Free Schools

Debate between Gregory Campbell and John Pugh

Tuesday 19th November 2013 Westminster Hall

[John Pugh]

Certainly, Mr Gray. The parent contacted the New Schools Network and the Department for Education à propos the children’s circumstances—the lack of play space, and so on. She got no advice that was of any use to her, and what she says complements and adds to the points of the previous correspondent. I apologise, Mr Gray, for reading out that e-mail so fully, but it is important to say that those are not my sentiments, but those of someone who had a child at a free school, but who had to withdraw them.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Gentleman gave a litany of complaints, and it sounded like an extreme instance. How extreme does he think it was? Does he think it may have been replicated elsewhere?

[John Pugh]

I simply do not know, but I agree with the hon. Member for Llanelli (Nia Griffith) that if there are extreme cases it is not obvious how they are to be dealt with. It is obvious that there is not the institutional back-up to assist with difficulties whether they are extreme or not.

There is a solution. It would be possible to set up a local body to advise and support such schools to set standards and possibly provide some democratic accountability: we could call it an LEA.

The High Street

Debate between Gregory Campbell and John Pugh

Tuesday 21st May 2013 Westminster Hall

[John Pugh (Southport) (LD)]

I congratulate the hon. Member for Rochdale (Simon Danczuk)on having introduced the debate with his usual cheery optimism, in a slightly more partisan way than he needed to. I must apologise to you, Mr Davies, because I am moonlighting from the Finance Bill and might have to return there before the final summing up. I have another colleague here in a similar situation—the Whips should not be informed.

On Sunday I had a very optimistic experience. I was in a small street in Southport called Wesley street, where the traders have suffered for some time, blighted by shops not being filled and worries about custom. They have done a great deal for themselves, including painting their shops in contrasting vibrant colours. On Sunday they had organised a festival. They had put a green swathe down the middle of the street and a series of events was taking place. The place was absolutely buzzing. That group of traders have had the courage and initiative to reinvent themselves, and that is what we need in the high street.

The high street must, in a sense, reinvent itself. Certain pressures are not due just to the coalition Government, as might be supposed from the opening contribution. They are due to fairly long-term things, such as changes in shopping and working habits, the fact that we are living in an age of austerity and there is generally less money around and less profit for companies, and the fact that the drift out of town continues. Overwhelmingly, they are due to the threat of the internet and the fact that people can now shop at any time of the day or night. In some places, including my own constituency, the pressures are also due to the threat from increased mega-retail development—as I call it—such as at Liverpool One, Bluewater and the Trafford centre.

People look at what is happening on their local high street and see it as a kind of blight. They regret the lack of vitality. They look at the empty shops, and believe that something must be done. That is apparent, but what is not is what must be done. Some things clearly will not be done. The clock will not be put back, the internet will not be abandoned—people will use it more—and people will continue to change their habits. We cannot roll back to the 1960s.

Above all, the high street cannot buck the markets. Certain things are thriving. In the high street, things that may be undesirable, such as charity shops, and payday loan and cash register companies, are thriving in the current regime. Nail bars seem to do extraordinarily well in my neck of the woods, and coffee shops are in wild abundance—no one need be short of caffeine in any part of the UK as far as I can see. Building societies are also there, but they are a rather dull and sober presence. Most of the general public do not see that as satisfactory, and they say that something must be done. But it is not obvious what must be done, or who will do it.

Businesses are doing something anyway—they are pulling out. The chains have deserted many of our towns, some by going bust and some by moving to retail in other ways. Councils must do something, but they are desperately short of cash, and I agree with the hon. Member for Rochdale that metropolitan boroughs in particular are getting a poor deal at the moment with regard to the grant support settlement. Councils also complain about being short of certain necessary powers and levers—the Minister might have something to say about that—and they are also short of options.

Very early in any conversation with retailers we are asked, “What can you do about parking and the onerous charges? What can you do to level the playing field with out-of-town shopping?” Councils can tinker, but they cannot stop rationing parking because people will have just as many cars and there will be no more space in town centres than before. There will need to be some sort of system.

People say that the Government must do something, but the Government do not seem to have a clear or obvious solution. If they had one, I think they would employ it, because there is certainly the public demand, and also demand from other Members of Parliament. They do fund schemes, such as the Portas ones, and they employ advisers, such as Ms Portas. I think that they also employ Terry Leahy, which I am not so sure about. In my view, he is not necessarily the guy who has done the most for the high street over the past few years—certainly not in my town. We have a big out-of-town shopping centre, and Tesco made an unsuccessful bid to increase its area for non-food retail there, which would have hugely damaged the high street.

What I am trying to say is that the solution is elusive, which is probably because there is not just one solution but a range of individual ones. During the Portas phase, the Government did not approach a local authority and say, “You must do this,” or “You must do that,” but rather, “Bid for what you think you can do that will work”. The Government have a positive role. They can spread good practice. If they find that something works in Stockport or Rochdale, they should tell the world about it so that other local authorities and communities can follow suit. They can encourage the reinvention of the high street, through the promotion of business improvement district projects and the like. In my constituency, we hope soon to have a BID of some sort. A business improvement district gives local retailers more control over their immediate environment, and that can only be a good thing.

The Government need to do something, and sometimes it is easier to reduce the retail footprint, where that is sensible. If that means more domestic use in town centres, that is not necessarily a bad thing, as far as the vitality of towns is concerned. It might bring young people to a town who otherwise would not get housed at all.

The Government can do something about out-of-town development. I am told by the Federation of Small Businesses that Tesco often pays no rates on its car parks. It pays rates on its stores, but it has often negotiated an environment in which it pays no rates on its car parks. That is a clear anomaly that could be addressed to level the playing field.

I agree with the hon. Gentleman that, above all, the Government need to do something about the rates system, or about stimulating and producing some change in the commercial property market.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Gentleman touches on an interesting topic when he says that Tesco and other large stores pay rates on their stores, but not their car parks. In examining the possibility of large out-of-town stores paying rates on their car parks, would it not make sense to redeploy and recycle that money into the regeneration of town centres to give them innovation, as well as colour, class and style, and so ensure that they are reinvigorated, even if that costs a bit more for out-of-town centres?

[John Pugh]

Totally. Out-of-town shopping centres have a duty to the town that they are outside, and with which they are often not engaged.

I understand that, during the pre-Budget negotiations, the Department for Business, Innovation and Skills thought it reasonable to investigate whether something might be done about retail business rates, but that the difficulty is how to advantage the people we want to be given an advantage—the small shopkeepers—not the big players, some of whom need no financial support whatever. I could refer again to Tesco.

Where we want to do something about business rates, that is currently more complex than it need be, which I want the Minister to investigate. I have heard reports from small business sources that when they want a downward valuation of their business rates and have a serious case—and when business rates are out of kilter with rents, as the hon. Member for Rochdale suggested—it takes far too long to get a result. By the time that it has all been sorted out, they will be out of business.

My fundamental point is that retailers must adjust to the shock of the new. They need to see their shops not as antagonistic to the internet, but must play along with it and be portals for it, because they have certain advantages. The current system, with white vans constantly going up and down the country and leaving brown parcels in the porches of people who are out, is not frightfully efficient. There is no capacity within internet marketing or sales for much to be done about repair or return, at least not without additional expense. Very little quality control can be exercised when people deal with an internet retailer, as opposed to one whose shop they can walk into to complain about the product. The interesting point—this is why I think that the hon. Gentleman is really on to something—is that some big stores, such as John Lewis, which have used the internet very well, have found that that has not corrupted or reduced their in-store sales, but has enhanced and developed them, so antagonism need not exist.

In conclusion, there is a need for the retail sector and the high streets of this country to pull themselves up by their own boot straps. There is significant help that the Government can get, and I am sure that there will be lots more sensible suggestions.

Tax Avoidance

Debate between Gregory Campbell and John Pugh

Wednesday 16th June 2010 Westminster Hall

[Dr John Pugh (Southport) (LD)]

It is a pleasure to serve under your chairmanship, Dr McCrea, and I welcome the Front-Bench speakers to the debate. I have a high degree of respect for them both and I hope that between us, in this relatively informal environment, we can start the ball rolling on what is a serious topic for this Parliament: tax avoidance.

Let me put the Minister at ease by saying that I am not going to discuss the capital gains tax proposal or any of the media coverage of it. It is a key aspect of the coalition agreement. All I will say is that the thrust for change comes from the desire to close a loophole that allows for tax avoidance, where people receive economic rewards as capital rather than income so as to avoid higher rates of taxation. Obviously, that is a move for the privileged few that potentially costs the Exchequer millions. Recently, there have been both decent and some dodgy arguments in the media about the mooted capital gains tax proposals. I am prepared to acknowledge that a number of sensible points have been made apropos the need to encourage long-term investment rather than short-term gain, and the need to privilege savers above speculators. There has been much learned discussion about tapers, capital relief and so on. I remain fairly sanguine about the matter and will leave the Minister to his pre-Budget deliberations—provided that, within the coalition, we do not lose the essential goal of successfully attacking tax-avoiding abuse.

Tackling tax avoidance is important to the coalition, particularly in the present circumstances. If the central problem of this Parliament is reducing the structural deficit, there are essentially not two but three ways to help to do that: we can cut spending, which none of us wants to do unless necessary; we can increase taxation, which none of us wants to do unless necessary; or we can ensure that tax revenues are more often and more efficiently collected and not avoided, which all of us would be perfectly happy to do were it the panacea for all our ills. Unfortunately, in the present circumstances, it is not.

If the coalition is not ruthless in its pursuit of avoidance and evasion, now more than ever, we will stand accused of harming or at least being indifferent to the industrious and needy, to the advantage of the devious and the privileged few. That is scarcely fair or in line with the themes announced by the coalition of fair taxation and fair reward. So far in the history of this Parliament, little has been said by the Government about tax avoidance. I understand that the Minister has answered a few questions, both oral and written, but by and large he has given answers that I would describe as holding answers that refresh the position that we understand to be in place—that Her Majesty’s Revenue and Customs does not take lightly the matter of tax avoidance and there is a big gap to be plugged. There is a big gap, because potentially large sums are to be obtained by a clampdown. The Treasury estimates the tax gap of tax avoided or evaded to be about £40 billion. The Tax Justice Network—not uninformed people—gives a figure of £120 billion. The truth is probably that we do not know the precise figure, and perhaps we should split the difference.

The reality is that we have made some progress in getting large sums back to the Exchequer as a result of a serious attack on tax avoidance. That is to the credit of Ministers in the previous Government, who recognised that a serious attack was necessary. The figures for 2008-09 provided by the Treasury suggest that about £12 billion of extra revenue was collected because of the forthright approach taken to tax avoidance. The figure expected for 2010-11—the Minister will be able to tell us whether we get anywhere near it—is a whopping £16 billion. Those are significant sums.

A distinction is often drawn between avoidance and evasion. I do not want to trespass into the area of evasion, as that is a different issue, although at times it is quite difficult to define the difference. Somebody said that the only real difference or line between evasion and avoidance is the thickness of a prison wall.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Or an accountant.

[Dr Pugh]

It is a different sort of accounting, let us put it like that. Evasion characteristically involves not only non-compliance, but a breach of tax law and often an element of downright and explicit dishonesty. However, in truth, some forms of avoidance are almost equally morally reprehensible if looked at from an ethical point of view rather than a technical or legal one. We think of past abuses of charity law, which people have explicitly used to make a fast buck with no real benefit to charity, thereby bringing the whole business of charity law into disrepute. We think of a genuine unwillingness on the part of some members of society to pay towards the maintenance of the society that enables them to thrive—the free-rider mentality that is found in certain sections of society and business.

On the other side, we must recognise that we are talking about an industry that does not hang its head in shame. It is staffed by clever and well rewarded people who are dedicated to not what they would call tax avoidance—although it is that in a sense—but, to give it another name, tax planning. As tax law becomes more sophisticated, the economic instruments with which tax planning is arranged become ever more complex and, because of the global reach of the economy these days, ever more global.

The demands for such services are huge and appreciable. There are some well rewarded people in the City whose life is almost entirely dedicated to some form of tax avoidance or tax planning—whatever they want to call it—which they regard as an entirely legitimate enterprise. One should not be too pompous about this. Few people volunteer to pay more tax than is due, or avoid opportunities that come their way to defray their own tax burden. Some people are capable of availing themselves of clever, post hoc rationalisations that run along the lines of: if they spend the money rather than paying it in tax, it will be spent to greater social benefit. That is not a plausible argument, but it is a comforting moral argument if one’s conscience bends in that direction. Such people argue that they can spend their money better than the state can for the social benefit of people in their community. That is a bit of sophistry with which we need not detain ourselves.

Who has not had a discussion with a tradesman about paying in cash, while remaining completely oblivious to the consequences that might befall the Inland Revenue? Are we not sometimes encouraged by the state to modify our economic behaviour by being offered tax breaks and incentives?

[Mr Gregory Campbell]

I congratulate the hon. Gentleman on securing this debate. He touches on a matter that I have raised for many years. In areas of high unemployment, there is a tendency for the black economy to thrive. There is a tendency for small to medium-sized employers to employ people on the basis that he has just outlined, giving a cash payment of £100 or £150 per week for several hours per day or whatever. The raising of the income-tax level to £10,000, which the Liberal Democrats and my party have been advocating for some time, will help but not completely eradicate the desire of some to employ people on the side, in the black economy, for a few pounds per week, rather than doing it legitimately, which would raise more income for the state and bring people from the black economy into proper, better paid jobs.

[Dr Pugh]

The hon. Gentleman is right to suggest that the black economy needs a whole toolkit of approaches. I happen to have with me the report from the Public Accounts Committee entitled “Tackling the hidden economy”, which contains a number of rational, sensible and workable proposals, which will enable people to earn a living and at the same time pay taxation legitimately and fairly. Obviously the fairer the system is, the more prone people are to do that.

Tax avoidance properly, though, is the apparent attempt to frustrate the intent of tax law. That is fundamentally what it is. It is normally done by organising economic transactions in a way that ensures that whatever wealth, investment, profits, income or rewards people have or aim for, they escape the charge that the state would ordinarily impose on them. The state does not do that for idle purposes, but for the common good. Tax avoidance is therefore morally reprehensible. MPs flipped their homes and were rightly criticised in the media, but it was not the intention of the expenses scheme—or the capital gains tax regime, for that matter—to ensure that that would happen. People in this place availed themselves of a loophole. That is an almost classic case of tax avoidance, but one could give sundry examples, in various exotic formats.

The previous Government did an appreciable amount of work, endeavouring to ensure that tax avoidance, when spotted, gets dealt with. They fought what I would describe as a long guerrilla war against exactly what we are talking about: loopholes. I pay tribute to the right hon. Member for East Ham (Mr Timms), who was a kind of platoon commander, for prosecuting that guerrilla war with some success. He tried to track down the loopholes and closed them where possible. I think that most hon. Members here, while reading through very dull tracts of successive Finance Acts, will have recognised that those provisions are there simply as part of the ongoing skirmishing between the tax planners—tax avoiders—and the Inland Revenue. By and large, however, what we have seen so far have been post hoc reactions to abuses that have been identified in charity law, with repo arrangements, or with controlled foreign companies—we had an awful lot of debate about controlled foreign companies in the last year of the previous Parliament, as well as stamp duty and other matters.

The Inland Revenue has been involved in constructing complex defences against complex devices and schemes. Quite frankly, even though we pretend to understand them properly as we sail through the Finance Act, many of the schemes are not adequately grasped by many Members. It used to amaze me how the right hon. Gentleman had command—or seemed to, at any rate—of some very complex schemes and some very complex remedies for them. The basic strategy, however, is one of shutting the door after the horse has bolted, which normally leads to those people who wish to persist with mechanisms for avoidance simply adjusting the scheme in some marginal way, modifying it and presenting a new scheme that leads to a new ad hoc adjustment, when it is spotted—it is, of course, not immediately spotted and cannot be dealt with retrospectively. Again, I am reminded of guerrilla war. It is rather like the US forces trying to deal with an ever-elusive Viet Cong that springs up around them in the jungle. My analogy slightly breaks down, however, when one recognises that the resources available to the people fighting that guerrilla war far exceeded those of the Government in this case.

The problem is therefore difficult to deal with, and is made immeasurably more complicated by the global reach of modern international capitalism, with the plethora of tax havens and the associated absence of transparency. Again, I pay tribute to the right hon. Gentleman for having done a great deal of work on that. In the last few months of the previous Parliament, there was a slew of double taxation treaties that attempted to deal with precisely that problem, devised meticulously and with extraordinary detail by very clever people in the Treasury. Generally speaking, what we were hoping for—and sometimes got—was greater transparency and sharing of information, but again we were involved in the post hoc job of trying to close down complex tax arrangements that seemed to evade many jurisdictions when it came to the pursuit of tax liabilities. Interestingly, PricewaterhouseCoopers recently suggested that it would make it a heck of a lot easier if big international companies were to list in full their assets right across the piece on a global basis, and suggested that as a new standard for accountancy. I agree, but I think it fairly unlikely that many such companies will follow suit. Big organisations that keep their property arm in Liechtenstein or wherever will not be the first candidates for laying all their cards on the table.

It is worth making the point, in passing, that the British Exchequer is not the only loser here. A substantial amount of tax leakage is caused by people not paying tax in developing countries, and it is distressing to see organisations such as the Commonwealth Development Corporation, which was set up for laudable ends and with massive national and public support, putting an awful lot of money into development projects in the developing world, but having the money sourced or put through private equity companies, many of which are in offshore tax havens.