Finance (No. 2) Bill (Second sitting)

Gareth Davies Excerpts

Committee stage
Tuesday 16th May 2023 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

That schedule 6 be the Sixth schedule to the Bill.

Clauses 45 and 46 stand part.

Clause 49 stand part.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure to serve under your chairmanship, Ms McVey. Clauses 44 to 46 and 49 introduce part 2 of the Bill, which delivers on the Government’s commitment to reform alcohol duty. Clauses 47 and 48 were debated in the Committee of the Whole House, which accepted that they should stand part of the Bill. The clauses change the structure of alcohol duty by creating a standardised series of tax bands based on alcohol strength.

At Budget 2020, the Government announced that they would take forward a review of alcohol. This legislation is the result of that review and makes changes to the duty structure for alcohol, moving from individual product-specific duties and bands to a single duty on all alcohol products and a standardised series of tax bands based on alcohol strength. In making these changes, the Government aim to support public health, encourage innovation and ensure that the duty system reflects modern drinking practices.

Clause 44 sets out what is meant by “alcoholic product” and points to definitions in schedule 6. Clause 45 explains the meaning of alcohol strength and gives HMRC the power to make regulations about how strength is to be determined for duty purposes. Clause 46 gives His Majesty’s Treasury the power to amend the categories of alcohol product and treat products as falling within a certain category, even though they may otherwise have fallen in another. Clause 49 explains when excise duty on alcohol is payable, how the amount is determined and how it is paid.

The changes made by the alcohol duty clauses are expected to impact up to 10,000 businesses that produce alcohol, import alcohol or supply it wholesale. This impact will be down to changes in how they calculate the amount of duty that is due on their products. The entire alcohol reform package will cost £155 million in 2022-23 and £880 million across the scorecard period.

To conclude, the clauses and accompanying schedule form an essential part of the Government’s ambitious reform of alcohol duty and will modernise the tax treatment of alcohol. I commend the clauses and schedule to the Committee.

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It would be incredibly helpful if the Minister could be clear that he intends and hopes that the guidance will come out as quickly as possible, so that people have as good an understanding of it as possible—I am talking about the guidance and regulation that is not in this Bill, but will follow. That would ensure that businesses and companies could make the best and most informed decisions.

[Gareth Davies]

That was an extensive display of preparation and reading, and quite right too, because that is exactly what we are here to do—scrutinise the Bill. Let me try to answer some of the many points that were raised in the three speeches. First, let me thank Opposition Members for their very generous and kind words. It is a great pleasure to serve in this position in the Treasury.

First out of the gate, let me say that the reforms were extensively consulted on; a lot of the comments related to that. As was pointed out, the reforms were first mentioned in 2020. The hon. Member for Wallasey is quite right: one of my first meetings was on this subject. Engagement with industry is paramount, and that is an ongoing process. Many in the various industries affected by the reforms very much welcome the public health focus that is driving this significant change. Many also welcome the simplification that we are bringing in across the board, and the fact that we are correcting several inconsistencies. I was asked by Opposition Members to give several examples. I can do that. One that springs to mind is the fact that sparkling wine pays 28% more duty than still wine, yet has significantly less or the same alcohol content. The driving principle behind the reforms is that the more alcohol in a product, the more tax that the producer pays. That is very clear for businesses to understand.

We were asked at the beginning about our support for businesses, and were told that businesses require certainty. I completely accept that, and we are providing it with the reforms. This is a massive simplification of our tax system for alcohol, and it builds on all the support that the Government have provided through covid and the energy crisis, as hon. Members will be well aware.

Let me try to rattle off a couple of quick responses to the hon. Member for Wallasey. I was asked about the differences in banding and how certain categories of alcohol can fall into different bands. That is true of spirits; Scotch whisky is required to be over a certain level of alcohol, but cocktails in a can and other items that I am aware of are lower in alcohol content, and so will have a lower tax requirement. That is very pertinent to businesses that have a portfolio of different products in their range.

The question about HMRC readiness is absolutely fair, and we are very confident that the processes have been put in place and businesses are ready to adapt to the new system. As I say, it is based on an extensive programme of consultation and engagement. The hon. Lady asked about exports. They are not subject to alcohol duties, although we are aware of the importance of exports to our alcohol industry. That is a live discussion that we have with the Scotch whisky industry all the time.

Let me address the point about the wine easement, which also relates to the question that the hon. Member for Aberdeen North asked about engagement with industry and others. There is a unique circumstance involving wine that comes from fresh grapes: the alcohol content changes by season, according to seasonal factors. That is different from fortified wine, which involves a more artificial process in which spirits are put into the wine to achieve a specific alcohol content. As part of the consultation that I mentioned, we listened to the wine industry, and for 18 months we have put in place a transitional arrangement for still wine of between 11.5% and 14.5% derived from fresh grapes to enable the industry to transition accordingly.

The hon. Member for Wallasey asked about draft relief. If she will forgive me, that was fully covered in Committee of the whole House, but she is right that it will benefit drinkers of pints in a pub over supermarkets. Draft relief applies to all alcohol below 8.5%. It is something that we are doing in support of beer drinkers and to support our community pubs, which are a vital part of all our communities.

Finally, I will just say that cider is also subject to the general principle that we seek to adhere to—namely, that the higher content of alcohol, the more cider producers will pay. Producers of super-strength ciders above 8.5% will pay more duty, but those of fruit ciders will pay significantly less. At the moment, on certain fruit ciders that are not apple or pear cider, producers pay two to three times the amount of duty. The outcome of these reforms will be a range of differential impacts for the cider industry. I will always support the cider industry, because it is incredibly important to the south of our country, but also to those across the country who enjoy drinking cider in the pub or at home.

[Dame Angela Eagle]

The Minister talked about simplification, and changing the system to make it easier for people to understand often brings important benefits. However, the reliefs that are coming in complicate it again. Is he satisfied that he has the right balance in extending the reliefs to the new simplified system, particularly the draft relief and the transitional relief?

As the person who brought in the small brewers relief, I have a certain attachment to it, although we will not be talking about that. What revenue does the Treasury believe these reliefs will rob it of, and does he think he has the right balance in imposing a more complicated relief-based system on his simpler system?

[Gareth Davies]

It is a fair question. We are seeking to simplify the entire system of alcohol taxation, and in the round that is broadly what we are doing. However, we are conscious that certain sectors are under acute pressure—smaller cider makers may have particular vulnerabilities to some of these reforms, for example, and we are mindful of that.

However, we are still applying the principle that I have discussed: the higher the alcohol content, the more tax will be paid. As I mentioned, the wine easement is a reflection of the particular and unique circumstances that I heard about from the wine industry. That is a transitional arrangement, not a permanent reform; overall, we are seeking to simplify the system.

[Abena Oppong-Asare]

I thank the Minister for his explanations so far. I want to get clarification on a few points. As I mentioned, clause 46 and schedule 6 have been drafted to allow the reclassification of categories. Is any guidance being drafted at the moment? Can the Minister give us more information about how the operation will be carried out to make sure that no issues are identified later? The legislation is not very clear.

To follow on from the points made by my hon. Friend the Member for Wallasey, extra work will be given to HMRC as a result of this. I know that the Government have done work on the issue for some time, but I would like reassurance that adequate processes are in place. How much resource has been allocated to ensure that this is carried out? There will be extra work for HMRC to make sure that the alcoholic strength regulations are determined. It is important that we know whether there have been issues for HMRC in delivering because it has been under a lot of pressure. More information about that would be very helpful.

[Gareth Davies]

Let me answer the point about guidance. I assure the hon. Lady as well as the hon. Member for Aberdeen North that guidance will be issued very shortly. The hon. Member for Erith and Thamesmead will be able to review that and it should answer a lot of the questions that she has just asked.

Let me repeat what I said about HMRC. The organisation has some incredibly hard-working staff who I have had the pleasure of meeting just in my first two weeks. As a Treasury, we have been preparing for this for quite some time. I have every confidence that our colleagues at HMRC are ready and waiting to implement the system. I have nothing further to add on this, so I urge that the clauses stand part of the Bill.

[Kirsty Blackman]

I have a brief comment about the guidance. I appreciate that a proportion of the stuff coming out is guidance so will not need to go through any parliamentary processes. However, some of the issues are to do with statutory instruments. Is the Minister satisfied that enough parliamentary time would be given for those, whether under the negative or affirmative procedure? Will they happen as quickly as possible? Clause 119 is about procedure and regulations. Will there be enough time for all that as well as for the less formal guidance coming through from HMRC?

[Gareth Davies]

We all take parliamentary scrutiny incredibly seriously and of course we will allow appropriate time for scrutiny of the Bill and all the guidance in the appropriate way.

[Dame Angela Eagle]

Given the newness and thoroughness of the changes that the Minister has outlined, and obviously extensively consulted on, I am presuming that the Treasury will also have a review process once the introduction has happened, so that it can look at how the changes have gone and whether further tweaks are necessary. Certainly, but not surprisingly, some aspects of the industry at the higher ABV end wish the transitional arrangements for wine to be extended beyond 18 months, as the Minister would expect. Is there going to be a review process? Could the Minister briefly outline the kind of time scales that are on his mind?

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[Gareth Davies]

All taxes are always under review, as the hon. Lady knows. The Treasury Committee, of which we were both members, plays a vital part in the scrutiny process—of course it does. That process started when the Chancellor appeared before it, and carries on through the parliamentary procedures we are going through right now. The Treasury is unusual in that it has two fiscal events per year—

[Dame Angela Eagle]

Or more!

[Gareth Davies]

I was waiting for that.

The Treasury has two fiscal events in which the full House has the opportunity to scrutinise our decisions. That also gives the Treasury the opportunity to review existing rates and systems, which is what we are doing as part of the spring Budget.

Question put and agreed to.

Clause 44 accordingly ordered to stand part of the Bill.

Schedule 6 agreed to.

Clauses 45 and 46 ordered to stand part of the Bill.

Clause 49 ordered to stand part of the Bill.

Clause 61

Mergers: general provisions

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 62 to 71 stand part.

[Gareth Davies]

Clauses 61 to 71 provide for transitional arrangements for small businesses that merge under the new small producer relief and provide definitions for terms used in the chapter.

The Government are committed to modernising and reforming alcohol duty. Part of the reform package is a new small producer relief for businesses that make alcoholic drinks of a strength less than 8.5% alcohol by volume. That will extend the benefit of progressive duty rates enjoyed by small brewers to the producers of other alcohol products. The provisions on mergers and acquisitions mean that small businesses that merge will not face a cliff-edge duty increase in the first year of the merger; instead, their duty rates will increase gradually over a three-year period. The clauses also include some general provisions around definitions for the purposes of the relief.

Clause 61 introduces the concept of a post-merger group, which is a company formed from the merging of two or more companies, and explains how each of the three years in the transitional period will be referred to. Clause 62 sets out the conditions which must be met for a newly merged business to qualify for the relief. Clause 63 explains what is meant by the “relevant production amount” during the transition period. Clause 64 explains what is meant by “post-merger amount”, which determines the level of relief available to newly merged businesses.

Clause 65 provides for termination of a transition period where the amount of alcohol produced by a post-merger group decreases. Clause 66 explains the treatment when another merger takes place during an ongoing transition period. Clause 67 explains the treatment of mergers involving more than two small producers at the same time. Clause 68 provides that that the transition period ends when businesses demerge. Clause 69 gives definitions of “production premises”, “production groups” and “connected premises” for the purposes of small producer relief. Clause 70 explains that the definition of “connected persons” for the purposes of the relief mirrors that in the Corporation Tax Act 2010. Clause 71 provides a table of expressions used throughout the small producer relief chapter.

Around 10,000 businesses in the UK produce alcohol, import alcohol or supply it wholesale. The clauses will help small businesses compete with larger businesses, such as multinationals, and support them as they grow. The entire alcohol reform package will cost £155 million in 2022-23 and £880 million across the scorecard period. These clauses and accompanying schedule form a key part of the Government’s ambitious alcohol duty reform and will support small alcohol producers to grow and thrive.

[Abena Oppong-Asare]

The clauses under discussion in this group form part of chapter 3 on small producer relief, as the Minister mentioned. I thought it would be helpful to remind the Committee that Labour introduced the small brewers relief in 2002, and we are proud of the effect it has had in supporting small brewers, creating the vibrant UK beer scene, and supporting British business. We therefore support its extension to other producers.

In the context of small producer relief, clauses 61 to 68 specifically deal with the regulations and provisions for when mergers take place. Clause 61 sets out general provisions, determining that a merger of two small producers is to be called a post-merger production group, and is deemed to be in a transition phase for the three years following the merger. Clause 62 introduces modified conditions to determine whether the premises of two small producers that newly merge are small production premises for the purposes of small producer relief. A merged small producer will be eligible for small producer relief if the adjusted post-merger account does not exceed the small producer threshold of 4,500 hectolitres and if, for each set of premises in the group, fewer than half of the alcoholic products produced on those premises in the previous year were produced under licence.

Clause 63 sets out that, in calculating small producer relief for a post-merger group, the adjusted post-merger amount is used for the “relevant production amount” as set out in section 59. Subsection (3) sets out that the exclusion in clause 58(c) does not apply to the premises in a merger transition year. The Minister will not be surprised that I want to ask why that is the case. I cannot find anything about the purpose of the subsection in the explanatory notes, and it would be helpful to get the background as to why it exists.

Clause 64 provides a definition of the adjusted post-merger amount, which is used to determine eligibility and calculate the rate of small producer relief for companies transitioning post merger. Clause 65 sets out that a merger transition period will end early if the total amount of alcohol produced on all premises by a post-merger group in the preceding production year is less than the adjusted post-merger amount for the current year.

Clause 66 lays out provisions for subsequent mergers of alcohol producers. If a second merger takes place, the producer is no longer considered to be in its merger transition period for the first merger. The second merger could be considered a new merger transition period if the eligibility conditions are met. On the other hand, clause 67 lays out provisions for simultaneous mergers, setting out which producers will be considered the “larger producer” and the “smaller producer” for the purposes of determining the small producer relief. Clause 68 sets out what happens when a production group demerges and the regime to be applied for demerged businesses looking to receive small producer relief.

As we know, clauses 69 to 71 provide some guidance on the interpretation of chapter 3. Clause 69 lays out definitions of the terms producer, production premises, group premises and connected premises. Production premises are premises where alcoholic products are produced, including premises outside the UK. Group premises are all the premises on which the same person produces alcoholic products. A production group includes the group premises and all connected premises. A producer is a person who produces alcoholic products.

Clause 70 states that two people will be considered to be connected persons if they meet the test contained in section 1122 of the Corporation Tax Act 2010, although HMRC’s commissioners can overrule that if they think it necessary. Finally, clause 71 provides a table of expressions used in the small producer relief chapter. These clauses are all administrative in purpose, and we will not oppose them.

[Gareth Davies]

I am very grateful to the hon. Lady for her comments. Let me start by acknowledging the success of small brewers relief. We have seen the number of breweries increase six times since its introduction, and I think we should applaud a good policy, wherever it originates. In fact, we are seeking to build on it by expanding its principles to the new small producer relief and extending it to all alcohol products under the parameters that she has outlined. There was a very specific point of clarification, which I am afraid I do not have to hand at the moment, but I am happy to set out in writing the detailed answers that she seeks.

Question put and agreed to.

Clause 61 accordingly ordered to stand part of the Bill.

Clauses 62 to 71 ordered to stand part of the Bill.

Clause 72

Exemption: production for personal consumption

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 73 to 81 stand part.

[Gareth Davies]

Clauses 72 to 81 reproduce existing exemptions and reliefs from excise duty on alcohol products. These reliefs and exemptions will continue to operate in the same way as they do now. To reform the alcohol duty system, we are legislating for a restructured duty system and two new reliefs. To ensure that all primary legislation relating to the production and use of alcoholic products is contained in one place, existing exemptions and reliefs from alcohol duty unaffected by the reforms but still needed in the new duty system have been re-enacted in the Bill. The relevant legislation in the Alcoholic Liquor Duties Act 1979 and Finance Act 1995 will be repealed.

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[Kirsty Blackman]

Alcohol hand sanitiser is obviously not for human consumption, but is it considered to be a medical item and so exempt under clause 76(2), or to be not fit for human consumption and so exempt under clause 79? However it is considered, will the Minister clarify that it is exempt from alcohol duty? Many of us had not often used it prior to 2020, but these days it is a significant part of our lives. It would be a concern if it received an alcohol duty charge, because it is part and parcel of keeping us safe and ensuring that we stop any further spread of covid or anything else.

[Gareth Davies]

As I set out at the beginning, the changes are largely administrative. To answer the question directly, there is no change whatsoever in terms of how the provisions are operationalised; they are carried over. The whole point is to consolidate the legislation in one place. I think our alcohol taxation system dates back to 1643, and the last change was in the 1990s. A lot of the changes are administrative, and the hon. Member for Erith and Thamesmead should take assurance from that.

[Abena Oppong-Asare]

I appreciate that a lot of these clauses are administrative. In that case, is the Minister able to tell me whether there has been any work done on unauthorised exemptions? Has that issue come up, does he have data on it and is he confident that unauthorised exemptions are being prevented? Could he give more information about what schemes or measures may be put in place? I appreciate that the clauses are administrative, but there is nothing in them about how to ensure that the system is not being abused.

[Gareth Davies]

There are penalties already in place if a person uses products or carries out activities that are not approved. The hon. Lady should take my assurance that these are carry-over provisions that come with the protections that we already have in place. I really do not have anything more to add, other than the fact that what was in existence prior to this legislation is being carried over. To answer the specific question on hand sanitizer, it is exempt.

Question put and agreed to.

Clause 72 accordingly ordered to stand part of the Bill.

Clauses 73 to 81 ordered to stand part of the Bill.

Clause 82

Approval requirement: producers

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 83 to 89 stand part.

[Gareth Davies]

Clauses 82 to 89 make changes to the approval and registration requirements for alcohol producers, ensuring that they are harmonised across all products. The new alcohol duty rates and reliefs will take effect from 2023, but the commencement of changes to approvals will come into force at a later date. The Government are committed to simplifying the current alcohol duty system, which is complicated and outdated. The clauses repeal and replace the Alcohol Liquor Duties Act 1979, as well as sections 4 and 5 of the Finance Act 1995.

The changes made by the clauses will standardise the approval processes for all alcohol producers, regardless of which alcoholic product they produce. Clause 82 sets out the requirement for a person to be approved by HMRC in order to produce alcoholic products. Clause 83 stipulates that an approval may cover multiple premises and product types, and that HMRC may vary or revoke an approval at any time. Clause 84 provides an exemption from the requirement to be approved for those who make alcoholic products for their own consumption, although that does not apply to spirits.

Clause 85 provides an exemption from the requirement to be approved for those who produce alcohol only for research and experiments. Clause 86 restricts the mixing of multiple alcoholic products except in certain circumstances. Clause 87 reproduces a section of the Alcoholic Liquor Duties Act 1979 with minor changes to update terminology. Clause 88 gives HMRC the power to make regulations regarding the administration and collection of alcohol duty. Clause 89 details the penalties and forfeiture that may apply if a person does not comply with the approval requirements. Overall, the clauses simplify and standardise approval requirements for alcohol producers.

[Abena Oppong-Asare]

We come to chapter 5 of the Bill and a group of clauses concerning regulated activities and approvals. Clauses 82 and 83 would require any person producing alcohol products to be approved by HMRC as a fit and proper person to do so, as determined by the HMRC commissioners. Clauses 84 and 85 provide exemptions from the approval process, so that a person may produce alcoholic products for their own consumption or for research into, and experiments in, the production of alcoholic products without needing approval from HMRC.

Clause 86 restricts the mixing of multiple alcoholic products, except in certain circumstances, such as if it is done in an excise warehouse and the mixing occurs before the duty point; the alcoholic products being mixed are all of the same type and strength; or the alcohol duty on each product has been paid and the resulting mixed product is to be consumed at the place where the mixing took place, such as a pub or bar. Clause 87 sets out that a person cannot mix water or any other substance with alcoholic products if the mixing is after the duty point, the mixed product is to be sold, and the resultant product would have attracted a higher amount of alcohol duty if the mixing were done prior to the duty point.

Clause 88 provides for HMRC to make regulations concerning the production, packaging, keeping and storing of alcoholic products; charging alcohol duty in reference to a strength that might reasonably be reached; relieving alcohol products from alcohol duty in certain circumstances; and regulating prohibition of the addition of substances and mixing. Before the Minister says that these are all largely administrative clauses, which I do not dispute, these seem like quite wide powers. I am interested to see that they will be subject to the negative procedure. Perhaps he can explain why that is the case?

Clause 89 sets out the penalties or forfeiture that can occur if a person fails to comply with clauses 82, 86 and 87, and any regulations made under clause 88, as we have just discussed. As we know, this is an administrative set of clauses laying out a reasonable approval and exemptions process, so we will not oppose it.

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[Dame Angela Eagle]

It is obviously important, when we get on to enforcement, that we are confident that HMRC is on top of this. The Minister was a bit coy about when these clauses will come into being, so perhaps he can explain that, given that they are quite important. They are about the fitness, rightness and properness of the characters out there producing alcohol, who must be properly registered by HMRC.

The Minister gave the impression that this is just a technical thing—that it is a hold-over from older laws dealt with in a more simplified and perhaps modernised way—but he was not very explicit about how it will be simpler or modernised. Can he give us some idea? Will it all be done online? Is there some modernisation such as that? If he can give us a handle on how the administration of the scheme will change, that might give us an idea of HMRC’s intention.

The Minister is about to introduce a new scheme, whereby the taxation of alcohol is based on the alcohol by volume level. That creates a completely different incentive for adulteration along the production process. HMRC’s decisions about which category of duty a product is in become important in terms of what tax is due. That creates new forms of incentives for fiddling. I am not saying that everyone in the alcohol industry, by definition, wants to fiddle and avoid tax, but there will be temptations along that line, given the new focus on alcohol by volume as a way of calculating what tax is due. That makes adulteration and fiddling potentially much more valuable for avoiding tax. It also means that HMRC has to be vigilant in protecting revenue from those taxes.

Will the Minister therefore say a little about enforcement? Given the new dangers around alcohol by volume and the approach to what duties are due, will HMRC beef up its enforcement regarding not only approved producers but checking along the production line when decisions are made on what tax will be due on the particular product being manufactured?

[Gareth Davies]

Let me respond to those questions in turn, but I will come to the post-duty point dilution last, if that is okay. I was asked about scrutiny in the first instance by the Labour spokesperson, the hon. Member for Erith and Thamesmead. The powers mirror those that we have already, and we are putting exactly the same procedures in place in the Bill, but I will outline, and give an example of, how the Government could use the powers.

The powers allow HMRC to make adjustments to the new reforms by regulation, if needed. It will have that flexibility, given the scale and novelty of the reforms. That is a sensible precaution to allow HMRC to make changes quickly if the reforms are not working as intended. Today, reviewing and tweaking as necessary have come up consistently. We are carrying over a lot of the legislation, and this is one power, in particular, that we are able to use.

The overarching policy is one of simplification and putting in place a simpler, streamlined process, where we have one single approval process for all alcohol products, to answer the hon. Member for Wallasey. She also asked about HMRC’s readiness and, as I have already said, I have full confidence in our colleagues at HMRC to be able to process the changes and—she also asked about this—to enforce the rules, regulations and laws we are putting in place. Furthermore, we are looking to deliver a digitised application process, which will happen at a later date, once robust systems are put in place. As she would rightly expect, we want to get that absolutely right for producers first.

Let me directly answer the question of post-duty point dilution. The hon. Member for Aberdeen North raised that with my predecessor in 2018, and she is a great champion of her constituent, who raised the issue with her. Following the question to my predecessor, we introduced post-duty point dilution specifically to address wine, I think. We now go further by extending the provisions to all alcohol products and not just wine. That goes back to the overarching principle that we are trying to impose a consistent, simplified approach to all alcohol categories. That is why we are doing it, and we believe that it is impactful. I have no anecdotes, but if I obtain any, I will certainly write to her.

[Kirsty Blackman]

I appreciate the logic behind the original measure and behind the change. Had I been the Minister, I would have been talking positively about the change and about the fact that we are moving from made-wine and wine to everything. He is right that this is a simplification and a good thing, and it will ensure that everyone ends up paying the right tax. He is playing it down a bit by saying that it was just about terminology changes. That is another of the issues I had with the explanatory notes, which could also have sung the praises of the changes that are being made, rather than simply describing them as minor terminology changes to tidy things up. This is a change in the application, and I am glad the Minister has confirmed and clarified that from the virtual Dispatch Box. That will make this change easier for people to understand when they read about it in concert with the Minister’s statements in Committee.

[Gareth Davies]

I always take constructive feedback on presentation and talking up the policies we are implementing, so I completely accept that. For the record, we believe this is a really important anti-avoidance measure, which will protect the integrity of the duty system we are implementing, and I want to be really clear about that.

Question put and agreed to.

Clause 82 accordingly ordered to stand part of the Bill.

Clauses 83 to 89 ordered to stand part of the Bill.

Clause 90

Denatured alcohol

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 91 to 97 stand part of the Bill.

[Gareth Davies]

Clauses 90 to 97 reproduce the existing exemption from excise duty on denatured alcohol. The exemption will continue to operate in the same way as it does now. As mentioned during the debate on clauses 72 to 81, we are legislating to ensure that all primary legislation relating to the production and use of alcoholic products is contained in one place.

No policy changes are made by these clauses. They reproduce an existing exemption from the charge of alcohol duty for denatured alcohol. In some clauses, changes to the structure and language have been made to modernise and simplify the legislation, but the operation of the exemption remains the same. The clauses reproduce the exemption for denatured alcohol, which is used for the manufacture of products that are not for human consumption, such as paint fillers, cosmetics and toiletries.

The clauses are an administrative measure to ensure that the current exemption for denatured alcohol will continue as now in the newly reformed alcohol duty system. I therefore urge that the clauses stand part of the Bill.

[Abena Oppong-Asare]

We now come to chapter 6 of the Bill, which concerns denatured alcohol. Clause 90 states that the definition of “denatured alcohol” will be provided by the HMRC commissioners. Perhaps the Minister could give us an idea of what that definition might look like. The clause also sets out that alcohol duty will not be charged on denatured alcohol.

Clause 91 specifies that a person must be licensed as a denaturer to legally denature alcoholic products or be a wholesaler of denatured alcohol. Clause 92 provides the HMRC commissioners with a sweeping set of powers, such as allowing them to regulate the denaturing of alcoholic products and the supply, storage and sale of denatured products. Perhaps the Minister could outline the purpose of this wide set of delegated powers or give an example of where he would expect them to be used.

Clause 93 sets out that failure to comply with the regulatory regime for denatured alcohol, as set out in chapter 6, will attract a penalty under section 9 of the Finance Act 1994. Clauses 94 and 95 lay out the circumstances in which denatured alcohol is liable for forfeiture or penalty—for example, when a person produces or possesses more denatured alcohol than they are licensed to.

Clause 96 gives HMRC officers a power to inspect, at any reasonable time, premises being used to produce denatured alcohol, and to take samples. Finally, clause 97 lays out the circumstances in which it is an offence for a person to use denatured alcohol—for example, preparing denatured alcohol as a beverage or purifying denatured alcohol. Most of these clauses simply update and integrate into the Bill provisions already laid out in the Alcoholic Liquor Duties Act 1979, so we will not oppose them.

[Gareth Davies]

Let me again provide reassurance that we are not changing the definition of denatured alcohol, and we have no need to do so—this is a legislative update. However, the hon. Lady should know, for interest and further exploration, that the definition is found in the Denatured Alcohol Regulations 2005. In this measure, we are simply re-enacting existing powers. She should take reassurance from that.

Question put and agreed to.

Clause 90 accordingly ordered to stand part of the Bill.

Clauses 91 to 97 ordered to stand part of the Bill.

Clause 98

Definitions

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[The Chair]

With this it will be convenient to discuss the following:

Clauses 99 to 105 stand part.

That schedule 10 be the Tenth schedule to the Bill.

Clauses 106 and 107 stand part.

[Gareth Davies]

Clauses 98 to 107 and schedule 10 simply reproduce existing provisions for excise controls on anyone making wholesale transactions in duty-paid alcoholic products.

As mentioned during the debate on clauses 72 to 81, and clauses 90 to 97, we are legislating to ensure that all primary legislation relating to the production and use of alcoholic products is located in one place. Clauses 98 to 107 and schedule 10 reproduce the requirements for the wholesaling of controlled alcoholic products. Those controls and requirements will continue to operate in the same way as they do now.

To conclude, these clauses and schedule 10 are an administrative measure to ensure that all primary legislation relating to the production and use of alcoholic products for duty purposes are contained in one place.

[Abena Oppong-Asare]

We now come to chapter 7 of the Bill, which concerns the wholesaling of controlled alcoholic products. Clause 98 provides several definitions relevant to the chapter, and clause 99 allows HMRC commissioners to make specific definitions concerning whether goods are to be considered wholesale or retail sale. Clause 100 lays out an approval process to allow a person to carry out wholesale activity. Again, that simply reproduces, with updated terminology, sections of the Alcoholic Liquor Duties Act 1979.

Clause 101 requires HMRC to keep a publicly available register of all approved wholesalers, and clause 102 provides HMRC with powers to regulate the wholesale system. I would be grateful if the Minister could humour me and give me more information on how the register will be made publicly available, what timescales have been given to HMRC and what publication dates will be required for that information.

Clause 103 turns the focus to purchasers of alcoholic products, specifying that a person may not buy controlled alcoholic products unless they are buying from an approved wholesaler. Clauses 104 and 105 and schedule 10 make it clear that a penalty could be incurred if a person knows, or reasonably suspects, that they have bought alcoholic products from someone who is not suitably approved.

Clause 106 defines a group for the purposes of the alcoholic product wholesaler provisions, and clause 107 provides definitions for some of the terms used in the chapter. We do not take issue with this set of clauses concerning wholesale transactions, and we will not oppose them.

[Gareth Davies]

I appreciate the points that the hon. Lady has raised. I reassure her that these are technical updates to consolidate the legislation, so that, for simplification purposes, we have in one place all the legislation for alcohol duty and measures—isn’t that a wonderful thing that we are doing?

The hon. Lady made a good point on communication. We will ensure that all communication is as good as it can be, and we will come up with further details on that in due course.

Question put and agreed to.

Clause 98 accordingly ordered to stand part of the Bill.

Clauses 99 to 105 ordered to stand part of the Bill.

Schedule 10 agreed to.

Clauses 106 and 107 ordered to stand part of the Bill.

Clause 108

Reviews and appeals

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

That schedule 11 be the Eleventh schedule to the Bill.

Clauses 109 to 112 stand part.

That schedule 12 be the Twelfth schedule to the Bill.

Clauses 113 and 114 stand part.

That schedule 13 be the Thirteenth schedule to the Bill.

Clauses 115 to 120 stand part.

[Gareth Davies]

Clauses 108 to 111 and schedule 11 make supplementary changes for the reformed alcohol duty system. The provisions are necessary consequential amendments as a result of changes made elsewhere in the Bill. Clause 112 and schedule 12 reproduce the requirements for duty stamps on alcoholic products. Those controls and requirements continue to operate in exactly the same way as they do now. Clauses 113 to 116 make changes to repeal outdated legislation and provide transitional arrangements for wine businesses and small cider makers as they move to the new duty system. Clauses 117 to 120 allow for regulations to be made to supplement the provisions in primary law.

The Government are committed to simplifying the current system for alcohol duty, which is complicated and outdated. As mentioned in debate on previous alcohol duty clauses, we are legislating to ensure that all primary legislation relating to the production and use of alcoholic products is contained in one place. Clauses 113 to 116 and schedule 13 repeal some parts of the Alcoholic Liquor Duties Act 1979 that are no longer needed, and they ensure that all primary legislation relating to alcohol duty is now contained in one place. They also include specific transitional provisions for cider and wine products, which face the biggest challenges as we move to the new strength-based system. Clauses 117 to 120 allow the Government to commence different parts of the primary legislation at different times by appointed day order.

Clause 108 and schedule 11 provide a right to reviews and appeals for decisions that HMRC makes. Clause 109 ensures that the forfeiture provisions across the reformed alcohol duty system are consistent. Clause 110 updates legislation relating to certain movements of alcohol products from a warehouse so that it applies equally to alcohol products removed from premises that have the new alcohol approval. Clause 111 extends brewers’ existing ability to offset a claim for refunds of excise duty against liability on their monthly return. Clause 112 and schedule 12 reproduce the requirements for duty stamps on alcoholic products. Those controls and requirements will continue to operate in the same way as they do now.

Clause 113 provides a list of repealed legislation. Clause 114 makes consequential amendments to other legislation, which is required as a result of the policy changes. Clause 115 is a temporary provision for producers and importers of certain wine products, to help them to manage the transition to a strength-based system. That will be in place for 18 months, and it will ease the administrative burdens of moving to calculating the duty on wine based on strength. Clause 116 is a temporary provision for small cider producers to maintain the effect of the exemption from registration and paying alcohol duty that they currently hold until the approvals provisions are given effect next year.

Clause 117 provides an index of terms used in this part of the Bill and references to where further detail can be found regarding each. Clause 118 provides a power to make regulations in relation to this part of the Bill and how the power may be used. Clause 119 explains the parliamentary procedure that must be used to make regulations using the various powers included in this part. Clause 120 concerns commencement and states that, other than these clauses and other regulation-making powers, none of the provisions in the Bill concerning alcohol duty takes effect until an appointed day order is laid.

These clauses and accompanying schedules are administrative measures that ensure that the Government’s ambitious alcohol reform is underpinned by modern legislation, and that the transition to the new system is smooth. The clauses conclude the part covering alcohol duty reform, and I commend them to the Committee.

[Abena Oppong-Asare]

With this group of clauses, we turn to chapters 8, 9 and 10 of the Bill concerning supplementary items, repeals, further amendments, transitional provisions and final provisions. Clause 108 and schedule 11 make relevant amendments to the Finance Act 1994. They appear to be purely administrative, but perhaps the Minister could clarify that? Clause 109 specifies that HMRC may destroy, break up, or spill anything seized as liable to forfeiture. Clause 110 inserts new subsections into the Customs and Excise Management Act 1979. As this is quite technical, perhaps the Minister could explain precisely what the clause achieves, because I found that the explanatory notes did not cover it in depth. [Interruption.]

--- Later in debate ---

[Gareth Davies]

Let me first address the request from the hon. Member for Erith and Thamesmead for me to further explain certain clauses. Clause 108 ensures that the legislation works, basically, and detail is provided in the explanatory notes. If she requires more detail, I am happy for her to write to me. Clause 110 ensures that this measure works with amended legislation, because it is about the movement of alcohol from excise warehouses to authorised people. Clause 115 basically sets out the period of 18 months that I am about to address. Clause 116 relates to when the period ends and approvals come into force.

The hon. Member for Aberdeen North makes some good points, and she asked a good question about the 18-month period for the wine easement. It has been determined, through consultation and engagement with the wine industry, that 18 months is sufficient time for it to put in place the operational requirements, such as labelling, for it to be able to meet the alcohol reforms that we are making. As I set out at the beginning, some types of wine will see a reduction in duty. Simplification is driving these reforms, and we are moving to the principle that the more alcohol a product contains, the more tax it attracts, so there will be increases and decreases as part of all this.

Question put and agreed to.

Clause 108 accordingly ordered to stand part of the Bill.

Schedule 11 agreed to.

Clauses 109 to 112 ordered to stand part of the Bill.

Schedule 12 agreed to.

Clauses 113 and 114 ordered to stand part of the Bill.

Schedule 13 agreed to.

Clauses 115 to 120 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Andrew Stephenson.)

High Street Bank Closures and Banking Hubs

Gareth Davies Excerpts

Thursday 11th May 2023 Westminster Hall

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a particular pleasure to see you in the Chair, Mr Davies, because I know that if you were not in the Chair, you would be making an impassioned speech. I thank my right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) for bringing forward this debate. There is strong feeling on this subject across communities and constituencies, including mine. She spoke with great passion and knowledge on behalf of her constituents, whom she serves very well.

My hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) quite rightly said that banking is changing. In recent years, innovation has led to an increase in online banking, which many people find quicker and more convenient than banking in branch. We know this from our experience, as well as seeing it in the data. In 2021, the industry body, UK Finance, found that 86% of UK adults made contactless payments; 72% banked online; and 57% banked using their mobile phone. That is not just young people. The latest data shows that more than 70% of people aged over 65 use online banking.

As the hon. Member for Barnsley East (Stephanie Peacock) pointed out, given the rise of online banking, we have to ensure that digital connectivity and mobile phone coverage are strong. In 2020, the Government announced a £1 billion deal with mobile operators to deliver the shared rural network, which will see operators collectively increase mobile phone coverage across our country. As for speed, in 2021 the Government launched Project Gigabit, which commits £5 billion to expanding gigabit coverage to 85% of households in the country.

The basic fact is that local bank branches receive fewer and fewer visitors because, frankly, many customers’ needs can be met digitally through video calls, banking apps or on the phone. In that environment, banks and building societies have a decision to make about how to provide in-person services to those who need them in the communities in which they operate. Those decisions are nuanced, local and, most importantly, commercial. The Government rightly cannot and do not intervene in them.

That being said, we recognise the real concerns expressed more widely about losing access to bank branches, which, as has been said, are important to many communities. For a variety of reasons, some members of our communities, such as those who are vulnerable, may need to do their banking in person. All firms should follow the FCA’s guidance to ensure that they carefully consider the impact of planned closures on their customers. That guidance sets the expectation that if a branch closes, firms will put in place reasonable alternatives in order to meet customer needs. Where firms fall short of that expectation, the FCA has the power to ask for closures to be paused, or for other options to be put in place.

[Wendy Morton]

I am interested to know the number of occasions on which an intervention has been made after a closure. I hope the Minister agrees that this is important. Banks should not close a branch and then review the engagement and so on, because then it is too late. Too much is happening on the back foot.

[Gareth Davies]

My right hon. Friend makes a good point. I will have the Economic Secretary to the Treasury write to her with any figures that we have on the pauses that have taken place as a result of FCA guidance. LINK carries out reviews in order to suggest and recommend the services that can be put in place. If there are no bank branches left in a community, a banking hub can be suggested. However, if my right hon. Friend will allow me, I will ask my colleague to write to her with more detail on that point.

The industry is innovating and finding new ways to respond to customers who want and need to access in-person services. I am pleased that we have heard a lot of discussion today about post offices, because they play a vital part in this issue. It is right to point out the statistics, which I was quite shocked to learn when preparing for this debate. Some 99% of personal banking customers, and 95% of business banking customers, can do their everyday banking—can do such things as withdraw cash or check their balance—at one of 11,500 post office branches across the country. I was also shocked to learn that 93% of people in this country live within just 1 mile of a post office, so almost everyone can access their everyday banking services locally.

[Kirsten Oswald]

Does the Minister appreciate that that will be cold comfort to people who no longer have a post office, or who have an on-and-off post office, which is not a very reliable way of doing business, or who do not live in the heavily populated areas that presumably make up that 99%? That is probably an unhelpful comment, in their opinion.

[Gareth Davies]

I accept the challenge, of course. The hon. Member for Motherwell and Wishaw (Marion Fellows) also asked me to comment on what support the Government are providing to post offices. I can respond to both points.

In the 2021 spending review, some £227 million was secured in Government investment between ’22 and ’25, including a subsidy of £50 million to protect access to post office services in commercially challenging locations. That later increased to £335 million, including a £150 million subsidy to those in commercially challenging locations. I therefore accept what the hon. Member for East Renfrewshire (Kirsten Oswald) says, but the reality for the 93% who live within 1 mile of a post office cannot be ignored. For those who are not within that catchment area, the Government have stepped in with subsidy and significant funding to ensure access to a post office.

[Tulip Siddiq]

We are lucky in this place, with two post offices that hardly ever have queues, but in my constituency there are massive queues outside the post offices, in which people have to wait a long time. Also, some of the services that constituents want to use a bank for are just not appropriate in a post office. Some post offices, certainly in my constituency, are based in WHSmith or another shop; it would not be appropriate to go in there to talk about personal banking services. Will the Minister comment on that?

[Gareth Davies]

What services banks provide is a commercial decision for them, but they provide a lot of different ways to interact with them these days, including several online options. As I pointed out right at the start, the majority of the British public access banking in those ways, whether online through a website, web chat or a mobile banking app, or via the telephone. Customers of commercial banks have a variety of ways to interact and get advice, and I would encourage them to do so. It is not the Government’s place to intervene in the commercial decisions of banks on what services they provide and where.

In addition to what I have just laid out on the variety of online services, many banks and building societies have programmes in place involving community centres, libraries, mobile banking vans or semi-permanent banking pods. The pods are structures that provide a dedicated private space to support customers with banking services. They can be moved around to different locations, depending on demand—the hon. Member for Hampstead and Kilburn (Tulip Siddiq) may wish to engage the banks on those for her area. For people who need to speak to their bank face to face, such places can make a vital difference.

Alongside those programmes, there is the high-profile innovation of shared banking hubs, which many Members have referred to in the debate. The hubs provide a dedicated space where customers can meet community bankers, who support them with more complex services. The hubs also offer a range of everyday banking facilities, allowing customers to deposit cheques, check their balance, and withdraw and deposit cash. More than 50 shared banking hubs have been announced for communities across the country, as has been said. Four have opened their doors already and two more are expected in the coming weeks.

[Wendy Morton]

Does the Minister agree that 52 hubs are due to open, which is great, but only four have opened? What more can he or his Department do to encourage, or gently push or prod, the organisers of the hubs to get them in place? The point made by Members across the Chamber today comes down to banks closing and hubs not opening.

[Gareth Davies]

I am grateful to my right hon. Friend. The Government recognise and share the frustrations that she has voiced about the pace of the roll-out of the hubs. Those are commercial arrangements and the industry is working to deliver the hubs quickly. We expect the delivery to accelerate over the coming months, but I share the frustration. The Government have laid out very clearly, as I have today, our expectation: we want the delivery to speed up. We welcome these initiatives, which clearly demonstrate how innovation is supporting access to banking in the longer term. We believe that the impact of branch closures should be mitigated where possible, so that all customers, wherever they live, continue to have access to appropriate banking services.

We are also taking strong steps to protect access to cash, as has been asked of me today. It is true that electronic payments are being used more and more, and cash less and less. Over the last decade, the use of cash to pay for goods and services has declined by almost three quarters. However, cash continues to be important for millions of people across the UK, including businesses and people who may be in vulnerable groups. There is, as ever, a balance to be struck. As more and more people and businesses embrace the benefits of new payment methods, the Government should not stand in the way, particularly when those innovations can make it easier to start and grow a business or to manage family finances, but we must offer reassurance and protection for those who do need cash.

My right hon. Friend the Member for Aldridge-Brownhills asked me to make a commitment on this, and I will say that the Financial Services and Markets Bill, which is going through Parliament right now, does just that. It will enshrine access to cash in legislation. In doing that, we are helping to ensure that everyone, whoever they are and wherever they live, is able to manage their finances in a way that works for them. I hope that that commitment has been heard today by not just my right hon. Friend but many of her constituents, who I know will be concerned about that.

Like many of the speakers in today’s debate, the Government understand the challenges that these changes have brought, and the nervousness that can accompany any change, but supporting customers, communities, businesses and people across the country remains our key duty. Of course, we will always welcome innovation, especially in financial services, to support competition and grow our economy. We will continue to work with the sector, the public and all Members across the House to ensure that we have a modern, flexible banking system that caters to the needs of every person and business in our country.

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 9th May 2023 Commons Chamber

[Christine Jardine (Edinburgh West) (LD)]

4. What fiscal steps he is taking to support businesses with energy costs.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The energy bills discount scheme will provide all eligible businesses and other non-domestic energy users with a discount on high energy bills for 12 months from 1 April 2023 to 31 March 2024. It will also provide businesses in sectors with particularly high levels of energy use and trade intensity with a high level of support. The scheme will help those locked into contracts signed before recent significant falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again.

[Christine Jardine]

Speaking to businesses in my constituency of Edinburgh West over the past week, I have been hearing that they are not finding the help that they need. The combination of the cost of living crisis, energy costs and business rates is pushing them towards a crisis. The Federation of Small Businesses estimates that 93,000 small businesses could go out of business this year because of high energy costs. Do the Government accept that more will have to be done, particularly to help small companies renegotiate tariffs, and will they tell me what they intend to do about that?

[Gareth Davies]

The hon. Lady raises an incredibly important point, and this Government are very alive to the issues that businesses face across the country. She will be aware that, last year, the energy bill relief scheme was unprecedented in its nature and scale, and that the Government were always clear that that would be time limited and intended as a bridge for businesses as wholesale gas prices come down. Those prices have now come down quite significantly, but we do have the energy bills discount scheme, which strikes the right balance between supporting businesses for another year, but also limiting the taxpayers’ exposure to volatile energy prices.

[Robin Millar (Aberconwy) (Con)]

The Treasury was quick to act during the pandemic when hoteliers in Aberconwy told me that banks were directing them to their premium lending products instead of the Government’s coronavirus business interruption loan scheme. Now those same hoteliers are telling me that the energy supply market seems to have failed. They are seeing their bills tripling just as market rates drop below Government support levels. They fear that the supplier’s thumb is on their side of the scales. None of this will be new to the Minister, so can he please tell me what he is doing and can he meet me and sector representatives to make sure that some common sense is brought back to energy supply contracts?

[Gareth Davies]

My hon. Friend is a great champion of businesses in his constituency. In the first instance, I advise businesses always to contact suppliers to discuss their contracts. We are alive to the fact that some businesses are having difficulties securing the benefit of falling wholesale prices from their energy suppliers. In January, the Chancellor wrote to Ofgem, which oversees the energy market for consumers, and Ofgem has now launched an investigation into the non-domestic energy market. We await its conclusions, and, at that point, I would be very happy to meet my hon. Friend.

[Mr Philip Hollobone (Kettering) (Con)]

5. What recent steps he has taken to reduce the rate of inflation.

Funding for Major Infrastructure Projects

Gareth Davies Excerpts

Wednesday 3rd May 2023 Westminster Hall

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure to see you in the Chair, Mr Sharma, particularly as this is my first outing as a Minister in Westminster Hall. What a great start!

There has been a really informed, detailed and, if I may say so, courteous display of speeches. The central core of every one of them was a deep care for our national infrastructure and a recognition of how important it is to all our constituencies. I congratulate the hon. Member for Bath (Wera Hobhouse) on securing the debate—at the last minute, I hear, although you would not know it—and thank hon. Members for all the other contributions. I will try to cover off some of the points raised in the time available.

Good infrastructure acts as a knot that ties our communities and our Union together. It is a vital part of how we protect our environment and helps us to unlock economic potential. The Government, right up to the Prime Minister and Chancellor, are absolutely committed to delivering the long-term economic benefits derived from capital investment and infrastructure schemes. We want to build infrastructure that is modern, efficient and accessible to everybody across our four nations.

During this Parliament there has been a step change in how we fund national infrastructure, underpinned by our national infrastructure strategy, which was referenced by my hon. Friend the Member for Wimbledon (Stephen Hammond). To achieve the aims of the strategy we are increasing funding; we have a strategy and we are matching it with funding. That was announced in the spending review of 2021. A multi-year settlement provided £100 billion of investment in economic infrastructure for this spending review period. That includes over £35 billion for rail investment—including, yes, HS2, which I will come to in a moment—and other rail enhancements to boost connectivity across our country. In the longer term, our integrated rail plan, published in November ’21, committed £96 billion for rail construction and upgrades, representing the biggest ever single investment into our rail network. It will deliver a modern network that will benefit small towns and big cities, boost productivity and bring our communities closer together.

The hon. Member for Bath referred to HS2, so let me address that head on. It is a key part of our rail strategy—a long-term investment that will improve connectivity across the country and provide a low-carbon alternative to cars and planes for many decades to come. It is already supporting tens of thousands of jobs. The Government remain absolutely committed to delivering HS2 from Euston to Manchester, and continue to push on with the sections in peak construction so that the first high-speed services—running from Old Oak Common in west London to Birmingham Curzon Street—can be delivered between 2029 and 2033.

[Wera Hobhouse]

I share the Minister’s wish for HS2, but it is just that because there are so many delays, we are losing the public. Is it not important that the Government really come clean and say, “We will deliver this, and it will be great for this, that and the other reason,” rather than putting doubt into people’s minds that it might not be delivered, might be only half-delivered, or whatever it is? Let us go out there and really sell this as a great improvement to our rail infrastructure. Does the Minister not agree?

[Gareth Davies]

I thank the hon. Lady, although I think we are selling it. She is absolutely right: it will boost productivity. It is creating jobs, as I have said, and it will boost connectivity. It is important that we all do go out and sell that. However, we have to be real: we have to balance the need for high-speed rail with sustainable public finances and respond to events as they happen around the globe. That is the reality of what we are doing with the recently announced rephasing. This is true for construction projects all over the country and, if I may say, in many parts of the world; we face significant inflation as a result of Putin’s war in Ukraine and supply shortages coming out of covid. We are reacting to that as hon. Members would expect any reasonable and responsible Government to do.

The hon. Member for Bath referenced the National Audit Office report—I can tell her that we are looking at that report very carefully and will respond in due course. However, the point I am trying to make is that on HS2 is that it is vital and we are committed to it, but we have had to make difficult decisions and choices in order to balance the need for both robust transport infrastructure and robust public finances, which we will always do for the British people.

More broadly, as has been mentioned by many speakers, we are improving rail connectivity and restoring our transport services across the country, but in particular to reverse the 1960 Beeching cuts. It is important that we expand the rail network as well as improving the existing rails.

In the interest of time, I will pick up some of the direct points raised by hon. Members. The hon. Member for Bath should be aware that I am briefed on the M4, which she mentioned—even though I am only a week in, I know about the M4 connection to Dorset. The hon. Lady will know that the DFT commissioned a study by National Highways on that route, and its outcomes are being carefully considered by the Government and wider stakeholders. It is a live discussion and we look to come back on that very soon.

The hon. Member for Bath and my hon. Friend the Member for Wimbledon also made some excellent points on rail electrification. The hon. Lady should be aware of the transport decarbonisation plan, which will deliver a net zero railway by 2050. She referenced some specific statistics, and I will respond with a couple of my own: since 2010, we have electrified 1,224 miles of track, of which 1,000 miles have been installed in the past five years alone—compared, by the way, with just 70 miles electrified in England and Wales between 1997 and 2010. I think we are doing a pretty good job, although there is more to do. I do not think anybody would deny that.

The right hon. Member for Orkney and Shetland (Mr Carmichael) made a very insightful and interesting speech about the challenges his constituents face. I will look into the issue he raised about Treasury responsibility for the pot and come back to him.

My hon. Friend the Member for Wimbledon said eloquently that these things do not all rest on Government finances; the Government cannot pick up the tab for all our infrastructure projects. The benefits of our national infrastructure strategy will be secured through Government and private funding, so we will win the prize by mobilising private capital investment. Almost half of the UK’s future infrastructure pipeline is forecast to be privately financed, and the Infrastructure and Projects Authority recently estimated that the total infrastructure investment for the next decade across the public and private sectors will be nearly £650 billion.

As my hon. Friend mentioned, we are building on a strong base. The UK is a great centre for private investment. We have a strong system of regulation, a strong legal framework that is replicated all around the world, and a leading financial and services sector that helps to mobilise private capital. He talked about the bond market, and as he knows we are one of the leading issuers of green gilts. We are doing a lot to help mobilise private capital, but critical to our financing will be the mechanisms and institutions that we have available to mobilise private capital. That is why, when I was a Back-Bench MP, I was delighted to join him in the debate on the UK Infrastructure Bank, which will play a massive role in funding the projects that people around the country rely on. It has been set one mission: to partner with the private sector and local government authorities to increase infrastructure investment in pursuit of two objectives. The first is to tackle climate change, and the second is to support regional and local economic growth through connectedness, opportunities for jobs and higher levels of productivity. As it stands, £22 billion of financial capability has been provided to the bank, and we expect it to crowd in private capital investment and support more than £40 billion of infrastructure investment. To date, it has already announced 15 deals worth more than £1.4 billion, covering clean energy, digital infrastructure and green transport. That will be transformational.

A lot of Members mentioned net zero, which is absolutely critical. What every party has in common is our commitment to the health of the planet. We are world leaders in fighting climate change and galvanising action on the global stage, as we saw at COP26, and we are right to do that at home with our net zero pledge. The UK already has a world-leading track record of delivering decarbonisation. We have reduced emissions faster than any G7 country since 1990. By the way, we have grown our economy by 75% over the same period.

The Government are committed to a total of £30 billion of domestic infrastructure for the green industrial strategy. Since March 2021, an additional £6 billion for energy efficiency was committed at the autumn statement, and £20 billion for carbon capture, utilisation and storage was announced at the spring Budget. We have in place a clear strategy to deliver on our net zero obligations, deliver energy security and drive economic growth.

To Members who question our ambition and ask whether it is achievable, I say look at what we have already done. Some 71% of all UK households have access to gigabit-capable broadband—an uplift of 8% since November 2021—and we are on track to reach a target of 85% coverage by 2025 and at least 99% by 2030. Some 92% of the UK has access to 4G mobile coverage, and we are on track to meet the Shared Rural Network target of 95%, which has a big impact on Scotland. We also had the opening of the Elizabeth line between Paddington and Abbey Wood. Those are all high-quality infrastructure priorities and projects, and other crucial projects will be announced for economic growth, boosting productivity and competitiveness.

We will go on. We will continue with our strategy, our funding and our prioritisation of national infrastructure. We will transform our railways, including HS2 to Manchester, East West Rail and the Northern Powerhouse Rail core network. We will secure the UK’s energy security through delivering new nuclear power, including Sizewell C, and the roll-out of cheap, clean renewables, including wind and solar.

Infrastructure offers us one of the most exciting and efficient direct ways of improving living standards, boosting our economy and supporting our communities, and I appreciate the opportunity to outline that today.

Financial Services and Markets Bill (Seventh sitting)

Gareth Davies Excerpts

Committee stage
Tuesday 1st November 2022 Public Bill Committees

[Siobhain McDonagh]

My amendments 16, 17 and 18, together with new clauses 10, 11 and 12, address access to free cash, which is indisputably important in our society. Ten per cent. of UK adults—5.4 million people—continue to rely on cash to a great or very great or extent in their daily lives. One in five people says that they would struggle to cope in a cashless society, and that struggle would disproportionately affect those on lower incomes, the elderly and people with physical or mental health difficulties.

Without Government intervention, we are losing free access to cash in our society. In my constituency, the number of free-to-use ATMs has declined by 36% in the last five years, while the number of pay-to-use ATMs has increased by an extraordinary 22%—there is money to be made somewhere. The problem is not confined to Mitcham and Morden: since 2015, the UK has lost more than half its branch network—5,003 branches—at a terrifying rate of 54 branches each and every month.

Through my amendments, I wish to draw the Committee’s attention to the notable decline in the provision of free-to-use ATMs. Since August 2018, the UK has lost 12,599 free-to-use ATMs—a decrease of nearly 24%. Meanwhile, almost a quarter of ATMs now charge people for access to their own cash. It is no wonder that more than half of consumers experienced one or more issues accessing cash at a bank branch in the past year.

Who are the losers in this cashless society? The access to cash review unsurprisingly revealed that those earning less than £10,000 per year were 14 times more likely to be dependent on cash than those earning more than £30,000 per year, and yet they are the residents of the areas where free access to cash is hard to come by.

Take Pollards Hill in my constituency, where a ridiculous clause in the lease prevents the new Co-op from opening a free-to-use ATM because of two paid-for cash machines further down the row of shops. Residents are taking out small sums of money in order to control their budgets, some of them at just £10 a time, but they are charged £2 to take that out—a 20% charge for every single payment. They literally have to pay for access to their cash. Surely the legislation must be tightened to avoid imposing additional costs such as that on the most hard-pressed.

I believe that the need for access to cash is growing. Age UK highlights that one in five older people still relies on cash for everyday spending. The cost of living crisis has seen households reliant on cash counting out the pennies to ensure that they can make ends meet—it is no wonder that in August, the Post Office handled its highest total of cash ever. The evidence is overwhelming and I believe that there should be a societal duty on the Government to ensure that the most vulnerable people in our society have free access to cash and are not left behind.

It is not just me who has such concerns. The hon. Member for Vale of Clwyd (Dr Davies), now the Under-Secretary of State for Wales, stated on Second Reading that he hoped the Government would commit to protecting free cash withdrawals and deposits, presumably in light of Prestatyn losing TSB, Barclays, HSBC, NatWest and Royal Bank of Scotland in recent years, initially leaving the town’s high street without a single bank or cash machine despite being a major regional shopping centre.

On 19 April, the hon. Member for Beaconsfield tweeted after the announcement of bank branch closures in her constituency that she would take up the issue in Westminster, describing crisis talks with the banks on access to cash on high streets everywhere as essential. I am sure she agrees that this is the moment to vote where her voice was.

The hon. Member for Havant has seen at first hand how damaging the removal of access-to-cash provision has been for his most vulnerable constituents, having launched campaigns against TSB, NatWest, Barclays and HSBC in recent years, and having raised his concerns with HSBC about the potential impact on the elderly, who might not be able to access online banking and are reliant on face-to-face services. The hon. Member for Orpington has seen Nationwide, Santander and Barclays close in Petts Wood. He pledged to hold the latter to account in support of those residents who do not use mobile or online banking. Well done to that Member!

The hon. Member for Grantham and Stamford, in advance of the closure of the HSBC branch in Bourne, shared concerns with his constituents about the impact on his elderly constituents whom he said relied on the bank as a vital service in the town centre.

[Gareth Davies (Grantham and Stamford) (Con)]

The hon. Lady is making a fantastic speech—let me say that straight out of the gate—but may I clarify that her proposed access-to-cash solution is for the Treasury to make an intervention on the regulator?

[Siobhain McDonagh]

I do not believe that the regulator, the FCA, will force through free access to cash unless we legislate for that. As Members, we are responsible for that. I suppose I am trying to say that hon. Members are doing their job excellently by highlighting concerns in their constituencies. Even though we have been through a very rough time in politics and a lot of our constituents are unhappy about the turbulent times we have entered, many of them still have faith in democracy, party politics and our system because Members do that sort of work. I believe that we need to follow through when we are given the power to do so.

I have more. The point was even more strongly expressed by the hon. Member for West Bromwich West, who made a powerful speech. Following HSBC’s decision to close its branch in Wednesbury, he gave this message to his constituents:

“The argument of go to West Brom is not good enough! I am determined to fight this”—

good on him!

The hon. Member for North Warwickshire described the impact on local residents as “obvious” when the Lloyds Bank branch closed, leaving Coleshill High Street without a bank branch. As an MP for a rural constituency, the hon. Member for Hastings and Rye detailed her concerns to our witnesses last week about her constituency being able to access cash free, and about the distance her residents would have to travel otherwise.

I do not doubt that my constituency neighbour, the hon. Member for Wimbledon, shares my concern about the loss of cash machines and bank branches in Morden town centre, which we share. One of the only remaining free-to-use ATMs is hidden in a Cashino—an arcade. That is extraordinary.

Government Members need not worry: the new Chancellor shares their view. He was pictured in the Alton Herald just last November celebrating the arrival of a new free-to-use cash machine in his constituency. I say to the Minister: do not worry. If these amendments pass, the Chancellor is right behind you.

Given what appears to be an overwhelming consensus on the issue, I hope Members on both sides of the Committee acknowledge that the Bill needs to be amended to ensure not only that there is access to cash but that there is free access to cash. They will be lauded in articles in their local newspapers and posts on Twitter and their social media for passing these amendments.

Financial Services and Markets Bill (First sitting)

Gareth Davies Excerpts

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

I am chair of the all-party parliamentary group on blockchain.

[Gareth Davies (Grantham and Stamford) (Con)]

I am a vice-chair of the APPGs on environmental, social, and governance and on financial markets and services. I also spent 14 years in financial services and my wife works in financial services.

[Shaun Bailey (West Bromwich West) (Con)]

I am chair of the all-party parliamentary group on financial resilience.

--- Later in debate ---

[Emma Hardy]

Did you want to add anything, Victoria?

Victoria Saporta: No, I think Sheldon has covered it.

[Gareth Davies]

Q Good to see you again, Sheldon. Can you confirm whether you know of any country in the world that has a competitive objective for its regulators?

Sheldon Mills: I’m not aware of one. Vicky?

Victoria Saporta: Singapore has one. Its financial stability, however, is primary; it overrides the competitive objective, which is secondary. There is the Hong Kong Insurance Authority. Otherwise, it is not common, particularly for prudential authorities, which is what I know about.

[Gareth Davies]

Q Australia and Japan also have regulators with a competitive objective. Would you regard Singapore, Hong Kong, Japan and Australia as being robust regulatory financial centres?

Sheldon Mills: We do not like to comment on other financial centres, but, yes, I would consider them to be robust financial centres.

[Gareth Davies]

Q You consider them to be robust financial centres. Would you consider those financial centres of Japan, Australia, Singapore and Hong Kong to be competitive financial centres to the United Kingdom?

Sheldon Mills: Yes, in certain respects.

[Gareth Davies]

Which respects?

Sheldon Mills: I think they are competitors to the financial services system. The UK is extremely strong, varied, and has a multiplicity of financial services. Some of the competition that comes from some of those regions is quite specific in terms of what it seeks to compete with. We have a very broad-based financial services system.

[Gareth Davies]

Q Thank you. Sarah, how do you believe the secondary competitiveness objective might change your behaviour and your policy making?

Sarah Pritchard: From an FCA perspective, it is very much as Sheldon has said. It is important to say we support the Bill as it is currently framed. We think a secondary competitiveness objective can work alongside our primary statutory objectives. It will give us another lens through which to look at the policy work and the development of the regulatory agenda that we are taking forward. Back to the points raised previously on transparency and accountability, it will give us another method by which we will be reporting and considering our outcomes against. We will take that into account. We think it can work as a secondary objective.

On the various elements that make up competitiveness that have been touched on earlier, I think that innovation and ensuring that we can stay ahead of the game with the pace of development across the financial services markets is really important. You can see the financial markets infrastructure sandbox proposals contained within the Bill. There are proposals there on critical third parties as well, so you can already see on the face of the Bill in those particular areas a real desire to make sure that the UK can stay in lockstep or stay competitive as a country enabled through the way in which the financial services regulatory framework is developed going forward.

I think the agility is important. We often hear that regulators are too slow. Sometimes we hear that regulators are too fast in terms of putting out too many consultations. Clearly there is a balance there. We have shown ourselves able to act at speed through the Russia-Ukraine conflict and introduced new rules on side pockets to enable support in that context of war. We will need to maintain that flexibility to be agile when we need to, while retaining the checks and balances that are really important in terms of transparency and accountability.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Q The FCA announced in June that you would be strengthening the protection of access to banking services. Some might say that this was closing the stable door after the horse has bolted, given that 50% of branches in town centres have now closed. What powers does the FCA currently have to protect banking services, and why were you not doing that before?

Sheldon Mills: Thank you very much for the question. The first framing point to this question is to understand that banking services have and are changing, and there are many, many benefits of those changes. The move towards digitalisation of banking services provides a huge amount of support to many people who are vulnerable. My mother is deaf and the change to a digital means of banking services has transformed her life completely.

The starting point must be that we have to consider the variety of ways in which people can provide banking services. That said, we know that, locally, branches can be important for communities. It is not just branches. It is a point at which people can deposit money and take out money. You can have a variety of those. They can be branches or post offices. They can be what we are trying to encourage the industry to develop when they close branches.

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[Emma Hardy]

Q Okay. So, in general, would you welcome anything that we can do to strengthen provisions against fraud?

David Postings: Yes.

[Gareth Davies]

Q I just want to pick up on one thing you said, David. Can you confirm that the removal of the share trading obligation will make the UK a more competitive and open market?

David Postings: Yes, it will.

[Gareth Davies]

Q Thank you. More broadly, concern has been expressed about the Bill in some quarters that a freer derivatives market will push up commodity prices. Do you have a view on that?

David Postings: I do not have a view on that, I am afraid.

[Gareth Davies]

Q Do you believe that derivatives in general and competitive trading markets push up commodity prices?

David Postings: They can change the volatility in the market. They do not necessarily push the price up, but they can change the volatility.

[Gareth Davies]

Q Thank you. Do you have a view on that, Emma?

Emma Reynolds: I defer to David.

[Peter Grant]

Q Clause 1 proposes to repeal around 250 pieces of European legislation, pretty much at the stoke of a pen. The rest of the Bill then expects the Treasury to replace all those bits of legislation by a process that will allow for very minimal parliamentary oversight. Do you have concerns either that there may be a period where parts of the market are inadequately regulated or, alternatively, that there is uncertainty as to what the regulations are, because of the process of repealing something before you know what is going to replace it?

Emma Reynolds: From what is in the Bill, I do not think that is the Government’s intention. As I understand it, the Bill gives the power to the Treasury to transfer—restate—EU legislation, and we have encouraged the Treasury to think of this as a sequence, because we do not want big regulatory change in one go, as the compliance costs are quite high. We absolutely see that there is an opportunity to tailor EU legislation to our markets, so I do not think it is the case that this legislation would not apply; I think this is going to be done in a phased way.

Financial Services and Markets Bill

Gareth Davies Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Gareth Davies (Grantham and Stamford) (Con)]

It is a great pleasure to speak in this debate on a Bill that is, frankly, the biggest reform of financial regulation in a generation. First, I pay tribute to the longest-serving Economic Secretary that we have known, my hon. Friend the Member for Salisbury (John Glen), who committed his work with great diligence and who is greatly respected in the industry to this day.

I care a lot about the financial services industry. I worked in it for many years, it taught me a lot about the world, and my wife works in it, so I personally want it to thrive, but given its significance to our economy and people, we all should. The Prime Minister was right when she said that it is the “jewel in the crown” of our economy. It is a direct benefit to businesses, savers and investors, and an indirect benefit to us all through jobs, growth and tax revenue. That is why it is important that we do everything we can to unleash its potential, as this Bill does.

I welcome the fact that the Bill takes advantage of our regulatory freedoms now that we are not in the European single market, gives more control to our domestic regulators and ensures that they are more focused on international competitiveness. All those who worry about that resulting in a decline in regulation should be assured that the primary objective remains intact, and that that mirrors established conventions in markets with highly regulated systems, such as Australia and Japan.

I welcome the moves to tighten the regulations on promotions by creating a new regulatory gateway for approvals. I also welcome the provisions to improve the co-ordination between the FCA and the PRA. As a member of the Treasury Committee, I welcome its enhanced role, but join others in saying that it is important that it has the resources and expertise to carry out that role effectively.

This is an excellent Bill that will help to drive the industry and our country forward. I have been struck that we all agree on one aspect, which I will talk about: the need to further democratise our capital markets. Despite the remarkable success in the finance industry, it genuinely bothers me that not enough of our people are directly participating in or benefiting from our capital markets. Although we are all stakeholders in UK plc, not enough of us are shareholders with a stake in our economic success.

We can do three things to address that. First, I am a huge advocate of extending auto-enrolment to those aged 18 to 22, so that they can get on the savings ladder earlier. That would create 900,000 new savers and £1 billion extra in savings for our economy, and it would do a great deal to encourage a better savings culture. Secondly, we should look at removing regulatory obstacles to people receiving investment advice, so that people do not just save, but invest. Thirdly, I want us to get on with reforming Solvency II, so that more pensioners can expand their investment universe into illiquids such as infrastructure. If we do those things, we can build on this excellent Bill and ensure that everyone shares in the success of our world-leading financial services sector.

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 28th June 2022 Commons Chamber

[John Glen]

Most mainstream understanding of how the economy works recognises that we need wealth creators, but we also need a Government who recognise the strains that the country is facing. That is why three quarters of the support will go to vulnerable households, including specific additional top-ups such as the £12 million going to Liverpool for the household support fund. This Government will stand by wealth creators and innovators, however, because we need growth in the economy and a more productive economy.

[Gareth Davies (Grantham and Stamford) (Con)]

One way to tackle regional economic inequality is to ensure that our regional businesses are able to attract investment. Will my hon. Friend outline what more we can do to ensure that we unlock more private investment into Britain’s firms of the future?

[John Glen]

The Government are constantly looking at new ideas. The regional angels programme and our reforms to financial services to make FinTech and banks more accessible to regional businesses are at the core of this Government’s agenda, and I will bring further measures to the House in the next few weeks.

Economy Update

Gareth Davies Excerpts

Thursday 26th May 2022 Commons Chamber

[Rishi Sunak]

Again, perhaps the hon. Gentleman did not hear what I said. We are extending the support to all those on means-tested benefits, not just those on universal credit, who account for less than half of all households on means-tested benefits. What we are doing is more comprehensive than what he is suggesting and, in fact, it is more generous, because £650 of support is more generous than uprating, which in aggregate, on average, would be worth only just over £500.

[Gareth Davies (Grantham and Stamford) (Con)]

Since 2011, the basic state pension has gone up by 35%. Today, pensioners across Grantham and Stamford are seeing additional support at this very difficult time. Does the Chancellor agree that, ultimately, we need to improve the culture of saving for a pension in this country, so that pensioners are well prepared for future challenges?

[Rishi Sunak]

My hon. Friend is thoughtful on that topic, and he is right. Previous Governments have reformed auto-enrolment to bring about that change in culture. The advantage that we are seeing now, with financial technology making it far easier for people to access and direct savings, means that we should only see that grow, and we will help to encourage it.

National Insurance Contributions (Increase of Thresholds) Bill

Gareth Davies Excerpts

2nd reading
Thursday 24th March 2022 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

As we debate the Bill, I cannot help but notice it is becoming a bad habit of this Chancellor to rush national insurance legislation through Parliament in a day. A little over six months ago, I stood here setting out the view of the Opposition on the Government’s Health and Social Care Levy Bill, which was similarly rushed through all its stages in just one day. As we know well, that Bill introduced a new levy that would be preceded by an equivalent increase in national insurance contributions for employees and employers of 1.25%. Since that national insurance increase was agreed, it has become ever clearer that it will be the worst possible tax rise at the worst possible time.

The Opposition will support today’s Bill, as any help for people facing the Chancellor’s national insurance tax hike in April is something we welcome. There are benefits to raising the threshold at which people begin to pay national insurance, but we should be conscious that the Bill has more to do with the Chancellor’s increasingly desperate desire to paint himself as a tax cutter than it does with a well-thought-through package of measures to help people with the struggles they face. Even after the Bill passes, the tax burden in our country will still be at its highest in 70 years, and we are still the only G7 country to be raising taxes on working people this year. The Chancellor is making sleights of hand his speciality. As the Office for Budget Responsibility has pointed out, for every £6 he has taken in tax since he took on that role, yesterday he gave back just £1.

The Chancellor has realised that his national insurance hike in April is wrong. Labour could have told him that six months ago. In fact, that is exactly what I told the Minister in September last year when we debated the Health and Social Care Levy Bill. We set out clearly our decision to vote against that Bill on Second Reading. We set out how it broke the Government’s promise not to increase national insurance, and instead raised taxes on employment that would disproportionately hit working families, young people, those on lower and middle incomes, and businesses trying to create more jobs in the wider economy, while leaving income from other sources untouched. We were not alone in criticising that tax rise. The British Chamber of Commerce warned:

“A rise in National Insurance Contributions would represent a hammer blow to jobs growth at this crucial point in the UK’s economic recovery.”

At the same time the TUC general secretary, Frances O’Grady, criticised the Prime Minister for

“raiding the pockets of low-paid workers, while leaving the wealthy barely touched.”

[Gareth Davies (Grantham and Stamford) (Con)]

Does the hon. Gentleman acknowledge that 14% of the highest earners in this country will pay 50% of the levy?

[James Murray]

As the hon. Gentleman knows, we have debated the increase in national insurance at length, and today we are debating the package of measures that the Chancellor brought forward. Overnight analysis by the Resolution Foundation, which he would do well to consult, recognises that seven in eight workers will pay more in tax and national insurance in 2024-25, as a result of decisions taken by this Chancellor and this Government.

--- Later in debate ---

[Jacob Young]

rose—

[Gareth Davies]

rose—

[James Murray]

I am going to make some progress. The record shows that the Chancellor likes putting up taxes. He has been busily defending his tax rise on working people, but when it comes to oil and gas profits he is suddenly nowhere to be seen.

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[Paul Bristow]

Like my hon. Friend’s mother-in-law. I went to a “politics and a pint” pub surgery in the Oxcart pub in Bretton in my constituency to talk to my residents. I wrote to a large number of people living around the area and told them that I would be there between 6 and 8 o’clock and that I wanted to listen to what they felt about the spring statement, and any other issues that they wanted to talk to their MP about. The single most popular measure in the spring statement that came up was the rise in the national insurance threshold.

Peterborough is a city of hard-working people and hard-working families and they want to see work rewarded. That is what this measure does. It will mean that if they work those extra hours and have the dignity of a job, they will keep more of their own money, pay less tax to the Government and be able to spend it on what they perceive to be best for them and their family. That is the Conservative way, and that is why I welcome these measures. I think they will go a significant way towards relieving pressure on families in my constituency. One lady I spoke to told me exactly what this extra money might mean for her. For her and her family, it would mean help with school uniform costs and help with the weekly food shopping bill, and of course it would also mean help with rising energy prices.

That was not the only thing raised with me last night, and it would seem partisan if I did not mention that constituents raised elements of concern. One constituent told me that, although the spring statement will go some way towards addressing energy prices, people need the heating on during the winter, and they asked whether there will be more measures later down the line. I also spoke to pensioners, who raised a concern about what this might mean for people on a fixed income.

The landlord of the pub pulled me aside to explain that, typically, he was paying about £1,200 a month for energy but, due to the rising costs, some of the deals on offer are almost £4,000 a month, which is an eye-watering amount for a local community pub like the Oxcart. However, he told me how pleased he is with the continued cut in business rates.

Far be it from me, as a new MP elected in 2019, to say this to longer-serving colleagues, but a “politics and a pint” pub surgery is an excellent thing to do because it supports local businesses. If we do not use pubs, unfortunately we will lose them. A “politics and a pint” surgery is a fantastic way to meet our constituents.

Returning to my central point, the rise in the national insurance threshold will reward work. As my hon. Friend the Member for Redcar (Jacob Young) outlined, people who earn less than £12,500 a year will not pay any tax at all, which means more money in their back pocket to support themselves and their family.

A large number of people in my constituency are on universal credit while in work. One of the most popular things this Government have done in recent times is to alter the universal credit taper rate from 63p in the pound to 55p in the pound. That is an extra £1,000 in the back pocket of hard-working families in my constituency, which makes an incredible difference.

I praise the raising of the national insurance threshold because it simplifies the tax system. It was an anomaly that people did not pay income tax until they earned £12,500 but they were still paying national insurance. This measure creates a simpler and clearer tax system, which is in everyone’s best interest. We do not want tax to be confusing, lacking sense or difficult to understand. People pay their tax, so it should be as easy as possible for them to understand, which is what this measure does.

Finally, I want to talk about what the rise in the national insurance threshold will mean for particular people in my constituency. As I said earlier, work is plentiful in my constituency. We have lots of vacancies in Peterborough—in fact, there are more vacancies than people on universal credit—and this rise sends a message that the Government are putting their arm around everyone in this country, and particularly hard-working families. If people want to go out and find a job, work hard and make a contribution, they should be rewarded. There are plenty of those people in Peterborough and across the country.

[Gareth Davies]

My hon. Friend and constituency neighbour is a great champion of everyone in Peterborough, and I pay tribute to him for all the work he has done since his election in 2019. How do his hard-working constituents feel about the 6.6% increase in the national living wage, which makes sure that having a job is a way out of poverty?

[Paul Bristow]

My hon. Friend and constituency neighbour makes an important point, and it is another example of how this Government are rewarding those in employment who work hard and make a contribution. That is what this Government are all about, and it is what any Government should be all about. This Bill is another example of rewarding people who make the right decisions.

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[Wendy Chamberlain]

I accept the measure helps other people, but the reality is that we have seen an increase, on average, of 40p a litre. As other hon. Members have said, there has been a 5p a litre increase in the last week. A 5p reduction is helpful, but it does not go far enough to support those who really need it.

Frankly, lowering the basic rate of income tax is the biggest wheeze of all. Paul Johnson of the IFS said in The Times this morning that we are experiencing “fiscal drag.” The freezing of income tax, which the Chancellor previously announced, means that, even as people’s wages increase, they will pay more tax, and the reduction is not happening yet. All the Chancellor has said is that he will do it at an unspecified time before the next election.

The reduction will help those on low incomes the least. It is a tiny reduction and, overall, the tax cuts announced yesterday are worth only a quarter of what is being increased. Arguably, it is not workers who benefit from the cut but people, such as landlords, with unearned income from investments. People who are wealthy enough to get their income from savings and property will pay less tax, while the least well off continue to pay more and more. This is driving another wedge between unearned and earned incomes. I tabled a further amendment with my hon. Friend the Member for Bath to require reporting on the impact.

The Chancellor repeatedly spoke about hard-working families—that was his catchphrase of choice—but those hard-working families are not being helped. They are seeing their energy bills go up and the price of food to feed their children skyrocket, and working parents are being pushed into higher tax brackets by the choice to freeze the thresholds. They pay ever more tax. My final amendment addresses unearned income.

This spring statement is a huge missed opportunity. I would have liked to see a packed Chamber debating legislation that actually makes a difference to people, but I think we would all accept that this is not that Chamber and not that Bill. There are so many steps the Government could have taken today but did not. We had an Opposition day debate at the start of this week on pensioner poverty, which we know is increasing year on year. The Minister in that debate said he was sure the Chancellor would have been listening to Opposition Members calling for more support for pensioners and suggesting some of the ways in which that could be done—you were in the Chair at the time, Madam Deputy Speaker. Clearly, the Chancellor was not listening, because pensioners were not mentioned at all yesterday. There was very little for pensioners who do not drive or own their house—or for those who do own their house but are not planning any energy-efficient home improvements.

[Gareth Davies]

I point out to the hon. Lady that 200,000 fewer pensioners are in absolute poverty now than were in 2010. I just put that on the record.

[Wendy Chamberlain]

I thank the hon. Gentleman for putting that on the record, but we are looking at 1.3 million additional people, some of whom I am sure will be pensioners, going into absolute poverty in the next year. Our state pension is set to have a real-terms cut. Inflation is at 6.2% and is expected to go up to 8% in April, yet pensions are going up by only 3.1%. That was what the triple lock was designed to deal with; it was there to keep pensions in line with and up to the cost of living. As I have said many times in this Chamber, the state pension is not just about pensioners now; it is about ensuring that people in the longer term know that they have a state pension that they can look forward to, and that matters for younger generations, too.

This Government say that they oppose loneliness, but, as always, actions speak louder than words and the measures are leaving older people on their own, in the dark and the cold. There are very good reasons why some people cannot work. There is nothing at all for those receiving social security, who are also suffering the real-terms cut to incomes and are also struggling to pay their rent, because of the freeze to housing allowance—even the National Residential Landlords Association has called that out as being catastrophic. Frankly, it is more expensive to be poor. People on benefits are being unfairly punished by a system that is set up to make them fail. They are worrying about money, making ends meet and debts, and living in unsuitable housing that costs more to heat. These are not the conditions that set someone up to apply for jobs, to succeed in interviews or to move on to a better place in their lives. We know, as we have heard the evidence, that the benefits system can cause serious harm, damaging people’s mental health, sometimes to the extent that they take their own lives. This is not a system that helps people—often it harms them. We know that our economy is stronger when those who are able to work do so, but our system does not help people do that and it must be more compassionate. It must also receive sufficient funding so that those receiving benefits are not pushed further and further towards the edge.

Do the Government want this country to be one where destitution becomes normal? As I have said, the estimate is that 1.3 million people will move into absolute poverty as a result of the current cost of living crisis. The only support offered yesterday for those on the lowest incomes was the boost to the household support fund, via local authorities. That is no substitution for having a proper support system that stops people falling into poverty in the first place. As happens with pension credit, people do not always come forward for the support they need, so I echo the suggestion that anyone facing hardship contacts their local authority so that they can get support that may be available to them.

The Government could have cut VAT to 17.25%, which is what my party would propose to do. That measure would help everyone. Cutting VAT will shield our constituents from the worst of the increased costs, put money back in their pocket, and help those on middle and low incomes the most. With an economy that is struggling, because of a variety of factors, we need people to be out in our economy; we need people on our high streets, buying things that are made in our factories and marketed on our streets. A cut to VAT would give an immediate boost to every household, but it also helps us in the long term. That is what a meaningful policy would look like.

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[Alexander Stafford]

I completely agree with my hon. Friend’s point. This is a Bill that really helps people because it will reduce the amount of taxation and put more money in people’s pockets.

We need to make sure that work pays. That is vital. I mentioned the £400 billion that the Government have spent; they have kept jobs going throughout the pandemic. That is vital. It is why unemployment in Rother Valley is only 3.6%, which is below the national average. Of course, that still means that 2,000 people in my seat are actively looking for jobs, which is why last Friday I held the first ever Rother Valley jobs fair. It was a great success: there were more than 30 employers and hundreds of people turned up, and I am told that dozens of people have already got jobs out of it. That is the Conservative view on the ground in a constituency, helping with jobs, and the Government are doing that nationally.

[Gareth Davies]

My hon. Friend is making a fantastic and eloquent speech. Is he aware that last year unemployment fell every single month, thanks to the Chancellor’s plan for jobs?

[Alexander Stafford]

I was not aware of that exact point, but it does not surprise me because that is generally what happens under Conservative Governments: we try to promote people and work.

The measures on national insurance that we are discussing will encourage more people into work, but we must also look at the wider context. It is not just about working people; the Government recently changed the universal credit tax taper, thereby helping people on universal credit. The simplification of that system will not only make a huge difference to everyday lives but, hopefully, reduce some of the accounting costs and make it easier for business. That will be a double help for business.

Fundamentally, I believe this is a great measure, in the sense that it will put more money into people’s pockets but also pay for the important health and social care levy. We all need that great NHS that protected us throughout the pandemic. This will fund the NHS, put more tax in people’s pockets and clearly shows the way for us to lower taxes in the years to come.

--- Later in debate ---

[Rachel Hopkins]

I am really pleased that the hon. Member is able to remember that figure; I hope he is also able to remind the House of the more than £100 million that has been taken away from Luton council over a decade of Tory austerity, which is why so many of the families in my constituency are living in poverty and are in fuel poverty.

[Gareth Davies]

Will the hon. Lady give way?

[James Daly]

Will the hon. Lady give way?

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[Lucy Frazer]

As we know, there is energy price volatility in that the price of oil and gas will be going up and down, which is why the Chancellor has put in the measure for a 12-month period, but I should point out that that builds on the 12th consecutive year of fuel duty freezes.

[Gareth Davies]

Will the Minister give way?

[Lucy Frazer]

I am going to carry on, because there are a lot of points to which I would like to respond and I have limited time.

My hon. Friend the Member for South Dorset (Richard Drax) made a very powerful speech about freedom, recognising the impact of global challenges. He mentioned the armed forces, and I would like to reassure him that last year’s integrated review was accompanied by the largest cash increase in the defence budget since the cold war, with an additional £24 billion.

The hon. Member for Gordon (Richard Thomson) asked why the Chancellor is not using his £30 billion headroom. I would like to point out that the OBR has said that there is “unusually high uncertainty” in relation to the outlook, and the OBR has also said that the headroom the Chancellor has kept is the same as, or indeed less, than that of previous Chancellors. That is important because, if there is a 1.3% increase in interest rates, that will totally wipe out the headroom the Chancellor has given himself. We are already looking at £83 billion being paid in interest next year. Those of us on the Government Benches think we need to be fiscally responsible in the way we deal with our taxpayers’ money.

The hon. Member also said that to increase the national insurance contributions threshold as we are doing was not the right way to go. I would like to point out that Martin Lewis has said on Twitter:

“This is the big one. Increasing the National Insurance threshold so it now matches Income tax from July.”

He said various other things, and then he said, “Good call”.

My hon. Friend the Member for Redcar (Jacob Young) recognised that there are no easy choices. He reminded us of Labour’s record on the economy, which reminded me that the shadow Chancellor had put forward a total of £170 billion of uncosted spending proposals just by September last year, and she has refused to rule out hiking up income taxes.