Oral Answers to Questions

Jim Shannon Excerpts

Tuesday 6th February 2024 Commons Chamber

[Bim Afolami]

I thank my hon. Friend for his question, for writing to me and for standing up for the rights of his constituents. It is important the House knows that over 90% of investors voted to accept the scheme of arrangement. It is now up to the court to decide whether to approve it, and I therefore will not comment on it any further. I am happy to be in constant dialogue with him on this matter, as on many others.

[Jim Shannon (Strangford) (DUP)]

As the Minister knows, the Northern Ireland Assembly sits for the first time today to make a change for Northern Ireland. We would very much like to be part of the financial services sector, so what can he and the Government do to support the Northern Ireland Assembly in relation to the financial services sector, and to ensure that we in Northern Ireland can be part of this great country of the United Kingdom of Great Britain and Northern Ireland? Always better together.

[Bim Afolami]

I strongly echo the hon. Gentleman’s sentiments. I am very happy to engage with him and his colleagues from Northern Ireland to see what more I can do in the Treasury to work with him and, indeed, the Northern Ireland Executive, particularly to encourage our financial services institutions to invest more in Northern Ireland. I am very happy to discuss ways in which we can do that.

Finance Bill

Jim Shannon Excerpts

Report stage
Monday 5th February 2024 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

On behalf of myself and my Liberal Democrat colleagues, I express our sympathies to the King and his family, and our hope that his treatment will prove to be successful.

I will speak to amendments 1, 2 and 3, in addition to new clause 5. To reiterate, the Liberal Democrats are not supportive of the Bill, which is a deception from the Government after years of cruel tax hikes on hard-working families. The legislation maintains the Government’s unfair tax rises on working families through the freezing of income tax thresholds, fails to invest properly in our public services, such as the NHS, and takes none of the vital steps needed to grow the UK economy. Some of the measures in the Bill have worthy aims, but the context is important from the outset.

Amendments 1, 2 and 3 make further changes to the new R&D regime defined in the Bill. While the changes may be necessary and sensible clarifications, just last week, colleagues in the other place, sitting on the Economic Affairs Committee, reported their concern

“that the number of significant R&D changes made in the last 5 years has led to a perception of instability in the UK’s R&D tax relief regime and undermined the intended incentive effect of the relief.”

What businesses need more than anything is certainty and stability. The Government’s chopping and changing on R&D is indicative of a wider failure to create a stable and settled environment in which business can flourish.

Perhaps the clearest example of that has been the scrapping of the UK’s industrial strategy and the disbanding of the independent body overseeing it. This short-sighted step has robbed businesses of the stability they need to grow. The constant changes to the R&D relief regime are a clear example of how that lack of foresight and stability can undermine the aim of economic growth. Once again, I urge the Government, even at this late stage, to relaunch an industrial strategy. A proper industrial strategy can create the conditions for sustainable growth, including through effective and clear incentives for R&D investment, especially among SMEs, and ensure that the UK’s regulatory, R&D and tax frameworks are geared towards fostering innovation.

New clause 5 introduces an exemption to the energy generator levy for new plant investments. The Liberal Democrats believe that, although this may help to strengthen investment in renewable energy and contribute towards our net zero targets, the Government’s own assessment of the measure notes that it is unlikely to affect the retail price of electricity for households as energy prices remain tied to gas prices.

The Bill, and the autumn statement from which it arose, does nothing to help families with soaring energy prices or to put a proper windfall tax on the oil and gas giants. The Government continue to sit on their hands as businesses and families struggle with energy price inflation. A windfall tax on the super-profits of oil and gas producers could raise significant revenue which could have paid for a targeted package of support for those worst affected by the energy crisis, by doubling the warm home discount and investing in an emergency home insulation scheme. It remains clear that November’s autumn statement and the Finance Bill both represent a missed opportunity to address the crisis in energy prices.

To conclude, while the Liberal Democrats are supportive of certain measures within the Bill, such as the extension of full expensing, we cannot support any legislation that arises from such a deceptive and unjust autumn statement. Ultimately, British households are seeing the biggest fall in living standards since the 1950s, and households across the country are crying out for real support from the Government, for action on the cost of living crisis and investment in our NHS, but all we have heard is more stale announcements from a Conservative Government who are completely out of touch.

[Jim Shannon (Strangford) (DUP)]

I concur with the comments made by others about King Charles, on my behalf and that of the Democratic Unionist party and his loyal subjects in the United Kingdom of Great Britain and Northern Ireland—especially Northern Ireland. I pray, as I know you do, Mr Deputy Speaker, as well as others in the Chamber, for King Charles and for the royal family. I pray for a speedy recovery to his health. I pray, as we all pray, to the great healer, omnipotent over all, that his family will know the peace of the Lord as they support him at this time.

I thank all those who have contributed to this Bill debate, and I thank you, Mr Deputy Speaker, for giving me the chance to participate. Understandably, much of the Bill focuses on the measures that are needed to deliver the autumn statement. The Minister understands that—I would like to welcome him to his place. As he knows, I hold him in great respect, and look forward to his responses at the end of this debate.

For every public sector pay rise that is rightly awarded, money must be raised, and therefore we all support the principle of this Bill in theory. However, in practice, not many of us want to sign off on a Bill that raises taxes for those who are struggling at present. Obviously, as prices have risen, obligations have gone up correspondingly. Northern Ireland has been seeking a complete removal of the air passenger duty as a way of enhancing our connectivity and our attractiveness to international business investment. As a result, the rise in APD is disappointing. I know what the Minister’s response will be. We are all aware of what the renewal of Stormont means: it means that we can look at this matter ourselves. None the less, the renewal of the Assembly has also highlighted the issue of the allocation of finances. It is clear that an overhaul of the funding formulas for Northern Ireland is necessary to meet the need in the long term.

Before I left the office this morning, I heard the Secretary of State for Northern Ireland on the radio saying that he hoped that a new funding formula would be found for Northern Ireland. We on the Northern Ireland Affairs Committee have also put forward that view. It is matter that involves all parties. The hon. Members for Belfast South (Claire Hanna) and for North Down (Stephen Farry) join us in wanting the same. That is three of the political parties in Northern Ireland that want that formula. There are also labour Members who support the view, along with a number of Conservatives with some concerns. We are all pushing for a formula similar to the Welsh system. If that comes into place, we in Northern Ireland would benefit, and that is only fair and right. I am highlighting this because if we as a party wished to do something about air passenger duty in the Northern Ireland Assembly, or if a cross-party group were wishing to do the same, we would need to have that formula in place. As I say, we are looking for fair funding for the future.

The £3.3 billion that has been made available now is money that many of my constituents believe has been withheld, and that is welcomed. Ever mindful of the positivity that came out of the debate last week, I say let us be positive in looking forward—

[Mr Deputy Speaker (Sir Roger Gale)]

Order. The hon. Gentleman understands that he has caught my eye and I have caught his. May I gently remind him that we are talking about the Government’s new clauses and amendments at the moment? There is a Third Reading debate ahead in which more measures can be raised if necessary, but, at the moment, will he please concentrate on the matter in hand?

[Jim Shannon]

I knew when I saw you looking at me, Mr Deputy Speaker, that you were going to tell me to get back on to the subject. I was about to do so. I thank you for that very kind reminder. You spoke to me in a very nice way, which was much appreciated.

I did refer to new clause 7 and air passenger duty, so I will quickly return to that. When I looked at a number of these issues addressed in the Bill, I could see a very clear and obvious theme: air passenger duty to rise in line with the retail price index; plastic packaging to rise in line with the consumer prices index; aggregate levy in line with RPI; tobacco levy in line with RPI plus 2%; and vehicle excise duty for cars, vans and motor bikes in line with RPI. So it continues and, to be honest, that seems to be understandable.

However, what is clear in the Finance Bill is that, although these things rise by RPI or CPI—I understand how the system works—the Government have again chosen to ignore the needs of the working middle class. I wish to make this point. I have done so in every finance debate, Mr Deputy Speaker. I have taken every opportunity I can to bring up this matter. I am seeking the support of the Minister on this. Indeed, I have asked the Minister about this on a number of occasions, so he knows about the issue. It is about the middle-class families who need that extra bit of help. They are paying their tax, but the £40,000 and £50,000 a year threshold is not helpful. If we wish to address the issues of new clause 6 in relation to permanent full expensing and the issue of air passenger duty—the things that people want—then we also have to address the issue of the threshold as well.

I gently say to the Minister that, when it comes to how we help our squeezed middle class—I am not talking about the very wealthy—can he look at changing the threshold? I ask the Minister for a direct response on that. I do not want him to talk about the higher income benefit charge or any other mitigation. I just want him to help us understand why those who pay into the tax system do not get as much as they should when they are struggling in a way that families back in 2013 could not have imagined. The Government know that to be the case—I think the Minister knows it to be the case—so when it comes to legislation that helps us to represent all of the people of this United Kingdom of Great Britain and Northern Ireland, let this Bill tonight be one that does just that.

[Mr Deputy Speaker (Sir Roger Gale)]

I call the Minister.

--- Later in debate ---

Some of the challenges with the calculations, and the point about rounding to the pound, have arisen because in April 2023 we cut APD on domestic flights by 50%, but not the rate for private jets, which therefore remained equal to that on short-haul international flights. The Bill provides for the uprating of APD rates by forecasted RPI in 2024-25, rounded to the nearest pound, and then of course there are the multipliers. Some of this is the sheer mathematics of ensuring that we do not have disparities. Current APD rates ensure that passengers in private jets pay significantly more tax than passengers on commercial flights. For example, in 2024-25, the higher rate for domestic private jet passengers will be more than 10 times the economy rate. Since the Government keep all rates, including all APD rates, under regular review, new clause 7 is unnecessary. I note the appeal of the hon. Member for Strangford (Jim Shannon), which I have heard before.

[Jim Shannon]

The Minister knows that I am particularly fond of him, but if he has heard my request before, let us now have action.

[Nigel Huddleston]

We always try to act; I cannot do everything, though. I note the hon. Gentleman’s comments. In a similar vein, my hon. Friend the Member for Totnes (Anthony Mangnall) raised the importance more broadly of the tourism, hospitality and leisure sector, and of the creative sector. He is absolutely right. Measures in the Bill and elsewhere will support all those sectors. Of course, business rates relief is vital to the tourism, retail, hospitality and leisure sector. My right hon. Friend the Member for Wokingham made a range of comments, some outside of my direct remit. I assure him that I will raise his points, which ranged from bonds to public sector efficiency—a vital area—with colleagues in the Department.

I was somewhat entertained by the comments of the Labour spokesman, the hon. Member for Ealing North, who was effectively asking me to commit to Conservative party policies as enthusiastically as he does, which is quite a turn up for the books. Of course, we welcome Labour’s support for the policies that we have announced, but there is clear blue water between the Labour party and the Conservative party in terms of principles about the size and scale of Government and the level of taxation. We have seen Labour’s flip-flopping over the £28 billion. I am not sure what the policy is today. It was rather rich of him to ask for commitments from me, given the flip-flopping that is so prevalent in every area of Labour policy.

At one point, the Labour party was supportive of Brexit. Now I do not know. Are Labour Members against it? Were they supportive of the right hon. Member for Islington North (Jeremy Corbyn) being Prime Minister, or do they not want him in the party? Are they in favour of nationalisation, or against it? Are they in favour of private sector involvement in the NHS, or against it? In a whole host of policy areas, we have seen persistent, perennial flip-flopping from the Opposition. I literally have goldfish whose commitments I would trust more than those from the Labour Front Bench. On those points, we will have to respectfully agree to disagree.

As I said, new clause 5 and the six amendments that the Government have tabled will help to ensure that the changes in the Bill apply as intended, and deliver a vital policy to protect renewable investment. They will make the tax environment more easily understood by business and protect vital tax revenue used to fund our public services. I therefore urge that they be added to the Bill. The six new clauses tabled by the Opposition seek to get the Government to publish data and information that is already being published through other sources, as I have outlined. I therefore urge the House to reject them.

Question put and agreed to.

New clause 5 accordingly read a Second time, and added to the Bill.

New Clause 6

Assessment of the impact of permanent full expensing

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the measures in clause 1 of this Act on—

(a) business investment, and

(b) economic growth.

(2) The review under subsection (1) must—

(a) assess the impact of full expensing being made permanent, and

(b) consider what other policies would support the effectiveness of the measures in clause 1 of this Act.”—(James Murray.)

This new clause would require the Chancellor to publish an assessment of the impact on investment and growth of the measures in this Act to make full expensing permanent, and to consider what other policies could support the effectiveness of permanent full expensing.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Future of UK Capital Markets

Jim Shannon Excerpts

Tuesday 30th January 2024 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

I congratulate the right hon. Member for Vale of Glamorgan on securing this debate, and I am pretty sure he will agree with what I am going to ask. Does he not agree that we cannot live up to the potential in the City market without implementing the necessary changes to promote safeguarding and safety? Those are critical. Does he believe that the Government and the Minister must be more proactive in that matter?

[Alun Cairns]

The hon. Member makes an extremely important point, and I will come on to it as I progress. He is right about the importance of standards. London’s reputation on standards is essential not only to London, but to every part of the United Kingdom and well beyond.

I was highlighting the challenges we have had in the UK. If there are challenges here in London, there are even greater challenges elsewhere. London still dominates the European market. However, the market is always evolving and we need to react. That being the case, I am pleased that the Government are already alive to change and, along with others, have launched a series of initiatives to analyse and act on what the UK needs to do to secure London’s important international role. We have seen the wholesale markets review, the UK listings review, the Kalifa review, the UK secondary capital raising review and the London stock exchange UK capital markets industry taskforce. Those are just some examples of what has been going on in recent times.

The influence of some of the reviews led to the Edinburgh reforms and the Chancellor’s Mansion House speech last year. Those are positive steps but, 12 months on from the Edinburgh reforms and six months on from the Mansion House compact, this is a good time to take stock. There is a need for co-ordination and assessment of developments. I am concerned that there has been a series of reviews, including those I mentioned earlier, but securing outcomes for the benefit of companies and investors must be our focus.

There is clearly a balance to be struck between evolution and revolution. The Chancellor is on record as saying that he favours evolution, which is fair enough, but we do need to see progression, too. We also need to consider the freedom that Brexit provides, against the diversion from standards in our closest markets. I am not saying that is easy, but regular review of progress is a positive step. There are wins available for the United Kingdom, and I look to the Government to respond.

The central piece of the Mansion House speech was an agreement with the largest UK defined contribution fund managers to invest at least 5% in private equities by 2030. There are also clear ambitions for defined benefits schemes, and I hope the Minister can provide a further update on that in his response. After all, when we consider that just 1% of the UK’s near £5 trillion assets are in private companies, the 5% target is a major step. I press the Minister by saying it is a good start but we need to go even further, and monitor progress towards that 2030 target. I also look to the Minister to provide further details on the defined benefits reforms and ambitions.

I recognise that the Chancellor announced plans to consolidate the local government scheme. As he said, when it comes to pension pots, big is beautiful. I get that, and the wider benefits that consolidation will bring. I would, however, add a note of caution. Large funds need large investments, which in general is a good thing, but we could end up squeezing small and mid-sized companies out of the equation. Guidance to secure the role of smaller private equity funds, which usually focus on smaller firms, would be helpful. I am concerned that large pension funds will have few places to go, other than to large private equity firms in the US, defeating much of the Government’s objectives.

The London stock exchange plans for an intermittent trading venue also offer new opportunities to bridge the gap, but it would be helpful to gain feedback on the timing of the regulatory approval. I also welcome the Treasury’s commitment to the replacement of the EU prospectus regulation with the Public Offers and Admissions to Trading Regulations 2023 that stem from Lord Hill’s listings review. That is welcome and will streamline the process significantly.

We obviously await detailed Financial Conduct Authority rules, and look to it to act swiftly in that respect. To credit the FCA, it has streamlined the listings process and loosened the rules for related party transactions. These reforms and others are very welcome, and I pay tribute to the Minister and his colleague for the part they have played. The scale of the reforms should be recognised and will have effect. However, the speed of change and the scale of reform need to increase. The capacity of the regulator will be a challenge, but we need to do whatever possible to support it to make the necessary changes we are asking of it, at pace.

In this technical debate, however, we need to remember why we are doing it, and what else can be done. We need to make it easier to raise capital in London, and the process of listing less clunky, while also focusing on attracting capital from domestic and foreign investors to provide the liquidity and funds for growth. London’s reputation for high standards is a good thing, and something we need to work with. We should continue the momentum to review the access for early stage business finance, to expand the scope and remove the potential cliff edge.

Tax incentives and greater digitalisation of capital markets processes can help too. Enterprise management incentives could play a part in widening the opportunity for staff to take a stake. Stamp duty changes are also relevant. We need a new approach to investing at both fund manager and retail level. Current regulations force fund managers towards bonds and Government debt to de-risk, which almost came back to bite us just a little over 12 months ago. Savers have also been encouraged to remove risk. The classification of investments needs to be reviewed, and better research needs to be available, akin to Rachel Kent’s report.

We need to re-engage the retail market in the opportunities of equities. I can recall—as I am sure you can, Ms Nokes—the privatisation of public services in the 1980s and 1990s, and the opportunities that provided for the public to invest. I have already mentioned, “If you see Sid tell him.” Regulations aimed at protecting the public from risk have removed legitimate opportunities like those. It is almost impossible for an adviser to facilitate investments directly into equities, in spite of today’s reduced costs and swifter processes. Proportionate regulations are required, along with further ISA reform. I can well recall the personal equity plans of the ’90s, which had a specific allowance for a single company PEP. That made capital investment accessible and relevant to the masses.

In closing, I want to recognise the changes and reforms that have taken place but to suggest that we need regular—at least annual—reviews of progress and of the impact of change, with all stakeholders involved. That would show the world that we are determined to get it right and to continue to evolve to ever-changing needs. We must always remember that gaining and accessing new capital is essential to growing business and the economy. By getting this right, we can offer greater returns for the public through better pension and investment returns, while maintaining the UK’s prominence in this vital industry.

I started off by talking about Arm, and I want to highlight a quote from Craig Coben, a prominent journalist in the field. He wrote that

“Arm should float in the US not because London has any particular flaws as a listing location, but rather because the scale, scope and depth of American capital markets make it a more compelling venue… Nasdaq-only flotation offers the broadest access to investors without the complications of two primary listings.”

That is just one example of the sort of change that can be brought about. I look to the Minister to continue his positive agenda.

Loan Charge

Jim Shannon Excerpts

Thursday 18th January 2024 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to speak in this debate. I thank my right hon. Friend the Member for East Antrim (Sammy Wilson) and the hon. Member for Buckingham (Greg Smith) for setting the scene, securing the debate and bringing this matter to the Chamber.

I believe that the job of this House is to act on behalf of our constituents. Although HMRC is independent, it is a tool of the Government, so there has to be some accountability. With great respect, I believe that the ball will lie at the feet of the Minister, whom I am very fond of, at the end of this debate. He will tell us what is going to happen.

The loan charge is a controversial tax policy that has affected thousands of employees, freelancers and contractors who were persuaded or, in many cases, coerced into using loan schemes to reduce their tax bills. The policy, introduced as a tax-related measure in 2019, gives HMRC the ability to collect taxes going back to April 1999. Some people have faced bankruptcy or depression, or even committed suicide, because of this. I ask the Minister how it is possible for HMRC to investigate individuals for unpaid taxes going as far back as 20 years, given that its limit for holding information on taxpayers is only seven years. I cannot quite get my head around that. How does a person challenge a 20-year-old tax demand? Does HMRC breach the GDPR by holding such information for this length of time?

The loan charge policy is unjust and unworkable. It is a retrospective tax that violates the principle of legal certainty and the rule of law. It is a punitive measure that targets innocent taxpayers who acted in good faith and followed professional advice. It has resulted in disastrous consequences, causing immense hardship, distress and tragedy for thousands of people across the country. It is a retrospective tax of an insidious nature, because it changes the rules after the game has been played. Imagine winning a football match 3-0 and then someone comes and says, “By the way, you didn’t win 3-0. You lost 3-0, and here’s how it happened.” That is what has happened with the loan charge. It ignores the fact that many people used schemes because they had no choice, as they were forced to do so by their employers or clients. It disregards the fact that many people who used schemes did not benefit from them, as they paid fees, interest and taxes on their loans.

We all seek professional advice daily in our jobs. If we follow it because we believe that it is legal and correct, we expect to be protected. In this case, people have not been protected. The loan charge is a retaliatory measure, and imposes disproportionate and unreasonable demands on taxpayers who have already paid their fair share. It calculates the tax liability based on the total amount of loans, regardless of the actual income or profit derived from them. It adds interest and penalties on top of the tax, inflating bills to astronomical levels. It denies the right to appeal, challenge or settle tax disputes at a fair and independent tribunal. It forces people to pay the tax in one lump sum, with no regard to their current financial situation or ability to pay.

HMRC employs a process that has caused immense hardship and distress for thousands of people across the country. It has pushed people into debt, poverty and homelessness. It has ruined careers, businesses and reputations. It has damaged mental health, wellbeing and relationships. It has driven people to despair and suicide. According to the Loan Charge Action Group, at least 10 people have taken their own lives because of the loan charge—a sobering figure. It has also identified 13 suicide attempts and 11 cases of serious self-harm. We need to remember that these are not just numbers, but human lives. These are constituents, colleagues, friends and family members. How many more lives will be lost before the Government listen and act? There is an immense responsibility on the Minister and I hope, on behalf of our constituents, that he can give us reassurances on this issue.

Perhaps the most striking feature of all this is the brutality of HMRC’s ruthless approach, which extends to cruelty. It is no stretch to say that people are effectively pursued to the grave and beyond, because bereaved families are ruthlessly pursued by HMRC for its demands. HMRC continues to be unyielding and relentless. It defends its actions by claiming that it has a duty to collect tax that is owed, and that it offers support and flexibility to those who are struggling. I believe that, above else, HMRC has a duty to be competent and to uphold its charter, which states that it will always act to “get things right”. HMRC is in breach of its own charter, and the Minister needs to come clean and give us some reassurance on that.

The loan charge policy has failed on every level—fiscal and human. It has failed to collect the tax that it claims is due. It has failed to uphold the principles of justice and fairness that underpin our tax system. It has failed to protect the rights and interests of taxpayers who have done nothing wrong. It has failed to prevent the harm and suffering that it has inflicted on thousands of people. It has failed to acknowledge the errors that have been made in implementing and enforcing the policy. It has failed to respond effectively to the recommendations and criticisms that have been made by various bodies, including the House of Lords Economic Affairs Committee, the loan charge and taxpayer fairness APPG, and the independent review led by Sir Amyas Morse.

To conclude in adherence to the timescale that I was given, the loan charge is a policy that must be abolished. It is not too late for the Minister and the Government to do the right thing. It is not too late to end this injustice. It is not too late to save lives. I urge the Minister and the Government to listen to the voices of reason, compassion and conscience, and to abolish the loan charge once and for all. The quicker it is done, the better.

--- Later in debate ---

[Nigel Huddleston]

I will give way to the hon. Member for Strangford.

[Jim Shannon]

Further to the point made by the hon. Member for Bath (Wera Hobhouse), I think of those who were unknowingly brought into the scheme by their employers and then found themselves with a financial burden that they were not aware of. I am reminded of the TV programme about the Post Office Horizon scandal, in which the terminology “the little people” was used. With the greatest of respect, these people are “the little people”—people who accept the systems that are put down before them. There must be a way to help them.

[Nigel Huddleston]

I completely understand where the hon. Gentleman is coming from in relation to going after employers that have been deceptive. The loan charge ensures that tax is paid in respect of individuals who entered into the schemes and received payments with no tax deducted, but where possible, HMRC has been seeking that tax from the employer in the first instance. I would like to reassure hon. Members that 80% of the revenue collected to date has come from employers, so we are targeting the employers, as he rightly points out.

Inheritance Tax

Jim Shannon Excerpts

Wednesday 17th January 2024 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to serve under your chairship, Sir Robert. I first thank the hon. Member for Hemsworth (Jon Trickett) for securing this debate and giving us all the chance to participate. It is no secret that my politics are left of centre, and I very much have a social conscience about these things, but I have to say honestly to Opposition Members that perhaps it is time we disagree. Hopefully, they can appreciate my point of view, which I will explain. The hon. Member for Darlington (Peter Gibson) made it very clear in his contribution where he stands, and that is where I also stand. Opposition Members always have been and always will be good friends of mine, but I am on a different page to theirs on this one.

I welcome the opportunity today to make a strong case for why inheritance tax should be abolished in the United Kingdom of Great Britain and Northern Ireland. Inheritance tax is a levy imposed on the estates of people when they die, and I believe it is one of the most unfair taxes in existence. That is my opinion, and I hope others will respect it. Inheritance tax punishes a lifetime of hard work, discourages saving and creates inequality. It goes against the very principles of meritocracy, aspiration and family, and I believe it needs to go.

I will tell a story, and it is not because I want to boast in any way. My dad will be dead nine years this March, and when my mummy and daddy got married, he started with £5. My dad was very talented; he was very good with his hands and he could turn them to anything. He fixed a cartwheel and sold it for £5, and that £5 got mum and dad married—my mum is 92, by the way, so this was a long time ago. My point is that dad then progressed, through four or five shops, from western Tyrone right through to Ballywalter, Millisle, Newtownards and back down to where we now have farm. I can tell hon. Members that mum and dad got that farm through hard work, through the sweat of their brow, and through their efforts to try and do something, starting with £5. That story is gospel truth, and perhaps it illustrates where I come from. I think it is about working hard and having a hard-working ethic.

I say this with great respect to Opposition Members, because I know that they have a work ethic as well—it is not about that. I just want to explain that my dad did what he did, and got to where he was, through those efforts. My father is now dead and gone, but that effort has been replicated by hundreds of thousands of people across this great United Kingdom of Great Britain and Northern Ireland. I believe we must address the fundamental principles that underpin our economic system. The accumulation of personal wealth through hard work, dedication and innovation is the basis of a thriving economy. In its current form, inheritance tax undermines that very principle by placing a significant burden on individuals who wish to pass on their accumulated assets to their loved ones.

I am not sure when I will pass away—it may be soon or it may be some time away, but whenever it is, I am ready to go, and I know where I am going—but I will wish to pass on what I have to my three boys. My will has already been made and that decision is done, because that is what I have worked hard for over all these years. Abolishing inheritance tax would allow families to retain the fruits of their hard labour, enabling the transfer of their hard-earned property from one generation to the next without any undue interference from the state.

I come from a farming background. I live in the farmhouse on my farm, and I will quote the old saying, “A father farms for his sons” or his daughters. A father does so in order to pass to the next generation a work ethic and whatever has rightly been earned from that work. If there is one reason to work hard and save wisely, surely it is doing so for one’s own family. I believe that inheritance tax punishes people, and many hundreds of thousands of others have the same opinion.

Inheritance tax is ineffective and inefficient. It raises a small amount of revenue for the Government but imposes a high administrative and compliance burden on taxpayers and their families. According to the Institute for Fiscal Studies, inheritance tax currently raises £7 billion per annum and will reach some £15 billion by 2032-33. However, that is only 0.5% of GDP, and it comes at the cost of complex rules, loopholes and avoidance schemes.

My mum and dad had a clear work ethic. I remember my mum taking me down to Northern Bank with £10 when I was 16, so that I could open a bank account. I am still with the bank, having received a £10 contribution from my mum to get me started. She instilled in me and my family a willingness to save for what we want and for what we need to get for our houses on so on.

Inheritance tax distorts economic behaviour, as it discourages people from saving and investing. Instead, it encourages them to spend or give away their possessions before they die, which I think is not entirely correct. Critics argue that abolishing inheritance tax may increase wealth inequality, but I do not believe that. It is essential to recognise that the tax affects not only the wealthy but many middle-class families, who may be asset rich but cash poor. That is the way I see it. In the area where I live, most families are middle class, and they express the same concerns that I am expressing today on their behalf.

Forcing families to liquidate assets to pay inheritance tax can result in the sale of family businesses or properties, leading to economic instability and job losses. Abolishing the tax would protect family-owned enterprises and allow for the preservation of businesses that contribute to local communities. Inheritance tax is unfair and inequitable. It hits people with different levels of wealth and different types of assets in different ways. The very wealthy effectively pay a lower rate of tax than the moderately wealthy, as they can use trusts, gifts and other legal devices to reduce their liability. I understand that and, to be fair, the hon. Member for Hemsworth referred to it earlier. I cannot say that people are abusing the system because, by its very nature, the system lets people find loopholes.

Inheritance tax violates the principle of double taxation, because it taxes people on income or savings on which they have already paid tax during their lifetime. They have already paid tax, and then they have to pay it again. That is not right. Inheritance tax also violates the principle of autonomy, as it restricts a person’s freedom to dispose of their property as they wish—the freedom to give what they own to their children or grandchildren, or to a charity.

I honestly see the tax as wholly un-British because it goes against the values of the British people who have traditionally believed in rewarding hard work, supporting family and achieving social mobility for the next generation. That is what I believe in my heart. We should always work to make the next generation better off than the previous one. That is why I have a social conscience. I am not saying that nobody else has a social conscience, but that is why my politics lie left of centre. I will always fight for the wee man and the wee woman to make sure that they have rights.

However, I cannot go along with what was proposed in the debate. Inheritance tax is consistently rated as the most hated tax in the country. There is a strong public demand for its abolition. I have no idea what the Minister will say, but if he says that inheritance tax will be abolished, I will cheer and I suspect the hon. Member for Darlington will do likewise. There might be others of the same opinion. It is 330 years since its inception in 1694—a long time to have a tax in place. There have been many changes in how we look at things today and differences in wealth dispersion, not just among those who are very wealthy but among the middle classes. My daddy and mum started off with £5 when they got married.

It is time to re-evaluate the tax. It seems to penalise success and undermine the family. I am a great believer in the family being the core of society. It is time to respect the wishes of the people who have worked hard to earn what they have and let them decide how to use it for the benefit of themselves and their loved ones.

[David Linden (Glasgow East) (SNP)]

It is, as ever, a great pleasure to serve under your chairmanship, Sir Robert. I thank the hon. Member for Hemsworth (Jon Trickett) for securing the debate, which has been quite informative and good-mannered. I pay tribute to my colleague and comrade, the right hon. Member for North East Hampshire (Mr Jayawardena), who I am sure was here to advocate a 5% inheritance tax.

I also pay tribute to the hon. Members for Darlington (Peter Gibson), for Easington (Grahame Morris), for Wansbeck (Ian Lavery), for Coventry South (Zarah Sultana) and for Strangford (Jim Shannon). It is not often that I disagree with the hon. Member for Strangford. He knows that I hold him in high esteem. But to gently push back on his argument, I suggest that perhaps his parents started with only £5 because of the inequality that exists. Perhaps if inheritance tax was properly in place, his parents might have had more money.

[Jim Shannon]

Perhaps I did not make my point in the right way. My mum and dad started with £5. They worked hard, developed all those shops and the farm that they owned through hard work and effort. What I am trying to say—I hope I can convey it in a sensible way—is that with that hard work ethic they made their £5 go far. It is like the story in the Bible of the 10 talents. They got 10 talents and a whole lot more.

[David Linden]

I appreciate that. Anyone watching this debate will know that, given how we are debating this, some of which is based on Bible principles, this is just something that we will disagree on. I none the less appreciate how the hon. Member put his point and I respect it.

I have listened with great interest to the points made by Members today. As we approach the spring Budget, I suspect it will not be the last fiscal event of the year if we are heading for an autumn election. As with last year’s autumn statement, I am sure that the issue of inheritance tax—we got to the crux of this with the contributions from the hon. Members for Darlington and for North East Hampshire—or more specifically the issue of scrapping inheritance tax, will feature heavily in the debate leading up to the Chancellor’s announcement this spring.

As we debate this issue it is important to be cautious and take stock of who this debate favours and at what cost. Who are the winners and losers? I appreciate that, in the cosy consensus of Westminster, talking about the royal family is not often appreciated, but there is an elephant in the room here: there is no inheritance tax for the royal family. Indeed, recently, the King, following his mother’s passing away, benefited enormously from inheriting the Duchy of Lancaster, and his son benefited enormously from inheriting the Duchy of Cornwall. Neither of them paid any inheritance tax—we are talking about hundreds of millions of pounds being inherited by the King and the Prince of Wales, and not a single penny of inheritance tax being paid on that. I am at risk of upsetting either the Clerk or you, Sir Robert, so I will not make any more comment on that, but simply leave it on the record that my constituents and I find the situation deeply unacceptable.

Just last week, I stood in this Chamber outlining the dire situation that people currently face as a result of the cost of living crisis—a crisis that shows no real signs of improving any time soon. As I go around my constituency of Glasgow East and people talk, quite rightly, about the impact of the cost of living crisis and the upcoming Budget, not a single constituent who has spoken to me in person, emailed me or come to my surgeries has said, “Do you know what, David? The biggest solution to the cost of living crisis is to abolish inheritance tax.”

I suspect that if we challenge people on the issue of polling and go out there—whether to Westminster tube station, Hemsworth or Worcestershire—abolishing inheritance tax will be so low down in people’s priorities. That is why, in the midst of this cost of living crisis, debating whether to scrap inheritance tax—which less than 5% of people pay, despite bringing in nearly £7 billion to His Majesty’s Revenue and Customs—seems ludicrous. Against the backdrop of a British Government intent on bringing forward draconian measures to force ill and disabled people into work in order to balance the books, it is ludicrous that they are floating the idea of scrapping an inheritance tax that is paid by only the wealthiest households on these islands.

However, the British Government’s commitment to reducing taxes for the most well-off is a timely reminder of just how out of touch they are. As people struggle to turn on the heating this week in -4° conditions, it is simply absurd that the British Government should be even considering getting rid of a tax that goes at least some way, albeit a very small way, to alleviating the entrenched wealth inequality that is so prevalent in our society. The UK has one of the highest levels of income inequality in Europe, so scrapping or even reducing inheritance tax only deepens further the chasm of inequality that no modern or fair society should have.

Fuelling speculation around the scrapping of inheritance tax, the Chancellor has previously stated:

“I think that inheritance tax is a pernicious tax because one of the main reasons people invest is because they want to pass on savings to their children”.

Inheritance is an emotive subject of debate. It makes us consider life after we are no longer here and what that may look like for the generations after us. This is where my friend the hon. Member for Strangford and I entirely agree: we both know where we are going after we have been here, because of our belief in Jesus. I also happen to believe that people should not have a removal van or a bank van following them to their grave, but that is a separate issue.

As a parent myself, I understand the logic of wanting to be able to provide for our children, even from beyond the grave, but here is why I take that statement and the Chancellor’s line of argument with a degree of incredulity. I recently—in fact, only yesterday—spoke with Daniella Jenkins, a senior lecturer at the University of Bristol, who made an important point about recognising the existing inequality of intergenerational wealth. Like the hon. Member for Darlington, the Chancellor made a sweeping statement without giving any consideration to what I would argue are the huge disparities in intergenerational wealth that exist across these islands.

Pre-existing parental wealth is often overlooked in this debate. It is worth noting that while some children are set to inherit from their parents, some stand to inherit absolutely nothing, either because they do not have any parents or because their parents themselves face dire levels of income inequality, meaning that they will have little to leave behind. Sadly, that issue is probably more the case in constituencies such as mine, Glasgow East; I respectfully suggest that perhaps that is why I bring to the debate a different view from that of my friends on the Conservative Benches.

Although the Chancellor frames his argument around the desire to transfer wealth to children, we cannot escape the fact that the national trends across the population show that parental wealth is very, very unequally distributed. We should also remember that the value of wealth being passed on has also increased over time. If that cycle continued, it would only further entrench wealth inequality among millennial children and younger children, because—frankly—the difference between having rich parents or poor parents is now shaping what economic resources are available to children. That is why it is so important that the discussion about inheritance is centred on fairness and equality.

In Scotland, the issue of taxation has been under intense scrutiny over the last few months, following the Scottish Government’s latest reforms to their progressive tax framework. Only today the Prime Minister spoke about Scotland being the highest-taxed part of the United Kingdom. I am afraid that is not something that keeps me awake at night. As a higher earner, I am quite happy to pay more tax, because the tax that I pay goes towards the education that my children receive at the local school; the tax that I pay goes towards the salary of my mother, who works in the national health service. As a higher earner, I have no issue whatever with paying more tax, although I know that view is not shared widely in this place.

Although the Scottish Government currently have no ability to introduce measures related to income tax, within their income tax framework they have been able to create a progressive tax system conducive to a fair and more prosperous Scotland. With the limited powers that they have, the Scottish Government have ensured that the tax and social security system is progressive and equitable, so that everybody in Scotland—regardless of their background—has the opportunity to thrive. It is within those guiding principles that progressive policies have resulted in Scottish households, particularly in the lower half of the income distribution bracket, being £400 better off a year than they would be in other parts of the UK.

While we are faced with these elevated levels of income inequality, scrapping or reducing inheritance tax would simply deepen and perpetuate the existing disparity. If the British Government are determined to make an already deeply unfair inheritance tax system more unfair, the only conclusion that I can draw is that they must transfer the necessary powers to legislate on inheritance tax to the Scottish Parliament, either through the means of further devolution or—my desired option—independence. Only then will Scotland be able to build a comprehensive and progressive tax system that puts fairness and equality at the centre, representing the values of a modern and equitable society and not those of a Westminster system that frankly does not have the confidence of the people of Scotland.

Public Sector Pay 2024-25

Jim Shannon Excerpts

Wednesday 17th January 2024 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is a real pleasure to speak in this debate. I thank the hon. Member for Cynon Valley (Beth Winter) for securing it.

First, may I say how saddened I am to hear that Tony Lloyd has passed away? I knew him for all my time here of some 15 years. He used to sit behind me in the Chamber, or I sat in front of him—perhaps that would be a better way to say it. We had many chats and much fun together. Along with others in this Chamber, I pass on my sincere sympathies to his family. He was a very good friend to Northern Ireland. We might have had some differences in how we looked at things, but I tell you what: no one can ever take away his dedication and commitment to Northern Ireland. I will sadly miss him on the Northern Ireland Affairs Committee. I put on the record the burden of his passing.

This is certainly a timely debate. In Northern Ireland tomorrow, our schools will be closed because the teachers are on strike. Public transport workers will join them. Anyone who wishes to travel to work will do so on roads that are not gritted, while road gritters go on strike and temperatures fall today and tomorrow in Northern Ireland. More than 150,000 public sector workers, across 15 unions, are set to strike. If we took this to the nth degree and all public sector workers went on strike, we would find a total shutdown in Northern Ireland.

Some people here may be getting ready to chime, “Pay sector awards are devolved.” Yes, they are, but I will make my case. It has to be remembered that Northern Ireland is grossly underfunded, as has been acknowledged by the Secretary of State and by central Government. We need an appropriate uplift in Government funding. I am invested in this deal to ensure the Barnett consequentials. This has been discussed at the Northern Ireland Affairs Committee and is one of the issues that we have taken forward. All the officials who attend have acknowledged that the Welsh system of funding, with great respect to Welsh colleagues here, would make us better off in Northern Ireland. If that has been accepted on the Northern Ireland Affairs Committee, it is only right that we should see a reflection of any uplift and increase.

I cannot speak on this motion without highlighting the fact that, unlike in the English system, we have been held to ransom not by strikes but our own Secretary of State, who is on record as acknowledging that an enormous budget increase is required. He has sourced part of that funding but is withholding the money that would give the public pay sector increase required. He has tied the release of the extra £3.3 billion, which has been well bandied about and talked about. We have pushed him on the issue. The ham-fisted blackmail attempt has been highlighted by my party leader, my right hon. Friend the Member for Lagan Valley (Sir Jeffrey M. Donaldson), who has said about the pay rise:

“There’s nothing to stop that from happening—you don’t need to have a functioning Stormont in order for the Secretary of State to use the temporary powers that he has given himself for that purpose. He has the power to set the budget. He has the power to deal with this issue, and we’re saying to the Secretary of State that he should get on and do that.”

Why should the Secretary of State do that? Because the Government here have already done it on three occasions. They did it for sex and relationships education, they did it for the Irish language Bill and they did it for the abortion Bill. If they can do it three times, they can do it once more and create the money—the £3.3 billion, which would pay for the whole increase that the workers want. I support them. A number of unions have gone on the record, including on a television programme last week. They said, “Let’s focus on who can make this decision.” They went on record to say that this is not a matter for politics, but for leadership. Where does that leadership come from? It comes from the Secretary of State for Northern Ireland. He can make that decision.

I put on record my support to others here and to my constituents back home. I have supported decent pay sector increases for hard workers in this place. Northern Ireland deserves no less support and action. I conclude by asking Members here to voice their concerns to Government in support of public sector workers throughout the United Kingdom of Great Britain and Northern Ireland, without whom we would be completely lost and much worse off. I support them in what they are doing. The thing about it this time is that the Secretary of State has the money to do it.

Public Services in Cornwall: Funding

Jim Shannon Excerpts

Monday 15th January 2024 Commons Chamber

[Steve Double]

I wonder whether the hon. Lady actually read the subject of the debate, which is specifically about funding and delivering public services in Cornwall. She can make her points in her own debate about her part of the world; I am here to talk about Cornwall this evening.

There is a need to reflect on these challenges and this combination of factors that we face in Cornwall when it comes to the funding that we receive for our public services. My first point is about geography. Cornwall has a unique geography within the British Isles. We are long and narrow peninsula, unlike any other part of the country. We are almost an island. As I have said in this place before, if the River Tamar was 2.5 miles longer, we would actually be an island, and there is many proud a Cornishman who has talked about taking their shovel and finishing the job to create an island. The challenges we face often have more in common with those of an island than with being a part of the mainland.

[Jim Shannon (Strangford) (DUP)]

rose—

[Steve Double]

I see the hon. Member for Strangford (Jim Shannon) wishes to intervene and I will happily give way.

[Mr Deputy Speaker (Sir Roger Gale)]

Order. I trust the hon. Gentleman will adhere to the subject of the debate.

[Jim Shannon]

I hope you will be impressed, Mr Deputy Speaker, by the significance and interest of my comments, and how much they tie in with what the hon. Member for St Austell and Newquay (Steve Double) has said. I congratulate the hon. Gentleman on securing the debate. He is my Gaelic cousin, which means that his interests are similar to my own. Has he ever considered working with other regions in the United Kingdom of Great Britain and Northern Ireland to help address the matter of public services funding? We have Gaelic cousins in Wales, Scotland and, of course, in Northern Ireland. We are united by culture, history and language, and we have mutual interests. Does the hon. Gentleman agree that our Gaelic strength is better within the United Kingdom of Great Britain and Northern Ireland?

[Mr Deputy Speaker (Sir Roger Gale)]

Order. Nice try, but this is an intervention not a speech.

Financial Advice and Guidance: Consumer Market

Jim Shannon Excerpts

Tuesday 9th January 2024 Westminster Hall

[Harriett Baldwin (West Worcestershire) (Con)]

I beg to move,

That this House has considered the consumer market for financial advice and guidance.

It is an absolute pleasure, Mrs Harris, that you are in the Chair for this debate on the consumer market for financial advice and guidance. I am very grateful for the opportunity to hold this debate, which follows up on a cross-party amendment I tabled to the Financial Services and Markets Bill a year ago. I am grateful for all the hard work done by officials from the Treasury and the Financial Conduct Authority over the past year under the leadership of the former Economic Secretary, my hon. Friend the Member for Arundel and South Downs (Andrew Griffith), who championed this cause. I am also grateful to the current Economic Secretary, my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), for taking things forward and for his support.

I welcome the proposals published in December for closing what is called the advice gap and completing the first part of the advice guidance boundary review. This morning, I want to cover three things. Why is this review important for our constituents? How will these changes help them? And what more can we do to help them? I will start with why this is important for our constituents.

Now more than ever our constituents need personalised help and advice about their financial situation, and when I say “help”, I do not mean just the billions of pounds of financial support that was given through the energy price guarantee, the money off electricity bills and so on. I mean the kind of help that will make our constituents more financially resilient over a lifetime.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Lady on bringing this debate forward, and I commend her for her work on improving facilities for providing financial advice and guidance in the consumer market—that has been noted in the House, and I congratulate her on that. I wholeheartedly support her view that we must give individuals and businesses the best possible opportunities to grow their wealth. Does she agree that we should particularly target help to smaller businesses that are looking to start up locally, to ensure that they can take advantage of high-quality and, most importantly, affordable services and advice to help them make informed financial decisions?

[Harriett Baldwin]

I want to limit my remarks today to consumers and their access to financial advice, but the Treasury Committee is doing an inquiry into access to finance for small and medium-sized businesses, and I encourage the hon. Gentleman to share with us any evidence he might have in that regard.

Our constituents need more personalised help to make them more financially resilient over their lifetime. We want them to be more prosperous, better informed and more able to prepare for the inevitable highs and lows of financial life. With the success of auto-enrolment, we now have millions more people taking personal decisions about saving for their retirement, possibly across a multitude of different pension schemes over a full working life. They need an expert hand to help them to make good decisions and yet, despite our world-leading financial services sector, it is surprisingly difficult to get help. That is because of the advice/guidance legal definitions.

Mrs Harris, I want to try out an analogy on you. Imagine a supermarket where, if you pay an up-front fee of several hundred or perhaps even several thousand pounds to join, you will, over your whole lifetime, be allowed to go into a section where you have a full choice of delicious, healthy food and other goods, offered at competitive prices. Someone will ensure that you are buying things appropriate for your age and dietary needs; they will suggest some terrific, easy-to-cook, healthy recipes and wonderful meal plans.

However, to make it worth paying the up-front fee, you have to buy exceptionally expensive goods or sufficient quantities, and only 8% of our constituents would in fact choose to pay the fee; everyone else in the supermarket chooses to avoid it. They wander round the generic aisles of the supermarket. They may see some generic NHS advice about healthy eating or something on the supermarket website. They pay much higher prices for the same range of goods and often choose the unhealthy and expensive options. They even find scam and rogue options that scam them out of their shopping money altogether, because anyone can set out a stall in the supermarket I am describing.

It is a slightly stretched analogy, but I know that you know what I am getting at, Mrs Harris. The quality and cost of financial advice in this country mean that we have created a marketplace where only the richest 8% of the population choose to shop and benefit from the healthy financial choices that our excellent financial services firms can give.

Oral Answers to Questions

Jim Shannon Excerpts

Tuesday 19th December 2023 Commons Chamber

[Bim Afolami]

Under the industry-led Mansion House compact, 11 of the UK’s largest defined contribution pension schemes have signed up to the objective of allocating at least 5% of their funds to unlisted equities by 2030. We believe that could unlock £50 billion of investment in high-growth companies and should help increase returns to savers.

[Jim Shannon (Strangford) (DUP)]

The Minister will appreciate that the greatest investment that anyone can make is in themselves and their own country—Northern Ireland and all the United Kingdom. What steps can be taken to ensure UK-wide investment by pensions schemes in cutting edge businesses such as Wrightbus and Thales?

[Bim Afolami]

There are a couple of things that we need to do. We need to ensure that the industry abides by its commitment to the 5% target. Working with the Exchequer Secretary, my hon. Friend the Member for Grantham and Stamford (Gareth Davies), we must present the right investment opportunities so that the capital goes into the UK in the right way.

--- Later in debate ---

[Jeremy Hunt]

I thank my right hon. Friend for his question and for his campaigning on these issues. I just note that on electric vehicle manufacturing alone, the Society of Motor Manufacturers and Traders says that in the past year we have had more investment pledged for UK electric vehicles than in the previous seven years combined.

[Jim Shannon (Strangford) (DUP)]

The life sciences sector is worth £2.4 billion to the Northern Ireland economy. What steps have been taken, with counterparts in the Northern Ireland Assembly, to increase funding for employment within this worthy sector?

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The hon. Gentleman is quite right that life sciences is one of the key growth industries for this country. I would be happy to meet him to discuss all the things we are doing for the sector, particularly in Northern Ireland.

Bank Profits: Windfall Tax

Jim Shannon Excerpts

Wednesday 6th December 2023 Commons Chamber

[Richard Burgon (Leeds East) (Lab)]

Today I am calling on the Government to introduce a windfall tax on the banks, which have exploited the cost of living crisis to make super-profits, just as the energy companies did before them. Such a tax could create much-needed funds to invest in our public services and to help bail out those hit hard by the ongoing economic crisis. Before I make the case for that, however, I want to look at where we are after 13 years of Tory misrule.

British economic growth was recently downgraded again. Britain has now seen well over a decade of economic stagnation. We are living through the largest fall in living standards since records began 75 years ago. This will be the first Parliament in history in which people are poorer at the end of it than at the beginning. What a record! Wages are set to be no higher in 2028 than they were 20 years before. That is the slowest wage growth in 200 years, and it has cost the average worker £10,700 a year in lost pay growth. Shockingly, 9 million younger workers have never worked in an economy where they have seen sustained average wage rises.

Income inequality in the UK is higher than in any other large European country. We have a much weaker economy and much lower living standards. That is the record of the Government’s agenda of austerity, deep public service cuts and trickle-down economics. They have created a social nightmare, too. Fourteen million people live in poverty, including over 4 million children. One in seven people is facing hunger, and 6 million households are in fuel poverty. As the cost of living crisis continues to hit families across the UK, this should be a time to bail them out. It should be a time of public investment to boost economic growth and living standards, and to rescue our public services. Instead, the Government are plotting another £20 billion-worth of cuts to public spending. I cannot think of a single policy that would cause more economic and social harm.

When we talk of a worsening economic and social crisis, we cannot forget the class politics of it all: how it affects the 99% and how it affects the 1%. We hear a lot about the cost of living crisis, but it is not a crisis for the elites. For them, it has been boom time. There have never been so many UK billionaires, and British billionaires have increased their wealth by £120 million every single day over the past decade. The profits of the UK’s largest companies are now 89% higher than before the pandemic. Bankers’ bonuses have hit record highs. Bosses’ pay at the largest 100 companies has been going up and up, and has increased by 16% in the past year.

One sector that has been doing very well out of the crisis is banking. Just like the oil and gas companies, the banks have used the crisis to line their pockets. While millions of people struggle to pay their mortgages and rents, the banks have been cashing in. Higher interest rates have enabled them to charge households more for mortgages and firms more for loans, but those higher interest rates have not been passed on to savers.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for bringing forward the debate; I spoke to him beforehand. Does he not agree that the closure of high-street banks—there have been some 11 in my constituency of Strangford— especially in rural communities, has left a massive problem of rural isolation and that there should be a windfall tax on the banks making profits, with that money routed to the rural communities who have felt the brunt of the banks’ thirst for enhanced profits over service, which seems to be their calling card?

[Richard Burgon]

The hon. Member makes an important point. The example he gives of the closure of so many high-street banks, which disadvantages people in my community as well as in rural communities, just goes to show that the banks’ huge increase in profits has not been achieved through delivering a better service to consumers at all. Higher interest rates have not been passed on to savers; they have been hoarded by the banks, creating a windfall for them of many billions for doing nothing productive.

Such a transfer from the public to banks would be unjustifiable at any time, but it is especially so when so many people are struggling to cover the essentials and our public services are on their knees due to Tory cuts. The banks should face the same type of tax on their unearned and underserved windfalls as the energy companies.

The pre-tax profits of the big four banks—Lloyds, Barclays, HSBC and NatWest—show why that would be a just tax. In the first nine months of 2023, they made a staggering £41 billion in pre-tax profits, which is almost double the £23 billion they made in the same period last year, according to research by Unite the union. The question we must answer is this: will we allow the Government to claim that more austerity and cuts are inevitable and that public investment is unaffordable, or are we to build a better tax system that focuses on making the wealthiest pay their fair share?

[Richard Burgon]

The hon. Member makes a valuable intervention. I will come to how it was unjustifiable for the Government to reduce the surcharge in that way. Both approaches are possible and desirable, with yes, a windfall tax, but also reversing that cut.

If we build a fairer, better tax system that focuses on making the wealthiest pay their fair share, we can invest in rebuilding the economy so that it serves the majority of people, we can invest in renewing our public services, and we can give people back some hope. A windfall tax on unexpected and undeserved bank profits can play an important role in creating that fairer tax system. Banks are not reinvesting their profits in the economy; they are handing out huge pay and bonuses, which could go even higher, aided and abetted by the Government’s decision to scrap the bonus cap.

That all comes at a time when the banks are turning their backs on local communities. As the hon. Member for Strangford (Jim Shannon) mentioned, bank branches have been disappearing from our high streets at an alarming rate. Since 2015, almost 6,000 branches have permanently closed their doors. At a time of deepening social crisis, while banks collect record profits, they have made it even more difficult for working people to access their finances and get financial advice.

[Jim Shannon]

Does the hon. Member not feel that there is something immoral about banks making high profits, closing branches and seeing their profit margins actually grow, while people are being left disadvantaged? There is something immoral about that. People are being disadvantaged, while others are making more.

[Richard Burgon]

The hon. Gentleman is completely correct: there is something immoral about the way that banks’ profits are soaring while they are not delivering a better service for their customers, particularly vulnerable customers—the less affluent, the disabled and the elderly. That is not how we should be going about things, and he makes an important moral case.

Based on the latest quarterly results, a windfall tax in the UK could raise between £4 billion and £16 billion this year from the profits of the big four banks alone, depending on the form that that windfall tax takes. That is billions of pounds that could be used to boost public investment and to tackle the soaring inequality that we are facing. Spain’s progressive Government offer us an example. They introduced a 4.8% windfall levy on certain bank incomes and commissions above a threshold of €800 million. Replicating that here could raise almost £4 billion this year. Even Margaret Thatcher introduced a form of windfall tax, with a 2.5% tax on banks’ non-interest-bearing deposits. In words that sound all too familiar today, Thatcher said that the banks had

“made their large profits as a result of our policy of high interest rates rather than because of increased efficiency or better service to the customer.”

Such a tax in the UK, according to Positive Money calculations, could raise up to £11 billion today, and a windfall tax, in whatever from, would be popular. According to a poll commissioned for the TUC, three quarters of the public support a windfall tax on banks’ excess profits, including 76% of people who voted Conservative in 2019.

Perhaps the simplest move—we heard this in an earlier intervention—would be to reverse the tax break for banks that the Government introduced in last year’s autumn statement. They slashed the bank profits surcharge from 8% to 3%, saying that this was to cushion them against the impact of higher corporation tax rates. But this surcharge, along with the banking levy, was one of the special taxes raised on banks after the financial crash due to the greater risks that banks posed to our wider economic stability. The risk they pose clearly still remains and so too should the surcharge.

The TUC general secretary, Paul Nowak, rightly described the slashing of the surcharge as starving our public services of much-needed funds at the worst possible time. Reversing it could provide key funds to, for example, introduce universal free school meals, scrap the two-child cap or fund a proper pay raise for junior doctors. The TUC estimates that the Treasury will lose at least £1.5 billion a year over the next four years, although it believes that it is likely to be more given the recent boost to bank profits.

Positive Money estimates that reversing cuts to both the bank surcharge and the levy could raise more than £4 billion this year. We need to be clear about this: it was a political choice for the Prime Minister to slash the surcharge on the banks just as it was a political choice to scrap the cap on bankers’ bonuses. Doing so is a sign of what is so wrong in our current taxation system.

It is clear that more of the same Tory dogma of the past 13 years of cuts and trickle-down economics is not the answer. All that that would succeed in doing is deepen the social crisis that is harming so many families in Britain. It is time that we put a stop to that. It is time to tackle the tax perks handed to the wealthy. The banks were bailed out when they were in trouble during the 2007 global financial crisis. It is now time for them to be taxed fairly to help bail out communities that are suffering because of the Tory party’s focus on building an economy that serves the wealthy few while the vast majority fall ever further behind. A windfall tax on bank profits is a just policy, it is economically sound and it would be welcomed by people across this country. I look forward to the Minister’s response.