Public Bodies and VAT

Debate between Bernard Jenkin and George Eustice

Wednesday 17th May 2023 Westminster Hall

[George Eustice]

My right hon. Friend raises an incredibly important point. It is profoundly unfair on the young people who choose to attend an FE college, and perhaps even to do A-levels in its sixth form, that the college is treated differently—almost as a second-rate institution—when a school with a sixth form enjoys the higher funding and benefits that come with being able to reclaim VAT.

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

I apologise to my right hon. Friend and the Minister that I cannot stay, but I will read very carefully what the Minister says. Perhaps she could quantify what she thinks the VAT take from FE colleges is, so that we know what we are discussing.

Does my right hon. Friend the Member for Camborne and Redruth (George Eustice) agree that we are not discussing a free gift to FE colleges? Like Colchester Institute, which serves my constituency, they are suffering an unparalleled financial squeeze at the moment and are having to inflict redundancies and cost reductions against a background of very low pay for most of the academic staff. Unless the Government can resolve that anomaly, FE colleges will face a crisis.

[George Eustice]

My hon. Friend raises an important issue, which is affecting colleges in Colchester, the rest of Essex, Cornwall and the whole country. The cost of having staff at an FE college to run courses in practical skills such as electrical engineering or bricklaying and construction is probably higher than at a university, which can just cram a couple of hundred students into a lecture theatre and simply deliver a lecture. The cost of providing those important skills, which are vital to our economy, is higher. My hon. Friend is right that it is incredibly difficult for FE colleges to recruit and retain staff, because of the squeeze on their budgets, so we need to do better.

During the EU era, the Government were able to blame EU law for the fact that FE colleges had to be treated differently. I have done my share of blaming EU law in the past for various things that were my responsibility, but EU law is no longer a barrier and cannot be used as an excuse or a reason for not doing the fair and just thing. We have now vanquished EU law and we have the freedom and power to set a coherent tax policy that is consistent and fair.

Doubts have sometimes been expressed about whether FE colleges are public bodies per se, but that has now been settled. I understand that, last autumn, the Office for National Statistics, which has been going through a rather tortuous classification exercise, has deemed that all sorts of bodies that might have been considered private are now public. It has cleared the issue up and said that FE colleges are public bodies, and in my view they should therefore be included in the section 33 list of public bodies that can reclaim VAT.

I have looked at parliamentary questions that have been raised in this area, and Treasury Ministers have sought to insist that the ONS designation does not change anything and, indeed, that it does not change the Treasury’s right to set out what it considers the right bodies to be included in the section 33 list. That might be the case, but the House is entitled to a rational answer as to why FE colleges are treated differently. We are entitled to insist on consistency and fairness in the tax system and, therefore, to request and require the Government to bring forward a statutory instrument to remedy this unfair situation.

This issue matters because the FE sector really matters. I declare an interest: as a teenager, I attended Cornwall College, which has a campus in my constituency and is the leading FE college there. My hon. Friend the Member for St Austell and Newquay (Steve Double) is also passionate about the interests of the college, which has a site in his constituency. I learned to arc weld at the college; I was not particularly good at it—indeed, I returned recently and tried my hand at it, and if I was not good then, I am certainly not very good now. I also attended a course on business studies and management, and a second course on farm management, and the skills and knowledge I gained were invaluable to me, not just during my first career, when I went into the farming business, but for things I have done since.

A succession of Ministers in this Government have been passionate about the FE sector and have recognised the importance of apprenticeships. The Government can be proud of the way they have tried to raise the status of vocational courses through apprenticeships. That is one of their great achievements; it started under the coalition Government and has been maintained. That is important, because apprenticeships add real value to the real economy, but we have to put our money where our mouth is, and at the moment FE colleges just do not have a fair financial settlement.

We often point to the success in technical skills of other countries in Europe and elsewhere, and we argue that we want to match that. We have lots of good ideas about apprenticeships and raising the standard and consistency of the courses, but sadly it feels like we do not follow through by providing the funding offered by countries that have shown us how to do technical skills properly.

Last year, schools were rightly given an injection of about £2 billion to help them with the cost of energy and the pressures on labour charges and wages. We all have schools in our constituencies that are suffering those pressures, but FE colleges, although they had some uplift, received just a fraction of what schools were given. Again, it is difficult to escape the impression that they were treated unfairly.

FE colleges are really struggling to recruit staff. They have the difficulty of running courses that are much more hands-on. There are all sorts of health and safety considerations for courses such as bricklaying, carpentry or electrical engineering, and the tutor-to-learner ratios are probably much higher than in universities, where everyone is just sat in a lecture theatre with their notebooks out. The situation is very different, and it is much harder for FE colleges to cope with fewer staff. Because these are successful parts of the economy—wages have been rising for technical skills such as electrical engineering and construction—it is difficult for colleges to lure people back from the private sector. They often find that people do the work partly out of a sense of duty or public service.

It is important that we recognise that, because the FE sector really matters. It gives us the skills we need for the economy of the future. We increasingly recognise that if we want to level up economic growth around this country, we need to rekindle and start to respect again manufacturing industries and the sectors of the economy that require technical skills. We cannot just get by with people in pen-pushing roles and the service industry; we have to recognise the value of those skills and fund them.

Even in new sectors of the economy, such as computer software and coding, the best way to learn those skills is often in a business, so that an apprentice can actually learn the approach taken by an individual computer software company and really learn on the job, while getting generic training in computer coding from the local FE college as well. As my right hon. Friend the Member for Chelmsford (Vicky Ford) said, we should value young people who have chosen such a career and to train in something that will be of real value to our economy.

The Budget earlier this spring had much in it to welcome. In particular, I welcomed the introduction of investment allowances, which will benefit the manufacturing sector and help it to get tax relief and capital allowances for investments in business, but I must say that it feels like there was a failure to support FE colleges in the Budget. That was disappointing for many Members on the Government Benches, and dozens of us wrote to the Chancellor asking him to take the plight of FE colleges seriously and to look at whether additional funding to help FE colleges could be found, but that appeared to fall on deaf ears. I hope the Chancellor will take the earliest opportunity to put that right and rectify that unjustified omission.

I invite the Minister simply to commit to bring forward a statutory instrument under section 33 of the 1994 Act. I appreciate that she may need to do a bit of a Government write-round before being able to commit fully, but I hope she will at least express an openness to the idea and give us a clear explanation, if she is able to, of why a school with a sixth form can reclaim VAT, but an FE college with a sixth form cannot. That is the key question, which highlights this terrible unfairness.

In conclusion, many hon. Members on both sides of the House want to see fairer funding for FE colleges. Introducing the change I have set out would help; it would not involve a huge amount of money, but it would probably give FE colleges somewhere in the region of a 2% to 4% respite on their budget. They would probably all use that money immediately to help retain and recruit staff. It is a relatively small amount of money but, like my hon. Friend the Member for Harwich and North Essex (Sir Bernard Jenkin), I am interested to hear what the Minister considers it would cost. Among those who support the change is my hon. Friend the Member for Worcester (Mr Walker), who is Chair of the Education Committee. There is widespread support for this, and I very much hope that the Minister will give us positive news in her response.

Northern Ireland Border

Debate between Bernard Jenkin and George Eustice

Thursday 3rd February 2022 Commons Chamber

[George Eustice]

As I said earlier, Minister Poots has taken legal advice. Under the constitutional arrangements in Northern Ireland, I understand that he is entitled to issue this direction. The Northern Ireland civil service and DAERA are taking separate legal advice relating to some of the accounting officer issues, and Minister Poots understands why they would want to do that.

On the hon. Gentleman’s wider point, I come back to what I said previously. The agreement on the Northern Ireland protocol required many things, including that there should be no disruption and no unnecessary checks that would cause problems for trade within the UK, which is why there are still grounds for us to try to resolve some of these issues constructively. That is why my right hon. Friend the Foreign Secretary continues to have discussions with the European Commission on this particular point.

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

I have confidence in and admiration for my right hon. Friend, but I am somewhat disappointed that this matter is being treated as some kind of technical problem when it is actually a constitutional crisis. He says the Northern Ireland Executive should seek to resolve it but, under the Northern Ireland Act 1998, the Northern Ireland Executive resolves matters by agreeing things between the power-sharing parties. They fundamentally disagree on this matter because the Northern Ireland protocol is, in fact, incompatible with the Good Friday agreement. The protocol is also incompatible with the Act of Union, because it has been ruled that it supersedes the Act of Union. And the European Union says there are not enough checks taking place.

Is it not now clear that the Northern Ireland protocol is unfit for purpose and is not delivering on what it said on the tin, which is that it would strengthen and underpin the Good Friday agreement? It needs to be scrapped and replaced by something completely different, and the EU should agree to that. The EU is the only party that has threatened to put infrastructure on the border in Northern Ireland, and we should keep reminding the EU that it is the one threatening the peace in Northern Ireland.

[George Eustice]

My hon. Friend makes an important point, and it is why the UK Government have engaged in negotiations with the European Union to seek important changes. We are motivated solely by our commitment to the Belfast/Good Friday agreement. In so far as the implementation and the interpretation of the Northern Ireland protocol by the European Union to date is incompatible with the principles of the Belfast/Good Friday agreement, all parties should seek to adopt a more sensible interpretation that brings it back into line with the Belfast/Good Friday agreement. That is what we are endeavouring to do.

European Union (Approval of Treaty Amendment Decision) Bill [Lords]

Debate between Bernard Jenkin and George Eustice

Monday 3rd September 2012 Commons Chamber

[George Eustice (Camborne and Redruth) (Con)]

I should start by saying that I agree with much of the analysis of my hon. Friend the Member for Stone (Mr Cash) about what is wrong with the euro and how we got to this situation. However, I disagree strongly with his conclusions about this Bill, because I think it is relatively uncontroversial. As the Foreign Secretary pointed out earlier, the new European stability mechanism is certainly an improvement on the European financial stabilisation mechanism that went before it. Under that previous arrangement, Britain was liable for some 15% of the liability, which could have been a bill of up to £9 billion, whereas the new ESM means that Britain will not be taking on any future liabilities. So, first and foremost, this is a step forward.

Secondly, we must bear in mind that the Bill is not about the establishment of the ESM itself; it is simply about the amendment to article 136. This is just about clarifying the legal basis on which the ESM is set up, and discussion is taking place about whether that even needs to happen, as my hon. Friend the Member for Stone pointed out. This has already been happening under article 122, and it is apparent that it is mainly a concern of the German constitutional court that has prompted this change. The one thing I would say is that if other European countries or all 27 member states are going to acknowledge the concerns of one member state—Germany—by amending the article to reflect its needs, I look forward to the day when that will be reciprocated. I look forward to those moments when Britain is in a minority of one in having concerns about some things European and that, too, is respected by the other member states.

[Mr Jenkin]

I cannot quite believe what I am hearing, because a criticism that my hon. Friend and I have regularly made of the European Union is that what we are categorically assured will not happen then happens, and when we amend the treaty just to tidy up the wording, that makes it more explicit that it was always intended to happen in the first place. May I just read to him what the no-bail-out article actually says? It says:

“A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State”.

That is what the treaty says now and he is supporting, by a sort of sleight of hand, that being negated and set aside simply because it has already happened illegally. Is that not the grandmother’s footsteps of European integration that he and I have always railed against?

[George Eustice]

I would simply say to my hon. Friend that Britain is not bound by the ESM; it is very clear that only eurozone member states will be affected. Is it proportionate for us to stand in the way of those countries that are wrestling with and trying to decide what is going to happen with the euro? Is it proportionate for us to block that particular tweak to that treaty? I just do not feel that it is. I agree with him in that I want renegotiation and I want it, at some future point, to be put to a referendum. However, we need to pick our battles and pick our moments, and I think it is wrong to nit-pick over what I would regard as a small change.

[George Eustice]

My hon. Friend makes a point that I was going to deal with. I simply return to what my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) said, as I do not think that by blocking this Bill we are going to stop the ESM. Other countries will continue, because they have decided that they need to do so to try to save the euro.

We also need to give the Government and the Prime Minister credit when they achieve things and make progress. My hon. Friend the Member for Stone and I would like to see faster progress made and a renegotiation sooner rather than later, but we should give the Government credit where they safeguard British interests and improve on the situation we inherited. We should not blame our own Government for the mistakes the previous Labour Government made. They engaged in sloppy negotiation, and, as a result, we ended up with the former arrangements in the EFSM. The situation has now been improved with the ESM and we should support that.

[Mr Jenkin]

Where is the consistency in the Prime Minister’s vetoing fiscal union at 27 in December last year and now implicitly consenting to it by scrapping the no bail-out article? Should we not be extracting a real concession? Should we not be getting the concessions we really want? Should we not be using this opportunity as a fulcrum for renegotiation? Is this not the moment—when these countries want fiscal union to support monetary union—to say, “This is what we want to pull back in return”? Instead, we are just giving this away, and for what?

[George Eustice]

I think that there is a big difference between the fiscal compact that we vetoed last December and this particular one. Again, this comes back to the point about what is proportionate. By vetoing that fiscal compact, Britain was sending a clear signal that we were not going to be part of a wider decision at an EU level for those types of fiscal integration, because we were not affected. That approach was absolutely right on a number of levels. First, it showed that Britain was serious and that, on these issues, when we said we were going to do something, we meant it and we were ready to use a veto. That will help us when it comes to budget negotiations.

Secondly, by vetoing that particular treaty at an EU level, the Government managed to limit its scope, because it was, thus, necessarily just about the eurozone members and it cannot affect the UK. Had we signed up to that particular treaty, we would have faced all sorts of threats and demands, and people trying to put other agendas on the table. We would have had months and months of wrestling over things we did not want, before we would probably finally have had to veto it in any case, so I think that we did the right thing. However, I am just not convinced that such an approach is right in this instance, for the reasons I have set out. As I say, I think it would be disproportionate, as the ESM is not going to affect the UK; there is nothing that will expose us to future liabilities. Would it be right for us to stand in the way of countries that think that it is the right thing to do? There is a question of whether it is the right thing, but would it be right for us to stand in their way?