Fiscal Rules

Clive Betts Excerpts

Monday 28th October 2024 Commons Chamber

[Darren Jones]

The hon. Member’s constituents will note at the Budget on Wednesday that this party honours its promises—the promises, set out in its manifesto, to protect working people. He might want to reflect on the way that his party failed his constituents at the last election before trying to lecture this Government.

[Mr Clive Betts (Sheffield South East) (Lab)]

I welcome measures that allow for more long-term investment to improve our economic performance and public services, but I would like my right hon. Friend to address two issues. Is housing one of the areas where more investment might be allowed, to help us achieve our target of 1.5 million more homes in this Parliament? Secondly, will he ensure that where there is public investment, we try to make that investment produce orders for UK companies, rather than many of the orders going abroad? That is the way to create real growth in our economy.

[Darren Jones]

We made a commitment to delivering 1.5 million homes, and we will do just that. On the second part of the question, the whole purpose of the national infrastructure strategy and the overlapping multi-year spending reviews is to give investors and suppliers confidence that when the Government say something will be delivered, it will, so they can invest and plan on that basis, to help improve the British economy. Frankly, they are starting from a position of complete dismay because of the failed promises of the last Government; we will rectify that.

Public Spending: Inheritance

Clive Betts Excerpts

Monday 29th July 2024 Commons Chamber

[Rachel Reeves]

First, specifically on the black hole, we could not have known these numbers because the Conservative party did not tell the OBR these numbers. That is why we are in the position we are in today. That is the biggest scandal of them all.

The shadow Chancellor asks about the estimates. He should recognise the estimates we laid yesterday because he produced them. We had to lay those estimates to allow public spending to continue, but since those estimates were produced, information was given to us by Treasury officials about the true scale of the overspending by the Conservative party.

The shadow Chancellor mentions the IFS. Paul Johnson from the IFS has just said that it appears that these overspends are genuinely unfunded—words not from me, but from the independent IFS, which the shadow Chancellor referenced.

The shadow Chancellor mentions what happened to the reserve. Well, the reserve has been spent, shadow Chancellor. It was spent by you three times over. That is why we are in a position of a £22 billion in-year gap between spending that was happening and the funding to produce it.

If the shadow Chancellor could do all the things he spoke about today, why were they not in the forecasts? If he was able, as he says, to make those in-year changes on welfare and productivity, they would have been in the forecasts. They were not.

On the issue of the pay review bodies, the previous Government set the remit for those but they refused to give them any indication of affordability. That is almost unprecedented. The teachers reported before the election and that recommendation sat on the former Education Secretary’s desk. Today, we are drawing a line on the industrial action: the £1.7 billion cost to the NHS alone last year and 1.4 million cancelled appointments. We are incorporating a third of those pay increases into efficiencies in our public services, as the shadow Chancellor suggested we should.

When it comes to tax, I am not going to take any lessons from the Conservative party. The Conservative party took the tax burden to the highest level in 70 years.

The response of the shadow Chancellor just confirms what we already knew: the previous Government were deluded, out of touch and grossly irresponsible. Today, we begin to fix the mess that they have created.

[Mr Clive Betts (Sheffield South East) (Lab)]

In 2010, we repeatedly heard the words, “The Labour Government did not fix the roof while the sun was shining.” Is it not the case that the last Government not only did not fix the roof, but destroyed the entire foundations of our public services?

In the context of difficult decisions, I welcome two points made by my right hon. Friend. First, there was the encouragement to work with local councils to increase the take-up of pension credit. The Levelling Up, Housing and Communities Committee called for that repeatedly in the last Parliament, but it was not taken up. Secondly, can the Chancellor confirm that she intends to provide multi-year settlements, ultimately, for local councils, which—again—have called for that repeatedly? It would be a welcome step to help them with the very difficult financial situation that they are facing.

[Rachel Reeves]

I can confirm that we will be arranging multi-year settlements with local authorities, as well as with Departments. It is extremely important that both Departments and authorities can plan for the future knowing what money is available, rather than running down the clock towards the end of the year.

I thank my hon. Friend for welcoming the announcement that I made today about working with local government to improve the take-up of pension credit. It is woeful that it is so low. It is vital that everyone receives the money to which they are entitled, especially pensioners, which is why we have taken on those recommendations from elderly people’s charities today to ensure that we work with local government to boost take-up of that benefit.

Budget Resolutions

Clive Betts Excerpts

Tuesday 12th March 2024 Commons Chamber

[Laura Trott]

To put it simply, it is because we are more in control of that figure. The overall figure is falling, but public sector net debt excludes the impact of the Bank of England on the figures.

The rise in public sector productivity will help us to manage the size of the state in the long term, while also maintaining public service quality and delivering savings for taxpayers. That is why, 14 years on, in my role as Chief Secretary to the Treasury, I am delighted to be leading our public sector productivity programme.

[Mr Clive Betts (Sheffield South East) (Lab)]

I am pleased that the Minister is in charge of that programme. Perhaps she can explain a little more about it. Local government currently has a deficit of about £4 billion. In the productivity plan for local government, the Government highlighted the need to reduce waste on equality, diversity and inclusion. I have found no Government figure showing how much that will save, but the TaxPayers’ Alliance says that it will save £50 million over three years, towards the £4 billion deficit. Has the Minister a figure that suggests that the saving in that part of the productivity plan will be greater?

[Laura Trott]

Yes, the savings in the productivity plan will amount to billions of pounds.

Let me say a little about the economic context. The last few years have not been easy. The pandemic, Putin’s illegal occupation of Ukraine, energy price rises, and now conflict in the middle east have taken their toll on the economy, on businesses and on families. However, because of the difficult decisions that the Government have taken, the economy is turning a corner. Inflation has more than halved, from 11% to 4%; real wages have risen for seven months in a row; and unemployment is down, from a high of 8% in 2010 to 3.9% at the end of last year. Because we have stuck to our plan, we have been able to cut the double tax on work, putting £900 back into working people’s pockets. On Sunday, the independent Institute for Fiscal Studies gave its verdict on our tax cuts for workers:

“genuinely putting a lot more money into the pockets of people”.

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[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

One of my mother’s favourite phrases was that anything can be proved with statistics. It seems to me that Budget debates always follow that, as they are something of a statistical salad from which Members can pick out their favourite morsels to support any individual argument.

What is often more important is not to pick and choose statistics to advance an argument, but to look at trends. The reports that I think every Member receives on a regular basis from our big banks and financial institutions—NewDay, Barclays’ Insights reports, Lloyds and others—tell us a great deal about what is going on in the financial lives of the people we serve. Broadly across the country we see a clear trend that people are in a position to save more from their day-to-day incomes. Spending on consumer activity is increasing quarter on quarter, and is particularly strong among constituents on a household income of between £20,000 and £40,000 a year—those on lower incomes, but in employment. That is part of a generally improving—although not rapidly improving—trend.

It is against that backdrop that I welcome in particular the fact that the Budget focuses its support primarily on the lowest income households, including pensioners through the triple lock. It incentivises work, but not just for the benefit of people earning their own income. It recognises the benefits of having a job—for mental and physical health, and for tackling child poverty. It also encourages investment. We have heard a great deal of debate about manufacturing. The introduction of full expensing, and the commitment to retaining it, will be hugely important in raising productivity over time and will help us to address our biggest national challenge, the demographics of a reducing workforce, while helping individual businesses. On a recent visit to the Sharmans Pharmacy in my constituency, I was shown its new pharmacy dispensing robot. It increases rapidly the ability of that pharmacy to fill prescriptions for people who come in. It increases the efficiency of workers and their ability to engage with customers, and it represents a degree of confidence on its part that an investment in an expensive piece of technology will help to increase its profit margins, secure jobs and provide a better service to people who come through the door.

Against that backdrop, and although we have seen amazing progress, with on average an additional 800 jobs per day since the Government took office in 2010, we still face a very significant recruitment challenge. I hear from businesses in my constituency, day after day, that securing workers with the skills to fill the jobs that enable us to grow and increase productivity remains a challenge. I will provide the Government Front Bench with the thought that, just as with the Windrush generation, when we went out and specifically sought to recruit people from across the world to fulfil the roles we needed—it did not always end well, but on the whole it was enormously significant and positive—we might need a similar kind of deal with a friendly nation today, and to make a decision to take control of economic migration and establish links with countries from which we can source the skills we need and with whom we have an affiliation, to provide the stability our economy needs, and in particular the public sector workers we require in the NHS, dentistry and so many other areas of our national life.

To develop the theme of productivity, all across the public sector we hear interesting examples of how different public services are looking to improve productivity. From the Royal Navy, we have heard how future generations of warships will require one third of the number of sailors that the current technology demands. Across the NHS, we see examples of how new technology—I declare an interest; I am married to an NHS doctor—is improving the efficiency of both the delivery of services and the speed with which they can be provided. In that context, it is striking that, while people can be cynical about capitalism, there has been a 50% improvement in cancer survival rates over the past five decades as a result of the wealth that has been generated and invested in this technology.

I very much encourage the Government, as they look at where the productivity gain can most be found—echoing the points made by my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken) and having spent a lot of my time in local government—to focus on the areas of our public sector where we have seen the most impressive gains in productivity. It is clear from, for instance, our experience of the better care fund and what has happened in relation to public health that local authorities have consistently achieved not only some of the most impressive efficiency savings in any part of the public sector, but also the greatest productivity gains. That is because they contain accountable, elected politicians like ourselves, responsible to their communities, who are willing to run things as if they were running their own businesses. One example is the investment in jet patchers enabling potholes, which are a real pest for many of our constituents, to be fixed very rapidly. The decisions on that investment were made in local government years before anyone in central Government got around to identifying the potential benefits of the technology.

[Mr Betts]

Is it not therefore disappointing that while the Government have assumed 5% productivity increases in the Budget, they are also assuming that central funding from the Department for Levelling Up, Housing and Communities will be cut by 2.3% a year in real terms for four years? Even if a 5% increase in productivity were achieved, it would fill only half the gap caused by the cuts in local government funding that are projected in the Budget. That is no way forward, is it? Moreover, the Budget made absolutely no mention of public health or integrated care.

[David Simmonds]

The hon. Gentleman has enormous knowledge of the local government world. I think he would also acknowledge the complexity of the local government finance world and, in particular, the opportunity created by the freedoms relating to council tax increases. As we know from other debates in the House, that is not distributed across the country as evenly as we would like, but it will nevertheless enable local authorities that have built up significant financial balances specifically to manage effectively some of the economic shocks that we know are out there in the system.

Let me end with a brief defence of the value of capitalism. In this Chamber we often debate the need for greater regulation—ten-minute rule Bills, for instance, are often intended to address injustices, and that is entirely right—but if we are honest we will admit that, notwithstanding the grandeur of the Chamber and the status of Members of Parliament, the Government do not exert as much control over the day-to-day life of our economy and our national life as some of our debates imply. We need to recognise that free markets, capitalism and people’s ability to invest and seek returns have helped to deliver that doubling of cancer survival rates, as well as the incredible improvements in educational attainment. It does not always work, of course. The private finance initiative remains a significant burden, but it was a worthy attempt to do the right thing which has turned out to have some significant downsides.

We should consider the improvements in our national mental and physical health and to the rates of absolute poverty that have been driven by investment and the creation of 4 million additional jobs since 2010, which have transformed our constituents’ lives beyond almost anything else that we have done in this Chamber. It is for that reason that I have confidence in the impact that the Budget will have, and in the benefits that a Conservative Government are bringing to all our people.

Oral Answers to Questions

Clive Betts Excerpts

Tuesday 6th February 2024 Commons Chamber

The Chancellor of the Exchequer was asked—

[Mr Clive Betts (Sheffield South East) (Lab)]

1. What recent steps he has taken to ensure fairness in the application of the tax system.

[The Financial Secretary to the Treasury (Nigel Huddleston)]

Regarding fairness, we have a progressive tax system where the top 5% of income tax payers pay nearly half of all income tax, while the top 1% pay more than 28%. In addition, the national insurance reforms announced at the autumn statement cut taxes for 29 million people. That package also strengthens the fiscal position by helping taxpayers to get their taxes right, while bearing down on the small minority who seek to avoid paying their fair share.

[Mr Betts]

The Minister talks about tax cuts, but in April most households in this country will receive a 5% increase in their council tax. That is not because local councils have mismanaged their finances, but because after 13 years of austerity, the local government finance system is essentially broken and relies on a regressive and unfair council tax. Why in the autumn statement did the Chancellor freeze the budgets of the Department for Levelling Up, Housing and Communities for the whole of the next Parliament, leading the Office for Budget Responsibility to forecast a further £13 billion rise in council tax? Does that not show that the Chancellor has no regard at all for councils and the services they provide, or is he simply deferring a problem that his Government has created for the next Government to sort out?

[Nigel Huddleston]

I am afraid that is a ridiculous characterisation. We on this side of the House care, including about our vibrant, important local councils. That is precisely why they just received an additional £600 million, and future spending will be a matter for future fiscal events.

Economic Growth

Clive Betts Excerpts

Tuesday 14th November 2023 Commons Chamber

[Rachel Reeves]

I thank my hon. Friend for that intervention. The truth is that the combination of austerity, which was five Prime Ministers ago, Brexit without a plan—which relates to most of them—and the kamikaze Budget has contributed to the parlous state of our economy and the cost of living crisis that we are enduring today.

This is a party led—and I say “led” in the loosest sense of the word—by a Prime Minister with no mandate whatsoever and with no authority or vision for the future. This Prime Minister appears to be spending more time polishing his CV in conversation with Elon Musk than fighting for the livelihoods of manufacturing workers in Scunthorpe, Port Talbot and Derby.

And it is the previous Prime Minister, the right hon. Member for South West Norfolk (Elizabeth Truss), who still sets the tune for so many in the Conservative party. She wanted to scrap the bankers’ bonus cap in the kamikaze Budget last year, and that has now been dutifully delivered by this Prime Minister and this Chancellor. When the previous Prime Minister called this year for delaying the timetable for new electric cars by five years, undermining both the net zero consensus and the British automotive industry, this Prime Minister and this Chancellor delivered. Today, the former Prime Minister’s so-called growth commission is setting out its demands for next week’s autumn statement, oblivious to the damage already done. Will the Chancellor tell the House whether he agrees with the person who appointed him to do the job he is now doing and her proposals to slash corporation tax, abolish inheritance tax, abolish stamp duty and other unfunded commitments that make last year’s mini-Budget look like small fry, with tax cuts announced totalling £80 billion?

Labour will never gamble with the livelihoods of working people, as the Conservatives have. Labour’s economic approach is built on a rock of fiscal responsibility, with respect for taxpayers’ money. We will work in partnership with industry to bring about the change that our country so desperately needs. We know what the Tories did last autumn. They blew up our economy with their reckless, unfunded promises and a trashing of our economic institutions. It was a collective failure from the Tories. It was not just one bad apple, but a whole orchard of irresponsibility. The Conservative leadership contest of summer 2022 produced a sum total of £200 billion of unfunded promises. The Chancellor did not want to be left out. His leadership candidacy might not have been as successful or lasted as long as he may have wished, but there was still time for him to make almost £80 billion of unfunded commitments himself on corporation tax, business rates and defence, with no idea how those commitments would be funded.

Following the leadership election last year, Conservative Cabinet Ministers tried to blindfold the nation and global financial markets by preventing the Office for Budget Responsibility from publishing its assessments. The Conservatives knew that the truth would hurt, but they continued to gamble with the livelihoods of our country. The pound crashed, pensions were put in peril and interest rates soared. Working people were made to pay the price for the Conservatives’ kamikaze Budget and reckless eagerness to cut the taxes of the wealthiest few. It was reckless, it was irresponsible, and with Labour it will never happen.

The result is an average Conservative mortgage penalty of £220 each and every month for hard-working homeowners. This out-of-touch Government do not have a clue about what that really means for people. That is a lot of money to try to find from nowhere each and every month. It means holidays cancelled, spending cut back and life made harder. Some families are having to downsize, and others who have been trying to get on the housing ladder for years have had their dreams snuffed out. Meanwhile, rents rise as landlords see their mortgages go up and want to pass the costs on.

[Mr Clive Betts (Sheffield South East) (Lab)]

My right hon. Friend is making a good point about housing costs and the shortage of housing in this country. Is it not therefore astounding that, given the climate we are in, there is not one single word about housing in the whole King’s Speech? There is not a single word about the shortage of housing or the rising costs of housing, no long-term proposals to build on this vague commitment of 300,000 homes, and no idea how to build them.

[Rachel Reeves]

My hon. Friend speaks powerfully on what he knows well. On top of the big challenges with house building and the Government getting rid of their housing targets, the number of homeowners in arrears on their mortgage is also up a staggering 18% compared with a year ago. The Conservatives are no longer the party of home ownership. Higher housing costs are the last thing people need in a painful cost of living crisis. It should never have happened in the first place, and it must never happen again.

--- Later in debate ---

[The Chancellor of the Exchequer (Jeremy Hunt)]

It is an honour to speak in the first King’s Speech debate for more than 70 years. Her late Majesty was a figure of grace and continuity, and we now look forward to His Majesty the King leading us, as she did, through troubled times.

It is always a pleasure to debate with the shadow Chancellor, although in a whole year of my being Chancellor, this is the first time we have had an economy debate, and now we know why: she has been busy writing a book, or, rather, Wikipedia has been busy writing her book. Today, I see she has been busy copying and pasting Conservative language about tax. May I tell her gently that that will take her only so far? Conservative Members will never forget what happened under Gordon Brown, who she campaigned for: income tax up, national insurance up, stamp duty up, fuel duty up, pensions up and multiple other taxes up.

Let us turn to some of the shadow Chancellor’s assertions. She said that the economy was flatlining. What she did not tell the House was that since Labour left the economy in the deepest recession since the second world war, we in this country have grown faster than Spain, Portugal, Italy, France, the Netherlands, Austria, Germany or Japan. She did not mention that after a global pandemic and energy shock, our economy is nearly 2% bigger than it was pre-pandemic. That is higher, for example, than countries such as Germany, whose economy is only 0.3% larger, not least thanks to the furlough scheme introduced by my right hon. Friend the Prime Minister.

The shadow Chancellor also did not mention that when it comes to the fastest-growing industries, we are doing even better. In the last 13 years under Conservative Governments, we have built Europe’s largest tech sector—double the size of Germany’s and three times that of France; it is the third-largest in the world. We also have Europe’s largest life science sector, saving more lives than any other country globally with vaccines and treatments discovered in Britain. We have more offshore wind than anywhere in Europe bar Germany and Norway—it is the third-largest sector in the continent. We also have a world-leading creative industries sector, including Europe’s largest film and TV industry and a thriving publishing industry that has even produced a book written by the shadow Chancellor, which helpfully collates some fascinating information from the world wide web.

[Mr Betts]

The Chancellor talks about what he sees as some successes. Why does he not address the problems of small modular reactors? Sheffield Forgemasters in my constituency could be building SMRs, but it has been waiting for months for the Government to make a decision on a go-ahead for the right techniques. ITM Power, which is a leader in green hydrogen, is building plant in Germany, which is spending £7 billion on it in the next few years, while in this country we are spending £1 billion, so we are losing the international race on that.

[Jeremy Hunt]

The first big infrastructure decision that I took was on nuclear, when I assigned £700 million to Sizewell C. I completely agree with the hon. Member about the potential of SMR. That is why we set up a competition, and with the previous Energy Secretary I stipulated that it should finish by the end of this calendar year so that we can proceed as quickly as possible on SMR, because it could be an important part of our net zero future.

The shadow Chancellor’s central argument is that we can get growth only by borrowing £28 billion a year more. [Interruption.] Well, I was listening to her words. She may not have mentioned this in her speech, but on 9 October she said on the “Today” programme that she wanted to take borrowing “up”—her word. We delivered all those achievements in technology, life science, creative industries and advanced manufacturing industries during a time when we were cutting borrowing, which went down by 80% between 2010 and the start of the pandemic. That is the difference. Unlike Labour, the Conservatives know that we cannot borrow our way to growth. We have to do the hard work to support entrepreneurs and innovators, including by keeping their taxes down, which Labour has never wanted to do. Because we have done just that, the International Monetary Fund says that after inflation has been brought to target from the end of 2025, this country will have faster growth than France, Germany or Italy. No shortcuts; just hard work to get one of the fastest growth rates in Europe.

--- Later in debate ---

[Mr Clive Betts (Sheffield South East) (Lab)]

I pay tribute to the outstanding speech by my hon. Friend the Member for Mid Bedfordshire (Alistair Strathern). It was one of the very best maiden speeches I have heard in this House. It had humour and seriousness. He succinctly described his predecessor in a couple of sentences, and in one sentence he demonstrated his superior knowledge of football compared with the Foreign Secretary. Many people watching across the country will now be reflecting, “If that is the quality of representative we could get by voting for change, perhaps we will give it a go at the next general election, too.”

Housing was not mentioned in the King’s Speech. We have a housing crisis in this country, and both sides of the House share an aspiration to build 300,000 homes a year. I agree with the right hon. Member for Middlesbrough South and East Cleveland (Sir Simon Clarke) that we are not building enough homes—that is true—but who has just changed the planning system to take away housing targets from local areas? We will never get to 300,000 unless each area has its own housing targets that add up to that number.

A further problem is that we will never hit 300,000 through the private sector alone. The Housing, Communities and Local Government Committee produced a report four years ago saying that we need to provide at least 90,000 units of social housing through housing associations and councils. The Levelling Up, Housing and Communities Committee is holding an inquiry now, and all the evidence shows that we simply do not have the resources.

There is a challenge for both Front Benches. We will have to find more money at some point to build more social housing in this country, both to get the numbers we need and to get the numbers that people can afford, as people cannot afford to go into the market to buy in the current circumstances. So many people have to save for years, even beyond retirement, for a deposit on a home. Rising mortgage costs are certainly not helping.

There was a promise to abolish section 21 notices in the private rented sector, but we are now told the Bill will wait until some future time—we do not know when—when the court system has been reformed. Yes, the court system needs to be reformed, and we ought to have a dedicated housing court, but the cost to local authorities of dealing with homelessness and temporary accommodation has risen by 50% in the last two years alone. That is due to section 21 notices, the local housing allowance freeze—many people cannot afford even to rent a home in the private sector—and the Government’s asylum policy, which is all over the place and is putting great pressure on local authorities in some parts of the country to house people while they are having their asylum position confirmed. We have a massive challenge, and there is nothing in the King’s Speech to deal with it.

We ought to address how we build homes for the future. Four years ago, the Government had a working party on modern construction methods, but they have forgotten about it. They have given up. I went to visit Lighthouse, a firm in my constituency that has just taken on 100 workers. The firm has doubled in size and is venturing into modern methods of construction for social housing. The Government should be encouraging that at national level, but there is nothing at all. There is no policy, no strategy and no plan for the future.

Levelling up was not mentioned in the King’s Speech either. Germany saw the inequality across the country after reunification, so it had a 30-year programme. The inequality in this country is now as great as it was in Germany on reunification, yet all we have had is £4 billion in scattered pots of money for local authorities to bid for. There is no strategy and no long-term solutions.

Levelling up, again, appears to have been forgotten but, if we are to get our economy growing as a whole, we have to address the disparities in gross value added, productivity and income levels between different parts of the country. Productivity in the north of England is now lower than in the Czech Republic. GVA in our major cities is lower than the national average, which is completely different from what happens in Germany and France. We need to get the whole country and the whole economy growing but, again, there is no plan, no strategy and no long-term future for this country.

There are one or two good things in the King’s Speech, and I welcome them. We have not yet seen the details of the leasehold reforms, but certainly stopping the building of new leasehold houses and allowing people more easily to purchase their freehold are good measures that we need to implement as soon as possible. Addressing the problems of service charges and outrageous permission fees also needs to be in the Bill. I also welcome the proposals on football regulation. It is about getting a fairer distribution of funding and giving fans the legal right to be consulted on important things that affect their club; again, we will have to see the details.

Finally, I completely condemn Hamas’s attack on innocent Israeli citizens, but I condemn just as strongly what Israel is now doing. The killing of innocent women, children and other civilians in Gaza is not acceptable and cannot continue as it is. I want to see a humanitarian pause and an end to the blockade to get aid into Gaza, and I want to see that as the basis for a ceasefire. A ceasefire cannot just be announced; both parties need to sit down and agree to one. That has to be done, and it has to be a stepping-stone to moving forward to a two-state solution: safety for Israel and a free Palestine, free of Israeli occupation. That is what we should be moving towards.

Oral Answers to Questions

Clive Betts Excerpts

Tuesday 5th September 2023 Commons Chamber

[Jeremy Hunt]

I very much enjoyed my visit to South Yorkshire to open that investment zone. It is incredibly impressive what is happening there and it was wonderful to welcome new investment by Boeing as part of that. The hon. Gentleman is right to talk about transport; that is why we involve local authorities in all our investment zone decisions. It is also vital to have universities involved, which is why the University of Sheffield is playing such a key role.

[Mr Clive Betts (Sheffield South East) (Lab)]

I was present on the day the Chancellor came to launch the investment zone in my constituency, and of course I too welcome the investment into Boeing there. Does he accept that one of the other areas for future development in the investment zone is small modular reactors? A consortium is being developed in Sheffield with Sheffield Forgemasters, Rolls-Royce and GE Hitachi Nuclear Energy to look at the future—not merely to develop the techniques for SMRs, but to start building SMRs in Sheffield. Would he be willing to look at that proposal and hopefully offer support for it?

[Jeremy Hunt]

I enjoyed meeting the hon. Gentleman when we opened that investment zone. Let me reassure him that I am a big supporter of nuclear and I am very excited about the potential of SMRs. There is a competition going on this year, which we hope will be completed by the end of the year, to assess the viability of the various SMR manufacturers, and we want to get going as quickly as we can.

Public Bodies and VAT

Clive Betts Excerpts

Wednesday 17th May 2023 Westminster Hall

[George Eustice]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Mr Clive Betts (in the Chair)]

We have only one other Member asking to speak, which makes things quite easy this morning.

[Kevin Foster (Torbay) (Con)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate my right hon. Friend the Member for Camborne and Redruth (George Eustice) on securing this very worthwhile debate. I agree with much of what he said about the impact this issue has on the further education sector, and that will be the focus of my remarks as well.

For background, there are 10,000 public sector organisations in the UK, the vast majority of which can claim the VAT they pay back from His Majesty’s Revenue and Customs, on the basis that that simplifies budgeting. Although public bodies may account for VAT on supplies of goods and services in the same way as any other business, they will often undertake non-business activities, which are outside the scope of VAT. As HMRC’s own guidance for local authorities and other public bodies explains:

“the general rule is that where a public body is funded by way of public expenditure (such as grant-in-aid) to do something for the public good, it’s unlikely to be engaging in business activities for VAT purposes.”

In that context, the term “public body” already includes Government Departments, non-departmental public bodies, NHS bodies, local government bodies, the police and fire and rescue services.

The impact of VAT on further education and sixth-form colleges—in particular, South Devon College in Paignton —is significant. The crucial background to the argument being made today is this: 228 further education and sixth- form colleges, operating from around 850 campuses across England, were reclassified as public sector organisations in November 2022 and are now subject to the same controls as academies and other local organisations, but they must still pay VAT, without having an opportunity to recover it, because they are not part of the refund scheme.

That has significant consequences. It means that money that Parliament voted to have spent on 16-to-19 education is taxed if spent on colleges. Colleges account for the vast majority of students taking T-levels, and their students in general are more likely to come from disadvantaged backgrounds, so those courses are essential to providing young people with the skills that they will need in a wide variety of sectors, including construction, engineering and health. Those funds would not be taxed in the same way if they were spent on schools, which, as my right hon. Friend the Member for Camborne and Redruth outlined, may similarly provide education for 16 to 19-year-olds on a range of subjects.

As my right hon. Friend will know from discussions in our previous roles, the skills that we are talking about are often those over which there is a debate about the balance between immigration and domestic supply. It is vital that we look to fill more of these skills gaps domestically, and ensure that colleges can step up and provide that training. He touched on his training in arc welding. For many jobs in which there are skills shortages across the economy, it is colleges that will be training people to meet that skills demand, so that they can then access the rewarding salary packages and careers that often come with them.

The impact on South Devon College is clear. Unlike Torbay’s schools or others in the public sector, South Devon College pays VAT that it cannot claim back, which gives it an immediate 20% disadvantage in spending power compared with a school. This becomes even more odd when we consider that South Devon College has South Devon High School within it. South Devon College’s non-pay spending each year is approximately £15 million, including VAT, so if it could reclaim the applicable VAT, it would have in the region of another £1 million to £2 million each year to invest directly in education, skills and training. That would obviously make a significant contribution to what the college can offer its students and the wider community that it serves across Torbay and south Devon.

Given the impact on South Devon College, I would be interested to hear the Minister’s thoughts on a few specific points. First, what assessment have the Government made of the financial impact on the further education sector of not being able to reclaim VAT? Secondly, why was that not changed during the reclassification of organisations as public sector organisations in November 2022? It would be a simple decision for Government to amend the Value Added Tax Act 1994, so that colleges such as South Devon College were included in the refund scheme, in the same way that previous Governments extended the refund rules to cover academies, national museums and various new regulatory bodies. The position of colleges seems even more odd when we consider the decisions taken previously. This is a logical step to take that will boost vital skills training and help provide the opportunities that our next generation needs, so I hope that this decision can be taken very quickly.

[Mr Clive Betts (in the Chair)]

We now move on to the Front Benchers, starting with Douglas Chapman for the SNP. There is no time limit; just take the necessary time.

--- Later in debate ---

[Victoria Atkins]

For the sake of avoiding any headlines, I do not agree with or accept my right hon. Friend’s description of the ONS. As I said, I appreciate that he has a particular set of experiences with ONS classifications; I do not know whether that is replicated in other Departments. I gently point to the range of public bodies that do not have VAT refunds or VAT exemptions, even though they have publicly funded activities. I am not sure that I can improve on that point. If it was not right when he was in the role, I am not sure we should be replicating that on his account going forward.

On the estimated cost, as I say, we know that there will be an impact elsewhere in the Budget, but it is the Department for Education and the Secretary of State for Education who make those decisions. I must not trespass on that Department’s funding decisions, but the funding that we provide does bear in mind the VAT issue.

On VAT, I mentioned that colleagues have a great many helpful suggestions as to how we could improve the VAT scheme. I have had this debate at least once or twice in Westminster Hall already, but we have had requests for more than £50 billion-worth of relief from VAT since the EU referendum. I know colleagues feel passionately about each and every request, but sadly the job of Treasury and of Ministers is to ensure that we keep our tax base in place because, of course, we have to pay for the services we care so much about.

I have very much enjoyed the debate, but I regret to inform my right hon. Friend the Member for Camborne and Redruth that at the moment we have no plans to make changes here. We will, of course, keep the matter under review. He has raised some important points that I will take away and mull over. I thank him for this debate.

[Mr Clive Betts (in the Chair)]

As the Chair, I obviously have to be scrupulously independent in these debates, but I just have to say that Angela Foulkes, the principal of the Sheffield College, wrote to me to draw my attention to this issue. I said that I was chairing the debate and could not contribute, and I am not going to.

Energy Suppliers: Customer Credit

Clive Betts Excerpts

Wednesday 22nd February 2023 Westminster Hall

[Patrick Grady (Glasgow North) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts. I am grateful to be called at relatively short notice. I echo a lot of what my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) has said and I congratulate him on securing the debate.

Many people nowadays are used to paying subscription models for services or products, for mobile phones or the use of the gym, or for online streaming services, but, by and large, what you pay for is what you get. The energy model is slightly more uncommon.

Of course it is very helpful for customers’ budgeting and planning to know that if they are on a direct debit and paying into that model, a regular amount will come out of their bank account over the course of the year. Yes, perhaps there will be a small credit balance, because generally energy usage during the summer will be slightly less than during the winter, but over the course of the year we would expect that to balance out. But what my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey has demonstrated—and what many of our own inboxes will demonstrate as customers start to pay close attention to their bills because of the high cost of energy and the other increasing costs of living—is that people are starting to discover a very significant failure in that model. Perhaps, as the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) has suggested, they are even discovering failures more widely in the energy market and system as a whole.

What is particularly disappointing is the number of issues that people seem to be having with their smart meters. By the sound of things, several of us here have personal experience of these matters, let alone the cases that come to our surgeries and our inboxes. Smart meters were supposed to make all these issues a thing of the past; people would know exactly what their usage was and would pay exactly for what they had used, and as a result would be incentivised to be more efficient with their energy use, which is better for their own personal finances—and, of course, much better for the environment, if we can reduce energy consumption and emissions.

Instead, people are getting readings that make no sense—that do not appear to match with their own perceived usage, at least—and the energy companies, for whatever reason, are using the opportunity to adjust direct debits, sometimes without any say-so; people sign up in advance for an adjustment of a direct debit and suddenly find that it has gone up, or maybe gone down. That negates the whole point of smart meters enabling them to budget. Smart meters were supposed to avoid such problems entirely, but in fact those problems seem to be increasing.

I heard from a gas engineer that some models of smart meter were designed to operate in climates that are very different from ours, so if they have been installed outside that can be a reason why readings do not make an awful lot of sense or do not appear to match up.

As I said in an intervention on my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey, although we are largely talking about people who pay by direct debit or in arrears, this situation is also affecting customers who pay by prepayment meters. The issue of prepayment meters has been discussed at great length, so I know the Government are aware of it and are trying to take action, but we have all argued repeatedly that there is more that they can do, which comes back to my hon. Friend’s recommendations.

For people who use prepayment meters in the way that they are designed to be used, the companies are getting that money up front—when the energy has not even been used. That is one of the key questions that the energy companies ought to answer and perhaps ought to be required to answer, either by the Government or Ofgem, or by any other mechanism by which they can be held to account. What are they doing with that money? I ask that question because, as I said in my intervention on my hon. Friend, it is not a balance just sitting there on an account; it is clearly not there for a customer to draw down as they see fit. It is clearly being used for other purposes: either to prop up the company elsewhere in its operations, or to earn very tidy interest because of course interest rates are going up. It is either contributing to the vast profits of the company or it is being used to shore up other parts of the company that may be having difficulties.

If the energy companies were required, as we suggested, to consider what benefit they gain from maintaining that money in their accounts, and had to recognise that in the form of discounts or an interest payment back to the customer, perhaps they would suddenly start moving a lot faster.

I agree with all the recommendations that my hon. Friend has made about how bills should be published and presented to consumers, so that they know exactly what their balance is and have the opportunity to draw that money down as quickly and on demand as they want. The company should have an obligation to do that. If they do not have such an obligation, we should look at how they can be incentivised to do so, or penalised if they are not going to respect their consumers. We want an energy market that functions effectively and well. We want to encourage people to reduce their demand on the system, which helps the environment, the ageing infrastructure, and the bank balances of our constituents—the consumers. The energy companies have to realise that they have got away with a lot of these things for too long, and the wider market now needs to be scrutinised in serious detail.

I end by quoting my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey, who said several times during the debate: this is not the energy companies’ money; this is money that our constituents—their consumers—have earned and have paid, expecting a service in return. It is not for companies to keep and profiteer from that money. If it is not being spent and does not reflect the consumer’s energy usage, it should be returned to the consumer so that they can use it to meet the increasing cost of living and other personal expenditure.

[Mr Clive Betts (in the Chair)]

We move on to the Front-Bench spokespeople. They have about 20 minutes each if they really want to take it, but that is entirely up to them.

Autumn Statement

Clive Betts Excerpts

Thursday 17th November 2022 Commons Chamber

[Jeremy Hunt]

I welcome my hon. Friend to his role as Chair of the Health and Social Care Committee. I know that he will do a brilliant job and that he will hold me and the Secretary of State for Health and Social Care to account strongly and tenaciously on everything to do with cancer and public health. I welcome that, because they are very important areas.

[Mr Clive Betts (Sheffield South East) (Lab)]

To come back to social care, in the Chancellor’s previous role as Chair of the Health and Social Care Committee, he will remember arguing for a £7-billion increase in social care funding. Will he confirm that today’s package is nothing like that? Will he further confirm that much of it is coming from council tax increases, which give most to the richest councils and take proportionately most from the poorest households? Finally, will not the rest of local government face real-terms cuts to essential services? This is austerity mark 2, with the prospect of financial collapse for many councils up and down the country.

[Jeremy Hunt]

I have to say that I think local councils are welcoming today’s announcement because the biggest item of expenditure that worries them the most is their social care budgets, and this is the biggest-ever increase in the social care budget. I am pleased that the hon. Gentleman has read the report into social care that the Health and Social Care Committee produced when I was the Chair—I sometimes worry whether people actually read the reports—and he is right to point to that £7-billion figure. That was made up of about £5 billion in core funding and £2 billion for the Dilnot reforms. Today, we are delivering nearly that £5 billion of funding and the Dilnot reforms will happen at a later stage, so it is not everything at once, but it is broadly consistent with what I recommended.

Oral Answers to Questions

Clive Betts Excerpts

Tuesday 11th October 2022 Commons Chamber

[Chris Philp]

I am pleased to say, as my right hon. Friend the Chancellor said when he introduced the growth plan, that expediting critical infrastructure was an important part of that plan. Without critical infrastructure, we are not going to see the growth in jobs or wages and the prosperity that we all want. The Government will do everything that they can to speed up the delivery of those projects.

[Mr Clive Betts (Sheffield South East) (Lab)]

We do not know much yet about the Government’s new investment zones, but in order to achieve success for the primary investment in them, will the Government have specifically targeted funds for infrastructure projects in those zones? If so, will this be a further unfunded expenditure commitment?

[Chris Philp]

I think the Chancellor set out the investment zone concept very clearly. There will be, by agreement with local authorities, planning freedoms and very significant tax cuts. Infrastructure investments are being handled separately to that, but it would be reasonable to expect a degree of co-ordination between the Department for Levelling Up, Housing and Communities and the Department for Transport, as they consider the way investment zones interact with transport projects.