Finance Bill (Fifth sitting)

Christian Matheson Excerpts

Thursday 15th October 2015 Public Bill Committees

[Christian Matheson (City of Chester) (Lab)]

Does the hon. Gentleman agree that this is an excellent early opportunity for the Conservative party to put words into action by showing that it is, as it claims, the party of ordinary working people, as opposed to, for example, the political wing of the City of London?

[Roger Mullin]

I fully agree; indeed, I look forward to the Minister’s response in that regard. This may have been a missed opportunity that the Government now recognise and will want to correct.

Let me make another comparison. In my own constituency, my wonderful constituency manager, Lynda Holton, pays about the same effective tax rate as many fund managers who earn 100 to 200 times more than her. [Hon. Members: “Pay her more!”] When I was on the phone to her this morning, she did want me to say “my underpaid constituency manager”. And she is underpaid, but of course I am a devotee to the rules of the Independent Parliamentary Standards Authority in this regard. Surely it cannot be right that people on much more modest incomes have effective tax rates that are higher than those for some of the highest paid people in our society. I am prejudiced in favour of the simplification of tax as well as justice in tax. For both those reasons, I hope that the Government will respond positively to our new clause.

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[Rob Marris]

It may be nice for the hon. Gentleman, but it will not be so nice for his great-grandchildren when they reap the havoc from climate change. That Audi emits 181 grams of CO₂ per kilometre. Under the new scheme, assuming it is still on sale in March 2017, the car will move up from band I to band J, yet those emissions will receive a discount, as it were, of £60; the current seven-year cumulative duty would be £1,700 but under the new scheme it will be £1,640. The change is not huge, but it is a 3.5% change in the wrong direction.

A petrol Infiniti Crossover, of the Nissan luxury brand, which as far as I know is not made in this country, produces an antisocial 265 grams of CO₂ per kilometre. It is currently in band M and liable for a seven-year duty of £4,130. Under the new regime, the charge will be £1,290 less, at £2,840—a 31% drop because of the interaction between the new vehicle excise duty regime and the £40,000 cost threshold, above which a different regime applies. That is a 31% drop in vehicle excise duty over a seven-year period for one of the most polluting light passenger vehicles currently on sale in the United Kingdom.

Now let us look at a Jaguar XF, which currently costs just under £50,000. It is now in band F because its CO₂ emissions are 144 grams per kilometre, and costs £1,015 over seven years in vehicle excise duty. Under the new regime, if a car costs less than £40,000, it will move up—up being less polluting—to band H and cost £1,040 over seven years, an increase of £25, or £3.57 a year, as my wonderful researcher, Imogen Watson, tells me. But as for the Jaguar XF, fine vehicle as it is, no doubt with an engine made in Wolverhampton, because its price tag is over £40,000—and remember: its CO₂ emissions are 144 grams per kilometre, which is still high, but nothing like the Infiniti’s 265 grams per kilometre—it will cost an extra £310 per year for the first five years, meaning that over seven years the duty will go up to a total of £2,730, an increase of £1,715 or 169%.

Now, I have nothing against the Infiniti—as far as I know I have never been in one—and Nissan is a fine manufacturer, but its luxury model emits 265 grams of CO₂ per kilometre, and yet there will be a 31% drop in duty for it over the seven-year cumulative period, whereas the Jaguar is much less polluting, at 144 grams per kilometre, but its duty will increase by just under 169%. That cannot be right.

I urge the Government to think again. They should think about the pulmonary diseases from which thousands of people are dying already. Much—not all, but much—of that illness is arising because of vehicles, including light passenger vehicles. The Government also need to think again about the mixture of bad gases, to put it in lay terms, used as the metric for calculating vehicle excise duty. I also urge them to think again about the CO₂ based regime they are proposing from 2017 onwards, because it cannot be that the successor to the greenest Government ever, which is a phrase that hon. Members have no doubt been waiting for me to utter, are moving in the wrong direction by jettisoning what has been—I will try to be dispassionate, although it was my Government who introduced it—a vehicle excise duty regime that has been extremely successful in lessening considerably the CO₂ emissions from the fleet of light passenger vehicles in the United Kingdom.

I take the Minister’s point that the way in which new clause 5 is worded means that the review would happen eight months after the new clause would come into effect if the Government do not withdraw clause 42, as I hope they will. If he were to say a little more about the Chancellor’s remarks regarding a review of the impact and effect of clause 42, something to which he adverted in his remarks, I might be reassured and so not wish to press new clause 5 to a Division at the appropriate time. I therefore hope for some reassurance from the Minister; although, capable as he is, he can only rely on what the Chancellor of the Exchequer has said in that regard. I urge Members to vote against clause 42 if the Government do not withdraw it, as it will be bad for the economy, bad for the environment and bad for our children.

[Christian Matheson]

I feel I ought to add my congratulations to my hon. Friend on his research. He seems to be doing an impressive job. I was also impressed by the recommendation he gave about Honest John in The Daily Telegraph—I might cancel my Saturday subscription to the Morning Star and take the Telegraph instead.

My hon. Friend makes an important point. It is entirely legitimate to build environmental considerations into the taxation system if we want to change people’s habits in order to protect the environment, and the clause gives the impression that the Government are once again rolling back from their pledge to be the greenest Government ever and falling into bad old ways.

There is a way out. Perhaps the Minister should take a pause on the clause, as my hon. Friend suggested, because so much of it is predicated on emissions standards that have been thrown into turmoil by one company, which was not a British company—I do not believe that a British company would partake in such skulduggery. We cannot be absolutely sure that emissions standards across the industry are as they should be, because manufacturers in certain areas have been telling us, shall we say, statements that lack 100% veracity.

It is not only that motorists have been hoodwinked. The Government have potentially lost revenue as a result of emissions figures being massaged, with lower figures given. What are the Minister’s intentions, either through the Bill or perhaps more appropriately through another mechanism, on claiming back any revenue lost as a result of the Volkswagen scandal? The state has lost revenue as a result, so taxpayers have been hoodwinked as well as individual motorists, and although the Bill might not be the right mechanism for this, there must be a role for the Government in chasing down such manufacturers. Perhaps the Minister should not push through new measures linked to emissions standards until he and his colleagues in the Department for Transport are sure that a fair taxation system can be based on those standards. The Minister may wish to heed my hon. Friend’s good advice.

[Mr Gauke]

Let me try to respond to the points made. On the environmental incentives, consumer research suggests that VED is not an important factor in purchase decisions. Where VED has been shown to play a supportive role is in the highly visible first-year rates. In those we have retained, and indeed strengthened, the environmental signal: for example, first-year rates will double for the most polluting cars.

To drive real emissions reductions in transport, we need to incentivise the uptake of fully zero-emission cars such as pure electric cars. Owners of such cars will pay nothing in the VED system, while highly polluting cars will see a doubling of their rate. As more expensive cars are generally more polluting, it is the case that owners of such cars will continue to pay more than those of smaller, efficient cars through the standard rate supplement.

The point made by the hon. Member for Wolverhampton South West about the number of cars in the lowest band was correct. We are deliberately tightening the incentives at the bottom end. The current structure provides little incentive to buy a car much cleaner than 100 grams of CO₂ per kilometre and we believe that such an incentive should be there. It is also worth making the point that nobody’s VED on their existing cars will go up. I made that point earlier, but I want to reiterate it.

Finance Bill (Third sitting)

Christian Matheson Excerpts

Tuesday 13th October 2015 Public Bill Committees

[Mr Gauke]

I hope I will be able to welcome the support of the Opposition for the clauses in full, although the hon. Gentleman is quite right to ask scrutinising questions.

We are not making any claims about the effect on house prices. The OBR’s assessment is that the impact on the housing market will be small and it has not adjusted its forecast for house prices. The answer to the issue of house prices is improvement in supply—I suspect the hon. Gentleman would agree—so it is worth pointing out that housing starts are at a seven-year high. However, the Government remain focused on putting the right conditions in place so that we build more houses and more people have the opportunity to own their own home.

[Christian Matheson (City of Chester) (Lab)]

The hon. Member for Wyre Forest made the interesting point that home ownership is the principal form of saving for most people in this country—I hope I am not misrepresenting him, Sir Roger. Do the Government share that view?

[Mr Gauke]

It is up to individuals to decide how they wish to save. We are determined to ensure that the opportunity to own one’s own home is available to as many people as possible. That requires us to increase the supply of homes in this country, and that is a Government priority. We are moving in the right direction, but, as we set out during the Conservative party conference last week, we want to do more to put in place the conditions wherein more people will have that opportunity.

On the impact of the changes, there was a question about whether the measures might move a basic rate taxpayer into the higher tax band. We expect that around 94% of landlords who will have to pay more tax will have a total taxable income of over £35,000. On average, landlords own 2.7 properties. Those currently with taxable income under £35,000 who will have to pay more tax have, on average, larger rental incomes and larger property portfolios; they have an average pre-tax rental income of more than £64,000, and own six properties. It is true that basic rate taxpayers could be affected by the measures, but often—not in every case, but overwhelmingly—those people will have quite large portfolios and may have leveraged up to a greater extent than the typical buy-to-let landlord.

I hope that clarification has been helpful to the Committee, and that the measures will have the Committee’s support.

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[Mr Gauke]

The clause makes changes to ensure that sports people who visited the UK to compete in the London Anniversary games are exempt from tax on any income received as a result of their performance at the games.

As hon. Members will know, the London 2012 Olympic and Paralympic games were an extraordinary success, with stunning wins for British athletes, beautiful stadiums and an unforgettable atmosphere. For the Olympics, the Government provided an exemption from income tax for non-resident sportspersons. That was a condition of the bid to host an internationally mobile, world-class event.

The success of the 2012 Olympics and Paralympics did not end there: we have now created a legacy programme that has delivered urban regeneration and engagement in sporting activities. The prestigious 2015 London Anniversary games were an important part of that legacy, attracting icons that hon. Members will remember from 2012.

The clause applies the same exemption policy that the Government provided in 2012. It benefits athletes who reside overseas and visited the UK to participate in the London Anniversary games, which were held in July. Importantly, this tax exemption encouraged more world-class international athletes to compete in the event. Following the announcement in the Budget, Usain Bolt confirmed that he would compete and he went on to win the 100-metre race, which drew a much wider audience’s attention to the success of the Olympics and London. The exemption was granted on an exceptional basis owing to the opportunity the event provided to build on the legacy of the 2012 games.

[Christian Matheson]

The London Anniversary games were specifically related to the Olympics, which were a great success for London and the whole of the nation. I have to say that a feeling remains in other parts of the UK that London, notwithstanding its success, does seem to get more than the lion’s share of sporting events. Is there a view in government that specific provisions such as this, which help to attract world-class athletes such as Usain Bolt, might be extended on individual bases to other great events that take place outside London, so that they too might benefit from the attendance of such athletes?

[Mr Gauke]

I can give one good example: we applied the same exemption for the Glasgow 2014 Commonwealth games. That is an example of the Government’s willingness to do that. Again, that was part of maintaining the Olympic legacy and ensuring that we could get top athletes to compete in the Commonwealth games. The hon. Gentleman raises a fair point and I hope he accepts that I have given a fair answer to it. I hope the Committee agrees that the clause should stand part of the Bill.

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I am pleased that these changes will not adversely affect spin-out companies—I did not expect them to, but it was a helpful clarification from the Minister—because these have had success in certain parts of the country. One thinks of Cambridge in particular, where spin off has been very helpful not only to the local economy but to the national economy and to exports. Will the Minister elucidate with some trend figures on Government support for university research and development? It might allay the fears of some in the university sector observing this debate, perhaps not in real time, who are concerned that this will be a major blow to university-sponsored research.

[Christian Matheson]

Will the Minister clarify one small area I am unsure of, which comes from my experience serving as Member for City of Chester? When Shell decided to close its research and technology area at Thornton in my constituency, which contains a large petrochemicals sector, it gave the Thornton research centre over to the University of Chester, which is growing in size, in stature and in academic reputation. Thornton science park has since become a very successful seedbed for growing companies as well as for academic research. My hon. Friend the Member for Wolverhampton South West talked about spin-off companies, and I am looking for clarification from the Minister on a similar issue. Some joint venture companies comprise higher education institutions, such as the University of Chester, and companies from the private sector that are engaged in research that may well bring economic development into an area or into the nation, and may lead to new technologies being developed in the area. Will the participation of a higher education institution preclude a company from receiving such grants? Is this an area on which the Government are not yet quite clear?

Finance Bill

Christian Matheson Excerpts

Tuesday 8th September 2015 Commons Chamber

[Damian Hinds]

It was necessary, because of the imperative to deliver value for money, to move quickly on this change. The Government are committed to supporting the investment and innovation needed to achieve a cost-effective transition to a low-carbon economy while ensuring security of energy supply and avoiding unnecessary burdens on businesses and households. We are making great strides towards achieving those goals, with emissions down 30% since 1990. We will ensure that our policies provide maximum value for money for the taxpayer in delivering environmental benefits without harming the economy.

Several hon. Members have voiced their concern about the impact of the clause, and I want to take a moment to address those concerns. The change will not increase household energy bills, because the climate change levy is not charged on households. Business customers should not lose out from the change either. The business energy market is competitive and wholesale electricity prices will not be increased as a result. Energy-intensive businesses are already exempt from 90% of the costs of the climate change levy for electricity by being in climate change agreements. The change will also not affect renewable generators’ long-term investment plans. Most generators were expecting to receive a negligible value from the exemption by the 2020s.

Of course, the renewables sector will also benefit from Government’s recent cuts to corporation tax, which will save businesses over £10 billion a year, giving the UK the lowest rate of corporation tax in the G20. Lastly, the change will not affect the UK’s ability to meet its climate change goals, as emissions from electricity generation are capped through the EU emissions trading system. Nor will it affect our ability to source at least 30% of electricity demand from renewables by 2020. The Government remain committed to meeting their climate change objectives but we believe we must do so in a cost-effective way.

[Christian Matheson (City of Chester) (Lab)]

The Minister has outlined the various assessments that the Government have made, but have they assessed the effect of these measures on the industry itself, and on the many companies that have built successful businesses installing and manufacturing these products? Those companies have just had the rug pulled from under their feet by the Government’s measures.

[Damian Hinds]

It is a bigger rug than that. The climate change levy is only a relatively minor part of the support that was given to the industry, compared with the support given through the renewables obligation and through contracts for difference.

It is essential that we show that our measures to achieve climate change and renewables objectives provide good value for money, in order to retain long-term public support for them. I look forward to hearing hon. Members’ views and I urge them to give their support to the clause.

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RenewableUK, the industry body for on and offshore wind, suggests that the certificates account for up to 6% of an onshore wind project’s revenues and that they are worth roughly £5 per MWh. In its view, taking away the exemption certificates could be the difference between profit and loss for some marginal projects. It is as simple as that.

[Christian Matheson]

Was this industry not one in which we had a lead on innovation and design and technology that we could have exported across the world? There are numerous examples in my hon. Friend’s constituency and mine of companies going under as a result of the proposed changes. She may be interested to know that a major installing company in the Chester area estimates that 90% of its employees will have to be made redundant as a result of the Government’s proposals.

[Alison McGovern]

That is terrible news for our region and the rest of the country. My hon. Friend and I have a great deal in common, not least that we have both visited renewable energy firms in our constituencies. I visited one recently that was similarly disappointed at the Government’s attitude and the business now faces risks that it simply did not expect.

Of even more concern than the fact that the removal of the certificates may mean a difference between profit and loss is that such income has been factored in to the strike prices agreed for projects awarded a contract for difference to date. Surely the removal of the certificates will either open the Government to legal challenge or some contracts for difference will have to be reassessed. Which is it?

I will give an example of such an impact. One small onshore wind project in Scotland generates about 35,000 MWh per year. The loss of the certificates could cost the project £175,000 each and every year. As with many such projects, it was financed with bank loans, the terms of which anticipated an exemption certificate of roughly £175,000 a year. Somebody involved in the project told us:

“We identified each of these projects and risked development capital to secure planning permission, and invested a large amount of time, all on the understanding that the LEC would be available. We raised debt funding from banks, who look at the expected revenue from the project to determine what amount they are willing to lend—they based their calculations on the LEC remaining in place. Therefore, the sudden removal of the LEC will reduce the turnover of these projects, which at the very least will reduce the returns to our investors and in the worst cases, could cause problems with banking covenants.”

Does that example not demonstrate the responsibility that we in the House have to provide a stable regulatory environment for business? That is not a lesson I ever thought I would have to preach to the Conservative party.

NAREC Distributed Energy, the National Renewable Energy Centre in the north-east, has suggested that it knows of at least four European wind developers that have decided to cease, or significantly to reduce, plans to develop in the UK. It says that another firm from mainland Europe with which it was in talks has decided to avoid the UK completely. We have also heard from sources in the solar industry about the growing concern that the industry faces severe challenges ahead.

We can see the impact of clause 45 and other recent policy changes in the announcements made by key energy companies operating and investing significantly in the UK. For example, Vattenfall the Swedish energy company, has already abandoned two onshore wind projects in the UK, one in Wales and one in Lincolnshire. Frankly, those are both regions of our country that could do with the investment. In one case, it cited the Government’s changes to onshore wind planning policy, and in the other, it cited a market that had “moved on”.

What does that picture mean for the UK economy? More importantly, what does it mean for the Chancellor’s ambition, which he tells us he has, for a high-skill, high-wage exporting economy of the future? How do such policy decisions impact on our prospects for overcoming the current productivity crisis, which, as Labour Members have repeatedly set out, must be at the top of the Chancellor’s priorities?

According to the Renewable Energy Association, some 112,000 people are employed in the renewable energy value chain across the UK, some 11,000 of whom are employed in the north-west—my region—alone. Companies in the north-west turn over some £700 million a year, which is investment we can little afford to lose. According to the REA’s figures, the number of renewable energy jobs has grown seven times faster than those in the rest of the economy. Green jobs are undoubtedly vital to regional economies in the north and in Scotland, where renewable technologies are deployed much more widely, and renewables supply chains are more established there than elsewhere in the country.

RenewableUK, which is predominantly the voice of the wind industry, has said that the onshore wind industry alone supports almost 14,000 jobs in the UK and contributes almost £1 billion of gross value added. As the CBI has said,

“green is not just complementary to growth, but a vital driver of it”.

This is a central economic question for our country. It means establishing clear and stable market frameworks, as well as the UK playing a strong role internationally.

The REA agrees, estimating that the industry could create up to 400,000 high-skill jobs by 2020 and, equally importantly, contribute a cumulative £60 billion benefit to the UK’s trade balance. What could be more vital in these times of global economic uncertainty? The Office for Budget Responsibility forecasts that the UK’s current account deficit will remain broadly unchanged up to 2020—a deficit, by the way, that we rarely hear mentioned by the Chancellor. The low-carbon sector could play a key role in turning that around, yet here we have the Government stripping out the support that underpins it.

The first majority Conservative Government for years have been in office for little over a hundred days and this policy framework will severely diminish their business credibility. That fact is evident not just because I say it is, but from the reaction of the business community. The senior vice-president of Veolia in the UK and Ireland has suggested that Ministers risk

“sending this country back to the dark ages”

when it comes to green policy. She said:

“What I don’t understand is why the government would apply the carbon levy on renewable energy plants which are carbon-positive—it’s illogical.”

Jon Ferris, the head of energy markets for the consultancy Utilitywise said the decision would

“do little to convince investors of UK policy stability”.

The chief executive officers of 10 leading environmental charities penned a strongly worded letter to the Prime Minister, pointing out that the Government’s rhetoric post-election runs entirely counter to that during the campaign, concluding:

“We have, as yet, seen no positive new measures that would restore the health of the environment or grow the low carbon economy.”

If the Minister does not like to hear it from me, perhaps he will take it from those on his own side, because there has been no shortage of criticism from Conservatives. Various members of the Conservative party have, quite rightly, failed to comprehend the lack of coherence not just in the Government’s climate change agenda since the election, but in their wider approach to ensuring that the UK is an attractive proposition for investors. The Conservative peer and former shadow Chief Secretary to the Treasury, Lord Flight, in a damning verdict of the Chancellor’s revenue-raising decisions, said:

“Charging renewable companies the Climate Change Levy is a contradiction of Government energy policy, which is still seeking to encourage Renewable Energy investment.”

The Chair of the Conservative Environment Network, Ben Goldsmith, wrote a letter to the Financial Times describing the climate change levy changes as “perverse” and “contradictory”. He even drew parallels with Greece:

“Introducing a retroactive subsidy cut with one month’s notice means more guesswork over what the government will do next—the very worst basis for raising capital. This makes the UK look more like the volatile markets of southern Europe—impacting on newbuilds and undermining confidence in generating assets.”

I often hear the Chancellor compare the UK to Greece, but I never thought I would hear a Conservative activist use his own words against him.

The reaction across the business world and among other stakeholders speaks to a wider point about what these changes mean for the UK’s economic future. Despite the rhetoric from the Conservative Chancellor about a plan to boost productivity, deliver higher-skilled, higher-wage jobs, pursue cost-effective climate change policies and act always in a business-friendly manner, the truth is that clause 45, taken together with a string of other policy announcements since 7 May, symbolises the exact opposite of that approach.

As the Chancellor wrote in the foreword to his productivity plan in July:

“The drivers of productivity are well understood: a dynamic, open enterprising economy supported by long-term public and private investment in infrastructure, skills and science.”

I could not agree more. Unfortunately, the Chancellor’s actions in recent months speak louder than his words ever will. He would do well to heed the advice of some in his own party, including the hon. Member for Selby and Ainsty and those I have just quoted.

New clause 2 calls on the Government to assess all of the impacts I have just outlined. It aims to highlight the true impact of removing the climate change levy exemption for renewable-sourced electricity. It asks Ministers a number of questions that are crucial to the future of the UK’s green economy, its role in achieving a more balanced, productive economy, and the UK’s role in the world. How does the removal of the exemption affect existing renewables generators and projects currently in the pipeline? What impact will clause 45 have on investor confidence? Finally, what does it mean for the UK’s ability to meet its climate change commitments?

Oral Answers to Questions

Christian Matheson Excerpts

Tuesday 16th June 2015 Commons Chamber

[Greg Hands]

The hon. Lady makes a reasonable point, but that is why in the previous Parliament we increased spending on innovation, including on the new catapult centres and on a whole host of other projects, and we look forward to doing more in this Parliament.

[Christian Matheson (City of Chester) (Lab)]

15. What assessment he has made of the level of productivity in the economy.

[The Financial Secretary to the Treasury (Mr David Gauke)]

The UK’s productivity has been lower than the G7 average since OECD records began 45 years ago. In the previous Parliament, we took a number of steps to increase the UK’s productivity in the long run, including cutting the corporation tax rates to the lowest in the G20 and investing in skills, infrastructure and science. The Chancellor will set out what further action this Government will take to boost productivity in our productivity plan to be published before the Budget.

[Christian Matheson]

I thank the Minister for his reply. In Chester, the number of people on apprenticeships continues to decline, and I am talking about Conservative-style cheap and cheerful apprenticeships with little added value at the end. Was the creation of a low-skill, low-wage economy an intention of the Government, or was it an unintended by-product?

[Mr Gauke]

On the subject of Chester, unemployment fell over the course of the last Parliament by 49%, which is something I would have expected the hon. Gentleman to welcome. The reality is that we are investing in apprenticeships; we saw 2.2 million people undertake apprenticeships in the previous Parliament, and we will increase that to 3 million in this Parliament.