Beer Duty Rates

Jesse Norman Excerpts

Tuesday 25th June 2019 Westminster Hall

[Giles Watling (Clacton) (Con)]

I beg to move,

That this House has considered differential rates of beer duty.

It is an honour to serve under your chairmanship, Mr Hollobone. I am extremely grateful for the opportunity to raise, again, the importance of beer duty, and pleased to represent all the constituents who have contacted me to ask that we cut beer duty. It is a campaign I am delighted to support. Although I am certainly a keen supporter, I do not believe that an across-the-board cut in beer duty is the best option, as I shall argue in this speech. That is where a differential rate of beer duty is to be much desired. Simply put, it would differentiate between the duty rates for on-trade sales of beer in pubs and the rates for off-trade sales. I am keen for that proposal to be implemented, so I have written to the Chancellor to seek his support—as the Minister will know, having responded to my letter of 23 April. That was my second letter to the Treasury on the intriguing proposal, in which I carefully responded to the points that the Minister had raised in his reply to my first letter in November 2018.

[The Financial Secretary to the Treasury (Jesse Norman)]

I point out that my hon. Friend wrote to my predecessor, and it was my predecessor, my right hon. Friend the Member for Central Devon (Mel Stride), who responded to him, rather than the present incumbent of this illustrious slot.

[Giles Watling]

I thank the Minister for pointing that out. I am well aware that it was his predecessor; it was the Minister incumbent at the time.

I sent a long and detailed reply to the letter, but the response was almost word for word the same as the first. Four words at the start of one sentence had been removed, and one word and one number—the date—had been changed. I am sure that that was just an oversight in the machinery of the Government; I hope it is not an indication of how much the Treasury wants to debate the matter. We must do more to protect our pubs.

The Minister will tell me that the Government have supported pubs in many ways, notably through the beer duty freeze, which means that beer duty is 18% lower than it was in 2012—hurrah! No doubt that is an impressive achievement, but if we have done so much, why have 11,000 pubs closed in the last decade and why does one pub still close every 12 hours?

--- Later in debate ---

[The Financial Secretary to the Treasury (Jesse Norman)]

It is a great pleasure to serve under your chairmanship, Mr Hollobone. This is an important topic, as hon. Members from across the House have rightly said, which commands widespread interest across not merely the House but the country. In that context, if I may make a small but telling party political point, I wish that the Opposition had been able to field a spokesman to express their view on the matter.

[Mr Philip Hollobone (in the Chair)]

Order. The Opposition are not required to field a spokesman for a half-hour Westminster Hall debate.

[Jesse Norman]

On a point of order, Mr Hollobone. Does that also apply when a debate has been extended beyond half an hour to 45 minutes, as in this case?

[Mr Philip Hollobone (in the Chair)]

That is correct. The Minister is enjoying the benefit of 15 minutes injury time owing to the previous debate not having completed its full passage.

--- Later in debate ---

[Jesse Norman]

I am grateful to the previous speakers for giving me that opportunity. I intend to take full advantage of it. I stand corrected on the point about the Opposition, for which I am grateful.

I thank my hon. Friend the Member for Clacton (Giles Watling) not merely for his ingenuity and brilliance in securing the debate and raising this topic, but for the vigour and energy that he has shown in pressing this issue over the several years he has been in the House. In doing so, although he may not realise it, he takes up a beacon that was held for many years in this House by my great friend, my hon. Friend the Member for Burton (Andrew Griffiths), who I am delighted had the chance to speak. I have no doubt that, in due course, the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney) will himself carry that beacon, or if not, will play an important role in making this argument, because it is an important one to advance. I thank all Members who have spoken for their contributions.

As my hon. Friend the Member for Clacton rightly said, and as colleagues from across the House know, beer and breweries are an important part of our national life, and the same is of course true for that essential accompaniment, the great British pub. As a Herefordshire man, I ought to point out that pubs do not merely serve beer. In my constituency we have Bulmers, while in Herefordshire we have Westons, Tom Oliver and Denis Gwatkin; we have a host of fantastic cider producers. Tragically, they are not the subject of this discussion; our attention must focus exclusively on beer and the beer duty. However, they contribute to the important presence of pubs in our national life.

[Giles Watling]

Might it not be worth consulting and finding out whether some sort of reduction in cider duty might also help to preserve the pub in the future?

[Jesse Norman]

That will certainly be of great interest to my constituents, both as consumers and producers. As my hon. Friend knows, there has been a tremendous reinvigoration of the brewing industry over the last nine years. The number of brewers has this year risen dramatically to more than 2,200. The rise of craft beer has seen breweries grow and flourish in every part of this country, including microbreweries, and exports have reached more than £500 million a year.

Again, it would be wrong of me not to mention a personal interest in this context. Certainly, my county of Herefordshire is as amply endowed with fabulous breweries and pubs as any part of the country. It would be wrong not to mention Wye Valley Brewery, Golden Valley Brewery and Hereford Brewery—I have pulled a pint of its Hereford Best in the Strangers Bar. Notable pubs in Hereford are the Barrels, where I held an informal surgery last Friday afternoon for a considerable period; the Volunteer Inn, known as the Volly; the Lichfield Vaults, known as the Lich; the Grapes; and the Britannia. However, I also pay attention to the specialists that have come into the market in my constituency over the last few years, which picks out this wider process of economic and social change, including Beer in Hand and the Hereford Beer House—part of a panoply of pubs across the entire county, including the King’s Head Hotel, the Man of Ross, the Mill Race in Ross and many other fine houses.

It would also be wrong of me not to touch on the excellent work in the community of the local Campaign for Real Ale team, with my support, in saving, for the second time, the Broadleys pub in south Hereford from being turned into a Co-op. It sheds a very bad light on the Co-op, which is in many ways a fine institution that I otherwise rather admire, even if I did have the crystal Methodist in front of me at one point when I was on the Treasury Committee, if hon. Members remember him. It should not sponsor the closure of pubs in order to open new Co-ops merely a few hundred yards away from ones that already exist. I single it out personally, not as a matter of Government policy, for its misbehaviour in that regard.

[Andrew Griffiths]

I agree with my hon. Friend, because I have seen that in action. Does he agree that one great way to support the great British pub is by doing something on beer duty? Seven out of 10 alcoholic drinks purchased in a pub are beer, so if we want to help pubs, doing something specifically on beer is the way to do it.

[Jesse Norman]

I will come on to a point my hon. Friend raised, and with great eloquence, on the vigorous role that the Government have taken in cutting beer duty and supporting the industry. However, I point out that this great change over the last few years has not been the result merely of enlightened tax policy but of an outbreak of entrepreneurialism and energy in the sector as a whole. It is important to realise that the Government cannot reverse the laws of economic gravity or changing tastes and habits, but they can help at the margin, and have tried to.

As my hon. Friend will know, in 2013 the Government took the decision to end the beer duty escalator. Since then, they have cut or frozen beer duty several times, including at the last Budget, with the effect that a typical pint of beer is 14p cheaper than it would otherwise be. The Government will of course continue to look for ways to support the brewing industry, and I absolutely look forward to further engagement with my hon. Friends and Members from across the House.

However, it is important to try to strike a responsible and sustainable balance with wider public spending commitments. It is worth noting that the Exchequer has forgone more than £5.2 billion in revenue due to cuts and freezes to all alcohol duties since 2013. That is £5 billion that has to be made up by taxpayers by other means if we are to be able to spend as we would wish on our public services. [Interruption.] Hon. Members who have recently arrived for the next debate will not be aware that we have a few more minutes, because of the kind courtesy of the Chair, and can run the debate until 4.45 pm.

My hon. Friend the Member for Clacton is absolutely right to emphasise the social importance of pubs, which are central places in the community. They are mixing places and meeting places for people from every walk of life. My hon. Friend the Member for Burton also made the point that pubs are a place of supervised, safe drinking, where publicans—male or female—know their customers, pulling pints and pulling people together in a social environment. That of course raises the stakes from a Government standpoint.

When considering whether to introduce differential beer duty, we and Governments before us have had to acknowledge that the UK is currently bound by EU laws that harmonise excise duties applicable to alcohol products. We can only introduce reliefs or different rates of duty for beer that are compatible with the EU directive on alcohol excise duty structures. My hon. Friend the Member for Burton made the point that, once the UK has left the EU, the Government and Parliament will no longer be bound by this directive, so there should be much greater opportunity to explore creative proposals to redress that balance. But until then, there are limits laid down in statute as to what can be introduced. However, even within that context—this point has been touched on—we have been able to make progress and exploit some existing differentials, which have benefited pubs and breweries. Those include the small brewers relief, which allows the smallest breweries to receive up to 50% off their duty bill in the start-up and growth phase. As hon. Members will know, the Treasury announced a review of that relief in the Budget. My officials are now working to take the results of the survey further to address the issues raised, and the Government hope to make further announcements in due course.

Of course, as I have said, we also recognise the importance of responsible drinking. That is why there are already differential rates of duty on lower-strength and alcohol-free beers. On beers of less than 1.2% ABV, no duty is paid at all, and on beers between 1.2% and 2.8%, the reduced rate is less than half the standard beer duty rate. My hon. Friend the Member for Burton is absolutely right. It is hard to produce a beer of, I would say, less than 2.3% that maintains its taste, but at between 2.3% and 2.8%, one can have a delicious pint and benefit from the duty differential. Conversely, higher-strength beers over 7.5% ABV pay a higher duty rate of roughly 30% more, in part to send a fiscal signal about the importance of responsible drinking.

[Andrew Griffiths]

The Minister is absolutely right in what he says about lower-strength beers and the potential that that has, but may I share with him what brewers across the country have said to me? If they got the opportunity, through the duty regime, to promote beers at 3% or up to 3.5%, they would do that wholeheartedly. That would not only create a new category, but help to take alcohol units out and therefore help responsible drinking at the same time.

[Jesse Norman]

I am grateful for that intervention. There may be scope to contemplate an uplift in relation to the higher level of lower-strength beer. It would be interesting to discuss that further.

Let me turn to some of the points that my hon. Friend the Member for Clacton raised. I intervened only to provide the point of information to him, because of course I did not see the correspondence that he had received and therefore could not respond to it in those terms. I apologise if he was disappointed by the response that was given. It is always the Treasury’s policy to try to give informative and full as well as, of course, accurate responses.

Let me pick up a couple of the points that were raised in my hon. Friend’s speech and that reiterate some of the wider issues. Of course, there are public health outcomes that need to be met. The closure of pubs potentially affects some of those, particularly in a world that has seen, in this country at least, something of an epidemic of loneliness, so my hon. Friend was absolutely right to pick up on that. He is also right to say that there is evidence that responsible drinking and better public health outcomes can be due to differential rates of duty. I understand that point. It is important, though, to remind ourselves of the practical difficulties that need to be overcome. It is not merely the EU law issue. It is also important that whatever the regimen may be, it is not subject to legal challenge for breaching state aid or competition rules. And we may wish to remain aligned with the EU even post Brexit, from a competition or state aid perspective, in part to prevent mercantilism from breaking out between EU businesses and our own.

Of course, there is an issue about enforcement. Her Majesty’s Revenue and Customs taxes beer at the point at which it moves into general distribution, rather than monitoring the wider beer supply chain. The concern is obviously about the potential to repackage beer that had the lower rate of duty paid on it and then to sell it and trouser the difference.

[Andrew Griffiths]

I absolutely understand the point that the Minister makes about the grey market and the potential for fraud; the all-party parliamentary beer group did an investigation into that. I therefore point him back to my previous remarks on draught beer. It is very easy to understand draught beer. It cannot be repackaged; it cannot be put in a different container; it is draught beer. We could have a differential on draught beer that I think would solve my hon. Friend’s problem.

[Jesse Norman]

I am delighted to have taken that final point of information. It may be the case that when we come to reconsider it, the draught beer distinction that my hon. Friend draws gives us a workable legal and practical basis on which to proceed. My point is a much simpler one: it is important to bear in mind the potential grey market impacts, as well as the competition, state aid and legal points that I raised earlier. Having said that, I am enormously grateful to my hon. Friend the Member for Clacton for initiating the debate and for making a case of great passion and urgency with his usual oratorical flourish. Even if I cannot join him in his own Kings Head where he was a publican, I very much hope to be able to join him in the future at some point.

Question put and agreed to.

Resolved,

That this House has considered differential rates of beer duty.

Finance Bill

Jesse Norman Excerpts

Tuesday 25th June 2019 Written Statements

[The Financial Secretary to the Treasury (Jesse Norman)]

The Government will introduce the Finance Bill following the next Budget.

In line with the approach to tax policy making set out in the Government’s documents “Tax Policy Making: a new approach”, published in 2010, and “The new Budget timetable and the tax policy making process”, published in 2017, the Government are committed, where possible, to publishing most tax legislation in draft for technical consultation before the legislation is laid before Parliament.

The Government will publish draft clauses for the next Finance Bill, which will largely cover preannounced policy changes, on Thursday 11 July 2019 along with accompanying explanatory notes, tax information and impact notes, responses to consultations and other supporting documents. All publications will be available on the www.gov.uk website.

[HCWS1657]

The Value Added Tax (Reduced Rate) (Energy-Saving Materials) Order 2019

Jesse Norman Excerpts

Monday 24th June 2019 General Committees

[The Financial Secretary to the Treasury (Jesse Norman)]

I beg to move,

That the Committee has considered the Value Added Tax (Reduced Rate) (Energy-Saving Materials) Order 2019.

It is a great pleasure to serve under your chairmanship, Mr Robertson. The instrument amends the Value Added Tax Act 1994 to alter the scope of the reduced rate of VAT for the installation of energy-saving materials. That ensures consistency with the 2015 judgment of the Court of Justice of the European Union.

As the Committee will know, this Government are deeply committed to greening our economy and our society and bid fair to be the greenest Government ever. It is of huge regret to us that we have felt compelled to make this change because of EU regulation.

Under current UK VAT rules, a reduced rate of 5% applies to the installation of energy-saving materials such as insulation, solar panels and other technologies in residential properties. Under EU law, it is not possible to remove VAT from those materials, so the reduced rate of 5% applies. The VAT relief aims to lower the cost for consumers and families to install those energy-efficient products in their homes.

In 2011, the European Commission launched an infraction proceeding against the UK, arguing that the scope of the UK’s reduced rate for the installation of energy-saving materials was too wide and needed to be changed. The Government did not agree with the European Commission’s infraction proceeding, so the matter was heard by the Court of Justice of the European Union. In 2015, the Court agreed with the Commission and found that the scope of the UK’s reduced rate for energy-saving materials was indeed too wide.

Under EU rules, the UK is obliged to comply with the decision of the EU Court of Justice. If it does not, the European Commission will be required to issue infraction fines against the UK.

[John Spellar (Warley) (Lab)]

Given that the Prime Minister and others, including the Conservative leadership candidates, say that we are going to leave the EU on 31 October, why is the Minister rushing to comply rather than ignoring this and waiting until then?

[Jesse Norman]

As the right hon. Gentleman will know, it is hardly rushing to respond to an infraction proceeding that began in 2011 and involved a European Union Court of Justice appeal in 2015. While we remain a member of the EU, we are required to obey its laws. When we leave the EU, we will of course be in a position to revisit the issue.

[John Spellar]

I understand the build-up—it always takes this long—but given that Britain may leave the EU in only a few months, why does the Minister feel it necessary to do this now?

--- Later in debate ---

[Jesse Norman]

There is a natural pace of change to these things. The negotiations have taken place over the last three years, and the Government felt that, all things considered, it was appropriate not to delay further but to continue with the process of seeking to comply. We could be placed under infraction proceedings if we delayed on this matter, so it is important not to be delayed. As I have said, it will be perfectly possible and not difficult for a future Government to reverse the change by statutory instrument, in the usual way, after we leave the EU.

Under EU rules, the UK is obliged to comply with the decision of the EU Court of Justice. If it does not, the European Commission will be required to issue infraction fines against the UK. The Government have taken appropriate time to ensure that as much as possible of the existing VAT relief is maintained. The problem would have been faced by any Government committed to green energy, but we have managed to set up mitigations that others might not have done.

In 2015, a consultation on potential changes was published, which included proposals to remove entirely the VAT relief from the installation of solar panels. That could have affected 40,000 installations per year, and would have had a significant impact on those wishing to invest in sustainable energy solutions. Following a 2016 consultation on that proposed change, the Government recognised the concerns of industry, of colleagues across the House and of campaigners, and decided to go back to the European Commission to agree, if possible, scaled-back changes.

Since 2015, Treasury officials have held several sets of discussions with the European Commission. Following those discussions, the Government agreed with the Commission to maintain much of the reduced rate of VAT for solar panels, meaning that the changes will now affect far fewer installations. That is a highly successful negotiation outcome. We have done the right thing by complying with international obligations while maintaining as much of the VAT relief as possible for UK households.

The proposed amendments will maintain the reduced rate on all installations of energy-saving materials for recipients who are aged 60 or over or on certain benefits, for relevant housing associations, and where the installations are in buildings used for relevant residential purposes, such as care homes and children’s homes. The proposed changes will remove the reduced rate for the installation of wind and water turbines, which are not deemed to be improvements to residential accommodation, and maintain the reduced rate for all other installations of energy-saving materials in residential accommodation where the cost of the materials does not exceed 60% of the total cost of the installation. That is a significant improvement on the 50% originally consulted on in 2016. The proposed changes are expected to take effect from 1 October 2019.

Her Majesty’s Revenue and Customs put the changes to public consultation in April 2019. I am grateful for the responses provided by industry groups and other interested stakeholders. Although it was reasonable for industry groups to wish for the relief to be maintained in full, there was some acknowledgement that the Government are required to make the changes under EU law.

I understand that there will be concern from industry about the loss due to EU law enforcement of a VAT relief for energy-efficient products at a time when we are encouraging use of those products through other schemes. That is why our agreement with the Commission to implement changes that affect relatively few installations is important. HMRC does not expect the changes to have a significant impact on the industry. Around 1,500 future installations of solar panels, energy-saving boilers and wind turbines, plus some other smaller-scale items, are expected to be affected annually. That represents less than 5% of the value of all installations currently eligible for the reduced rate. Overall, the changes are expected to have a negligible impact on Exchequer revenue.

Overall, the Government continue to support investment in energy-saving technology. Her Majesty’s Treasury and HMRC will continue to work with the Department for Business, Energy and Industrial Strategy at official and ministerial level to manage the impact of the changes.

These changes are the result of a highly regrettable EU process of infraction and legal proceedings. They are necessary for the UK to maintain compliance with its international obligations. Speaking personally, I wish the previous arrangements had continued, as I am sure do many members of the Committee, but I am pleased that these changes have been agreed. They are designed to have the minimum possible impact so the Government can continue to support families with installing energy-efficient products in their homes. I commend the order to the Committee.

--- Later in debate ---

[Jesse Norman]

I thank all colleagues who have spoken in the debate. Let me start in reverse order, with the issues raised by my right hon. Friend the Member for Newbury. He is absolutely right to highlight the extent to which this country has been in the vanguard of legislation and change to combat climate change and to improve our energy efficiency, often ahead of the EU—he is right to focus on that and I identify to a degree with his experiences. He is also right to suggest that it is quite wrong to imply that somehow our officials or lawyers are soft on these matters. When we send legal teams in to negotiate or fight battles, that is done at the highest level in the European Court of Justice and with the gloves off, as one might expect from any high-quality legal adviser or barrister. The same is true of policy officials. We have a rule-of-law society, possibly more developed than anywhere else in the EU. That is why, as a general matter, we take it upon ourselves to be compliant with EU law and in good time.

My right hon. Friend raised two interesting ideas. One was a grant scheme on the model of the churches scheme that he described; the other was whether batteries should somehow be accommodated by HMRC to create a new battery industry. Both are interesting ideas; they are tangential to the scope of this debate but I am happy to take them away and write to him with proper advice about whether we could do something in both areas. We will need to, and want to, comply with relevant EU law, but within that there would be some scope for discussion and I would be happy to take that up with him.

The hon. Member for Aberdeen North raised a series of more technical questions. First, I will ask my officials to make sure that the link to the tax information impact notes has been corrected. She asked about the impact on industry; if she has specific impacts in mind, she is welcome to write to me about her constituency or Scotland more generally and I will be happy to discuss that. In this case, the Government consulted twice: once on the policy and once on the statutory instrument. I assure the hon. Lady that officials meet the industry regularly and have shared aspects of the negotiation as they have gone forward, to bring that consent with them.

The hon. Lady closed by asking about the logic of the 60% figure, which is an improvement on the original EU suggestion. As I think she understands well, having read the explanatory memorandum and researched the matter, EU VAT law allows the reduced rate to apply to all installation costs except where the cost of the goods is significant. The question is: what does “significant” mean? The original suggestion was 50%; in negotiation, that was pushed up to 60%. That was a better outcome than was anticipated—certainly a better outcome than was anticipated by the other side. Our judgment has been that it strikes the right balance—certainly the right negotiable balance—between the twin concerns of complying with EU law and minimising any adverse impact on UK businesses.

It is important to note—certainly, the comments of the hon. Member for Bootle show that it is easy to forget—that we are talking about a very small change in terms of impact. Some 95% of installations are projected to be unaffected by this change, and its overall effect on the Exchequer is negligible—less than £5 million. As we have spent £30 billion supporting renewable energy over the last few years, one can see the magnitude of the contrast.

I come now to the comments of the hon. Member for Bootle. This is our first debate together, and I hope future debates are not characterised by the approach that he has taken today. There was a lot of bombast and windbaggery in his remarks, and I do not think it dignified him or the debate. Let me pick up some of his points. First, he tried to suggest there was great conflict in the position into which we have been forced not merely by EU regulation, but by a prolonged process of litigation and negotiation.

The hon. Gentleman contrasted our position with other aspects of Government policy over the past few years. Let me remind him that this is the only Government to announce that the country is exiting the coal industry entirely. There is the Renewable Transport Fuel Obligation Order 2007, the Energy Act 2013 and the “Road to Zero” transport strategy—a vast array of measures have been taken to comply with our international obligations and electrify the economy.

Wind power, particularly offshore wind—an area with which I was closely associated when I was a Minister at BEIS—has been a conspicuous success story precisely because we have taken the kind of energetic international action that characterised the forward position we have taken as a country, to which my right hon. Friend the Member for Newbury referred. Before the hon. Member for Bootle accuses the Government, he needs to tell us whether he would accept the EU Court judgment if he were part of a Labour Government, or whether he would propose allowing the situation to drag on and endure significant infraction costs.

[Peter Dowd]

The premise of my argument is quite simply that we are in this position because the Government failed to do proper negotiations and discussions. That is the whole of it. The Minister is now asking me to close the door after the horse has bolted, but it is his horse and his door.

[Jesse Norman]

I am absolutely not proposing that. Members will recall that the original infraction case has dragged on for many years. It is a problem that any Government would have faced. The hon. Gentleman is not prepared to say whether a Labour Government would accept the EU judgment or incur the infraction costs, which illustrates the hollowness and bombast of his position. We are in this position despite a very prolonged process of litigation and negotiation, and it is fatuous to suggest that he would somehow work more closely with the EU than the Government have done to agree proposals. He was not in the Court when the judgment was made, and he was not present at the negotiations. He has absolutely no reason to second-guess the intelligence, wisdom, advice or good intentions of the officials and legal advisers who were involved. We must treat what he says as essentially evidence free.

The hon. Gentleman refers to paragraph 37 of the European Court judgment. From what he read out, it appears to concern zero rates of VAT, which does not bear on the matter at all. This issue has been taken to the highest level in the EU judicial framework: the European Court of Justice itself. A better outcome has been negotiated than was originally sought. The order will have a negligible impact because 95% of installations will not be affected. I therefore commend it to the Committee.

Question put.

Inheritance Tax Relief: Kindertransport

Jesse Norman Excerpts

Tuesday 18th June 2019 Written Statements

[The Financial Secretary to the Treasury (Jesse Norman)]

The Government are proud to continue to support victims of Nazi persecution. Earlier this year, the German Government set up a compensation scheme for Jewish individuals who were transported from Germany on the Kindertransport. Under the previous rules, these payments would be treated as part of the individual’s estate and liable to inheritance tax. The Government will legislate in Finance Bill 2019-20 so that compensation payments made as part of this scheme will not be subject to inheritance tax considerations.

[HCWS1634]

Draft Double Taxation Relief and International Tax Enforcement (Israel) Order 2019 Draft Double Taxation Relief (Cyprus) Order 2019

Jesse Norman Excerpts

Tuesday 18th June 2019 General Committees

[The Financial Secretary to the Treasury (Jesse Norman)]

I beg to move,

That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Israel) Order 2019.

[The Chair]

With this it will be convenient to consider the draft Double Taxation Relief (Cyprus) Order 2019.

[Jesse Norman]

It is a pleasure to serve under your chairmanship, Mr Hosie.

The draft orders, as colleagues will be aware, are narrow and technical pieces of legislation. They give effect to amendments to the 2018 double taxation agreements, or DTAs, with Cyprus and Israel. Double taxation agreements remove barriers to international trade and investment, and provide what are widely regarded as a clear and fair framework for taxing businesses that trade across borders. By doing so, they benefit both business and the wider economies of the countries that sign them. I will say a few words about each agreement.

The amending protocol that we agreed with Cyprus implements a transition period for changes made to the taxation of Government service pensions in the 2018 double taxation agreement. Under the previous agreement with Cyprus, such pensions paid by the UK to residents of Cyprus were taxable only in Cyprus. The 2018 DTA gave the UK sole taxing rights if the pension is paid to a UK national who is resident in Cyprus.

The treatment in the 2018 DTA is in accordance with international standards, but concerns were expressed in Committee and by members of the public that the changes would lead to hardship for pensioners due to the increased rates of tax that they would pay on their income. I am grateful to colleagues who raised this in the House. Having listened to the arguments, my predecessor asked officials of Her Majesty’s Revenue and Customs to review the position with Cyprus. The protocol before us is the result of that review. As requested by those affected, the new provision will allow individuals to elect to continue to be taxed only in Cyprus for a period of up to five years, and so is designed to give them adequate time to plan for the change after that period elapses.

The current double taxation agreement with Israel dates from 1962, as amended by a protocol in 1970. Its age means that it is in need of updating to reflect changes to the OECD model tax convention and the domestic tax laws and treaty preferences of both states. We were therefore happy to accept Israel’s suggestion that the situation should be rectified. In line with the request of the hon. Member for Oxford East in an earlier Committee, the explanatory memorandum spells out in paragraph 7.8 and following where the amended DTA reflects the OECD model treaty.

The amended DTA also introduces a number of improvements for businesses, individuals and HMRC. It removes a provision that denied many UK residents access to reduced withholding tax on dividends paid by Israeli companies. In addition, the updated agreement reduces withholding tax on dividends in respect of direct investments from 10% to 5%. The rate of 15% applicable to portfolio investments remains unchanged, and that rate also applies to dividends paid by a real estate investment trust. The rate of withholding tax applicable to interest is reduced from 15% to 10% generally, with a 5% rate for interest paid to banks.

A drafting error at paragraph 7.6 of the explanatory memorandum erroneously states that interest paid to UK-resident companies will not be taxed in Israel. That will be corrected in the final explanatory memorandum published with this instrument, if approved.

The updated DTA also contains important exemptions for interest paid to pension schemes and relating to listed corporate debt. It provides the option for taxation of interest on a net basis in the territory from which it is paid. Withholding tax on royalties is reduced from 15% to 0%. That range of reductions in withholding tax is designed to encourage cross-border trade and investment between the two countries, to the benefit of both.

The new DTA also contains a number of modern anti-avoidance provisions that meet the minimum standard agreed under the OECD and G20 base erosion and profit shifting, or BEPS, project. The provisions include: an updated preamble that makes it clear the purpose of the DTA is not to create opportunities for tax evasion and avoidance; and a principle purpose test that denies treaty benefits in cases of abuse.

Other anti-avoidance rules in the new treaty that go beyond the BEPS minimum standard include a tiebreaker provision for determining corporate residence based on competent authority agreement. Another provision preserves UK taxing rights on gains from shares which derive their value principally from immovable property in the UK. Finally, the new DTA brings the exchange of information article into line with contemporary international standards and provides for mutual assistance in the collection of debts.

[Mr John Baron (Basildon and Billericay) (Con)]

I fully endorse what the Minister has been saying about tax avoidance schemes. In future deliberations, I ask him to resist any temptation to increase tax on dividends. He will understand that, over the long term, the reinvestment of dividends over time has accounted for the vast majority of investment returns, which has benefited pension funds, charities and large swathes of society, particularly those in retirement.

[Jesse Norman]

I am grateful to my hon. Friend for his comment. He is right that dividends are an important stream of revenue. I hope he welcomes the changes made in this double taxation agreement.

As I have said, the provisions include an exchange of information article, which brings that information exchange into line with contemporary international standards and provides for mutual assistance in the collection of tax debts. Together, we believe these features will strengthen both countries’ defences against tax avoidance and evasion.

In summary, the orders implement important improvements to our DTAs with Cyprus and Israel. The Government have listened to the arguments presented by UK nationals living in Cyprus and agreed to delay the introduction of the change to the taxation of Government service pensions for up to five years. The agreement with Israel is one the UK and Israel can be happy with. It protects UK revenue and provides a stable framework in which trade and investment between the UK and Israel can continue to flourish. I commend the orders to the Committee.

--- Later in debate ---

[Jesse Norman]

Having read accounts of previous debates on double taxation agreements, it was clear to me that to broach this topic would be to encroach on an area of considerable expertise amounting to genius on the part of the hon. Lady. She has shown it today. You do not need to be at the cricket world cup to see bouncers on a sticky wicket. I am grateful to her. I could not understand why she was not sitting directly opposite me. I think it is because she is bowling over the wicket rather than round it.

The hon. Lady raises three topics: the taxation of royalties, the purpose test and the schedule of negotiations. She will be aware that the taxation of royalties, particularly in the Finance Act 2019, is an area in which she is a great expert while I am a great novice. It is aimed at abusive structures where there has been no double taxation agreement. The point is to try to crack down on procedures whose purpose is only, or in many cases principally, to avoid tax.

I am happy to write to the hon. Lady on the specific question of the treatment of intangibles in the Finance Act. There should be no ambiguity about the Government’s desire to crack down on abusive avoidance of the kind described here.

On the purpose test, the hon. Lady will be aware that purposive readings of the tax code are not by any means limited to Government—they are adopted in different parts of the law. A historic case is the Rangers case in the Supreme Court and the loan charge. A new international standard agreed was agreed following the BEPS project. The UK is a world leader. Although it is true that, to some extent, all world leaders face the possibility of being under question and legal challenge, we believe that the measure is robust and will prove to be so.

On the publication of priorities and negotiation schedules, the hon. Lady will be aware that we conducted a consultation on negotiating priorities at the end of 2018 and published conclusions. I would be happy to write to her on that topic if there is anything further.

Question put and agreed to.

Draft Double Taxation Relief (Cyprus) Order 2019

Resolved,

That the Committee has considered the draft Double Taxation Relief (Cyprus) Order 2019—(Jesse Norman.)

Social Mobility: Treasury Reform

Jesse Norman Excerpts

Tuesday 11th June 2019 Westminster Hall

[The Financial Secretary to the Treasury (Jesse Norman)]

It is a pleasure to serve under your chairmanship, Mr Robertson, and I am grateful for the opportunity to make my parliamentary debut as Financial Secretary to the Treasury and Paymaster General by discussing social mobility, which is an issue of great importance to the House, as today’s interesting debate has demonstrated. I have a certain degree of nerves, however, because if in my first debate a former senior Treasury Minister contemplates the abolition of the Treasury, I shudder slightly to think what my second debate may lead to, but I will take it for what it is.

I thank my right hon. Friend the Member for Putney (Justine Greening) for her fascinating and thought-provoking contribution, and I congratulate her on securing this debate. A Putney debate on social mobility is becoming an important part of the Treasury calendar—perhaps it should be counted as a fiscal event, along with other events of more familiar coinage. I very much congratulate her on her long-standing commitment to improving the life chances of people from disadvantaged backgrounds. That was a hallmark of her time in government, and I respect and applaud her tenacity in pursuing the issue now, as well as her work on social mobility more widely, which includes the social mobility pledge that she highlighted in her speech.

If I may, Mr Robertson, I will briefly canter through some facts about what the Government are doing in this area, and then come to the contributions that have been made, in particular that from my right hon. Friend. The Treasury’s record on social mobility is a good one. There may be plenty of work to do across Government, but the Treasury has had 35 new apprentices in the last financial year, and it offers internships and insight days to students from diverse backgrounds. It was ranked 34th on the Social Mobility Foundation employer survey last year. The Treasury is rightly seeking to make headway in this area, as should the Government as a whole.

The wider point is that social mobility is a force not just for social progress but, as has been highlighted, for economic progress. If one were to use philosophical terms, we should seek to create not merely negative freedom but positive freedom. We need not just relief from the things that constrict and impede human potential but active empowerment and support for people from every background in this country. Supporting social mobility is not only right but it is in the public interest, as it means that our culture, national conversation, politics and economics will benefit from the widest possible range and diversity of voices. It is also wise in a more directly economic sense because, as the global economy’s centre of gravity moves eastwards in the 21st century, the UK’s strength will lie in not merely the size but above all the quality of its workforce. Social capital and investment in human capital is vital to those things. It is therefore in our national interest to encourage and nurture people to achieve their best, because we need their talents and skills.

The Government’s record is a good one. They have achieved higher employment in every region of the UK, and introduced and increased the national living wage. They have taken millions of the lowest paid out of income tax altogether. That can, of course, only be a staging post, and the Social Mobility Commission’s report, published at the end of April, demonstrates that there is plenty of work still to be done. Importantly, however, we understand the magnitude of the task.

For many people, the yardstick for social mobility is home ownership, and as a result of Government policy, 80% of first-time buyers pay no stamp duty at all—that is one reason why the number of first-time buyers is reaching its highest level for 11 years. The Government have also made a real impact in education, which was in part due to my right hon. Friend’s time in government. A combination of the free schools programme and a reformed curriculum has narrowed the attainment gap between disadvantaged pupils and others at every stage, from early years to secondary school. Ninety-five per cent. of all early years settings are now rated good or outstanding. That is up from 68% in 2010 and means that a record proportion of children start year 1 with a good level of development.

The Government have backed schools with £1.3 billion of extra investment and protected the pupil premium, with 1.9 million more children in good and outstanding schools. However, that funding will not get to the heart of improving social mobility unless we also tackle geographical inequalities. That is why, as my right hon. Friend rightly highlighted, it is important to make school funding fairer and more consistent.

The Department for Education provides roughly £25 million every year through the national funding formula to assist the smallest and most remote schools, and in the last Budget it was announced that rural primary schools would benefit from a £200 million programme for fast and reliable internet access across the country. The apprenticeship funding model is designed to support individuals from disadvantaged areas, by providing cash payments to providers for training apprentices who live in the top 27% of deprived areas. The Government have awarded the first 11 Institutes of Technology across England, so that even more students can access an excellent technical education.

My county of Herefordshire is something of a social mobility cold spot, and I am particularly grateful to my right hon. Friend as she was Secretary of State when the Department for Education approved the New Model in Technology and Engineering in my constituency. That was the first new university in this country for 40 years, and it is a specialist tech and engineering institution that focuses specifically on a 50:50 gender balance, open access, and the kind of empowerment that is characteristic of social mobility around the country. It will make a huge difference not only in Herefordshire, where social mobility is much lower than it should be, but elsewhere around our nation.

The Government have invested in 12 coastal, urban and rural opportunity areas, where young people face entrenched challenges, to bring together local and national partners to work with local communities and bring about lasting change. Education must ultimately equip young people to make a successful transition into employment and life as a whole. Employment is obviously important, and people should have choices as they reach adulthood. That is why technical education is so important. The transformation is now under way through T-levels, which will mean that young people have the knowledge to get the highly-skilled, well-paid jobs of the future, and through continuing work on the apprenticeship programme, which will try to create more diverse opportunities; over 1.7 million people have started apprenticeships since 2015. As my right hon. Friend will be aware, in higher education we have record rates of disadvantaged 18-year-olds getting into university. There has been an increase in the take-up of degree apprenticeships, and we have been specifically encouraging bids to improve access to degree apprenticeships for disadvantaged and under-represented groups.

Skills remain of vital importance later in life, particularly in a 21st century in which people will be regularly re-skilling and re-educating themselves. The Government fully fund all adults to take English and maths to level 2, and from 2020 they will be funding basic digital skills. They are also establishing a national retraining scheme to support those in work, including the self-employed, to develop the skills that they will need to thrive in the new economy. To that end, the Government have pledged £100 million in funding to get the scheme up and running.

Let me pick up some of the questions raised by Members in the debate. The hon. Member for Strangford (Jim Shannon) rightly stressed the importance of sexual equality across social mobility and highlighted the complexity of the benefits system as a potential impediment to change. He is absolutely right about both those points. He may have misread the proposals in the Augar review. It is an independent report the purpose of which is not to diminish social mobility but to enhance it; it needs to be read as a whole. If the hon. Gentleman looks at the members of the panel who commissioned the report, he will see that they are all deeply committed to improving social mobility, not just through this report but in their wider lives and work.

The hon. Member for Glasgow Central (Alison Thewliss) gave a more combative speech. I remind her that the Treasury is the product of cross-party evolution; whatever its weaknesses, they are the product of historical processes. It may require radical change—I will come to that question later—but the suggestion that it is not an institution with its own ethos that has developed over many years and generations is one that any Treasury Minister would contest. If the Scottish Government are unhappy with the fiscal arrangements that they have with the UK as a whole, it is up to them to raise taxes themselves, using the new tax powers they have, and to spend that money as they see fit.

The hon. Lady was dismissive of the Government as regards inequality in different ways, including in education. I remind her that Scottish higher education policy has been regularly criticised for being regressive, that Scottish schools performed worse than ever in the Programme for International Student Assessment scores for 2016 and that it may be worth her while looking at the Scottish Government’s own record before raising these issues more widely.

[Alison Thewliss]

The Minister is quite wrong in what he says; I ask him to correct the record, or at least to show his working. For the first time, more than 30% of pupils left school last year with a minimum of five Higher passes at a higher level, which is up from 22.2% in 2009 and 2010. The gap between those in the most and least deprived areas achieving a pass at higher level has reduced for the eighth successive year. The Scottish Government have made huge progress on education, in vast contrast to what is happening in England.

[Jesse Norman]

The hon. Lady misunderstood what I said. I said that the Scottish Government had been regularly criticised for having a regressive higher education policy. There is some evidence for that.

[Alison Thewliss]

That is not true.

[Jesse Norman]

It certainly has been; if the hon. Lady looks at the record, she can see that. I also pointed out that Scottish schools had performed worse than ever before in the PISA rankings in 2016. She can check that; it is an objective fact, not a matter for debate. She is entitled to her views, but not to the facts.

The Opposition spokesperson, the hon. Member for East Ham—I apologise, I mean the hon. Member for West Ham (Lyn Brown); I am sure many footballers will not thank me for that. The hon. Lady mentioned table tennis tables; having been a director of the Roundhouse in London for many years, I know the value of local social involvement and engagement. I agree with it, and the Government have invested significantly in it. She seems to have forgotten that the Government will have spent almost £6 billion in 2019-20 on childcare, which is a record amount. They have doubled the amount of free childcare available for working parents of three and four-year-olds to 30 hours. The Government have a tremendous record in this area in many ways. I am glad she mentioned table tennis tables; I was playing at a free table tennis table, provided through public funding, only last weekend, in the village of Little Dewchurch in my constituency.

[Lyn Brown]

Will the Minister give way?

[Jesse Norman]

I am sorry; I have no time. If the hon. Lady had spoken for less time, I would have had more time to respond.

I will respond to the question raised by my right hon. Friend the Member for Putney. It is a very interesting attack, not just on the Treasury but on the model of Government that we have in this country. It deserves to be taken with the utmost seriousness. The point has often been made before, although not quite in the same terms. Historically, there is a tension in British Government between the Treasury as a finance ministry and the Treasury as an economics ministry; that is well understood.

My right hon. Friend’s concerns about short-termism in public policy making are also criticisms that have often been made. The extent to which this Government, their immediate predecessor and the one before that, have taken steps to attempt to ameliorate and address some of these issues is interesting. For example, we now have multi-year funding strategies for road and rail infrastructure, which we did not have before; there is a separate independent economics ministry, the Department for Business, Energy and Industrial Strategy, which is specifically designed to provide an economic counterpart to the Treasury; and, other steps have been taken to try to combat embedded institutional concerns about short-termism in public funding. Undoubtedly, there is more to do. The criticisms have weight, as has been shown by the responses that the Government have made; it is a point that the Government have well taken and are making significant progress.

There is an embedded tension between the desire for longevity in funding and the desire for democracy. If we lived in China, we would operate according to a 100-year economic plan; we cannot do that because this country has always been bound by the principle that no Government can bind their successors. It is right that we should try to build more longevity into public policy; I have touched on some of the ways in which that can be done, but I have no doubt there are many areas in which it can be done better. This embedded tension between cash constraints, managing the public exchequer, the democratic accountability of Ministers and long-term funding is one that will not be removed by abolishing the Treasury.

My right hon. Friend said that no company would ever see a contradiction between the chief executive and the financial director; I think she is mistaken. There are many companies in which the chief executive would like to spend money and the finance director, in league with the chair, prevents him from doing so. There have been many points in British government when that has been true. It is often true in a Labour Government, when the wisdom of having an independent Treasury, with a degree of control over public finances, stops a Labour Government from thoroughly spendthrift public spending policies. I close by saying that I encourage my right hon. Friend to be careful what she wishes for.

Finance (No. 3) Bill

Jesse Norman Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

18:57

Division 288

Ayes: 292

---

Labour: 227
Scottish National Party: 35
Liberal Democrat: 11
Conservative: 10
Plaid Cymru: 4
Independent: 4
Green Party: 1

Noes: 303

---

Conservative: 289
Democratic Unionist Party: 10
Labour: 3
Independent: 1

[The Minister of State, Department for Transport (Jesse Norman)]

On a point of order, Mr Speaker. I understand that in the previous debate there was some unhappy and unfortunate talk about the potential for the M3 to be closed in connection with a lorry park. I want to put it on the record, from the Government’s perspective, that the Government have absolutely no intention whatever of closing the M3 in connection with a lorry park. Therefore, the record should stand corrected as from now.

[Mr Speaker]

I am very grateful to the hon. Gentleman for what he has said, which is on the record and will be widely observed.

Finance Bill

Jesse Norman Excerpts

Monday 26th October 2015 Commons Chamber

[Mr Gauke]

I would like to open the debate by discussing amendments 31 to 70. As announced in the Public Bill Committee, the Government are introducing amendments to clauses 25 and 26 and schedules 5 and 6 to ensure that the Bill works as intended and that the new rules work correctly with the existing provisions.

I remind the House that the original clauses and schedules make changes to the rules for the enterprise investment scheme and venture capital trusts to bring them into line with new state aid rules. This will secure the future of the schemes and ensure they continue to be well targeted towards companies that need investment to develop and grow. The enterprise investment and venture capital schemes have been supporting small companies to access finance for more than 20 years and provide generous tax incentives to encourage private individuals to invest in high-risk small and growing companies that would otherwise struggle to access finance from the market. The original clauses and subsequent amendments ensure the long-term future of these important schemes.

Alongside the amendments, the Government are also introducing new clause 4, which makes changes to exclude companies from qualifying for the seed enterprise and investment scheme, the enterprise investment scheme and the venture capital trust, if their activities involve making available reserve electricity generating capacity—for example, under the capacity market agreement or the short-term operating reserve contract. In recent years, there has been a significant increase in tax-advantaged investment in energy companies benefiting from other guaranteed income streams. These activities are also generally asset-backed. The new clause will ensure that the Government remain consistent in their approach by keeping the venture capital schemes targeted at high-risk companies. We will also introduce secondary legislation to exclude subsidised renewable energy generation by community energy organisations.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

The Minister will be aware that the very late tabling of new clause 4 might have disconcerted and inconvenienced companies. Among those it has unsettled is one in my constituency which was on the point of closing a funding arrangement that would have given it access to capital of about £25 million to £40 million. Given that the concern the new clause appears to address is focused on state aid or subsidy, particularly capacity market agreements, will he confirm that it is not intended to apply to businesses that do not use capacity market agreements, such as the one I have described?

[Mr Gauke]

I am grateful to my hon. Friend for letting me know earlier today about his constituency case. It is difficult to be drawn too much on an individual case, although I understand why he has raised it, and I can assure him that the representation he made to me earlier today on behalf of his constituent is being looked at closely. He has obviously put his concerns on the record, but all I can say now is that there is a clear objective behind new clause 4. It is about ensuring that the provisions are state aid compliant and that the regime is well targeted. I hope he will be reassured that I and my officials will look closely at his case, but if he will forgive me, I will not get too drawn into the specific circumstances he outlines.

[Jesse Norman]

I am extremely grateful to the Minister for those assurances. Am I right in thinking that there will be scope within regulation to allow the kind of carve-out that might be necessary if his investigations uphold, as it were, the position that I am taking?

Office for Budget Responsibility (Manifesto Audits)

Jesse Norman Excerpts

Wednesday 25th June 2014 Commons Chamber

[Ed Balls]

I believe that the Chief Secretary to the Treasury is on a visit to the United States. It may be that the Chancellor is engaged in rather more immediate and urgent matters that have cropped up in the past 24 hours, or it may be that he will arrive in the next few minutes to respond to this debate. I had assumed that the Chancellor would respond to this debate. I do not know whether you, Madam Deputy Speaker, have had any other guidance. Anyway, let us hope that he turns up.

In the meantime, and fully consistent with that consensus, it is our view that now is the right time to take a further step to enhance the role of the OBR. I will come on to explain our strategy and seek the views of the Chancellor, so he has about 10 minutes to get here.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Will the right hon. Gentleman give way?

[Ed Balls]

Sure. If the hon. Gentleman is playing for time in order to facilitate the arrival of the Chancellor, I will take as many interventions as is needed for the Chancellor to wing his way over from whichever lawyer’s office he is sitting in at the moment.

--- Later in debate ---

[Jesse Norman]

I think the Minister present is fully capable of discharging any function required to see off the shadow Chancellor. A statement from the Institute for Government said:

“More feasible than making any hasty change to the OBR remit at this point would be to consider this option in detail during the five-year review of the OBR’s operation due to take place in 2015.”

How does the shadow Chancellor respond to that?

[Ed Balls]

I am making a speech in an attempt to build a cross-party consensus. If the hon. Gentleman thinks that the Chancellor, or whoever is in his place, will see me off, that might say something about their approach to this important matter.

--- Later in debate ---

[Ed Balls]

My hon. Friend, who regularly advises me on my speeches, can obviously see where this speech is going. I have worked hard to try to secure consensus. Despite the support of many influential figures, I have not yet managed to succeed in making it a cross-party consensus. The reason for that is that, so far, the Chancellor has not engaged. He has refused to co-operate with the discussions. He has not responded to my proposals and letters. He has not even turned up today.

The question is: why is the Chancellor so reluctant? The reason cannot be the need for primary legislation, because we will support it. It cannot be the timetable because, despite the protestations of Government Members, the head of the OBR confirms that there is time to get this done and to get it done properly. The Chancellor says that he wants to protect OBR independence, but so do we, and the head of the OBR says that this reform need not jeopardise that independence.

[Jesse Norman]

Will the right hon. Gentleman give way?

[Ed Balls]

No, the hon. Gentleman has already had one go.

What is the issue? What is going on? I am afraid that it is not hard to conclude that the Chancellor sees this as an opportunity to play political games. [Interruption.] The more that Government Front Benchers laugh, the more we see the political games they want to play.

We know from the head of the OBR that if an agreement to proceed is reached by the end of June and we can conclude its details by the end of the summer, the OBR can independently audit all our tax and spending commitments for the next general election. It is just a matter of political will. The Chancellor wants to place political traps—through his aides, he very often tells people that he is setting them here and setting them there—but he is not willing to back an important reform in the national interest. What is going on?

Why is the Chancellor so keen to prevent Labour from having its manifesto independently audited, and so reluctant to put his own party’s manifesto through the same scrutiny? Might it be that, as the head of the Institute for Fiscal Studies said at the last Budget, the Chancellor is “getting into bad habits” by making tax changes that appear to bring money into the Exchequer in the short term but have a long-term permanent cost to the public finances; or that, as the IFS said at the last autumn statement, he

“continues to make specific promises on spending increases while stating that he will keep total spending at the same level”

and that he “can’t keep doing that”? The risk for the Chancellor is that people draw the conclusion that he wants the freedom to make promises in his manifesto that he knows he cannot afford and will not deliver, while making claims about Labour’s manifesto that he knows to be false, and blocking our desire for proper independent audits.

I have to tell the Chancellor and other Ministers that we remember the Conservatives’ uncosted promise to abolish inheritance tax last time around; and as for the Liberal Democrats’ promise to end tuition fees—enough said. My advice to the Chancellor, if he had turned up, and to the Chief Secretary, if he were here, would be that if they do not want to be reminded again and again of those mistakes, they should support our proposal and help us to forge the cross-party consensus we need.

It is hugely disappointing that the Chancellor seems determined to oppose this reform. I have tried hard to persuade him to put politics aside and to do the right thing. Our proposal would be the first ever such independent audit. We believe that it is essential to restore public trust in politics and to improve the nature of our political debate. It is not too late for him to come to the House to say, or to tell his Front-Bench colleagues, that he has changed his mind. I urge the House to vote to persuade the Chancellor to do just that—to change his mind, to stop playing politics and to stop blocking this important reform. If he fails to do so, people will rightly ask: what are they so scared of?

--- Later in debate ---

[Nicky Morgan]

It is all very well for the right hon. Gentleman to have a conversation with the head of the OBR, but we do not know the details of that conversation; if he is going to release a transcript, I would be very interested to read it. In fact, the letter dated 15 January makes it very clear that

“To embark on this exercise in a rush, or with insufficient resources, could be very disruptive for the parties and very damaging to the OBR.”

Is the right hon. Gentleman saying that he wants it to be damaging to the OBR? I do not think that he does.

[Jesse Norman]

On the topic of misinformation, does the Minister share my surprise that the shadow Chancellor should have misrepresented the position of the Institute for Government on this, when he suggested that it was giving up on the idea of a reform of this kind in this Parliament? In fact, what it said—it was an expert judgment— was that:

“More feasible than making any hasty change…would be to consider this option…during the five-year review…due to take place in 2015.”

Does she not share my view that the shadow Chancellor should be invited to correct the record on what he said about that?

[Nicky Morgan]

I thank my hon. Friend for that very good point. He has eloquently set out the misrepresentation by the shadow Chancellor of what was said by the Institute for Government. I am sure that perhaps through later speakers and in the winding-up speech the Opposition will have a chance to correct the record.

--- Later in debate ---

[Nicky Morgan]

My hon. Friend is entirely right; it will take time to recruit skilled members of staff to carry out the project that the Opposition say the OBR should be able to do within a matter of months.

[Jesse Norman]

Is my right hon. Friend aware that Mr Chote also made it very clear that his job would be made additionally complicated by the run-up to a general election? Is she surprised that the shadow Chancellor comes here to present his views with no form of back-up, official record, transcripts or anything on which this House might properly rely?

[Nicky Morgan]

Nothing in politics surprises me any more, so I am not surprised that the shadow Chancellor has done that. I am just surprised that he thinks that the House is going to buy it.

--- Later in debate ---

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Perhaps it would be correct for me to state at the outset that, in view of the six-minute limit, I do not intend to take any interventions. I hope to confine myself to fewer than six minutes. I will not take an intervention, even from the hon. Member for Hereford and South Herefordshire (Jesse Norman), whose interventions so far have been a waste of time. Time is at a premium. On that basis, I will make some progress.

I do not think that I have heard a more blatant party political set of arguments, electorally inspired, from any Government since I have been in the House. The Government are going against the grain—

[Jesse Norman]

Will the hon. Gentleman give way?

[Mr Robinson]

No, I am not giving way. I have made that clear already, although not out of any fear of what the hon. Gentleman might say. The Government are afraid, though. They are afraid that, if our proposals before the election were properly and independently costed, as they will be—we will probably try to get it done independently in some other way if we have to—it would give them the credibility that the Government seek to deny them by being misleading and by obfuscating, at which they are experts—the Chancellor in particular, who is not here.

When we look at what individuals have said about the proposal, it is clear that it is possible—no one has tried harder to secure this than my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor—to achieve consensus across the House if right hon. and hon. Members on the Government Benches want it. The hon. Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, said on 15 October 2013, around the time that my right hon. Friend was writing to the Chancellor on these points:

“I made clear in the Commons that this should include examining, at their request, the fiscal policies of opposition parties at election time.”

The whole point is that election time and the run-up to the election is the appropriate time to do this. That is why my right hon. Friend started this in October—nine months ago. It is a complicated, difficult process, but why have we had nothing from the Chancellor since? Why has he refused to engage in that?

--- Later in debate ---

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I speak in part as a member of the Treasury Committee and as a member of the council of the National Institute for Economic and Social Research and a senior fellow of Policy Exchange.

One of the tragedies of modern politics is that so many issues are no longer discussed soberly and on their merits but are viewed purely through the prism of party politics. The present subject of debate—whether, and if so how, manifesto policies should be costed by the OBR—is one of potentially great importance that could shape political debate across many years and many future Parliaments.

The shadow Chancellor, who is no longer in his place, despite his strictures about the Government Benches, has attempted to politicise this debate and drag Robert Chote’s name into it. Let us simply say that expert opinion on the issue is divided. The Institute for Government has described the pre-election timing as “hasty”, and the IFS has questioned the very idea of the OBR undertaking this role. As I will show, there are several crucial issues of principle as well as practice. They must be addressed before legislation can be considered.

First, there are practical matters of funding and staffing. Let us not forget that the motion states that manifestos should be costed. Manifestos are very long and their policies are often described very briefly and vaguely, so there would be an enormous amount of work. When Mr Chote and others appear before the Treasury Committee, they refer to individual clusters of policy, not whole manifestos.

[John Glen]

Is it not also significant that there is room for great interpretative range? There is a massive number of think-tanks and analysts out there who will all draw different conclusions. The idea that one entity could somehow create a reliable and completely authoritative conclusion about any single manifesto is totally unrealistic.

[Jesse Norman]

My hon. Friend is absolutely right, and I will move on to that point shortly.

The OBR is a new institution. Would it be right to put its recently created reputation at risk by inserting it into the political process in the run-up to an election? The answer is obviously no. These issues need to be calmly and soberly addressed, not patched together late in a Parliament. The proposal would require primary legislation, which will take time and consideration. It should not be rushed into on this timetable. The Institute for Government was perfectly clear that it should not be adopted as a hasty change to the OBR’s remit at this point in the Parliament.

The second question is this: would such a new role compromise the OBR’s key functions? There is an obvious danger that it might. The remit would require careful amendment. Clear rules would be needed on how many policies could be costed, if not a full manifesto, and on which political parties would be eligible. The OBR could not be expected to invigilate in hard cases or act as judge on these issues. It would undoubtedly be attacked by parties that were ineligible to have their policies costed.

[David Mowat (Warrington South) (Con)]

My hon. Friend has referred two or three times to policies being “costed” by the OBR. In fact, the motion refers to auditing, which has a precise meaning. I think that is the weakness of the Opposition’s case. What does an audit opinion mean? It would be qualified, true and fair, and in reality there would be several caveats, which we would end up arguing about.

[Jesse Norman]

That very important point speaks better than I can to my hon. Friend’s expertise. I suspect what the Opposition mean is “costed,” so their failure to understand the difference is reason alone to reject the motion. “Costing” was the word used by the Treasury Committee and that is what I would call it, too.

There is some risk of bias against insurgent parties that were growing in public support but did not have many MPs, or in favour of declining parties for the opposite reasons.

I remind the House that there are deeper questions to be addressed. Is it actually possible to have all policies costed in a genuinely authoritative and independent way? The answer is far from clear. Many policies are non-financial, many are vague and many have complex interactions with other policies that may themselves not have been costed, and many have implied costs that will not be captured by a direct costing exercise. It may be that the OBR will not enjoy the relative immunity from political controversy enjoyed by the civil service when it ends up costing Government and Opposition policies. Parties may try to gain the OBR, as they have attempted to do in Holland.

My final question is this: is it wise for the state to be pushed further into the political process? My hon. Friend the Member for South West Devon (Mr Streeter) has made this point, but let me reiterate it. It is a far bigger question than we have time to debate today, but just as there are perfectly proper concerns about the state being dragged into funding political parties or into press self-regulation, so there are proper concerns that the state should not be pulled into costing party policies. After all, parties have been producing policy ideas, themes and, indeed, platforms, if not manifestos, for more than 200 years, ever since the time of Burke, Fox and Pitt. The British public have found themselves able, mirabile dictu, to make judgments for that period, even without the wisdom of the Office for Budget Responsibility.

This very debate shows how this topic has already become bogged down by partisanship. Why does the Labour party now seek to have manifestos audited? The reason is that its polling data overwhelmingly demonstrates that Labour is hopelessly short of economic credibility. The shadow Chancellor himself is specifically responsible for—indeed, he incarnates—that lack of economic credibility. He was a key figure in the previous Government, who left our country so vulnerable to financial crisis. He had to be dragged kicking and screaming to accept his mistakes in office as a soft-touch regulating City Minister. He is still in denial over the success of plan A. The irony is that his performance on this very issue perfectly exemplifies the reasons for his diminishing authority: first, he was against costing policies, but now he is for it. For naked short-term advantage, he is prepared to politicise the OBR and its head, amid a lot of pious words about cross-party consensus from one of the most divisive figures in politics of the past two decades.

In conclusion, this is an important issue, but the shadow Chancellor embarrasses himself twice over: first, by placing it in such a party political context, and secondly, by ignoring the real problem for him, which is the catastrophic failure of trust in politicians and political parties today—a failure to which he himself has been no small contributor. The causes of that loss of trust have little to do with politics. They run much deeper to the decline in Britain’s influence around the world; the loss of standing of Parliament over so many recent scandals; feelings of powerlessness among the general public; an apparently increasing sense of outrage fanned by parts of the media; and a general unwillingness to grasp the complexity of Government or to give those in power the benefit of the doubt.

The time has passed when the shadow Chancellor could expect to be heard on this or any issue. He has thrown that right away. He has lost what authority he ever possessed. Today’s debate shows precisely why he will never, and should never, regain it.

--- Later in debate ---

[Jesse Norman]

Might it be worth my hon. Friend sharing my view and correcting the record? The OBR was set up by transferring existing civil servants from the Treasury into a new entity. It is therefore not right to say that it was set up quickly and could therefore be expanded quickly. It already had those civil servants, which was why it was allowed to succeed and start so quickly. Growing it is an entirely separate matter.

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. Before the hon. Member for Poole (Mr Syms) replies, I point out that Government interventions are having the consequence of talking out any Members who are still waiting to speak, and there are quite a number. We will start the wind-ups at 6.40 pm.

Oral Answers to Questions

Jesse Norman Excerpts

Thursday 1st May 2014 Commons Chamber

[Sajid Javid]

I know that the hon. Lady is very passionate about this issue and I commend her for her leadership, alongside my hon. Friend the Member for Hove (Mike Weatherley), of the APPG on ticket abuse. She will know that the Culture, Media and Sport Committee looked at this issue in 2008, as did the previous Government in 2009. I agree with their broad conclusion that there is no need for further legislative action. However, I would be more than happy to sit down with the hon. Lady and discuss her concerns further.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

6. What steps he is taking to help football clubs in financial difficulty.

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mrs Helen Grant)]

I continue to work closely with the football authorities to press for improvements in governance. They have made some good progress, notably putting clubs on a much stronger financial footing through the introduction of the financial fair play rules.

[Jesse Norman]

I thank the Minister for that reply and I congratulate the Secretary of State on his new job, to which he is bringing his characteristic freshness and intelligence.

Last Saturday, Hereford United won their do-or-die relegation battle to stay in the conference premier league despite extremely difficult financial circumstances. Will the Minister join me in congratulating the Bulls players and staff, and in recognising the massive role played by the club’s supporters in sustaining the club? Does she share my view that all the football authorities need to get together now and look at what more they can do to preserve our football heritage and support clubs in the lower leagues?

[Mrs Grant]

My hon. Friend the Member for Amber Valley (Nigel Mills) is not in his place, so I can congratulate the Bulls on their win over Alfreton. I also congratulate my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman), who has worked tirelessly to help Hereford United, which has had a difficult time recently. Running a football club is a challenging matter and supporter trusts play a crucial role in that regard. I will follow the Hereford United Supporters Trust bid for the club with eager interest.