Post Office Closures

Huw Merriman Excerpts

Tuesday 1st December 2015 Westminster Hall

[Huw Merriman (Bexhill and Battle) (Con)]

I beg to move,

That this House has considered service provision in the event of post office closures.

It is an absolute pleasure to serve under your chairmanship this afternoon, Mrs Gillan. I am grateful for the opportunity to lead this debate about post office provision. I have particular concerns about post offices closing and not being reopened, or not for some significant time. This being a debate about post offices, I very much hope to receive your stamp of approval, Mrs Gillan. I am conscious that other MPs will wish to speak—mail or female—and I will leave plenty of time for them to do so. If I go on for too long, I am sure that Members will tell me in no uncertain terms, “Letters speak!” I shall leave behind the appalling puns and move on to the subject of the debate.

With the Post Office having moved towards a franchise model, local provision is increasingly reliant on private individuals providing a post office as well as running their own business. If those individuals decide to hand in the keys, the Post Office is left to try to find a replacement, and the community is without a post office until it does. I shall explore three areas in my speech. First, I shall provide a brief case study of the closure of my local post office in Heathfield in my constituency, Bexhill and Battle. Secondly, I shall assess whether the Government’s contract with Post Office Ltd obliges the latter to provide replacement post offices following closures. Thirdly, I shall ask the Minister what more can be done to ensure that Post Office Ltd is held responsible for better service provision.

Turning first to the case study on post office closure, Heathfield is a rural settlement serving 12,000 residents. It is the largest parish in the country by population. In most eyes, it is a town, although it is fair to say that I would be run out of town—or, indeed, parish—if I suggested so. As befits a population of that size, Heathfield has a high street with banks, supermarkets, and both national and local shops. Whereas high streets around the country may be struggling, Heathfield’s has strong footfall, with new national retailers opening for business.

In March this year, the postmaster running the post office branch expressed a wish to leave the business. Post Office Ltd identified a potential new postmaster, but he was unfortunately unable to secure a lease agreement on the site. Sadly, the branch closed on 1 April 2015. The Post Office employed an agent postmaster, but he could not agree a lease on the premises either. That leads to my first issue: Post Office Ltd will send in a temporary postmaster to run a post office only from the existing site, so people are at the mercy of the landlord when it comes to making this work. Post Office Ltd will not look at alternative temporary premises for the temporary postmaster, despite there being plenty of premises available in my Heathfield example.

By summer, the pressure applied by the community and our fantastic county, district and parish councillors caused Post Office Ltd to consider a temporary solution in the form of a portakabin post office. Despite the district council offering a berth in the car park adjacent to the existing site, Post Office Ltd decided that that was not logistically possible, so it opted for a different car park in Heathfield. Having delivered the portakabin via crane, time was taken waiting for BT and other suppliers to kit out said portakabin. That leads to my second issue: Post Office Ltd must have huge buy-in clout when dealing with its vendors, but there appeared to be an institutional unwillingness to drive BT and others to deliver the required capability, or to hold feet to the fire.

When the portakabin was finally ready to go live, Post Office Ltd engineers found that the site was not flat enough to provide safe access for customers. The portakabin was promptly removed, and no temporary solution has been provided. That leads to my third issue: there are more than 11,500 post offices in operation, so if my local one can close, I am sure that others can and have closed.

[Mark Pawsey (Rugby) (Con)]

My hon. Friend makes an important point. I am sad to hear what has happened in Heathfield. I hope that the same will not happen in Bulkington in my constituency, where the Co-op gave notice of withdrawing its post office franchise only last week. That set all sorts of hares running in the village, with talk of the post office closing down. It is not the post office that is closing down; the Co-op has elected to take away the franchise and has not, at this stage, taken any steps to find an alternative site. My hon. Friend has raised an important problem, and I look forward to hearing from the Minister how the Post Office might deal with such matters.

[Huw Merriman]

I thank my hon. Friend for making that point. Indeed, Co-op was one of the retailers we approached in Heathfield to see whether it would be willing to take on the post office, but that particular Co-op franchise at least made it clear that it was not in the business of post offices anymore. That might add fuel to my hon. Friend’s fire.

[David Simpson (Upper Bann) (DUP)]

I found it humorous when the hon. Gentleman mentioned post offices in portakabins—they would not last too long in certain parts of Northern Ireland. Does he agree that although the Co-op might have had some responsibility, so does the Post Office, because post offices are part of the fabric of the community, and are where pensioners and others meet? Surely the commitment needs to come from the Post Office.

[Huw Merriman]

I absolutely agree, and will touch on that when I discuss the effect on my constituents.

[Karen Lumley (Redditch) (Con)]

I thank my hon. Friend for securing this debate. I add my concerns to the others expressed, because the post office in Inkberrow in my constituency is up for consultation. The local shop was keen to have it, but the Post Office could not consult properly with local residents. It would be great if post offices could be sited in community facilities such as pubs.

[Huw Merriman]

I very much take my hon. Friend’s point. One of the challenges we have found has been in trying to find businesses that are willing to take on post office sites. The choice does not seem to be there any longer—at least, not that I can see from the situation in Heathfield.

[Andrew Percy (Brigg and Goole) (Con)]

Will my hon. Friend give way?

[Huw Merriman]

I will give way one more time, because I am a sucker.

[Andrew Percy]

I congratulate my hon. Friend on securing this debate. In my constituency we have exactly the same problem, with post offices closing and there being a long gap before they are replaced. There are problems even when people are willing to take on a post office. A sub-postmaster in my constituency wishes to take on a post office in another community, but he cannot because the Post Office demands that he goes through all these hoops, despite being a serving sub-postmaster. Often, because of the processes put in place by the Post Office, willing people will not accept the role, and we end up with no facility at all.

[Huw Merriman]

I very much agree with my hon. Friend. The compliance process is long and detailed. The current consultation in Heathfield means that we will not see a solution until February at the earliest.

Returning to my story, the portakabin was removed because the Post Office Ltd had no plan in place for portakabin roll-outs. If the closures that I believe will come do come, there needs to be a plan. The councillors realised that a permanent replacement was the only option, so they approached a number of national and local stores in the high street. I will give examples that show how difficult it now is to get businesses to take on a post office. Having previously hosted the post office, Sainsbury’s said no, despite losing footfall following the closing of the adjacent post office and having to compete with a new Waitrose. A WHSmith is opening soon, which is a good sign that the town is vibrant; one would think that the business would work well there, but it said no. As I say, Co-op said that it is not taking on post offices. The post office used to be sited in the sorting offices, but Royal Mail refused to accommodate even a temporary outlet. All other retailers declined to apply.

Finally, one local business, an off-licence, was willing to make an application. Thank goodness for that gentleman. That leads me to my fourth issue: the model now seems to be that neither village post offices—often called “locals”—nor main post offices in towns will operate as a stand-alone business now. That would be fine if existing businesses were willing to take on the operation, but as our experience in Heathfield shows, they are not. I question whether the commercial terms will stand the test of time for the other 11,500 post offices when renewal comes up.

As I said earlier, the Post Office is now in consultation with the community until January 2016. The expectation, if all goes well—touch wood—is that the new post office service will be in place in February 2016. That is almost a year after the doors closed to a post office that serves 11,500 to 12,000 residents.

Throughout the period of closure, the vast majority of customers have had to use services at a village a few miles from Heathfield. That is fine for those who have a car and can travel, but like many hon. Members here, I represent a rural constituency in which the bus service has been reduced. The proportion of over-65s in my constituency is 10% above the national average. The elderly cannot jump on a bus and then wait more than an hour in the cold to come back.

That leads me to my fifth issue and my second key question. Does the Government’s contract require the Post Office to provide a post office replacement following a closure if the branch serves a significant number of community members, or has been closed for, say, six months? It appears that it does not. Post Office Ltd must meet access criteria, as they are called, and overall branch numbers, but as somebody at the Post Office rather haughtily said to me,

“The way in which the Post Office meets the access criteria and branch numbers is an operational matter for the Post Office.”

That may be so, but it is also of great significance to my constituents and those of other hon. Members. The Post Office currently meets the access criteria, but I question how long it will continue to do so in the marketplace that I have described.

My concluding question is: what more can be done to ensure that Post Office Ltd is held responsible for better service provision? If the Government contract required either a temporary or permanent replacement to be in place within a set period, Heathfield would not have been without its post office for so long. I call for the contract terms to be amended to require a replacement post office to be in place within six months if the previous post office serviced a community of, say, 10,000 residents or more. If a replacement fails to be found, there should be financial penalties and ramifications on the career ladder. Although the Post Office staff have done everything they can, their roles are not subject to incentives, and there are no penalties if a post office closes, provided that the general access criteria are met. Those are the changes I ask for.

[Mrs Cheryl Gillan (in the Chair)]

Four Members have indicated that they would like to speak, and we must accommodate the three Front Benchers’ speeches. I will not impose a time limit, but I hope that you will all bear that in mind.

Spending Review and Autumn Statement

Huw Merriman Excerpts

Wednesday 25th November 2015 Commons Chamber

[Mr Osborne]

The £15 million from the tampon tax will be available to charities that support women: not just women’s health causes but domestic violence causes, where they do brilliant work. I have announced the allocation to four charities, some of which are already involved in domestic abuse prevention. Having listened to the hon. Lady over the past few months as a new Member of Parliament, I suspect that we will not agree on many things in this Parliament, but if she has some good causes that she would like to be funded by this money, I will take a very serious look at them.

[Huw Merriman (Bexhill and Battle) (Con)]

I welcome the devolved powers on business rates and adult social care funding to local authorities. In my constituency, we desperately need to attract more business to pay for an ageing population. With that in mind, will the Chancellor restate his support for the High Speed 1 link between my constituency and the neighbouring constituency of Hastings and Rye?

[Mr Osborne]

I am happy to restate my support for the Javelin travelling to Hastings and supporting my hon. Friend’s constituents in Bexhill and Battle. We are also investing in the roads in his area, because it is a particularly congested part of the south-east. There are lots of exciting things happening on the south coast at the moment, as businesses come in and the university in Hastings—where some of the people he represents work—grows. I am very happy to look at anything more we can do to boost businesses in my hon. Friend’s constituency.

HMRC Office Closures

Huw Merriman Excerpts

Tuesday 24th November 2015 Commons Chamber

[Hannah Bardell]

I could not agree more with my hon. Friend. I am aware of the complexities of the oil and gas industry, but I am afraid that the Government and Conservative Members do not seem to appreciate them.

The world of work is changing, and many people across the UK are choosing to start and develop their own small businesses. In particular, women are choosing to take charge of their own destiny and start their own businesses, many of them from home. A network of good tax support is essential to support those businesses, run by men and women, if they are to thrive.

I was recently visited by a constituent who has a farming business. He impressed on me the importance of access to local HMRC services and face-to-face support. Industries such as farming often operate a year in arrears to very tight margins, and I and my colleagues have grave concerns about the impact on them and a wide range of other sectors, not least small and medium-sized enterprises.

[Huw Merriman (Bexhill and Battle) (Con)]

I called my local tax offices today to see whether I could pop in to speak to them. For the past year they have been unwilling to allow anyone to see them face to face. People can contact them only by phone, so it makes no difference if they are based in the region or locally.

[Hannah Bardell]

The hon. Gentleman makes my point very well.

--- Later in debate ---

[Huw Merriman (Bexhill and Battle) (Con)]

In opposing this motion, I wish to applaud HMRC’s excellent work over recent years. Thanks to its endeavours, there has been a reduction in the tax gap to its lowest level of 6.4%. That is a long-term trend showing that the targeted approach to tackling non-payment is working. However, the issue facing HMRC today is that in attempting to calculate and pay their taxes, taxpayers are spending 30 minutes or longer waiting to discuss their affairs. In the first half of 2015, 50% of callers were not answered at all.

It is clear to me that the current tax centre arrangements are not working and need modernising. It makes huge sense to replace the numerous local offices, where staff levels range from 6,000 employees to just 10, with regional centres that will give a more balanced and even coverage. This follows the trend of other service operators in moving to a regional model. Indeed, it is not just service centres that are moving to regional, or indeed country, models. Last Friday, listening to the First Minister of Scotland on an excellent “Desert Island Discs”, I was struck by her reasoning for moving Scotland’s police towards a one-country force. I therefore ask why it has taken so long for HMRC to move to this type of model. Banks were setting up current account centres when I was a 16-year-old working as a cashier for Abbey National in my holidays. [Interruption.] It was many years back.

In an increasingly technological age, it is outmoded to continue to argue, as this motion tacitly does, that the effectiveness of an operation is down to the number of workers, or their location, rather than the completion of the work itself. In many public-facing industries, technology means that human input is no longer required or is required less. In reducing and streamlining its staff numbers, I welcome HMRC’s intention to invest in technology to make itself more efficient. In an age when many of my constituents elect to complete their work online, it makes more sense to move funding to the areas where HMRC is able to target avoidance.

In my constituency, where we have two offices that will be replaced by a regional centre in Croydon, for the past year it has not been possible for my constituents to go and discuss their tax arrangements: that walk-in service has been unavailable. I therefore cannot see how they will be inconvenienced by the fact that the person they speak to on the phone is no longer in Hastings but in Croydon.

It is of course always regrettable when new service models, driven by new technologies, and the preference of the public to work online rather than deal face to face, lead to the potential for redundancies. As is the case for any employee faced with the uncertainty of redundancy, I have the greatest sympathy for those impacted, and I am glad that our economy is performing strongly enough to give confidence and optimism to those who may be rejoining the jobs market. However, I contend that it would be wrong to hold back modernisation, to use resources that can otherwise be better targeted in the sophisticated fight to win more tax receipts, and to fail to address the shortcomings in customer service. I therefore welcome these changes to HMRC and will vote favour of them today.

Tax Credits

Huw Merriman Excerpts

Tuesday 20th October 2015 Commons Chamber

[Huw Merriman (Bexhill and Battle) (Con)]

I have the greatest concern for anyone who loses out and finds that these measures have an impact on their household budget. I came into this place not to reduce incomes but to see them increase. However, in making good our manifesto commitment, savings in Government spending were always going to have to be made, with a proportion of our population unfortunately being affected by the need to make them.

Ultimately, I feel that it is right to introduce this measure to reduce tax credits for the following reasons. First, it moves the country away from a position in which Government and taxpayers subsidise the wage bills of employers, acting as a disincentive to pay rises. Secondly, as a cost-saving measure it moves the country to a position where the books are balanced and we can reduce the interest bill on Government debt.

[Mr MacNeil]

rose—

[Huw Merriman]

I will not give way just now.

In 1998, the amount spent by the Labour Government on tax credits was £6 billion. That figure rocketed to £30 billion by 2010. Three of our largest supermarket chains have employees who claim tax credits to the tune of almost £800 million. I contend that it is not for Government or taxpayers as a whole to contribute a portion of pay, but for employers to pay staff all their wages and to pay them properly. Of course, the Government can and should act to incentivise pay—by reducing tax for the employer and employee and not by paying a contribution to the wage packet.

As for balancing the books, last week the House debated the motion for fiscal responsibility and as a result the Government have pledged to deliver a surplus by 2020 and through normal times. This measure is essential to meet that task. I recognise that we need to help those the measure will impact on and I am glad that the Government are doing so in a number of ways, which I shall not repeat. I recognise that these measures do not mitigate the cost of the tax credit changes in full. If they did, the reduction in Government spending would not be delivered, the surplus would remain out of reach and the Government interest bill would continue to be wasted.

Finance Bill (Second sitting)

Huw Merriman Excerpts

Thursday 17th September 2015 Public Bill Committees

[Barbara Keeley]

I think businesses might say, “About time,” given the history of the allowance. As the Minister said, the clause increases the maximum amount of the annual investment allowance from £25,000 to £200,000 for expenditure incurred on or after January 2016. In fact, that is a cut to the existing temporary level of £500,000.

The allowance ensures the immediate deduction of expenditure on most plant and machinery from taxable profits. The history of the allowance’s levels is entertaining. It was set at £50,000 between 2008 and 2010 and then it increased to £100,000. It was cut to £25,000 in 2012 but then increased to £250,000—supposedly temporarily—in 2013. In the 2014 Budget, as we just heard, it was raised again to £500,000 and, as was announced in the Budget, it is now being cut to £200,000 in 2016. The Institute for Fiscal Studies said:

“These changes and instability create costs and uncertainty and distort behaviour.”

In 2010, the Chancellor cut the main capital allowance rate and reduced the annual investment allowance to just a quarter of its previous level, from £100,000 down to £25,000. The Government then increased it, but on a temporary basis. Such unpredictability and complexity makes it difficult for businesses to plan the long-term investments that the allowances are intended to support—that is their whole purpose.

[Huw Merriman (Bexhill and Battle) (Con)]

That said, taking into account fluctuations over the years and the fact that it was a two-year stimulus, does the hon. Lady agree that the key part to the provision is that it is permanent, thus allowing businesses to plan in the way she advocates should be the way forward?

[Barbara Keeley]

The hon. Gentleman says that, but, looking at what people say about this, it seems that they do not have confidence that the allowance is permanent because of the way it has chopped and changed. That the Government acted in 2010 to reduce it to a quarter of its earlier value—it was £100,000—is part of the problem. One can see from what I just read out that it jumped around.

To answer the hon. Gentleman’s point, both the Institute of Directors and the British Chambers of Commerce have called for the annual investment allowance to be retained at £500,000. Crucially, the IFS also states that

“restricting the AIA to investment in plant and machinery only creates distortions through differential treatment of assets.”

The IFS has estimated that setting the annual investment allowance at £200,000 from January next year will cost £0.8 billion.

Will the Minister explain how the Chancellor reached the figure of £200,000? As I say, the allowance has jumped about: it was cut to just £25,000 and is now going to be £200,000. There were calls from some small and medium-sized businesses to set a level over £500,000. The IFS says that over the past few years there has been

“an absurd degree of inconsistency”

in the setting of the allowance. As highlighted earlier, PricewaterhouseCoopers’ “Paying for Tomorrow” campaign put forward a strong argument for a need for a long-term view on tax, with a simple, focused approach to tax reliefs. The history of the allowance is anything but that.

The inconsistency has a damaging effect on businesses’ confidence to plan for the future. The move to make the annual investment allowance a permanent rate is welcome, and we support the move to encourage investment and productivity, but we question whether the measure goes far enough. As I said, a number of small and medium-sized businesses have called for the allowance to be set above the current level of £500,000. As with business rates, they feel that the Chancellor has not listened to them. There are calls for him to look again at how he helps businesses to continue to spend and grow.

Other reliefs should also be considered. Consultations are out on business rates—although the Minister did not seem keen to tell me more about that one—enterprise investment schemes and venture capital trusts. We encourage the Government to focus more than they have on the needs of small businesses. I have many questions about how the annual investment allowance has been handled by the Government to date, but of course we welcome some degree of permanence, as guaranteed in the summer Budget—if it is to be permanent. However, the overall system of tax reliefs for businesses must be considered if we are to have a competitive and fair system for businesses to invest and grow. I hope that the Minister will adopt Labour’s new clause and launch a public consultation on reforms to the system of tax reliefs for businesses. I hope also that Members will support the new clause when we vote on it later.

National Insurance Contributions (Rate Ceilings) Bill

Huw Merriman Excerpts

Tuesday 15th September 2015 Commons Chamber

[Huw Merriman (Bexhill and Battle) (Con)]

I warmly support the provisions in the Bill to enshrine the level of contributions for national insurance. This measure, together with the commitment made earlier this year not to raise income tax, was an essential part of my party’s general election manifesto, and I am pleased to see the legislative effect being enacted.

I am passionate about my Government’s pledge to give people the opportunity of work. In the last term, the Government put business at the heart of their programme, creating more than 700,000 new businesses. That climate has helped to allow 2 million new jobs to be created in this country. In the term to come, the desire is to create a further 2 million jobs, to increase that success. In order for private enterprise to deliver these new jobs, it is essential to give business an environment of certainty, to allow it to plan over the next five years. That is what creates jobs.

[Callum McCaig (Aberdeen South) (SNP)]

rose—

[Huw Merriman]

If you disagree, I will take the intervention.

[Callum McCaig]

I am disagreeing. Certainty is being provided in one narrow aspect of business taxation. As my party’s energy spokesperson, I know that the oil and gas industry would love legislation ruling out increases in its taxation. Does ruling out an increase in one narrow aspect not increase the uncertainty in the whole range of other business taxation?

[Huw Merriman]

Not at all. Perhaps I can come on to deal with that by considering the macro levers the Government will have over this term, which will give a real boost to the economy, and other matters where it might be right to leave things open.

I was talking about the need to create jobs, which is what is essential here. Jobs change lives, creating hope, aspiration and well-being for all of our constituents. Any move to create more jobs should be welcomed by all parties, not just the Conservative party, and should not be branded as a “stunt” or a “gimmick”.

[Kwasi Kwarteng (Spelthorne) (Con)]

Does my hon. Friend feel that this Bill chimes in well with what we saw from the last Government, who created about 1 million new jobs in the private sector? Does he agree that this is exactly the kind of direction the country needs to pursue?

[Huw Merriman]

I absolutely agree with that. I recall that five years ago there were howls of derision when the Government announced that they would seek to create one new job in the private sector for every one public sector job lost. At the end of the five-year period I believe that the actual figure was five for every one. We had great success, and it shows that we are the Government who can manage the economy and turn it around, despite what we were faced with in 2010.

The content of this Bill was at the heart of this Government’s manifesto commitment. Today is all about honouring promises—it is not about gimmicks or stunts. What has this House become if, when we stand proudly and enact our manifesto in legislation, it is branded as a gimmick? What does that say about the manifestos of other parties, given that it is only four months since the previous election? I was reassured to hear from the Cabinet Office that a unit is in place to ensure that every Department is making good on this Government’s manifesto pledges, as opposed to the Labour party which, as mentioned, is tearing up its pledges after only four months and a leadership change.

With the commitment not to increase national insurance, which is, after all, a tax on job creation, Conservative Members are making good on our commitment to support business and create a platform for jobs.

[Rehman Chishti]

Our commitment to creating more jobs and bringing more jobs to our country goes hand in hand with what we are doing on corporation tax, where we have one of the lowest rates in the western world. As a result, Deloitte is saying, “These measures will bring more businesses into this country.” This lower taxation measure is therefore in line with the other measures put forward by the Chancellor to create more jobs and opportunity by having one of the lowest levels of corporation tax in the developed world.

[Huw Merriman]

I fully agree with that point and I think I can link it to the one made previously by the SNP. This Government have a commitment ultimately to reduce the deficit and run a surplus by 2020, and that requires some changes and some levelling in taxes. The key thing is to look at which taxes we use: which taxes will have to increase to pay back some of the debt and which ones can be cut, because every £1 cut creates more in the private sector and more spend.

Let me touch on two things. The annual investment allowance is a tax measure that was due to revert to £25,000 per annum at the end of this year, but after the July Budget it will now increase to £200,000 per annum. That is a good example of a tax change that will boost the UK supply chain and cause private industry to purchase more plant, causing more pounds to be created as a result. Alternatively, let us consider the insurance premium tax, which will rise but which will be way below levels in the European Union, particularly in Germany. I envisage that it is unlikely to have a negative effect. This is all about this Government understanding how the economy is managed and how these macro levers can be manoeuvred to favour private investment. [Interruption.] There may be chuntering from Opposition Members, but our record in government over the past five years—we have created jobs and started to balance the budget—cannot be denied, despite what is said by Opposition Members.

I come back to my personal commitment in Bexhill and Battle. The number of my constituents on jobseeker’s allowance stands at 613, which is a decrease on the 2010 figure of 1,400, of whom 135 are aged 18 to 24—that compares with a figure of 385 in 2010. Our focus on reducing youth unemployment makes me incredibly proud of what this Government have done. These figures show that some of the 2 million new jobs created in the UK over the past five years have been delivered in my constituency. But my local task is to attract new employers to Bexhill and Battle.

I was listening to my hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer) talking about the science park and the developments there. I was fortunate enough to visit her constituency and Milton Keynes last weekend, when I was struck by the differences between those areas and East Sussex, which is home to my constituency and where I reside. We have a real need for regeneration and we do not have those new jobs being created. The challenge for us is incredibly difficult. We do not have the motorways, the dual carriageways or the rails—as yet; I am delighted by the commitment from the Government in this Budget to try to fix that. Our regeneration is a hard quest and moves such as those in the Bill, which provide certainty, make the job much easier. Thanks to this Government, a new link road is being built from Bexhill to Hastings, which will deliver thousands of houses, a 42-acre business park and a country park, all of which should attract thousands of high-skilled jobs and boost our economic regeneration and productivity.

Creating this infrastructure is one thing, but turning it into a jobs factory requires a persuasive case to be made to business to take risks. Being able to tell businesses that they can expand and grow without the danger of taxes rising is a key ingredient for them to take that risk involved in financing expansion.

[Rehman Chishti]

My hon. Friend talks about taxes rising. The Bill provides certainty, whereas rising taxes cause uncertainty. In his manifesto, the Leader of the Opposition said that he wanted to increase corporation tax from 20% to 20.5%. That would create uncertainty and hinder jobs and investment coming into this country.

[Huw Merriman]

I agree completely. The cut in corporation tax allowed this Government to justify the increase in the living wage, as it offsets that. Such a change would put all that at risk, although I very much hope that we will never see that day.

[Barbara Keeley]

Will the hon. Gentleman give way?

--- Later in debate ---

[Huw Merriman]

Perhaps I can make a little progress, but then I will of course give way.

The Government continue to reduce levels of taxation and I welcome that move. In a recent report, Bexhill and Battle constituency, which I represent, was in the top 10 constituencies for the fastest rise in wages for the past 10 years. As I am from a constituency that has lagged behind the national average for far too long, I am incredibly excited about this change in fortune.

I fully support the commitment in the Bill and hope that the benefits will be felt across the country as well as in my constituency.

Finance Bill

Huw Merriman Excerpts

Tuesday 8th September 2015 Commons Chamber

We believe that vehicle insurance is of the greatest importance, because drivers are legally required to insure their vehicles if they want to drive in the UK. The legal minimum of third-party insurance covers drivers if they have an accident causing damage or injury to any other person, vehicle, animal or property. It is right that the UK law encourages drivers to take that responsibility. When fines for driving uninsured are becoming a fraction of the costs of insurance, higher premiums could lead to more uninsured drivers, and there is a real fear about that in the industry. Young drivers already face premiums of more than £1,200, and that will increase with this tax increase, so a fixed penalty which can be only £300 and six penalty points could be seen increasingly as a risk that people are—wrongly—prepared to take.

[Huw Merriman (Bexhill and Battle) (Con)]

There seems to be the assumption that the entire increase will be passed on—perhaps in part it will—but I visited one of the country’s largest insurers in my constituency and it did not seem to have cause to pass on the increase. Perhaps the hon. Lady should reflect on that and see that passing on such costs may not be automatic. It may be that a reduction in corporation tax means that the costs can be absorbed.

[Barbara Keeley]

I think that I have already covered that. In a debate in 2010 it was accepted that these costs are almost always passed on. Almost every commentator has said that the costs will be passed on. Aviva and RSA have already announced that they will pass them on, so all the signs are that they will be passed on. Clearly, it would be good if any part of the insurance industry decided not to pass on the costs, but what we are seeing is an increase in premiums across the piece.

This tax increase on a merit good like insurance could undermine the message that individuals and society benefit if the correct level of insurance is taken out. An increase in the insurance premium tax of 58% punishes families and individuals for acting responsibly. When there have been previous increases in the tax, they have been something in the order of around 1%. There is a major concern that this steeper increase could be large enough to alter the coverage chosen by customers, which means that they would become underinsured. It may be that Conservative Members do not face problems of underinsurance in their constituencies. I must say that I have seen a lot of it in my constituency. People really suffer when they are underinsured. If levels of crime are high and there are other issues affecting them on the roads, underinsurance is a real issue.

The Government need to ensure that tax policies do not lead to a situation in which families struggling on low incomes decide to forgo insurance or let their previous policies lapse because prices have risen and they decide that they can no longer afford insurance. That could leave many families at risk of great loss in the event of burglary, or if they have a road accident.

Underinsurance could be a consequence of this rate rise. People could also opt for cheaper policies, which means that they do not get the right coverage, or they opt for higher excesses, which effectively means that their coverage is less. Buying insurance can be a complicated business and a good price may often take precedence over having the right level of coverage.

The HMRC policy paper for this rate rise estimated that there would be

“a small reduction in the demand for standard-rated insurance.”

Any fall in demand for insurance that leaves families open to greater risks should be avoided. Where does the Minister believe this “small reduction” is likely to occur and what is she doing to prevent reductions in the demand for insurance?

Finally, HMRC suggests that there could be changes in the behaviour of insurance companies. It states that there is likely to be

“a small increase in tax planning activity by insurance companies.”

What are the Government doing to minimise this further potential unwanted consequence?

Clause 43 is a typical measure from a Conservative Government who promise one thing and then deliver the opposite. In this case, the Chancellor promised before the election that he had no need to raise taxes, but then he raised this tax, which will have an impact on households throughout the UK and on their usage of insurance. The increase could have a number of negative consequences. Higher insurance premiums may lead to fewer families and individuals purchasing much-needed insurance to protect themselves against everyday problems, which happen much more often in some parts of the country than in others. I am talking about burglary and damage to property and possessions.

The Government must provide more information and analysis of the wider impacts of this tax increase, as well as strategies to prevent the negative consequences that are likely to result from this policy. Labour’s amendment to clause 43 asks the Government to consider the impact of any future increase of the tax.

The Institute for Fiscal Studies has called for a road map to indicate a long-term strategy for our tax system. The CBI has outlined its concerns about the UK tax system in a letter to the Financial Secretary, stressing the need for Ministers to recognise that

“changes to the tax system that appear innocuous can have wide-ranging effects.”

The CBI also stated that there was a need for “renewed discipline” in tax policy making and that the lack of consultation and notice period for tax changes can cause great uncertainty for businesses. None the less, the Government continue to increase and lower taxes for short-term policy goals. Labour believes that we need to consider how to reform our tax system so that people and businesses are taxed efficiently and fairly.

As I have outlined, there are particular concerns about this and any future potential rise in insurance premium tax because of the impact it might have on the price of insurance policies and the take-up of insurance by families and individuals. With that in mind, will the Minister comment on the potential for any further increases in the insurance premium tax during this Parliament, given the comment of her colleague in the Lords that the tax is an easy target?

Labour’s amendment will ensure that the impact of any future increase is properly considered by the Government. It will ensure that there are careful deliberations—much more careful than we have seen on this occasion—on the short and long-term consequences of any further increase in the insurance premium tax and its effect on families and business. I ask Members on both sides of the Committee to support our amendment tonight.

--- Later in debate ---

[Roger Mullin]

I wish to speak to SNP amendments 3 and 4, and let me say three things at the outset. First, I am seeking to curry favour by making my remarks fairly short, as we have had a long two days; I hope that is appreciated. Secondly, our amendment gives the Government the opportunity to change their approach to setting the 8% surcharge by introducing it in a tiered manner. This would have the benefit of removing a cliff-edge and replacing it with a more manageable approach. However, and thirdly, we do recognise that our amendment may not be the only way of achieving a more sensible introduction of the surcharge, and therefore we are keen to hear the Minister’s response.

What is the fundamental issue? A number of fine comments have already been made about building societies, the problems of retained profits and the like, so I shall mention some other matters. Our concern is primarily centred on the impact this Bill will have on challenger banks and the adverse consequences it will have on competition and diversity and in respect of entry barriers for prospective new challengers.

As Carlos Suarez Duarte, vice-president at rating agency Moody’s, said,

“profitable challenger banks will be the most affected by the new charge on profits,”

while changes to the bank levy

“will be positive for UK banks with large overseas operations such as HSBC and Standard Chartered.”

About 30 banks are subject to the current levy, but the new 8% additional tax on profits will affect any challenger bank with profits of more than £25 million, expanding the scope of bank taxes to potentially around 200 institutions, The Daily Telegraph estimates.

I and my colleagues have little issue with the surcharge applying to institutions that have posed a systemic risk to the sector, but the smaller banks have not posed such a danger. Indeed, the coming of the era of the challenger banks is seen by many as part of the solution to the problems posed by having too few, too powerful institutions. Challengers are not part of the problem in this regard; they could be part of the solution.

Indeed, the surcharge as currently proposed will have perverse effects on the Government’s own banking strategy. The Chancellor vowed only a couple of months ago to boost retail banking competition by proposing at least 15 new licences over the next few years, but as Nigel Terrington, chief executive of Paragon Group, which recently launched its own bank, said:

“This surcharge took everyone by surprise and does seem to be contrary to the stated government policy of wanting to increase competition.”

Indeed, as he has also commented:

“It feels like they’ve replaced a punishment tax on the larger banks with a charge on all of us. What did we do wrong—I thought we were part of the solution, not the problem?”

In effect, this surcharge will prove a barrier to encouraging new entrants. Indeed, the tax will hit small profitable domestic banks particularly hard, which completely goes against previous Government efforts to lower the barriers to entry for new lenders, which we welcomed. Anne Boden, the founder of Starling, has previously praised the Government strongly on more than one occasion, but she has recently been quoted as saying in relation to the new surcharge:

“It is not just a constraint on the development of smaller banks, but, more importantly, not in the best interests of consumers.”

Many of the challenger banks’ consumers and customers will be small and medium-sized enterprises. As a former owner and director of a number of SMEs myself, I know from bitter experience how difficult it can be, particularly in the early years of trading, to access banking support. That is why, in my life before entering this place, I was supportive of the move to enable the establishment of more challenger banks willing to deal more effectively with the needs of the SME sector. That is particularly important in the Scottish economy, which is heavily reliant on SMEs.

Analysts, including Gary Greenwood of Shore capital, have been highly critical. He, like others, has argued that the surcharge as currently planned will be counterproductive, and that it will inhibit the ability of smaller banks to grow and compete as effective challengers. He states:

“Banks can lever up their equity by 10 to 20 times, so for every £1 of tax you take off them, you rip £10 to £20 of lending capacity out of the market. It is crazy.”

Crazy indeed. By harming lending and therefore investment, particularly by SMEs, this will also have the effect of creating a further problem for achieving higher levels of productivity in the economy. We need more investment, not less; more lending, not less.

The Government’s explanations of why this burden should be placed so heavily on small profitable domestic banks are unconvincing. It is hard to find any analyst who sees this as helpful for competition, diversity or entry. I hope the Minister will reflect on these arguments, and perhaps address the following questions. Have the Government undertaken a detailed analysis of the likely effect on SME lending in the four countries of the UK, and if so will they publish it? Have the Government changed their policy on the need for effective banking competition? I look forward to hearing their response, and hope that it is strong and purposeful enough to satisfy our concerns.

[Huw Merriman]

I very much support the Government’s proposals, and I particularly welcome the balance that they intend to strike between ensuring that banks make a fair contribution and giving greater recognition to the role that they play in providing jobs and powering growth. I also welcome the fantastic critique given by my hon. Friend the Member for Wyre Forest (Mark Garnier), which has resulted in my putting half my speech into the bin. It would not have been half as eloquent as his.

The hon. Member for Wirral South (Alison McGovern) mentioned the behavioural implications of the proposed change. Scottish National party Members have also touched on that subject and asked whether challenger banks were being punished via their profits. I do not believe that tax itself, either on profits or on the balance sheet, will stop risky transactions. Indeed, the European Union transaction tax would mean that a bank would pay tax at the outset and would then be free to enter into a potentially catastrophic transaction at a flat fee. In comparison, the UK’s approach has been to require banks to set aside capital, with a requirement for more to be set aside against riskier transactions. That is not a tax; it is capital being set aside. By separating the balance sheet of retail banks from the riskier investment banks, the investment bank does not have the capital to enter into that potentially catastrophic transaction in the first place. Measures taken by this Government—and, to be fair, by the prior Government, too—have helped the UK buffer itself well following the crisis of 2008.

[Alison McGovern]

I do not know whether the hon. Gentleman misunderstood or whether I misunderstand him, but the particular concern in relation to profits is the impact on mutuals, which, by definition, have little access to capital and use their profits to grow capital for lending. That is the effect there is concern about. Does he think the proposed tax would be good for mutuals?

[Huw Merriman]

The point made earlier was that this measure helps the likes of HSBC and Standard Chartered, so I took the new clause to be about more than just mutuals, with it being about an unfair benefit being added to certain banks. I am trying to highlight that tax is not necessarily the means to control riskier transactions. Reference was made to those banks, which is why I was extending the point. With an allowance of £25 million set in place, the smaller institutions will be buffered to a certain extent. In addition, I do not believe it is essential that we start treating different institutions differently. Of course some pay less tax because they have fewer profits.

[Mr Steve Baker (Wycombe) (Con)]

I am wondering whether my hon. Friend is as surprised as I am that Labour Members have discovered that tax on profit is harmful. Will he join me in welcoming their discovery that tax can actually do harm? Does he believe it represents a new direction of travel for Labour?

[Huw Merriman]

My hon. Friend puts the point much better than I could have. I commend the Committee for this section of this debate, because it is where it is at its most thoughtful and most articulate—perhaps because it is at the close of business.

The by-product of the regime to which I made reference is that foreign investment banks have moved their head offices from London to their home nations but not necessarily their jobs. That means that UK taxpayers are not liable for bank failure in the same way as they would have been previously. The point I wish to articulate is we should not just think of tax as the means to control the behaviour of banks; we should look at the regulation, and the separation of investment banks and retail banks. That has been a success.

As we move into the newer regime and as banks, to use their own rating, would be on “negative watch”, it is right that they pay an increased premium for the risk that still exists. We should absolutely be on our guard in that respect. It is also right that we treat them as another corporation—with corporation tax but with the tax in addition on profits. To address the point made in an intervention, I do believe that there are buffers within, but I also do not think it requires an amendment to state that the Treasury must undertake a periodical review, because the Treasury will of course do that on a daily and weekly basis. Given the support that this Government have given to allow challenger banks to be set up, the Treasury will of course ensure that the help is provided and that this is on watch throughout.

I welcome this change of approach, and believe the time has moved on from when we have a bank levy towards when we have an ordinary tax on profits. On that basis, I very much support the Government’s line.

[George Kerevan (East Lothian) (SNP)]

I will be brief, Mr Howarth. I just wanted to respond to some of the points made by my colleague the hon. Member for Wyre Forest (Mark Garnier). Nobody from my side of the House disputes that the bank levy was in need of reform. Indeed, he made it sound far too well organised and manufactured; it was ad hoc, arbitrary and unpredictable, and it definitely needed to be replaced by something more predictable. Therefore, we are in no way rejecting the notion of moving to a surcharge on profits, which could be an effective way of raising the funds from the banks and, in a sense, of surcharging them for the social service that we provide through the Treasury in protecting them.

I do not go as far as the hon. Gentleman in relation to what I would describe as the gentle blackmail from HSBC and Standard Chartered Bank. If anyone looks at the turmoil in the Asian markets and in China at the moment, they will not think that it was a good moment for a bank to shift their headquarters from London to Hong Kong.

Let us accept that there will be a change. Our view is that we need a mechanism that allows the Treasury to use statutory instruments to vary the rate and the application of the surcharge as it evolves and as we learn whether it is impacting adversely on some banks, building societies and mutuals. That is all we are saying. We are trying to find common ground with the Chancellor. We are moving in the same direction, but the Government are rushing the application. They are making it too uniform and are choosing arbitrarily a rate of surcharge that is simply designed to reproduce the current level of tax yield. That is a bad way of approaching how we manage the surcharge on the banks.

I suppose the essence of the argument—this is really where I want to go—is that there are differences between the challenger banks and the larger banks. Those differences are not just based on their level of profit. It is quite clear that it is proportionately more expensive for the smaller banks to provide the capital to support the credit risk in their loans once it is weighted against their risky assets. We know that from the work that has been done by the Competition and Markets Authority, and I would prefer to take its view rather than the special pleading from the banks—even the special pleading from the challenger banks.

The Competition and Markets Authority has looked at the expense to the different scale of banks in providing the capital to support their credit risk. It has come up with figures that say that on a typical £100,000 loan to a small business, a challenger bank, or a bank of that scale, has to put aside roughly £8,000 per £100,000 loan, compared with about £6,000 from one of the very large banks. The mathematical reason for that is quite simple; it is not rocket science. The smaller bank with the smaller balance sheet is carrying proportionately more systemic risk on each loan. When a small bank loses a customer or has a non-performing loan, it is quite costly to it given the scale of its balance sheet. Therefore, when we start doing the risk-weighted analysis, it will have to put more capital by; it will cost it more. It is economies of scale. Big banks have economies of scale. A specific non-performing loan to a small business is a relatively small risk to the larger bank, so the cost to it will be small. It follows on from the matters of big and small economies of scale. Nevertheless, they act as a barrier to the smaller banks being able to grow.

If we impose a uniform profits surcharge on all the banks, there is a higher real burden on the smaller banks. I would like the Treasury to take that into account as we move along, and have the powers to be able swiftly to shift the rates. I was trying not to be prescriptive in laying down how we would set different levels for different kinds of banks; I wanted a system to evolve. I want the Treasury to have the powers to do that so that if it does prove to be more costly for the challenger banks and to be taking more from their profits and their ability to raise capital, we might think about different kinds of banding, and that would be up to the Treasury to consider. We are simply saying that the smaller banks have different cost structures and therefore different risk elements, which means that imposing a single levy on profits across all the banks, big and small, is a bit too arbitrary and a bit too ad hoc. In other words, it brings us back to the sort of problems that we had with the original bank levy.

Finance Bill

Huw Merriman Excerpts

Tuesday 21st July 2015 Commons Chamber

[Catherine West]

I thank my hon. Friend for her intervention. Does she also remember the huskies trip? I am not sure whether we will be visiting polar bears any more with the huskies, but I remember around 2009 the promise to which she refers and, for a short while, a real sense that we were generating some momentum and genuinely approaching green issues with energy and commitment.

I wonder whether, as we move towards the Paris summit, we will see any improvement and any genuine debate, because this Budget fails to give any hope on the green agenda. I am pleased that Opposition colleagues have chosen the climate change levy as one of three topics to be debated in Committee in September. That is when we will all have more of a chance to debate this important deal—or lack of—and when we will table amendments.

Some of the statements on taxation are quite welcome, particularly those provisions that assist people on low and medium incomes. However, there are other provisions with which we could do more. In particular, we could consider gaining a little bit more from the financial sector. As we know, there have been some announcements on anti-avoidance measures. Provided that HMRC is resourced adequately to deal with those, we might see some positive developments in that regard.

However, we could be doing much more in relation to private equity and hedge fund managers. We could strengthen some of the proposed measures around the “Mayfair” tax loophole. For example, we could look at how private equity fund managers manage to shrink their tax bills, arranging to pay 28% capital gains tax rather than 45% income tax, which is what we could be getting.

Members will be aware from their advice surgeries that we are still in the tail of the recession. There should not be one rule for certain people in society and another rule for others. That is why we need to consider charging that 45% income tax rate—rather than the 28% capital gains tax—on the portion of income paid out of the profits of the funds that those managers manage, which is called carried interest. Carried interest is their remuneration for managing other people’s money and should therefore really be taxed as income tax. Their ability to pay capital gains tax on what is properly income also allows fund managers to avoid paying any national insurance contributions on a major portion of their income.

The “Mayfair” tax loophole also permits some fund managers to reduce their tax bills even further, sometimes qualifying for additional capital gains reliefs such as entrepreneurs’ relief. I do not hear that being offered to the small cafés or the small businesses on our high street, but the entrepreneurs’ relief for people in the City allows them to pay just 10% tax on up to £10 million of their carried income. That is why I throw back the idea that this is a Budget for working people—perhaps it is a Budget for those who work in the square mile. Some people in the City are still getting a 40% tax cut. They are paying less tax on much of their income than many nurses and teachers. We know what is happening to public sector recruitment: we are losing nurses and teachers every day, because they tend to earn much lower wages than others, and of those wages they are paying a higher proportion in tax than our friends in the City.

[Huw Merriman (Bexhill and Battle) (Con)]

Is it not the case that raising the tax threshold to £12,500 may help not only those in the City who are paid very low rates, but the very people that the hon. Lady is talking about outside the square mile?

[Catherine West]

I am very concerned about those people who are on that level. Indeed, many people in the financial sector, a large percentage of whom live in my constituency, work very long hours and are on low pay. I welcome some of the new tax changes, which is why I will abstain rather than vote against Second Reading tonight. However, we also know that certain others who go in on the tube with those lower paid workers, or ride their bikes in with them, might, in a good year, be earning between £1.2 million to £15 million or more. Using the private equity industry’s own statistics, we estimate that the “Mayfair” loophole may be sacrificing UK tax revenues of between £280 million to £700 million every year. That is likely to be a conservative estimate as it does not take into account forgone national insurance contributions, or the effects of some fund managers qualifying for additional entrepreneurs’ relief. Given that the Chancellor’s smaller plans are predicted to raise more than £350 million a year, we can be confident that a further tightening of the rules will raise substantially more. A simple legislative change, similar to those already achieved in our neighbouring European countries— I make no apologies for mentioning the word “Europe” in this Chamber—could ensure that some of the highest earners of the financial sector start to pay a fairer share in tax. That could be introduced as early as in this Bill, with a small change to the proposed legislation.

In conclusion, let me make some general points about productivity. The first relates to childcare, and this Budget and Bill and the various elements of productivity that need to accompany them. I understand from press reports this morning that various Departments face a difficult time on their savings targets, and I am worried that some of the good things that have come out of this Budget, small though they be in number, will be undermined by things such as the lack of childcare provision. In particular, I am thinking about cuts to local authorities, which are trying to introduce the Government’s 30-hour pledge on childcare. Children’s centres and Sure Start centres will once more be facing terrible cuts. We know that it is crucial to get women, and parents in general, back into the workforce, and that that is key to proper growth in the economy. Many economists have estimated that if we can return women to the workforce within two years after the birth of their first child—and indeed after the birth of subsequent children—the economy can take off exponentially. In many local authority areas, however, children’s centres and nurseries are closing, whereas they should be remaining open to provide that crucial childcare.

--- Later in debate ---

[Huw Merriman (Bexhill and Battle) (Con)]

I applaud the content of the Finance Bill, and I am keen to explore certain clauses within it. Before I do so, may I applaud Labour Members for agreeing with the annual investment allowance and rise in the tax allowance? There may not have been as many Labour speakers as one would expect, but those who spoke have been considered in their tone towards the Bill. However, as someone from a socialist background, it makes me sad to see no Labour Back Benchers in the Chamber. I was always told proudly by my parents that Labour was the party of Keir Hardie and Nye Bevan, and those empty Benches would be a huge disappointment to them. None the less, we can perhaps all agree that the argument is being won on the Government side of the House.

[Mr MacNeil]

Will the hon. Gentleman give way?

--- Later in debate ---

[Huw Merriman]

No, I will not give way. I will make some progress, if I may, and refer to my predecessor, Mr Greg Barker, who organised the husky trip that was lamented by the hon. Member for Hornsey and Wood Green (Catherine West).

Clauses 1 and 2, on the income tax and VAT locks, and clauses 3 and 4, on the personal allowance and national minimum wage provisions, demonstrate that making work pay means giving workers more of their pay. Raising the personal allowance to £12,500 shows that the Government are committed to that aim. The increase in the tax allowance will take more than 800 of my constituents in Bexhill and Battle out of the tax system altogether, and a further 50,000 of my 80,000 electors will also benefit from the tax allowance increase. Indeed, my constituents will further benefit from the tax locks over this term, which will allow them to plan, save and spend in an organised manner, without fear of the Government raids so beloved by Chancellors between 1997 and 2010.

[Mr MacNeil]

Once the hon. Gentleman’s constituents get past the Blairite spin he is giving us, I am sure they will find that their incomes have actually decreased. Does he think that his constituents will be grateful to him when the changes go through and they find that their incomes have decreased, thanks to this Tory Government?

[Huw Merriman]

My constituents will be delighted that after the terror that this Government took over from, we are seeing earnings and incomes get back to their pre-recession levels. They are already there for those at pension age, of whom there are many in my constituency, and are getting there for those in other age groups. My goodness, if this Government had not taken the difficult decisions that the hon. Gentleman’s party has opposed all the way through, we would not be in the positive situation we are now in.

[Stewart Hosie]

Will the hon. Gentleman give way?

[Huw Merriman]

No, I will make some progress, if I may.

I was bemused by the Opposition’s attempts to lay claim to the policy of tax locks. Perhaps by losing the election and allowing this Government to gain a majority and introduce these clauses, they have brought the policy about.

This is a one nation Government that seek to help people into work and, in so doing, give them hope, aspiration and pride. By taking those who work 30 hours a week on the minimum wage out of the tax system, the Government are committing to the principle that work pays. Furthermore, by committing to review that principle and assess the tax position of an individual working 30 hours on the national minimum wage when reviewing the tax allowance over and above £12,500 in the future, the Government are demonstrating that they really mean for that proposal to be here to stay.

[Alison McGovern]

I am listening carefully to the hon. Gentleman. I am especially pleased to hear that he pays great attention to the views of his constituents. When a single parent with two kids who loses thousands in tax credits comes to his surgery and explains how much worse off they are in work, what is he going to say?

--- Later in debate ---

[Huw Merriman]

I will say that this Government, by creating millions of jobs, will give that individual the opportunity to get into work. If I were on the Labour or SNP Benches, I would say, “We will keep you on subsidies, keep you in your place and not give you hope, aspiration and a better opportunity for your life.”

[Alison McGovern]

Will the hon. Gentleman give way?

[Huw Merriman]

No, I will not give way. I will make progress.

The first four clauses demonstrate that the Government are on the side of the worker, not the abstainer.

Clauses 7 and 8 relate to corporation tax and the annual investment allowance. I welcome the measures to reduce corporation tax to 19% by 2017 and 18% by 2020. In my constituency of Bexhill and Battle, the Government and East Sussex County Council have ploughed millions of pounds into a new link road between Bexhill and Hastings, which will deliver new homes, 500,000 square feet of new business park and a country park. The new link road and the labour that will come from the new housing will, if delivered in conjunction with the high-speed rail project from Bexhill to London St Pancras that we hope to get, encourage new businesses to relocate and existing businesses to expand.

However, we need to do more than deliver infrastructure. We need to encourage entrepreneurs to take risks, create new jobs and deliver wealth. That wealth will then be delivered to the Exchequer and the country as a whole. I therefore welcome the cut to corporation tax, which tells the world’s companies that UK plc is open for worldwide business, with the lowest corporation tax in the G7. I hope to use the favourable economic climate to champion the idea that companies should locate themselves in my constituency and to end its status as a constituency with no major corporate headquarters within its boundary.

I welcome the permanent status of the annual investment allowance. The temporary two-year allowance did much to boost spending on plant and machinery in rural constituencies such as mine. The trickle-down effect on suppliers, producers and small businesses has been immense. I welcome the manner in which my Government use the tax system to give firms more money to invest, rather than using the model of Government borrowing and spending, which crowds out private companies from the market.

The final clause that I wish to consider is clause 9 on the increased nil-rate band for homes that are inherited by descendants. Representing Bexhill and Battle as I do, I feel that the policy of effectively increasing the inheritance tax threshold to £1 million per couple will be highly relevant and even more highly welcome. Individuals who have worked hard and done the right thing deserve the right to hand on the fruits of their labour to their descendents, and that is particularly welcome in a period when interest rates on savings and investments has been low and delivered low yield, albeit that that has helped those with mortgages.

I welcome the mantra behind the Bill: lower taxes to make work pay; fairness by clamping down on those who do not pay their fair share of taxes; and rewarding endeavour by encouraging companies to invest and expand in this country by sending out positive signals that business is open under this Conservative Government. I look forward to proclaiming proudly the Government’s economic policies over the summer, and I am pleased that Labour Members have already stolen a march and are perhaps doing so already.

Oral Answers to Questions

Huw Merriman Excerpts

Tuesday 21st July 2015 Commons Chamber

[Mr Osborne]

We are well aware of the difficult situation with the finances of the Northern Ireland Executive, and of the objections in some quarters of the Assembly to what are, I think, sensible welfare reforms that will help people in Northern Ireland into work. We are working with the First Minister and the Deputy First Minister to resolve that impasse, but it is clearly not sustainable to allow a devolved Administration to ignore the controls placed on them. I know that the hon. Gentleman and his party support that position, and we are working with him, and others, to resolve the issue.

[Huw Merriman (Bexhill and Battle) (Con)]

Will my right hon. Friend continue to encourage Opposition Members to support our Budget proposals, noting that the legislation for a budget surplus comes before the House later this year?

Tax Credits (Working Families)

Huw Merriman Excerpts

Tuesday 7th July 2015 Commons Chamber

[Huw Merriman (Bexhill and Battle) (Con)]

I, too, will take no interventions, following that example. I thank those Members who came in earlier, intervened and then walked straight out again, eating into the time available for my speech in the process.

In opposing the motion, I wish to explore three areas mentioned in—or, in fact, omitted from—the proposal. The first relates to in-work tax credits, what they were designed to achieve and what has happened in practice. “In-work tax credits need substantial reform to end the practice of employers paying low wages which are topped up by the state.” I was heartened to read that they were the words of Alistair Darling, who introduced tax credits in the early 2000s. I am a firm believer that it is always wise to listen to those who pioneered a measure, as they are best placed to review whether it is meeting the objective it set out to achieve.

I submit that tax credits were not introduced to encourage large and profitable employers to keep wages low and to keep employees on the lowest rung of the ladder or risk losing a taxpayer-funded subsidy. Tax credits were introduced to incentivise employment, but with the view that as the employee showed his or her worth, their pay and prospects would increase and they would move beyond the tax credit threshold. However, I contend that tax credits have instead acted as a drag on real-time pay increases, because to increase pay would mean that the employee no longer received a top-up from the state. As such, they tend to keep employees in part-time work or on lower pay. With hindsight, it might have been better to put a time limit on the payment of tax credits, in the way this Government have done for the two-year national insurance holiday.

The second area relates to whether there is a better model for Government intervention in working pay. The motion talks about a belief

“that people should be given support and incentives to find employment and stay in employment”.

Indeed, with over 2 million new jobs having been created since the Government came to power in 2010, there is compelling evidence that the Government have supported people to find work. The motion should talk about the need to incentivise employers and employees to move up through the pay scales, which will boost spending in the economy overall and lead to increased productivity. The Government have provided incentives by reducing the tax rates for 26 million workers. However, while the Government, and therefore the country, find the money to give employees more of their own money through lower taxes, we continue to pay employers for employing staff. It is not as if the Government have increased the tax burden on companies to compensate for the cost of tax credits, because corporation tax has been reduced from 28% in 2010 to 20% in 2015.

Assessing whether it is possible to phase out tax credits, with an expectation that employers will cover the pay differential to staff, will free up more money for essential public services, such as health and education, where funding would be better utilised by us as a whole. Under the alternative—stepping out of private pay provisions that should be set by employer and employee, and funded by the employer only—there is a case for the Government sharing the cost of this reduction with employers and employees, with some of the savings being recycled as further corporation tax and income tax reductions.

The third point is more of an omission. It relates to high earners. The motion

“urges the Chancellor to guarantee that any assistance in the July 2015 Budget is focused solely on people on middle and low incomes.”

I fear that is another attempt to try to segregate those on higher incomes from the policies affecting this country. It should be remembered that the top 3,000 earners pay more tax to the Exchequer than the lowest 9 million—a third of all workers. Many in this House would say that is eminently sensible and just. However, it is crucial for any Government to assess whether the tax rates applicable to higher earners make economic sense for the rest of us, and not merely to play politics by demonising those who do so much to keep our public services funded through their own risk-taking and endeavour. In the last financial year, the wealthiest were funding a greater share of Government spending than at any time in history, notwithstanding the reduction of income tax from 50p to 45p. The wealthy are now largely weaned off the state.

In conclusion, the Government have created a remarkable economic climate, with 2 million new jobs and a 40% reduction in out-of-work benefits. The challenge, as we hopefully move to a period of growth and rising pay and incomes, is to set the jobs market free, lift people above the tax credit threshold, and, in so doing, ask employers to contribute the full share of pay.