Landfill Tax Fraud
James Cartlidge Excerpts(1 year, 3 months ago)
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The Exchequer Secretary to the Treasury (James Cartlidge)
It is a real privilege to respond to today’s Backbench Business debate. I congratulate the right hon. Member for North Durham (Mr Jones) and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) on calling this debate. I have only responded to one of these Backbench Business debates before, and it was when I was a Justice Minister, and, sure enough, one of the proponents was my right hon. Friend. It was on the subject of strategic lawsuits against public participation, so he does cover a diverse range of issues, but that is a credit to him.
The shadow Minister, my regional neighbour, referred to the fact that the right hon. Member for North Durham had called himself an anorak on this subject. I agree with the shadow Minister that, what the right hon. Gentleman has shown—as have the hon. Member for Blaydon (Liz Twist) and my hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell)—was a clear passion for this subject. He raised some very serious and important constituency matters.
I want to assure all hon. and right hon. Members that we do agree that landfill tax fraud and wider waste crime is an important concern in itself, but it also has a distortive effect on legitimate waste management businesses and the waste management sector, causes significant environmental damage and seriously impacts on local communities. Every single Member who has spoken today—with an emphasis, it should be said, on quality rather than quantity of colleagues participating—has clearly emphasised, above all else, the impact on their communities. I totally understand and sympathise with that point.
I will just canter through the history, as the shadow Minister did, because it is very important. We had a long established habit of landfilling our waste. As recently as the 1990s, more than 90% of household waste went to landfill, with only 5% of household waste being recycled. As he said, a landfill tax was introduced in October 1996 to help remedy that. The idea was to encourage the diversion of waste away from landfill and towards more environmentally friendly waste management options, such as recycling, reuse and recovery.
Having introduced the tax, it is also true, as the right hon. Member for North Durham pointed out, that successive Governments have applied escalators to that standard rate. These escalators increased the rate but also provided lead-in time and certainty that was welcomed by the sector, which was looking to invest in more sustainable waste management options. The tax has been widely recognised as being successful in contributing to the fall in landfill waste.
Where are we now? Since 2000, local authority waste sent to landfill in England has fallen by 90% and household recycling rates are now at around 45%. The tax collected in the last financial year was £667 million, which is in many ways a successful tax. Obviously, I am speaking primarily from the Exchequer’s point of view, but we have achieved a substantial policy goal there. We should think of a parallel universe in which we did not achieve that reduction in landfill—imagine how many square miles of our wonderful countryside would now be taken up by landfill. It is a striking thought.
David Linden (Glasgow East) (SNP)
I do not want to intrude too much on this debate, but the Minister is right when he talks about the importance of moving more towards recycling and less to landfill. Will he join me in calling on Glasgow City Council to reject the planning application from Patersons of Greenoakhill, a landfill site that blights communities in Mount Vernon, Carmyle, Baillieston and Broomhouse?
James Cartlidge
It is fair to say that the hon. Gentleman has got that on the record, but he will appreciate that I am not going to comment—it is devolved, but beyond that it is a planning matter and not a matter for the Exchequer. He has got it on the record, though.
It is true that landfill tax has inevitably been relatively difficult to enforce, and non-compliance is high. The right hon. Member for North Durham is absolutely right that this is partly due to increases in the standard rate but, obviously, as the tax has increased, it has become more effective at incentivising disposal other than landfill. In parallel, there has inevitably been an increase in abuse and non-compliance.
Mr Jones
Listen, as I said in my contribution, I have no problem with the actual policy. It has been effective. I question the figures because, frankly, nobody knows what they are. The Environment Agency does not know what they are. What I cannot get my head around is this: the Minister says the tax has been difficult to enforce. Talk to people in the industry—they have known that for years. They have known every scam that has been going on for the past 27 years, and nothing has been done. That is what I just do not understand.
James Cartlidge
I was just being frank with the right hon. Gentleman. It is a relatively difficult tax to enforce, compared with others, but that does not mean we are not determined to do everything possible to deal with non-compliance. Let me turn to some of the specific points that he and other colleagues raised.
James Cartlidge
I will make a bit of progress first and turn to Operation Nosedive, which I think every single colleague raised. First of all, I have no information whatsoever on the etymology—it is fair to say it is striking. As right hon. and hon. Members know, the legal obligations in relation to taxpayer confidentiality mean that it would be inappropriate for me to discuss the specific details of Operation Nosedive. However, the Public Accounts Committee acknowledged in its report that HMRC had been frank about the challenges associated with investigating these types of cases and that a high standard must be met for any criminal investigation to reach the prosecution stage.
The right hon. Gentleman for North Durham mentioned the operational independence of HMRC, to which I would just add—perhaps referring back to my previous role as Justice Minister—that perhaps the most fundamentally independent institutions under our constitution are the judiciary and, of course, the Crown Prosecution Service as independent prosecutors. It is ultimately its decision whether to prosecute, based on the evidential threshold.
Liz Twist
Of course I will ask why it happened and ask for details, and of course I got the reply about confidentiality. But does the Minister not accept that after this period of time—six and a half years that we know about, and time before that—it is just not reasonable to say, “We can’t tell you how much it costs”, because that is a matter of public interest.
James Cartlidge
As I understand it, the figure is public—[Hon. Members: “It is now!”]—following robust campaigning by colleagues present in the Chamber.
Turning to the linked point about decriminalisation, I emphasise that most of HMRC’s work to tackle fraud makes use of civil powers. HMRC does use criminal powers selectively to focus on criminal investigations at the top end of the highest harm and the most complex organised crime and serious fraud. Just to underline that, in 2021 HMRC closed 700 illegal waste sites, including 200 high-risk sites—I say HMRC, but it might have involved the Environment Agency as well. Significant action was taken, but it was primarily civil in nature.
My hon. Friend the Member for Newcastle-under-Lyme continues to raise Walleys Quarry—
James Cartlidge
I am now on Walleys Quarry, so I will stick with that. My hon. Friend the Member for Newcastle-under-Lyme will have anticipated that I cannot comment on ongoing investigations, but I can confirm that, as I understand it, the Environment Agency continues to regulate the operator closely and to consider appropriate action, in accordance with its enforcement and sanctions policy. While it sounds like there has been some progress, my hon. Friend is being a stalwart constituency MP and is a credit to his constituents. It is difficult for Ministers to go into the data at the Dispatch Box. He made points about the mental health impact and so on, and I sympathise with those who have experienced the impact at first hand.
I will now give way to my right hon. Friend.
Mr Davis
In a way, the Minister’s comments on Walleys Quarry reinforce the point. He says it is a difficult area to enforce in tax terms. I do not actually agree. I think a great deal more could have been done on the ground with Operation Nosedive in terms of physical investigation. Such things would not normally be undertaken, but that should have happened for something as big as this.
I reiterate the point I made earlier to my hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell). The costs of the failure to enforce are financially enormous and socially disastrous, and serve to completely invert the purpose of the policy. The hon. Member for Cambridge (Daniel Zeichner) quoted the industry association and talked about an environmental catastrophe waiting to happen. No, it is an environmental catastrophe waiting to be discovered, because much of it lies underground in our constituencies. This is an area where a huge amount of resource is at play, and a huge amount of effort should be put into dealing with it.
James Cartlidge
I understand where my right hon. Friend is coming from. Speaking generally about all these cases and issues—I will go through all the points that have been raised as best I can, because he also talked about joint working and co-ordination—there is point of principle that we have to accept. We have a tax with a rate that incentivises a behaviour that is a positive policy goal, and that has been achieved to an extraordinary degree in the substantial reduction in waste going to landfill. Precisely because of that mechanism of a financial disincentive, there are some rogue actors—there will always be some—who want to take advantage.
All right hon. and hon. Members raised the point about data. I can confirm that the Government are committed to publishing an annual framework of indicators to track progress towards the objectives set out in the resource and waste strategy, including indicators of illegal waste sites, fly-tipping and littering.
The right hon. Member for North Durham and my hon. Friend the Member for Newcastle-under-Lyme both made points about what constitutes a fit and proper person. DEFRA recently consulted on reforms to the carrier, broker, dealer regime, and those transporting or making decisions about waste must demonstrate that they are competent to make those decisions. DEFRA anticipates phased implementation of the reforms from 2023-24.
James Cartlidge
The hon. Lady will appreciate that that is a DEFRA consultation, but I strongly encourage her to engage with it. She is an assiduous campaigner and contributor to these debates—I think she has been at every debate I have attended—so I pay tribute to her for that. I am sure she will pursue that consultation with interest.
I will talk briefly about the tax gap. My hon. Friend the Member for Newcastle-under-Lyme made the point that there was a spike with the inclusion of unauthorised sites. The latest figures we have, which are for 2020-21, show a gap of 17.1%. That was a fall, but that was partly because the year before was impacted by covid and the year before that we had the spike because of the inclusion of unauthorised sites.
Of course we want to make progress on that, but I speak for the Treasury as a whole when I say that we should be judged as a Government on the totality of the tax gap, because it will vary between taxes; some taxes are fundamentally easier to collect and some are easier to evade. As my hon. Friend the Member for Newcastle-under-Lyme said, the total tax gap was 5.1% in the last year for which we have figures available—a fall from about 7.5% in 2005-06. That is one of the lowest published tax gaps in the world and it has been in decline, which is very positive and shows that overall we are making effective progress, although I agree that we need to make more progress specifically in relation to landfill tax.
Matt Rodda
Will the Minister write to me on the related matter of trying to quantify the scale of fly-tipping costs to local authorities, residents and businesses? I appreciate that it is not the subject under discussion, but it is of enormous concern to many people across the country. In my area of Reading, we have huge problems in the town centre and on other sites, often on private land, with enormous cost to neighbouring properties.
James Cartlidge
The hon. Gentleman is right that it is not within my bailiwick, but I am happy for my officials to get in touch with him and let him know who is the appropriate Minister.
On waste incinerators, we should acknowledge that energy-from-waste plants have made an enormous contribution: the biggest factor in the reduction in landfill is the use of energy-from-waste plants. In my county of Suffolk, we have a very successful operation. When what would have been landfill is burned, it is used to create energy for homes. That is a joined-up operation and it has made a massive difference.
On joint working, I think it was my right hon. Friend the Member for Haltemprice and Howden who made the point that there was a failure of co-ordination. As he knows, in 2020 we established the joint unit for waste crime in the Environment Agency, in partnership with HMRC, the National Crime Agency and others, to tackle organised waste crime. Through shared intelligence and enforcement, the joint unit is identifying, disrupting and deterring criminals, and I can confirm that between April 2020 and November 2022, the joint unit worked with more than 100 partner agencies and engaged in 175 multi-agency days of action, resulting in 51 arrests by other agencies.
I turn to the report by the Public Accounts Committee, which all colleagues have mentioned. As right hon. and hon. Members know, the National Audit Office and the Public Accounts Committee last year published reports on Government efforts to combat waste crime. Despite the work done to date, the Government are not complacent and recognise that more needs to be done. That is why we accepted and are implementing all the recommendations in the Public Accounts Committee report, “Government actions to combat waste crime”. Importantly, we are not going from a standing start; there are, as I have just demonstrated, a host of multi-agency efforts already under way.
The hon. Member for Blaydon mentioned the landfill tax review. I can confirm that we launched the landfill tax review in 2021 to explore how the tax’s design can continue to support environmental goals. The Government are considering responses to the review’s call for evidence, which closed in February 2022, and we hope to issue a response in due course. The Public Accounts Committee has recommended that DEFRA should work with HMT and HMRC to ensure that the review of landfill tax takes into account the incentives that the tax, as currently designated, creates to commit waste crime. We agree with that specific recommendation and we will look at that factor.
Mr Kevan Jones
This question is within the Minister’s bailiwick: as colleagues have said, the higher rates have incentivised waste crime, so will he engage with the Environment Agency to look at the test for labelling waste as inert and the way it is enforced? Frankly, it is frankly a farce. Operators are allowed to do the test themselves and put it forward as a bulk of waste. There might be some inert waste on the top, but under it there will be active waste. This is about enforcement, but it is also about whether we should just abolish it altogether.
James Cartlidge
The right hon. Gentleman makes an important point. He will appreciate that I am not going to predetermine our review, but it is important that we look at those precise points. That is why we have established the review. As I say, we will respond in due course to the responses we have received to the call for evidence.
I turn finally to HMRC, which lots of colleagues have mentioned. A further recommendation from the PAC was for HMRC to respond on how it has improved its approach to landfill tax prosecutions. It did that in December. Briefly, HMRC’s approach to landfill tax compliance aims to collect the right amount of tax and support the Government’s aim to create a better environment. Most of its work to tackle tax fraud makes use of civil powers, as I said earlier, but it also uses criminal powers selectively.
HMRC has learned lessons from previous operational activity and is developing a number of criminal investigations into those involved in waste crime—[Interruption.] Yes, there are ongoing investigations to confirm that for the right hon. Member for North Durham, who is chuntering away in his invisible anorak on the Labour Back Bench. The investigations are at an early stage of development, and the House will understand that it is not appropriate to provide further detail at this point.
Lastly, colleagues on both sides of the House have raised the point about resourcing, including the hon. Member for Cambridge (Daniel Zeichner). HMRC has deployed more resources to increase the number of civil investigations of landfill tax non-compliance. Actions between 2018 and 2021 have already secured £110 million of additional tax revenue, and in future we expect at least £50 million of extra tax to be paid annually. HMRC increased the operational compliance resource dedicated to landfill tax in 2017 and 2018, doubling capacity to 50 people. It is deploying a further 10% more resource specifically to increase the number of civil investigations of landfill tax non-compliance. That was funded in the spring Budget of 2022.
To conclude, I thank the “Landfill Four” for their excellent contributions, and my right hon. Friend the Member for Haltemprice and Howden and the right hon. Member for North Durham for securing the debate. Landfill tax has helped to transform the approach to waste and resource management, with reductions in waste to landfill and increases in recycling rates. However, there is and will always be more work to tackle criminals looking to take advantage of the system. Finding that balance and achieving both those things is crucial, and I am determined that we will.
Energy Bills Discount Scheme
James Cartlidge Excerpts(1 year, 4 months ago)
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The Exchequer Secretary to the Treasury (James Cartlidge)
Following a review of the energy bill relief scheme (EBRS), the Government today announce a new energy support scheme for businesses, charities, and the public sector. The new energy bills discount scheme (EBDS) will provide all eligible UK businesses and other non-domestic energy users with a discount on high energy bills until 31 March 2024, following the end of the EBRS in March 2023.
This will help businesses locked into contracts signed before recent substantial falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again.
This further support follows the Government’s unprecedented package for non-domestic users through this winter through the EBRS, worth £18 billion per the figures certified by the OBR at the autumn statement.
At autumn statement, we were clear that such levels of support, unprecedented in their nature and scale, were time-limited and intended as a bridge to allow businesses to adapt. Wholesale energy prices are falling and have now gone back to levels seen just before Putin’s invasion of Ukraine. But to avoid a cliff-edge for businesses and provide reassurance against the risk of prices rising again, we are launching the new energy bills discount scheme, giving them the certainty they need to plan ahead.
The new scheme strikes a balance between supporting businesses over the next 12 months and limiting the taxpayer’s exposure to volatile energy markets, with a cap set at £5.5 billion based on estimated volumes.
Through the scheme, from 1 April 2023 to 31 March 2024, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill, except for those benefiting from lower energy prices. The relative discount will be applied if wholesale prices are above a price threshold of £302/MWh for electricity and £107/MWh for gas.
A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive—predominately manufacturing industries. A long-standing category associated with higher energy usage, these firms are often less able to pass through cost to their customers due to international competition. Businesses in scope will receive a gas and electricity bill discount based on a price threshold, which will be capped by a maximum unit discount of £40.0/MWh for gas and £89.1/MWh for electricity. This discount will only apply to 70% of energy volumes and will apply above a price threshold of £185/MWh for electricity and £99/MWh for gas.
This Government are committed to supporting UK business and the voluntary sector, and through this package we aim to give organisations the certainty they need to plan through next winter.
[HCWS486]
Non-domestic Energy Support
James Cartlidge Excerpts(1 year, 4 months ago)
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The Exchequer Secretary to the Treasury (James Cartlidge)
With permission, Mr Deputy Speaker, I will make a statement on how the Government are continuing to support businesses, charities and the public sector with their energy bills. Before I outline how we are helping businesses, I remind the House why we are in this position.
Although wholesale energy prices are now falling, some businesses are still exposed to higher energy bills after Putin’s illegal invasion of Ukraine pushed prices far above their historical averages. Putin’s military aggression has put households and businesses across Europe and beyond under serious financial pressure. For that reason, we have already provided a package of support for non-domestic users through this winter that is worth £18 billion, as per the figures certified by the Office for Budget Responsibility at the autumn statement.
The energy bill relief scheme gave a direct discount on energy costs for all eligible businesses. It lessened the shock of the immediate increase in prices; it gave businesses the certainty they needed to plan for the winter; and it is one of the most generous packages in Europe. It comes on top of our support for households, including the energy price guarantee worth £900 this winter according to the OBR, which further helped to support consumers and the businesses that rely on them. I remind hon. Members that that followed unprecedented business support during the pandemic.
The Government are proud to have helped businesses through a twin combination of unprecedented shocks that nobody could have expected a few years ago. We will always do what is necessary to keep the economy and the British people secure, which is why the Prime Minister has been clear that we will halve inflation this year to ease the cost of living and give people financial security before returning it to target. That is also why we unleashed the furlough scheme, which avoided 2 million forecast job losses; a groundbreaking vaccine roll-out, which saved lives and ensured the safe reopening of our economy; grants for pubs, shops and other retail businesses; and now, humanitarian and military aid to Ukraine as it fights for democracy, with the UK giving more than any other nation bar the US. All those steps have been right, but all have come at a significant combined cost, leaving our national debt standing at £2.48 trillion or 98.7% of GDP.
To secure the future of public services, we have committed to get national debt falling, including two new fiscal rules—that the UK’s national debt must fall as a share of GDP by the fifth year of a rolling five-year period, and that public sector borrowing in the same year must be below 3% of GDP.
As we look to the next steps in supporting businesses, it is therefore in our national economic interest that we chart a path to withdrawing such support and restoring fiscal sustainability, but in a sensible and fair way that strikes a balance between supporting businesses now and protecting taxpayers’ exposure to volatile energy markets. As my right hon. Friend the Chancellor said at the autumn statement, one of our key economic priorities is stability, and we cannot have stability without financial prudence. So all Members must recognise that there is a balance to be struck, and it is not sustainable for the Exchequer to continue to support large numbers of businesses at the current level.
No Government—no responsible, serious Government —anywhere in world can permanently shield businesses from this energy price shock, and we must cap the taxpayer’s exposure to volatile energy prices. We have also been clear throughout that such levels of support were time-limited and intended as a bridge to allow businesses to acclimatise. Firms need to adapt and invest in energy efficiency to remain viable, and as they do so, we will be at their side to help, including with £6 billion of additional investment to cut the UK’s overall energy use.
Yet we remain fully alive to the fact that businesses would be facing a cliff edge as support comes to an end. To avoid this, we are going to provide a further package of transitional support, so today I can confirm a new energy bills discount scheme for businesses, charities and the public sector. Up to £5.5 billion will be made available from the end of the energy bill relief scheme period on 31 March until 31 March 2024.
The Chancellor has been working with the key industry stakeholders to get this right. We heard that they needed a 12-month rather than six-month scheme. We have listened and, as a result, I confirm that we will be providing a year’s worth of support for all non-domestic bills beyond the current six-month scheme. This will give certainty and ongoing assistance to businesses locked into contracts signed before recent substantial falls in the wholesale price, and provide others with reassurance against the risk of prices rising again. It is different from the previous energy bill relief scheme, but provides long-term certainty for businesses and reflects how the scale of the challenge has changed since September last year.
From 1 April 2023 to 31 March 2024, non-domestic customers that have a contract with a licensed energy supplier will see a unit discount of up to £6.97 per megawatt-hour automatically applied to their gas bill and a unit discount of up to £19.61 per megawatt-hour applied to their electricity bill, except for those already benefiting from lower energy prices. This means a typical pub can expect a taxpayer-funded discount of up to £2,300 over 12 months and a typical small retail store will get up to £400 off its annual energy bill.
We also recognise that some businesses, especially intensive users such as major manufacturers, are highly exposed to both energy prices and international competition, which means they are unable to pass through or absorb all of these costs. I can therefore confirm that the Government are targeting a substantially higher level of support beyond April 2023 to energy and trade-intensive sectors, providing a major boost for the manufacturing sector. Businesses in scope will receive a gas and electricity bill discount based on a price threshold that will be capped by a maximum unit discount of £40 per megawatt-hour for gas and £89.10 per megawatt-hour for electricity. This discount will only apply to 70% of energy volumes. These firms will continue to be supported at source, based on a price threshold of £99 per megawatt-hour for gas and £185 per megawatt-hour for electricity. This means a typical medium-sized manufacturer would expect to receive nearly £700,000 of direct support over 12 months.
This comes on top of the £13.6 billion of support for firms with business rates over the next five years, a UK-wide £2.4 billion fuel duty cut this year and the protection from full corporation tax rises for businesses making profits of less than £250,000, with those making profits of less than £50,000—the vast majority—not facing any rate rise at all.
I have set out how this transitional support will reduce overall as a cost to the Exchequer while remaining significant at a time of elevated energy costs and providing certainty for a further 12 months. However, I have also been clear that, just as we withdrew covid support when we moved to a position of living with the pandemic following the success of our vaccination efforts, this energy support is deliberately transitional in nature. That means that in due course we will move unambiguously to a point where there is no universal support for businesses with energy bills from the taxpayer.
Ultimately, it is in the national economic interest that we move to a position where the Government do not routinely subsidise UK businesses. It is not for the Government to habitually pay the bills of businesses any more than it is for the Government to tell businesses how to turn a profit, and it cannot be that the taxpayer props up failing or unproductive firms. Instead, we must protect the forces of free enterprise and entrepreneurialism that have led to our economic success for generations. [Interruption.] Labour Members do not understand free enterprise and entrepreneurialism, and I do not think many of them have ever run a business.
The approach I have outlined today does just that: it is fair in balancing the needs of non-household energy users with the need for prudence and a restoration of competitiveness, and it shows that this Government remain committed to supporting businesses, charities and the public sector through these challenging times. I commend this statement to the House.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
Thank you, Mr Deputy Speaker, and happy new year. I thank the Minister for advance sight of his statement.
Businesses have been crying out for some much-needed clarity. In September, the Government promised a review to look at targeted support, saying of the energy bills support scheme:
“We will publish a review…of the scheme in three months”.
I noticed the Minister made limited mention of this review. Could he tell the House where it is, who was consulted, what were the outcomes and whether it even took place? Many industries have suspected that the review was always intended as a delaying tactic. They have strung businesses along, playing for time, just like everything the Government do—living day to day and crisis to crisis, and hoping the blame does not land on them.
It is criminal that this sticking-plaster politics has forced British businesses into the same cycle, with firms unable to plan and not knowing what the next month will bring, let alone the next quarter. Business owners and their staff have faced two Christmases racked with worry because of covid and half-baked announcements from this Government, not forgetting the £6.5 billion of money recklessly squandered by this Tory Government. Firms were promised clarity last year, but Tory chaos meant that they spent another Christmas worrying about their energy bills. Will the Minister apologise today for the distress and uncertainty caused by the Government, not least for the hospitality sector during what should have been its most profitable trading period? What has been announced today is just a sticking plaster. What are the Government doing to ensure the take-up of energy efficiency measures for small businesses, and what plan does he have to deliver energy security and lower bills for the long term, or are businesses to be treated to this merry-go-round every winter?
The Minister spoke about support for energy-intensive industries. Can he confirm what businesses are in scope and how this will be implemented? Can I point out that Wade Ceramics in Stoke-on-Trent closed while the Government dithered and delayed over energy support? What does he have to say to those 140 workers? Our steel producers paid twice as much per megawatt-hour than German producers did last year. [Interruption.] Conservative Members do not want to hear this, but these are the facts. Reports from the Scunthorpe plant are deeply alarming, so can I take this opportunity to ask what steps his Government are taking to secure the future of the domestic steel industry? Will the Minister confirm today that he will commit to the long-term investment that steel needs to protect our manufacturing base and national security?
With delayed announcements, constantly changing plans and a Government living day to day, they are forcing industries to do the same. I agree that firms need to invest, but what steps have the Government taken to make this possible? There was no mention in the statement of support for businesses investing in green technology. The British Chambers of Commerce and Make UK are very clear that, rather than inspiring business confidence and investment, the Government’s policy decisions have reduced confidence.
It simply does not need to be like this. Labour would back British businesses and give them the certainty they need to plan and invest, scrap business rates with a fair tax on the online giants, have a long-term industrial strategy alongside which our industries can invest and, crucially, deal with the energy crisis at source.
For 13 years, Britain’s energy policy has been a perfect example of sticking-plaster politics. Of course the Government are not responsible for the effects of the war in Ukraine, but the truth is that it was not the war that banned onshore wind, scrapped the home insulation and shut our gas storage facility; the Tory Government did that. That is why we are so exposed as a country, and families and businesses are paying the price. Labour’s green prosperity plan will deliver green electricity by 2030, getting bills down, ending the cycle of Tory crisis; the choice is between proper energy security that benefits Britain and a real plan to back British business with Labour, or an out-of-touch Tory Government with no ideas.
James Cartlidge
I am grateful to the hon. Lady. She asked what happened to the review. Well, I am making a statement about the results of the review, and the policy decisions that we have come to a conclusion on, based on the review and consulting all the key stakeholders in business and industry and also the voluntary sector, who I spoke to only this week.
The hon. Lady used the word “criminal” to describe the announcement today. I think that is a little over the top. We are continuing to provide significant support for businesses. We have a universal scheme, plus the targeted support for energy and trade-intensive sectors, with significant expenditure of up to £5.5 billion. We must balance this, however. She talked about failing to support business, but I remind the House that at this precise moment we are in the middle of a six-month scheme worth £18 billion, which is an extraordinary sum.
The hon. Lady said that we have somehow betrayed hospitality. The last statement I made, the day before the House rose for the Christmas recess, was that we would be freezing alcohol duty for another six months. We have supported pubs throughout the pandemic. To a typical pub, this will be worth about £2,300 in support over the next 12 months. Beer duty is now at the lowest real-terms level for 30 years, having been cut or frozen in nine of the last 10 Budgets, and spirits duty is at the lowest level in real terms since 1918, and of course we have extended the discount on business rates for the hospitality sector—previously it was 50% and we are increasing it to 75%. So there is a huge amount of support for hospitality.
The hon. Lady called for energy security. I agree that the long-term answer to this problem is investment in energy security; it is about having robust British energy, and we should look at the figures on that. Only a few days ago we heard from the BBC that in 2022 we had a record level of wind production in this country producing electricity: almost 27%, with just 1.5% from coal compared with 43% from coal in 2013. No other country is making that sort of progress. I am proud as an East Anglian MP to say that offshore wind has made a massive contribution; we have the largest array of offshore wind in Europe. We are delivering energy security and, as the Chancellor said in his statement, we are going to keep doing it, investing in nuclear and putting other investment in place, backing contracts for difference.
I will make one final point. A few days ago the Leader of the Opposition said that it was no longer the time for the big Government cheque book and that we need to put the cheque book away. I am not sure that his Front-Bench Members have got the memo, because there is a balance to be struck here: we need fiscal prudence. The underlying problem for the country is inflation: inflation is the reason why people are experiencing cost of living problems. If we want to get a grip of inflation, we need to set a path for fiscal sustainability, because the problem with what the hon. Lady is suggesting is that it implies not just getting the Government cheque book out again, contrary to the words of the Leader of the Opposition, but getting a blank cheque book out. The problem with that is that if a Labour Government start writing blank cheques, we know where that ends up: with them writing a letter saying there is no money left, and bankrupting the country. We must balance prudence with supporting businesses and the voluntary and public sectors with their energy bills. We have done that today as a result of our review, and I believe this is the right balance of policy for the House.
Mr Deputy Speaker (Sir Roger Gale)
I call the Chair of the Treasury Committee.
Harriett Baldwin (West Worcestershire) (Con)
I welcome the Minister’s announcement. He rightly points out that President Putin has, by illegally invading Ukraine, effectively weaponised the cost of energy against western economies, and he is right to highlight that we have been able to withstand that attack with £18 billion of support over this six-month period.
We now have a gas price close to where it stood before the invasion of Ukraine, and businesses across the country have realised the big risk they face in terms of their energy costs. Will the Minister encourage them not to pass on the cost of higher energy through inflation to their customers, and instead call for the wholesale price of energy to feed through more swiftly to the retail price our businesses pay?
James Cartlidge
I think this is the first time I have taken a question from my hon. Friend since her appointment to the chairmanship of the Treasury Committee and I congratulate her belatedly on her success. She makes the good point that wholesale prices have fallen significantly. The gas price is back to where it was before the invasion. Of course, we should be clear that before the invasion it was still elevated in relative terms historically, not least because there was an increase in energy prices following the reopening of the economy after the pandemic. Of course, we do not want prices to be passed on to customers in terms of inflation—that is the last thing we want to see—but I should stress that one reason why we are giving extra support to energy and trade-intensive sectors is that, because they tend to trade internationally, they are particularly exposed to those price pressures and find it harder than other companies that are energy intensive but not trade exposed to pass on those high prices.
Mr Deputy Speaker (Sir Roger Gale)
I call the Scottish National party spokesman.
James Cartlidge
There will have been 18 months of support for non-domestic accounts for businesses, charities and the public sector, in which time we have emphasised—I was very open about this—the need to adapt to the new environment we all face. Everyone is having to do that —households and businesses, and so on. In the autumn statement, the Government announced a new long-term commitment to drive improvements in energy efficiency and to bring down bills for households, businesses and the public sector, with an ambition to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030 against 2021 levels. Alongside existing support to 2025, the Government committed an additional £6 billion from 2025 to 2028 for energy-efficiency schemes across households, businesses and the public sector.
On the right hon. Member’s point about the £5.5 billion, I do think that we need some perspective, as £5.5 billion is roughly the cost of a 1p cut in income tax. That remains a significant fiscal intervention. It may be that, because of the huge amount of support that has been needed by our country, particularly since the pandemic—we have seen £400 billion-worth of support, and potentially close to £100 billion on energy—a figure such as £5.5 billion does not look as large. Perhaps that is understandable, but, compared with any normal fiscal event, it remains a very significant intervention. As I have said, it could still be worth up to £2,300 for a pub next year and, in our energy and trade-intensive sectors, up to £700,000 for a typical medium-sized manufacturer. That remains very significant support.
Sir Robert Buckland (South Swindon) (Con)
I welcome my hon. Friend’s statement. He will understand that many businesses face the prospect of having to pay significant up-front costs to enter into new contracts, which is a real challenge for those in my constituency and elsewhere. What work will he do with Ofgem, the regulator, to ensure that such punitive contracts can be ended and businesses can operate on a much fairer basis?
James Cartlidge
My right hon. and learned Friend asks an excellent question. Through the review, we have heard of issues in and around the pricing and availability of non-domestic tariffs, including increased standing charges, prohibitive contract renewal terms such as those he referred to and, in some cases, decisions by individual suppliers to withdraw from supplying particular sectors. Ofgem and the Department for Business, Energy and Industrial Strategy are working urgently to understand those issues, and Ofgem is launching a deeper review of the market. I can confirm that today, the Chancellor has written to Ofgem, asking it to do that work with the utmost urgency and to update him in time for the Budget. The Government recognise the importance of that work to many pubs, restaurants and other businesses that feel they are not getting a fair deal from their suppliers.
Mr Deputy Speaker (Sir Roger Gale)
I call the Chair of the Business, Energy and Industrial Strategy Committee.
Darren Jones (Bristol North West) (Lab)
We know from the design of the domestic scheme that people in particular circumstances are not being helped as the Government perhaps intended. Will the Minister therefore confirm that the Government will tweak the design of this policy in the same way that they did the domestic scheme where there are legitimate cases of businesses not being helped as Ministers intended?
James Cartlidge
It is a good question. Obviously, there are quite a few of those categories. As the hon. Gentleman is the Chair of the Select Committee, I am happy to engage with him—I think we will be speaking later, if not tomorrow—and to go through some of those categories. There are some important examples, but I can certainly confirm that where those exceptions arise, we will look to see what we can do to provide assistance.
Mr Philip Hollobone (Kettering) (Con)
I welcome the extension of energy price support for non-domestic users. However, may I give my hon. Friend a real-world example of what is happening in the non-domestic sector? A popular local pub in the Kettering constituency emailed me this week. Up to 2 January, it was paying £2,000 a month for electricity. At the end of the contract, its supplier switched it to an out-of-contract tariff of £9,700 a month. The pub went out to the market and, reluctantly, had to agree to a cost of £5,700 a month with another supplier. Surely that is blatant profiteering when one company can offer a price £4,000 a month less than a competitor’s quote. I therefore welcome what he said about getting Ofgem involved as quickly as possible to sort out these rogue suppliers.
James Cartlidge
I pay tribute to my hon. Friend for being an absolute champion for his constituency. I know that he had a question on hospitals earlier and now he is championing his pubs. We all know how important pubs are to all of our constituencies. I will make two points.
First, in response to my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) I referred to the letter that the Chancellor is sending today to Ofgem, urging it to update him as a matter of urgency on its review of the non-commercial market. Hopefully, that will look at some of the factors around how contracts operate and, indeed, at whether there are abuses and what can be done about it.
Secondly, one of the reasons we are maintaining universal support is precisely because there will be examples, such as the one my hon. Friend raised, of those who came to the end of a deal and fixed when prices were high, and so will not have benefited, even though prices are falling. This support is there to prevent that sharp cliff edge. It is about getting the balance right.
Kerry McCarthy (Bristol East) (Lab)
The Christmas period should be a boom time for hospitality companies; sadly, in Bristol we saw quite a number go under, and energy bills were a huge reason for that. The Newtown Park Brewing Co. was forced to stop production—a 500% increase in its energy bill quote was the final straw. It was not helped by the fact that, when it tried to speak to its energy company about what support was available, its energy company did not know. It said, “We would tell you if we did know, but we have no idea what we can offer you.” Will the Minister ensure that, with packages going forward, everybody is in the know, the details are communicated and there is enforcement so that people get the help that they are entitled to?
James Cartlidge
The hon. Lady asks a pertinent question. I will make a point about hospitality this Christmas. Of course, a particular factor facing hospitality was that people could not get around on our railways to enjoy hospitality at Christmas as they normally would. We all know the reasons for that. It is a great disappointment to me that that industrial action has threatened many otherwise viable businesses up and down the country. However, her question was perfectly fair. Payments should be automatic. I obviously do not know the exact circumstances of, I think, the pub—
James Cartlidge
Sorry, the brewery that she was talking about. Assuming that it is still going, it would benefit from the scheme; I hope that it can. On whether it would benefit from the universal scheme or the intensive scheme, it would likely be the universal one. If colleagues want to find out whether a particular sector is in the intensive scheme, that information should now be available on gov.uk.
Andrew Percy (Brigg and Goole) (Con)
I take no lectures from the Opposition on support for the steel industry: not only did they preside over the loss of thousands of steel jobs, but they have supported policies that have put costs on our industry and flirted with climate extremists who would close down the steelworks in Scunthorpe if they had their way.
I thank the Minister for the support for intensive industries such as steel. However, we are not operating on a level playing field across Europe, as other Governments continue to subsidise their steel industries unfairly against ours. Will he therefore continue the engagement taking place at a senior level between the steel industry and Government to look at what other support can continue into the future?
James Cartlidge
My hon. Friend is a stalwart champion of the steel sector, which I know is so important to him and his constituents. I absolutely agree with him. Of course, we are aware of the differing levels of support. In fact, with schemes such as this, it is difficult to make a comparison internationally because of the variations. On the additional discounted support for energy and trade-intensive industries that we have announced today, international comparators were a factor in considering the greater generosity of that support. Obviously, in the long term, what we need is secure energy supplies so that we can have choice and secure energy. That is the most important thing in the long run, but across Government we want to see what we can do to support the steel sector.
Dame Nia Griffith (Llanelli) (Lab)
In the long term, we need to reduce the reliance of energy-intensive industries such as steel on fossil fuels, and for that we need further investment in innovation. On 17 November, the Chancellor committed to write to me about whether the Government would earmark the £200 million contributed by steel producers and now returned to the UK Government from the EU research fund for coal and steel to set up a UK steel innovation fund. Will the Minister now tell me what the Government’s policy is and when I can expect that letter?
James Cartlidge
I am not aware of what has happened to the letter or where it is, but I am more than happy to look into that as a matter of urgency and to ask my officials to chase it up. We will write to the hon. Lady as soon as we can.
Sir John Whittingdale (Maldon) (Con)
While I agree with my hon. Friend that support cannot continue indefinitely, I welcome his recognition that high energy users will continue to require special help. Will that support cover agricultural businesses that are high energy users such as Dengie Crops in my constituency, which uses gas to dry crops to produce animal feed?
James Cartlidge
My right hon. Friend asks an important question. Like him, as an MP representing an East Anglian arable constituency, I am aware of the importance of such businesses to the wider agricultural sector. As I said to the hon. Member for Bristol East (Kerry McCarthy), we will be publishing a list on gov.uk showing those energy and trade-intensive industries that are eligible for the higher level of support; I refer him to that. I am also happy to write to him to confirm it exactly, because within one sector there will be a range of different types of industry that may qualify.
Sarah Olney (Richmond Park) (LD)
At the end of October, I had a meeting with a number of publicans in my constituency. They were looking forward to strong demand during the World cup and over Christmas, but they were deeply, deeply concerned about what would happen between January and March in particular. They were desperate for clarity on support for fuel bills. The fuel bills issue is the biggest issue they are experiencing, although it sits alongside other pressures such as staff shortages, supply chains and so on. What consultation did the Treasury have with UKHospitality and other bodies before making today’s statement and the new policy on fuel bills? What discussions did it have with UKHospitality about other potential forms of support for the sector as it comes through the crucial first quarter of 2023, which will be so challenging?
James Cartlidge
All I can say is that I suspect pubs did get a boost from the World cup. I wish it had run for longer, but I am afraid that is beyond my control. We very much enjoyed the tournament none the less. I understand the challenges facing hospitality. In my statement on our last but one sitting day of 2022, I announced the six-month extension of the freeze on alcohol duty. This has been a particularly challenging time for pubs. As the hon. Lady knows, we are in the middle of the £18 billion EBRS support, which has helped pubs in particular. We have been clear that we have continued what is effectively a universal scheme, notwithstanding the specific extra support for the energy and trade-intensive sectors. UKHospitality has been included in that consultation. That has happened at an official level, but also through the Chancellor and me, with the voluntary sector and others. We continue to engage very closely with UKHospitality through our Department, the Department for Business, Energy and Industrial Strategy and others on those matters.
Wendy Morton (Aldridge-Brownhills) (Con)
I, too, welcome the Government’s announcement. It is really important that we avoid the cliff edge. Speaking to businesses across Aldridge-Brownhills, whether they are part of the energy-intensive sector, retailers, hospitality or even funeral directors, they are all deeply impacted by the energy costs. Can the Minister provide any more clarity or confirmation on whether all business sectors will be covered by today’s policy announcement?
James Cartlidge
My right hon. Friend makes a very good point about how broad the impact is of rising energy bills. She used the phrase “cliff edge”. That is precisely why we have continued with a universal scheme. Yes, I am happy to confirm that there will be support for every single business, charity and institute in our public sector, but there will be additional support if they are in the energy and trade-intensive sector. The reason for that is the exposure to internationally competitive pressures and how much harder it is for them to pass on those prices. We recognise the energy challenges for small and medium-sized enterprises in every single sector. We are doing what we can, but balancing that against the need for fiscal prudence.
Nick Smith (Blaenau Gwent) (Lab)
On possibly tweaking the scheme, last week I visited a housing scheme for older people in Blaenau, where constituents with private pensions were complaining of increased energy costs of 400%, or £50 a week, just for heating the common social areas. The housing association complained that none of the Government’s energy schemes is of help to the organisation, so it had to pass on the costs. Will the Minister please meet me to hear those important concerns?
James Cartlidge
The hon. Gentleman raises a very important point. I would have to know the exact details, but, yes, I am more than happy to meet him. He will be aware that the care home could benefit from EBRS, which will become the eligible discount scheme after March, but I stress that there are 900,000 in England, Scotland and Wales without a direct relationship with an energy supplier, such as care home and park home residents. This month they will be able to apply online for £400 of non-repayable help with their fuel bills.
Greg Smith (Buckingham) (Con)
I very much welcome the package of support announced this afternoon and the enormity of the total support package, but may I push my hon. Friend a little on what is energy intensive? Padbury Meats, a butcher in my constituency, wrote to me over the weekend. It is a healthy business with a huge gross income per annum, it employs six staff and has no borrowings. Thanks to careful decisions, it managed to buy a freehold and therefore pays no rent, but it has seen a fourfold increase in its energy bills since the invasion of Ukraine and is not making a profit. The owner is personally subsidising the business through their own savings, which is not sustainable. Instead of looking at specific energy-intensive industries, will he look at the proportionality of energy bills to total revenue to determine which businesses, such as butchers who have huge fridges and walk-in freezers, need support?
James Cartlidge
My hon. Friend makes an important point. The first part of my answer may disappoint him, but I want to be clear. The additional support, particularly for manufacturing, is not just about energy intensity but trade intensity. There are two measures that determine if sectors are entitled to support: whether they are above the 80th percentile for energy intensity and the 60th percentile for trade intensity. So, it may be that the sector does not fit in that category. But that is why—I appreciate the support is less generous, but it is still significant—alongside the additional support for the intensive users, there will still be a universal scheme offering a discount from April this year to March next year.
Joanna Cherry (Edinburgh South West) (SNP)
A much-loved institution in my constituency, Gorgie city farm, is facing closure. Its energy bills for 18 months were previously £17,000, but its last bill for just eight months was £27,000—an increase of over 300%. Can the Minister not see that what he is offering is a drop in the ocean for charities like Gorgie city farm? How does he expect fantastic community institutions, such as the city farm in my constituency, to survive crippling costs when what is on offer is such a drastically reduced package?
James Cartlidge
I am grateful to the hon. and learned Lady for mentioning the charity in her constituency. As I said, I appreciate that the energy increase has been a challenge for every type of SME, charity and institution up and down the country. I am sorry to hear about the challenges for Gorgie city farm, which I have not had the pleasure of visiting but it sounds fascinating. Charities have shown huge resilience over the past two years and will continue to receive support with their energy bills from the latest iteration of the discount scheme. I emphasise that there is wider support to help them with their costs, including a reduction in VAT from 20% to 5% and an exclusion from the main rates of the climate change levy on some of the energy they use. The key point is that we are announcing a scheme that is still universal in nature and still includes charities. It is not as generous as before, but when we engaged with stakeholders about the £18 billion six-month scheme, what was interesting was the number of them who remarked that they had not expected that scheme to continue at that level of generosity. They could see the issue about sustainability for the taxpayer, which we all have to understand and address. It is in all our interests, and in the interests of every single business and charity, that this country has sustainable public finances.
Sir Desmond Swayne (New Forest West) (Con)
Has any analysis been made available to Ministers regarding the movements in wholesale prices and the tariffs actually being offered to customers going forward?
James Cartlidge
It is very timely that my right hon. Friend raises that point. He will have heard me mention to the former Lord Chancellor, my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland), that the Chancellor has today written to Ofgem to encourage it to update him as soon as possible and as a matter of urgency about the review of the non-domestic market, because we are hearing about many issues with it. A key point I will be feeding back is that colleagues on all sides of the House have experienced cases in their constituencies relating to deposits being asked for, deals being rejected and what will happen at the end of fixed rates. There is clearly work to be done and that is why the Chancellor has written as he has. I will ensure the letter is published on gov.uk along with the other documents.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Businesses small and large in my constituency, from shops to my local steel plant, have raised very serious concerns with me, so they will no doubt look at the statement very, very closely. I have one group of constituents who have lost out on any support so far. The Minister mentioned the energy bills support scheme alternative fund. I have residents in an apartment block in Sully who have not yet received any support at all because they fall into that category. When will the website portal be open? Will they receive backpay? Why will they get only £400 of support, instead of £600 like everybody else? The Government website says it is because the overall block may have benefited from business support schemes, but if they believe that not to be the case—it has not been passed on or the apartment has not been eligible for one of those schemes—how will they get what they need? They are really struggling at the moment and they have not had any answers from the Government so far.
James Cartlidge
I totally understand the hon. Gentleman’s point. There are issues with people in apartment blocks in certain specific cases; I do not want to second-guess the case that he raises, because there are lots of different schemes. A £600 payment is going out in Northern Ireland: the £400 general support payment that everyone will have had this winter will be paid out together with the alternative fuel payment, because so many people in Northern Ireland use heating oil, whereas in this country it is less common except in rural areas and constituencies like mine.
The hon. Gentleman is absolutely right that there is a category of user who has not yet received the £400. They may be on a contract under which the energy provider is benefiting from the current EBRS and should be passing that benefit on. I am happy for the hon. Gentleman to write to me with details of his case. As for the website, we have said that the relevant link should be available this month so that people can go online and find it. If he writes to me with the details, I will push my officials on when we can expect it to be live so that his constituents can apply for the £400. He makes a good point.
Theresa Villiers (Chipping Barnet) (Con)
I really welcome the fact that businesses in my constituency will get another 12 months of support, but none of us can be in any doubt that the global energy price shock will continue to make circumstances extremely difficult for many businesses across the country. May I urge the Minister to put relentless focus on energy efficiency, which gets costs down for business and for taxpayers and helps us to avert disastrous climate change?
James Cartlidge
My right hon. Friend makes an excellent point. The long-term answers are about increasing energy security in this country and the amount of energy that we generate. We have made huge progress with renewables, for example, and in North sea transition. I can confirm that alongside energy efficiency measures, businesses can take advantage of the £315 million industrial energy transformation fund and the £450 million boiler upgrade scheme. There are also several capital allowances that may help businesses to make energy efficiency investments, such as the annual investment allowance, which has been set permanently at £1 million; the structures and buildings allowance; and, until 31 March, the super deduction.
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
Diolch yn fawr iawn, Mr Dirprwy Lefarydd.
Pen Llŷn entrepreneur Siôn Edwards has had to take the difficult decision to temporarily close his farm shop in Abersoch because the business cannot afford the electricity bills. He tells me that what he desperately needs is Government support with investment in energy efficiency measures and renewable energy production measures such as solar panels for small businesses, so that he can permanently reduce his energy bills. Will the Minister please meet me to discuss the proposal from the Federation of Small Businesses for support to be delivered via “help to green” vouchers?
James Cartlidge
That sounds like an interesting idea. I would be more than happy to meet the right hon. Lady.
Holly Mumby-Croft (Scunthorpe) (Con)
I welcome the measures announced today, particularly those relating to energy-intensive industries, and the duration of those measures. I will look very carefully at what has been announced.
The Minister will know that thousands of world-class steelmakers in Scunthorpe are listening carefully to what is being announced. May I press him to look at the evidence over the next 12 months so we can reassure ourselves that our support is in line with that in other countries, and so we know we are providing a level playing field for the domestic steel industry in this country? That is all it asks.
James Cartlidge
My hon. Friend, like her constituency neighbour sitting next to her—my hon. Friend the Member for Brigg and Goole (Andrew Percy)—is a champion for the steel sector. She makes a very good point. I understand the huge importance of the industry to her constituency and hope that it will welcome today’s announcement on the energy and trade-intensive industry support and the additional discounts that will be provided. I should stress that as well as having a more generous discount, the scheme will apply at a lower threshold; that is important.
My hon. Friend makes a really important point about duration. The current £18 billion scheme is for six months; the industry said that it wanted 12 months, and we have delivered that. We absolutely want to look at what more we can do to be internationally competitive.
Cat Smith (Lancaster and Fleetwood) (Lab)
Post offices provide incredible support not only to our communities, but to the economic vibrancy of our high streets. However, they are often on quite a tight turnover. Having heard from many postmasters and postmistresses in my constituency, including in Forton, Brookhouse and Knott End, I wonder whether post offices will continue to be eligible for the same level of support. They will be well aware that the headline figures in the support package have been reduced.
James Cartlidge
The hon. Lady makes an important point. I know from my own constituency that sub-post offices are incredibly significant in our communities. These days, they are often where we do our banking as well as our shopping and everything else—that is certainly the case in some of my villages.
Sub-post offices are not in the intensive scheme. The level of support that they receive will therefore be less generous; we are being absolutely open and transparent about that. That is because there is a balance to be struck. If we are to be fiscally responsible, making something universal will by definition mean making it less generous than if it were targeted narrowly. We have tried to strike a balance, with more generous support for those sectors that are exposed to international competition and find it much harder to pass on higher costs. At the same time, although it is less generous, our support for the rest of the economy is still significant. That includes sub-post offices.
Mark Pawsey (Rugby) (Con)
Businesses have certainly appreciated the support that they have had over the past six months through the energy bill relief scheme, but businesses like and want certainty. The Minister will know that his announcement today has therefore been eagerly awaited. The 12 months of support that he is providing will go a long way, and I welcome the additional support for energy-intensive businesses. He spoke about businesses being in scope; I know that he has been challenged already today, but could he say a little more about where businesses can find the definition of “in scope” to identify whether they qualify?
James Cartlidge
My hon. Friend speaks with great knowledge of manufacturing, which is very important in his constituency. I am glad that he welcomes the 12-month duration, which I agree is important: it is what businesses were calling for, and it gives them extra certainty. I am afraid that I do not have the exact “www” off the top of my head, but hopefully it is live on gov.uk; I look nervously at my officials. There will certainly be a list on gov.uk at some point today. Is it live? [Interruption.] Noises off and a nod from the officials tell me that it is now live on gov.uk. I will tweet the exact address in due course.
Justin Madders (Ellesmere Port and Neston) (Lab)
From talking to local businesses before Christmas, it was clear to me just how important it was for them to get clarity on the issue. It is a shame that we did not have a statement before Christmas—I am afraid that businesses have already had to make some decisions, because they could not afford to wait—but we have had a decision now.
I want to pick up on a point that other hon. Members have made in relation to blocks of flats. Communal areas are charged at a commercial rate, but obviously that will be changed as a result of the decision announced today. How can we ensure that costs are not passed on to leaseholders?
James Cartlidge
The hon. Gentleman makes a very good point. Just to be clear, we are aware that some domestic customers receive energy bill support via the EBRS—the current scheme, which is non-domestic. They include people in park homes and on heat networks, which are presumably the sort of case that he is talking about. While domestic consumers on a non-domestic meter will continue to benefit from the discount offered through the extension of the EBRS to the new discount scheme, we are developing options to ensure that they receive support in line with other domestic users after April.
Simon Hoare (North Dorset) (Con)
Micro and small businesses are the lifeblood of my constituency. Many of those businesses will be off grid and will be using oil. I welcome my hon. Friend’s statement, but can he say something to give them a crumb of comfort? Can he assure me that they and others in similar circumstances across the country will be in his thoughts going forward?
James Cartlidge
I am grateful to my hon. Friend for raising those cases and exceptions, as did his fellow Select Committee Chair, the hon. Member for Bristol North West (Darren Jones), who chairs the Business, Energy and Industrial Strategy Committee. As we announced at the 2022 autumn statement, the Government will provide £150 in support for UK non-domestic consumers who are off the gas grid and who use alternative fuels, with larger users of heating oil receiving additional top-up payments based on actual usage. No decisions have been made on further support. We will continue to monitor the situation.
Barbara Keeley (Worsley and Eccles South) (Lab)
Many theatres, galleries and museums are in energy-inefficient buildings—listed buildings with high energy costs, which are necessary if they are to maintain appropriate conditions for their audiences or their collections. We know that there will be a reduced support scheme, but the Minister has not given details about the public sector and charities. That lack of clarity will compound anxieties about financial pressures in the spring. Theatre and orchestra tax reliefs are already planned to be cut by 15%. Can the Minister tell me what the Government are doing to reassure our critical arts organisations and protect them from this storm of financial challenges?
James Cartlidge
I assure the hon. Lady that those organisations would at least qualify for the universal scheme. If she wants to hear the exact details, from 1 April until 31 March next year all eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97 per megawatt hour automatically applied to their gas bills, and a unit discount of up to £19.61 applied to their electricity bills. That will include all the types of institution to which the hon. Lady has referred.
Jack Brereton (Stoke-on-Trent South) (Con)
Energy-intensive industries, particularly the ceramics industry in Stoke-on-Trent, have been most exposed to global energy price shocks, as they have to fire their wares at over 1,000°C. Many of those businesses have not been eligible for the support received by other energy-intensive sectors. Can the Minister reassure me that all ceramics producers in Stoke-on-Trent will receive the additional support that they need?
James Cartlidge
My hon. Friend is a champion for the ceramics sector, and I know how important it is to the Potteries and to his constituency. If he looks at SIC code 23 in the list of sectors, he will see a range of ceramics industries that are covered. It is worth looking at that list, because there are a great many specific types. Obviously we want to support business as far as possible. As I have said, the qualification for support is for the sector in question to be above the 80th percentile for energy intensity and the 60th percentile for trade intensity, and that is likely to cover much of the ceramics sector.
Sammy Wilson (East Antrim) (DUP)
I welcome this package, and I especially welcome the inclusion of charitable organisations, but the fact remains that even if energy prices stabilise, given Government policies on net zero and the decarbonisation of electricity, there will be continued upward pressure on businesses’ energy bills for the foreseeable future, and I do not believe that the package will help many of the small businesses that are hanging on by their fingertips at present because of the massive energy price increases.
First, will these measures apply to Northern Ireland automatically or, because of the separate regime, will they have to be tailored to the Northern Ireland market? Secondly, when it comes to energy-intensive industries that do a lot of trade, will the package include businesses such as food processing, which is very important in Northern Ireland?
James Cartlidge
Yes, food processing would be included. If the right hon. Gentleman is asking whether food processors would be in the energy and trade-intensive section, I suggest that he look at the website later or ask the company in question to do so. As with the current energy bill relief scheme, support will be given to UK non-domestic customers including those in Northern Ireland.
Jonathan Gullis (Stoke-on-Trent North) (Con)
The statement will be welcomed by many ceramics manufacturers in Stoke-on-Trent North, Kidsgrove and Talke, but they also want to ensure that they are all eligible. The support to date has meant that £4 million has been saved for one of them, but, sadly, hidden clauses, never used before, are being exploited by some energy suppliers that are trying to smack companies such as Churchill China and Steelite with millions of pounds’ worth of costs on the basis of a past spot price. Will the Minister meet me, other Stoke-on-Trent Members of Parliament and Rob Flello, the chief executive of the British Ceramic Confederation, to look at those examples and hold to account the energy companies which are trying to exploit the Potteries?
James Cartlidge
Like my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton), my hon. Friend is a champion for that incredibly important industry in his constituency, and he is right to stress the importance of energy support. I entirely understand that there has been great anxiety about the prevailing level of energy costs, and we hope that this package will provide vital help. According to a message that I have received on WhatsApp, ceramics are dealt with in SIC codes 23.1, 23.2, 23.3 and 23.4 and, I think, one more. As for my hon. Friend’s other request, of course I would be happy to meet him to see what more we can do, because this is an important sector for him and, indeed, for the rest of the United Kingdom.
Steve McCabe (Birmingham, Selly Oak) (Lab)
As well as considering the excessive deposits about which we have already heard, will the Ofgem inquiry consider the high charge for the delivery of energy to business premises, which, in some cases, can amount to double the wholesale price? Does the Minister agree that any inquiry will need to be swift, with immediate action, if we are to avoid a raft of businesses going bust later this year?
James Cartlidge
The hon. Gentleman is right about the need to be swift. I have responded to a number of Members by referring to the letter to Ofgem that the Chancellor was sending today, asking it to produce an urgent update, before the Budget, on the review of the non-domestic energy market, because of all the stories we are hearing from colleagues about the way in which some non-domestic providers are behaving. I will ensure that the letter can be found on gov.uk. It must be said that there are many excellent providers in the market, but it is less regulated than the domestic side, so I think it important for Ofgem to consider these many points. I should also say to the hon. Gentleman that there have been some recent changes in the cost of connecting to the grid, and I am happy to write to him with further details about that.
Caroline Lucas (Brighton, Pavilion) (Green)
I appreciate that balances must be struck, but I think that small businesses, including many in my constituency, will have listened to this announcement with deepening anxiety. Research from the Federation of Small Businesses suggests that one in four small businesses are expected to close, downsize or radically change their business models when the Government reduce energy support. Obviously, that research was conducted before we knew the shape of this proposal, and it is much less supportive than the FSB and others hoped.
Let us be clear: this decision poses an existential threat to small businesses, many of which think that, in a sense, they are being left vulnerable to wholesale energy price hikes while the Government wash their hands and walk away. Will the Minister look at it again, and, in particular, will he look at other ways of supporting small businesses with the multiple challenges that they face, for example by suspending covid loan debt repayments so that they have some hope of surviving this year?
James Cartlidge
I understand why colleagues are concerned when they receive correspondence, whether it involves the FSB acting at a national level or individual businesses in their constituencies. These have been incredibly challenging times. I ran a business before I came to the House, and I went through the credit crunch, which was unbelievably stressful. We were a mortgage company, and mortgages disappeared on a far greater scale than they did some months ago. It is good to see them returning, and with lower rates in recent days.
Let me say to the hon. Lady, however, that this remains generous support. It is not as generous as it might be—I have been clear about that—but it will still be significant for businesses. Let me also stress a point that I made in an earlier answer. If we go back to the beginning of the EBRS and then up to the end of the discount scheme in April 2024, we see that there are 18 months in which businesses can adapt. I know that it is not easy, but significant funds are available to support efficiency. I think that, in circumstances such as these, all of us—people who run charities or businesses, and Ministers —must look at what more we can do to run our operations more efficiently in the face of huge changes in energy prices.
Mike Amesbury (Weaver Vale) (Lab)
What would the Minister say to Mr Uppall, who runs a vital service—a post office—in Hartford, in my constituency? What would he say to the likes of Alison, the landlady of the Bulls Head in Frodsham, also in my constituency, about his rationale and that of the Government in reducing vital support at this particular time?
James Cartlidge
The hon. Gentleman is absolutely right to raise the points made by his constituents. As I said to the hon. Member for Brighton, Pavilion (Caroline Lucas), we do understand that the way in which prices have risen has caused great anxiety. In Government, however, we have a duty to consider not only what support we can provide, but the cost to the Exchequer. We have to take that balanced approach. The £18 billion six-month scheme that is currently operational is extremely expensive, and, as I said earlier, stakeholders to whom I have spoken, including those in our major industrial lobbying organisations, did not expect support to remain at its former level because of the huge cost. We have to balance this continued support—which will help the businesses and institutions to which the hon. Gentleman has referred—with the need for fiscal prudence.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
On Friday I visited Gills convenience store, which provides essential services for constituents in Brakelaw and Fenham. The owners told me that the No. 1 threat to their business was spiralling energy costs, and that message is being echoed by pubs, the hospitality sector, charities, and small businesses across Newcastle. The Minister says that this support will be limited to £400 because, he says, it is not for Government to pay the bills of business. Will he at least agree with me that it is for Government to deliver a sustainable, secure energy market which works for small businesses, and that his Government are entirely failing to do that?
James Cartlidge
One of the reasons for the Ofgem review that I have referred to several times is precisely to ensure that we have a non-domestic market that works as effectively as possible for businesses. A situation such as this will bring to the surface problems that businesses would not experience to the same degree in normal times.
Let me make this point to the hon. Lady: not a single Opposition Member has stood up at any point and acknowledged to any degree that we have to consider the cost of these schemes. Of course we have to consider the impact of rising energy prices on businesses, but it was only a few days ago that the leader of the Labour party said that the era of the “big Government chequebook” was over—those were his words. We have to take a balanced approach. We are continuing to provide universal support for businesses, charities and the public sector, and targeted additional support for internationally trading sectors, particularly manufacturing. At the same time, we have to consider fiscal prudence if we are to run a stable and growing economy.
Stephen Kinnock (Aberavon) (Lab)
I am sure the Minister would agree that a key aim of the support scheme must be to ensure that our steel industry can compete internationally on a level playing field. The German Government have guaranteed their steel industry an electricity price of €130 per megawatt hour for 2023. In contrast, what the Minister has announced today only provides our steel industry with a discount on electricity prices above £185 per megawatt per hour. That leaves UK steel producers to pay an estimated 63% more than their German counterparts. Why are the Government once again letting down our steel industry and forcing our steelworkers to compete with one hand tied behind their back?
James Cartlidge
I do not agree about the level of support. I cannot speak for what is happening in Germany, but this remains significantly more generous support for the energy and trade-intensive industries. The hon. Gentleman is right about the figures for this country: the price threshold for the scheme is £99 per megawatt hour for gas and £185 per megawatt per hour for electricity. To be clear, about 60% of the up to £5.5 billion that we have allocated for this scheme would be for the energy and trade-intensive industries. That is more than half of all the funding. It is a significant commitment and includes major manufacturing sectors such as steel.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
The Minister talks about financial prudence, but when any business goes out of business this Government lose the tax from pay-as-you-earn and all the other income from them. His own Government have described the hospitality sector as a vulnerable industry. We have heard in the Chamber today that increases of 400% and 500% are common. Energy costs of £5,000 to £15,000 a month are not uncommon. Does he think that a maximum of £191 per month will make them feel any less vulnerable?
James Cartlidge
We do see the importance of the hospitality sector in every part of the United Kingdom. That is precisely why we have the current six-month scheme—£18 billion. Let us be clear about something: if a Government wanted to raise £18 billion year on year, that would require an increase in the basic rate of income tax of 3p. That is enormous and puts into context the scale of that cost.
Yes, we want to support hospitality. To give one example, because of freezes or cuts to the duty on whisky and spirits, that duty is now at the lowest level in real terms since 1918. Alongside that, next August, for the first time ever in this country—something not possible when we were a member of the EU—we will have a differential duty with a lower rate on a pint in a pub compared with a can of the same beer in a supermarket. We are supporting hospitality but we are balancing that against the need to run a tight fiscal ship.
Stephen Farry (North Down) (Alliance)
The Minister has already clarified that the scheme will automatically apply to Northern Ireland. However, energy policy is normally devolved in Northern Ireland. As he knows, we have a distinct energy market with a different profile in the use of fuels, including alternative fuels. Will a restored Executive have the opportunity to shape that policy to suit local needs? I suspect that we will get a much greater share through the Barnett formula based on the population than we would through direct support, given that we do not have the same degree of reliance on gas.
James Cartlidge
The hon. Gentleman makes a fair point. There are substantive differences between the way the energy market works in Northern Ireland and how it works on the Great British mainland, as it were. We want to see, as far as possible, the same support in Northern Ireland as in England, Scotland and Wales. He will know that the £600 payment, which combines the £400 support that all households should have had and the £200 alternative fuel payment, is being paid out this month. That shows the degree of support for Northern Ireland. On what would happen were an Executive to be in place, although we would very much like to see that, I will not speculate on Northern Ireland politics at this stage.
Fleur Anderson (Putney) (Lab)
The delay in this statement has already left several businesses in Putney to go under. I am now concerned about the post office in Southfields, where the sub-postmistress thinks they will be unable to continue operating. There will be a community cost if post offices across the country go under as a result of the increase in bills. Has the Minister assessed the impact of the energy crisis on post offices? Can he confirm whether they will be included in the cut-back scheme after March? Could he consider a community impact criteria in the scheme so that there will not be a high cost for our communities in Southfields and beyond?
James Cartlidge
On the point of going under as a result of the delayed announcement of the results of the review, we were due to announce on the last sitting day before recess, and we have announced on the first sitting day—it is a delay, but not a huge one. In that time, those businesses, whatever they are, will have been benefiting from the current support running until the end of March. We have now given them certainty for the next 12 months with a scheme that remains generous and universal. It is not as generous as before but I can confirm that it will include the sub-post office.
Alison Thewliss (Glasgow Central) (SNP)
The Minister seems to be missing the point. Many businesses I speak to are now locked into impossibly expensive contracts. They have no choice. That is not just the cost per unit but the standing charges that they are asked to pay. The best deal that the charity Toryglen Community Base in my constituency could get was to go from £9 k a year to £62 k a year. The food manufacturer Calder Millerfield is paying six times more now than it was before—that is what it has been offered with the Government support at its current rate. Many small businesses and hospitality businesses in Glasgow Central are facing the same. What will the Minister do about these hopelessly expensive contracts that businesses are being locked into now at these high prices? What negotiation is he doing with the energy companies to bring those prices down? They will push businesses under more than anything else.
James Cartlidge
I was absolutely clear in my statement that the precise reason that we are continuing the universal support is for those very companies, charities or other public sector organisations that fixed while prices were higher and have since reduced. We have precisely those companies in mind, but it is also for those companies that may currently be on a lower tariff that is about to finish, who had a long-term fix from some years ago when energy was much cheaper. The point is that it is another 12 months of security. It is right that it is not as generous as it was, but when speaking to stakeholders there was no expectation that a Government would continue a level of support costing £18 billion for six months. That is a very expensive intervention. This remains a significant intervention and will remain generous for charities, businesses and public sector institutions.
Wendy Chamberlain (North East Fife) (LD)
Since the autumn statement, I have raised the case of an agricultural food manufacturer in my constituency in relation to energy support four times. Despite positive noises in the Chamber and its offer to engage in the review, to date we have heard nothing back. I have two questions for the Minister. First, will the review be published on gov.uk so that we know exactly who has been consulted? Secondly, he mentioned the different centiles, but what if a business disagrees with the Government’s assessment? Who does it appeal to? Who is the ultimate arbiter?
James Cartlidge
If the hon. Lady has a business that wrote in to the Department to contribute to the review and did not receive a response, I would be grateful if she forwarded me a copy of that correspondence so that I can look into it.
Alan Brown (Kilmarnock and Loudoun) (SNP)
The energy profits levy measures are predicted to bring in £56 billion and most of that money is coming from Scotland, yet businesses across Scotland are left struggling, particularly in the hospitality trade. The Struther Farmhouse Tea Room in my constituency is facing a 500% increase in its gas bill, with its gas and electricity up by £25,000 in a year. Despite what the Minister says, these businesses are now reaching a cliff edge because Government support is estimated to be a maximum of £2,000 against these increases. How many small businesses and jobs does he think will be lost under the guise of Government fiscal prudence?
James Cartlidge
I know that the Scottish National party struggles to understand the basic concept of fiscal prudence, but let me just explain this to the hon. Gentleman. When he talks about the £56 billion, it is not just for the energy profits levy; it also includes the energy generator levy, and we see that money as coming into the UK Treasury from across the UK to support the United Kingdom. It will support businesses in Northern Ireland, as we said earlier, as well as businesses in England, Scotland and Wales. Scotland has benefited from huge support, not just in the pandemic but through the increase in energy costs that has been seen across the United Kingdom. It has benefited from the fact that we are stronger together as a Union supporting every part of our Union.
Dave Doogan (Angus) (SNP)
Meanwhile, back in reality, I am sure the Minister will agree that manufacturing is the lifeblood of any economy. Many of the manufacturing successes across these islands are small and medium-sized enterprises such as ScanStone in my constituency, which manufactures outstanding potato systems. It is competing with the Germans across not just the UK market, but the EU market. The existing support that it is enjoying is not proving enough, and now it is going to get less. Can the Minister help me to understand what I should say to ScanStone in Angus about its need to navigate its way through this energy crisis? It is not an intensive user but energy is a major overhead that it is really struggling to accommodate.
James Cartlidge
The hon. Gentleman talks about being back in the real world, but when I made my statement about our plans for alcohol duty, the day before the House rose for the recess, he asked me if I had considered having a differential duty. We had been consulting on a differential duty for months before then. As to his particular question, I suggest that the company looks at gov.uk to see whether its sector qualifies under the energy intensive industries support scheme, because that remains very generous and significant, and I am sure it will be welcomed by many in that sector.
Mr Deputy Speaker (Mr Nigel Evans)
I would like to thank the Minister for the statement and for responding to questions for just under one hour and a quarter.
Oral Answers to Questions
James Cartlidge Excerpts(1 year, 4 months ago)
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Dan Jarvis (Barnsley Central) (Lab)
The Exchequer Secretary to the Treasury (James Cartlidge)
May I begin, Mr Speaker, by wishing you and all of your brilliant House of Commons staff a very merry Christmas?
The integrated rail plan, published last November, set out an estimate of £17.2 billion at 2019 prices for the core Northern Powerhouse Rail network, with a further £5.4 billion for the TransPennine route upgrade. That includes building 40 miles of new, high-speed line between Warrington, Manchester and Yorkshire, as well as upgrading and electrifying the rest of the route between Liverpool and York, and the existing line between Leeds and Bradford.
Dan Jarvis
I am grateful to the Minister for that response. The Chancellor has rightly spoken about the importance of capital investment to the long-term growth of the economy but, at the same time, he has downgraded the £40 billion vision of Northern Powerhouse Rail, which was agreed on a cross-party basis with northern leaders, to the much-reduced £17 billion core scheme. Decisions on Northern Powerhouse Rail will shape the future of the railways in the north of England for generations to come and unlock massive economic benefits. Will the Minister look at refocusing Treasury appraisal of NPR on its long-term transformative benefits and whole-life value, rather than on short-term factors? Otherwise, a massive opportunity, not just for the north, but for the whole of the country, will be missed.
James Cartlidge
I commend the hon. Gentleman, who speaks with great passion on these issues. He is right that the Chancellor is absolutely committed to the long-term benefit to the economy of capital investment and infrastructure schemes like these. Just to be clear, the IRP set out the Government’s view that the core NPR network is the most effective way to deliver rail connectivity benefiting the north. Our plans would deliver substantial journey-time saving and capacity benefits all the way from Liverpool to York. It will do so far more quickly and cost-effectively than alternatives.
Wendy Chamberlain (North East Fife) (LD)
The Exchequer Secretary to the Treasury (James Cartlidge)
The structure of the electricity market means that the price of electricity is tied to the wholesale gas price. Russia’s invasion of Ukraine triggered an unprecedented increase in gas prices, driving energy prices to eight times their historic levels. As a result, many energy generators’ profits are well above pre-crisis levels. As announced at the autumn statement, the Government are introducing a temporary 45% tax on extraordinary returns made by some UK electricity generators from 1 January.
Mr Speaker
I call Wendy Chamberlain, whose birthday it is today. Happy birthday.
Wendy Chamberlain
Thank you, Mr Speaker.
Shell announced worldwide profits of £8.2 billion and £9 billion for the three-month period between July and September and the three months to June. BP announced more than double its profits for the same period. They have increased their dividend payments and spent billions buying back their own shares from the market. Shell says that it does not expect to pay any windfall tax at all this year and BP said that it would pay £678 million. Does the Minister agree that, if the Government had implemented a proper windfall tax that captured these things, we could be supporting offshore customers such as my own in North East Fife?
James Cartlidge
Obviously, the hon. Lady knows that we do not comment on the commercial decisions of individual companies. What I can confirm is that the specific levy to which she refers—the energy profits levy—will contribute £40 billion to the Exchequer. We must remember that that £40 billion will play a key part in enabling us to afford the support that we are giving to constituents throughout the United Kingdom this winter and next year, which will total, for businesses and households, more than £100 billion, and the Office for Budget Responsibility has already found that that will help to reduce inflation overall.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
May I begin, Mr Speaker, by wishing you, the Minister and the whole House a jolly Christmas?
If the Government had implemented Labour’s windfall tax, they would have raised an additional £16.8 billion. Why have the Government chosen to leave this windfall of war on the table and not put it to use to support families and businesses in the tough winter ahead?
James Cartlidge
I do not entirely accept that. I would be interested to know the detail behind that figure. What we can confirm is that we have two specific levies: one on oil and gas, and one on certain electricity generators. We think that these are being applied in a very fair way. The levy to which the hon. Member refers does include an allowance for investment but this is the point. That level of support cannot continue for ever. The long-term answer is energy security—investment in new energy sources and, indeed, investment in the North sea, supporting UK jobs and the transition to net zero.
John Penrose (Weston-super-Mare) (Con)
Peter Grant (Glenrothes) (SNP)
The Exchequer Secretary to the Treasury (James Cartlidge)
The Chancellor published the “Impact on households” document alongside the autumn statement 2022, containing analysis of how policy announcements affect household incomes. The results show that the autumn statement decisions on tax, welfare and changes to the energy price guarantee in 2023-24 benefit low-income households across the UK, including Scottish households, the most. The autumn statement announced further support targeted at 8 million of the most vulnerable households across the UK, who will benefit from additional cost of living payments in 2023-24.
Peter Grant
The Joseph Rowntree Foundation found that, by October this year, one in five households in Scotland had already had to go without food or without heat because they could not afford both—and that was before the recent severe cold snap. The JRF also described the Scottish child payment, introduced by an SNP Government, as
“a watershed moment in tackling poverty”.
Does the Minister have any plans to speak to the Scottish Government to find out how the Scottish child payment works so it can be introduced here? Who knows—they might give him some tips on how to avoid a nurse’s strike at the same time.
James Cartlidge
I am, as ever, grateful to the hon. Gentleman for his advice. Of course, we engage closely with the Scottish Government. The latest official statistics from the Department for Work and Pensions, based on data up to 2019-20, show that, compared with 2009-10, there were 55,000 fewer people in absolute poverty after housing costs in Scotland. But I think the key point is that we are supporting everyone in every single part of the UK with their energy bills this winter. It is a challenging time, but our extraordinary help is making a real difference.
Mark Eastwood (Dewsbury) (Con)
Vicky Foxcroft (Lewisham, Deptford) (Lab)
The Exchequer Secretary to the Treasury (James Cartlidge)
I am grateful to the hon. Lady for that important point. Yes, I would draw attention to the cost of living support for those on disability benefits, which is extremely important, together with the energy price guarantee. On the specific point about the warm home discount, I am happy to look into that and write to the hon. Lady, but I remind her that in the autumn statement the Chancellor made a very significant commitment to energy efficiency which will apply to the whole country: the 15% target and £6 billion more funding for energy efficiency.
Michael Fabricant (Lichfield) (Con)
Inflation is high in the UK, but I understand that it is lower than the EU average. Why do we not do what they do in France? All the funding that goes into supporting people with the cost of energy is given to the utility companies so the bills are lower, thus reducing inflation.
James Cartlidge
Few colleagues put a question about inflation more eloquently than my hon. Friend. He makes an interesting suggestion. The support we have put in place has come through a variety of mechanisms, such as direct support for our constituents to help with cost of living and the energy price guarantee. He asks about how we ensure that that reduces inflation; the key point is that the OBR has confirmed that because of the energy price guarantee, the peak of inflation will be 2.5% lower than it would have been. That shows that our support is not only making a difference to our constituents this winter but is reducing the underlying cause of inflation, and that is in the best interest of the whole of the United Kingdom.
Dr Rupa Huq (Ealing Central and Acton) (Ind)
I am sure that like me, Mr Speaker, you long for the days of cool Britannia under a Labour Government. Touring musicians and performers are now hamstrung with restrictions and red tape because of the Government’s botched Brexit deal. We need a Christmas miracle, don’t we? When will the Government accept that this as a problem, and what are they doing about it?
Caroline Lucas (Brighton, Pavilion) (Green)
A very Merry Christmas, Mr Speaker.
With oil and gas companies making grotesque profits from high global prices, it is beyond belief that the Chancellor does not scrap the so-called investment allowance announced in the autumn statement, which means that companies are still able to claim £91.40 in tax relief for every £100 invested in oil and gas infrastructure. Will he now come clean about the cost to the taxpayer of this perverse and utterly unjustified subsidy?
James Cartlidge
I am happy to confirm that that levy will raise £40 billion. As I said earlier—and this is very important—the support that the hon. Lady’s constituents, and indeed all our constituents, will receive this winter has to be paid for somehow. A key purpose of the levy is to help fund support for businesses and for our constituents, with higher cost of living payments for the most vulnerable and those on benefits. It is extremely generous, and, as I have said, it is bringing down inflation for the whole country.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
Over the weekend, an anonymous Conservative MP admitted to a newspaper:
“We’ve got no ideas and people feel abandoned.”
This was an
“economy that’s in recession with 10 per cent inflation”
and
“possibly one of the least successful governments in modern Europe.”
My constituents are going into Christmas poorer as a consequence of 12 years of Conservative government. Is the Chancellor proud of that?
Dave Doogan (Angus) (SNP)
I know that the Chancellor has invested in public health personally, but may I urge him to invest, in a fiscal sense, in beer and alcohol duty, and to create a differential between off-sales and on-sales? On-sales are where jobs and tax and employment are generated, and off-sales are where all the harmful drinking comes from.
James Cartlidge
In my statement yesterday I not only confirmed a six-month extension of the alcohol duty freeze, but announced that next August we will introduce an ambitious reform package which will include—this is happening for the first time ever, and is only possible because of our departure from the European Union— a duty rate differential between what is on tap, namely draught beer, cider and so on, and what is in the supermarkets. That will create a level playing field which I think is in the best interests of our pubs.
Alison Thewliss (Glasgow Central) (SNP)
Asylum seekers, who are at the very sharpest end of the cost of living crisis, have seen only a 13p increase in asylum support payments. Will the Chancellor uprate that? It should not fall to brilliant charities like Refuweegee to ensure that asylum seekers get a Christmas this year.
UK Electricity Generators: Tax on Extraordinary Returns
James Cartlidge Excerpts(1 year, 4 months ago)
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The Exchequer Secretary to the Treasury (James Cartlidge)
Along with resurgent demand for energy following the pandemic, Russia’s invasion of Ukraine and weaponisation of gas supplies has driven UK wholesale gas prices to record highs. Due to the composition and structure of the UK electricity market, higher wholesale gas prices are in turn driving higher wholesale electricity prices and leading to exceptional returns arising to some electricity generators in the UK.
Consistent with action taken in other countries, from 1 January 2023 the Government are introducing a temporary 45% tax on extraordinary returns made by some UK electricity generators. HM Treasury will today publish on www.gov.uk draft legislation, along with an updated technical note explaining the policy in detail. The levy will be applied to a measure of extraordinary revenues, defined as revenues from selling periodic output at an average price above £75/MWh. That is approximately 1.5 times the average price of electricity over the last decade. It will apply to revenues from electricity generation in the UK from renewable—including biomass—nuclear, and energy from waste sources and will be focused on the largest generators through a generation threshold of 50GWH of annual output and a £10 million allowance.
This temporary measure is not designed to penalise electricity generators. It is instead a response to the fact that, as a result of exceptional and unforeseen geopolitical events, some electricity generators are realising extraordinary returns from higher electricity prices—higher prices that have imposed substantial costs on households and business energy users and necessitated the Government to take unprecedented action with £55 billion to directly help households and businesses with their energy bills. The Government have previously considered a price cap in response to the current crisis. We have instead adopted this levy as a more proportionate approach. It leaves generators—whose continued investment in the industry is vital to our long-term energy security—with a share of the upside they receive at times of high wholesale prices.
The levy will end on 31 March 2028. This reflects the possibility that wholesale electricity prices remain elevated for a number of years and the need for businesses to have certainty around the measures the UK is taking in response. However, should the crisis abate and prices fall below the benchmark price, the revenue forecast from the levy will not materialise and consideration would be given to the tax’s ongoing application.
Furthermore, responding to concerns that have been raised around the tax’s duration and its impact on investment, the £75/MWh the benchmark price will be indexed to CPI inflation from April 2024, and relief will be provided for certain exceptional costs that are reducing the degree to which generators are benefiting from higher electricity prices.
Support for investment in renewables
The Government are committed to decarbonising power systems by 2035 and reaching net zero emissions by 2050. Britain is a global leader in renewable energy. Last year, nearly 40% of our electricity came from offshore wind, solar and other renewables. Since 2010, our renewable energy production has grown faster than any other large country in Europe. We are committed to ensuring that the UK remains one of the best places in the world to invest in clean energy and have set stretching deployment ambitions, including up to 50GW of offshore wind by 2030 and a fivefold increase in solar by 2035. As we move towards these ambitious goals, the Government will seize the opportunities for growth through the transition, creating the right framework to crowd-in billions of pounds of new investment into the UK’s economy. That includes:
Our highly successful Contracts for Difference scheme continues to bring more and more generation online, with our most recent auction delivering a record capacity of almost 11 GW. A consultation for the sixth Contracts for Difference round was published last week.
The Offshore Co-ordination Support Scheme, which will provide up to £100 million of grants to energy projects to develop co-ordinated options for offshore transmission infrastructure, was launched earlier this month.
Government also continue to work with the Offshore Wind Acceleration Taskforce and other developers to identify and address barriers to deployment. This includes reforming the planning system, where Government are acting to ensure that consents are secured faster, and the risk of delays are reduced.
We have heard calls for the tax system to provide strengthened incentives for—long-term—investment in the low-carbon electricity generation sector, including investment in new capacity as well as investment needed to maintain and upgrade existing capacity. The Government continue to recognise the value of capital allowances for supporting investment within a sustainable fiscal strategy, and any further changes will be set out at a future fiscal event in the usual way.
Government are undertaking the Review of Electricity Market Arrangements (REMA) which will assess how our power markets can best deliver a low-cost, low-carbon and secure electricity system, whilst reducing our exposure to international oil and gas prices.
[HCWS475]
Alcohol Duty
James Cartlidge Excerpts(1 year, 4 months ago)
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The Exchequer Secretary to the Treasury (James Cartlidge)
With permission, Mr Deputy Speaker, I would like to make a statement on the alcohol tax system.
When in the autumn 2021 Budget the then Chancellor—now Prime Minister—announced the biggest reforms to alcohol duty in 140 years, he did so in order to change an outdated and impractical system. Following our country’s departure from the EU, our changes will overhaul the UK’s obsolete rules, which our membership of the EU precluded us from doing. With these new freedoms, we will embark on radically simplifying the entire system and slashing red tape.
The new alcohol tax system will adopt a common-sense approach whereby the higher a drink’s strength, the higher the duty, while new reliefs will be made available to help pubs and small producers to thrive. In doing so, we have made a system that fits with our national priorities, encourages growth and innovation, aligns with public health goals and is fairer for hard-working producers. The aim that lies at the root of this reform is to make the system fairer, simpler to use and more supportive of business.
Notwithstanding those ambitions, we fully understand that businesses face difficulty and uncertainty in the face of rising energy bills and inflation. I have listened to and value stakeholders from across the sector, and I understand that they want certainty and need reassurance in these challenging times. That is why today I can confirm that the freeze on alcohol duty rates has been extended by six months, to 1 August 2023.
Although new duty rates typically come in on 1 February each year, I can confirm that the Chancellor will instead make his decision on future duty rates at the spring Budget 2023, to give businesses certainty and time to prepare. To further support the industry, we are going further by confirming that if changes to duty are announced then, they will not take effect until 1 August 2023. This is to align with the date that historic reforms of the alcohol duty system come into force, and amounts to an effective six-month extension to the current duty freeze. Most importantly, to minimise the burden on business, it avoids the sector having to deal with multiple changes to duty rather than one.
As I mentioned a moment ago, the alcohol duty reforms will help create a simpler, fairer and healthier duty system. A higher rate for sparkling wines will come to an end, meaning that they will pay the same rate as still wine. Liqueurs will be put on the same footing as fortified wine, meaning that a sherry will now pay the same duty as a spirit liqueur, and the duty rate on super-strength white cider will increase in order to address public health concerns.
New draught relief will be worth £100 million a year, and to ensure that smaller craft producers can benefit, the threshold for qualifying containers will be 20 litres. The wine industry will also be supported as it adapts to the new system. Duty on all wine between 11.5% and 14.5% alcohol by volume will have its duty calculated as if it were 12.5% ABV. This will last for 18 months from the implementation of the new system.
Pubs, cider makers, brewers, distilleries and wine makers have an historic place at the heart of our communities. They provide not only thousands of jobs, but hubs that enrich and often define the social fabric of our villages, towns and cities. By saying to the industry that it will face just one single industry-wide change next summer, rather than two over the course of the year, we are giving it maximum certainty. Hospitality is a major part of our economy, and while these remain challenging times, we are doing everything we can to support individual hospitality businesses of every size so that they can have a prosperous new year. I commend this statement to the House.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
I thank the Minister for advance sight of his statement. The Government have confirmed that they are freezing alcohol duty rates for six months. I know that the sector will welcome the announcement, especially given the difficulties that businesses are facing, whether they are producers, suppliers or hospitality venues. I must say, however, that it is absolutely laughable that the Government have announced the change in the name of certainty. We should call it what it is: a U-turn. The previous Chancellor announced a freeze, the current Chancellor scrapped it, and now it is back on.
How did we get here? In October 2020 the Government announced a call for evidence to seek views on how the alcohol duty system could be reformed. At the time, they said that they would make the system
“simpler, more economically rational and less administratively burdensome on businesses and HMRC.”
What we have seen since then, however, is indecision, U-turns and delays.
The Government finally published a response to the alcohol duty consultation in September this year. Then in the shambolic mini-Budget that crashed the British economy, the then Chancellor announced a freeze on alcohol duty that was due to come into force in February 2023. The new Chancellor scrapped the planned freeze, however, in October’s autumn statement—just a couple of months ago. We now have a screeching U-turn; the freeze is back in place.
We see again that the Government have no long-term plan for the British economy. They cannot provide the certainty that businesses and their hard-working employees need to plan for the tough winter ahead. They have left businesses and consumers out in the cold. They may not want to hear it, but that is the reality. They are unsure what regulatory systems will be in place in as little as two months.
Today, Labour found that more than 70,000 venues have had to reduce their opening hours due to the price of energy bills, which means that almost a third of pubs, bars and hotels are missing out on customers at the busiest and most profitable time of the year. Those businesses and producers of wine, beer, cider and spirits enrich our communities and boost our high streets. I recently popped into the Standard, a pub in my Erith and Thamesmead constituency, which is really struggling with soaring energy bills and the lack of Government support. It needs the Government to be on its side. The Government promised to tell the House what the new energy bills support scheme would look like before Christmas, but we have yet to hear anything from them. Only Labour has set out a long-term plan to get our economy growing again.
Looking to the future, we agree with the principles behind the alcohol duty review and we want the alcohol duty system to be made simpler and more consistent. We recognise that there is a balance to be struck between supporting businesses and consumers and protecting public health, and maintaining a source of revenue for the Exchequer, but this statement leaves many questions unanswered.
Can the Minister give an indication of his plans for duty reforms in the coming spring? Can he confirm whether the alcohol duty reform package will be implemented in full? If so, what impact assessment has been carried out on the impact of the transition to the new duty regime? I hope that he can provide some clarity. The alcohol sector and the businesses and jobs that it supports have suffered enough uncertainty and U-turns. These are major changes that will affect businesses and consumers in all our constituencies, so I hope that they will be properly thought through and that we will not see last-minute policy announcements and changes, as we have today.
James Cartlidge
I am grateful to the hon. Lady. To be clear, this is good news for every single part of our alcohol industry and for those who drink in our pubs. Crucially, it gives certainty to the industry. The hospitality industry employed 2.1 million people at the latest reckoning, so it is a huge part of our economy and we want to do what we can to support it.
The hon. Lady mentioned a U-turn. To be clear, we said that we would introduce a radical reform of alcohol duty, and we will introduce that reform. It will come into effect next August. That reform could not have happened if we had not left the European Union. It will introduce, for the very first time, differential duty rates on tap and in the supermarkets. The public want that, because they value their pubs and understand the importance of pubs to their communities. [Interruption.] The hon. Lady intervenes, having sat down. She talked about her local pub. Obviously, we want to assist her local pub, and all pubs up and down the country; that is why we have put in place an energy bill relief scheme worth £18.1 billion, which is a huge intervention.
The energy bill relief scheme is very generous, but it is expensive, and we need to ensure longer-term affordability and value for money for the taxpayer. That is why we are carrying out a review of the scheme, with the aim of reducing the public finances’ exposure to volatile international energy prices from April 2023. We will announce the outcome of the review in the new year to ensure that businesses have sufficient certainty about future support before the scheme ends in March 2023. We should remember that this energy-related support comes on the back of the enormous support that we put in place during the pandemic. There were grants, bounce back loans, and of course furlough for all staff working in the hospitality sector.
We are proceeding with this ambitious reform package next year. We felt that it was appropriate to give the sector certainty as soon as possible that it would face only one uprating. That is the right thing to do, and it shows that the Government are supporting the hospitality industry.
Sir Peter Bottomley (Worthing West) (Con)
Like the hon. Member for Erith and Thamesmead (Abena Oppong-Asare), who speaks for the Opposition, I support what has been announced today. I declare an interest: I drink most things, except super-strength draught cider.
On wine, using an average rate of 12.5% is right; stepped rates would not have worked, because growers do not know what strength a wine will be—the strength fluctuates naturally. A revenue-neutral level makes sense. I hope that this approach will continue beyond the 18 months.
I hope that the Minister will consider whether farm-gate concessions can be made for the growing number of vineyards in this country. I hope that between now and the Budget the Chancellor will calculate the price and tax elasticity, because often, when duty rates are frozen, revenue goes up. There have been times when the rate has gone up and the revenue has gone down, which is perverse.
James Cartlidge
I am grateful to the Father of the House for his question—I do not think that I will ever get another that mentions both elasticity and high-strength cider; it was an interesting combination of points. He made a very good point about wine. I have enjoyed engaging with all the main alcohol sectors, mainly in November, in the run-up to the making of this decision. As he knows, we are requiring all wine between 11.5% and 14.5% ABV to be treated as though it were 12.5% ABV for the purpose of calculating the duty rate. That will apply for 18 months, so there is a transition. We have to ask ourselves: if that were made permanent, would it not undermine a regime that is ultimately based on taxation by strength? I understand my hon. Friend’s point and will continue to engage with the sector on it.
Stewart Hosie (Dundee East) (SNP)
I welcome the statement. I have long supported an alcohol content duty regime, and I hope that it delivers the fairness that the sector needs. As a gentle aside, may I say that we did not need Brexit to bring in this regime? The UK could have applied for a derogation, but it chose, over decades, not to do that.
I have some technical questions. The previous Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), announced a one-year freeze on alcohol duty in “The Growth Plan 2022”; that was due to cost £545 million in 2023-24. The current Chancellor scrapped that, but anticipates an additional yield of £1.3 billion in 2023-24; that was in the autumn statement 2022. First, how can a one-year freeze cost £500 million, while its cancellation in the same year suddenly generates £1.3 billion of additional yield? Also, we have been told that the freeze is being reintroduced and will last until August. How much will that cost the Exchequer?
The proposals following the post-2021 Budget consultation have been reported as having a modest cost of only £25 million next year—that was in the autumn statement Green Book. But this statement seems to suggest that the cost to the Exchequer of the draught beer relief scheme alone will be £100 million a year. Will the Minister explain what the net cost of this measure will be either to the Exchequer, or to the industry? As things stand, the numbers are not clear and in some cases do not add up.
James Cartlidge
I am glad that the right hon. Gentleman supports the principle of the reform package that will come into place next August. I hope Members across the House can do so. The cost obviously depends on what decision is made in the Budget next year. That is a matter for the Chancellor at the time. We know that that will be on 15 March, so there is not too long to wait.
The right hon. Gentleman made the point that it was not necessary to leave the European Union to make these changes. To be clear, EU law does not allow member states to differentiate beverages on qualitative characteristics such as whether the product is on draught. EU law actively discourages any attempt to support the on-trade through the duty system. That is also true for a system based on ABV; by and large, that would have been very difficult as well. The fact is that this is a radical reform and it has been made possible by Brexit.
Alun Cairns (Vale of Glamorgan) (Con)
I declare an interest as the chairman of the all-party parliamentary beer group, and someone who enjoys much of what we have been discussing. May I at least warmly welcome my hon. Friend’s statement? This will provide significant certainty to an industry that has experienced significant challenges over recent times, from the impact of weather on crops, to the impact on energy prices on the back of the fallout from covid. So this is a much needed platform on which the industry can build a strong future. It is looking forward with enthusiasm to the differential draught beer duty. That is an important principle. Come the Budget in March, will the Minister consider going much further that the 5% that has already been promised? The principle, and the Brexit dividend, can bring significant benefits to our pubs and beer industry across the country.
James Cartlidge
I am extremely grateful to my right hon. Friend for his comments. He has become the chairman of the all-party beer group, but we should remember the work of the former chairman, my hon. Friend the Member for Dudley South (Mike Wood). He cannot speak as he is a Whip, but he put in place all those sessions lobbying MPs and Ministers and making the case for beer. Much as we enjoy that, it is a major employer in this country. My right hon. Friend makes an important point about differential duty. To put that in context, the 5% cut to cider duty will be the biggest cut to cider duty since 1923, so it is significant. Of course I cannot from the Dispatch Box make decisions for the Budget next year, but it is not too far away and I am sure there will be plenty of chances for colleagues to engage up to then.
Navendu Mishra (Stockport) (Lab)
Stockport has several wonderful producers, including Robinsons Brewery and Stockport Gin, and they have been through a lot over the past few years. When will the Government finally end the U-turns and delays, and agree a long-term solution and support package for the alcohol sector?
James Cartlidge
I am grateful to the hon. Gentleman for mentioning the producers in his constituency: Robinsons Brewery and Stockport Gin. I am grateful to them for all they are doing in these challenging times to provide employment in his constituency and support consumers with the products they offer. That is what this is all about—supporting those companies and vital sectors in our constituencies. The hon. Gentleman asks about a long-term commitment. This is the biggest reform to alcohol duty for 140 years. It is a significant reform, getting the balance between competitive rates of duty and consideration of public health, which is incredibly important. It is an opportunity we should all seize and welcome.
Philip Dunne (Ludlow) (Con)
I warmly welcome the proposals announced by the Minister today in one of his most impressive performances at the Dispatch Box, and in particular the differential duty rates to allow pubs and restaurants to charge their customers a lower rate of duty than the off-trade, for which many of us have called for a long time. I also congratulate him on the point made by the Father of the House—differential rates on wines will be consolidated to a single rate for the vast majority of wines—because that reaches the principle of simplicity, which was an essential part of the consultation. What is the 18-month period dependent on? If we were to move then to differential bands per percentage of ABV, that would not really help the trade to prepare. The trade needs to know where it is going.
James Cartlidge
I am grateful to my right hon. Friend for his kind words. My first ever Parliamentary Private Secretary job was as a PPS to him, as a brilliant Health Minister. He mentioned simplicity: he is absolutely right that that is a key part of the reform package. In terms of the wine easement, as we call it, the 18 months is there precisely to enable the sector to adapt to the changes that are coming. He was also right to emphasise the on and off-trade differences. There is a key point on those differences. It is again about public health. The evidence shows that, while all drinking should be done responsibly, where people are socialising and going to the pub, they are less likely to encounter the more severe end of problem drinking; that is more likely to happen in private. That is one of the reasons why we have the differential.
Wendy Chamberlain (North East Fife) (LD)
The Scotch Whisky Association said on behalf of producers that it was furious about the Government’s decision to increase rates of duty in the autumn statement. The freeze is therefore welcome, but distilling is an energy-intensive business. The Minister said that the energy bills report will come in the new year, but the Chancellor assured me at the Dispatch Box during the autumn statement that it would come before Christmas. I would be grateful if he could explain the delay.
James Cartlidge
The hon. Lady makes an important point. We are aware of the importance of energy costs. I was absolutely clear just now that we will report in the new year. It has taken slightly longer than expected. These are complex matters. It is complex enough to put in place household support. Non-domestic support is particularly complicated because of the huge range of businesses involved. However, let us be clear what is happening: six months of support since October, worth £18.1 billion for businesses, including pubs, distillers and breweries, with their energy bills. That is huge. Of course, I know that people want to know what happens next and in the new year we will come forward with the results of our review.
Douglas Ross (Moray) (Con)
It is encouraging to hear support from across the House for these duty reforms, which were originally announced as a manifesto commitment at Roseisle distillery in my constituency. Of course, Moray is home to more Scotch whisky distilleries than any other constituency in the House. [Interruption.] As my hon. Friend the Member for Milton Keynes South (Iain Stewart) says, many are very good ones. I have been pressing both the Chancellor and the Prime Minister to maintain the freeze on duty for Scotch whisky for as long as possible, which is important for the entire industry and the jobs that rely on it. Will the Exchequer Secretary take on board what the Father of the House said? When it comes to the Budget in March, will the Government listen to the industry, which has time after time proven wrong Treasury officials who predicted that an increase in duty would increase revenue to the Treasury? In fact, a freeze in duty increases revenue to the Treasury and it would be welcome to see that continuing.
James Cartlidge
I am extremely grateful to my hon. Friend, who speaks with great knowledge on these matters. He has been a consistent champion for the Scotch whisky industry, standing up for it in this place, whether on tariffs or duties. I know that he was lobbying the Chancellor and the Prime Minster to continue the freeze, so I hope that he is pleased with the result. On what happens going forward, I will engage with the Scotch whisky industry and indeed all the other alcohol sectors. The clear point is that the extension of the freeze is good news for every single sector and I hope that colleagues welcome that.
Grahame Morris (Easington) (Lab)
I am not sure whether I should declare an interest, but I do enjoy a tipple—a glass of beer—on occasions. I thank the Minister for his statement. May I seek clarification in relation to his comments on differential rates of duty? He mentioned the need for certainty and the need to encourage diversity in choice in the small brewery sector. He referred to the new draught relief, worth £100 million a year, to ensure that smaller craft brewers can benefit, and he mentioned that the threshold for qualifying containers will be 20 litres. Can he go further and say something about the duty taper? Are the Government going to address the cliff edge above 5,000 hectolitres for small producers?
James Cartlidge
The hon. Gentleman makes a good point. To clarify, the draught relief is the new differential duty between the rate applied to alcohol purchased on draught—in other words, in the pub—as opposed to, for example, in the supermarket. This is about creating a level playing field. Small brewers relief is becoming small producers relief, so it extends to cider makers, for example.
As a general point, I have a chart here—you will be pleased to know, Mr Deputy Speaker, that I will not get it out—showing the old rates and the new rates that will come in under the reform, and it is striking how much leaner the new system is. I am more than happy to write to the hon. Gentleman with details of the taper and the technical points. I think he will observe that this is a much simpler system.
Andrew Jones (Harrogate and Knaresborough) (Con)
I welcome the extension of the duty freeze and am particularly pleased to see the draught relief to support the important on-trade. Can my hon. Friend comment or write to me about the proposals for mergers and acquisitions to absorb production over three years rather than one? Basically, allowing that to happen would facilitate a smoother business transition and smoother ownership in the sector.
James Cartlidge
Of course, my hon. Friend was an Exchequer Secretary to the Treasury, and I should put on record that he did much of the work that led to us being able to deliver these reforms in the first place. On his question about mergers and acquisitions, I am more than happy to meet him and share with him further detail from officials about the matter.
Christian Wakeford (Bury South) (Lab)
I speak as the chairman of the all-party parliamentary group on alcohol harm. I thank the Minister for recently meeting me and alcohol harm charities. I welcome the introduction of duty in regard to the strength of drinks, but my view is that it still does not go quite far enough, although I appreciate the differential duty. What assurances can he give me, alcohol harm charities and all those concerned about alcohol harm that he will continue to work cross-party and cross-Department to ensure that public health is fundamental in any alcohol duty changes?
James Cartlidge
I enjoyed meeting the hon. Gentleman, other parliamentarians and alcohol harm stakeholders on, I think, 24 November in the Treasury. It was a good meeting, where I think there was acceptance that we are trying with the reform package to strike that balance. We want to have competitive duty rates and to look at levelling the playing field that exists between pubs and supermarkets, but, equally, alcohol harm and consideration of public health must be at the heart of this. That is why the reform package in August has one underlying principle: taxation on the basis of ABV. We think that that is the right way forward, balancing both those approaches.
Jim Shannon (Strangford) (DUP)
I very much welcome the statement. It is good news not simply because the hospitality industry is on its knees, but because the steep increases in prices have led to more people having not a social drink with friends but a sustained drinking at home mentality, which can be detrimental to families. Has the Minister considered taxation aimed at multibuys in supermarkets, in co-ordination with the welcome freeze for pubs and hospitality?
James Cartlidge
I am grateful to the hon. Gentleman for his comments. As I said last time he asked me a question, the occupant of the Chair always seems to save the best till last. The hon. Gentleman hit the nail on the head. Let us be clear. He is talking about friends who cannot go for a drink because of economic pressures. With the enormous surge in energy costs and the rise in inflation, the biggest impact economically is on consumption and therefore discretionary spend such as in pubs, hitting hospitality. When we talk about the support that matters, it is not just help for businesses with their energy bills but the help that we are giving to consumers, so that they can still find that expenditure to support our pubs this winter. Of course, we are helping them by freezing duty for six more months. It is a win-win for consumers and for the sector.
Mr Deputy Speaker (Mr Nigel Evans)
I thank the Minister for his statement and for responding to questions for just under half an hour.
Deputy Speakers
Ordered,
That, for the period up to and including 31 January 2023,
(1) in the absence of Dame Eleanor Laing, the functions reserved to the Chairman of Ways and Means by Standing Orders or the practice of the House shall be exercised by Dame Rosie Winterton, or, if she is unable to perform them, Mr Nigel Evans; and
(2) Sir Roger Gale shall act as Deputy Speaker and shall exercise all the powers vested in the Chairman of Ways and Means as Deputy Speaker.—(Penny Mordaunt.)
Russia: UK Companies
James Cartlidge Excerpts(1 year, 5 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Dame Margaret Hodge (Barking) (Lab)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on continued involvement by UK companies in Russia.
The Exchequer Secretary to the Treasury (James Cartlidge)
I am grateful to the right hon. Lady for her question.
The UK and international partners have moved in lockstep since the invasion to impose the largest and most severe economic sanctions that Russia has ever faced, designating more than 1,200 individuals and over 120 entities. That includes a ban on new outward investments in Russia, and £18.4 billion-worth of Russian frozen assets reported to the Government. On Monday, in alignment with coalition partners, we banned the import of Russian oil and oil products into our markets. In conjunction with partners, we have prohibited UK ships and services from the maritime transportation of Russian oil unless the price paid is at or below $60.
The Government do not comment on individual commercial decisions. The process of divesting themselves of assets in Russia will be complicated for companies, which need to ensure compliance with financial sanctions. However, since Russia’s illegal and unprovoked invasion of Ukraine, we have seen commitments from many firms and investors to divest themselves of Russian assets.
The Government have been clear that we support further signals of intent to divest of Russian assets. In March this year, the then Chancellor—now the Prime Minister—said he welcomed
“commitments…made by a number of firms to divest from Russian assets”,
noted that he
“supports further signals of intent”,
and said that
“there is no case for new investment in Russia.”
That remains the Government’s position.
Dame Margaret Hodge
Mr Speaker, thank you very much for granting this urgent question. I thank the Minister for his reply. However, after listening to it, I would simply say to him that the Government have constantly talked about taking back control, and if there is one issue on which they should take back control it is this: ensuring that no British company invests in Russia.
Today is the 286th day of Putin’s invasion of Ukraine. In February, three days after the war started, BP said it
“will exit its 19.75% shareholding in Rosneft”,
Russia’s main oil company. Despite this promise, BP remains one of the largest shareholders. According to the excellent research by Global Witness, it is set to receive £580 million in dividends on the back of bumper profits fuelled by the war. Does the Minister agree with me that it is utterly shameful that a large, publicly listed British company profits from the sale of oil that is funding Putin’s war?
Does the Minister further agree with the words of Mr Ustenko, President Zelensky’s economic adviser? He wrote to BP and said:
“This is blood money, pure and simple, inflated profits made from the murder of Ukrainian civilians.”
BP’s claim that it is locked in as a shareholder is both laughable and easily solved. To put this into perspective, BP’s dividends are equivalent to over one quarter of the total military and humanitarian aid provided by the UK Government to Ukraine.
Does the Minister agree with Mr Ustenko that BP and any other company still invested in Russia’s fossil fuels must donate the entirety of its wartime profits to the victims of the war? Does he further agree that it is our duty to ensure that companies are not damaging Britain’s national interest? Will this Government therefore work to persuade BP to donate the entirety of its Russian dividends to the reconstruction of Ukraine, and if that fails, will the Minister commit to acting and forcing it to do so through a special windfall tax?
James Cartlidge
I am grateful to the right hon. Lady and pay tribute to her for her long-standing record of holding Governments to account on issues such as sanctions and international finance—I was previously Justice Minister when we had the strategic lawsuits against public participation issue. She has been very active, including across party lines.
I entirely understand why people feel so strongly on this subject, and I feel strongly too—what Putin has done in Ukraine is appalling—but I am not going to comment on a specific UK company or taxpayer or their commercial decisions. I have set out the range of measures we are taking, and it is important to stress that while we all want companies that have committed to divesting to do so, there are of course issues. I do not say this with specific prejudice to any individual, firm or company, but, for example, should a firm divesting from Russia by selling its shares sell them in such a way that they returned to an individual entity that was sanctioned, there would rightly be condemnation of that. This is not a straightforward process—and I repeat that I do not say that in reference to any specific company.
I totally agree that we should do everything possible to support the people of Ukraine, and we can be very proud of the enormous effort our country has made. The right hon. Lady rightly talked about our duty, and I believe we have a duty to support Ukraine. We are second only to the United States in the amount of aid we have given to the people of Ukraine, now totalling over £6 million, and, as I understand it, we have been training its soldiers—22,000 of them—since 2015. This country has done its bit in relation to Ukraine. We are proud of that, and of course we want to do more and go further, which is why we work with our partners; that is why only on Monday we announced a decision in partnership with G7 states and Australia in relation to Russian oil across the piece. We have a record of taking decisive action, and in terms of the Treasury, of the most powerful sanctions against Russia on record, which is hitting its economy. We of course have no dispute with the Russian people, who will feel the impact of that, but we are doing everything possible, bar direct military action, to support the people of Ukraine.
Dr Julian Lewis (New Forest East) (Con)
I am sure the entire House agrees with the Minister that the UK has done a tremendous job in supporting Ukraine ever since it was illegally invaded, but what we want is a way for the Government to intervene to stop private companies somehow drilling a hole in the bottom of the bucket, as it were, while we are pouring in water at the top. Is there really nothing that can be done to impound, confiscate or levy a tax against money that has been raised in this unacceptable way?
James Cartlidge
I pay tribute to my right hon. Friend for his great expertise on these matters but say to him that we have to differentiate. We have taken explicit and direct action on firms within the sanctions regime—120 entities and 1,200 individuals have been sanctioned and, as I said earlier, £18.4 billion-worth of frozen assets have so far been reported to the UK Government. There has been a clear commitment from a number of important UK and indeed global businesses to divest from Russia—I am not specifically talking about any one—but we must recognise that there is complexity in that. When the Prime Minister was Chancellor back in March, he was very clear about what the Government want in terms of divestment, and we obviously support companies in taking that action, but I am happy to look at what further can be done in this space and to work with colleagues.
Mr Pat McFadden (Wolverhampton South East) (Lab)
I thank my right hon. Friend the Member for Barking (Dame Margaret Hodge) for tabling this urgent question.
Right now in Kyiv, the temperature is around freezing. Putin aims to weaken the resolve of the Ukrainian people by freezing them over this winter. But with every Russian missile that falls on energy infrastructure, he does not weaken the resolve of the Ukrainian people—he strengthens it. The resounding answer to the question posed by President Zelensky—without electricity or without you?—should be heard loudly and clearly in Moscow.
To support the efforts of the Ukrainian people, many British companies have ceased their Russian operations and divested themselves of their interests. Those decisions have cost businesses money, orders and jobs, but they have made them because they want to do the right thing. And other businesses are paying higher energy costs as a result of the war. But some companies either continue to operate or have not fully divested themselves of their interests.
The excess profits made by energy companies have rightly been called the windfalls of war. Energy is the central pillar of the Russian economy and the profits from it fuel the Russian war effort. My right hon. Friend the Member for Barking has told the House today that the dividend due to BP as a result of its stake in Rosneft is worth about £580 million. Those funds may be frozen at the moment, but what do the Government believe should happen to those funds when they are eventually released? Do the Government believe that those funds should be used for the welfare and benefit of the people of Ukraine, whose country is being devastated by Russian aggression? How many other British companies are still operating in Russia and why are they still operating? What is the Government’s position on money they could be making there, which could also be described as the windfalls of war?
We are united across this House in our support for Ukraine and for the incredible bravery shown by both its armed forces and its people. The question the House poses today is how will the Government make sure that British companies are not profiting from the appalling Russian aggression we have seen in Ukraine?
James Cartlidge
The right hon. Gentleman poses a number of very important questions. On a general point, he talks about strengthening the resolve of the people of Ukraine. This country can be rightly proud of every step it has taken to strengthen that resolve, and, I must say on record, of the leadership of two former Prime Ministers, as well as the current Prime Minister. They have shown extraordinary leadership appearing in Kyiv under huge pressure and supporting President Zelensky, alongside the support we have given to the Ukrainian armed forces and our massive humanitarian aid. I know there is consensus on that, but we should not in any way be defensive about the steps we have taken to support the Ukrainian people.
The right hon. Gentleman talks about companies doing the right thing. He is absolutely right that companies are divesting and exiting from Russia. We welcome that. I explained about the statement made by the Prime Minister when he was Chancellor back in March, which is obviously something we welcome. I think there are some complexities in that process and I will not be drawn on individual firms. That is long-standing Treasury policy for very good reason.
The right hon. Gentleman mentions the windfall tax. We have a windfall on North sea oil and gas which will raise £41.6 billion—an enormous sum of money. Why are we raising that money? It is in part precisely to fund the extraordinary support we are putting in place to help British people and British businesses through this winter. He talked about the impact on companies of Putin’s war and the impact on people. Yes, of course, the harshest impact is on the people of Ukraine, not least the bereaved families, but there is an impact on our people with higher prices, including energy prices, here and throughout Europe and the world. Our windfall tax funds that support so that this winter we are doing everything possible to support our businesses and our people, alongside massive support for the people of Ukraine.
Mark Pritchard (The Wrekin) (Con)
There is no doubt that the UK has led the Ukraine war effort with the United States, and there is no doubt that the UK has led the international sanctions regime, but this urgent question is about UK companies. Does the Minister share my concern that DP Eurasia is selling pizzas in Russia, Unilever is selling Cornetto ice creams in Russia, and HSBC is still servicing Russian corporate clients? Does he think that is acceptable? What more action can the Government take to encourage those companies to remove their services and businesses from Russia and to divest themselves fully, rather than just give interviews to corporate magazines and offer warm words?
James Cartlidge
My hon. Friend makes an important point. It is for good reason that we do not entertain specific discussions on individual companies and their commercial interests, but we have been very clear on the need to divest. We have an outright ban on investment in Russia, and I sincerely hope that companies are not abusing that. I am not going to suggest that the companies he mentioned are doing so or comment on those specific cases, but I am always happy to meet my hon. Friend, or receive correspondence from him, if he has concerns in that regard.
Alison Thewliss (Glasgow Central) (SNP)
It seems to me to ring a little bit hollow to say that companies are still trying to unwind their various operations in Russia. If some companies can do that quite easily, can the Minister explain to me why companies such as Infosys are still working in Russia?
James Cartlidge
As I said to the right hon. Member for Barking (Dame Margaret Hodge)—I apologise if this becomes a relatively repetitive point—I am not going to comment on specific individual companies. As I say, there is very good reason for that, and it is a long-standing Treasury policy that I think any Government would follow.
We have set out our policy. In my opening answer to the right hon. Member for Barking, I read out the statement from the Prime Minister when he was the Chancellor. We have been very clear that we want to see companies divesting from Russia. There are some complexities in there—of course there are—but the direction of travel is very clear.
Mr Mark Francois (Rayleigh and Wickford) (Con)
As a Member of the House of Commons Defence Committee, I visited Ukraine about three weeks ago. We were welcomed literally with open arms, so grateful are the Ukrainians for staunch British support. They know a hard winter is coming, so may I make a practical suggestion? They clearly need more weapons, but they also desperately need generators in order to keep hospitals and other critical facilities operating even if they lose main power stations to missile strikes. Is there anything the Minister and the Government can do to encourage UK companies of all types that might be able to spare even one or two generators from their stocks to get them to Ukraine, where they would be put to incredibly good use?
James Cartlidge
My right hon. Friend speaks not only with his expertise on the Defence Committee; he also served in His Majesty’s armed forces and, of course, as a Defence Minister. He makes a very important point, and I was delighted to hear about his visit. It is inspirational to me and, I think, to the rest of the country when we see leading British politicians going over to Ukraine and showing that we are not afraid to go there. We will give the Ukrainians every form of support that we can.
On the specifics of that support, my right hon. Friend makes a good point about generators. I do not know the specific answer on that, but I do know that the Foreign Secretary recently set out measures to provide ambulances. Of course, the energy network is being affected by attacks from Russia, so military support remains so important, because that is how we enable the Ukrainians to defend themselves so that they can thwart these attacks. It will be tough, and there will be further attacks—this is not going to finish tomorrow—but we are doing all we can, and it helps when people such as my right hon. Friend are going out there and showing the support of the British people.
Chris Bryant (Rhondda) (Lab)
I am sorry, but this is just terribly complacent. It is 3,218 days since the annexation of Crimea, and there are still British companies that seem to be invested in Crimea, let alone British companies—including Infosys, from what I understand; the Minister did not refute that point earlier—that are still operating in Moscow and Russia with a staffed office. He says he will not comment on individual companies, but he does it all the time: that is what sanctions are. That is the whole point of sanctions. Some £778 million-worth of Russian oil has ended up coming into 10 British ports this year, having been transferred from one ship to another on the route here. This is complacency. We have to have a total effort from every Government Department to make sure that we stop funding Putin’s illegal war.
James Cartlidge
As ever, the hon. Gentleman makes his point with his usual passion. The point I was making was not to refute or in any way entertain points about individual companies; I am simply saying that it is long-standing Treasury policy not to comment on individual taxpayers or companies, or on their commercial activities, and I suspect that would be true of any Government.
The hon. Gentleman mentions oil. I remind him that on Monday, in alignment with coalition partners, we banned the import of Russian oil and oil products into our markets. In conjunction with partners, we have prohibited UK ships and services from the maritime transportation of Russian oil unless the price paid is at or below $60 a barrel.
Jason McCartney (Colne Valley) (Con)
As the secretary of the all-party parliamentary group on Ukraine, and as a constituency MP with a large Ukrainian community, I gently prompt my hon. Friend the Minister to urge BP, if it is unable to sell its stake in Rosneft, to take the profits and commit them to the reconstruction of Ukraine and to aiding the victims of Putin’s barbaric invasion.
James Cartlidge
My hon. Friend is right to remind us of the many Ukrainians who have made their home here and, of course, the many UK nationals who have opened their homes to them. It has been an extraordinary contribution. The reason we do not comment on individual companies’ commercial affairs is that, for a start, these are matters of commercial sensitivity. I appreciate that there are strong feelings on this point, but that is a consistent policy irrespective of the issue at hand.
We have been very clear on the need to divest from Russia. We have put in place a strong sanctions regime and banned further investment in Russia. I think that sends very strong signals, but we should not detract from the fact that this country is second only to the United States in what it is doing to support the people of Ukraine.
Darren Jones (Bristol North West) (Lab)
Last week I met Andrii Zhupanyn, a counterpart of mine from the Energy Committee in the Ukrainian Parliament. His priority was to source as many generators as possible to back up the Ukrainian energy system, so may I ask the Minister a specific question? Will he, at the very least, write to the chief executive officer of BP to suggest that the moneys gained by the company be used to pay for generators for Ukraine?
James Cartlidge
I should say that we have seen a positive attitude and support for Ukraine from across the House. On the specific issue of generators, I will go away and look at it. I will write to the hon. Gentleman and my right hon. Friend the Member for Rayleigh and Wickford (Mr Francois), because I do not have the answer to hand.
I will not comment on what individual companies do. We in the Treasury are responsible for UK tax and spending decisions, and we have been extremely clear in setting out a windfall tax, which will be funding energy support for our constituents this winter and now, in fact, next year. That is very generous support, and it is ultimately connected to the impact on our country from Putin’s illegal invasion. All of this is about supporting the people of Ukraine but also helping our people with the wider shocks resulting from that invasion.
Rehman Chishti (Gillingham and Rainham) (Con)
I very much welcome what the Minister said about the United Kingdom stepping up to the forefront in support for the people of Ukraine militarily, economically and diplomatically. As the former Minister for sanctions, I agree with him that the United Kingdom took decisive action, but may I ask him to clarify a specific point? On the oil price cap coming at $60 per barrel, that is not set in stone. It can be subject to review, taking into account implementation, international adherence and alignment, market developments and the potential impact on coalition members. When does he expect that review to take place so that we can take further decisive action, looking at the levers that are really having an impact?
James Cartlidge
I am grateful to my hon. Friend, who speaks with great expertise on these matters. The key point is that the action in relation to oil was agreed at G7 level with Australia. He talked about the review, and it is very much about the constant dialogue we have with international partners—that is where we will be reviewing these things. Obviously, it is a step we have only just taken, but I am happy to confirm that, as ever, the Treasury keeps all these matters under review.
Sarah Olney (Richmond Park) (LD)
On 17 November, my hon. Friend the Member for St Albans (Daisy Cooper) asked the Prime Minister whether he agreed that
“private citizens in the UK should follow the example of several British businesses and sell any shares they have in businesses that still operate in Russia”.—[Official Report, 17 November 2022; Vol. 722, c. 837.]
For some reason, the Prime Minister was unable to give my hon. Friend an answer on that occasion, so I wonder whether the Minister might be able to answer that question today.
James Cartlidge
That is an important point and I understand why the hon. Lady asks about it. In March the Prime Minister—as Chancellor—set out our very strong position on urging companies to divest, making it clear that there was no further case for investing in Russia. As for what happens with individual shareholdings, I said that I would not comment on specific companies and, to be fair, the hon. Lady has not asked me to. However, as I hope we can all acknowledge, it is not necessarily straightforward to divest. We want companies to do that, but as I said to the right hon. Member for Barking (Dame Margaret Hodge), if firms divest their shares, they have to be clear that any new owners will comply with the sanctions regime and that they will not be sold on to an entity or individual who is part of the regime. It is not straightforward, but that does not mean that we do not want every possible step to be taken to divest.
Shaun Bailey (West Bromwich West) (Con)
The flipside of this narrative is that companies are doing the right thing. I am concerned—I have read such reports locally—about companies that have divested their interest in Russia but are now struggling to get legal and audit services. As a result of having that previous interest, companies are reluctant to touch them. It is bizarre that companies and organisations that have done the right thing cannot access those statutory services. Will my hon. Friend ensure that he has conversations across Government, particularly with the Department for Business, Energy and Industrial Strategy and professional service providers, to ensure that companies that do the right thing on Russia are not penalised as a result?
James Cartlidge
My hon. Friend—I think he was a lawyer by training—gives a good example from a sector where one can imagine that might be happening. If firms are complying with the regime, other firms should have no fear of working with them. If he wants to raise specific cases with me, he is, as ever, welcome to write to me. He makes a very good point and it is on the record.
Ms Marie Rimmer (St Helens South and Whiston) (Lab)
The French and Norwegian energy companies have successfully managed to exit Russia while BP has not. That is embarrassing, and the stain on Britain’s reputation needs removing. We appear to be undermining our efforts to support Ukraine and its people. The Treasury must ensure that the £580 million dividends that are due are used to provide aid to Ukraine and its people. Will the Minister ensure that if that does not happen, we will legislate to ensure that it does?
James Cartlidge
I understand why people make the link between what they have heard alleged about the shareholding of a particular company and how that should be spent, in an ideal world. I cannot comment on an individual company or its commercial interest and I am not going to, but I understand why people make that point. It therefore falls to us to talk about where we can act. The hon. Member talks about humanitarian assistance. We have given more than £6 billion of assistance—military aid and humanitarian assistance—and that is second only to the United States in scale. It is having a huge impact. We can safely say that the world, and least of all Vladimir Putin, did not expect Ukraine to fight back as it has done. One reason for that is the armaments and training provided by the United Kingdom.
Simon Fell (Barrow and Furness) (Con)
European payments for Russian oil and gas have totalled more than €100 billion since the illegal invasion of Ukraine began. I welcome the efforts of this and other Governments to end the use of that oil and gas, but the fact remains that millions of barrels of oil a day are still being resold through third-party countries back into our markets. Can the Minister give us some detail about the efforts to stop that illegal resale, which is just giving succour to Putin and his illegal war?
James Cartlidge
My hon. Friend makes an excellent point. As I said, not only have we banned the import of Russian oil and oil products into our markets but, in conjunction with other parties, we have prohibited UK ships and services from the maritime transportation of Russian oil unless the price paid is at or below $60—in other words, the onward trade from within our respective jurisdictions. Effectively, he also makes an important wider point about the amount of money that has been spent in Europe on Russian energy historically. There has to be a long-term answer to that. Ultimately, we as a country, and with our European and G7 partners, have to wean ourselves off all forms of Russian energy. The way we do that, as he knows—he represents a Cumbrian constituency—is by investing in nuclear and UK energy production, as well as by living up to our net zero commitments and driving up even further our offshore wind capacity, which, I am proud to say as an East Anglian MP, is the largest array of offshore capacity in Europe.
Clive Efford (Eltham) (Lab)
Should not the position of the Government be that UK companies must not profit from activities that sustain Putin’s war? And having said that, should the Government not say to those companies, “Where you do profit, we will use all the powers at our disposal to sequester those funds and make them available for the regeneration of Ukraine”?
James Cartlidge
We have set out precisely that with the commitments that the Prime Minister made in March, when he was Chancellor, on the desire to see businesses divesting from Russia. The hon. Member for Eltham (Clive Efford) is aware that there have been many high-profile public cases of firms divesting, and other colleagues have spoken of companies in their constituency. They all use the phrase that the shadow Minister used, which is “doing the right thing,” and I totally agree. Ultimately, that is why we have our very strong sanctions regime.
Derek Twigg (Halton) (Lab)
I congratulate my right hon. Friend the Member for Barking (Dame Margaret Hodge) on securing this important urgent question, and I associate myself with the calls for generators for Ukraine. For Putin to be defeated, and for him to know that he will be defeated, it is essential that there remains rock-solid support for Ukraine from the UK and the west. Not only is that about defence materiel, military equipment and humanitarian aid, but it means ensuring that no British company, for whatever reason and in whatever way, benefits Putin’s regime. The Minister mentioned a desire to achieve certain things, but a desire is not enough, so will he go away and look again at what more can be done in legislation—if necessary, through new legislation—to ensure that that situation stops, and will he make a statement to the House next week?
James Cartlidge
We always keep our sanctions regime under review. In particular, we are looking with our international partners at what more can be done on illicit finance and so on. [Interruption.] The hon. Member talks about desires, but these very strong sanctions are having an impact in practice on Russia’s economy. We are sanctioning 1,200 individuals and 120 entities. We have already heard reports of frozen assets worth £18.4 billion. What matters above all—this is what he wants—is that we stand with the people of Ukraine and show that we support them. No country, other than the United States, has done more than we have, and we should be proud of what we have done. I absolutely guarantee that the Government will work night and day to keep supporting the people of Ukraine in the wake of this terrible invasion.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
May I raise the issue of a UK company, the Lawn Tennis Association, being fined $1 million by the ATP—Association of Tennis Professionals—tour for banning Russian and Belarusian players from all tournaments, including Wimbledon, with further sanctions potentially to come? That is on top of a similar fine and ruling from the Women’s Tennis Association. Will the Minister join me in condemning the ATP and the WTA, which have both shown an extraordinary lack of empathy towards the people of Ukraine? Given that they were rightly urged by Ministers to ban Russian players from the tournaments, might the Government pay the fines for the LTA, should any appeals fail?
James Cartlidge
That is an interesting point. My colleagues have been clear on the record about where we stand on that. I will not comment on any specific appeals, but our sanctions regime, to which he referred, is very strong and is working in practice. We are always committed to looking at what more we can do as a Government and working with our international partners.
Karl Turner (Kingston upon Hull East) (Lab)
Fenner Dunlop has existed in Marfleet in my constituency since the company Fenner was established in 1861. It manufactures conveyer belts for the mining industry. It refused to trade in Russia and has done the right thing. As a result, it is reviewing the business in Marfleet and 71 jobs are potentially at risk. Everybody can see that the company needs to be commended—it is an excellent employer—but the reason the Minister is having difficulty mentioning specific businesses is because one of them is Infosys. Does he want to put his finger on why he is struggling to talk about that business?
James Cartlidge
As ever, I am grateful to the hon. Gentleman for his question. All I will say about the company in his constituency—in Marfleet, I think—is that companies divesting their interests in Russia will undoubtedly have an economic impact at home. They will have gone into that market for a commercial reason and there will be a commercial impact if they divest. We have to do everything possible to show our resolve to the people of Ukraine. That includes strong economic sanctions, even if they have an impact here, but by far the biggest economic impact is on our economy from the enormous surge in energy prices and the resulting inflation. Global inflation will drive the economy around the world to experience a hiatus in growth. We want to see growth return, and one of the reasons that we have windfall taxes is to raise funding to support our constituents and businesses through this winter.
Andy Slaughter (Hammersmith) (Lab)
The Exchequer Secretary cannot have failed to notice the exhibition in Portcullis House showing the gross human rights abuses committed by Russian forces in Ukraine. As well as justice, the victims of these war crimes deserve compensation, but so far that has not come from seizing and distributing the assets of Putin’s allies or the Russian state. Why can it not come from BP and others’ Russian earnings?
James Cartlidge
I always enjoyed working with the hon. Gentleman in my previous position at the Ministry of Justice. He makes an extremely powerful point. The abuses that we have seen have been horrific, and he is right to draw attention to them. A great range of activities are taking places in that regard—for example, the significant support that we have given to the International Criminal Court at The Hague so that it can look into those abuses. Of course, it will be very difficult until we get a resolution to the conflict, which is why the most important thing we can do in all these cases is to continue supporting the people of Ukraine, their armed forces and the humanitarian effort.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
I fully support the right hon. Member for Barking (Dame Margaret Hodge) in her efforts. Would not one way to dissuade UK companies from investing in Russian oil assets and to encourage disinvestment be to prohibit any such companies from benefiting from the North sea windfall tax investment allowance?
James Cartlidge
The hon. Gentleman asks an interesting question, knitting together two points. To be fair to him, I have to say that he has consistently attended all the recent Treasury debates at which I have been present. I am grateful to him for that.
We should not confuse divesting and investing. We are clear that there is an outright ban on investing in Russia: the Prime Minister said back in March, when he was Chancellor, that there was “no case” for such investment. Divestment is happening. It is a process that for some companies will take time, but I think we are all clear that we want to see it happening.
The hon. Gentleman is absolutely right to highlight the windfall tax. While it will raise more than £40 billion to support our economy, help us fund public services and, above all, support people with energy bills this winter, it does have a generous allowance. Let me be clear about the reason why, which goes back to my answer to my hon. Friend the Member for Barrow and Furness (Simon Fell): while we want to raise funds from the levy, we also want to incentivise investment in energy security. Ultimately, the long-term answer to the question of how to defend ourselves against being held to ransom over energy prices is by ensuring our energy security for the future.
Jim Shannon (Strangford) (DUP)
I thank the Exchequer Secretary for his answer to this urgent question. It is clear to me and to the House that he is doing his best to address the issue in a firm way.
We have seen not only the continued involvement of UK companies in Russia, but the ongoing involvement of Russian companies and kleptocrats in infiltrating UK companies potentially to commit fraud. What steps will the Exchequer Secretary take to ensure that UK companies are discouraged from any involvement with the Russian economy and ensure that a harder stance is taken to protect our economy from the promotion of economic crime and infiltration by Russia itself?
James Cartlidge
As ever, Mr Speaker, you have saved the best till last. I am grateful to the hon. Gentleman for his kind words. There is a legal side to protecting our economy—the sanctions regime protects it from the impact of sanctioned individuals and companies—but I think the most important way to protect our economy is by providing support this winter to our businesses and constituents, including constituents in Northern Ireland. We will be bringing forward many energy schemes with specific application in Northern Ireland; I know that he takes a keen interest in them. We are working with BEIS to ensure that we deliver those programmes in Northern Ireland, as well as in the rest of the United Kingdom. The hon. Gentleman makes an excellent point. Ultimately, we are supporting not just the people of Ukraine, but our businesses and our constituents.
Greening the Financial System
James Cartlidge Excerpts(1 year, 5 months ago)
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The Exchequer Secretary to the Treasury (James Cartlidge)
It is a real pleasure to serve under your chairmanship, Mr Bone. I congratulate the hon. Member for Sheffield, Hallam (Olivia Blake). This is an incredibly important subject and a very timely debate. I thought she delivered her speech very clearly and eloquently and made some very important points, and I will do my best to respond to the various points that have been made by her and other colleagues. I thank them all for contributing to what has been a thoughtful debate.
I will just give a couple of personal perspectives. I had the privilege to represent the Treasury at the COP finance day. It was pretty much my second week in the job. It was striking that in discussions with financial counterparts, three of them raised the fact, without my prompting—just by coincidence—that their nations had raised their green sovereign bonds, or the equivalent instrument, in the UK. That is a real testament to the strength of the City. I think it was Mexico, Uruguay and Egypt, which of course was our host. That feeds into the point made by the hon. Member for Kilmarnock and Loudoun (Alan Brown), who spoke for the SNP: this should be seen as an economic opportunity. The journey to net zero goes hand in hand with strengthening our economy and taking advantage of economic opportunities. The hon. Member for Strangford (Jim Shannon) quite rightly referred to the green industrial revolution. I will go as far—[Interruption.]
Mr Peter Bone (in the Chair)
Order. I am sorry to interrupt the Minister, but the sitting will be suspended; we have a number of votes. If people return as soon as possible after the last vote, we will reconvene.
James Cartlidge
To cut straight to the chase—given I was interrupted by the vote—we published the green finance strategy in 2019 and the “Greening Finance: A Roadmap to Sustainable Investing” policy paper in 2021. Together, they add up to an ambitious and detailed agenda on which we are making significant progress.
The hon. Member for Bristol East (Kerry McCarthy), who spoke for the Labour party, said that the market needs a clear steer—just as I need to get my breath back. To be clear to her, a central tenet of our approach has been to ensure that every financial decision takes climate change into account. This year, the UK made good on our commitment to introduce a mandatory Task Force on Climate-related Financial Disclosures, or TCFD. This is the first country to make a commitment to do so and we have now delivered. As set out in the greening finance roadmap, we will build on those rules with new SDR rules, the aim of which is a comprehensive, streamlined and co-ordinated reporting framework. SDR will incorporate international sustainability standards—I’m sorry, but I have completely lost my breath.
Mr Peter Bone (in the Chair)
Order. I am grateful to the Minister for running back—I know what it is like. We are pushing things a little earlier to help with later debates. My saying that might have given the Minister enough time to catch his breath.
James Cartlidge
You are very kind, Mr Bone. As I was saying, SDR will incorporate international sustainability standards, including the global baseline standards being developed by the International Financial Reporting Standards Foundation.
The SNP spokesman, the hon. Member for Kilmarnock and Loudoun, raised the subject of transition. A central element of SDR is transition plans for financial firms. We recognise the importance of requiring firms to set out how they will adapt as the world transitions towards a low-carbon economy. Transition plans form a key part of the UK’s ambition to become the world’s first net zero-aligned financial centre, and will see organisations setting out how they plan to adapt as the world transitions to a low-carbon economy. That is why we launched the transition plan taskforce in May to create the gold standard for transition planning. I was pleased to announce at COP a few weeks ago the launch of the TPT’s disclosure framework and implementation guidance consultation. The documents are a huge step and set out clear recommendations for the preparation and disclosure of high-quality transition plans.
Let me turn to the important issue of stewardship. More than 70% of the UK public say they want their investments to avoid harm and achieve good for people and planet. In 2020, on average UK savers put almost £1 billion a month into responsible investment funds—a clear sign that a shift is under way. As made clear in “Greening Finance: A Roadmap to Sustainable Investing”, the Government expect the UK’s pension investment sectors to act as responsible stewards of capital.
The FCA’s consultation on SDR and investment labels includes proposals to promote integrity and trust in the market, protect consumers, allow consumers to better compare products and reduce the risk of what my hon. Friend the Member for Rother Valley (Alexander Stafford) quite rightly referred to as greenwashing. In November, the FCA convened the vote reporting group to develop a more comprehensive and standardised vote disclosure regime.
On the specifics of the greening financing programme, Members will know that the UK kick-started a greening finance programme with a record-breaking debut sovereign green bond last September. The UK plans on raising an additional £10 billion from green gilts this financial year, with transactions worth £6 billion so far. That means we have raised more than £22 billion from green gilts and retail green savings bonds since September 2021, helping to finance projects to tackle climate change and other environmental challenges. The world sees the progress we have made. There is a lot of talk about the competitiveness of the City and UK financial institutions. Just last month, London was once again ranked one of the leading centres in the world for green finance in Z/Yen’s global green finance index.
Let me turn briefly to the UK Infrastructure Bank, for which we are legislating at this very moment to put it on a sound footing. The bank has £22 billion of capital to invest in infrastructure that supports two objectives: helping to tackle climate change and levelling up the UK. Based on the 10 investments it has announced so far, UKIB estimates it has already crowded in £4.5 billion of private investment. Notably, its first private-sector deal was to support a £500 million subsidy-free solar fund—a good example of exactly what we are setting out to achieve.
Of course, it is about not just tackling climate change but the key issue of nature. The Government have invested significantly in financial sector transparency and the disclosure of nature-related financial risk. The UK is the largest financial backer of the taskforce on nature-related financial disclosures and supports its work developing a framework for financial institutions and corporates to assess and report on their nature-related dependencies, impacts and risks.
Let me turn to some of the points raised by colleagues. My hon. Friend the Member for Rother Valley—we were right not to ignore him—made a good contribution, and I note his previous work with WWF before becoming an MP. He is right about green taxonomy—it must be about quality not speed—and I look forward to receiving a copy of his report. The Government will be engaging with the market on the design of a policy approach to guide investors on how they can best support the transition to net zero, and the value of taxonomy rests on its credibility as a practical and useful tool for regulators, companies and investors. It is important that we learn from the approach taken in other jurisdictions and take the time to get this right for the UK and the market.
Alexander Stafford
I invite the Minister to attend the all-party group meeting to discuss the report with our members as a priority.
James Cartlidge
I would never say to my hon. Friend that he should be ignored. On that basis, I will certainly consider his invitation, alongside reading his interesting report.
The hon. Member for Sheffield, Hallam raised the issue of insulation. Our new £1 billion ECO+ scheme will see hundreds of thousands of homes receiving new home insulation worth approximately £310 a year each. Of course, the autumn statement made significant and ambitious commitments on energy efficiency.
The hon. Members for Bristol East and for Strangford spoke about charging points. Since 2020 we have committed £1.6 billion on charging points, but I know that people want to see us go further and faster, and we are making huge progress on the transition to electric vehicles.
The hon. Member for Strangford and my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), who is not in his place, mentioned the important issue of deforestation. The Environment Act 2021 includes due diligence requirements for companies to check and eliminate illegal deforestation, and a significant pledge was made at COP26. To be clear about financial services, the UK is focused on transparency with regard to deforestation and has included that very point about disclosing that sort of activity in our disclosure framework, as part of the taskforce on nature-related financial disclosures. That is the key point about the financial services sector: it is all about disclosure. [Interruption.]
Mr Peter Bone (in the Chair)
Order. I am afraid the sitting is suspended. It will be great to see you all back here in 15 minutes.
James Cartlidge
It has been an interesting debate. I again pay tribute to the hon. Member for Sheffield, Hallam for raising this very important subject. I hope I have managed to set out the comprehensive steps the Government are taking to support the green finance system. We look forward to further action in due course.
Finance Bill
James Cartlidge ExcerptsMonday 28th November 2022
(1 year, 5 months ago)
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The Exchequer Secretary to the Treasury (James Cartlidge)
I beg to move, That the Bill be now read a Second time.
In the face of challenging global headwinds, my right hon. Friend the Chancellor of the Exchequer delivered an autumn statement that was honest about the difficult decisions this Government will need to take to tackle the cost of living crisis and rebuild our economy. We are not alone in dealing with economic problems. One third of the global economy is forecast to be in recession this year or next. At the same time, while inflation is high in the United Kingdom, it is notably higher in Germany, at 11.6%, in Italy, at 12.6%, and in the Netherlands, at 16.8%.
It is our duty to curb rising prices, restore faith in our country’s economic credibility internationally and, ultimately, to deliver growth. The independent Bank of England is responsible for controlling inflation. However, as the Chancellor set out in the autumn statement, monetary and fiscal policy need to move in lockstep. That means, for the latter, taking a disciplined approach and giving the world confidence in our ability to pay our debts. We have been clear that we will be following two broad principles in this consolidation: first, we ask those with more to contribute more; and, secondly, we will avoid the tax rises that most damage growth. With just under half of the £55 billion consolidation coming from tax and just over half from spending, the autumn statement set out a balanced plan for stability.
Today, we are debating a small number of the tax measures that were announced last week. In order to provide certainty to markets and help stabilise the public finances, we are taking forward important tax measures in this focused autumn Finance Bill, ahead of a fuller spring Finance Bill, which will follow the Budget early next year as usual.
Sir William Cash (Stone) (Con)
During the autumn statement, I raised the point about High Speed 2 with the Chancellor, and I also wrote to the Chief Secretary to the Treasury and, indeed, to the Chair of the Treasury Committee, my hon. Friend the Member for West Worcestershire (Harriett Baldwin). According to the Office for National Statistics yesterday, annual inflation in the infrastructure sector was 18.1% in September, which is 80% higher than the consumer prices index for the same month. How can the Government continue to bankroll phase 2 of the HS2 project at a cost of more than £40 billion when all the independent advice suggests that it will make rail services to the north-west worse than could be achieved with merely phase 1 and the Handsacre link? Could I also have a reply from the Chief Secretary to the letter I wrote to him?
James Cartlidge
I am grateful to my hon. Friend and will of course check with the Chief Secretary’s office; my officials will have heard the point he makes and will ensure he receives a response. On inflation in infrastructure costs, obviously that will apply across the board and cannot in itself be a reason to reconsider such fundamental investment. There are strong views on this project; from the Government’s point of view, it creates thousands of jobs and apprenticeships and builds much greater connectivity. But of course, as the Chief Secretary himself has been clear—I am sure he will emphasise this in the letter to my hon. Friend—we need to see discipline on cost control whatever is happening to wider macroeconomic factors.
Turning to the substance of the Bill and the specific measures, I shall start with the energy profits levy. Since energy prices started to surge last year there have been calls for the Government to ensure that businesses that have made extraordinary profits during the rise in oil and gas prices contribute towards supporting households that are struggling with unprecedented cost of living pressures. This Bill takes steps to do exactly that by ensuring oil and gas companies experiencing extraordinary profits pay their fair share of tax. We are therefore taxing these higher profits, which are due not to changes in risk taking or innovation or efficiency, but as the specific result of surging global commodity prices driven in part by Russia’s illegal invasion of Ukraine.
The measure increases the rate of the energy profits levy that was introduced in May by 10 percentage points to 35%. This will take effect from January next year, bringing the headline rate of tax for the sector to 75%, triple the rate of tax other companies will pay when the corporation tax rate increases to 25% from April next year or 30% for the largest companies. The Bill also extends the levy until 31 March 2028, but as the Government have made clear, it is important that such a tax does not deter investment at a time when shoring up the country’s energy security is vital.
Paul Holmes (Eastleigh) (Con)
I thank the Minister for outlining the detail on the energy profits levy. Does he agree that the measures he has announced will raise £52 billion over six years? Although in previous debates the Labour party has said that that does not go far enough, it is more than Labour’s proposed energy profits levy would raise.
James Cartlidge
My hon. Friend is extremely astute: he has noted the significant contribution these taxes will make to the Exchequer. As I have just said, although this generous allowance is to ensure that we still encourage investment at a time when energy security is critical and where the long-term solution is having secure energy in this country, he is right to highlight the revenue being raised. After all, it goes a long way to funding the support that our constituents are receiving. In fact, they are receiving it this very week: payments are going out to support people facing these very high energy bills. The energy support guarantee this winter will save a typical household £900. We are putting in place extensive support, and as my hon. Friend says, a significant amount of that revenue comes from this new tax.
Putin’s barbaric illegal invasion of Ukraine and the utilisation of energy as a weapon of war has made it clear that we must become more energy self-sufficient. That is why this Bill also ensures that the levy retains its investment allowance at the current value, allowing companies to continue claiming around £91 for every £100 of investment. This investment will support the economy and jobs while helping to protect the UK’s future energy security, and in future the Government will separately legislate to increase the tax relief available for investments which reduce carbon emissions when producing oil and gas, supporting the industry’s transition to lower-carbon oil and gas production. Together these measures will raise close to £20 billion more from the levy over the next six years. As my hon. Friend said, that brings total levy revenues to more than £40 billion over the same period—of course he added on top of that the electricity generators levy, which we will be consulting on. The Government are also taking forward measures to tax the extraordinary returns of electricity generators, as I have just said, but we will do so in a future Finance Bill to ensure that we can engage with industry on these important plans.
The autumn Finance Bill also introduces legislation to alter the rates of the R&D tax reliefs. Making those changes will help to reduce error and fraud in the system, ensuring that the taxpayer gets better value for money while continuing to support valuable research and development needed for long-term growth. Over the last 50 years, innovation has been responsible for about half of the UK’s productivity increases. That is an extremely important statistic. We all know the value of R&D to all of our constituencies—I look in particular at my hon. Friend the Member for South Cambridgeshire (Anthony Browne), who will know of its importance in our university cities and all of our key clusters. R&D is a key way of raising productivity, which is why we have protected our entire research budget and will increase public funding for R&D to £20 billion by 2024-25 as part of our mission to make the United Kingdom a science superpower. These measures are significant, but ultimately businesses will need to invest more in R&D. The UK’s R&D tax reliefs have an important role to play in doing that.
Richard Fuller (North East Bedfordshire) (Con)
The Government are absolutely right on this point. The objective of giving taxpayers’ money to companies for use through R&D tax credits is to focus on improving productivity. There were real concerns, particularly in the smaller business segment, that the scheme was not working correctly. One aspect of the scheme that caused some concern to small businesses was the time that it was taking for some credits to be paid out, but I think that is improving. Perhaps in summing up later, the Financial Secretary to the Treasury could point to what recent progress has been made on that.
James Cartlidge
I am grateful to my hon. Friend. Of course, he was in the Department and has a business background, so he knows the detail and the importance of R&D tax reliefs. I am sure that my hon. Friend the Financial Secretary to the Treasury will have a chance to look at that later. I believe that we will be having a meeting about a separate issue of concern—a certain railway project that matters to him—when we can also discuss these points.
I turn to the specific detail. For expenditure on or after 1 April 2023, the research and development expenditure credit rate will increase from 13% to 20%. The small and medium-sized enterprise additional deduction will decrease from 130% to 86%, and the SME scheme credit rate will decrease from 14.5% to 10%. That reform will ensure that the taxpayer support is as effective as possible. It improves the competitiveness of the RDEC scheme and is a step towards a simplified RDEC-like scheme for all.
That means that Government support for the reliefs will continue to rise in cost to the Exchequer—from £6.6 billion in 2021 to more than £9 billion in 2027-28—but in a way that ensures value for money. To be clear, the R&D reliefs will support £60 billion of business R&D in 2027-28, which is a 60% increase from £40 billion in 2020-21. The Government will consult on the design of a single scheme and, ahead of the spring Budget, work with industry to understand whether further support is necessary for R&D-intensive SMEs without significant change to the overall cost.
Richard Foord (Tiverton and Honiton) (LD)
It was indeed welcome to hear the Chancellor talking in the autumn statement about additional money for research and development, but what seemed to be lacking was investment in skills. He talked about skills only loosely, and actually there was not one mention of colleges. Will there be any additional money for colleges as a result of the Bill?
James Cartlidge
I am grateful to the hon. Gentleman. In raising education, I hope he will have noted and strongly welcomed the fact that, despite the tough fiscal situation, the Chancellor was able to find additional spending for education—indeed, £2.2 billion this year and next year for our schools. I hope he agrees that that is crucial.
James Cartlidge
The hon. Gentleman is right to raise further education. We also announced in the statement that there will be a review by Michael Barber looking at the many positive initiatives that the Government have in place for training and increasing technical and vocational skills—T-levels, for example. We want to see maximum support for such schemes, so we will be reviewing them to ensure that we deliver them as effectively as possible. He makes an important point.
I turn to the measures on personal taxation. We know that difficult decisions are needed to ensure that the tax system supports strong public finances. To begin with, we are asking those with the broadest shoulders to carry the most weight. The Government are therefore reducing the threshold at which the 45p rate becomes payable from £150,000 to £125,140.
Clive Efford (Eltham) (Lab)
What consideration have the Government given to taxation of those who benefited during covid? The National Audit Office states that the Government invested £368 billion in the economy through furlough and various other pieces of support, but the people who received that money passed it on. Far from trickling down, the money has trickled up. During covid, the number of billionaires and millionaires increased to record levels in the UK. They have clearly benefited extraordinarily well from Government investment. Why are we not following the money?
James Cartlidge
The hon. Gentleman makes an interesting point. I, for one, would never resent the fact that someone is successful in life, particularly because of starting a business, working hard, investing in this country and creating wealth. We should always celebrate that. He says, however, that the money and expenditure during covid did not trickle down. On the contrary, speaking from my experience out in my constituency, businesses still express to me their gratitude for the grants and loans, for the £400 billion of support that we put in place that helped to carry the country through the pandemic—
James Cartlidge
I will finish this point; the hon. Gentleman is welcome to come back at me on it. He will recall the estimates at the start of the pandemic that unemployment would be 2 million higher than it turned out to be. That is an entire depression’s-worth of unemployment that we saved through our measures, and he should be grateful.
Clive Efford
I absolutely agree with everything that the Minister just said, but the truth is that the money paid to people in furlough and to small businesses was passed on. That money was used to repay loans, to pay rent and to pay the lease. People have paid their mortgages. The people who received that money at the end of the day were those who were already wealthy, as the figures show. We should follow the money. We should not squeeze those people until the pips squeak, but we should make them pay their fair share.
James Cartlidge
By any objective assessment, that enormous support helped our country through one of the toughest challenges that we have ever faced—the biggest crisis outside war in recent memory. We have, of course, moved straight into another one. Across the House, there is recognition that the £400 billion of extra support that we put in place has benefited the country.
The hon. Gentleman talks about business costs. Of course, businesses had costs that we had to help them with, but to protect public health, steps were taken to close parts of the economy. We faced an extraordinary contraction. To avoid that, the Government had to step in and, in so doing, we lost 2 million jobs fewer than were predicted to go.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
Will the Minister give way?
James Cartlidge
If the hon. Member for Eltham (Clive Efford) will forgive me, we have some interest from another part of the House, so will I take an intervention from Wales, from the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards).
Jonathan Edwards
I am grateful to the Minister. I welcome the announcement in the Bill that reduces the additional rate level to £125,000. The calculations I have seen show that somebody earning £150,000 will pay about 1% more in income tax, so this is definitely a step in the right direction. However, somebody earning £1.5 million will pay only 0.1% more as a result of the proposals. Does that not make the case for a further band to be created for those earning very high wages? My understanding, if my history lessons were correct, is that the Thatcher Government, for instance, had a 60% rate.
James Cartlidge
The hon. Gentleman makes an interesting suggestion. He will not be surprised to hear that I do not announce new tax bands from the Dispatch Box on Second Reading of a Finance Bill. I can confirm, however, that those earning £150,000 or more will pay just over £1,200 more in tax every year. That is the precise figure.
For the final time, I give way to the hon. Member for Eltham.
Clive Efford
Any Government would have given the support that the Government gave at that time, so I accept everything that the Minister said about that, but where is the money now? There has been £368 billion paid into the economy. Who has it now? Who benefited from it? Should we not follow that money and make those with the broadest shoulders contribute?
James Cartlidge
The furlough scheme, on its own, protected 11.5 million jobs. Does the hon. Gentleman seriously think that the Government should expand some extraordinary array of resource to find out what those 11.5 million people did with the money that kept them in work when they could have been looking at unemployment, and we could have been facing the most staggering economic depression in our history? We avoided that and, instead, we reduced unemployment by 2 million more than was expected. We avoided that cut in jobs, which would have been absolutely devastating for communities across the country, and we should all be grateful.
James Cartlidge
I have already given way to both my hon. Friends, but I will go to Bedfordshire.
Richard Fuller
That is certainly the best place the Minister can go. He is always welcome in North East Bedfordshire.
The Minister will remember that the additional rate of tax was introduced as a temporary measure by Gordon Brown. When the Conservatives came into government in coalition in 2010, we looked forward to its being scrapped—yet here we are today, proposing that more people on lower incomes, in nominal as well as real terms, be made to pay that additional rate of tax. With the basic allowance tapering off above £100,000, and with the introduction of this rate, does the Minister accept that people in this country who earn more than £100,000 now face effective tax rates of 60% or 50%?
James Cartlidge
As a Conservative who wants taxes to be lower, I do not stand here with any relish in putting forward a Finance Bill that will increase taxes. The Chancellor was very clear that we will have to pay more tax, but my hon. Friend understands the aggregate reason, I hope, which is the need for fiscal stability. The overall rate will have an impact of £1,200 a year, as I have said; I do not deny that it will be significantly impactful for our constituents. We want to cut taxes if we can, but before we do so we have to get on top of inflation.
I give way to my hon. Friend the Member for Eastleigh (Paul Holmes).
Paul Holmes
I thank the Minister for giving way. It is a good job I can remember what I was about to say.
The hon. Member for Eltham (Clive Efford) asked where the money has gone. The support that the Government have given has kept a lot of small businesses in business, as I know he recognises. Does the Minister agree that the money actually went to the medium-sized businesses that keep people in our constituencies employed and on the payroll? That is where the money went, thanks to the actions of this Government. Opposition Members should not pooh-pooh those actions, because they kept businesses going and people in work.
James Cartlidge
My hon. Friend is an absolute champion of small businesses and of businesses of all sizes in his constituency. We and our colleagues believe in free enterprise. We knew that the pandemic was an extraordinary situation in which, to keep businesses and free enterprise going, we had to step in an extraordinary way and be a force for maintaining aggregate demand and expenditure. My hon. Friend is absolutely right. What did those businesses do by staying in business? They maintained employment in our communities and maintained the services that they provide. We should all be proud of the extraordinary effort that was made.
We have announced a reduction in the dividend allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024, as well as a reduction in the capital gains tax annual exempt amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. We have also announced that we are abolishing the annual uprating of the AEA with the consumer prices index and are fixing the CGT reporting proceeds limit at £50,000. The current high value of these allowances can mean that those with investment income and capital gains receive considerably more of their income tax-free than those with, for example, employment income only. Our approach makes the system fairer by bringing the treatment of investment income and capital gains closer in line with that of earned income, while still ensuring that individuals are not taxed on low levels of income or capital gains. Although the allowance will be reduced, individuals who receive a high proportion of their income via dividends will still benefit from lower rates of 8.75%, 33.75% and 39.35% for basic, higher and additional rate taxpayers respectively. These two measures will raise £1.2 billion a year from April 2025.
We are maintaining the income tax personal allowance and the higher rate threshold at their current levels for longer than was previously planned. They will remain at £12,570 and £50,270 respectively for a further two years, until April 2028. This policy will have an impact on many of us, as I said to my hon. Friend the Member for North East Bedfordshire (Richard Fuller), but no one’s current pay packet will reduce as a result. By April 2028, the personal allowance, at £12,570, will still be more than £2,000 higher than if we had uprated it by inflation every financial year since 2010-11.
I reiterate that these are not the kinds of decisions that any Government want to take, but they are decisions that a responsible Government facing these challenges must take. I remind the House that this Government raised the personal allowance by more than 40% in real terms since 2010, and that this year we implemented the largest ever increase to a personal tax starting threshold for national insurance contributions, meaning that they are some of the most generous personal tax allowances in the OECD. Changing the system to reduce the value of personal tax thresholds and allowances supports strong public finances. Even after these changes, as things stand, we will still have the most generous set of core tax-free personal allowances of any G7 country.
Let me now turn to the subject of inheritance tax. As we announced in the autumn statement, the thresholds will continue at current levels in 2026-27 and 2027-28, two more years than previously announced. As a result, the nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2 million. That means that qualifying estates will still be able to pass on up to £500,000 tax-free, and the estates of surviving spouses and civil partners will still be able to pass on up to £1 million tax-free because any unused nil-rate bands are transferable. Current forecasts indicate that only 6% of estates are expected to have a liability in 2022-23, and that is forecast to rise to only 6.6% in 2027-28. In making changes to personal tax thresholds and allowances, the Government recognise that we are asking everyone to contribute more towards sustainable public finances, but—importantly—we are doing this in a fair way.
I am almost there, Madam Deputy Speaker, but I will be assisted by an electric vehicle, because I am now moving on to that method of transport. Earlier this month I attended COP27, where I met international finance Ministry counterparts and reaffirmed the Treasury’s commitment to international action on net zero and climate-resilient development. The Government welcome the fact that the transition to electric vehicles continues apace, with the Office for Budget Responsibility forecasting that half of all new vehicles will be electric by 2025. Therefore, to ensure that all motorists start to make a fairer tax contribution, we have decided that from April 2025, electric cars, vans and motorcycles will no longer be exempt from vehicle excise duty. The motoring tax system will continue to provide generous incentives to support electric vehicle uptake, so the Government will maintain favourable first-year VED rates for electric vehicles, and will legislate for generous company car tax rates for electric vehicles and low-emission vehicles until 2027-28.
These are difficult times, but that does not mean we will shy away from difficult decisions; it means we must confront them head-on. Today the Government are tacking forward specific tax measures in this Bill to help stabilise the public finances and provide certainty for markets. This is an important part of the Government’s broader commitments made in the autumn statement on fiscal sustainability, ensuring that we take a responsible approach to fiscal policy, tackling the scourge of inflation and working hand in hand with the independent Bank of England.
We will do this fairly; we will give a safety net to our most vulnerable, we will invest for future generations, and we will ensure that we grow the economy and improve the lives of people in every part of the United Kingdom. The measures in this autumn Finance Bill are a key part of those plans, and I therefore commend it to the House.
Energy (oil and gas) profits levy
James Cartlidge Excerpts(1 year, 5 months ago)
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The Exchequer Secretary to the Treasury (James Cartlidge)
It is a privilege to open the second day of debate on the autumn statement for the Government. Last Thursday, my right hon. Friend the Chancellor presented this House with a plan to tackle the cost of living crisis and rebuild our economy—a statement that was honest about the challenges we face and fair in its response. His three priorities, and the priorities of this Government, are simple: stability, growth and public services. The people of this country need us to take the difficult decisions on their behalf, and that is what we will do.
In yesterday’s debate, we heard how our plan leads, among other things, to lower energy bills, higher long-term growth and a stronger NHS and education system. The subject of today’s debate is sustainable public finances and taxation, and the House will understand if I focus my remarks on those aspects of the statement.
For the record, and as the Chancellor revealed, the Office for Budget Responsibility judges that the UK, like other countries, is now in recession. Overall this year, the economy is still forecast to grow by 4.2%. GDP then falls in 2023 by 1.4%, before rising by 1.3%, 2.6% and 2.7% in the following three years. The OBR says that higher energy prices explain the majority of the downward revision in cumulative growth since March. It also expects a rise in unemployment from 3.6% today to 4.9% in 2024, before it falls to 4.1%.
One of the most salient points, and an issue we cannot and will not ignore, is inflation. Last week, the Chancellor called inflation “the enemy of stability”, noting its impact on mortgages, household bills, businesses and unemployment. We are experiencing very high levels of inflation, the primary cause of which, according to the OBR, is global factors. Those who question that should remember the following: yes, inflation is high in the United Kingdom, but it is higher in Germany, at 11.6%, in Italy, at 12.6%, and in the Netherlands, at 16.8%. The reality is that the pandemic is still casting an economic shadow, with the lasting impact on supply chains having made goods more expensive. As Members will understand, this has been significantly exacerbated by Putin’s illegal invasion of Ukraine.
The OBR forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year, although I note that the OBR has said that actions taken as part of the autumn statement will help inflation to fall sharply from the middle of next year. Tackling high inflation needs fiscal and monetary policy to work together, with the Government and the independent Bank of England acting hand in glove. It also needs the world to believe that this country will always pay what it owes. Thanks to the decisions this Government have already taken, the OBR has said that the peak of interest rates is likely to be lower than it would otherwise have been, in turn benefiting our economy and public finances.
But we cannot be complacent. That is why we are committed to rebuilding the public finances. The decisions the Chancellor made last week will mean that over the next five years, borrowing is more than halved. This year, we are forecast to borrow 7.1% of GDP, or £177 billion. Next year, it is 5.5% of GDP, or £140 billion, then by 2027-28, it falls to 2.4% of GDP, or £69 billion.
The Chancellor also confirmed two new fiscal rules. The first is that underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period. The second is that public sector borrowing over the same period must be below 3% of GDP.
Peter Dowd (Bootle) (Lab)
Given that the Government since 2012 have broken virtually every fiscal rule they have set themselves, why should we pay a blind bit of attention to this new fiscal rule? Why would we believe anything that those on the Tory Front Bench say about their fiscal rules, which are brushed aside as and when they feel like it?
James Cartlidge
I always enjoyed intervening on the hon. Gentleman when he was a shadow Minister and I was a Back Bencher, and I have great respect for him. The Opposition may want to airbrush from history the extraordinary events of recent years—the pandemic and now the invasion of Ukraine—but any Government would have to adjust to those circumstances. These were not minor events; they were once-in-a-generation events, and they have had a huge impact.
Overall, the autumn statement delivers a consolidation of £55 billion, with just under half from higher taxation and just over half from spending reductions. The consolidation ensures that excessive borrowing does not add to inflationary pressures and push interest rates up further. In the short term, we are taking difficult decisions to make sure that fiscal policy keeps inflation in check, but doing it in a compassionate way that still provides support to the most vulnerable.
Chris Stephens (Glasgow South West) (SNP)
I thank the Minister for giving way; he is being very generous. The OBR says that Her Majesty’s Revenue and Customs compliance measures and chasing social security fraud against the Department for Work and Pensions will bring in £2.8 billion, but the Green Book says that social security fraud is £2.2 billion, which suggests only £0.6 billion coming in from tackling tax avoidance and evasion. Why is that figure so low, when the estimate is £70 billion of tax avoidance and evasion?
James Cartlidge
The hon. Gentleman asks a perfectly good question. He will be aware that we have made huge progress on closing the tax gap, which effectively means that we are making huge progress on cracking down on tax avoidance. There is always further to go, but we have scored significant savings from those measures over the forecast period.
The upshot is what the Chancellor rightly called a “balanced path to stability”. We are tackling inflation to help all our constituents with the cost of living, while at the same time providing the stability that business needs to be able to invest and grow. We want low taxes and sound money, but sound money has to come first.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
What worries me about the Budget is the lack of focus on how the economy will grow in subsequent years. If we have an austerity Budget, public investment is falling; exports are falling because of Brexit; and consumer spending is going to fall because household budgets are being crushed by the cost of living crisis. That leaves business investment. Are businesses seriously going to invest when all other areas of growth are collapsing?
James Cartlidge
I am grateful to the hon. Gentleman. The key issue for growth at the moment is inflation. What on earth do we think is causing consumers to rein back spending? The answer is that this year, this country will have to find an additional £150 billion to pay for the higher cost of energy—that is the equivalent of an entire NHS. Yes, we are taking difficult decisions, but that is the best way to ensure that we get inflation down, in partnership with the independent Bank of England, and build the platform of stability that businesses need to grow and invest. On the point about Brexit, if it was causing the problems, why do the Netherlands and Germany have higher inflation? He should think about that.
On tax, the House will have heard the Chancellor say that we will be fair by asking those who have more to contribute more, and by avoiding tax rises that most damage growth. That means, for example, that while some taxes are rising, we have not raised headline rates of taxation. Tax as a percentage of GDP, meanwhile, will increase by just 1% over the next five years.
On personal taxes, we are reducing the threshold at which the 45p rate becomes payable from £150,000 to £125,140, which means that those earning £150,000 or more will pay just over £1,200 more a year. At the same time, we are maintaining at current levels the income tax personal allowance, the higher rate threshold, the main national insurance thresholds and the inheritance tax thresholds for a further two years until April 2028.
Jonathan Gullis (Stoke-on-Trent North) (Con)
In the summer leadership contest, the Prime Minister set out his plan to see a dramatic cut to the 20p tax rate at the end of this decade. Is that ambition still held by the Prime Minister and the Chancellor?
James Cartlidge
As I have said before, my hon. Friend is a champion for his constituents. In oral questions, he raised an important point about tax on fuel and he now mentions tax on income. We face an extraordinarily difficult position and I am sure that even he would agree that inflation is the ultimate tax. Inflation undermines savings, hits the poorest the hardest and hits the entire economy in every part of the country. We have had to take difficult decisions on income tax, but of course, in future fiscal events, we will announce what we will be doing with taxes.
The current tax changes include the fact that the dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024. The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024. Those are not insignificant changes, but they still leave us with more generous core personal allowances than countries such as Germany, Ireland, France and Canada.
To make our motoring system fairer, we have also decided that electric vehicles will no longer be exempt from vehicle excise duty from April 2025. We are keeping previously announced cuts to stamp duty to support the housing market, but only until 31 March 2025, following which we will end the measure.
Moving to the all-important business taxes, we have decided to freeze the employer’s national insurance contributions threshold until April 2028, but we will retain the employment allowance at its higher level of £5,000. That means that the smallest 40% of all businesses—the ones that are crucial to our growth—will still pay no NICs at all.
On VAT, we already have a registration threshold more than twice as high as the EU and OECD averages, but we will maintain it at that level until March 2026. We will implement the internationally agreed OECD pillar 2 global corporate minimum tax rate to make sure that multinational corporations pay the right tax in the right place. At the same time, we will take further steps to tackle tax avoidance and evasion. Further to the intervention of the hon. Member for Glasgow South West (Chris Stephens), that will raise an additional £2.8 billion by 2027-28.
Ahead of the autumn statement, there was much discussion on the merits or otherwise of windfall taxes applied to profits resulting from unexpected increases in energy prices. Our view is that any such tax should be temporary, not deter investment and recognise the cyclical nature of many energy businesses.
Chris Stephens
The Minister is being generous on these points. Of the 6,000 additional staff who are estimated to be going to HMRC and DWP, what is the split between the new posts that are going to DWP and those that are going to HMRC?
James Cartlidge
In my short time in this job, I have tried to cram a lot of facts into my head, but I do not have that split immediately to hand. I will write to the hon. Gentleman after raising the matter with my officials.
To return to windfall taxes, in that context, we will increase the energy profits levy from 25% to 35% from 1 January until March 2028. We have also decided to introduce a new temporary 45% levy on electricity generators to reflect the fact that the way our energy market is structured also creates windfall profits for low-carbon electricity generation. Together, those taxes will raise more than £14 billion for the public purse next year.
Christine Jardine (Edinburgh West) (LD)
The Minister is being generous with his time. On the specific point of the windfall tax, there have been calls in this place since October last year for a temporary windfall tax on the extra profits of oil and gas companies. Does he accept that, had the Government moved more quickly to do that, they might not have faced as much blame for not reacting quickly enough to the global events that he mentioned and that people would perhaps think that the Government were managing the crisis better? At the moment, a great deal of the criticism is about not the events themselves, but the Government’s lack of reaction and poor management of them.
James Cartlidge
I am grateful to the hon. Lady. We introduced a windfall tax in May. When we consider the timeline relative to the invasion of Ukraine, that is pretty swift. By that point, it was clear that we had an extraordinary surge in energy prices. Of course, as a Government, we would not ordinarily want to take such steps, but I think there is consensus that, when profits are rising so sharply and consumers are having to pay such high prices, we should look at putting that kind of regime in place.
Alexander Stafford (Rother Valley) (Con)
Can the Minister tell us more about what he means by “temporary”? Earlier this year, we heard that the windfall tax would be temporary. We have heard about lots of taxes, such as the 45p tax, being temporary. Indeed, income tax, which was introduced in 1799 by William Pitt the Younger, was going to be a temporary measure to deal with the Napoleonic wars, yet here we are dealing with it. What does the Minister mean by temporary, and when will it end?
Stephen Crabb (Preseli Pembrokeshire) (Con)
In response to the criticism of the hon. Member for Edinburgh West (Christine Jardine) about not responding fast enough to proposals to extend the windfall tax, I would say that changing the rules of the game regarding tax for some of the biggest investors and employers in different regions of the United Kingdom is a huge thing for a Government, so proceeding cautiously in response to changing events and to the precise quarterly profits that those companies posted was exactly the right thing to do.
James Cartlidge
My right hon. Friend puts it perfectly. These are significant changes for the industries concerned and one should not go about it in a wanton fashion. We have to try to carry the industry with us, which is why, for example, we have a very generous investment allowance in the North sea levy. As I said, I think the wider public support that but he is right that we have to go about it pragmatically to ensure that we balance the interests of investment with raising the revenue.
Let us not forget that that revenue is going to fund support for energy bills at an extraordinary level through the energy price guarantee, which the OBR now estimates will cut £900 from the typical energy bill this winter. Next year, with the new energy price guarantee, a further £500 will be cut. We are taking these difficult measures to be compassionate and help those at the bottom the most: earlier this year, the amount of energy support for the most vulnerable was £650; next year, it will be £900. We are taking serious steps to support the most vulnerable.
Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)
It is extraordinary to hear that response to the question about levying a windfall tax and those comments about the pragmatic approach that the Government took when the oil industry companies themselves were saying, “We’re happy to pay more tax. Take more money from us. We’re making so much money.” So the Government were incredibly slow to act.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
It’s a stock answer.
James Cartlidge
It is not a stock answer. How could it be a stock answer when I have not taken an intervention like that before?
The hon. Member for Kirkcaldy and Cowdenbeath (Neale Hanvey) will I am sure forgive me but, on his substantive point, we have delivered a significant windfall tax, but with the investment allowance that balances the interests of investment in the sector against needing to raise revenue. I repeat, where is that revenue going? It is to help families throughout the United Kingdom, including in Scotland, because we are stronger together when the support of the Treasury, at the heart of the United Kingdom, helps everyone in every part of this country.
The final issue to address with regard to taxation is business rates, which I know many colleagues feel strongly about. We believe that bills for business rates should accurately reflect market values, so we will proceed with the revaluation of business properties from April 2023. However, we will soften the impact on businesses with a £13.6 billion support package over the next five years. Nearly two thirds of properties will not pay a penny more next year and thousands of pubs, restaurants and small high street shops will benefit. Furthermore, we are extending and increasing the retail, hospitality and leisure relief scheme from 50% to 75% in 2023-24, showing that this is a Government committed to protecting the businesses that make our high streets and town centres successful.
These are not easy times to bring in these sorts of measures, but that does not mean the Government will shy away from difficult decisions. Our priorities, expressed through the autumn statement, are stability, growth and public services. Today, we are debating specific tax measures and the importance of sustainable public finances, but what the Government are delivering is much more comprehensive than that—an integrated response to what the Chancellor last week called
“a global energy crisis, a global inflation crisis and a global economic crisis”.—[Official Report, 17 November 2022; Vol. 722, c. 855.]
The bottom line is this: because of the difficult decisions that I have outlined today—the decisions this Government are not afraid to take—the OBR confirms we will see less severe inflation and a shallower recession, but perhaps most importantly, unemployment is forecast to be 70,000 lower than would otherwise have been the case. That is 70,000 real families who will benefit. At the same time, when growth returns, we will be in a better position to pay our debts, ensuring those are not simply passed on to future generations. That is the promise of this autumn statement—a statement that is balanced, honest and fair—and I commend it to the House.
Several hon. Members rose—