Finance (No. 2) Bill

Debate between Catherine McKinnell and David Rutley

Wednesday 9th April 2014 Commons Chamber

[David Rutley]

I am a regular visitor to Scotland—I normally drive—but I think we should move on to wider issues.

As they stand, the changes to air passenger duty from April 2015 will save business-class, long-haul passengers more than £100. It makes sense to abolish the very high bands of APD. They have caused understandable concerns, with the widespread perception that they were just another example of the unfair tax changes that we inherited from the Labour party. It is right that, as a result of the Government’s decisions, all long-haul flights will carry the same lower band-B tax rate that is paid to travel to the United States, for example. A family of four flying economy to visit relatives or communities in the Caribbean or south Asia will pay £56 less in APD. It is also right and fair that the Government have brought private jets into the scope of APD and that the share of the burden is more easily spread across air passengers.

Government Members believe in tax fairness, and we believe in reducing the burden of tax wherever possible. As my hon. Friend the Member for Crawley (Henry Smith) pointed out, however, it must be a fiscally responsible approach, although that seems to have been completely ignored in the comments of some Opposition Members.

By cutting APD, the Chancellor is again helping to support British exporters, not least first-time exporters looking to make their first steps into high-growth export markets, perhaps by attending international trade fairs or visiting prospective clients and customers abroad. Virgin Atlantic says:

“The Government has rightly recognised the damage APD is having on exporters and the travelling public alike.”

There is a real need to encourage more exports and exporters. As I indicated in my earlier intervention, Lord Livingston recently pointed out that

“only 17% of UK mid-sized businesses generate revenues outside of the EU compared to 25% in Germany and 30% in Italy.”

I am delighted that action is being taken across Government to meet that challenge. Our small and medium-sized businesses have the potential to be economic powerhouses for our economy and to create more wealth and more jobs across all regions of the UK, including Wales and Scotland. To realise that potential, we need to rediscover our great trading heritage and embrace the global opportunities for Great British services and manufactured goods. By cutting APD, we are underlining the commitment of the Department for Business, Innovation and Skills, the Foreign Office and UK Trade & Investment to provide support. Those are positive steps.

International aviation links are not merely important for exporting goods and services from the UK to other countries, or to make more sales missions feasible; lower APD will support UK tourism and help to improve our competitive position in the market for inbound tourists, be they leisure tourists or business travellers in the meetings, incentives, conferences and events sector.

According to Kurt Janson, the Tourism Alliance’s policy director, the Bill’s proposed savings

“will be a benefit for attracting visitors from the growth markets of China, India and Brazil as well as the traditional market of New Zealand and Australia.”

Indeed, PricewaterhouseCoopers suggests that the studies it reviewed for its research

“all point to a link between whole economy productivity and airline sector output.”

By encouraging greater connectivity between the UK and the global economy, reductions in APD can add to the mix of supply-side measures introduced by this Government since 2010. APD is another barrier to productive growth that the Government seek to remove.

This Government believe in long-term thinking. Difficult decisions have had to be made to save us from the appalling legacy that we inherited from the previous Government, but we are now seeing the results of that approach. It has become affordable and fiscally responsible to cut APD and other taxes that have been holding back this country’s businesses and people from realising their ambitions. The Government are helping people to realise their ambitions and objectives in life by working progressively to de-risk entrepreneurialism and support the export industry. For that reason, the measures have my full support.

[Catherine McKinnell]

It is a pleasure to serve under your chairmanship, Mr Bone. It is clear from the contributions and amendments tabled by the hon. Members for Carmarthen East and Dinefwr (Jonathan Edwards) and for Na h-Eileanan an Iar (Mr MacNeil) that APD remains an important issue for many hon. and right hon. Members. Indeed, we have debated APD on the Floor of the House on many occasions, so it is worth briefly reflecting on the coalition Government’s record on APD since they came to power in 2010— a record, as I am sure many hon. Members will agree, of prevarication, indecision and lack of direction.

Before the election, the Conservatives made a commitment to look at a per-plane duty. The report that resulted almost a year later, contrary to the manifesto commitments of the Conservatives and the Liberal Democrats and the coalition agreement, was not taken forward, and for very good reasons. The industry certainly did not support it. Although right hon. and hon. Members on both sides of the Committee will be all too conscious of the need not to take a Liberal Democrat promise at face value, we had certain expectations concerning the coalition agreement.

The Government promised a further review of APD. The consultation covered several areas including private jets, different tax bands, premium economy flights, flights from regional airports and the possible devolution of APD. The consultation paper raised the concern that the existing four-band structure was damaging the UK’s competitiveness and contained several anomalies, such as a higher rate for Caribbean flights than for other destinations in the USA. That was a source of concern for many hon. Members, which, given the announcement in this year’s Budget, the Government seem to have taken on board. The consultation lasted the best part of a year and numerous interested parties took considerable time and effort to respond constructively and in good faith.

What was the result of that long and arduous process, which, including the first consultation, spanned the best part of two years? It was next to nothing. Aside from the extension of APD to cover business flights, we have seen no changes to APD across the UK. That period of time has been described by industry players as

“a sham and a waste of taxpayers’ money.”

There were three full years of promises, yet the Government delivered next to nothing. Three wasted years—a phrase that is synonymous with the coalition Government, whether in respect of APD or, more broadly, the flatlining economy that we have seen for most of the Chancellor’s time in office.

In this year’s Budget, choices were made that, notwithstanding the years of delay and the further year of delay ahead, have been cautiously welcomed by much of the industry. The third coalition U-turn in this area in as many years means that there will be some relief for long-haul flights in the form of lower rates of APD. Let us not forget that APD on all flights of more than 2,000 miles will be uprated by RPI this month. That comes on top of the large increases over the past few years, including the 8% rise that the Chancellor announced in Budget 2012, which was double the rate of inflation.

Budget 2014 saw the announcement or re-announcement—I am not entirely sure which, as Ministers will not give me a straight answer—that the Government will provide funding to aid start-up routes at smaller airports. The regional air connectivity fund, as it will be known, will help new routes from regional airports according to the Red Book, but Ministers do not seem to know which airports or new routes will be eligible or what the fund may be spent on. Although any new support for new air routes is clearly welcome, the proposal seems to bring yet more uncertainty for the aviation industry, the like of which it has already endured for years.

Clearly, that support could be of most value to the constituents of the Members who have tabled the new clauses and the new schedule. Perhaps the Minister will enlighten the Committee and reassure hon. Members about what support their regional airports can expect to receive from the fund.

amendment of the law

Debate between Catherine McKinnell and David Rutley

Monday 24th March 2014 Commons Chamber

[Catherine McKinnell]

I caution the hon. Gentleman, given that long-term youth unemployment in his constituency has gone up 125% under this Government; he should check the figures.

However, back to the annual investment allowance, the slashing of which has cost jobs. Cutting the allowance from £100,000 to £25,000, then announcing a temporary increase to £250,000 with the expectation that it would then fall again to £25,000, before then increasing it to £500,000 in last week’s Budget, although welcome, does not really inspire confidence in the Government’s long-term strategy for supporting business growth and investment—businesses that desperately need stability and certainty, rather than continual chopping and changing over the years.

[David Rutley]

On that point, does economic growth of 2.7% inspire confidence in the hon. Lady?

--- Later in debate ---

[Catherine McKinnell]

The growth figures are a fraction of what the Chancellor promised back in 2010. I urge caution on the hon. Gentleman, who has seen long-term unemployment in his constituency go up 600% under this Government.

Indeed, that whole sorry saga just about sums up the Government’s haphazard and cavalier approach to backing economic growth and job creation. Clearly, it is welcome news that the economy is growing again—undoubtedly, after three years of flatlining—but as we all know, in 2010 the Chancellor predicted that our economy would have grown by 8.4% by now. Instead, we have seen growth of just 3.8%, lower than the US and lower than Germany. Indeed, GDP growth this year is still expected to be lower than the OBR forecast in 2010. This is now the slowest UK recovery for 100 years, with our economy still 1.4% behind its pre-crisis peak.

How many more businesses could have grown, and how many more jobs could have been created, had the Chancellor not slashed the annual investment allowance at the first opportunity? How many jobs and how much new investment have been lost as a result of his carbon price floor, about which the Opposition have consistently raised concerns and on which he finally used last week’s Budget to take some action?

Had the Chancellor acted before last week’s Budget, how many firms could have been given the support and finance they need to export, thereby helping to ensure that any economic recovery is driven not just by consumer spending? It is little wonder that he is so unlikely to achieve his target of doubling UK exports to £1 trillion by 2020, given that the Government’s export enterprise finance guarantee scheme helped just five firms before folding, and their export refinancing facility is still not operational, despite being announced back in July 2012.

Of course, three years of a flatlining economy have meant that the Chancellor’s much hailed deficit reduction plan has been an abject failure, with the coalition now set to borrow £190 billion more than originally planned. Indeed, the Government have borrowed more in three years than Labour borrowed in 13 years. The Prime Minister and the Chancellor previously promised to eliminate the deficit and balance the books by 2015, but now they will not be able to do that until 2018. As a result of their failed policies, the Government, who like to talk tough on welfare spending, will actually spend £1 billion more on welfare this year and next than Ministers were planning only last December to spend. They will spend £13 billion more than they planned.

[David Rutley]

It is interesting to hear the hon. Lady’s comments on the debt, the deficit and so on. Does she agree with the IFS that the Labour party would be spending £29 billion more under the plans it has in place?

[Catherine McKinnell]

I agree with the IFS that families are, on average, £891 worse off as a result of this Government’s tax and benefit changes. Once again, Government Members want to ignore the cost of living crisis that households are facing up and down the country as a direct result of this Government’s failure to deal with the deficit and help ordinary families.

Last week was the Chancellor’s final opportunity to introduce policies to provide the real help that people need now and to cement the recovery after choking it off when the Government first came to office. The key question that people across the UK will be asking is whether they are better off now and in the coming months than they were when the coalition came to power in 2010. With the exception of a very few of the Chancellor’s friends at the top, for most the answer is a resounding no. Last week’s Budget did absolutely nothing to reverse that.

National Insurance Contributions Bill

Debate between Catherine McKinnell and David Rutley

Monday 4th November 2013 Commons Chamber

[Catherine McKinnell]

Once again, Government Members want to airbrush the past three years of stagnation, lack of economic growth and the failure of the Government’s implementation of that policy. They failed to address the issue quickly enough, so only today are we finally introducing a policy that will help and that will give that support to small businesses. Unfortunately, it is a little too late in the day for some businesses, which have suffered over the last three years, and for the people who have lost their jobs as a result.

[David Rutley]

In the spirit of not wanting to airbrush, will the hon. Lady tell the House how she thinks the jobs tax would have helped her much-cherished goal of encouraging economic growth?

[Catherine McKinnell]

Coalition Back Benchers want to forget what the Government have done and the past three years of the policy we are debating. They want to debate a policy that never came into play.

None the less, despite the restrictive and complex nature of the previous scheme, the Exchequer Secretary and his Treasury colleagues had bold ambitions for it. He acknowledged from the Dispatch Box that some 400,000 new businesses would benefit from the scheme, with each successful applicant creating an average of two jobs. At that rate, the scheme would have created 800,000 new jobs, with a total cost to the Exchequer of £940 million over its three-year lifespan.

Given that the scheme, which was one of the Chancellor’s flagship policies, drew to a close in September, one might have assumed that the Exchequer Secretary would want to promote the outcome. Sadly, he cannot do so—sadly for the businesses that failed to benefit. Only through a written answer obtained by my hon. Friend the Member for Nottingham East (Chris Leslie), the shadow Chief Secretary to the Treasury, did we learn that a grand total of some 25,400 businesses successfully applied for the scheme over the three-year period. That is undeniably a sizeable number, and the creation of any new jobs in the past three years, during a period of economic stagnation, is welcome; but with only 6% of the target reached, the Exchequer Secretary has had to acknowledge that, as flagship policies for economic growth go, that one has been a bit of a flop.

When the previous scheme was introduced, the Opposition called for there to be no regional restrictions on it, for it to be extended to charities, and for a review of its effectiveness after six months. Those proposals were rejected. The Government ploughed on with a scheme that obviously was not delivering the goods throughout its operation. That was why, as long ago as September 2011, my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor, called for a one-year national insurance break for every small firm that took on extra workers, using the money left over from that failing Government policy—it was clear that it was failing even in September 2011.

The Government are now introducing the employment allowance. It is not regionally restricted and will apply to charities as well as businesses, and it will apply whether or not they are start-ups. It should be easier for firms to access it because it will be delivered by the standard payroll software and Her Majesty’s Revenue and Customs real-time information system, as the Exchequer Secretary said in his opening comments. The question is this: why did it take so long? Given that the scheme will not be available until April 2014, we have had nearly four wasted years when the Chancellor could have helped the thousands of small businesses about which Government Members have spoken so passionately to expand and create jobs.