Oral Answers to Questions

Diana Johnson Excerpts

Tuesday 14th May 2013 Commons Chamber

[Danny Alexander]

I welcome my hon. Friend’s efforts in trying to help his constituents to find employment—something that every Member of this House could be engaged in. On the deficit, the Labour party did seem disappointed when the triple dip did not materialise; no doubt it will be even more disappointed if, in due course, the second dip dematerialises. The one thing we can be sure of is that the biggest dip took place when Labour was in office.

[Diana Johnson (Kingston upon Hull North) (Lab)]

T8. On 25 June last year, the Secretary of State for Environment, Food and Rural Affairs told me that a new agreement was to be reached on flood insurance. I understand that the Chief Secretary, who has been heading up the negotiations, has blocked this deal. As the statement of principles is due to come to an end next month, can he tell me what assessment has been made of the effect on the housing market of hundreds of thousands of householders in this country not being able to get house insurance?

[Sajid Javid]

The hon. Lady raises an important issue; it is important that affordable insurance is available to people on whom flooding could have an impact. That is why this Government, led by DEFRA, are engaged in intensive negotiations with the Association of British Insurers. In Thursday’s DEFRA questions, she will have an opportunity to put this question to DEFRA Ministers.

Oral Answers to Questions

Diana Johnson Excerpts

Tuesday 12th March 2013 Commons Chamber

[Mr Gauke]

The costing for the cutting of the additional rate, according to Her Majesty’s Revenue and Customs and signed off by the Office for Budget Responsibility, was £100 million. The cost of raising the personal allowance is about £9 billion, and that is where our priorities lie.

[Diana Johnson (Kingston upon Hull North) (Lab)]

17. Instead of spending £3 billion on cutting the 50p rate for the richest, why not put the money towards 100,000 social rented homes of one and two bedrooms to make the coalition Government’s bedroom tax work?

[Mr Gauke]

This figure of £3 billion that is repeated time and again is simply inaccurate. It makes no assumption for behavioural effects whatsoever, and this was never the position of the Labour party. The fact is that the cost is £100 million, recouped several times over by other measures contained in the last Budget that are getting more money out of the wealthy.

Economic Policy

Diana Johnson Excerpts

Monday 25th February 2013 Commons Chamber

[Mr Osborne]

I cannot believe that the hon. Gentleman waited an hour and four minutes to read us the Whips’ handout again. As I have said, perhaps the Labour party will circulate its alternative economic policy, so that we can have a real debate about it in the House.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Given the loss of 1,000 private sector jobs in the Hull area over the last couple of months, and the 15,000 people who are looking for work, does the Chancellor think that the downgrading will help or hinder the economic recovery of the Humber?

[Mr Osborne]

What will help the economic recovery of the Humber are, first of all, the low interest rates, which, as I said earlier, are tested every day out there in the bond market. In addition, however, we have opened new enterprise zones in east Yorkshire, we have cut the bridge tolls on the Humber bridge—which I would have hoped that the hon. Lady would welcome—and we have invested in new road projects in and around the area, which had been demanded for years.

Banking Reform

Diana Johnson Excerpts

Monday 4th February 2013 Commons Chamber

[Greg Clark]

My hon. Friend is right, but I think we have already had the intelligent debate. The Government asked the commission to look into that issue in particular and to make recommendations, and the commission expressed the interim view that it was reasonable—as my hon. Friend says—for simple derivatives to be provided from within a ring-fenced bank. However, it wants to reflect further on whether any of its inquiries into the culture of banking may have implications for that. We will await its conclusions.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Following the bank mergers, many regional banks and building societies have gone, and we have lost the investments that they would have made at local level. Will the Minister explain how the Bill will enable areas such as Yorkshire to benefit, and can he assure us that it will not be just the south-east that benefits from the increase in the number of banks?

[Greg Clark]

The hon. Lady makes an excellent point. I should like very much to see banks in our great regional cities, as used to be the case: banks that can take deposits from local people and, knowing what local investment opportunities they have in the area, can establish a connection. So far it has been very difficult for new banks to obtain banking licences within a reasonable period, and to satisfy the regulatory requirements. We are doing all that we can to lower the barriers to entry, so that we can achieve exactly what the hon. Lady has described.

Oral Answers to Questions

Diana Johnson Excerpts

Tuesday 11th December 2012 Commons Chamber

[Danny Alexander]

That is an extremely good point, because on 29 November we introduced the Energy Bill, setting out the contracts for difference, which will deliver a stable financial environment of incentives, particularly for investment in renewables. Alongside that agreement, we set out the level of support consumers will pay for low-carbon generation—the so-called levy control framework—which will triple support for renewables between now and 2020, ensuring a great deal of investor confidence in that area. Along with gas investment, as set out in the autumn statement, that will help to bring forward massive investment that this country needs.

[Diana Johnson (Kingston upon Hull North) (Lab)]

18. There is a tendency for coalition infrastructure schemes to be news-ready many years before they are shovel-ready. Another tendency is unfairness; three out of the four road schemes in the autumn statement last week were in the south, including one helping port access in Thurrock. When is the port city of Hull going to get the A63 upgrade that is central to our regeneration?

[Danny Alexander]

The hon. Lady ought also to have noted that the autumn statement announced the complete dualling of the A1 between London and Newcastle, which is a very important scheme, and the upgrades for the A160 to Immingham, a very important port on the Humber estuary. That work has been accelerated under the new scheme introduced by the Department for Transport. I would have thought that she would welcome that, rather than criticise it.

Autumn Statement

Diana Johnson Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

I can absolutely confirm that. We are doing everything we can to support businesses in my hon. Friend’s area and to make sure that all parts of the country benefit from the infrastructure investment that we are making. Having been up to his part of the world, I know that we are making those investments and they are bringing real benefits to the area that he represents.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Can the Chancellor explain to the 1,200 people in and around Hull who are facing private sector job losses announced in the preceding four weeks exactly what is in the autumn statement in terms of jobs and growth for them?

[Mr Osborne]

Of course we regret any decision made by any company to reduce jobs, but we are creating jobs in the economy. In Humberside we have committed to new enterprise zones. We have reduced the tolls on the Humber bridge. We have introduced today new tax allowances from January next year to help small businesses in the hon. Lady’s area to invest. These will all help create jobs, and I hope the people she represents will also welcome the increase in the personal allowance, which will see a reduction in their income tax bill, and the decision not to go ahead with the Labour party’s 3p fuel duty rise.

Humber Economy (Fiscal Support)

Diana Johnson Excerpts

Tuesday 27th November 2012 Westminster Hall

[Diana Johnson (Kingston upon Hull North) (Lab)]

I congratulate my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson) on securing the debate and setting out, in his usual erudite way, an excellent analysis of the situation in the Humber, the possible solutions the Government should actively consider adopting and how they could secure the future of the Humber economy. I pay tribute to the contribution of the hon. Member for Cleethorpes (Martin Vickers). I am pleased that we will, I hope, have contributions from both banks of the Humber—north and south—because, to coin a phrase, we are all in it together.

I was particularly interested in what the hon. Gentleman said about tourism. People on the north and the south banks of the Humber see great potential in developing a tourism strategy. I particularly note the proposals in my home city of Hull for a Hockney gallery. The da Vinci drawings at the Ferens art gallery are attracting huge crowds, which is welcome. East Riding has the Yorkshire wolds, and the south bank obviously includes the traditional seaside resort of Cleethorpes, so there is much to recommend the area for tourism.

I shall focus my remarks on the proposals in Lord Heseltine’s report, “No Stone Unturned”. It has many sound recommendations for the Government, especially if they are serious about their commitment to rebalance the economy, and that means between the north and south, as well as the public and private sectors. The report points to what can be achieved in regeneration locally and regionally, if there is the will, the determination and a sustained effort for the long haul to make it happen. Lord Heseltine draws on his experience of the regeneration of areas such as Liverpool and London docklands. I want consider the regeneration of London docklands and compare it with Hull and the Humber area over the past 30 years. I know both areas well, having been a councillor in the docklands in the 1990s and a Hull Member of Parliament for the past seven years.

If Members will bear with me, I want to set out the context. In the 1980s, traditional employment in the docklands ended, which was paralleled with the decline of Humber-based industry in the Hull area. The divergence in fortunes of the two areas is particularly marked. Docklands has now had more than 30 years of determined regeneration, largely due to its proximity to the City of London, but clear lessons can be learned and applied to Hull and the Humber. Hull has had far less attention, tucked away in a corner of east Yorkshire. It has an excellent university and is home to such world-renowned companies as Smith and Nephew. We have the Deep—an outstanding museum quarter and one of the busiest port complexes and estuaries in the country.

There has been some regeneration and economic growth, but not nearly enough. I certainly do not want to be accused of talking down the area, but we must recognise that in recent years, as the hon. Member for Cleethorpes said, the Humber area has taken severe knocks. Under the current Government’s policies, Hull is now suffering a huge loss of local spending power. Public sector cuts have been deeper in Hull than in wealthy areas of the south. Hull city council has had a cut of £163.50 per head, compared with £2.70 per head for West Dorset district council, and only yesterday it announced more than 170 job losses. That has to be linked to announcements in the past month that 1,200 private sector jobs are going or are at risk, and the fact that 50 people are chasing every job vacancy in my constituency—the highest figure in the country. Social housing investment has been cut, and the £160 million Orchard Park housing scheme has been axed.

Against that background, what would be a successful regeneration strategy for Hull and the Humber? First, we need to attract private investment by having a clear plan of what we want to achieve and by signing up all key stakeholders. It is interesting that the Government and the London Docklands development corporation courted Canary Wharf investors Olympia and York and others in the 1980s. There was a clear plan for developing a centre for banks, finance, the media and legal and support services, and measures were put in place, while the plan was also encouraged by big tax incentives.

What is the plan for Hull and the Humber? As we have already heard, the Humber LEP has recognised renewables as a key area for economic growth. Hull’s geographical position is its great strength, with its proximity to the North sea and the largest offshore wind farms in the world. The North sea has been described as the Saudi Arabia of renewables, and the Humber area has the potential to be a world centre of excellence for renewables. As hon. Members have already said, potential green energy investors have identified Hull and the Humber as their preferred location, but such investors need long-term reassurance that the coalition is committed to renewables and has a coherent energy policy across the whole Government.

There is serious international competition for the new green energy jobs. If companies such as Siemens do not come to Hull, they will be lost to the UK altogether. This is about potential growth not only for the Humber but for the whole UK economy. The coalition needs to be as interested in attracting Siemens and green jobs to Hull as it is in attracting jobs that benefit Surrey or London. Although various big tax incentives were offered to investors in London docklands, MPs in our region have had to fight off plans to introduce the caravan tax on an existing industry and to fight for enterprise zones to attract future industries to the area. We are still waiting to see the effectiveness of such enterprise zones.

My second point is about the importance of local decision making. Lord Heseltine has stated that LEPs need to be more powerful and better funded—more like Labour’s regional development agencies, possibly. The role of city region status has already been raised, and I hope that we all support an approach that ensures money is best allocated and spent at the sub-regional level. I support the suggestion of my right hon. Friend the Member for Kingston upon Hull West and Hessle about the use of pilot schemes to deliver at that local level, and the Humber area would be ideal for such a pilot.

Questions still have to be answered about the impact and value for money of some of the Government’s policies—for instance, of the regional growth fund and its ability quickly and effectively to provide support on the ground in places such as Hull and the Humber. As we know, the green investment bank is to be located in the two already prosperous financial centres of London and Edinburgh. Might it not be possible to establish a branch on the bank of the Humber, either in Hull or somewhere in the Humber area? That would establish a formal link between the bank and opportunities involving renewables and the Green Port Hull development.

Thirdly, transport infrastructure is a vital part of any successful regeneration policy. London had the docklands light railway, the Jubilee line extension, London City airport and so on. In Hull, we have Hull Trains’ daily train service to the capital, a new transport interchange, a local airport and, of course, the important reduction in Humber bridge tolls. Although we have had good news about the A160, major investment is still needed for the A63 upgrade. If Hull is to reach its fullest potential, we need rail electrification all the way to Hull and not for that to stop, rather bizarrely, at Selby.

My fourth point is about the important role of education and training. Docklands showed that, with initiatives such as SkillsNET, we need actively to equip local youngsters and others for them to get the jobs of the future; that cannot just be left to chance. In Hull, we have three excellent colleges, with fantastic records of providing lifelong education, particularly for people returning to education in their 20s, but 2012 has seen the withdrawal of funding for the Humber Education Business Partnership, the removal of comprehensive careers advice in schools, the axing of the education maintenance allowance and cuts in university and science funding. University of Hull applications have fallen by 18% this year. There now needs to be not only a stronger national strategy, but a local one for vocational skills relevant to the green jobs of the future that we hope to attract locally. I pay tribute to my hon. Friend the Member for Scunthorpe (Nic Dakin) for the work that he has done on that with the LEP.

In conclusion, London docklands had a long-term effort to attract big employers in the skilled industries of the future, which boosted spending power and created further employment and a broad-based local economy resilient enough to weather the credit crunch of 2008-09. Meanwhile, Hull has continued to lose skilled and other jobs. Unfortunately, that has accelerated since 2010. My right hon. Friend the Member for Kingston upon Hull West and Hessle has stated that we will work constructively with the Government to use LEPs and city region applications to help regenerate the sub-region. However, what is also utterly true is that we cannot create a vibrant, resilient and prosperous local economy for Hull and the Humber around Starbucks, McDonald’s and Cash Converters, with people in low-paid jobs often now being forced to go to charities or food banks to feed their families. We need a strong, focused regeneration plan that links transport, education and local decision making for our region of Hull and the Humber to have the future that it deserves.

Finance Bill

Diana Johnson Excerpts

Tuesday 3rd July 2012 Commons Chamber

[Mr Gauke]

I certainly will, although at this point I am just setting out what we set out at the Budget. I will turn to each individual measure in more detail in a moment and happily give way to my hon. Friend at that point.

We propose to remove the anomaly whereby approved alterations to certain listed buildings are zero-rated while alterations to other buildings and repairs to and maintenance on all buildings are standard-rated. We included transitional arrangements for alteration works to listed buildings which had been contracted before the Budget, and we wanted to put beyond doubt the fact that VAT applies to the rental of hairdressers’ chairs.

Finally, we proposed to ensure that holiday caravans are taxed consistently at the standard rate of VAT. The proposal, as set out in the consultation document, was that all the changes would take effect from 1 October via secondary legislation, supported by anti-forestalling provisions in this Bill. The consultation was opened on 21 March, and overall HMRC received some 1,500 responses. Owing to the volume of interest in the consultation, we decided to extend it, and since it has closed we have reflected fully on the points made during the process.

As the House will be aware, in two areas—hot food that is cooling down naturally and static holiday caravans—the Budget proposals created a high degree of business uncertainty, so the Government wanted to let people know our preferred course of action as soon as possible; we did that on 28 May. Last Thursday, we published a consultation response document and tabled the new schedule setting out our approach to all the measures on which we consulted. We stand by the rationale for removing anomalies, but have made several refinements, including those we announced on 28 May. They are intended to improve the policy and reflect the practical concerns raised in the consultation.

[Diana Johnson (Kingston upon Hull North) (Lab)]

HMRC produced a document on the impact of the caravan tax, but can the Minister provide enlightenment on the impact of the 5% VAT imposition? There are no figures now on how many jobs will be lost and by how much demand for static caravans will decrease, and I was hoping that the Treasury had worked that out.

[Mr Gauke]

Clearly there is a substantial difference between 20% VAT and 5% VAT. We set out our estimates in relation to the 20% rate, and some of the concerns that people took from what HMRC set out were, I think, somewhat greater than the reality warranted, because the impact set out and the assumption regarding the reduction in demand related solely to that element to which the change from zero-rated to standard-rated applied. On many caravans that are sold, the VAT is recovered—VAT already applies to an element of the price of a static caravan: that of the fixtures and fittings.

We do not think the impact of the 5% rate is likely to be substantial. In the usual course of business there are tax changes—national insurance contributions and rates are the subject of regular fluctuations—and in many cases the VAT change may well be absorbed. In addition, we have given industry much more time by deciding not to implement the change until April next year. Caravan manufacturers will have the opportunity to sell more caravans in advance of next year’s summer season—the information we have is that spring tends to be the busiest period. The overall impact on the industry is therefore unlikely to be significant.

Before discussing each of the anomalies and saying more about static caravans, I would like to give the House a little bit of history about the VAT system. As I am sure all hon. Members know, the VAT system was introduced in 1973 and amendments and adjustments were being made as early as 1974. The then Labour Government added confectionary, soft drinks, ice cream, potato crisps and certain other savoury snacks—

--- Later in debate ---

[Mr Gauke]

One can never rule out the fact that some people will be litigious and try to take a creative view of any particular guidance. However, we believe that we have reached the right position after much consultation and discussion with the industry and with hon. Members, many of whom have been very engaged in the matter. I look around the House and see at least two Members who have been in my office to make representations on this point. We believe that we have reached a position that is sustainable and fair, and that is what we are putting to the House in the new schedule. The additional criteria will ensure that hot food will generally be taxed at the standard rate of VAT, but if food that would be zero-rated when cold is bought when it happens to be cooling down, but is not yet cold, it will still be zero-rated provided that it does not meet any of the criteria that I set out. These changes will add further tests to make the relief less open to abuse and provide a level playing field for all businesses supplying their customers with hot food.

Turning to the issue of holiday caravans, which we have touched on briefly, the VAT zero rate was originally intended to apply to the sale of caravans used only for residential purposes. To achieve that objective, the rules drawn up in the 1970s applied tax only to the sale of smaller caravans that could legally be towed on UK roads by a typical family car. However, over the years, an increasing number of large caravans have been used for holiday purposes. Those caravans inadvertently benefit from the VAT zero rate that was intended for residential caravans. That has led to widespread inconsistency in the VAT treatment of the sale of holiday caravans.

Under the current legislation, any caravan wider than 2.55 metres or longer than 7 metres is zero-rated as a residential caravan. The Government propose to replace the definition of a zero-rated caravan based on size with a new definition based on whether the caravan has been designed for residential use. To achieve that, we propose a new test that links the zero-rating with British Standard 3632, which indicates that the caravan has been designed and manufactured for continuous, all-year-round occupation and is therefore suitable for residential accommodation.

We consulted on whether the additional criteria should be added to ensure that the zero rate applies only to caravans intended for residential use. Given the reaction to the proposal, we decided that rather than having a single dividing line between a zero rate of VAT on residential caravans and a rate of 20% on static holiday caravans, static holiday caravans should be subject to VAT at the reduced rate of 5%. Static residential caravans—those that meet BS 3632, or early equivalents in the case of second-hand sales of older caravans—will remain zero-rated, as per the Budget proposal. We do not intend to restrict the zero rate further by adding additional criteria.

[Diana Johnson]

Will the Minister give way on that point?

[Mr Gauke]

There is a little more that I was going to say that may be helpful to the hon. Lady, but I will give way at this point.

[Diana Johnson]

I wonder whether it is sensible to make decisions on tax policy based on manufacturing standards. Manufacturing standards will change and no doubt get better, so is that a sensible way of operating tax policy?

[Mr Gauke]

In this particular circumstance, the manufacturing standard provides a better definition or borderline than the size criteria that I set out. It was put to us in the consultation that it would be very easy for manufacturers to do a bit more here and there, and that a static caravan that was once not BS 3632-compliant suddenly would be. When we investigated that, we concluded that it was quite expensive and difficult to meet BS 3632. Genuine residential caravans meet that standard, but non-residential, holiday vans do not. It seems to be an effective borderline. Of course these matters will be kept under review, but we think that this is a sensible conclusion and one that the industry recognises. The evidence that the industry has put to us is that BS 3632 adequately distinguishes between residential caravans and static caravans.

It is worth pointing out that BS 3632 caravans tend to be more expensive and are built to a higher specification. For those reasons, they tend to be used more in the residential market than in the holiday market. It is worth coming back to the intention of the 1970s definition for zero-rated caravans.

We recognise that static holiday caravans fall in a grey area between residential property and temporary holiday accommodation, which have different tax regimes. We have therefore produced the fair compromise of a 5% VAT rate. The argument was sometimes made to us that static holiday caravans should be treated like a second home, on which VAT is not paid. However, council tax is paid on a second home, which is not the case with static holiday caravans. Imposing the council tax regime on static caravan homes would have placed a significant burden on their owners and holiday parks, so we believe that we have made a fair compromise. As I said earlier, to give the industry more time to adjust, the measure will be delayed until 6 April 2013. All the other measures that we are discussing today will proceed as planned on 1 October this year.

--- Later in debate ---

[Diana Johnson]

The National Caravan Council has said that the caravan industry is fragile after the problems that it experienced in 2008. Based on the figures in the KPMG report, there would have been 6,000 job losses if the imposition of the 20% rate had gone ahead. Am I right to assume that with the 5% rate, the Treasury is working on the assumption that the impact will be a quarter of that number, which means 1,500 job losses?

[Mr Gauke]

Perhaps it will help the hon. Lady if I run through the situation. We have to raise a certain number of taxes, and VAT probably does less harm to the economy than almost any other tax that one could mention, whether it be employers’ national insurance contributions, which reduce the number of jobs, or corporation tax, which reduces investment. There is an issue with any tax.

On this particular policy, however, we are talking about a 5% rate on 80% of the price of a caravan, the other 20% being standard rated already, and on 85% of sales, the other 15% being standard rated already—or rather the purchaser being able to recover input taxes on it. There is then an elasticity of demand, and the 5% rate might result in a 5% reduction in demand, but of course that involves various assumptions and some uncertainty. As my hon. Friend the Member for Brigg and Goole (Andrew Percy) said, however, much of the industry does not think it will have a significant impact.

--- Later in debate ---

[Catherine McKinnell]

I thank my hon. Friend for that intervention and think that the response from Government Members is deeply worrying, as it shows worrying complacency about the direction in which they are taking this country and about the decisions they are making on the economy, which are making things worse, not better.

Our new clause 12 would reverse the VAT rise immediately and prevent it from rising again—I emphasise this point—until the Government can show that our economy is growing strongly again. That is the right move to get our economy back into growth and out of this double-dip recession. I also want to put on the record that we will oppose the Government’s new schedule 1, which would bring in ill-thought-through and unwelcome VAT changes that, despite the concessions, are still wholly unsatisfactory.

[Diana Johnson]

Does my hon. Friend share my concern that the proposals in schedule 1, especially those on the caravan tax, seem to have taken no account of job losses or of the effect on demand when we are in a double-dip recession and will cost the Exchequer more than it would gain in revenue?

[Catherine McKinnell]

I thank my hon. Friend for that intervention and her focus on the subject of the debate—that is, these deeply worrying and shambolic VAT changes. We have discussed at some length the new proposals that followed the Government’s concessions and we have had the opportunity to question the Minister on them. I share my hon. Friend’s concern at the failure to provide costings for some of the changes and the lack of consideration of the concern about jobs and growth that our new clauses aim to deal with. Those factors need to be given proper consideration and the Government do not appear to have done their homework.

--- Later in debate ---

[Catherine McKinnell]

I am pleased that the industry is “delighted” with a 5% increase in VAT on its products. That is surprising in the circumstances.

[Diana Johnson]

rose—

[Brandon Lewis (Great Yarmouth) (Con)]

rose—

[Catherine McKinnell]

I give way to my hon. Friend the Member for Kingston upon Hull North (Diana Johnson), who wanted to intervene earlier.

[Diana Johnson]

I would not say that the industry is “delighted.” I think that it accepts the measure, on the basis that it was very concerned about the 20% figure. My concern as a constituency MP, with 90% of static caravans being built in Hull and the surrounding area, is that there are 43.6 people chasing every vacancy in my constituency. That is the highest figure in the UK, and any job losses are going to be very difficult for my constituents, so that is why I am pressing the Minister to be very clear about the number of job losses that the 5% imposition will bring about. Will the shadow Minister comment on my concerns?

[Catherine McKinnell]

I thank my hon. Friend for that rational and considered intervention and appreciate that the industry is willing to accept the change, as it is much easier to bear than the original suggestion of 20%, but that is the point I seek to make. The Minister in his opening remarks confirmed that no assessment has been made of the impact of the 5% increase on the industry, and that is gravely concerning, because, as the hon. Member for Brigg and Goole (Andrew Percy) suggested, the industry needs certainty, security and stability to create the jobs that my hon. Friend is so concerned about.

The fact that the proposal is being put in place without a proper assessment of what is a lesser impact but still one of 5% is deeply concerning, because the last thing the industry needs is for the measure to be reviewed 12 months down the line, be seen to have had a detrimental impact, and for it to have to go through the whole process all over again.

--- Later in debate ---

[Andrew Percy]

No, I am not going to give way, because other people want to speak.

The shadow Minister talked a lot about VAT consultation and the Government’s failure, she said, to consult on the changes. I just wonder whether she has consulted very widely on her proposal to reduce the rate temporarily to 17.5%, because I suspect not.

[Diana Johnson]

It is a real pleasure to follow the hon. Member for Brigg and Goole (Andrew Percy), who, with characteristic humility, accepted that bringing forward these VAT proposals was not the Government’s finest hour, unlike the hon. Member for Truro and Falmouth (Sarah Newton), who unfortunately is no longer in her place. She has a rose-tinted view of the shambles of this Budget and the proposals that have been put forward, which caused consternation, upset and distress to many individuals and businesses around the country. However, she now seems to think that we should be celebrating the fact that the Government have had to cobble together this compromise.

I shall be supporting new clause 10, which was tabled by those on our Front Bench, and I want to speak against the Government’s new schedule 1. Our opposition to new schedule 1 underlines Labour’s commitment to having low taxes, because it would implement a tax increase, including the 5% VAT on caravans, which I want to address.

[Dan Byles]

I am interested to hear about that commitment, because I had understood that it was Labour policy to do more of the heavy lifting on deficit reduction through raising taxes than through cutting public spending. Is her party now the party of low taxes?

[Diana Johnson]

This section of the debate is about VAT. When we are in a double-dip recession, the imposition of VAT on items such as caravans is not going to help us to grow out of that economic position. That is what I will concentrate on.

The proposal for 20% VAT to be levied on static caravans came out of the blue in the Budget. There had been no consultation with the industry, and no warning that the Government were planning that measure. The impact assessment published alongside the Budget stated that the 20% VAT would result in a 30% reduction in the market for static caravans. The Government’s U-turn involved a 75% reduction in the amount of VAT involved, and 5% will now be levied from April 2103, as opposed to 20% from October 2012.

I can go some way towards welcoming the fact that the Government have listened and put forward a response to the widespread view that the imposition of 20% VAT would have been a disaster. There was cross-party work on the issue, with a number of debates, early-day motions and petitions. I will give the Minister his due; he did take the time to listen to what people had to say, especially those from my part of the world. However, serious concerns remain about the effect that the 5% VAT will have, and I want to run through them tonight.

I want to talk first about jobs and demand, which are at the heart of the issue. As I said, the Treasury’s own figures showed that the imposition of 20% VAT would have resulted in a 30% reduction in demand for static caravans. It worries me that the Treasury seems incapable of using figures appropriately. When I looked at the impact assessment, I realised that it had got the figures for businesses and manufacturers in the caravan industry wrong. It worries me that it cannot even get such basic information correct when it sets out to consult on a proposal. I want to see much better research into the impact of the 5% VAT on caravan manufacturers.

I have not been reassured by what the Minister has told me today, even though I have pressed him to tell me what will happen to manufacturers in the caravan industry. I did not feel that he really had a grasp of what the numbers might be. It worries me that there has been no proper assessment of this policy. Does he think that levying 5% VAT will put at risk roughly a quarter of the demand that the 20% VAT would have put at risk? Does he also think that the number of job losses in the caravan manufacturing industry will be reduced from the 6,000 mentioned in KPMG’s report to about 1,500 as a result of the change in VAT? Will he also comment on the knock-on effects for the wider UK tourism and domestic holiday industry?

I want to draw the Minister’s attention to the HMRC document, “VAT: Taxing Holiday Caravans”, which was published at the end of last week. On the economic impact of the 5%, it states:

“This measure is likely to lead to an increase in the price of static and larger touring caravans which could lead to a fall in demand.”

I take the view that the Treasury civil servants are among the brightest and best that the civil service has to offer, and it seems odd that they have been able to come up with nothing more definitive than that the measure “could” lead to a fall in demand. The document goes on to state:

“Although the overall impact on the macro economy is expected to be negligible, the measure will impact local manufacturing in Yorkshire and the Humber where the bulk of static holiday caravans are manufactured.”

Most people in Hull and East Yorkshire would agree with that, but surely the Treasury can come up with something better. The section of the document entitled “Impact on businesses including civil society organisations” states:

“The vast majority of static holiday caravans are manufactured in Yorkshire and the Humber and a small number of manufacturers account for the vast majority of all UK sales. Although some manufacturers produce other types of caravans, static caravans are the main source of income for most of these manufacturers.”

Again, it worries me that the document uses such general terms. Where is the meat in all this? Where are the figures? Where does it tell us what the actual economic impact of the policy will be?

Let us bear in mind that we are in a double-dip recession and we are all desperate to get growth back into the economy. I mentioned in an intervention that 46.3 people in my constituency chase every job vacancy going, so any loss of jobs in the caravan manufacturing industry is a disaster for my constituents. I think that the hon. Member for Brigg and Goole mentioned that the caravan industry suffered very badly in 2008-09, and it is only just getting back on its feet. If the Treasury thinks that the imposition of 5% VAT will be fine for an industry that is struggling in a double-dip recession when people are not spending, it really needs to look again at its figures and ensure that they all add up.

The Minister said that the goods within a caravan were already taxed, in that VAT had already been levied on such items. My understanding is that the figure involved is about 5%. Will he tell us whether the 5% proposed in the Bill will be an additional 5%, making a total of about 10% VAT payable? I am confused by that, and the Minister has not made it clear.

One of the strongest arguments against the initial proposal for 20% VAT was that it would raise very little revenue for the Treasury. When taking that into account, we also need to consider the welfare costs that would be incurred from people in the industry losing their jobs. Has the Minister looked at the figures involved? Does he think that the sums add up?

HMRC now estimates that the 5% VAT will first raise revenue in 2013-14, when it will bring in £5 million a year, rising to £10 million a year from 2013-14. That is a relatively small amount of money, given the Government’s overall spending, especially in the light of the millions that they have found in the Budget for tax cuts for millionaires. Let us put this into perspective: £10 million is perhaps a third or half of what Mr Diamond’s severance payment might be.

This measure will have an impact from next year onwards, while raising £5 million to £10 million. When we take into account the fall in demand in the industry and the resulting job losses, I do not think that the Treasury will end up in credit. Introducing the measure could result in more money being spent, through welfare benefits. Will the Minister set out for me the sums that he is using to ensure that the measure will bring a net benefit to the Treasury? In my view, this is an ill thought-through policy, and these are crazy economics.

The Minister referred to the manufacturing standard, BS 3632. As I said in my intervention, using a manufacturing standard to dictate tax policy is silly.

[Mr Graham Stuart]

I want to return to the hon. Lady’s point about the overall costs. A significant percentage of the cost of a new caravan is found in the chattels inside, which already have VAT on them. So the additional overall cost will not be higher than 5%; it will be more like 3% or 4% on the overall average retail cost of a caravan. The manufacturers are telling me that they think that that can broadly be absorbed within their business model. It will have some negative impact, but a fairly minimal one. We are certainly not talking about 10% costs, but about rather less than 5%.

[Diana Johnson]

I am grateful for that intervention, and I pay tribute to the hon. Gentleman for the work he did on this matter. However, I would really like to hear from the Minister what the VAT level is going to be, because my understanding is that it is 5% plus the additional VAT already levied. The hon. Gentleman says that it is 3% or 4% and not 5%, but is that 3% or 4% on top of the 5%, which would mean it was 8% or 9%, not 5%?

[Mr Stuart]

rose—

[Diana Johnson]

I am happy to give way again.

[Mr Stuart]

Basically, VAT has already been paid on those chattels, so if 25% of the cost of the caravan were for the chattels, that already includes VAT, so we are looking at 5% on 75% of the overall cost of the caravan. That is why it is significantly less than 5% as an addition to the actual cost when someone goes to a park to try to buy a caravan. The additional costs as a result of this change will be significantly less than 5%—I say that clearly and categorically.

[Diana Johnson]

I am grateful to the hon. Gentleman again, but I would still like to hear from the Minister exactly what the figure will be. My understanding—I was at the same meeting with the caravan manufacturers in Beverley as the hon. Member for Beverley and Holderness (Mr Stuart)—was that a figure was levied across the whole price of the caravan, including the chattels in the caravan at around 3% or 4% of the overall cost. Will the Minister clarify that? Are there two figures that we need to be aware of, or is it just 5% overall of the total amount of the purchase? I have to tell the Government that if this were intended to make things clearer, the truth is that it is making things even more complicated and less transparent.

Let me return to the BS 3632 specification. I was saying that I thought that that was not a sensible way to make tax policy. I know that the distinction between static caravans and those used for residential purposes 365 days of the year is based on the reference to BS 3632. If we look at the responses to HMRC’s consultation, we see that while many respondents felt it would be relatively straightforward to upgrade static caravans to meet the BS 3632 standard so that they could benefit from zero-rated standing, many others said that the costs of doing so would be prohibitive. There is a confusion there, which is why I would like the Minister to be very clear about it.

With certified British standards changing all the time because manufacturing gets better and better, how often does the Minister think he would need to return to this tax provision to update it? I doubt whether it will be set in stone for years to come; it will have to be looked at and changed in the future. I heard the Minister’s reassurance that we would not see changes to the standard in the future, but he is opening the door to potential changes. The system that the Minister has devised, based on the British standard and keeping the distinction between static, residential and touring caravans, does not make things clearer and more transparent; rather, I think it extends the anomalies in the tax system.

An even bigger issue for me is the lack of clear evidence of what the change to VAT policy will do for my constituents and for jobs in my city. That is what really concerns and worries me. I know that the Minister has listened carefully to my pleas about employment and jobs. I hope he will think again and will instruct his officials to do a proper piece of work, so that when MPs scrutinise Government policy, they will have accurate figures to look at in order to assess whether the Government’s policies will result in what they say they are trying to achieve. In this case, I do not think the Government will see additional revenue in the Exchequer. If they bring forward this ill thought-through proposal, which will disproportionately affect my constituents, there will be a loss to the Government.

[Stephen Gilbert]

I feel as if I have fallen into a parallel universe in this debate. It is interesting, is it not, that although Labour crashed the economy so totally, Labour Members today want to provide a £12 billion giveaway by reducing VAT—something that would presumably have to be paid for by further cuts in the public services that they say they want to protect, or indeed by an increase in borrowing. It seems inconceivable to me that this measure is on the amendment paper in the name of Labour Members. I recall that when I was growing up there was television programme called “Jamie and the Magic Torch”. I used to enjoy it considerably, but it seems that we have a show on the other side of the Chamber tonight called “Ed and the Magic Money Tree”, with the Opposition unable to be clear or consistent about their VAT policy.

Another bizarre aspect of the debate is that when the Government are forced into what my hon. Friend the Member for Brigg and Goole (Andrew Percy) refers to as a “recalibration” on a number of issues, which my constituents certainly welcome, the Opposition oppose the measures that the Government are taking to address the problems that they initially highlighted. It strikes me as utterly bizarre that, a few months ago, the hon. Member for Newcastle upon Tyne North (Catherine McKinnell)and her hon. Friends raised concerns, as did I and other hon. Members, about the pasty tax, the caravan tax, the problems affecting static caravans and other issues, yet tonight the same hon. Lady and her colleagues are going to vote against the U-turn that the Government have made. It may well be the case that the Government have made a U-turn, but it is clear from the positioning going on tonight that Labour has taken a wrong turn.

Labour Members cannot have it both ways. They cannot criticise a Government for being cavalier when they do not listen, and then criticise them as chaotic when they do listen. As they well know, the reality is that on all these issues, particularly on tackling anomalies in the VAT system, the problems were set out in the consultation that my right hon. Friend the Chancellor rightly announced. That consultation was widely subscribed to by many interested parties, and the Government took the responses to it into account and changed their view on the back of the evidence they received. I for one recognise that none of us has a monopoly of wisdom. It is surely in the finest traditions of good government that the people likely to be affected by these rules are listened to and that a Government take advice if a deleterious effect is pointed out.

Labour Members talk about the need to consult, but when they abolished the 10p tax rate, plunging millions of the lowest paid into further tax, I do not think they consulted on that measure. That is why, as I say, the last few moments of the debate have been somewhat eye-opening, highlighting the sheer opportunism of the Opposition in opposing a U-turn. They call for consultation, then, in the very debate that shows that the Government are listening, they choose to ignore it. Frankly, as I said at the outset, that is bizarre.

My constituents would want me to welcome new schedule 1 and Government amendment 17. Those provisions will protect jobs in Cornwall, protect the Cornish high street and high streets across the country, protect the secondary spend in the wider economy and will ensure that Cornwall, which is already a disadvantaged part of the our United Kingdom, is not further disadvantaged by proposals that the Government have, thankfully, amended.

I would also like to thank the Minister. In all the discussions between him, me and my hon. Friends, he has always been entirely professional, courteous and constructive in his engagement. I would like to thank others, too. As the hon. Member for Newcastle upon Tyne North knows, Greggs is based in her constituency. Its effort to mobilise more than 500,000 signatures across the country for a petition that my hon. Friends in Cornwall and I were able to deliver to Downing street showed the level of grass-roots concern about proposals that could have been very damaging.

I thank the National Association of Master Bakers; that is not a sentence that one wants to rush through! Its engagement with this issue has been constructive and professional, and it has represented the views of its industry to the Government very effectively. For what will probably be the only time in my life, I also thank and pay tribute to The Sun, which ensured that the issue touched the popular zeitgeist and was able, ultimately, to deliver change. More locally, the Western Morning News, the voice of the south-west, played a useful role in keeping the issue in the public eye.

I can tell the Minister that people in Cornwall are relieved that this coalition Government took soundings, listened and, at the end of the day, delivered a result that will protect an iconic and important Cornish industry. It is estimated that the measure will safeguard about 13,000 jobs in Cornwall, put hundreds of millions of pounds into the local economy, and guarantee the production of the 180 million Cornish pasties that are made in the county every year.

--- Later in debate ---

[Sheila Gilmore]

I shall say something about precisely that issue later.

The time and effort of officials and politicians was largely wasted by a process that, in some but not all instances, led us back to where we started at a time when the economy was tanking. Could not much of that energy have been expended on something far more worth while? It was said on Second Reading that this was not a Budget for jobs and growth but a Budget that tinkered at the edges of various issues, and the Government have themselves conceded that all that tinkering was probably a bad idea.

[Diana Johnson]

Does my hon. Friend agree that the VAT measures in the Budget had a major effect on business confidence in certain industries? For instance, when the caravan industry was threatened with the imposition of a 20% rate, some companies issued their work forces with 90-day potential redundancy notices.

[Sheila Gilmore]

Of course the stress and anxiety affected confidence and well-being. Indeed, it may have led to a further plunge in demand as people anticipated the impending redundancy which, thankfully, did not come about in many cases. That is an important consideration at a time when the economy is struggling so much.

I think that a great deal of time was wasted because the Government included measures in the Budget rather than dealing with the position earlier. If they believed that there were anomalies in the VAT system, why did they not consult? As I have suggested before, they could have said “We are minded to look at these things” at the time of the autumn statement, rather than at a time when they were putting together a Budget that, apparently, they wanted to balance. We heard a lot about that at the time.

Why did the Government not say “We want to look at these anomalies and review them in a general context”? One of our amendments proposes that that should happen in future. If there is to be consultation, it should be proper consultation. Saying, as the Chancellor did in March, “This is what we have to do and this is why we have to do it, but we will have a bit of consultation afterwards” is putting the cart before the horse. I hope that that lesson will be learned for the future.

--- Later in debate ---

Let me return to the various changes to VAT charging in new schedule 1, where, again, the Government have done exactly the right thing. They proposed some ideas, realised that they contained some mistakes and things that may be impossible to implement, and then changed them in order to get to a better policy. That is surely what we want Government consultations to end up with. We do not want the Government to announce something, consult on it and then blindly drive on without listening to any of the criticisms and details of any mistakes in it.

[Diana Johnson]

Does the hon. Gentleman feel that better decision making might come through consulting before putting a proposal to Parliament, and getting all the ducks lined up before coming before the House?

[Nigel Mills]

I agree with the hon. Lady, and I said yesterday that it would be better to consult before trying to legislate, but we did have a detailed consultation document that looked at this idea. I do not think that the legislation to implement this proposal was in the original draft of the Finance Bill, but it would have been brought forward by a statutory instrument later on; although it was announced as an idea, it was not in a legislative form at that point, so strictly speaking the Government have done what she calls for.

I wish to make one comment on the pasty tax, as an aside. It is clear that when making tax policy we have to avoid things that have a handy popular nickname. We have had big campaigns on the “pasty tax” and the “caravan tax”. It has been a bit harder to get the public behind a “sports drinks nutritional drink tax.” If it had been called a “Lucozade tax”, there might have been more publicity. The Government should be careful in making future tax policy to look out for what nicknames might be used. However, those who favour tax being understandable may feel that all taxes should have a simple nickname so that the public understand what they are for.

On the new “pasty tax” definitions, I am concerned that we might end up with some things that are unclear, such as the definitions of what is being “marketed” as “hot” and of what wrapping is allowed. We are told, “Don’t worry, it will be clear in HMRC guidance what is allowed.” However, we should be trying to legislate clearly: Parliament should be clear in what it says. I hope the Minister can put it on the record that bakeries on the high street that are trying to sell freshly baked products will not find those things subject to VAT unless they are kept hot or are wrapped in a heat-retaining bag, and that using ordinary, simple packaging or marketing those products as “freshly baked” will not be caught. That is absolutely the intention that Parliament has, and we should make it clear.

On sports drinks, I am concerned about going down the road of having a principle of deciding a tax treatment on the basis of how something is advertised or marketed, rather than on the fundamental underlying nature of the product. We can see that strange ways of how someone chooses to market something might change the tax treatment. I think I understand the aim of this proposal, which is to provide for high-sugar drinks sold as sports drinks when they are not much different from Coca-Cola or other fizzy products that we are trying to equalise the VAT treatment on. The wording in new schedule 1 leaves where the line is open to question.

We exchanged comments earlier about whether milk could strictly drift into being covered by the wording if it was marketed as something that aids physical performance and whether we risk a court, at some point, taking an utterly perverse and stupid view that milk is caught by the provision, given that we clearly do not intend it to be. We need to be careful what we mean. That line will be tested and people will ask, “What is a sports drink that is largely based on milk or some milk-derived product, and what is an ordinary pint of milk?” Where will we draw the line about what is VAT-able? A Mars drink is advertised with the slogan, “Unlike other sports drinks, this milk product actually tastes nice.” It is hard to understand why a Mars milk-flavoured drink is not going to attract VAT but a sports drink will. We need to be careful to avoid people not knowing what we actually mean.

If I market a whey-based product that is made up into a drink as a sports product, VAT will apply, but if I market it as a diet product or a nutritional supplement, perhaps for the elderly who are struggling to get enough calories in their diet, that will presumably not be VAT-able. All I have to do if I want to buy the thing to use it for sports purposes is choose the one marketed for an old person’s supplement, and although I would be able to use it in exactly the same way as the sports drink on the next shelf, I would be buying it for 20% less. I am not entirely sure that that is what we intend. Although I understand what is going on, we have to be careful if we start defining tax policy based on how something is sold and not on the underlying product.

With those few remarks, may I finally commend the Government on the position they have got these things into? It is vastly better than where we started, and I will certainly vote for new schedule 1.

Green Economy

Diana Johnson Excerpts

Thursday 28th June 2012 Commons Chamber

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to follow someone who can be defined as the Don Quixote of this debate, both figuratively and literally tilting at windmills.

The answer to the speech we have just heard is that the green economy is about not just underwriting one form of energy out at sea, but putting the entire economy on a green footing in terms of resources, energy and demand, and including our homes and our vehicles. As the Government said a little while ago:

“A green economy is not a sub-set of the economy at large—our whole economy needs to be green. A green economy will maximise value and growth across the whole economy, while managing natural assets sustainably.”

That is what a green economy is about. Those are not my words, but the first paragraph of the Government document, “Enabling the Transition to a Green Economy”. There is precisely one paragraph in the document about what the fiscal incentives to move to that green economy might consist of, so this debate is timely. We must ask what fiscal incentives we should put in place to bring about those changes.

Our aim in the economic recovery should not be simply to return the UK economy to business as usual as it was before the crash; it should be consciously to use the opportunity provided by the need to reinvest and to re-engineer our economy to make decisive moves towards the green, sustainable, low-carbon economy that the first paragraph of that document suggests we should be aiming for. We need to be clear about what that entails in how we craft our fiscal policy.

The emergence of a green economy cannot be brought about just by changing the dials on a few economic levers; it is fundamentally asymmetric with what has gone before. Low-carbon sustainable energy, for example, does not have an investment or operational pattern that is anything like what we have been used to for the past 100 years. We cannot construct the next generation of low-carbon power plants and providers on the basis of what has gone before.

We can no longer rely on the assumption that we can generally predict what capacity will be needed and then work out how best to meet it. Future energy policy must be based on investing first in consciously reducing demand and then in decarbonising the remaining demand. In doing that, we have to move to a different paradigm of investment, because demand reduction is a process not an asset, and because low-carbon plants are capital intensive but mean on fuel. In other words, low-carbon plants take a lot of money to construct but, once constructed, use fuel that is either free or recovered from other processes. The model of low and basic construction costs and investment in sourcing, transporting and using fuel, and paying for it as we go, is no longer applicable.

We can no longer rely on the assumption that the purpose of investment in resourcing the economy lies in procuring material into the economy, using it and disposing of the consequences. A linear model of investment and expenditure no longer applies. We will need to move increasingly to a circular-resource economy, in which we do not throw things away—there will be nowhere to throw them. We still throw things away, however. Something like 520 million tonnes of material comes into our economy for domestic consumption, and 200 million tonnes leaves as waste. Only 20% of our material is sourced from secondary inputs.

The changes we need are about investing not just in the green economy, but in jobs. Contrary to what the right hon. Member for Hitchin and Harpenden (Mr Lilley) said, they are real jobs for the future. Moving our resource base to the 70% EU27 recycling target would create something like half a million jobs in the UK by the early 2020s.

[Diana Johnson (Kingston upon Hull North) (Lab)]

I am listening carefully to what my hon. Friend says about jobs. If Hull becomes a wind turbine manufacturing site, 700 jobs will be created directly and up to 10,000 jobs will be created in the supply chain. Those are real jobs for real people in my constituency.

--- Later in debate ---

[Diana Johnson (Kingston upon Hull North) (Lab)]

I, too, congratulate the hon. Member for South Thanet (Laura Sandys) on securing the debate. When the coalition came to power, it talked about rebalancing the economy, including moving from services to manufacturing, moving from London and the south-east to the regions and moving towards a more low-carbon economy. In my area of the world, the Humber region, the green economy is one way in which we can see growth brought back into the local economy.

I understand that three of the world’s largest offshore wind farms are around the UK and Hull is particularly well placed for the third round, as we have the Hornsea and Dogger Bank areas of the North sea. I want to talk about the benefits to my area of the green economy and about why it is important that the Government are clear in their approach.

At the moment, the Hull and Humber area is working up a proposal for a green port at east Hull. The proposal is for Siemens to come to the port and set up a wind turbine manufacturing site for turbines that could then be used out in the North sea. We are well placed because of the deep channels in the Humber estuary and the sailing time to the proposed Hornsea and Dogger Bank wind farm areas. At the moment, we are talking about a £250 million investment in Hull, with the further investment of £100 million through the supply chain that we hope will come to the city when Siemens arrives. I must say to the right hon. Member for Hitchin and Harpenden (Mr Lilley), who is no longer in his seat, that my understanding was that a financial package was available to support such investment in the city in recognition of how important the development was not just to my city but to the wider economic situation in the Humber and around the United Kingdom.

[Laura Sandys]

I think the regional growth fund has given support to many of those companies as they open up their investment, to secure investment in Hull as well as in Sheerness. Perhaps the hon. Lady could provide clarification on that point.

[Diana Johnson]

I am grateful to the hon. Lady for her intervention. I will talk about the regional growth fund, but under the previous Government funding was made available for ports so that they could develop projects such as the wind turbine manufacturing that I mentioned. We need to recognise that not only the previous Government but, to give them some credit, this Government have taken steps to support the green economy through wind turbine manufacturing. I think it is a combination of the two things. I do not think we can deny that the previous Government did a lot around the green economy, with the very important legislation in the Climate Change Act 2008, which was the first of its kind in the world. I will come to the regional growth fund in a moment.

The North sea has been called the “Saudi Arabia of renewables”. There is huge potential for growth in the economy. Work on Green Port Hull is going exceptionally well and we are moving steadily, I hope, towards Siemens actually signing on the dotted line later this year. I pay tribute to the Associated British Ports manager, Matt Jukes, as well as Lord Haskins, who has been the chair of our local enterprise partnership, Councillor Steve Brady at Hull city council and Ian Kelly at the chamber of commerce. This has been an example of the public sector and the private sector working successfully together on the green economy. There are potentially 300 construction jobs on the Siemens site building the manufacturing factory. There will be 700 permanent jobs at Siemens and up to 10,000 in the supply chain working alongside different companies around the Hull and Humber area.

Let me put that into context. My constituency has 43.6 people chasing every job vacancy, so jobs are the key issue for my city and people who live in north Hull. At the moment, more than one in 10 young people in the city are not in education, employment or training, so it is important to do something fairly dramatic to ensure the regeneration of what was once a great city. Hull has the potential, with the opportunities offered by renewables, to become a world centre of excellence. We need to recognise the investment that is going not only into the green economy and the manufacturing side of turbines but into the wider economic benefits for areas such as mine. That is so important during a double-dip recession, and the green economy is growing at a rate of about 4%. I am sure that all parties would recognise that we need to do everything we can to support job creation and this particular industry.

I want to give the Government their due regarding the regional growth fund, through which £25 million was made available to work on the supply chain infrastructure that needs to be put in place to support the work that Siemens will, we hope, bring to the city. We also have enterprise zones on both banks of the Humber. I am waiting to see exactly how they are going to work, but the Government have given us the largest area of enterprise zone in the country. So, we hope that we are set, with a fair wind, to move forward, with Siemens coming to the city and with that renewables hub being developed.

Let me make two points about the Government’s approach. First, I am very concerned that any decisions the Government make on energy policy should be evidence-based. The hon. Member for South Thanet made this point in her opening remarks. We need clarity and transparency in policy and I am for ever asking the Government, in relation to all sorts of areas, where the evidence is that what they propose will work. It would be very helpful if the Minister, in his response, set out a commitment to provide reassurances about energy policy being evidence-based. The industry is looking for that and is keen to know why certain decisions are made. We also need to consider that, with investment now, the costs will come down in future. We know that the costs of the offshore wind industry will come down over time—the supply chain will ensure that—and that subsidy will reduce over time.

My second point is about the Government’s announcements, which need to be very clear and quick. The drip-drip of different possible announcements is very unhelpful. I also think that procrastination is a problem. Things need to be got on with. These mixed messages are a problem and I have to say that the Treasury seems to be causing the biggest problem. The Chancellor seems to have indicated in the past that he will not allow economic growth to be held back by green considerations, but clearly most of us in the Chamber today would say that green issues could drive the economy.

Finally, I understand that the consultation on the banding for renewables obligation certificates has taken us up to only 2017. Even with a fair wind and a relatively quick start, the green port in Hull will not begin until 2015, which will only give the industry two years of certainty about its returns. We have to look much more to the long term when we are asking industry to make huge investments.

I hope there is cross-party support for the motion. Labour introduced the Climate Change Act. We are committed to a green economy, and I very much hope that the Conservatives will fulfil their promise to be the greenest Government ever.

Static Caravans (VAT)

Diana Johnson Excerpts

Thursday 26th April 2012 Commons Chamber

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

I congratulate my hon. Friend the Member for Beverley and Holderness (Mr Stuart) on securing this debate. He has already made his case to me, leading a delegation of MPs to see me on 17 April, as he said, and I know that he has also made representations to my right hon. Friend the Chancellor. He also spoke passionately about the proposal in our debate on the Finance Bill on 18 April. I am pleased to have the opportunity in the time available to respond in more detail to the concerns that he and other Members have raised.

Let me begin with some general points to put the measure in context. Removing the zero rate of VAT from static holiday caravans is one of a series of VAT measures announced in the Budget that are designed to make the VAT system fairer to all traders and easier to administer and comply with. It will help to create a level playing field by ensuring that all holiday caravans are taxed in line with the sale of other forms of holiday accommodation that have restrictions on permanent occupation, such as touring caravans, camper vans, narrowboats, timeshares and new holiday homes.

Let me address two issues that were raised in my hon. Friend’s speech and in interventions. The first relates to revenue and costings, the second to the impact on businesses. First, the conventions used in the Treasury’s policy costings were set out in the 2010 Budget policy costings document. In brief, policy costings take account of direct effects on the tax base, but do not include indirect behavioural effects—for example, on employment, wages and salaries, or general consumption. However, the indirect economic effects are not ignored; instead, they are captured in the Office for Budget Responsibility’s economic forecast, taking into account, for example, the changes on the relevant sectors.

[Diana Johnson (Kingston upon Hull North) (Lab)]

I am listening carefully to the Minister. There are 43 people chasing every job vacancy in my constituency this month. The Treasury is not going to make any money from introducing VAT on static caravans, as it has failed to take into account the undoubted unemployment that will result from this measure.

[Mr Gauke]

As I have said, the Office for Budget Responsibility takes into account the second-round effects of all measures in the Budget.

Time is short, so let me turn to the demand reduction estimates and the figure of 30% that a number of hon. Members have quoted. HMRC has estimated that, as with what are described as “discretionary leisure durables”, expenditure on static holiday caravans will be impacted by the measure, with a 1.5% fall for every 1% increase in price. However, we should all be clear that this reduction in expenditure will apply only to static holiday caravans sold to the final consumer, and only to the proportion of the price of such caravans not already subject to VAT. The reduction in expenditure does not, therefore, apply to the approximately one third of caravans sold to caravan sites for rental. Their price should not change, as the caravan site will normally be able to reclaim the VAT in the usual way. That part of the static caravan market will not be affected by the measure. Neither will the measure affect the 20% of the price of a static holiday caravan that is already subject to VAT in respect of its removable contents.

Taking account of those factors, the overall fall in expenditure should be less than the 30% reduction indicated in the impact assessment. That is because the estimated 30% reduction refers only to the specific parts of the market that will be impacted by the measure: sales to private individuals who cannot reclaim the VAT.