Defence Industry: Scotland

Debate between Chris Stephens and Ged Killen

Tuesday 30th April 2019 Westminster Hall

[Ged Killen]

I completely agree with my hon. Friend, and later in my speech I will make the point that making short-term decisions without looking at the whole picture is inherently flawed.

[Chris Stephens (Glasgow South West) (SNP)]

The hon. Gentleman is making an excellent speech. Does he agree that one of the UK Government’s strangest decisions is to tender internationally for fleet support ships? If it were decided that they should be built in the UK, that could benefit shipbuilding not just in Scotland, but across the UK.

[Ged Killen]

I absolutely agree with the hon. Gentleman. I will touch on that point later in my remarks.

Although we must continue to support shipbuilding, the UK and Scottish Governments must focus on diversifying and deepening the defence industry in Scotland to ensure that there will always be a base for the high-skill and high-value roles associated with the industry—that is eminently achievable. Scotland is well placed to be a home for a variety of new industries. With strong universities and a history of manufacturing and design excellence, we are ideally placed to take advantage of the large demands of the UK’s defence. This debate gives Members the opportunity to discuss future high-growth areas and draw attention to the advantages of increasing diversity in the defence industry. For my part, I will touch on two high-growth areas: space and land vehicles.

Glasgow in particular has become a pioneering centre for the deployment of microsatellites, producing more satellites than any other city outside the United States. As future defence concerns rely increasingly on the gathering and analysis of information, significant space assets will be vital to the day-to-day operations of the armed forces in both military and non-military operations.

The space sector has huge potential for future growth. Year-on-year growth in the sector has been five times greater than in the wider economy since 1999, and the sector has tripled in value since 2000. Each new job in the space sector adds £140,000 of added value per employee, and the overall sector receives 36% of turnover from exports.

--- Later in debate ---

[Ged Killen]

My right hon. Friend will not be surprised to know that we have different views on Britain’s membership of the European Union. I largely consider that we are kicking ourselves out of the EU and should accept the consequences of that, although I regret the impact that it will have on projects such as Galileo.

Further to the space sector, the construction of advanced land vehicles offers an excellent opportunity for the expansion of the defence industry in Scotland. Glasgow now hosts an armoured vehicle centre of excellence, which was set up by defence company Thales. The centre aims to provide the MOD with an excellent new resource for the development of armoured vehicles.

Thales is currently bidding for the MOD’s multi role vehicle-protected programme which, if successful, would see 50 highly skilled engineering design and manufacturing jobs brought to the Glasgow site, and the possibility of 30 additional jobs created over the programme’s lifetime. Thales has said that if it is selected for the MRV-P and as the UK design authority and integrator for the Boxer and its variants, 100 new jobs could be created directly, while 180 jobs could be created through supply chains and around 200 further jobs could be supported indirectly.

Such programmes are vital for expanding the diversity of the defence industry in Scotland and introducing new skills, as well as deepening the existing skills base. A great example is my constituent Stewart Macpherson, an employee at Thales Glasgow who has been chosen as one of the top 30 electronics engineers under 30 in the UK.

Encouraging and supporting new skills and professionals is a great benefit of defence investment, so I should be grateful for an update from the Minister on the progress towards reaching a decision on the MRV-P programme. I appreciate, however, that he may only be able to reveal certain information as some might be commercially sensitive.

[Chris Stephens]

I again thank the hon. Gentleman for mentioning Thales, which is based in my constituency. Does he agree that if Thales is successful in obtaining the contract, the economic benefits for the whole Glasgow area—including for my constituents and his—would be considerable?

[Ged Killen]

I absolutely agree. Recently, when I visited the site, I was pleased to see how many of my constituents are employed there.

I am disappointed about the previous actions of both the UK Government and, to a certain extent, the Scottish Government. The recent failure by the UK Government to support the construction of the fleet solid support vessels, as mentioned in this debate and many other times in this place, shows completely misplaced priorities. Ill thought-out changes to Government tendering rules redefined the vessels, meaning that the ships will not fall under article 346 of the treaty on the functioning of the European Union. That opens UK shipyards to subsidised international competition and puts jobs and the potential investment in shipyards such as Rosyth at risk.

What is more, that situation was wholly avoidable, with the decision being made completely unilaterally, yet possibly writing off highly skilled, highly paid jobs that could return £2.3 billion in revenue to the Treasury while providing sustainable employment and an increasing skills base. I therefore urge the Government to think again about that, and to follow the Labour party’s lead by advocating that such ships are built in the UK. The case of the fleet solid support ships signals a Government who are far more interested in achieving in-year cost reductions than in looking at the whole picture.

HMRC Closures

Debate between Chris Stephens and Ged Killen

Thursday 2nd November 2017 Westminster Hall

[Chris Stephens]

I will meet the hon. Gentleman halfway. I do not believe that unpaid taxes are at a new low. In fact, I think the report I referred to earlier, published by Tax Justice Network and PCS, showed a gap of £119 billion. That certainly suggests to me that one of the major focuses of HMRC should be collecting tax and going after the rogues who are registered in the Cayman Islands and other places, shuffling money. I will meet the hon. Gentleman halfway on that.

HMRC faces a number of challenges requiring investment in offices and infrastructure, and no one from HMRC or from the Treasury has so far explained what changes they will make in the “Building our Future” programme to meet these challenges. I will not avoid saying, “We told you so,” because we did, time after time, in this place and elsewhere. We know that UK overseas territories are used to avoid billions of pounds of tax. We know that the uncollected tax avoided by these high-rolling spivs runs into tens or even hundreds of billions of pounds. It beggars belief that, at a time when there is more focus than ever on tax dodgers and their theft from public services, HMRC are shuttering dozens of offices across the country, losing staff and skills that could otherwise be used to target the high rollers who cost our hospitals, infrastructure and schools billions each year.

It is therefore somewhat ironic that Mapeley, to which HMRC’s office estate has been outsourced, is based in Guernsey, a notorious tax avoidance hub overseen by the UK Government. Downing Street confirmed yesterday that HMRC will need up to 5,000 new staff as a direct consequence of Brexit and the UK leaving the customs union.

[Gerard Killen (Rutherglen and Hamilton West) (Lab/Co-op)]

Does the hon. Gentleman agree with me that, with the combination of Brexit and the devolution of increased powers over tax and income bands to Scotland, it is exactly the wrong time for HMRC to consider scaling back its operations?

[Chris Stephens]

I agree with the hon. Gentleman. The next question is rather obvious: “Where are all these staff going to go?” Some will be deployed at the new hard border, which those on the Government Benches seem to believe will have virtually no impact on our economy. At least, I can only assume that they believe it will have zero impact; that can be the only reason for yesterday’s refusal to publish 58 impact assessments that they commissioned. Some will be based in HMRC offices, but what offices? Where in the country will these new recruits be based? Over the last two decades the number of HMRC offices has gone from 700 to, under the Government’s plans, just 13.

Where exactly are the HMRC staff tasked with border duties in the north of Scotland going to work? They cannot work at the Lerwick office, because it is closed. They cannot work at the Ullapool office, because it is closed. They cannot work at the Wick office, because it is to close. They cannot work at the Peterhead office, because—guess what?—it is closed. The only offices left in Scotland will be in Glasgow and Edinburgh. We will have legions of new HMRC staff, tasked with policing the customs border that it appears to be the Government’s wish to create, with nowhere to carry out their office role, in an area of work that is guaranteed to involve more paperwork, more deskwork and more IT skills. I mention those offices in particular because each of those towns is a port, importing and exporting on a daily basis—the very places where, one would assume, HMRC staff are needed most. The lack of joined-up thinking on the issue would be laughable were the consequences felt across the country not so serious.

We also found out in July this year that only 399 staff are employed by HMRC in enforcing the national minimum wage, less than one full-time staff member for each constituency represented in this House. I simply do not believe, and neither do HMRC staff members, that the number of exploitative and criminal employers is so low as to allow for that low level of staffing. Indeed, the Government confirmed to me in a written answer in June that it would not, and had no plans to, fill the 83 current vacancies in the HMRC minimum wage compliance unit.

In the last financial year, HMRC closed 2,600 cases of non-compliance with the national minimum wage. That such a small staff team managed to bring so many criminals to book is incredible, and a tribute to their tenacity and hard work. However, I simply do not believe that that is even the tip of the iceberg. There are many thousands of other criminals out there, exploiting low-paid staff and pocketing profits for themselves. These individuals must be rooted out and dealt with, but what hope do 399 staff have of policing the full gamut of employer exploitation when 2.67 million businesses are registered for VAT or pay-as-you-earn? How can an office in Edinburgh properly and sustainably investigate employer criminality in Islay or Caithness? HMRC’s cuts agenda is putting the poorest and most vulnerable employees at risk of exploitation by crooks and gangsters the length and breadth of these islands.

The hon. Member for Ochil and South Perthshire talked about the closures in the round. I mentioned earlier that the proposal for the Welsh language unit in Wales means there will be a relationship with the Department for Work and Pensions, but what is that relationship? It is time for the Government to produce a map of office closures for all Government Departments, because we will find ourselves in the farcical situation of an HMRC employee having to take redundancy because they cannot travel hundreds of miles to the new regional centre, only to find that the jobcentre has been removed from their town as well and they will have to travel further to sign on, never mind go to work at HMRC. I hope that the Government will produce a map of office closures across the United Kingdom.

I will touch on the roll-out of universal credit and HMRC’s role in how this is paid to claimants. Universal credit fundamentally depends on the ability of HMRC to provide real-time information to DWP about an individual’s earnings from work. The entitlement to UC for the following month is calculated from that, based on the Government’s own formula. It is therefore vital that the information provided by HMRC is 100% correct and accurate. Any errors in the processing or transfer across to DWP of the employee’s salary information could be catastrophic for someone relying on universal credit to top up their low salary.

We all know the carnage being wrought by the roll-out of universal credit; but I fear that the cuts to HMRC’s capacity could result in further devastating implications for people receiving in-work benefits. If things go wrong with the flow of real-time information to DWP, if errors are not identified before universal credit payments are calculated or if the data is provided to DWP late, the consequences for the worker pile up, with fewer staff and fewer offices within HMRC to correct these errors and ensure that the correct payments are made.

Improvements in digital services are welcome, but not at the expense of the capacity for human intervention and expertise to fix problems and resolve issues. I fear that the Government have not properly recognised these new, massive interactions between DWP and HMRC in its “Building our Future” programme, and that the price to all of us, particularly those who need help the most through universal credit, will only become apparent when people’s finances and lives are devastated through no fault of their own. The landscape has changed immensely since the “Building our Future” programme started. Customs barriers could be erected in a little over 18 months. Thousands of new HMRC employees will be recruited, after years in which we were told that job losses were the inevitable result of progress. I hope that the complexities of universal credit, with all the potential for human disaster that they entail, are now becoming apparent to those on the Government Benches.

There are growing demands for tax justice from across the political spectrum. It is surely time for HMRC and the Treasury to hold their hands up and admit that they got this one wrong. It is time to admit that the world has shifted on its axis since “Building our Future” commenced and that the burden on HMRC staff, both current and future, represented by the programme is unsustainable, unjust, and cannot be a rational way to run a taxation system. It is time for HMRC to go back to the drawing board and begin planning the next generation of accommodation for HMRC staff and services, serving communities and the people in them, rather than the bureaucratic nonsense that my constituents and others have to endure.

The plans to close HMRC offices will be extremely damaging to HMRC’s operations. They fail to understand or take into account the diversity of the needs of the Scottish or, indeed the UK, economy and have the potential to seriously compromise the ability to collect tax, enforce compliance and close the tax gap. They also create massive uncertainty about jobs and locations across Scotland and the UK. With Brexit looming on the horizon, the Government must now urgently review their plans for the future of HMRC and ensure that it is fit for purpose.