that we understand the impact on more marginal investments is valid, and that is precisely what we are doing.

The clause increases the rate of the supplementary charge, which is a tax on the profits of oil and gas production, from 20% to 32% from 24 March this year. It is fair to point out that oil prices have increased from $77 a barrel at the time of the June 2010 Budget to about $125 a barrel today.

[Dame Anne Begg]

Plenty of other companies and industries deal in commodities whose prices go up, and plenty of other companies and industries make huge profits, but can the Economic Secretary name one other industry where the marginal rate of tax is 81%?

[Justine Greening]

The point is that we faced an increase in oil prices that had fed through pretty directly to pump prices. The increase in the cost of fuel was not just impacting on motorists, but having a huge impact on hauliers, on the cost of living and on businesses. We had to decide what was the right thing to do. I think that the right and fair thing to do was to share the burden by taking some of the additional profits that oil companies were making—profits at a level that far exceeded the projections of the companies when they made those investments. I will come on to answer the question from the hon. Member for Bishop Auckland (Helen Goodman) about projected future investment. I will give a telling statistic that makes my point very well.

We expect pre-tax profits from oil and gas production in the UK to be £24 billion in the current tax year, which is a 50% increase in just two years, primarily as a result of the increased oil price. Oil companies can afford to pay a bit more, but hard-pressed motorists, hauliers and businesses deserve to pay less.

[Justine Greening]

We have just agreed to clause 19 without either the Scottish National party or the Labour party having divided the House. If we are willing to accept the cost of the motoring package in clause 19, which I think we all accept was badly needed to support motorists, hauliers and businesses, we also have to accept some responsibility for putting in place a way of funding it. Clause 7 is how we will do that.

[Dame Anne Begg]

Will the Economic Secretary give way?

[Justine Greening]

Let me make a bit more progress, because Members have raised some real concerns and I want to ensure that I respond.

The Government recognise that we need to act as a good custodian of the UK’s natural mineral wealth; at the same time, we need to manage a tax regime that tailors the level of tax to the level of profits available from the UK continental shelf. The UK’s oil and gas reserves are a finite resource that belongs to the nation. Current oil production was not sanctioned on the basis of the high prices from which the industry benefits today. Those unexpectedly high prices and profits have arisen due to geopolitical events in the middle east and north Africa, as we have heard, and the Government must ensure that they secure a fair return for the UK taxpayer, particularly given the impact that oil prices are having on the broader economy outside the oil and gas exploration industry.

Finance (No. 3) Bill

Anne Begg Excerpts

Tuesday 26th April 2011 Commons Chamber

[Danny Alexander]

I do not think I said that the position was rosy. I was going out of my way to describe the calamitous state of the public finances that the Labour party left.

I would like to touch on growth first. In the Budget we set out four economic ambitions: that Britain should have the most competitive tax system in the G20; that Britain should be the best place in Europe to start, finance and grow a business; that we should be a more balanced economy by encouraging exports and investment; and that we should have a more educated work force who should be the most flexible in Europe. The clauses in the Bill set us on the road to meet those objectives.

For the past decade Britain has been losing ground in the world economy. While other nations have reduced their business tax rates, ours have lost competitiveness. While other countries have removed barriers to enterprise, ours have grown higher still. We cannot afford this to continue. Instead, our plan for growth is based on private sector enterprise, not public sector borrowing—growing businesses, not growing debts—and on securing sustainable long-term investment.

Essential to that is creating a competitive tax system—one that enables our businesses to compete on a global stage. That is why clause 4 will see our corporation tax rate fall by 2% this year. As the House already knows, we will implement further cuts of 1% in each of the next three years, so that by 2015 we will have the lowest corporate tax rate in the G7, allowing businesses to invest more of the money that they earn, hire more workers, export more goods and support the recovery.

[Dame Anne Begg (Aberdeen South) (Lab)]

The right hon. Gentleman says that in order to encourage business growth he will drop corporation tax. Why has he taken a completely opposite approach to those who are developing the North sea oil and gas reserves?

[Danny Alexander]

For the simple reason that the very high price of oil on the world markets is having a direct effect on consumers and, I am sure, on motorists in the constituency of every Member. It is right, I think, to ask the one industry that is benefiting substantially from the high price of oil to make an additional contribution to help us to reduce fuel duty.

[Dame Anne Begg]

rose—

[Danny Alexander]

I will deal with the supplementary charge in more detail later, and the hon. Lady might want to come back to me at that stage, but I shall make some progress now, if I may.

An efficient tax system is not just about lower rates. To be competitive we must also look at how we tax, how that affects our businesses, and what has been holding them back in the past. The Bill legislates for reform of the taxation of foreign branches, as well as making interim changes to the outdated controlled foreign companies rules—a process started and consulted on under the previous Government. This will stem the tide of businesses leaving our shores for more favourable climes, and will ensure that the UK is an attractive place to locate and headquarter. This shows that Britain is once again open for business.

[Danny Alexander]

I have looked at those principles. The Government will, of course, respond to the Committee’s report—along with other reports—in the usual way, but the principles seem very sensible.

In fact, this is among the Finance Bills on which there has been the most consultation in advance. I believe that 260 of its 390-odd pages were published in draft some months before its publication. [Interruption.] I am replying to the question asked by the hon. Member for Chichester (Mr Tyrie). We have taken on board some of the principles to which he referred, but the Government must be able to respond to economic circumstances with their tax policy. As I have said, one of the predominant economic circumstances that we face is the high price of fuel. The Government considered that in order to relieve motorists of some of the burden on them—which we felt was incredibly important—we should ask the oil industry to pay a little more tax in the form of a supplementary charge.

[Dame Anne Begg]

At what point—it was certainly not during any discussions, because there were none—did the Chief Secretary discover that slightly more than 50% of the business of offshore oil operators is in gas, and that the price of gas is the equivalent of about $55 a barrel?

[Danny Alexander]

As the hon. Lady knows, the price of gas has also been on an upward path. However, we have discussed the matter with representatives of the industry, including Centrica, which has raised it directly with me and with other Ministers. We said in the Budget that we were willing to consider extensions of the field allowance regime to provide breaks for particular fields in the event of particular problems, and we are doing that at the moment. Existing rules allow breaks for very deep oil wells and heavy oil, for example. The discussion continues. It is right for us to engage with the industry openly, in recognition of the issue raised by the hon. Lady.

Amendment of the Law

Anne Begg Excerpts

Monday 28th March 2011 Commons Chamber

[Mr Pickles]

Into the former colliery areas. That £30 million is more than the hon. Gentleman’s party had put in. We will certainly do our best to ensure that there is sustainable development in that area.

[Dame Anne Begg (Aberdeen South) (Lab)]

Has the Secretary of State had discussions with the Department for Work and Pensions on the reforms to housing benefit, under which it will become impossible for someone who is under-occupying their house to get full housing benefit for that house? He talks about building new homes, but what proportion of them will be one-bedroom homes, because a large number of people who will be looking for property under the new housing benefit rules will be looking for such homes?

[Mr Pickles]

The hon. Lady will be aware that we have abolished the density targets, which led to a glut of flats. We will ensure that the market decides a reasonable mix. That seems to be a more sensible and reasonable way of going about the process.

For too long, the planning system has been a source of friction between councils, communities and businesses.

Amendment of the Law

Anne Begg Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Dame Anne Begg (Aberdeen South) (Lab)]

At the end of every Budget speech, the Chancellor has to pull a rabbit out of the hat. I will begin my remarks on the rabbit that I was not expecting today. It is something that will affect my constituency. Because I have been sitting in the Chamber since the Chancellor made his speech, I have not been able to quantify exactly how it will affect my constituency, but I have great fears that it might have a devastating effect.

I should explain that as a Member for Aberdeen, the economy of my constituency is based on the offshore oil and gas industry. I should also explain that I am the chair of the all-party group on the offshore oil and gas industry. Aberdeen has survived the downturn probably better than anywhere else, because the oil industry has been fairly buoyant. Unemployment in my constituency has risen from only 1.9% to 2.5%. I appreciate that that will sound very good to many Members. I fear that because of the rabbit that the Chancellor pulled out of his hat, that may not continue.

I speak, of course, about the fair fuel stabiliser. I think that that has the potential to destabilise the offshore oil and gas industry quite dramatically. I appreciate that the Chancellor was looking for something so that he could bring down fuel prices. However, it appears from the Red Book that huge amounts of money will come from the North sea. Apart from in the financial year 2011-12, in which the amount that will be given back to the taxpayer is £1.9 billion and only £1.78 billion will come in from the North sea from the increase in the supplementary charge, in every other year more will be raised by the Exchequer from the North sea oil and gas industry than the Chancellor will give away by bringing down petrol prices.

[Helen Goodman]

I also noticed that very interesting line in table 2.1—line 28. It shows that the proposed revenue stream is the same in every year. However, as the Chancellor said, that will depend on the oil price. Unless he is absolutely confident that the oil price will remain at the same level throughout the period, these are completely unfounded forecasts and estimates.

[Dame Anne Begg]

Indeed, if the oil price goes up, the amount that the Chancellor gets will go up. These must at best be guesstimates. Therein lies the problem for the offshore industry. The North sea is a mature province, but there is still a lot of oil left. In fact, there are probably as many known oil reserves in the North sea today as there were in the 1970s, but they are much harder to reach and more challenging to get out of the ground. The one thing that the offshore oil and gas industry needs is stability—stability in what the Chancellor is going to do. The last time the tax revenues for the offshore industry were changed, by the last Labour Government, there was a slowdown in the industry for a good two years before it recovered. The industry complained about the unexpected nature of that change and the fact that it was not able to plan for it. This change comes into effect from 12 o’clock tonight, so it will come as a huge shock to the offshore sector that it will be affected.

[Mr Kevan Jones]

Does my hon. Friend recognise, given her expertise on the oil industry, that investment in exploration is long term? In some of the fields that she is talking about, planning and investment can take up to 10 years. A fluctuating oil price will make such decisions very difficult. That will have a direct impact on Tyneside and Teesside, which are strongly supported by the supply industry for North sea oil.

[Dame Anne Begg]

I could not agree more. In fact, I believe that 200 constituencies have 50 jobs or more that are directly related to the supply chain of the offshore industry. The change will come as a big shock out of the blue, and I do not think people are prepared for it.

As my hon. Friend suggests, in its long-term planning, the offshore sector tends to use an oil price of between $50 and $60 a barrel. In other words, it projects a stable oil price in its forward planning. That is clearly not the real situation, because sometimes the price dips below that level and sometimes, as at the moment, it goes up to $100 a barrel. The fluctuation of the oil price makes the sector’s long-term planning difficult, and the Chancellor has added another factor that will fluctuate, making the situation even less stable. To call it a fair fuel stabiliser is a complete misnomer.

[Brandon Lewis (Great Yarmouth) (Con)]

Like the hon. Lady, I represent an area in which the oil and gas industry is prevalent. Does she agree that the measures that the Chancellor has taken today deal with the problem that arises when there is effectively a windfall for companies because of oil prices? In the long run, the change will be neutral to the taxpayer and the companies will not be at a loss. It just deals with what are effectively windfall profits that they have received because of the current high oil prices, to the benefit of the consumer.

[Dame Anne Begg]

With all due respect, that is not how the Chancellor has sold it. Even if there has been a windfall, perhaps it would have been better had he given some warning of the change so that people in the oil industry in particular could have taken account of it in their planning.

When we look at the Red Book, we see that the change is not tax-neutral. It states that by 2012-13, the tax raised will be £2.2 billion, and that it will be £2.1 billion the following year. The Chancellor is expecting to raise more than £2 billion a year—a much larger amount than is being given back to the consumer who buys petrol at the pump. Line 6 on page 42 of the Red Book shows that the Chancellor is taking more from the offshore oil and gas industry than from the banks, by a factor of 10.

[Helen Goodman]

I am grateful to my hon. Friend for being so generous in giving way. The other interesting thing in those numbers is that whereas the Chancellor claimed that the banks would not benefit from the corporation tax change, we can see from the Red Book that corporation tax reliefs will rise over the period in question but the bank levy will absolutely collapse.

[Dame Anne Begg]

Indeed, the bank levy will come down to just £100 million by 2015-16.

The change to the oil and gas charge has come as a bit of a shock, and it worries me. From looking at the Red Book, I am getting more and more worried about what the Chancellor has announced today. The Red Book states:

“The Supplementary Charge on oil and gas production will therefore increase to 32 per cent from midnight tonight.”

There was no warning, and it will have come as a big shock to the industry. The effect could be dramatic in my constituency. I only hope that the Chancellor has thought the matter through and had some discussions with the industry. I suspect he has not, and I am worried about what will happen.

I wonder what other nasties are lurking in the Red Book. Last time it was the 10% sanction on housing benefit when someone had been out of work for a year, which we did not discover until days afterwards. I am glad that the Government have backed down on that and that today’s Red Book shows that money again.

From a cursory glance at the Red Book, I discover something that comes as a bit of a surprise to those of us who were here for Prime Minister’s questions today. The Leader of the Opposition asked the Prime Minister why the Government were taking the higher-rate mobility component of disability allowance from people living in residential care. Those who were here will remember that the Prime Minister replied, “We are not”—a simple, straightforward answer. However, line d on page 44 of the Red Book is about the plan to

“remove mobility components for claimants in residential care from April 2013”,

with a figure of £155 million to be saved. That is different from the last Red Book, which stated that the change would come in in 2011-12 and save £135 million. All that the Government have done is delay it by two years. As the Leader of the Opposition pointed out, the change is still in the Welfare Reform Bill, and here it is in the Red Book. Perhaps the Prime Minister might want to come to the Chamber and apologise for not having been as accurate as he might have been.

[Richard Fuller]

For clarification, has the hon. Lady checked the following page, page 45, which mentions the disability living allowance reform gateway funds, which will kick in at £360 million in 2013-14 and rise to £1.45 billion? How does that match the figures that she has given, if at all?

[Dame Anne Begg]

They do not match, because they are totally different things. In fact, the Prime Minister did not quite understand that. The DLA gateway is about tightening up the criteria for those coming on to DLA. That will come in with the introduction of personal independence payments. The reform of the gateway is totally different from taking DLA away from people who live in residential care. By any criteria, such people would qualify to get through the gateway. The Government have decided that they will not get the money because they live in residential care, not because they do not fit the criteria.

[Richard Fuller]

I am grateful to the hon. Lady for that clarification. I am sure she will recognise that there are hon. Members on both sides of the House who share concern about the continuation of the mobility component of DLA. I believe that Ministers are looking for a way to both maintain the mobility component and expand personal payments, so that people with disabilities who live in care homes continue to receive the funding that they require for a decent living. If that is not included in the Budget, I will be very interested to talk to her about it.

[Dame Anne Begg]

What I have said is based on a cursory glance at the Red Book, but the evidence from the Welfare Reform Bill, which states that those in residential care will not get higher-rate mobility DLA, and from the Red Book makes it appear that the Government still intend to take the mobility element away from such people, albeit two years later. Those of us who said that the proposal was unfair thought we had won the battle, but it now appears that we have not won it at all. I am grateful to the hon. Gentleman for his intervention, because I know that Members of all parties objected to the proposal. I hope that he will put pressure on his Government to reconsider the matter.

I wish to say a wee bit about the merging of national insurance and income tax. It was trailed slightly in the press, but we needed to find out what it meant in reality. The Chancellor said it would not be the end of the contributory principle, but it is very hard to see how it cannot be. There needs to be a debate about the future of that principle, because other measures that the Government have taken have undermined it. People are quite shocked about what is happening, having paid their national insurance all their lives thinking that they were paying into an insurance scheme and that they would get money out of it when something went wrong. People get only six months’ jobseeker’s allowance of £65 a week as a result of their NI contributions when they are unemployed. Under the Welfare Reform Bill, people will get only one year’s sickness benefit under the new employment and support allowance as a result of such contributions. Most people assume that they get the basic state pension because of their NI contributions. That is the big one, because people are quite happy to pay their NI contributions for that, but the Government plan to introduce a flat-rate, £140 a week state pension. Such contributions pay for the basic state pension state and the earnings-related pension scheme as well as pension credit, and everything then gets divided out.

It is difficult to see how pensions can be based on a contributory record, as the Red Book says they are, if everybody gets the same. The Work and Pensions Secretary said a couple of weeks ago that he will introduce the flat-rate pension, and that that will help women, but it will do so only if it is not dependent on contributions. The Government cannot have it both ways. Either people get the flat-rate pension based on their working record and NI contributions, which will be part of income tax, or they get it because they have fulfilled other criteria, such as residency. The country and all parties in the House need a proper debate on how we fund welfare, the basis of our welfare system, and the future of the contributory principle.

[Lorely Burt (Solihull) (LD)]

The Liberal Democrats take pensions very seriously. I acknowledge that a lot of consultation and working out must be done, but does the hon. Lady welcome a basic state pension of £140 a week?

[Dame Anne Begg]

I advocated a universal or citizens pension as a Government Member for many years, but one strong argument against such a pension is that many people are very attached to the contributory principle. That came out in the original discussions, when the Government of the day decided to reduce the state pension qualifying years down to 30 for both men and women.

Part of the problem in this country is that we have no means other than NI contributions by which to determine who should qualify for a state pension, because we do not keep residency records, which is how the judgment is made in, for instance, New Zealand. The problem in this country is more complex than it may seem.

The state pension age is about to go up to 66 for men and women by 2020. This was meant to be a Budget for growth, but the very first thing the Chancellor spoke of was the downgrading of the growth figures. I am worried about where all the jobs will come from given the increased number of people in the workplace. The numbers in the work force are expected to increase because of the new work obligations on jobseeker’s allowance claimants; because lone parents will be expected to look for work when their youngest child is five; because 30% of incapacity benefit claimants will be assessed as fully fit for work and expected to go into the workplace; and because another 30% of such claimants will end up in the work-related activity group of employment and support allowance. Huge numbers of people are expected to go into the workplace. It is difficult to get figures on how many more people will be looking for work because the Department for Work and Pensions could not give them to us, but on top of those, the raising of the state pension age means that even more people will be looking for work.

[Mr Kevan Jones]

The Chancellor trumpeted the extension of support for mortgage interest, but has my hon. Friend seen page 42 of the Red Book, which says that that will continue for 2012-13, but decrease in 2013-14 to £15 million and then to zero in 2014-15?

[Dame Anne Begg]

I was going to talk about housing, but I could speak for another three hours if I go down that route, so if my hon. Friend will forgive me, I shall resist.

Will older people who have not reached state pension age be in work or not? At the moment, only 30% of men are still in work aged 65—not only because of early retirement and other things, but because people lose their jobs towards the end of their working lives—but they will be expected to work another year. Only 47% of women aged 60 are still in work, but they will be expected to work for another six years. Those people will not necessarily get anything under the universal credit, because they will probably have saved a nice little nest egg—a nest egg of just over £16,000—to see them through retirement. They will not get jobseeker’s allowance—or rather, they might get it for six months, but that is all they will get through the contributory principle. If they have fallen out of work because of ill health, the most that they might get is a year of employment and support allowance before then getting nothing. Those are big figures, and that is where a lot of the welfare reform savings in the Red Book will come from.

Indeed, it is perhaps worth alerting the House to the fact that the big savings in welfare reform do not come from getting “shirkers” back into work; they come from taking money from those who would normally have got contributory incapacity benefit, but will now get only contributory employment and support allowance for a year. That means that around £80 a week will come out of those people’s incomes. They will get nothing else if they live in a household with someone in work or with any other source of income, or if they have a small pension or savings of more £16,000. Therefore, there will be a new group of people struggling, and they will not be old-age pensioners; they will be pre-old-age pensioners, as it were. They are people who have fallen out of work, but not been able to work to 66 and get their state pension. They have been left with little—in fact, in some cases nothing—from the safety net that we think the welfare state is there to provide.

There is a lot more that I could say; indeed, I am sorry that I have spoken for longer than I intended. Over the coming days I will go through Red Book in a lot more detail than I have managed to today. However, from what I have seen already, there is a great deal for people to be concerned about in what the Chancellor has announced today.

--- Later in debate ---

[Mr Jackson]

I fully understand and respect the hon. Gentleman’s constituency interests. Were I in his position, I would make the same points. Clearly, when we are in a less than benign financial situation, clearing up the abysmal mess left by the Labour Government, we have to make difficult value judgments. To govern is to choose, and sometimes the choices made will not please everyone. I understand and respect the hon. Gentleman’s views, and I am sure the Chancellor and the Treasury Front-Bench team have heard his views.

[Dame Anne Begg]

Will the hon. Gentleman give way?

--- Later in debate ---

[Mr Jones]

If the hon. Gentleman continues, I might go on for a bit longer, so he must be clever and not do so.

As my hon. Friend the Member for Aberdeen South (Dame Anne Begg) said, it has been billed that the Government have somehow saved the motorist by reducing tax by 1p, but the effects of paying for that will be disastrous for the oil industry in this country, including Scotland. They will be disastrous for the north-east, as it relies heavily on Teesside and Tyneside to supply the expanding gas and oil fields, which need long-term investment. It is completely and utterly irresponsible to throw a spanner into the works of the investment in developing some of the most difficult oil and gas fields in the North sea.

[Dame Anne Begg]

Does my hon. Friend agree that the danger of today’s proposals is that they might fatally undermine the whole North sea offshore sector, which is fragile anyway because the geology makes it difficult to get the oil out? As a result, the country may lose even more money, because the sector is a huge taxpayer. As my neighbouring MP, the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), said, 20% of all corporation tax is paid by the industry. What is being done today could put that in jeopardy.

[Mr Jones]

I agree, and there will also be a direct impact on jobs in oil exploration and in the booming oil supply business in Tyneside and Teesside. The short-term measure to try to get the Government out of a political fix on petrol prices will cause deep and long-term damage to jobs in the north-east and in my hon. Friend’s constituency.

The first-time buyer scheme, which the Red Book states will cost £250 million for just one year, will not help the north-east in any great way, because it will clearly be concentrated where a large number of houses are being built—the south-east and other areas. Because the Government have removed housing targets and affected social landlords’ ability to build new houses through the ham-fisted way in which they have structured the financing of social house building, I doubt whether there will be much effect on the north-east.

I also note that none of the £200 million additional investment in regional railways will go further than Leeds. Investment schemes for railways in the north-east—I have been calling for extra capacity for people to commute into Tyneside from Chester-le-Street and other places—will clearly not be forthcoming.

Finally, I wish to mention armed forces pay. The Chancellor said that there would be a £250 uplift for those in the armed forces earning less than £21,000. I remind the House that that is from the same Government who have frozen armed forces pay for the next two years. In addition, they have changed the calculation from RPI to CPI, which will cost many thousands of servicemen and women huge sums of money over the coming years. The Government should not be proud of that. I get rather annoyed because if the previous Government had done that, when I was a Defence Minister, the Conservatives and Liberal Democrats would have howled us down and called us a disgrace.

Is this a Budget for growth? No, it is not. Will it help the north-east of England? No, it will not. Under the confused regional policy that is proposed, which is supported by the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) and his Liberal Democrat colleagues in the north-east, we will find that as the country’s economy declines and contracts, regions such as ours will go from the very bad position that they are in now to an even worse one.

Oral Answers to Questions

Anne Begg Excerpts

Tuesday 16th November 2010 Commons Chamber

[Mr Osborne]

Yes, I can give that assurance. I also note that the actions that the Government have taken have kept the small companies rate down, avoiding the rise in the rate that we inherited.

[Miss Anne Begg (Aberdeen South) (Lab)]

The comprehensive spending review contained a proposal to cut the mobility element of the disability living allowance for those in residential care. Why did the Government make that decision—because it was fair or to reduce the fiscal deficit?

[Mr Osborne]

In the spending review we took a number of difficult decisions, including decisions on welfare. We sought to identify the savings that we thought were most justified. As far as I understand it—although I am happy to be corrected—the DLA changes have been supported by the Opposition.