HBOS Reading: Independent Review

David Drew Excerpts

Tuesday 18th December 2018 Westminster Hall

[Kevin Hollinrake]

Yes. The hon. Gentleman is absolutely right, and he touches on the human cost of these issues as well as the financial cost, which is critical. What we want to see, which I will come on to, is an opening up of all the cases that have been through the Griggs review by means of examination through a completely impartial arbitration process that will fairly adjudicate and arbitrate the claims.

As if the fraud were not bad enough, there was a cover-up. HBOS and Lloyds became aware of the issue from 2006 onwards. The current chief executive, António Horta-Osório, was made aware of the fraud as soon as he took up his post in 2011 by the Turners and many others. Famously, in September 2013, Sally Masterton, a senior risk officer at Lloyds Banking Group, on the instructions of her line manager, produced a report called the Project Lord Turnbull report. Its findings were shocking. There was a corporate strategy within Lloyds and HBOS to conceal the fraud, which caused substantial loss to shareholders and investors.

At that point, there was another opportunity for the bank to hold its hands up and say, “Right, enough is enough. Let’s get all of this out in the open and get to the bottom of these issues.” Did that happen? No, that is not what happened. Sally Masterton was suspended from her job and discredited to the Financial Conduct Authority. Scandalously, she was prevented from working with the police, despite being told that she was vital to the investigation, and then she was fired. The senior management did not make the report available to non-executive directors or the chair of the board for three years. Finally, last month, the bank reversed its position and confirmed that Sally had

“acted with integrity and in good faith at all times”.

There were other elements of cover-up. Thames Valley police said that Lloyds had led them a “merry dance” in their £7-million investigation of these issues. There is evidence of a wider fraud, certainly from victims going through the Griggs review to whom I have spoken. They talk about other senior managers, including Paul Burnett, high risk managing director at HBOS Edinburgh, personally having involvement with HBOS Reading. HBOS compliance officers were embedded in the fraudsters’ operations, and of course gagging orders are used across the board to prevent more disclosures from coming to light.

Let me move on to the review. It was supposed to be an independent review and was headed by Professor Griggs—that is why we call it the Griggs review. It was supposed to provide swift and fair compensation to the victims. However, the SME Alliance, which has done so much work for so many of the victims, instructed Jonathan Laidlaw, QC, who names among his clients the Bank of England, to review the review itself. He determined, in a short report, that the review is “procedurally defective”, and its principles are “flawed and appear partial” to the bank’s interests. That description is consistent with the experiences and stories of the victims. They have described the review to us as corrupt, disgraceful, one-sided and evincing an absence of due diligence, with manipulated documents and lies about evidence. Agreed payments are not met, and the process makes life as difficult and unpleasant as possible. These are victims of fraud.

[Dr David Drew (Stroud) (Lab/Co-op)]

Will the hon. Gentleman add one more element, namely deliberate over-complication? It seems that this whole saga has been made so opaque that it is difficult to get to the bottom of what really happened. Does he agree?

[Kevin Hollinrake]

I totally agree with that. I will come on to the disclosure of evidence shortly, but the hon. Gentleman is absolutely right: the bank could have dealt with this summarily many years ago, as soon as it came to light, but it chose not to. Why it chose not to is an open question.

The basic assumption of this review was laid out by Professor Griggs himself, who was quoted as saying that when he deals with these businesses, he is

“invariably dealing with the financial equivalent of a car crash.”

How can that be the basis for any judgment that these businesses were viable? The judge in the case stated that some “were capable of rescue” and that there was

“deliberate mismanagement of these companies”

by the advisers—by the fraudsters. He added that there were “plunderings made from them”, and that

“fees and any useful assets”

were taken from them. Why would the review ignore a High Court judge? Only four of the 76 cases have been dealt with by means of a consequential loss. All the rest have been dealt with through distress and inconvenience—in other words, all those businesses were dud businesses. That is simply not statistically possible.

Finance (No. 3) Bill

David Drew Excerpts

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

[Dr David Drew (Stroud) (Lab/Co-op)]

Does the Minister accept that now that the Government have greater freedom of operation, this is fairly timid? We have an emissions crisis in this country, as we do across the rest of the world. Why are the Government not being more ambitious in trying to bear down on emissions, as seen in the Intergovernmental Panel on Climate Change report?

[Robert Jenrick]

I appreciate the point the hon. Gentleman makes, but perhaps he has missed the argument I have tried to make, which is that this is not prejudging the later outcome of how we should handle our carbon pricing as we leave the EU; it is trying to ensure that in the unlikely event, which the Government wish to avoid, of a no-deal Brexit we can maintain the system as close as possible to the present one. We chose the price of £16 because that is broadly the same as where the EU’s floating price has been in recent months. Of course the price has floated very widely from as low as £6 to as high as over £20, so making that assessment is not a precise exercise, but we believe that £16 is a reasonable figure to maintain stability, and that seems to have been well received by the industry and environmental groups.

Clause 90 is about preparatory expenditure. Alongside preparing for no deal, the Government are developing long-term alternatives to the EU emissions trading scheme. As set out already in the outline political declaration on the future relationship between the EU and the UK, we are considering options for co-operation on carbon pricing, including, if possible, linking a UK national greenhouse gas emissions trading system with the EU ETS. Clause 90 will allow Departments to begin preparatory expenditure on a UK ETS, which is included in the Bill, to prepare for a linked or unlinked domestic trading scheme. It does not mean, as I said earlier, that a final decision has been made as to which option to implement, but it does ensure that all the options are kept open and we can proceed with the kind of planning that one would expect.

I shall now turn briefly to amendments 8, 9 and 10 and new clause 10 tabled by the SNP. Amendments 8 and 9 propose that the Government must table a statement on the circumstances that require expenditure in the case of clause 90 and an estimate of the expenditure to be incurred and that the House would come to a resolution to approve that expenditure. New clause 10 and amendment 10 would require the Chancellor to review the expenditure implications of the carbon emissions tax and lay a report of that review before the House within six months of the passing of the Bill, and no regulations could be made by the commissioners unless that had taken place.

A statement of circumstances, as required by amendments 8 and 9, is in our opinion unnecessary. We are legislating because the UK is leaving the EU, and as part of that we have to prepare a domestic ETS, as mentioned in the outline political declaration, and for a carbon emissions tax only in the event of no deal.

More importantly, with all these amendments, the Finance Bill is not and has never been the place for detailed questions of expenditure. The Finance Bill is primarily a Bill about tax. Parliament gets other opportunities to review and vote on departmental expenditure, and if that is important to the hon. Member for Aberdeen North (Kirsty Blackman), I suggest that she direct her scrutiny to the estimates process when it arises in due course.

New clause 17 would require the Chancellor to review the carbon emissions tax to determine its effect on the UK carbon price and the UK’s ability to comply with its fourth and fifth carbon budgets. We are confident that the carbon emissions tax would be similarly effective to the EU ETS, and I can assure Members that there are already robust requirements to report on progress towards the UK’s emissions reductions targets. For example, the Climate Change Act 2008 provides a world-leading governance framework that we certainly support. First, it ensures that the Government are required to prepare and lay before Parliament an annual statement of emissions, setting out the total amount of greenhouse gases emitted to, and removed from, the atmosphere across the UK and the steps taken to calculate the net UK carbon accounts. Secondly, the independent Committee on Climate Change is required to prepare and lay before Parliament an annual report on the Government’s progress towards meeting the UK’s carbon budgets, which the Government are required to respond to. Thirdly, the Government are required to prepare and lay before Parliament a statement setting out performance against each carbon budget period and the 2050 target. We believe that, taken together, these are strong existing mechanisms, which are respected and understood, to ensure that we monitor and report to Parliament on greenhouse gas emissions. I therefore urge hon. Members to reject new clause 17.

Let me turn to amendments 2, 7 and 21 to clause 89, which deals with minor amendments in consequence of our EU withdrawal. We need to ensure that the tax system continues to work effectively and that we maintain stability and certainty, including in the event that the UK leaves without a deal. To allow us to do that, clause 89 will allow minor technical amendments to be made to UK tax law to keep it working as it does now and to update it to continue to work with changes made to other areas of law on account of EU exit. Clause 89 will provide the Government with the power to make such minor amendments.

These are, I stress again, minor and technical changes that are absolutely necessary to maintain the continued effect of tax legislation in the unlikely event of no deal. I can reassure the Committee that the power is not being taken to make changes to do anything other than ensure that existing tax legislation continues to have effect in the event of no deal. It will not be used to change tax policy or the tax paid by taxpayers. To reassure the Committee of that, I have placed a list of changes that the Government intend to make under the power in the Library and sent a copy to the shadow Chief Secretary to the Treasury.

Five-year Land Supply

David Drew Excerpts

Wednesday 4th July 2018 Westminster Hall

[Dr David Drew (Stroud) (Lab/Co-op)]

I am delighted to serve under your chairmanship, Sir Christopher. I shall be brief, because we are likely to be interrupted by Divisions.

I am pleased to say “ditto”, because we have exactly the same problems in Stroud district. We face the dilemma that for all the houses we might want to build, we have a huge number of extant planning permissions—more than 5,000—but no ability to force recalcitrant developers, promoters or landowners to develop those sites, whoever they may be. That is depressing, because we have acute housing need.

There are two other elements. First, the Government have substantially increased the number of houses that we are expected to get built. We are mystified by how they came to the number they did. Hopefully the Minister can do some work via his civil servants to find out why our numbers increased so dramatically when other authorities in Gloucestershire have had minimal increases, a standstill or actually a reduction. That would be helpful, because we think we are being punished for the simple fact that we have been quite good at delivering on our housing, despite all those extant sites.

Secondly—we all know about this—there is the viability assessment. Developer after developer comes back to us and says, “We can no longer afford to build those affordable units. The scheme is now very different from when we got planning permission. We cannot afford to provide the infrastructure we said we would and, more particularly, we will have to reduce, or indeed remove completely, the affordable units that are part of the existing planning permission. If we can’t do that, we will appeal or—worse—move ourselves off the sites,” and then we get no housing at all.

Those two elements make it difficult for a small district authority to keep up with demand—we are trying to build houses, as the Government and the Opposition want—while dealing with those people who say to us, quite rightly, “This was the planning permission. We might not have liked it, but we were getting some affordable houses out of it, so we stomached it. And what have we got? We’ve been kicked in the teeth.” It is as simple as that. Therefore, parish councils that might have proposed innovative schemes say, “Well, that other parish council got turned over big time. Why should we even consider this?” The process and environment are totally negative, adversarial and difficult.

[George Freeman]

The hon. Gentleman is making a powerful point. Does he agree that one injustice in the current system is that those councils—parish councils, in my case—that lead and put together a neighbourhood plan normally propose more housing than the district council had done, but they end up being punished for doing so, not rewarded? Three villages in my constituency did so and have ended up with a Gladman-led development forced through against their wishes. That destroys rather than enhances public trust in planning.

[Dr Drew]

We actually beat Gladman in my constituency, so there is at least one aspect where we are slightly different, but the reality is exactly that. It is most difficult to persuade parish councils that they can do more when they have seen their neighbouring parishes turned over big time.

There is a generic problem, so I appeal to the Minister to look at the process—and in particular at Stroud district, because we have a specific problem with our increase. We will never build anything like the numbers of houses we want unless we solve that quickly. We need clarity so that people know that what is promised will be delivered. Dare I say that we could get rid of some of these extant sites? If the developers do not want to use them, they should lose them. We will find other people who will come and build on them appropriately, and then we will begin to deal with our housing problems.

Banking Misconduct and the FCA

David Drew Excerpts

Thursday 10th May 2018 Commons Chamber

[Kevin Brennan (Cardiff West) (Lab)]

This is an important debate and I congratulate all the hon. Members who have contributed to it so far. Banks occupy a very special and important position in our economy and society. Without them, the economy could not function efficiently. However, they also operate in such a way that they borrow short and lend long, and they always have done. As a result, banks hold a degree of responsibility and trust when they take people’s moneys into their care. I am afraid that over the past few decades, as other hon. Members have described, a culture has been allowed to develop under Governments of different colours to allow banks to basically follow the principle that “Greed is good,” as so well elucidated in 1980s film “Wall Street”. Ultimately, everything that has been described today—the disasters that have been brought upon our constituents—has been born out of the greed of bankers operating not in the interests of our constituents, but to line their own pockets.

[Dr David Drew (Stroud) (Lab/Co-op)]

Does my hon. Friend accept that the situation is 10 times worse when the bank no longer exists? I have constituents who are still trying to work through HBOS, which is now part of Lloyds, which has washed its hands of it.

[Kevin Brennan]

I absolutely accept that; it is completely the case. I want to mention briefly some of my constituents who have been affected by what has been described today and by other practices that should be incorporated in the public inquiry that other hon. Members have called for. By the way, RBS has today been fined $4.9 billion by the American authorities for its activities when it was expecting to pay something like $12 billion, so if there is concern in the Treasury about the cost of a public inquiry, we have $7.1 billion available, given the assumption that was made by RBS, that could be levied on just one of the banks that we are talking about today to cover the cost of any public inquiry. I hope that the Treasury boffins have taken notice of that statistic.

My constituent Mike McGrath was also a victim of the kind of asset stripping we have heard about today. He can show quite clearly that Lloyds bank lied to the Financial Ombudsman Service to obtain a favourable judgment for itself and so that my constituents’ complaint was not upheld. The decision arrived at by the Financial Ombudsman Service was based on the probability of the evidence, but that evidence was incomplete, inconclusive or contradictory because Lloyds bank did not provide all the evidence that it should have done to the Financial Ombudsman Service. There was detrimental evidence that would have allowed the adjudicator to find in favour of my constituent—as the law should require them to do. Customers should have the right to complain to the Financial Ombudsman Service and get it to adjudicate quickly, fairly and at little cost. That is why it exists, but Lloyds bank, and I believe others have done the same, has concealed detrimental evidence to prevent that from happening. This left my constituent with the only option of expensive court litigation, which he could little afford, having been ruined and bankrupted by his own bank.

This allowed Lloyds Wholesale Banking Recoveries in Bristol, with the aid of their appointed Law of Property Act receiver, Alder King, which we heard about earlier from my hon. Friend the Member for Cardiff Central (Jo Stevens), to strip the customer’s assets, knowing that the customer had in fact given the true account of the facts to the FOS and would have had their complaint upheld had Lloyds bank been truthful. My constituent can show that this has happened on more than one occasion. He believes not only that there should be a public inquiry, but that the Treasury Committee should look at the wider issues that have been raised in this debate and by this scandal for all the people who have been affected by different banks’ actions when the banks were bailed out by the Government.

Banks are still engaged in other practices that should be part of any inquiry. That includes what a constituent, Mr Iqbal Hassan, came to see me about last week—the way that a bank can suddenly close down their customers’ bank accounts without any notice. In his case, he simply got a text message saying that there were insufficient funds in his bank account and that it had been frozen. He then showed me the letter of apology he received from the bank. The letter gave absolutely no explanation of why the bank—it was Barclays bank in this case— had shut down his bank account. In fact, it said that it did not know why it had happened, but then, a day after that, it closed it completely. Many practices of that kind are going on.

There is also the negligence of banks in relation to customers being defrauded, often over the telephone. They rely on the concept of gross negligence on the part of their customers, which is completely unacceptable. A constituent—I will not name them here, because it is very difficult when this happens—at first lost over £40,000 as a result of this kind of fraud. Fortunately, through the help that I was able to give and through the help of people like Richard Emery—I commend him for his work on this kind of banking fraud—we were able to recover most of my constituent’s money. However, there are many similar cases in which Members’ constituents are not being refunded money that has been transferred from their accounts to accounts in other banks, which are taking no responsibility for giving harbour to criminals by holding their accounts and paying out money that has been stolen from our constituents.

We should have a public inquiry, and I urge the Minister to talk to his Treasury Minister colleagues about it. I know that he may not be able to make an announcement during today’s debate, but I hope he will go away and talk to his colleagues about the requirement for a proper, fully empowered public inquiry to investigate this scandal.

Stamp Duty Land Tax

David Drew Excerpts

Thursday 26th April 2018 Commons Chamber

[Mr Speaker]

Things are hotting up now.

[Dr David Drew (Stroud) (Lab/Co-op)]

My area has many thousands of extant planning permissions that have yet to be brought forward. How will the Treasury try to get those planning permissions to a state where we can build houses? Is it about time that we had a sensible debate on land value taxation?

[Mel Stride]

The hon. Gentleman raises an important point: there is little point in land that has planning consent if properties are not swiftly built on it. My right hon. Friend the Member for West Dorset (Sir Oliver Letwin) is conducting a review of exactly that matter, and we will come to the House in due course with our proposals.

Finance (No. 2) Bill

David Drew Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Wednesday 21st February 2018 Commons Chamber

[Neil O’Brien]

I am pleased to speak in favour of the reforms to stamp duty for first-time buyers and to speak against the Opposition’s new clause. The changes to stamp duty mean that 95% of first-time buyers will pay less tax; in fact, 80% will pay no tax at all. First-time buyers will be getting a tax reduction of up to £5,000, which will be hugely welcomed by younger people in my constituency.

I support this reform for three reasons. The first is that it is part of a wider rebalancing of the tax system towards younger people and people who do not own a home of their own. In that context, it is worth thinking about these measures alongside the measures that we took in 2015 to reform the tax treatment of buy-to-let and second homes. Those reforms increased stamp duty on the purchase of additional properties. So we have this reform, which supports first-time buyers, and we also have a set of reforms that improve fairness and reduce the demand for housing as an investment asset. Together, these reforms tilt the balance of the system towards younger people and first-time buyers. Dare I say that they are redistributive measures, and I am surprised that the Opposition are opposing them? Given that younger people are the most affected by our failure over a generation to build enough houses in this country, it is right that we should tilt the tax system towards them.

Earlier in this debate, my hon. Friend the Member for Croydon South (Chris Philp) offered the Minister a suggestion for a revenue raiser, and I wonder whether I could do the same thing. Perhaps we should go even further in rebalancing the tax system towards young people and consider further reform of the private residence relief. The Minister will recall that, in 2013, we changed the way in which the exemption worked to make the system fairer and to end some of the abuses that happened under Labour, and I encourage him to look again at this issue, particularly given that a number of other countries have tighter restrictions on that important exemption. Such a move would complement the 75 anti-tax avoidance measures that we have already taken, which have raised £160 billion for public services.

The second reason why I support these measures is that, as the Mirrlees review and many other economists have pointed out, stamp duty is fundamentally a bad tax that reduces mobility. Obviously, the Chancellor is unable to abolish it at this stage, given that we are still in the process of cleaning up the biggest deficit in this country’s entire peacetime history and the situation in which, disgracefully, the Government were borrowing a quarter of all the money being spent. None the less, we are making important progress on ending this bad tax. These changes follow the ending of the absurd slab system that Gordon Brown had built up and the £300 million tax cut that accompanied that. This further reduction in stamp duty land tax, this time for younger people, is hugely welcome, and I hope that the Treasury will continue to chop away at this bad tax.

The third reason why I support the measures is that, even as we bring about longer-term reforms to increase supply, they can provide immediate support for younger people and those who do not own their own property. I agree with the hon. Member for Oxford East (Anneliese Dodds) that we must have higher supply. France has been building roughly twice as many houses as this country since 1970, so its house prices have gone up half as fast.

[Dr David Drew (Stroud) (Lab/Co-op)]

I am pleased to hear what the hon. Gentleman says, but why are so many of the housing measures, including support for local authorities, being delayed for a year before being properly implemented?

[Neil O’Brien]

I am afraid that I am not entirely sure what the hon. Gentleman is driving at, and I am conscious of the time.

I support the measures before us because they will provide immediate benefit, and they form part of a wider strategy to support first-time buyers, including Help to Buy, which has helped 230,000 people to get a home of their own, the lifetime ISA, which gives people a 25% bonus as they save for a deposit, the huge support for shared ownership and new supply measures, such as the housing infrastructure fund and the huge increase in funding for affordable housing in the 2015 spending review. My younger constituents will warmly welcome the end of stamp duty for first-time buyers, as will many older constituents—parents and grandparents.

The hon. Member for Oxford East rather made the case against her own measures by drawing on the huge amount of published detail about and analysis of our proposals. I have in my hand the OBR’s estimate of residential SDLT elasticities, and it notes the significant degrees of uncertainty. The creation of the OBR was a welcome reform, because it makes things more transparent, and it is right that the OBR is cautious in its forecasts. We created the OBR because Gordon Brown fiddled the figures and changed the economic cycle and led us to disaster by doing so. It is also right to stress the uncertainty around such measures, because it is fundamentally difficult to model things in the housing market.

When we introduced the annual tax on unoccupied dwellings, which I am sure the hon. Lady supports, we raised four times more money than predicted, so things are difficult to predict. However, my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) has already made the important point that even if we believe that the £5,000 would be entirely capitalised into the price of a house, my young constituents would be £5,000 better off as a result. In Harborough, Oadby and Wigston, that is still a significant sum of money, so I am hugely glad to be able to support these important reforms today and to oppose the Opposition’s amendments.

Budget Resolutions

David Drew Excerpts

Thursday 23rd November 2017 Commons Chamber

[Mr Sheerman]

My hon. Friend makes a very good point.

I want to move on to skills. We can talk about higher education. When I was Chairman of the Select Committee some people said it was disgraceful that we were going to aim to have 50% of people in our country going to university, but I was very much in favour of that move. I came into politics to give every child in this country the maximum opportunity to develop their potential to the full. Often, Members of Parliament like me, with a very successful university in their town—I am very keen on my university, which got the global award for teaching recently and is a gold standard for teaching whereas my alma mater, the London School of Economics, got bronze—find that those who train people for local businesses are the further education colleges. The local FE sector is the Cinderella of our education system.

[Dr David Drew (Stroud) (Lab/Co-op)]

Like my hon. Friend, I go back rather a long way. One of the problems now is the lack of security for those who are doing the teaching, both in higher and further education. Most of my friends are on short-term contracts and cannot invest in their future, let alone the future of the people they are teaching. Surely that is the wrong way to do things. Does he agree?

[Mr Sheerman]

My old friend, and hon. Friend, is absolutely right. The percentage of impermanent and short-term contracts in colleges and universities is not good and does not bode well for a happy team delivering high-quality output.

FE colleges are vital if we are to produce the people who work in the sectors in which we must improve our productivity. There is very little sign that that is being taken seriously. My local college is brand-new, with a fine new building—an extraordinarily good building—because it invested. Why should kids going to FE college not have the nice environment that university students have? All those colleges that invested in new buildings and high-class facilities are now in deep financial trouble. They are struggling.

We must also take into account the intransigence of the Department for Education on the question of GCSEs in English and maths. There should be a practical qualification as well as an academic one, and I and many others have called for this for many months and years. At the moment, most FE colleges are warehousing tens of thousands of young people who cannot get on with their lives or start an apprenticeship because they do not have a GCSE in English and maths.

We know that some very good reforms have come out of the Sainsbury recommendations. They were a good piece of policy in many ways. The new skills levy and apprenticeship levy are excellent policies, based on getting someone who knows about that stuff to take evidence. I gave evidence. However, in the Budget the Government have not considered one of the ramifications of the policy, which is the 62% drop in the number of young people starting an apprenticeship this year. That is appalling news for the income streams of further education colleges. According to the regulators—we had the commissioner in the House of Commons only this week—many of the colleges are experiencing real problems with their financial arrangements. My own college, Kirklees College, and many others are struggling, and this Budget does nothing to help them.

My next point is on housing. I believe that everyone in this country should have the chance of a decent home, but many people cannot afford one. Let us reflect on the history of housing crises over the years. The Victorians could see the problem and, as the railways came, they established a programme for garden suburbs. After the first world war, Lloyd George declared that we needed “homes fit for heroes”, and the Liberal Government encouraged the building of council houses. What a wonderful initiative that was! Between the wars, the new towns started to be built, and after the war we had the prefabs. In every housing crisis, there has been a resolute determination to have a policy to fix it, but the policy announced in yesterday’s Budget is neither bold nor imaginative, and it will not fix the problem. As the Chancellor was making his remarks yesterday, I could see behind him rows of people who jump up and down in their constituencies and tell their constituency associations and their local electorate, “There will be no houses near you. You can have the green views and the rolling hills. No one will move in next door to you.” The nimbys rule in the Conservative party, but they should stop being so powerful.

I want to finish by mentioning the north-south divide. There was little in the Budget about the north of England, and there was precious little about Yorkshire. When I asked the Secretary of State whether the Budget would give us the money to electrify the Pennine rail link, he would not answer, because the money is not in there; we have not got it. This country has greater gaps between its regions than any other OECD country. If only the Chancellor had grasped the real chance he had in the Budget to invest in the northern regions, he could have given us great transportation and great communications. He could have invested in the north, rather than investing in London and the south all the time. We will fight this Budget. We will fight it for Yorkshire and for working people, and we will change it when there is a Labour Government.

Public Country-by-country Reporting

David Drew Excerpts

Wednesday 22nd November 2017 Westminster Hall

[Nigel Mills (Amber Valley) (Con)]

I beg to move,

That this House has considered public country-by-country reporting.

I thank the Minister for being here. Today is a busy day for the Treasury, so I am grateful that he has found the time to respond to the debate. I also thank him for some of the measures that we heard earlier in the Budget, especially on the challenge that the digital economy and large companies pose to our tax system and the further measures to try to ensure that they pay all their VAT. We have been asking for those measures and it is great to see some progress. It shows that we all share the same goal: we want the largest companies to pay their fair share of tax in all the countries in which they operate. Any measures we can bring into force to do that will be greatly welcomed and that is exactly what we are trying to achieve here.

We are pressing the case for the largest companies operating in the UK to publish the country-by-country reporting that they are already required by the Government to do privately for HMRC, so that we can all see exactly where they are making their profits, where they have employees, where they have sales revenues and what tax they are paying on a territory-by-territory basis in all the key territories in which they operate. I strongly believe that the only way we will make real progress on these issues is to make companies publicly accountable so that they have to publish what they are doing and where, so that we can all see it and challenge them. If there are no adequate explanations for why they are reporting large profits in territories with very few employees, very low revenue and very few assets, perhaps we will have to conclude that they are doing that just to avoid paying their fair share of tax. We can all make a sensible buying decision on whether we wish to use those companies at all.

We will not achieve the solution that we want—everyone paying their fair share—by expecting HMRC to do all the compliance work and to challenge every company that is out there operating in the UK. We have to find a way to change the behaviour of the largest companies and to show that we do not believe that the use of aggressive tax avoidance, artificial structures or territories in which they have no substance is an acceptable way to behave. If we can achieve that behaviour shift, it will be far easier for us to collect the taxes that we want. I do not think there is any disagreement on that between hon. Members here who campaign on this subject and the Government; it is what we all want to see. The Government have followed exactly that approach in recent years.

This year, the Government are requiring very large businesses to publish their tax strategy and set out their approach to tax risk, tax compliance and tax planning. The reason for that was not to put an exciting document out there for tax professionals to argue about, but to make the highest levels of management at those companies think through their tax policy and their relationship with HMRC and set those out in a public document that we can all read and challenge. The aim was to improve their behaviour on the basis that the more sunlight we can shine on such issues, the more likely it is that we can change behaviour. We are not asking for a quantum shift from the Government’s existing approach, or for a huge amount of extra work on behalf of those companies, or for companies to put incredibly sensitive commercial data in the public domain. We are asking for an extension of the existing process, so that it includes this most important information: exactly how much money they are making in each territory and how much tax they are paying there.

[Dr David Drew (Stroud) (Lab/Co-op)]

The hon. Gentleman makes a compelling case. I asked two parliamentary questions last month about the Government’s strategy on country-by-country reporting. In both answers, the Government referred to the fact that they are making deliberations within ECOFIN, which is fine while we are members of the EU. Does he know what the Government’s strategy might be when we are no longer members?

[Nigel Mills]

That might be slightly above my pay grade, but I am grateful for the hon. Gentleman’s questioning of that situation. That is the challenge we put to the Minister today.

The Government have already imposed a requirement on the largest companies operating in the UK to give that information to HMRC. Two years ago, they accepted an amendment from the right hon. Member for Don Valley (Caroline Flint) to take the power to make that information public. Today, we ask the Government to set the date by which they will start to require that information to be in the public domain, maybe as a backstop so that if EU discussions on doing it multilaterally have not worked by—I do not know—the middle of 2019, we will require UK companies to start doing it and we will take the lead in that situation. That would be consistent with the timing of our departure from the EU.

I think we all agree that the ideal situation would be multinational and multilateral—preferably an OECD or a G20 requirement—so that most of the developed world was doing it. If we cannot have that, we would like the EU to do it. We would like the EU proposal to do something similar to what we want, but it does not entirely do that because it includes disclosures only for EU countries and countries it prescribes as tax havens. We would like a proper territory-by-territory disclosure of all the countries that are material to a company’s operations. That EU proposal is stuck, however; it is not happening any time soon. We want the UK to set an example and show the EU and the world that we are prepared to lead on this. We are the largest financial centre. We have huge numbers of very large companies listed on our stock exchange. It is right that we set an example and say, “This is the kind of transparency we expect if you want to operate in the UK and be listed on our stock exchange.”

The Minister and his predecessors have argued that public reporting could be a bad thing for the UK for various reasons, such as that it would make us less competitive. I am not convinced by those arguments. I will run through some of the disclosures that we already expect from our largest companies. Under international financial reporting standard 8 on operating segments, large companies must produce in their financial accounts an analysis by the key operating segments of their revenues, profits and all manner of other things. I am sure that before that standard came in they would have argued that that was incredibly sensitive commercial information, which they should not have to produce—but they do. Paragraph 33 of IFRS 8 sets out that companies need to provide

“analyses of revenues and certain non-current assets by geographical area—with an expanded requirement to disclose revenues/assets by individual foreign country (if material), irrespective of the identification of operating segments”.

There is already a rule out there for very large companies, especially those listed on the stock exchanges that use IFRS, that they have to publish that information in some form. We are not expecting them to do something dramatically different, but to publish that in a coherent format where we can see and understand it.

I would go further and say that over the last few years, we have so increased the requirements for what we expect large companies to disclose that that level of information by territory would not be a significant increase. In 2013, statutory instrument No. 1970 introduced a requirement for companies to produce a strategic report that has to include

“a fair review of the company’s business, and…a description of the principal risks and uncertainties facing the company.”

It must be

“a balanced and comprehensive analysis of…the development and performance of the company’s business during the financial year”.

It must also set out

“key performance indicators, including information relating to environmental matters and employee matters.”

To expect companies to come out and say what their KPIs are, how they performed against them, and set out the key risks facing them—they are quite wide-ranging disclosures. It shows that we have moved ever onwards in expecting companies to report on their corporate social responsibility, hence all the requirements that we have imposed on companies such as giving details of their employees and the gender pay gap, commenting on their environmental performance, and the transparency requirements about corruption, bribery and anti-modern slavery. I do not think that most of our constituents regard tax as different from corporate social responsibility; they see paying a fair share of tax as part of a company’s responsibility. If we require companies to report on so many other worthwhile things, why not require them to report how much tax they pay in each territory? If they are paying the right amount, they can show that transparently; if not, they can explain why not.

The concern that requiring public country-by-country reporting would dramatically disadvantage UK companies or scare them off from having head offices here is an overreaction. In fact, it would be a sensible extension of existing requirements, including those for segmental reporting or for a tax note that explains the difference between the rate paid and the statutory rate. The information currently published is so limited, hard to understand, condensed and—some might say—twisted that no one can make any sense of what companies are doing. In cases where a company operates in a jurisdiction with an average effective rate of 25% but pays 3%, that information is not readily available to us.

The advantage of requiring public country-by-country reporting is not only that it would change companies’ behaviour, but that it would restore people’s confidence that our tax system is fair, that companies are paying the right amount of tax, and that we are doing all we can to collect it. If we imposed such a requirement on the large companies that are sheltering their profits in places where they have no real presence, I suspect they would stop doing it. That would boost confidence by allowing us to see from companies’ disclosures whether they have been caught by the rules and required to pay extra tax. It would also show us the exact scale of aggressive tax-abusive behaviour. Most multinational companies are probably not engaging in such behaviour; they probably just want to know the right amount of tax to pay per territory and get on with running and growing their business.

Restoring confidence and belief in our tax system is extremely important, particularly to the UK as an outgoing, exporting, global economy with a lot of intellectual property assets and a commitment to science and research. We do not want the world to move to an aggressive tax that attempts to clobber companies on turnover without looking at their real profits per territory. Our UK businesses will lose if we do not get the level of confidence right. If we cannot find a way of enforcing our rules, changing behaviour and restoring public confidence, Governments around the world will have to take other action to recover revenue. In the long run, it is absolutely in our interests to get this right, which we can achieve only with sunlight and transparency.

I commend the Government for the position paper they published today on the challenge to our tax regime posed by the digital economy. It includes some sensible ideas, such as charging tax on royalties paid offshore. Its second paragraph points out that the Government have taken

“bold unilateral action where needed”

to tackle the issue. That is exactly what we need on transparency: bold unilateral action. If we cannot agree on an EU-wide approach within a sensible timeframe, let us set a date for taking the lead and setting an example. I am not fixated on any particular date—if we need until 2019 or 2020 for negotiations, I accept that—but will the Minister tell us the Government’s backstop date for getting a multilateral deal? If they cannot get such a deal, when will they act, unilaterally if necessary, to impose this policy in the UK?

HMRC Closures

David Drew Excerpts

Thursday 2nd November 2017 Westminster Hall

[Stuart C. McDonald]

Indeed. That is the argument that I will come on to make. Centralising those jobs in city centres, which are already in many cases doing very well in terms of employment, makes absolutely no sense at all.

This debate is also important to the public and taxpayers generally. When it was formed in 2005, HMRC had 96,000 full-time equivalent members of staff and 593 offices. Less than a decade later, staff numbers had fallen to below 50,000, in fewer than 190 offices. “Building our Future” sets out to close 137 offices and centralise even fewer staff in 13 large regional hubs, with between 1,200 and 6,000 staff. Some 38,000 staff are either going to have to move or leave HMRC. From any perspective, that is a massive and radical change to how our taxes are collected to pay for the services that we all use and rely on, so it deserves the closest of scrutiny.

[Dr David Drew (Stroud) (Lab/Co-op)]

Does the hon. Gentleman agree that it would help if, at the very least, some research was done into those areas that have already lost offices through the previous NOS programme, of which new Labour was monumentally supportive? We should look at the impact on those areas that have no tax office and rely entirely on phone lines or email, where lots of people cannot get any satisfaction from HMRC at all now. Would he support such an investigation?

[Stuart C. McDonald]

I agree entirely. In a nutshell, that is the point of my speech. We have an opportunity now to pause and look at what has happened and the impact it has had. When the proposals come under scrutiny, the business case for change looks decidedly dodgy, and it is also proving something of a moveable feast.

--- Later in debate ---

[John Grogan]

That was going to be my next central point. It seems very negligent that such social and economic impact assessments have not been carried out. It is no secret that one of the long-standing offices is in your constituency of Shipley, Mr Davies, which neighbours my constituency of Keighley. When we met the bosses of the Revenue, we were shocked that no such assessment had been made.

[Dr Drew]

I thank my hon. Friend for being so generous in giving way. The Government and the previous Government always said that rural proofing would be part of policy making. Was there was any attempt to rural-proof this decision?

[John Grogan]

I have studied the eight points carefully, and there does not seem to be any rural proofing, which one would expect of this exercise.

There is a relatively new boss at HMRC. It will be interesting to see how much the Government will own this process and how much they will say that it is all to do with HMRC. I think the call for a moratorium is very reasonable, as it would allow us to go back and carry out some economic impact assessments. If the Government press ahead with the broad policy of regionalisation—there are many question marks against that—at the very least they should locate these offices, which are big economic drivers, in areas that would benefit from the boost that they would bring.

I join many other Members in saying that there is still time to halt this process and in asking HMRC to look again. That needs to be done, and only the Government can give those instructions to HMRC.

Economy and Jobs

David Drew Excerpts

Thursday 29th June 2017 Commons Chamber

[John McDonnell]

The hon. Gentleman currently chairs the Public and Commercial Services Union parliamentary group, which I previously chaired, and we have campaigned on that point for seven years. If we cannot staff up the unit that is meant to carry out inspections and ensure compliance with the minimum wage, how can we expect the minimum wage to be paid fairly?

Let us look at the desperate state of our public services. How can anyone in government take pride in the fact that spending per pupil is set to fall by 8% by 2019-20? More than 46,000 children’s operations have been cancelled over the past four years. Police numbers have been cut by 20,000 since 2010, firefighter posts have been cut by 10,000, and 20,000 soldiers have been cut from the Army. A record of pride? I don’t think so.

So we have a Government who cannot feed their people, house their people adequately or protect their children and older people from poverty. They cannot ensure that when people go to work they earn enough to live on, and they cannot maintain our basic public services. They are a Government who do not deserve to remain in office.

[Dr David Drew (Stroud) (Lab/Co-op)]

Does the shadow Chancellor agree that it is a scandal that local authorities that have retained their council stock—the Government and the Opposition agree, post-Grenfell, that we need more council housing—are faced with having to pay back money because of the bizarre and byzantine housing finance rules, even though they have built houses? Does he agree that we need to get rid of that scandal as soon as we possibly can?

[John McDonnell]

The housing situation in our country is in dire straits because of the lack of building. That is why in the popular Labour party manifesto, we promised to build 1 million new homes—half of those to be council houses—and to free up local governments to perform their traditional role of putting roofs over the heads of local people.

All this suffering by ordinary people under austerity, so as to protect the rich and the corporations, has been for what? By the Government’s own metrics it has significantly failed. The Government promised that the deficit would be eradicated in five years, but now it will be 15 years at best. They have added £700 billion to the national debt, leaving £1.7 trillion of debt for future generations. In the first quarter of this year growth fell to 0.2%, and inflation has now increased to 2.9%. Last year saw the slowest rate of business investment since 2009. Unsecured debt per household will reach a record high this year.