Future Government Spending

Brian H. Donohoe Excerpts

Wednesday 4th March 2015 Commons Chamber

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

For some reason, my mind is drawn increasingly to the time that people are in particular positions, and I note this afternoon a conspicuous absence on the Liberal Democrat Benches. I think back to the early part of this Parliament, when the right hon. Member for Yeovil (Mr Laws) held the post of Chief Secretary to the Treasury for a total of 17 days, and I recall being in the Chamber when, with barely disguised glee and in a remarkable contribution that has continued in the approach of the coalition, he began the process of cutting back on investments, some of which have since been re-announced. This was at a time when the economy was beginning to grow after a long global banking crisis out of which we are only just starting to emerge. Since then, for the past five years, for the vast majority of constituents in all parts of the UK, things have been getting worse, not better. The coalition justified it on the basis of shoddy analysis of how our economy and situation was the same as that in Greece.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I notice that there are no Scottish nats in the Chamber at present, which is not unusual. Will my hon. Friend touch on the effect of the price of North sea oil on the economy of today?

[Tom Greatrex]

My hon. Friend makes a different point from the one I was making, but an important one. The reduction in the price of a barrel of oil has had a significant impact on revenues. If Scotland had become a separate country or was in the process of becoming a separate country, the impact on revenues would have amounted to the equivalent of the entire education budget. That much would have been wiped out in the course of the last few months, highlighting the dangers of an economy being over-reliant on what the record shows to be such a volatile commodity, and indeed, by definition, a declining one, given the amount of oil still left in the ground. This is an important point for Scotland.

The tenure in office of the current Chief Secretary to the Treasury has been slightly longer, and 1,591 days ago, the Prime Minister said:

“In five years’ time, we will have balanced the books.”

He has 63 days left in his job, and I suspect that he is not going to meet that promise.

Charter for Budget Responsibility

Brian H. Donohoe Excerpts

Tuesday 13th January 2015 Commons Chamber

[Mr Osborne]

My hon. Friend is absolutely right. It is not enough to eliminate the deficit. We then have to get our national debt down. It is too high and leaves us exposed to the next economic shock. We do not want to go into the next economic shock with a debt-to-GDP ratio of 80%. That is precisely why, in good economic times, we need to be running an overall budget surplus. That is the only credible and sustained way to get national debt down. That is the way to fix the roof when the sun is shining.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Was it not the case that the right hon. Gentleman’s boss, the Prime Minister, said that he would balance the books by 2015?

[Mr Osborne]

What we have done is cut the deficit by a half. We have neither gone faster than we said we were going to go, nor gone slower than we said we were going to go. We have stuck to our spending plans when people were urging us to take either course. To get lectures in managing the public finances from the Labour party is extraordinary.

Finance Bill

Brian H. Donohoe Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Mr Gauke]

On the question why now, it is worth pointing out that following a refocusing of the UK corporation tax regime to a more territorial basis over recent years, and in view of increasing recognition, through the base erosion and profit shifting OECD initiative, that transfer pricing and other international rules do not always provide a fair or consistent outcome, the Government have decided that the need to protect the tax take from those who benefit indirectly from the exploitation of the UK’s natural resources requires domestic action now.

In addition, recent Government incentives have resulted in record investment in the UK continental shelf. It is right that action is taken to ensure a fair amount of tax from activities carried out in connection with the exploitation of the UK’s natural resources, and HMRC ensures that all businesses pay the tax due in accordance with the tax law.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I have a constituent who is on a ship that serves the North sea. He is the only member of the crew who has had his national insurance contributions changed in the last round. He is an electrical engineer. The mechanical engineer, the captain and the bosun are still on the old rate, but the electrical engineer is not. Can the Minister explain to me why an electrical engineer is being discriminated against on a North sea supply vessel?

[Mr Gauke]

The hon. Gentleman raises a somewhat different point from the one that I am addressing, but if he writes to me in respect of the individual case—[Interruption.] If he has already written to me, I am delighted to hear that. HMRC may be better placed to respond to the particular case, but we are taking action in respect of intermediaries to ensure that the national insurance contribution system works fairly. This is another area where we are making sure that businesses that benefit from our natural resources make a fair contribution in tax.

The Economy and Living Standards

Brian H. Donohoe Excerpts

Thursday 12th June 2014 Commons Chamber

[Ed Balls]

Let me make a little more progress, then I will give way.

Let me start by trying to find some common ground with the Chancellor on these big and difficult debates. I think we can agree that Britain has always succeeded, and can only succeed in the future, as an open, internationalist and outward-facing trading nation, with enterprise, risk and innovation valued and rewarded. We need to back entrepreneurs and wealth creation, generate the profits to finance investment and win the confidence of investors round the world. We can agree on that.

Turning our face as a nation against the rest of the world and the opportunities of global trade is the road to national impoverishment. But at a time when there are powerful forces in technology and trade, which mean that many people are seeing their living standards falling year on year, we cannot take for granted public support for that open global market vision. As the Member of Parliament whose constituency until recently had the largest BNP membership of any in the country, I know how some on the extremes of left and right see isolationism as the solution—turning inwards, setting their face against Europe and the world economy—which would be a disastrous road to take. It would be the wrong way to proceed.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

On the question of jobs, we all applaud the number of jobs created in the country, but do we know how many have been created on zero-hours contracts?

[Ed Balls]

We know that the zero-hours contract is one of the symptoms of change in our labour market that is causing such insecurity. My hon. Friend raises that matter because the reality is that none of us on either side of the House can afford to bury our head in the sand and ignore the legitimate and mainstream concerns of people across our country about our economy not currently working for them and their families.

The challenge for this generation is how we respond. In my view, there are two quite wrongheaded ways to respond. The first is to assume that business as usual will just do the job—that the return of GDP growth will solve the problem. I must say to the Chancellor and to Government Members—particularly to the right hon. Member for Chelsea and Fulham, given the result in his constituency—that every time they boast that their economic plan is working, I am afraid most people in our country just think they are completely out of touch. It may be working for some—a privileged few—but people say time and again, “It’s not working for me. It’s not working for my family. It’s not working for our community.” That is what they have to solve.

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[Mr Osborne]

I will give way in a moment, but let me make some progress. I know that about 50 Members want to speak in this debate—[Hon. Members: “Not on your side.”] Well, we will hear. No doubt Labour Members can all get up on their feet and repeat what they said last year .

I have done something that I know we are not supposed to do in this place, because I actually bothered to read what the shadow Chancellor said in the House last year. Here we are in the privacy of the House of Commons where no one is listening, but what were his pearls of wisdom? In this exact debate last year he issued a stark warning that the British economy would “flatline” unless we abandoned our plan immediately. Since he made that prediction, we have stuck to our plan and our economy has grown by more than 3%.

Last year in this debate the shadow Chancellor said that business investment would “stall”, but it has since grown by almost 9%. He told us that unemployment would rise, but since he made that prediction more than 800,000 new jobs have been created. He warned ominously that youth unemployment would rise too, but it is down by 100,000 over the past 12 months. From re-reading the speeches of the shadow Chancellor, I have discovered that he performs a very useful function. He is an infallible guide to the future performance of the British economy: whatever he predicts, we can be sure that the exact opposite happens.

[Mr Donohoe]

Will the Chancellor answer a simple question about employment? How many people are on zero-hours contracts?

[Mr Osborne]

I do not have the number the hon. Gentleman asks for here, but there were zero-hours contracts under the previous Labour Government and there are Labour councils that use zero-hours contracts. As those on the Labour Front Bench have pointed out, not all zero-hours contracts are bad. One measure in the Queen’s Speech that was not mentioned by the shadow Chancellor—indeed, he did not actually address the speech in his remarks—will ban exclusivity with zero-hours contracts. Labour had 13 years; the shadow Chancellor was in charge of economic policy for 13 years and could have taken such a step, but he did not. I suggest that Labour Members hold their tongues and come with the Government through the Division Lobbies as we do something about an abuse that they did absolutely nothing to crack down on.

Currency in Scotland after 2014

Brian H. Donohoe Excerpts

Wednesday 12th February 2014 Westminster Hall

[Ian Murray]

I am grateful for that intervention. Again, I can only emphasise what the Governor of the Bank of England said. It was a non-partisan speech; it was a technical speech about currency unions and that was the point that he made: those monetary, fiscal and spending stabilisers have to be in place; otherwise a currency union does not work.

What about business? We sell twice as much to the rest of the UK as we do to the rest of the world combined. Losing the pound would mean that every time a Scottish company sold to or bought from somewhere down south, they would incur the cost of exchanging money. That would result in higher prices for us all, as the supermarket bosses—again, we have been told by the First Minister to ignore them—warned us last week. We should listen to business. In a strong criticism of the SNP White Paper, the Institute of Chartered Accountants of Scotland has warned that there is

“a high degree of uncertainty as to what the currency of an independent Scotland will be.”

ICAS states that no alternatives have been set out in case the negotiations are unsuccessful, and warns:

“The choice of currency will have a very significant impact across the pensions sector, the economy and the country generally, and this will inevitably remain as a major uncertainty for the time being.”

We should listen to that warning from Scotland’s accountants. The SNP must tell us what currency it would use instead. Will it set up an unproven currency or rush to join the euro?

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I congratulate my hon. Friend on securing this important debate on a matter that has got my constituents, and probably his, worried. Not so long ago, the nats wanted to join the euro; indeed, that was a slogan of theirs. It is very strange—it is a consequence of all that has happened in mainland Europe—they are now trying to hitch up to the pound, which would also be a foreign currency.

[Ian Murray]

My hon. Friend hits the nail on the head. The SNP has ditched its euro credentials and its wish to join the euro in favour of a currency union with the United Kingdom that it is already in. I believe its slogan was “independence in Europe” but it now seems to be “independence in the UK with the pound.” Will it rush to adopt the euro—indeed, will Scotland actually be in the EU—or will it join the only other two countries in the world that tie their currency informally to another? This is a great quiz question: which countries are those? The answer is Panama and El Salvador, which use the dollar. [Interruption.] I can hear the hon. Member for Perth and North Perthshire (Pete Wishart) chuntering, “Greece”, and that is exactly the point that I have been making.

The First Minister and Deputy First Minister of Scotland this morning made the unedifying assertion that Scotland will default on its debt if no currency union is forthcoming. That ill-thought-through, toys-out-of-the-pram threat is a recipe for economic crisis and political conflict. It is reckless and irresponsible, to say the least.

Fairness and Inequality

Brian H. Donohoe Excerpts

Tuesday 11th February 2014 Commons Chamber

[Guto Bebb]

It undoubtedly did not help.

When we discuss inequality we should be aware of the key point that the Government have been very proactive in ensuring that the inequality faced by pensioners is dealt with. We can compare the impact of the triple lock on pensioner poverty with the previous Labour Government’s decision to increase pensions by a paltry 75p.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Taxation is not just about income tax, but about VAT. Is that not perhaps the most unfair tax on those at the bottom of the pile?

[Guto Bebb]

I would reject that argument. We talk about VAT, we often forget the exemptions. If somebody is buying a new Ferrari, I have no problem with their paying £50,000 in VAT. If somebody buys their food in a supermarket, they pay 0% in VAT. If VAT were 20% on every single item, it would be a regressive tax. For those who spend a significant proportion of their income on food, or on household fuel, which is taxed at 5% rather than 20%, the VAT issue is not as clear cut as Opposition Members try to make it.

Oral Answers to Questions

Brian H. Donohoe Excerpts

Tuesday 28th January 2014 Commons Chamber

[Mr Osborne]

Credit conditions for small businesses have been one of the huge challenges since the banking crash. The better news is that conditions are starting to ease, as the most recent surveys show, but I am the first to say that the job is not done. That is why we are shifting the focus of the funding for lending scheme with the Bank of England onto small business lending and why we have introduced the British business bank, which did not exist before. We are doing all those things to support credit, including for small businesses.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Following that answer, will the Chancellor tell us how many firms have actually been helped by the business investment bank?

[Mr Osborne]

The British business bank is lending to intermediaries that support non-bank lending to small firms. [Hon. Members: “How many?”] There was no British business bank before. The only bank that the Opposition helped to take into public ownership was the Royal Bank of Scotland, because they completely failed to regulate it.

Pub Companies

Brian H. Donohoe Excerpts

Tuesday 21st January 2014 Commons Chamber

[Toby Perkins]

I have tremendous respect for the hon. Gentleman, but those whose lives have been wrecked by the behaviour of the pub companies will look askance at the idea that, because of the nature of this debate, people will choose whether or not to vote for the motion. We had a Back-Bench debate on the issue two years ago, at which the motion was carried unopposed. However, the Government ignored it. In fact, it is only when the Opposition have brought pressure to bear that we seem to have achieved any movement on the issue. Today, in an entirely open and reasonable way, we are calling for all Members who feel strongly about this, as I know the hon. Gentleman does, to support the motion and give the Government the necessary impetus and the courage of their convictions to take the action that is so desperately needed.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

One reason behind pub closures is the high taxation on spirits in general and on Scotch whisky in particular. Given that spirits and Scotch whisky account for 40% of the sales in pubs, and that the level of taxation continues to escalate, should not the Government look more closely at the inevitable loss of revenue involved?

[Toby Perkins]

My hon. Friend raises an important point. There are many aspects to the debate on the future of our pubs, but this debate is about the pub companies. I will therefore resist his offer to get drawn into what the shadow Chancellor should propose to do about the taxation of the Scottish whisky industry. However, my hon. Friend rightly identifies whisky as an important product for our pubs, for our economy and particularly for the Scottish economy. Whether the statistic that he has just given us lends any credence to Scottish people’s reputation for an enthusiasm for alcohol I will leave to Members to consider.

--- Later in debate ---

[Andrew Griffiths]

I am certainly open to the idea of an adjudicator. My question is, who pays? It is estimated that the administration of an adjudicator could cost £1 million, which is a huge amount of money to take out of the beer and pub economy. Who is going to pay for what could be described as just another piece of red tape and Government regulation?

I genuinely ask the Minister why she would want to sit in judgment on rent disputes or other commercial or contractual disputes between two businesses, especially when effective mechanisms are already in place that are unique to the pub sector, independent and funded by the industry. I ask her to consider carefully the Office of Fair Trading’s report to the consultation. It clearly expressed the view that the tie is not distorting the market, and states that the proposed intervention could result in a breakdown in economies of scale, leading to an increase in rents and prices that would affect tenants and consumers. I also urge the Minister to consider the report from London Economics, which her own Department requested. It suggests that more than 2,400 pubs could close as a direct result of the proposed intervention in the market.

The reality is that many pub companies are nursing pubs because they cannot find a tenant or buyer for them. The proposed economic model would mean that those companies would have to free themselves of those pubs, which could lead to thousands of pubs closing in a very short time. I ask the Minister: why regulate? Is there a consumer issue involved? Not according to the Office of Fair Trading. Would regulation help the smaller brewers? Certainly not, according to the Society of Independent Brewers. That organisation represents the micro-breweries. We have heard people rejoicing today that those breweries have flourished and blossomed. There are now 1,000 micro-breweries operating in this country as a result of the progressive beer duty introduced by the previous Government—I commend them for that—so why would we want to interfere in the market, given that those brewers have clearly stated that to do so would prevent their access to the market?

[Mr Donohoe]

I used to run a licensed premises myself, so I understand what the hon. Gentleman is saying, but he has not really addressed the issue before us today. Why are so many pubs closing? Why, in his opinion, is that happening?

[Andrew Griffiths]

I think that you would become apoplectic, Madam Deputy Speaker, if I were to wax lyrical on why pubs are closing. We all know that it is due to changing social demographics, to the fact that people are spending more time at home, to the drink-driving laws and to the supermarkets. There are many reasons—[Interruption.] And, yes, the smoking ban. The hon. Member for Central Ayrshire (Mr Donohoe) gesticulates as though he is puffing on a cigarette. I completely agree with him on that point. The previous Government introduced the smoking ban and, at a stroke, closed thousands of wet-trade pubs without putting in place any support for the pubs or the industry. He has pointed out another unintended consequence of legislation. It was a good idea that we stopped smoking in pubs—they have a nicer environment as a result—but the unintended consequence was that many of them closed.

The danger is that we repeat those mistakes in the proposed regulation. We would not expect McDonald’s franchisees to be able to sell Kentucky Fried Chicken products because they thought there would be more profit in doing so. Why, then, should we want a Marston’s pub to be forced to sell other people’s beer as a result of the proposed regulation?

--- Later in debate ---

[Andrew Griffiths]

I completely agree with my hon. Friend. The previous Government increased the duty by 60% during their time in office, and it is no wonder that 9,000 pubs closed on their watch as a result.

[Mr Donohoe]

I recall a previous debate on beer, which I think was led by the hon. Gentleman. I made an intervention on that occasion to ask about whisky and other spirits. It is now known that spirits account for 40% of the sales in pubs, so would he include them in his calculations, as well as beer?

[Andrew Griffiths]

The hon. Gentleman will also be aware that the vast majority of a pub’s income comes from the sale of beer. We brew beer in this country; it is something that we are fantastic at doing. It is a British product—

[Mr Donohoe]

Whisky is as well.

[Andrew Griffiths]

Of course, and whisky is a great product, but the hon. Gentleman will also know that the whisky industry is growing and that the vast majority of that growth is coming from exports, whereas the beer industry is in decline, and beer is produced and sold uniquely in this country.

I recognise that I am in the wilderness here, but I urge the Minister, colleagues and all Members who are considering how to vote in this debate not to introduce red tape and regulation that will force more pubs to close and create a further decline in the great British pub.

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[Ian Murray]

I think it is fantastic that communities are able to bid for pubs. It is happening in Scotland as well, under the Scottish Parliament. Indeed, I have a small vested interest in that, because I am leading a consortium of fans looking to buy Heart of Midlothian football club. Community ownership—or at least having the opportunity to go into community ownership—is the way forward for lots of industries that have a tie to the local community.

The combination of high rents and tied barrelage costs means that a pubco tenant must sell a pint at a price level that allows some reasonable profit margin. That level is well above what non-tied premises can charge, which makes the pubco tenants uncompetitive and pushes up the price for the consumer. As the hon. Member for Tewkesbury (Mr Robertson) mentioned, barrelage costs can be 50% higher in tied premises than in non-tied premises, which can distort the market in terms of how much tied premises need to charge the customer. Add to that an increase in VAT to 20% and we have a cocktail of disaster for the publican.

[Mr Donohoe]

As my hon. Friend was a pub licensee, he will know that in a tied pub it is not only beer prices that are tied but the spirits and everything else that is sold. I know that from my own experience.

[Ian Murray]

My hon. Friend is right to raise that because it is indeed the case. My hon. Friend the Member for Huddersfield mentioned that too, when he said that the ties can be on wet sales, dry sales and gaming machines, and they can mean compulsory courses, compulsory training, compulsory licensing and using highly inflated contracts through the pub companies for, for example, statutory checks like electrical checks.

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[Jenny Willott]

As the hon. Lady will know, we are evaluating the responses and we will publish our response as soon as we can. That will give much more information about what we propose to do and the costs and impacts of those proposals.

[Mr Donohoe]

Will the Minister give way?

[Jenny Willott]

I am afraid that I am very short of time and the hon. Gentleman has already intervened a number of times, so I will not.

The purpose of the consultation was to consider the proposals to address the problems in the relationship between pub-owning companies and their tenants, rather than to rehash the problems that we all know to be there. That leads me on to the response to the consultation; I emphasise again that the volume of responses we received was staggering, demonstrating the depth of feeling on the issue.

We received more than 1,100 written responses and more than 7,000 responses to the online questionnaire. One of those responses was 2,000 pages long, so the amount of evidence we have received is significant. That also shows that the situation is not as simple as some people have portrayed it, as illustrated by the speeches made by a number of Members today—not least those made by my hon. Friends the Members for Burton, for Tewkesbury and for East Hampshire and the hon. Member for Huddersfield. They raised concerns about what should be done to tackle the problems, including mentioning the views of the OFT, and highlighted that the matter is not simple but is far more complex than has been suggested by those on the Opposition Front Bench.

The responses to the consultation came from a wide range of interested parties. Since we published the responses online in December, they have been read several thousand times. If hon. Members have had the opportunity to look at even a little of the evidence that has been submitted—I am fairly sure that no one will have read the 2,000-page submission—they will see that views are often polarised on the degree and the nature of the problem, and what the best solutions would be. That has also been seen in today’s debate. The 2011 report of the Business, Innovation and Skills Committee noted that the evidence

“demonstrates a high level of acrimony within the industry and is littered with claims and counter-claims”,

which just shows that it is important to make sure that we get this right.

The breadth and depth of views expressed in the Chamber today and in the consultation help to illustrate what a complex issue this is, particularly if we aim to design a solution that is both effective and proportionate. As some hon. Members have highlighted today, the tie itself is not necessarily a problem; it is abuse of the tie that is the problem. Nor is the tie the only problem facing pubs, so finding the right solution is a complex matter.

As hon. Members have also highlighted, the Government had intended to publish their response to the consultation by the end of 2013. I know that those who are affected by the proposals, whether tenants or businesses, need clarity from us. This is, however, a complicated issue, and it is really important that we get the decision right. The excellent response to the consultation has created a broad evidence base upon which we can make our decision, and the evidence spans the range of proposals that we have discussed today, including the market rent only option, and puts us in a good position to make the right decision to ensure a fairer and more sustainable pubs industry.

We intend to publish the Government’s response to the consultation as soon as we can, but we are working to reach a proportionate solution that delivers greater fairness for Britain’s publicans. We believe fundamentally that a tied tenant should be no worse off than a free-of-tie tenant. The beer and pubs sector makes a significant and valuable contribution not only to our economy, although that has been highlighted in today’s debate, but also to the more intangible benefits of social cohesion and a sense of community. We want to support a fair and flourishing pub sector, which is why we removed the beer duty escalator, as has been mentioned by hon. Members, and reduced the tax on beer in last year’s Budget. It is also why we support the community right-to-buy scheme, which several hon. Members have mentioned today, and why we are giving £19 million to help communities to take advantage of the scheme.

By ensuring that tied tenants are treated fairly and putting an end to the abuses of the tied model, we will create a sustainable and fairer industry to enable pubs to remain as mainstays of our communities, and that will be good for publicans, pubs and the public.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

National Minimum Wage

Brian H. Donohoe Excerpts

Wednesday 15th January 2014 Commons Chamber

[Rachel Reeves]

I will come to that point shortly because the number of firms that are getting out of paying the minimum wage is incredibly worrying. We suggest increasing the fine to £50,000 for not paying the minimum wage, but there is no point in having such a fine if the legislation is not enforced.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Today’s Glasgow Herald reports that the fine will go up to £20,000 from where it is today. Surely, that is not nearly enough, given that hundreds of thousands of people are not even paid the very minimum wage of £6.31 an hour.

[Rachel Reeves]

At the Labour party conference, my right hon. Friend the Leader of the Opposition called for the fine to be increased to £50,000, and I support that. It is also important that companies that get out of paying the minimum wage are prosecuted, and we are not seeing that under this Government.

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[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes that since 2010, the Government has increased the National Minimum Wage each year, despite the worst recession in living memory, to protect the income of the low paid and increase their wages relative to average earnings, and is cutting taxes for the low paid to boost take home pay by £705 a year, taking 2.7 million out of income tax altogether; welcomes increased employment under this Government, which is at its highest ever level; notes that the Secretary of State for Business, Innovation and Skills has asked the Low Pay Commission for an assessment of how it might achieve a higher National Minimum Wage in the future without damaging employment; further notes that the Government has maintained a central enforcement body that covers all areas of the UK and ensures a consistent approach and high quality service; and further notes that the Government is quadrupling fines for employers in breach of paying the National Minimum Wage and has already made it easier to name and shame employers who flout the rules.”.

I am delighted to have the opportunity to move the Government amendment. Before I get down to the detailed substance of the motion, I want to say that this debate gives us the opportunity to discuss in more detail the regulations that, following my announcement before Christmas, I have laid today to increase penalties for non-compliance with the minimum wage by a factor of four. I also want to reinforce my earlier commitment that we will not merely do that but will proceed to introduce primary legislation to enable fines to be applied per worker, rather than per company, which will make them a great deal more forceful.

[Mr Donohoe]

Will the Secretary of State give way?

[Vince Cable]

I will take an intervention later.

The shadow Secretary of State, the hon. Member for Leeds West (Rachel Reeves), misadvised one of her Back Benchers, the hon. Member for Westminster North (Ms Buck), who quite rightly intervened, in relation to care workers, about there being no payment between jobs for social workers carrying out domiciliary care. That is actually an abuse of the minimum wage legislation. It has now been recognised as an abuse, and colleagues in the Department of Health, as well as my Department and Her Majesty’s Revenue and Customs, are making efforts to ensure that the regulations are properly enforced.

[Mr Donohoe]

Will the Secretary of State give way?

[Vince Cable]

Let me carry on for a few minutes. The hon. Gentleman knows that I always take interventions. Let me just build an argument and then I will allow him to respond.

Let me start with the very basics. It is a little difficult to do so in the face of the relentless tribalism that we have just heard, but I would say at the outset that the introduction of the national minimum wage was a real achievement of the previous Government. There were not many achievements, but two will stand the test of time: the establishment of the independent Bank of England and the establishment of the national minimum wage. [Interruption.] Indeed, there were others, but those were the two main ones in the economic field.

Having said that, I attempted to be constructive about the motion, but one blindingly obvious point is that the centrepiece of the national minimum wage legislation—the establishment of a non-partisan, non-political Low Pay Commission—did not even merit a mention. The shadow Secretary of State referred to it only in response to an intervention. That is rather important, because it suggests one of two things. The first possibility is that Labour Members do not understand how their own system works. Indeed, I heard a Labour Member cry out earlier, “Why don’t you make it increase the minimum wage?”, so there are clearly people who do not understand the mechanism. The second possibility is that Labour Members do not respect the basis of the system, which is independent advice from a non-partisan body. That advice has been followed consistently by successive Secretaries of State, including my Labour predecessors. That is the strength of the system and that is why there is political consensus behind it.

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[Vince Cable]

Yes, it is now the law. Of course we support enforcement of the law. I do not understand the question.

[Mr Donohoe]

Will the Secretary of State tell us why he came to the conclusion that the fine should go from £5,000 to £20,000, rather than the £50,000 that would deter all those gangsters out there who are not paying the minimum wage?

[Vince Cable]

The rise to £20,000 is a fourfold increase. However, the big difference is in applying that fine per worker rather than per company. That is a considerable escalation of the penalties. I hope that we will have the support of Opposition Members in voting that through.

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[Vince Cable]

On the last point, the hon. Gentleman may well be right, although I have seen an analysis suggesting that, because of the effect on corporate taxation, which offsets those gains, he is not. However, on the more substantive point about politicians intervening to override the Low Pay Commission, I believe that we should not be dogmatic about it. In the overriding majority of cases, it behoves the Secretary of State to listen carefully to the Low Pay Commission and it would be unusual to override it. He cites one case, and I have actually overridden the Low Pay Commission—on the apprenticeship wage, which I thought was excessively low, giving the wrong signal to young people and others who wanted to do apprenticeships. I made a decision on that specific issue to intervene and disregard the advice of the Low Pay Commission. If that became a habit, however, and if its advice were overridden on a major issue of pay policy, the minimum wage structure would crumble from being politicised in that way.

[Mr Donohoe]

To ask a simple question, what is the minimum wage for apprenticeships?

[Vince Cable]

I think it is £2.68, and it was going to be frozen at £2.65. [Interruption.] It is a very small increase, but there was an issue of principle involved, which is why I intervened to change it.

Let me proceed on the issue of the mandate. The Low Pay Commission has consistently regarded jobs as an important objective of policy—rightly, and we must respect that judgment because it is based on serious analysis. Let me quote a good study carried out by the Resolution Foundation, and I believe the National Institute of Economic and Social Research was involved, too. It analysed the effects of a general increase to the living wage level, which Labour Members would like to see happen.

The analysis suggests that if other things were equal and if all low pay were increased to the level of the living wage, there would be a net loss of 160,000 jobs. Worse than that, there would be a loss of 300,000 jobs among the unskilled and among young workers, because massive substitution would take place. That does not mean that the living wage is a bad idea as a voluntary principle, but it does spell out very brutally what would happen if Governments ignored the Low Pay Commission and took a cavalier view of the impact of the minimum wage on jobs.

Scotch Whisky Excise Duty

Brian H. Donohoe Excerpts

Wednesday 8th January 2014 Westminster Hall

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I am grateful to you, Mrs Main. I am aware that we are to vote at 4 o’clock, so we will find ourselves in a short adjournment. As I speak, I am waiting for the vote to come. [Interruption.] There we go.

Sitting suspended for a Division in the House.

On resuming—

[Mr Donohoe]

It is a pleasure to see you back in the Chair this afternoon, Mrs Main. It is just a pity that you do not have a glass of whisky in your hand, with which, at this time of the year, we would share a toast. Water will have to do, I am afraid.

It is quite incredible that we should have to have this debate, particularly in this very important year for the Scots, who are voting on whether to remain in the United Kingdom or to have a separate Government in Scotland. I shall pose a question: can anybody tell me how much taxation there is on a bottle of whisky that costs about £12.70?

[Graeme Morrice (Livingston) (Lab)]

It is 80%.

[Mr Donohoe]

On a bottle of whisky that costs £12.70, more than £10 is tax, including VAT. That is the level of taxation placed on our best industry in Scotland.

[Ian Paisley (North Antrim) (DUP)]

Will the hon. Gentleman give way?

[Mr Donohoe]

I will take interventions towards the end of my speech, if I may. I will give everybody who has made a representation to me an opportunity to speak. I also have an eye for the chair of the all-party group on Scotch whisky and spirits.

As I said, this is the year of separation, so it is important to have this debate as we move towards the Budget on 19 March. I fully support the “UK okay” campaign. One of the areas of vulnerability is the current disproportionate tax on Scottish whisky compared with English beer or cider. Whisky is taxed at 48% more than the same amount of alcohol served as beer. That is the difference in terms of the taxation on whisky and spirits. The beer duty escalator was abolished last year, but the spirits escalator continues at 2% above inflation. That should be addressed and I will come to the reasons why.

Excise duty on Scottish whisky is now 44% higher than in 2008. The escalator in 2014 will mean an increase in duty of 4.8%, or, in terms that I understand, 38p per bottle. That is what the escalator will bring. As I said, taxation as it stands now is more than £10 a bottle. Scotch whisky exports are growing, but the home market remains important, and the UK is the third largest market for Scotch whisky by volume.

However, volumes in the UK have declined by some 12% in the UK since the escalator was introduced—as a result of it, I would argue, and I am sure some of my colleagues would, too. The UK tax on spirits, which of course includes Scotch whisky, is the fourth highest in Europe. When we compare that with Sweden, Finland and Ireland, which have particular reasons for having high taxation, we can see the unfairness of the tax for the spirits industry.

The Scotch Whisky Association, which helped the all-party group, has called on the Chancellor to freeze duty on Scotch whisky in the 2014 Budget and to scrap the escalator. It should be scrapped because UK consumption has declined since it was introduced, and we want to see the UK market expand. Ernst and Young research shows that scrapping the escalator in 2014 would boost the drinks industry contribution to public finance by some £230 million in 2014 alone.

Consumers should be treated fairly across the range of alcohol products, but Scotch whisky drinkers are being heavily penalised. The sales of Scotch whisky form a significant part of the pub trade. Scrapping the escalator would boost UK sales, and therefore UK jobs in the industry. The industry is good not only for Scotland, but for the whole of the United Kingdom, because it accounts for more than 25% of all UK food exports. That is a significant figure that should not and must not be lost on the Treasury. It is good to see the Minister in her position this afternoon.

In 2012, the industry generated £4.27 billion for the UK balance of trade and 35,000 jobs. I can see there are Members present from the remote areas of Scotland; the industry has been the main employer in many small towns and villages in their constituencies. It has always been a major contributor to the support of the infrastructure within such communities, and I do not think that that has been taken into account by the Government.

Some 10,000 of those jobs are directly within the industry. Most of them, if not all of them, are in areas of most need, and they have supported the towns and communities for many years. The jobs are in rural and urban areas, and the industry is the sole employer in some of the smaller areas in Scotland.

The Scotch Whisky Association has called on the Chancellor to freeze duty on Scotch whisky in 2014—I am sure the Minister has seen that request—and also to scrap the escalator. The Chancellor took the decision last year on the basis that he would cancel the escalator for beer and cider, but not for spirits. I think that that is unfair and it does not really stack up when one considers that the reasoning was to safeguard the jobs in the pub industry. In fact, 40% of the pub industry is down to the sale of spirits, so the matter of unfairness between the pint and the wee dram needs to be looked at.

Taking action on Scotch whisky would show that the Government support that major industry both at home and abroad—that they support the jobs it creates and do not disproportionately penalise Scotland’s national drink.

[Grahame M. Morris (Easington) (Lab)]

My hon. Friend is making an excellent point about the benefits of the Scotch whisky industry to the Treasury and to Scotland in terms of jobs. Does he recognise the broader benefits that accrue from jobs in transportation and shipping? South of the border, in my region in the north-east, jobs are derived from transporting Scotch whisky to Teesport and there are jobs in shipping as the product is exported all over the world.

--- Later in debate ---

[Mr Donohoe]

I am grateful to my hon. Friend for making that important point. The issue affects not only Scotland; it equally affects his English constituency.

[Ian Paisley]

I am not the representative of Irish whiskey, but I do have the Bushmills distillery in my constituency. It employs 102 people, but it also supports a vital tourist industry; there are more than 140,000 visitors each year to the distillery. Does the hon. Gentleman agree that the tax impacts on jobs not only in Scotland, but in my part of the United Kingdom? Indeed, 90% of what is manufactured in my constituency’s distillery is exported globally, but if the Government continue with the escalator, we are going to have high taxation on products that are exported. That is a bad signal to send to an industry.

[Mrs Anne Main (in the Chair)]

Order. Please make interventions brief. There are a lot of Members in this room. If everyone has interventions of that length, Mr Donohoe will run out of time.

[Mr Donohoe]

I am grateful, Mrs Main. I hope that Members will note what you have said. What the hon. Member for North Antrim (Ian Paisley) said is important. He is from another part of the United Kingdom and correcting this wrong tax at the Budget is as important to him and his constituents.

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

rose—

[Mr Donohoe]

I give way to my hon. Friend, who is the treasurer of the all-party group.

[Gemma Doyle]

I am very grateful to my hon. Friend for giving way. He will be aware that the whisky industry is very important for jobs in West Dunbartonshire, too. Does he share my concern that the concessions previously given to beer and cider are mainly based on the fact that those industries ran a good campaign? I would not take that away from them, but we need a more coherent look at excise duty across alcohol products.

[Mr Donohoe]

Again, I am grateful for that intervention. I am sure that we have learned a lesson in that respect and that we will make damn sure that our campaign this time is as good as, if not better than, the beer campaign.

[Mr Alan Reid (Argyll and Bute) (LD)]

I am grateful to the hon. Gentleman for giving way and also for what he said earlier about the importance of the whisky industry for jobs in remote communities, such as the Isle of Jura and other places in my constituency. It is very unfair that whisky is taxed far more highly than beers and wines. We must be about the only country in the world that taxes our own product more highly than imported products such as wines.

[Mr Donohoe]

I thank the hon. Gentleman for his intervention; he makes a really good point. It is really ridiculous that people can go into a supermarket in Spain, Italy, Germany or France and buy a bottle of whisky far more cheaply than people in this country can.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

rose—

[Mr Donohoe]

I give way to my hon. Friend, who is the chairman of the all-party group.

[Jim Sheridan]

I want to take my hon. Friend back to the important issue of jobs. One of the significant factors of the Scotch whisky industry is that the jobs that it creates are excellent, well-paid, quality jobs. It is possible to tell that by the turnover of staff, which is very low.

[Mr Donohoe]

I am grateful to my hon. Friend for the point he makes, and it is clear that the issue of jobs is part of the equation.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

One of the crucial points that the hon. Gentleman highlighted about the export industry is that the way we treat our own whisky at home sends a signal to foreign importing markets. It is important to send the right signal to those markets, so the Treasury needs to consider the impact that the issue has on the importing countries.

[Mr Donohoe]

That is a very important point. If we go to the European Commission and argue with it, there is that divide between the north and south of Europe; until a few years ago, the Commissioner was very pro-wine and anti-spirits. It is an indicator of the seriousness of the situation that we are discriminated against—the Commission throws at us the level of taxation in our own country. That is an element that must be addressed by the Chancellor at the Budget.

[Sir Malcolm Bruce (Gordon) (LD)]

The Government are arguing that the duty on whisky has gone up by 37% compared with a rise of 42% on beer. The trouble with that argument, of course, is that, because the Government have eliminated the beer escalator, that division will be eliminated very quickly. The point that we have to maintain in export terms is that this is a home-based industry. If something is good enough for beer, it is good enough for whisky; the escalator should go and we should ensure that our most successful industry is supported competitively at home and abroad.

[Mr Donohoe]

I could not agree more with the right hon. Gentleman.

I have taken all the interventions that I will take. I will finish by putting four questions to the Minister. First, can the Treasury explain why it was that, when it stopped the escalator on beer last year to save struggling pubs, it failed to look at the situation as far as spirits and wines were concerned? As I said, they account for some 40% of the sales in those very pubs and the rest of the hospitality sector. Given that the Chancellor wanted to help that sector, it seems strange that the rise in duty on whisky was set against that.

Secondly, what assessment—if any—has the Treasury made of the impact on pubs of last year’s announcement on beer? I hope I can get a response to that question. Thirdly, can the Treasury provide reassurances to the Scotch whisky industry that the annual attack on Scotch whisky will come to an end in the Budget in 2014? Finally, does the Treasury acknowledge that the home market for Scotch whisky, which remains the industry’s third largest market, is diminishing due to excessive tax rises each year?

Sales of Scotch whisky in the UK have dropped by 12% since the duty escalator came into being. Is it possible to hear today what is likely to be in the mind of the Chancellor? I am sure that the Minister is aware that we, as an all-party group, have made a representation to him for a meeting. I hope that what she says today will include an agreement to that meeting.

--- Later in debate ---

[Nicky Morgan]

I hope that the message is going out that this Minister is always willing to listen and that she is willing to engage. I am also very willing to have the meeting that was suggested by the hon. Member for Central Ayrshire. However, I would be a foolish new Minister if I were to commit to announcing Budget moves now. Nevertheless, I shall certainly listen; I have listened; and I shall continue to listen to the debate that we are having and to the wider representations that have been made to me. I thank the hon. Member for Moray (Angus Robertson) for his intervention. As he said, he has a very onerous task in representing his constituency; I am sure that his constituency Fridays are filled with much fun and spirits.

I return to the duty escalator, including that on Scotch whisky. I am aware of the industry’s views on the pre-announced alcohol duty rises for 2014. It may be helpful if I explain the background to these increases before addressing the specific issues that were raised by the hon. Member for Central Ayrshire. Of course, the previous Government were responsible for introducing the spirits duty escalator and are therefore responsible for this year’s increase in spirit duty. The inflation plus 2% rises were first announced at Budget 2008 and they were extended for a further two years, until 2014-15, at the March 2010 Budget. These rises were for all alcohol duties and, as I say, were legislated for by the previous Government.

This Government made changes to beer duty at Budget 2013 to support pubs, which, as we all know from our constituencies, play an important role in local communities. The hon. Gentleman asked about the impact of last year’s Budget on pubs and I shall address that issue in a moment. However, he also talked about 68% of the alcohol that is sold in pubs being beer, so the changes to beer duty were, overall, a measure to help pubs. I can also tell him that although spirits and wine account for 41% of sales by value in the off-licence trade, they account for only 23% of sales in pubs by alcohol volume.

[Mr Donohoe]

I do not know where the Minister got that last figure from. I ran licensed premises, and although it is perhaps different down here in the south-east, I can tell her that in Scotland whisky accounts for at least 40% of sales in the pub, and in the pub that I ran the figure was 60%. [Laughter.]

[Nicky Morgan]

The hon. Gentleman’s pub sounds as though it was a very interesting place, and I am very happy to listen to representations on the figures.

The hon. Gentleman asked about the impact of Budget 2013 on pubs. The British Beer and Pub Association survey showed that, following a reduction in beer duty, 76% of the pubs would increase investment and 61% would employ more staff. That is why this reduction was targeted particularly at pubs. That is not to say that I have not listened to the hon. Gentleman’s arguments.

Given the Government’s commitment to ensuring sustainable public finances, it was not possible to end the escalator on all alcoholic products, so they made a targeted reduction in beer duty. The hon. Gentleman asked whether the Government had failed to consider other alcohol duties. I was not in the Treasury at that point, but I do not think that that was so. However, the decision to reduce the duty on beer was taken in 2013.

I have heard the views of hon. Members and I assure them that I will consider these as part of the Budget process.