Tax Avoidance and Evasion

Grahame Morris Excerpts

Tuesday 14th November 2017 Commons Chamber

[Mel Stride]

I am pleased that the hon. Gentleman has raised the issue of investment in HMRC, because we have a very good record in that respect. Some £1.8 billion of additional money has been invested in HMRC since 2010, of which £800 million will relate to the period after 2015, bringing in £7.2 billion by 2020-21. We will also be trebling the number of investigations of the wealthy to ensure they are paying their appropriate level of tax, as a direct consequence of all that additional investment.

[Grahame Morris (Easington) (Lab)]

Will the Minister please explain to the House why only 420 HMRC staff are engaged in chasing tax avoiders and evaders, yet 10 times that number of civil servants are engaged in addressing benefit fraud in the Department for Work and Pensions?

[Mel Stride]

I challenge those figures: a far larger number than the hon. Gentleman suggests are engaged in clamping down on tax evasion and avoidance. About 50% of the 2,100 largest corporations in this country are under investigation at any one time—not necessarily because they have done anything wrong, but because they have complex tax affairs. So we are investing in that.

--- Later in debate ---

[Nigel Mills]

I agree with the hon. Lady exactly, but the point I was trying to make was that I do not think that the size of the tax gap is down to a lack of effort or attempts to introduce new rules or measures. The problem is that the avoiders and evaders are perhaps one step ahead and move on to different things. That is why the Panama papers and the Paradise papers show that people are now just going offshore, or finding artificial ways to go offshore, rather than trying to do artificial domestic planning to get around the rules.

[Grahame Morris]

Is it not the case that the problem lies in our tactics of applying these complicated rules and regulations and in the fact that expensive minds—the accountants—can devise a way around them? Should we not be looking at a general principle, because people cannot get around a principle?

[Nigel Mills]

I agree with that view. The Government did introduce the general anti-abuse rule. It was quite a large step for them to take, as it said that HMRC can effectively ignore what is written in the law and apply what should have been written in the law. There is scope to extend that and to improve behaviour. It is right that we now expect large businesses to publish their tax strategy. It means that we can get the board to say that it does not condone such behaviour, it does not engage with it and it does not want its tax advisers to do such a thing. That is the way that we change the behaviour and the culture. We have seen advisers changing their codes of conduct, which is welcome. Some now say that artificial and aggressive abuse will not be committed under their management, but, clearly, there is still a long way to go.

Before I talk about the various measures that we could take, I should be clear that we will not be able to close the whole of the tax gap by tackling aggressive avoidance by the rich and the large multinationals. Obviously, we should narrow the gap by as much as we can, but the fact is that it is the small and medium-sized enterprises that form the largest group of companies not paying tax. Of a tax gap of £38 billion, £15.5 billion can be attributed to SMEs. The single biggest reason for the tax gap is not aggressive avoidance, which accounts for only £3 billion, but failure to take reasonable care. Therefore we cannot look at the whole tax gap of £38 billion and say that that is all being lost to us because of the awful behaviour of large corporates. Sadly, it is much more to do with individuals in the UK who are working and not declaring VAT, or who are working in the hidden economy. It is not quite fair to say that this is not about ordinary people, because, sadly, quite a lot of it is. We need to find ways of tackling that issue as well.

What has been exposed by these papers is a crisis of confidence. We need our tax system to be fair and our financial system to be legally compliant and as clean as we can make it. There are some further measures that the Government can take to improve the reputation of our financial system and to increase the confidence of our constituents in the tax regime. The good news is that most of these issues are Government policy already. It is just a matter of bringing them forward and perhaps finding some implementation dates. Let us get country-by-country reporting by multinationals in the public domain so that we can all see how much profit they are making and in which territory and compare that information with their turnover there, how many employees they have and what assets they have. That is perfectly fair information. It is not greatly enhanced disclosure.

If we look at the accounts of large plcs, we will see that they are required to disclose segmental information and tax reconciliation from their profits down to what tax they are paying. We want that information made available in a meaningful and useful way, so that we can work out how they are not paying the right amount of tax. That measure is on the statute book. Let us have a date when we require that information to be put in the public domain. It does not have to be tomorrow, or even next year. Let us have a date in 2019 so that we can see that information.

The other issue of transparency is related to who is buying the very expensive properties in the UK. We need to know who they are and how they have raised the money to buy those properties. It cannot be right that someone can buy a property here for £15 million or £50 million and not live in it and we have no idea where they got the money from to do that. Let us go ahead with the promise we made to have a transparent register of overseas owners of very expensive property in the UK. That will help to show that we are not encouraging kleptocrats or Russian oligarchs or people who have stolen from developing countries to put their money here in a safe UK asset.

Let me turn now to the overseas territories. The papers revealed some really shocking behaviour. For example, when Apple, one of the world’s largest and most reputable companies, was being chased by the EU through Ireland, it chose to try to move its affairs to Jersey to avoid the tax we all think it owes. Again, that shows why we need to get transparency into those territories of ours so that we know who is operating there and where their money has actually come from. Those territories have a right to exist, a right to choose their own tax rates and a right to be competitive, but they do not have a right to hide money that has been stolen from elsewhere in the world or to move profits that are not being earned there and try to give them a beneficial rate.

If we get transparency in the territories and we show who is operating there and where the money is coming from, those territories can show how clean they are and whether their claims are true. They can then compete on their reputation. They do not need to compete on being closed and dirty. They all assure us that they are not after dirty, corrupt, illegal and laundered money but are after real business. If they go ahead with that transparency, they will get a competitive advantage. As a country with so many territories, we cannot say that we will follow the herd; we are the herd, so let us set an example.

Paradise Papers

Grahame Morris Excerpts

Monday 6th November 2017 Commons Chamber

[Mel Stride]

The most important message for the hon. Lady’s constituents is the merits of getting on top of tax avoidance, evasion and non-compliance, which is exactly what this Government have done, and which is in turn raising the vital taxes for our public services so we can have the kind of public services that are a hallmark of a civilised society.

[Grahame Morris (Easington) (Lab)]

We probably need a time-out for a fact check on the £6 billion tax gap figure that the Minister is consistently quoting. May I refer him to the private Member’s Bill promoted by the former right hon. Member Michael Meacher, which set out detailed plans for a general principle on tax avoidance? We can get around a rule, but we cannot get around a principle; that seems to me to be a solid and sensible way forward.

[Mel Stride]

The hon. Gentleman referred to a £6 billion tax gap, but the figure is not £6 billion; it is 6% of all tax that should be collected. On his suggestion that there should be a general principle or general rule, there is already a general anti-avoidance rule for exactly the purpose to which the hon. Gentleman has alluded.

HMRC Closures

Grahame Morris Excerpts

Thursday 2nd November 2017 Westminster Hall

[Mel Stride]

A number of Members in the debate raised the costs mentioned in the National Audit Office report, the Public Accounts Committee report and so on. Certainly, the business plan has gone through various iterations, but where we are is quite clear: the total investment over the next 10 years will be £552 million. The NAO has disputed some of our figures, and the Government’s view is that the NAO has looked at those figures on a different basis—for example, over a 10-year period, whereas we were initially looking at figures over five years.

We have some cost avoidance of £75 million per annum from 2021 through getting out of the private finance initiative arrangement—which, incidentally, we entered into in 2001, which was of course under a Labour Government. On top of that, we will have £300 million-worth of savings over the next 10 years, and we will have annual cost savings of £74 million in 2025-26 compared with 2015-16, rising to around £90 million from 2026-27. The savings are ongoing and will be long standing.[Official Report, 27 November 2017, Vol. 632, c. 2MC.]

[Grahame Morris (Easington) (Lab)]

On value for money, I happen to agree with a number of points made about the opportunity here to rebalance the economy, but I do not understand how it can be any more cost-effective to relocate these major tax offices to very expensive city centre locations. The issue of future-proofing was raised by the hon. Member for Glasgow South West (Chris Stephens). The Government have signed, through HMRC, a number of long-term leases on large offices in Croydon and Bristol without break clauses. Clearly it is essential that the capacity of HMRC to collect taxes is not impeded, but is it in our long-term interest to sign such long contracts for very expensive city offices?

[Mel Stride]

The hon. Gentleman makes two points. One is a general point about the economic sense, or otherwise, of locating the services in larger hubs. The arguments on that are, broadly, extremely strong. They are that we can have larger groups of people and more collaborative working and can ensure that the infrastructure and technology are there. HRMC operates very differently today from how it operated some decades ago. We take a risk-based approach to chasing down tax that should be paid and is not being paid. That involves a lot of data and analysis. Frankly, the idea—if anyone here is entertaining it—that for the last few years people have been able to walk into their local tax office or have appointments there is just not correct. We need centres of excellence that can work in the manner that I have described.

The hon. Member for Easington (Grahame Morris) raises the issue of long-term leases, and he is right to say that in some cases there are no break clauses. I make three points on that. First, we get a much more competitive rate if that is the basis on which we enter into a lease. Secondly, that of course does not mean that leases cannot be broken at some future point by way of negotiation. That is quite typical in the commercial property market. Thirdly, we have flexibility within those leases, such that other Government Departments and employees would be able to use the buildings as well. There are therefore at least three very good reasons why that approach has been taken.

Let me now make some progress. We need a tax system that offers digital services in an age in which people increasingly expect and rely on them, that makes use of technological developments to deliver as efficient a service as possible, and that is suited to the dynamic and fast economy of today.

[Graham Stringer in the Chair]

I hope that the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East would agree that just dispersing employees across a wide area is not an efficient way to run any organisation, let alone one with responsibility to the taxpayer.

Oral Answers to Questions

Grahame Morris Excerpts

Tuesday 19th April 2016 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right to highlight that. All taxes are ultimately paid by people, but business taxes that discourage investment discourage the economic growth we need in this country, and that growth is what this Government are determined to deliver.

[Grahame M. Morris (Easington) (Lab)]

8. For what reasons the Government have not introduced a general anti-tax avoidance principle.

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

A general anti-avoidance rule was considered by an independent study group led by Graham Aaronson QC in 2011. The group recommended an anti-abuse rule for the UK because it felt strongly that it would strengthen and complement existing tools available to HMRC. The Government accepted the recommendation and introduced a general anti-abuse rule in 2013, striking the right balance between protection against avoidance and certainty for taxpayers.

[Grahame M. Morris]

One way to put an end to aggressive tax avoidance is a general principle—a principle, not a rule. I am sure the Minister understands there is a difference: people can find a way around a rule, but it is not easy to do that with a principle. Will the Government therefore back their public statements about tackling aggressive tax avoidance and legislate for a general principle of tax avoidance?

Bank of England and Financial Services Bill [Lords]

Grahame Morris Excerpts

Monday 1st February 2016 Commons Chamber

[Richard Burgon]

I thank the hon. Gentleman, who is experienced in these matters, for his intervention, but every time we have received correspondence from, and listened to, bankers on this matter, they seem desperate for the reverse burden of proof to be scrapped. They say how dreadful it would be, how it was totally unjustified and that business as usual is fine—that we can just return to things with no risk of a repeat of the financial crisis of 2008. Unfortunately, I believe they were wrong, but we need to remember that this presumption of responsibility, or the reverse burden of proof, was a safeguard brought in by the very same Chancellor who is now seeking to scrap it.

In 2013 the Chancellor said he had

“called for a thorough and intensive investigation into how to improve standards in the banking system and the PCBS has delivered. I am pleased to say that the government will implement its main recommendations.”

Of course one of its main recommendations was this presumption of responsibility.

On that occasion, the Chancellor was not alone. This was his Bill and Conservative Members backed it. Indeed, the right hon. Member for Tunbridge Wells (Greg Clark), then Financial Secretary to the Treasury, clearly explained that his Government were introducing new rules to promote higher standards for all bank staff and were reversing the burden of proof so that bank bosses are held accountable for breaches within their areas of responsibility.

The Conservative Member for Macclesfield (David Rutley) was briefly on the Treasury Committee, and he said:

“It is critical to bringing about the individual accountability that many of us want to see across our financial services sector, with the tough senior persons regime, reversing the burden of proof and criminal sanctions for reckless misconduct. All those steps are vital”.—[Official Report, 9 July 2013; Vol. 566, c. 261.]

His party colleague, the hon. Member for North East Cambridgeshire (Stephen Barclay), said:

“I do not think there can be any doubt about the merits of reversing the burden of proof…The Government’s announcement that they will reverse the burden of proof is extremely welcome.”—[Official Report, 8 July 2013; Vol. 566, c. 119.]

I could go on, but instead I ask this question: what has changed? What, or who, has so dramatically changed the mind of the Chancellor? At the Treasury Committee in October the hon. Member for Wyre Forest (Mark Garnier) put the question many of us are thinking when he asked the Chancellor whether the proposed scrapping of the presumption of responsibility was “largely as a result of lobbying by the banks, which has the flavour of getting stronger.”

[Grahame M. Morris (Easington) (Lab)]

My hon. Friend is making an interesting argument in a powerful speech. Does he agree that the Chancellor had said he had not met the banks in the lead-up to the general election, but apparently he has met bankers on five separate occasions since the general election—presumably to discuss the contents of this Bill? Is he concerned, as I am, that the Chancellor might be the victim of Stockholm syndrome and has become a prisoner of the bankers and their financial interests?

Housing and Planning Bill (First sitting)

Grahame Morris Excerpts

Tuesday 10th November 2015 Public Bill Committees

[Mr Jackson]

Q 72 Far be it from me to speak for the Ministers, but are you really suggesting that registered providers operate in a hermetically sealed bubble, given that the housing benefit bill has spiralled significantly over the past 20 years? The Government surely have a fiscal responsibility to make big strategic decisions in the provision of public housing when they have a spiralling housing benefit bill.

David Orr: The housing benefit bill is spiralling primarily because the number of people who need to claim housing benefit has grown as rents have grown, and because of the number of people in work in the private rented sector who have to claim housing benefit. It is not fundamentally about the growth of rents in the social sector, but, where rents have grown in the social sector, that has been a direct consequence of Government decision making. So I can sit here and say, “It’s not our fault, guv. It’s your responsibility. It’s Government decision making.” I don’t think that is acceptable. I think that local government and the public should be able to hold housing associations to account for the rents that they charge. It has been the case in the past that when the Government were setting rents, they also said that housing benefit would cover the cost of those rents. I am afraid that the decision to set the overall benefit cap at £20,000 and £23,000 means that rents that the Government have themselves set are not now, in a significant number of cases, covered by housing benefit. So if the Government want to limit their exposure by what they do with housing benefit rules, they should withdraw from rent-setting.

[Grahame M. Morris (Easington) (Lab)]

Q 73 I want to go back to starter homes and the issues that you have touched on. A survey found that 6 million people— 5.84 million, in fact—earn less than the living wage. That is not a TUC figure; it is from KPMG. Some 23% of the labour force earn less than the living wage, and the numbers are going up. There are 750,000 people on zero-hours contracts. What is there in the Bill to address the housing needs of that substantial sector of people who we refer to as the working poor?

David Orr: There is little in the Bill that addresses that group specifically. The only real new housing or tenure product that it contains is the starter home initiative. As a component of a much wider, mixed-tenure, mixed-priced series of developments, starter homes have a role to play, but a comprehensive transfer away from social rent or shared ownership towards starter homes would be a mistake. They have a role to play as part of a broad pattern of provision, but not instead of the other things we are doing.

[Seema Kennedy]

Q 74 Mr Orr, I want to ask you about affordable housing in rural areas, and the portable discount in particular. Will you expand on that? How do you think it will affect the affordability of housing in rural areas?

David Orr: In the voluntary deal, we have agreed with the Government that in small, rural areas, in most cases, housing associations will almost certainly say no to a request to sell a home that a tenant is currently occupying, but they will have the opportunity to use the portable discount, which I hope will help to stimulate the development of new supply.

The fundamental challenge in rural England is that we need to build more homes, especially ones that are affordable for young families. Rural England is being hollowed out. As the 25-45 population grows in the country at large, it is declining in rural areas, because people cannot afford to live in villages that are often becoming like theme park villages, and that are in danger of becoming mausoleums. How we invest in new supply to keep rural England dynamic is a huge strategic challenge. The portable discount might create some of the financing that will allow that to happen, but we need to take a broad view and say it is time we addressed what is a genuine crisis in rural England.

Royal Bank of Scotland

Grahame Morris Excerpts

Thursday 5th November 2015 Commons Chamber

[Kate Osamor (Edmonton) (Lab/Co-op)]

I beg to move,

That this House calls on the Government to consider suspending the further sale of its shares in the Royal Bank of Scotland whilst it looks at alternative options; and believes that this should take place in the context of a wider review of the UK’s financial sector and that such a review should consider the case for establishing new models of banking, including regional banks.

On behalf of the House, I thank the Backbench Business Committee for allowing us the opportunity to debate this issue in the main Chamber today. This is the first time that I have led a debate, and I am grateful to all hon. Members from both sides of the House who have agreed to participate in it today. I will keep my speech reasonably short so that as many Members as possible will have a chance to speak.

The selling of RBS shares is an important issue that deserves detailed discussion, and this is the first time that it has been formally debated since the Chancellor announced his intention to begin reprivatisation at his June 2015 Mansion House speech. He provided no opportunity for public discussion of the decision; he did not even present the decision himself in Parliament the following day, but rather sent the Economic Secretary to the Treasury on his behalf.

Today’s motion, signed by hon. Members on both sides of the House, touches on three themes. First, the Government should consider suspending the further sale of their shares in the Royal Bank of Scotland while they look at alternative options. Not enough evidence has been considered to give the Government a mandate to rush through the sale of shares. Secondly, such a review should take place in the context of a wider review of the UK’s financial sector. We need to look at the implications for our economy of the make-up of the UK banking sector, which is unusually large, unusually concentrated and uniquely lacking in diversity in comparison with other countries.

Thirdly, the review should consider the case for establishing new models of banking, including regional banks. Reforming RBS into a network of local banks would increase financial stability, help decentralise the economy, boost lending for small and medium-sized enterprises, maintain local branch lending and help restore faith in British banking. There is also a strong case for saying that such a move would be beneficial to the taxpayer and the economy—certainly enough to justify examining this option before pressing ahead with a fire sale.

In this opening speech, I want to set out the errors of process behind the sale, and the case for reforming rather than selling RBS. I call on the Government to halt the sale of RBS shares until a full and independent review of all the options has been conducted. As a result of the emergency bail-out package in October 2008, the British public effectively acquired 82% of RBS and 43% of Lloyds. The total cost to taxpayers of our stake in RBS has now exceeded £45.5 billion. The recent sale of a 5% stake in the bank has already resulted in a loss of £1 billion. Selling the entire Government stake at a similar price would result in losses of £13 billion or more—almost a third of the original bail-out.

The size of the expected losses, and the impossibility of meeting the Chancellor’s previous assurance that we would get our money back, reinforce the case for a broader review to establish whether this is really the best that we can do, taking into account all the economic costs and benefits of the different options available.

In 2013, the Chancellor of the Exchequer set out the following objectives for the future: maximise the ability of the banks to support the UK economy; get the best value for money for the taxpayer; and return the banks to private ownership as soon as possible. Privatisation is presented as the answer to the first two objectives and as a foregone conclusion rather than one of a number of options, each of which deserve consideration. A whole host of experts have suggested that we can do better with RBS—better for the taxpayer and the economy—than return to the pre-crisis business as usual. That is not a fringe view; it is a view expressed by the Parliamentary Commission on Banking Standards, the former Secretary of State for Business, Innovation and Skills and the previous Government’s own entrepreneur in residence.

[Grahame M. Morris (Easington) (Lab)]

rose—

[Kate Osamor]

May I make some progress?

Martin Taylor, a member of the Bank of England’s federal policy committee, said:

“I would like to have a feeling that the Government recognises there are policy options and is thinking along those lines rather than saying our job is to get the business back into the private sector.”

Unfortunately, the rushed nature of the sale, the lack of evidence provided to support it and the lack of discussion surrounding it suggests that the contrary is the case.

The Government’s decision to sell off RBS shares in the summer without any published evidence that they have considered alternative options raises important questions about public accountability and process. It signals a return to business as usual and an unquestioning faith that the private sector is the right direction for British banking.

The Chancellor argued that it was the

“right thing to do for the taxpayer and for British businesses”

and that the sale

“would promote financial stability, lead to a more competitive banking sector, and support the interests of the wider economy.”

To support those claims, the Government have relied on a 13-page report by the investment bank, Rothschild, and a two-page letter from the Governor of the Bank of England. Neither of those presents any concrete evidence to support the Chancellor’s assertion. Opposition to the sale has been voiced by the public, hon. Members and independent voices in the field. Nearly 120,000 people have signed a petition calling for an independent review of the options for the bank’s future before any shares are sold.

A survey commissioned by Move Your Money shows that only 21% of people agree with the current conditions of the share sale; 82% agree that RBS should act in the public interest and 67% agree that we should have a full independent review. Many alternative options have been put forward for RBS, including breaking it up into a series of challenger banks, turning it into a state investment bank and converting it into a network of local or regional banks.

I want to focus on the last of those options, which has been advocated by, among others, the New Economics Foundation, the Archbishop of Canterbury, Civitas, Respublica and the former Treasury Minister, my right hon. Friend the Member for Wentworth and Dearne (John Healey). It is modelled not on an untested economic theory but on the German Sparkassen, a network of local public savings banks owned in trust for the public benefit, accountable to local people and with a mandate to support their local economies. The Sparkassen are the powerhouse of small business lending in Germany and are an important part of the success story of the German economy.

The NEF has proposed that RBS could be broken into 130 local banks based on local authority areas, of a similar size to the Sparkassen. They would be carved out of the bank’s high street operations, with its investment banking and private banking arms being sold. Like the Sparkassen, they would be able to share risks and resources to achieve economies of scale but, crucially, each local bank would be independent. By refusing to consider this option, the Government are missing a golden opportunity to fix the structural problems of UK banking that were exposed in the crisis.

--- Later in debate ---

[William Wragg]

I am glad that the hon. Lady, representing Plaid Cymru, managed to refer to Wales in her question. I am not sure whether it is quite within my remit to say how the Government should direct such profits towards Wales.

The return of RBS to private ownership is an important first step, but the motion provides the opportunity to debate some particulars of RBS’s business and some important aspects of the aforementioned lending practices, which occurred both before and after the crash. I am sorry to say that RBS, in particular, was found wanting in that regard.

I want to highlight certain negative practices that have been shown by independent sources to have occurred in RBS that affected its small and medium-sized business clients, particularly one business in my constituency. I want to place my concerns on the record and am keen to hear from my hon. Friend the Minister how such practices will be investigated and what action will be taken to restore public trust in RBS and the banking sector more widely in the run-up to any further share sales.

The Government will no doubt be aware of the report by the businessman Lawrence Tomlinson, to which the hon. Member for Edmonton (Kate Osamor) referred. It was published in 2013, when Mr Tomlinson held the position of entrepreneur-in-residence at the Department for Business, Innovation and Skills. Mr Tomlinson’s report considered the lending practices of banks and in particular the treatment of businesses in distress. It considered several banks in general, but took a particularly in-depth look at RBS’s turnaround division, the global restructuring group, or GRG. Tomlinson received large bodies of evidence on RBS’s practices, including from its business customers. The report found

“very concerning patterns of behaviour leading to the destruction of good and viable UK businesses”,

all for the sake of profit for the Royal Bank of Scotland.

[Grahame M. Morris (Easington) (Lab)]

I agree with the hon. Gentleman’s point about some of the business practices, but does he accept that the motion is a reasonable and moderate proposal, and the contention of my hon. Friend the Member for Edmonton (Kate Osamor) that we should consider other models, such as the Sparkassen model in Germany? Does he agree that bankers’ bonuses have been a significant factor in driving the misbehaviour that led to the downfall and the financial crash in 2008? Is it not true that the German banking system is geared towards supporting jobs and the real economy, and it would be a far better approach altogether if we did the same?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Interventions need to be a little bit shorter. I am bothered that hon. Members are all down to speak and they will have nothing to say because everything will have been covered in interventions.

--- Later in debate ---

[Grahame M. Morris]

The hon. Gentleman is setting out an alternative view that RBS has changed and been reformed, but did not the LIBOR exchange rate-rigging scandal happen after it became a publicly owned bank? Has anything fundamentally changed in the bonus culture that drives such risk-taking and does not support jobs in the real economy?

[Jeremy Quin]

I acknowledge and appreciate the hon. Gentleman’s point. I would have a much better case if I could say that all the problems were pre-crisis, but they were not; I fully acknowledge that. There are clearly issues that were endemic in RBS’s culture, and I sincerely hope that it has got a grip on that now.

RBS certainly does have a grip on its corporate structure and how it is conducting its business. It is now far more focused back on the UK and on UK corporate lending. It is the largest single lender to UK corporates, the largest supporter of SMEs, and the largest provider of mortgage lending. That is what we all want to see and wanted to see when the stake was initially taken.

--- Later in debate ---

[Grahame M. Morris (Easington) (Lab)]

I should like to thank my hon. Friend the Member for Edmonton (Kate Osamor) for bringing this important debate to the House. I also want to thank the Backbench Business Committee for allowing the time for it to take place. I rise to speak in support of the motion. The risk of speaking quite late in a debate is that everything might already have been said, but I shall try to pick out a few points on where we are now and on the benefits of finding a real alternative to having another privately owned bank.

As we have heard today, and as we know from our own experience, the UK banking and financial system brought our broader economy to the brink of collapse in 2008. Indeed, we were just days away from the banks closing their doors and the ATMs—the cash machines—running out of money. That was caused not by a profligate Labour Government but by an under-regulated financial and banking sector that had no concept of social responsibility and that took reckless gambles with our economy and lost.

Today’s contributions from Government Members have generally been positive. Indeed, I have been quite surprised at how open Conservative Members have been to the ideas put forward in the motion, which is a reasonable one. We have also been hearing, however, that things have moved on and that RBS in particular has been subjected to major changes and is now a different entity. My view is that, for as long as we have a bonus culture in which bankers are financially incentivised by the prospect of receiving huge bonuses for a single deal—more than an ordinary working man or woman could accumulate in the whole of their working life—bankers will continue to take chances, to gamble, to fall foul of LIBOR schemes and to mis-sell products. We need to change that culture fundamentally, and we now have an opportunity to do that by creating an alternative system.

In the bail-out at the height of the crisis, the UK Government’s total support for the financial system exceeded £1.1 trillion and, as we have heard, the taxpayer-funded rescue package for RBS exceeded £45.5 billion. It is estimated that the privatisation proposals being put forward by the Chancellor of the Exchequer will cost the public purse £13.5 billion, which is a very considerable sum. I believe that the whole of Parliament, not just those on the Opposition Benches, should be affronted by the way in which this is being done. The announcement was made not to the House of Commons but in a speech at the Mansion House in the City of London. That is an affront to democracy. Our role is to hold the Executive to account, and we should have had a full debate in Government time on this issue. Now, however, we should look at some of the alternatives.

One of the downsides of RBS’s recent activities has been the number of branch closures, with 165 closing in the past year, a number of which were in my constituency. We have heard about the LIBOR scandal, and my hon. Friend the Member for Norwich South (Clive Lewis) has referred to other more recent scandals. The bank has also been implicated in undermining viable small businesses, as the hon. Member for Hazel Grove (William Wragg) pointed out. That has had scandalous consequences for the real economy.

I believe that, following the general election in 2010, the Government used the financial crisis as a way of justifying policies of austerity. Instead of focusing on the banking sector, learning the lessons and changing the political narrative, the Prime Minister and the Chancellor of the Exchequer successfully shifted that focus on to an apparent need to impose austerity. An economic crisis in the banking and financial sector was used to introduce a series of policies in which everyone was blamed, from public sector workers to the low-paid, the vulnerable, the unemployed, the sick and the disabled. Investing in our future, rebuilding our schools and hospitals, and increasing the numbers of doctors, police officers, teachers and nurses have now been caricatured as profligate spending. I am proud of Labour’s record, and I am never going to apologise for investing in the foundations and building blocks of a just, fair and decent society. We need a banking system that works for the real economy, and we have that opportunity if we choose an alternative way of looking at how we take forward RBS.

I implore the Chancellor to reshape our banking system. I ask him to consider the alternatives and not simply return RBS as the same London-centric, privately owned, commercial bank that mimics the existing banking culture and services in the UK. We do not necessarily want a state-owned bank run from Whitehall, and alternatives have put forward by various hon. Members, including my hon. Friend the Member for Dagenham and Rainham (Jon Cruddas). A real alternative would be to use our stake in RBS to create a local stakeholder banking network. That would be tasked with supporting small and medium-sized enterprises and rebalancing our economy, and it should have a public service mandate.

I had a walk through the City of London at the end of the recess, where I saw some of the fine buildings, with their images of industry—of ironworks, engineering and railway investments. We have lost that public service ethos. We instead have an idea of driving the investment banking arm, speculating in mortgages overseas, and of this drive to double-digit profits, which has undermined jobs in the real economy. There should be a specific duty to a particular locality, not a duty to maximise profits, but one to optimise returns to a range of stakeholders, including customers and the local economy. Such an approach would complement the Government’s stated devolution agenda, providing the regions with the financial power they need to support the SMEs that will deliver the economic growth and the new jobs that we need to rebalance the economy.

We should learn the lessons of the financial crisis. The large commercial banks withdrew credit from our economy and lending to the non-financial corporates—to manufacturing, construction and retail, for example—fell by 25% in the five years from August 2008. Germany experienced a similar collapse in lending from commercial banks, but its well-established local banking network, the Sparkassen, which colleagues have mentioned, and the local co-operative banks increased lending to domestic enterprises and to the self-employed over the same period by between 16% and 25%.

Time is short, so I wish to make only a few points in conclusion. The concentration of large, too-big-to-fail banks commercial banks leaves the UK uniquely exposed to another financial collapse. Returning RBS to that system would increase, not decrease, the risk to our economy. At the very least, the Government should consider the merits of the stakeholder model as a driver of growth, as well in creating a more stable banking system which can protect the real economy from future shocks. The Chancellor should not pursue a rushed policy of privatisation, which risks leaving the taxpayer worse off, not only through incurring a loss following the sale of the remaining shares, but, worse still, through continuing with an unreformed banking system that will condemn us, once again, to repeat the mistakes of the past. I support the motion.

[Several hon. Members rose—]

Finance (No. 2) Bill

Grahame Morris Excerpts

Wednesday 25th March 2015 Commons Chamber

[Mr Deputy Speaker]

Does anyone else want to speak on this matter?

[Grahame M. Morris (Easington) (Lab)]

Further to that point of order, Mr Deputy Speaker. I do think it is an absolute outrage that the hon. Member for Bristol North West (Charlotte Leslie) did not give us notice that she was raising the matter. She is subject to a referral. Other Select Committees have chosen not to publish reports.

[Mr Deputy Speaker]

I am sure that you are aware that Mr Speaker has sent a letter to the Chair of the Select Committee. I can also inform you that it is not a matter for the Chair; it is a matter for the Committee. In the new Parliament, there will also be a new Committee that can look into it. Unfortunately, as I say, it is not a matter for the Chair.

Amendment of the Law

Grahame Morris Excerpts

Thursday 19th March 2015 Commons Chamber

[Grahame M. Morris (Easington) (Lab)]

It is an absolute pleasure to follow the right hon. Member for Mid Dorset and North Poole (Annette Brooke), who has represented her constituency with great distinction. She will be sadly missed.

I want to make a number of points and challenge some of the things that have been said by various Members on the Government Benches and by the Business Secretary.

I was underwhelmed by the Budget because it makes no real or practical difference to the lives and living standards of the people I represent in the north-east and east Durham. Various figures were bandied around, but when I checked, the one I was drawn to was that over the past decade—pre-recession to current times—the richest 20% have become 64% richer than they were before the recession whereas the poorest 20% have become 57% poorer. I find it very difficult to accept Government Members’ narrative that the rich are shouldering a greater share of the burden of austerity and balancing the books, as the poor seem to be the ones who are suffering. That is certainly the case in my constituency, and the figures seem to back that up.

The Chancellor seems to have demanded more of the same, with deeper and more extreme cuts in public spending. That will certainly damage every service we value—education, policing and the NHS. No figures have been given, but I have seen suggestions that the cuts likely to fall on the police budget are of the order of 30,000 police and 6,700 community support officers. That is a colossal reduction in the number of officers, and suggesting that it will not diminish services, response times and public safety is incredible. The Chancellor’s own OBR warned that his Budget would mean

“a much sharper squeeze on real spending in 2016-17 and 2017-18 than anything seen over the past five years”.

That is a huge warning to the electorate and the general public.

My right hon. Friend the Member for Knowsley (Mr Howarth) treated us to a further rendition of Shakespeare and “A Midsummer Night’s Dream”, making reference to the coalition and the partnership between the Conservatives and the Lib Dems. I was thinking more of “Midsomer Murders”, because we know what a promise means from this Government. Much though I respect Government Members individually, let us not forget the promises that were made on tuition fees, on protecting the poorest—we then saw the introduction of the bedroom tax—on making work pay and on balancing the budget within a single Parliament. I have not got amnesia and I do not think the Chancellor will be able to erase the memory of the past five years. His claim was that he would make work pay, and the Prime Minister told the House and the nation that

“the best route out of poverty is work.”—[Official Report, 11 June 2014; Vol. 582, c. 543.]

I suggest that those words are meaningless to the two thirds of children in poverty who live in working households.

There are more than 5 million low-paid workers in the UK earning less than the living wage, which is an increase from 3.4 million in 2009. I thought it was ironic when I put the news on early this morning and saw the Chancellor in a luminous jacket visiting the port of Tilbury and extolling the virtues of the Budget, because no mention has ever been made of the insecurity of employment and the fact that 1.8 million workers are on zero-hours contracts, 1,400 of them at the port of Tilbury. Surely the right thing to do, particularly in that location, is to offer those people, who are working, in effect, full time, proper contracts on decent rates of pay. That would be an indication that the Chancellor is serious about making work pay.

I wish to say a few words about the northern powerhouse because not only have the Government hit people directly through spending cuts and tax rises, but they are failing to deliver the investment needed to grow our economy in the north-east. After the Business Secretary’s remarks, I was drawn to the table on page 45 of the Red Book. The section on the northern powerhouse lists 12 projects that are highlighted. The northern powerhouse does not seem to extend any further north than Leeds or Manchester, so of the 12 projects only two and a bit of them are linked to the north-east. One of them that is being trumpeted concerns the publishing of an interim report on transport. Another one—point 7—has £1 million going to the Centre for Process Innovation on the north-east chemical sector. Point 9 talks about welcoming talks—I know that this is very important for stimulating jobs and investment—to reinstate the ferry from Norway to Newcastle. That seems rather thin to me for a commitment.

In fact, the whole thing is a huge disappointment. This much vaunted northern powerhouse is just empty rhetoric for my people. Where is the definite action that we were promised? What the Government have done over the past five years is abolish our successful regional development agency and take away our voice by removing the post of Minister for the north-east.

For every £1 spent in the north-east, the Chancellor spends £24.33 in London. How can we create a northern powerhouse when the Chancellor inflicts disproportionate cuts on northern councils? Durham county council, my local authority, has had cuts of £250 million. In response, the council produced an ambitious programme to deliver jobs and growth, but it was rejected by the Government and the Planning Inspectorate.

In what scenario does the Chancellor believe that the decisions announced in the Budget will rebalance the economy and promote growth in the north-east? What does the northern powerhouse mean when there is a lack major infrastructure projects of national importance in our region? High Speed 2, for example, does not include our region, as it stops at Leeds. To benefit my constituents, Network Rail has suggested a cut in journey times from Durham to London of 11 minutes by 2033, at the potential cost of direct services to London and slower journey times to major cities in Scotland.

I cannot think of a policy that costs so much, with estimates ranging from £50 billion to £80 billion, but that delivers so little to my communities. I would like priority to be given to improving our connectivity to major lines, and to increasing rail services as we continue to work towards a new rail stop at Horden, on the Seaview estate. I want the Government to show some commitment, and a sense of urgency, to my constituency and get behind these plans, which are a tiny fraction of the cost of some of the major commitments that have been made.

The Budget delivered nothing for east Durham except more of the same policies of austerity and more damaging cuts for our communities. The simple question that everyone should ask is: can they afford another five years of policies crafted in Witney and Tatton?

Tax Avoidance (HSBC)

Grahame Morris Excerpts

Monday 9th February 2015 Commons Chamber

[Mr Gauke]

As a Government, we believe in low and competitive rates of corporation tax, but we also believe that those taxes should be paid. That is why we have strengthened the capacity of HMRC, why we are introducing the diverted profits tax, and why we are leading the way in international reforms of the corporate tax system.

[Grahame M. Morris (Easington) (Lab)]

The public are rightly concerned about the City financiers and hedge funds that donate large sums of money to the Conservative party, which is seemingly enriched by the tax avoiding and the dodgy dealings. The Minister says that it all happened on our watch. Why, then, in 2012, when this Government introduced the national loan guarantee scheme, did they not specifically exclude those companies that were based in foreign tax havens?

[Mr Gauke]

Let me address the issue of hedge funds. It was this Government who brought in some reforms to limited liability partnerships, which have resulted in a substantial increase in revenue from those partnerships, many of which are hedge funds.