Finance Bill

Jim Shannon Excerpts

Tuesday 21st July 2015 Commons Chamber

[Mark Durkan]

Yes, I certainly have no problem with that, and I welcome the breadth of opposition. I also welcome the depth of opposition I heard from some hon. Members who, because of their party’s Whips situation, did not vote but whom I know care passionately about a number of issues and have served notice that they will vote in the amendment stages. I hope, therefore, that we can go further in this Bill and yesterday’s Bill to build on that.

However, let us be clear: this Bill purports to cover more than just the issues that we discussed yesterday. Hon. Members have referred to the questions around corporation tax, and of course the Government have served notice that they are going to reduce it. I am someone who has supported the measures to give Northern Ireland the devolved capacity to vary the rate of corporation tax, and I have no issue or argument against that. Indeed, I predicted that one of the reasons why the Conservatives were so keen to devolve corporation tax was that they wanted to create an excuse or cover to do so in England and Wales as well.

However, although that can be welcome in Northern Ireland at one level, because it means that the cost of any variation in corporation tax for us will be less in time, let us be clear that, contrary to what the hon. Member for East Antrim said yesterday, it will not be parties such as mine holding these issues up; it will be the tactics and policies of the Government, who are trying to create a budgetary arm-lock on the devolved Executive. They are basically saying, “Unless you get your Assembly to pass the legislation that we want in respect of welfare reform, we are going to create budget stress”—which in turn will lead to a budget crisis, which in turn will become a political crisis—“as the price of your failure to do so.”

When we are locked in that budget crisis—which will be contrived and the result of the Government bullying us on welfare reform—they will then say, “You don’t have a balanced and sustainable budget; therefore, you’re not getting your corporation tax powers.” Just as the Government said they would not introduce the corporation tax Bill until they were satisfied with what it looked like the Assembly was going to do on welfare reform, so they have built in a clause for Northern Ireland in the Bill that says that, come 2017, they will not switch on the power unless they are satisfied that there is a balanced and sustainable budget.

When it comes to the outstanding measures in the Scotland Bill, I hope that hon. Members present in the Chamber will be mindful of the possible need for a clause to prevent the Treasury from adopting any such tactic on the dual exercise of welfare powers between Westminster and the Scottish Parliament, because the “twilight zone” difficulty that Northern Ireland has got into offers a very salient warning.

[Jim Shannon (Strangford) (DUP)]

I have the utmost respect for the hon. Gentleman, and he knows that, but the real reason why we have an impasse in Northern Ireland is the unfortunate delay from the SDLP in supporting the Stormont House agreement, which everyone signed up to. With that comes the delay in the corporation tax benefits for Northern Ireland. Surely it is time now for his party to honestly say, “Let’s support the Stormont House agreement, let’s get corporation tax back and let’s help everyone across the whole of the political spectrum in Northern Ireland.”

[Mark Durkan]

I would offer the hon. Gentleman the mutual observation of respect, but would also say, first, that we are not holding anything up. The legislation has already been passed. It provides for the switch-on of the powers in 2017. It is the Treasury that is imposing the condition, and let us remember that it is locked on to that condition in a way that is completely wrong and unwarranted. It is basically saying, “Yes, you have the nominal legislative power over welfare reform, but unless you do it exactly to our taste, as karaoke legislation, then we are going to interfere with your budget and claw back from the Barnett formula.” That is wrong. The Treasury has other ways of trying to control these things. If this is about welfare spending, then the Treasury already has a welfare cap that allows it to police welfare spending—literally—without creating budget stress within the Executive and between parties, so there is a different course that can be followed on all this.

As for some of the other provisions, I have no doubt that the Government will go further in their cuts to corporation tax. I know that they are saying that they want to get to 18% by 2020, but the Chancellor said in the second year of the last Parliament that there would be no more corporation tax cuts in that Parliament and of course there were. He is exactly lining up to do that again.

Let me touch on some of the other issues. The hon. Member for East Antrim rightly mentioned the road fund, in that the Chancellor said in his statement that the Government would have to work out exactly what would happen with the equivalent moneys in Northern Ireland—the money that would be raised in vehicle duties. However, I hope it is not the case that only the moneys raised directly in vehicle duties in Northern Ireland would be hypothecated for those purposes. Given the nature of our economy and the fact that many of the key commercial vehicles on our roads are not registered in Northern Ireland—many of those servicing many of our companies, not least in the retail sector, come from outside the region—and also, obviously, given our higher rurality, we have high relative overheads on roads, so we would need something more than that.

I asked the Financial Secretary earlier to clarify the position on banking because he seemed to be saying that the bank levy had largely served its purpose: the Government had to introduce it, but it was very much of its time, and now we needed to move on to something different. Let us recognise that although clause 18 rightly says that, in future, banks will not receive tax relief on expenses for compensation payments made to customers in respect of certain defined issues, until now the banks have been able to claim that tax relief. There is a catalogue of huge liabilities that they face because of their own wrongdoing, but they were able to absorb all that along with the bank levy, so it is not as though the bank levy was a serious burden to them.

Of course, the Government have responded to pressure from the likes of HSBC and StanChart, who have been saying that they will move if something is not done about the bank levy. So the Government have moved on the bank levy, but they are trying to tell the rest of us that that will be more than compensated for by the surcharge on corporation tax. If they reduce corporation tax by much more than they are currently advertising, that surcharge will not amount to as much. Given how they have rolled over on the bank levy, it is not very hard to canvass the suspicion that they will equally ameliorate the intended surcharge in response to the same threat.

On renewables, I do not intend to go on at anything like the same length or in the same colour as the hon. Member for East Antrim, but I want to make it clear that there is a different view from Northern Ireland. We see the Chancellor’s measures as directly interfering in our capacity to have a greener economy and to grow firms and businesses. It is a key target of the single electricity market in Ireland, north and south, to achieve over 40% supply from renewables. It is a key element in the grid investment that is needed. It is also a key aspect of the market, both north and south, to seek to export in terms of renewables. The Chancellor’s measures therefore fundamentally interfere in one of the growth sectors in Northern Ireland. It is a growth sector not only in terms of generation but in terms of renewable technologies, and the investment and export that goes with those. We take a fundamentally different view from that of the hon. Member for East Antrim. Let me be very clear: on issues such as contracts for difference, we have different politics, different starting points and different end points.

I agree with the hon. Gentleman on the age restriction on the national living wage; the fact that it does not apply to under-25s is grossly wrong. The whole concept of the national living wage as put forward by the Chancellor is not only an attempt to slightly enhance or rebadge the minimum wage; it is a blatant attempt to puncture the living wage, and to change its agenda and what is intended by it. That comes alongside other measures that we have discussed, such as changes to tax credits, which will directly take over £1,200 a year—over £100 a month—from people who are in work.

We are told that nobody who has more than two children at the moment will lose out as a result of the changes to the limits on child benefit; that will come later. If we are really to believe what Conservative Members were telling us earlier—that the number of children that people are having is an economic choice to do with the availability of tax credits and the eligibility for benefits—we need to hear from relevant Ministers how they will cope with the baby boom that we will have before April 2017, as people ensure that children are born in time to qualify for benefits. There will be either a race for benefits or a race for births, or both, if we believe half of what we heard across the way yesterday.

The new banking measures replace the big measures that were introduced by the Prime Minister and the Chancellor during the last Parliament, otherwise known as Project Merlin. A fairly effete bank levy was intended to sort out the banks and put manners on them. Now we have a new Project Merlin: the Chancellor seems to have decided to take key social policies from Merlin Entertainments. A family means two adults and two children, and no more. There is no deal for anyone who goes beyond that.

Budget Resolutions and Economic Situation

Jim Shannon Excerpts

Tuesday 14th July 2015 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to speak in this vital debate. I commend the three Members who have given their maiden speeches. The hon. Member for Kensington (Victoria Borwick) spoke of her constituency and how we can deal with what life gives us. I commend her for that. The hon. Member for Brecon and Radnorshire (Chris Davies) did not walk too far in the House, but he walked the length and breadth of his constituency, and we appreciate that. The hon. Member for Paisley and Renfrewshire South (Mhairi Black) has just left the Chamber. I am unashamedly a Unionist and I do not agree with the ultimate goal of the Scottish National party, but I tell the House this: I agree very much with many of the issues that she raised, as my speech will reflect. I commend her for her contribution. While she speaks for her constituents, I know that I speak for mine.

There are several issues that I feel must be addressed, as I have already been inundated with phone calls from constituents concerned in particular by the announcement on tax credits. That is a massive issue for me; the mailbag has been enormous. Those who have phoned or written have been worried. There are some pleasing announcements in the Budget—I recognise that—including on defence spending. I am on the Select Committee on Defence and I am pleased that we will be spending 2% of GDP, but is that enough? The Chairman of the Defence Committee has said we should have 3%, and I agree with him.

[Sammy Wilson (East Antrim) (DUP)]

Does my hon. Friend accept that the 2% on defence spending has been reached only as a result of including expenditure on internal security—it is not pure defence spending—which is a disappointment and, indeed, a manipulation of the figures?

[Jim Shannon]

I thank my hon. Friend for his contribution. We made the decision in the Defence Committee just today that we will look at this issue. We will thoroughly investigate whether the 2% figure amounts to real money. As I said earlier, the Chairman of the Defence Committee wants 3%, and I want it too.

Another of my concerns is about the national living wage. I also fear for the huge number of small and medium-sized enterprises across the Province and particularly in my Strangford constituency. I have grown increasingly concerned about the large number of people using food banks, to which other hon. Members have referred. Some people in secure employment simply do not earn enough to live, so it obviously goes without saying that wages have to increase. We must help to safeguard the most vulnerable in our society.

The Federation of Small Businesses Northern Ireland claimed that 99.9%—its figures—of employment in the Province comes from small and medium-sized businesses, so naturally this change in wages poses a huge threat to some employers. I am concerned about that. What is the Chancellor going to do about the minimum wage? We welcome it, but what is he going to do to help small and medium-sized businesses to remain profitable and successful. Will some businesses be forced to employ people in the lower-age bracket, and will it demean and detract from what is being put forward?

As for child tax credits, it seems that we are given something on the one hand, but a great deal is taken away on the other hand. It is great to hear that tax-free personal allowances will increase next year. I hope that it will put a little bit of extra money into our constituents’ pockets, but whether it will really help the poorest in our society is debatable.

I find it rather distressing that the Government are virtually saying that by 2017 they will support people if they have two children or fewer, but if they happen to have more than two children, they are on their own. One cannot help but draw comparisons between the United Kingdom of Great Britain and Northern Ireland and the Democratic Republic of China. I am reminded of a quote from the American poet, Maya Angelou, who said:

“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

Clearly, this Government are in danger of adversely affecting the people they are supposed to be standing up for. This change in tax credits and benefits will greatly affect many of my constituents.

The anti-child poverty charity, Barnardo’s in Northern Ireland, has claimed that 160,000 families across the Province could be left struggling if plans to cut tax credits go ahead. Barnardo’s also warned, as it launched a campaign, that the Westminster Government should keep the “lifeline” benefit. Lifeline benefit is rightly named, because that is exactly what it is. With low wages and high living costs stretching budgets across Northern Ireland, tax credits are an everyday lifeline for families. It would be remiss of me not to remind the Government of the impact on families of the reduction or removal of child tax credits and working tax credits. Let me assure the Chancellor and the Minister that people feel extremely aggrieved. Large families feel totally alienated, and people feel they are being punished for having more than two children.

In the last Parliament, the Democratic Unionist party worked alongside the Conservative Government to deliver the marriage allowance. What a breakthrough that was: we encouraged marriage, we encouraged the family. Yet now, one year later, it seems that the Government intend to punish those with more than two children. I find that quite incredible. Last year, the family was the cornerstone of our society, and we agreed that family brought communities closer together; now it seems that the Government have done a U-turn. The Government cannot claim to support the family unit, and then attach terms and conditions to it. We cannot say that we support families so long as they do not go over the two-child criterion—this is simply ludicrous. I have already had many calls from concerned parents, from families and from many of my constituents who are struggling. This reduction in child tax credits is going to make it even more impossible for them just to get by. Unfortunately, this is evidence that the Budget was certainly not designed to help working people in our society.

Another issue that concerns me—this, too, was raised by the hon. Member for Paisley and Renfrewshire South—is the change in housing benefit for those aged between 18 and 21, which will force young adults to live at home with their parents until they are 21. They will have to either “earn or learn”. In principle, that seems a good idea, given that a significant number of 18 to 21-year-olds are either working or still in education, but the fact is that a great many of them are not. All that this measure will do is increase the pressure on social workers, and that concerns me greatly.

The Budget has made some welcome changes, but a great many others will cause the worst off in society to struggle even more. It has been estimated that, in the years leading up to 2019, a 10th of the population in the United Kingdom will lose about £800 a year as a result of the tax and benefit changes. That is equivalent to nearly 7% of their net income. As I have said, I fear that the pluses in the Budget do not outweigh the disadvantages, especially for the most vulnerable and the worst off in society.

It is good to see the economy recovering and growing, but those at the bottom are struggling to see that that is happening. I fear that if the Chancellor and the Government press ahead with their £9 billion saving, reducing tax credits, housing benefit and other benefits and pushing 160,000 more families in Northern Ireland—including families in my constituency—towards child poverty, they will undo all the economic good that has been done. They may well lose sight of it altogether as, once again, the purse strings tighten around those who can least afford to absorb the changes.

Those are my concerns about the Budget, and they reflect the concerns of my constituents. I shall vote against the Budget this evening.

Rent-to-own Sector

Jim Shannon Excerpts

Tuesday 14th July 2015 Westminster Hall

[Stella Creasy (Walthamstow) (Lab/Co-op)]

It is a pleasure, as always, to serve under your chairmanship, Mr Hollobone, and it is a genuine pleasure to take part in this debate. The Treasury Minister might be surprised to see a shadow Minister from the Business, Innovation and Skills team but, as he knows, I have form in this area. I am secretly delighted that he is now in the Treasury, especially on the issue of debt. I hope he will be the cuckoo in the nest of the Treasury when it comes to getting right the issue of how we help people in debt.

First, I acknowledge the work that the all-party group, the hon. Member for Blackpool North and Cleveleys (Paul Maynard), and my hon. Friend the Member for Makerfield (Yvonne Fovargue) have been doing in this area. I want to talk a little about some of the work that was done on this issue for the Consumer Rights Act 2015, and I also want to say something about the broader context in which the firms operate. Finally, as I always like to be helpful, I would like to suggest some proposals for making progress on this issue to the Minister, and test whether he is willing to support them.

I congratulate the hon. Member for Blackpool North and Cleveleys on securing this debate. He said he is concerned that shadow Front Benchers may not be aware of these companies and may make the same mistake that others have made in thinking that the rent-to-own sector is about housing. Let me reassure him that the Opposition call a spade a spade. Legal loan sharking takes many forms. My hon. Friend the Member for Makerfield and I are as concerned about the rent-to-own sector and debt management companies as we are about payday lenders. That is why we have been campaigning for a number of years for reform of the sector.

Hon. Members will recognise concern in my part of town about what we call the “BrightHouse knock”—when we are knocking doors during campaigns, we have to be careful not to knock like the bailiffs, because people think we are BrightHouse coming to repossess their goods. I may have expressed some surprise when my hon. Friend cited BrightHouse’s statement that it does not repossess goods—it seems, then, that that is happening only in my part of town.

Rent-to-own companies are legal loan sharks. They operate in exactly the same way as the payday lending industry and a number of other consumer credit industries. They lend in a way that is designed to encourage a persistent relationship. The problem is that they lend in a way that does not ensure that people have access to fair credit, but ensures that they continue to pay something back weekly. They make sure they always get money out of people. In what other industry is there such a high default rate, yet such high profits to be made? That should surely tell us that it is not a competitive industry, and that there are problems that need to be addressed. We have all seen at first hand people in our communities who are exploited by that predatory model of lending.

[Jim Shannon (Strangford) (DUP)]

I apologise for not being on time, Mr Hollobone. I flew in this morning. We stayed for 12 July, which, as hon. Members will know, is a special day in Northern Ireland.

I, too, have great interest in this issue. My constituents regularly come to me when they have entered into hire-purchase arrangements, and sometimes arrangements with loan sharks as well. What I see is their desperation. They have made a decision based on what is right at that moment in time, rather than what is good for them in future. Does the hon. Lady have any idea about how the Consumer Rights Act can be better utilised, or how someone can control it, to ensure that when people make such desperate decisions, we can help them at the right time?

[Stella Creasy]

I do not want to keep the hon. Gentleman on tenterhooks. I have some ideas, growing on the work that the all-party group and my hon. Friend the Member for Makerfield have done on the industry. The hon. Gentleman is absolutely right that we can do things to change the situation. We need to recognise that it is predatory lending. The hon. Member for Blackpool North and Cleveleys talked about vulnerable people being exploited, and that practice is much more widespread than people realise.

The hon. Member for Strangford is right; people make what is probably the right decision for them at the time about where they could get a freezer, cooker or other basic consumer goods that their family need to live. The hon. Member for Blackpool North and Cleveleys was tempted into a discussion about consumerism and modern life, but the reason we began campaigning on legal loan-sharking in my community was that we could see that people were trying to make ends meet and needed to be able to wash their kids’ clothes so that they had school uniform. Those companies were their only option, and the method of lending increasingly prevented them from going to other companies. It affected their credit histories so they could not borrow from other parts of the industry.

Frankly, it is very expensive to be poor in this country, and the problems are compounded by the companies in question and by predatory lending. Consumers lack choice, and that distorts the market price that they pay. Some hon. Members have already talked about the method of selling, “pay weekly”. For the shadow Front Bench the issue is the mindset—lending to people in a way that means they cannot get away. We have all seen examples of what has been mentioned, when people pay double the cost of a washing machine, cooker or TV, and then some, only to have the goods repossessed like that—I do not know whether Hansard can record my clicking my fingers, but it is that quick. As soon as someone falls behind for a week the company comes round. There is no breathing space or recognition that something about the lending may have got people into difficulty so that they cannot make their repayments. There is no such responsibility.

The Opposition have tabled several proposals to deal with the companies in question, and other legal loan sharks, for some years. The Minister is aware of that and I know that he shares my concern about the companies. We may differ on how best to deal with them and with predatory lending, but he too is concerned about it. During the passage of the Consumer Rights Act we tried to address the issue of warranties and insurance sold with products, and how that breached people’s consumer rights. They would be sold a product with a requirement that created a lack of clarity and transparency about what they were buying. I recognise that some companies now say that those things are not compulsory, but we all know about the hard sell. I remember the Minister talking about his experience of being on the BrightHouse mailing list. I am interested to know whether he has finally managed to disentangle himself from that. He will know how hard the companies push the products, as part of the original deal that was agreed to. Even if they are not now compulsory, the arrangements are still difficult for consumers to get out of.

The Minister may take the opportunity, now he is no longer in coalition, to suggest that he was held back by his former partners in his attempts to deal with the problems, and say that he is now free to get to grips with legal loan sharks. He is among friends as far as wanting that freedom to be exercised. During the passage of the Consumer Rights Act, Jenny Willott, the then Under-Secretary, said:

“If a warranty provides no more than the statutory rights and there is a charge associated with it, whoever is selling the warranty may well be in breach of consumer protection regulations. When shops sell goods and the warranty is purchased at the same time, the full cost must be disclosed and consumers must be informed of their statutory rights. Consumers also have the right to cancel the extended warranty within a set period, and those rights must be made known to the consumers when they purchase the warranty.”—[Official Report, 13 May 2014; Vol. 580, c. 623.]

The Under-Secretary was adamant that our proposals for prohibiting such agreements were covered under the consumer rights measures that were being introduced, so one of my questions to the Minister today is what he knows about the implementation of such rights since then. After all, the Act has been passed, and the Government set up a consumer rights implementation group. Is the issue of rent-to-own companies being investigated by that group? How are we making sure that consumers can exercise the rights they now have under the Act? That would also extend to marketing methods—the Minister will know about marketing lists—and how companies tell people their rights and make sure they know that they do not have to take out insurance or an extended warranty. Often such warranties are not worth the paper they are written on and offer consumers no additional protection or benefits. Is that being made plain to people?

Why does all that matter? Why must we get to grips with those companies? It is because we know the issue is fundamentally about debt. Consumer and personal debt in this country are rising into what might be called uncharted territory. Since March, unsecured personal debt has gone up £48 billion. Personal debt is rising three times as fast as wages. The Minister and I disagree about the Budget and whether it will make things worse or better, but we know people are finding that there is too much month at the end of their money. Therefore the companies we are talking about—and their credit agreements and their predatory lending behaviour—are here to stay, unless we show the political will to tackle them and unless we recognise how they make people’s already difficult situation worse. I may disagree with the hon. Member for Blackpool North and Cleveleys about the Government’s decision to abolish the term “child poverty”, but we can all agree that making it difficult for people to make ends meet by leaving them stuck with companies that exploit them and squeeze out every last penny will do no one any favours.

The hon. Member for Blackpool North and Cleveleys talked about mortgage debt, and many people with mortgages go to the companies because they have no alternative. If interest rates go up just 2% families will have to find £1,000 extra a year in interest alone, to keep a roof over their head. If they are also trying to pay off an expensive cooker or freezer, we can see what is coming down the road for them. Some of us who fought to retain the social fund will know about the lack of alternatives. Many credit unions do wonderful work trying to come up with alternatives, but the lack of options is compelling people towards the companies in question. In the context where personal debt is rising—and that will cause a massive economic problem for us and put our recovery at risk—there is a compelling case to be much more proactive about predatory lending in the consumer credit market.

With that idea in mind perhaps I may give the Minister some suggestions for things to do, and things to raise with the Financial Conduct Authority. He will know that I have a slight sense that the Financial Conduct Authority is playing catch-up. If the banks were tyrannosaurus rex, legal loan sharks are the velociraptors of the consumer credit market. They are fast, nimble and ever-evolving, and that is evident when we compare the rent-to-own sector with the way lending is done by the lumbering beasts of banks. That is why voluntary action is not enough to deal with the companies. Will the Minister make a commitment to work with the Financial Conduct Authority and to get it to expand its remit, to look at the industries in question and how they can change? In particular, could there be a requirement on lenders to provide pre-contractual information on both the cash price of goods and the total cost of the credit agreement: the difference between the price at the start and what it could be by the end of the agreement? If consumers could have that up-front they would know exactly what the cost would be, including any additional fees and charges.

Companies could be banned from requiring consumers to take out additional products alongside the initial credit agreement—separating out the insurance and warranty to make it clear that, aside from its not being compulsory to buy them, it would be illegal to try to sell such additional products at the same time. The companies could be required to undertake affordability checks based on the possible total cost of the agreement rather than the initial up-front price of the good, so that companies would have to reflect, when doing the affordability check, on what debt people could possibly get into by borrowing in that way, and whether they could pay the money back. We clearly need to change the way affordability checks are done. [Interruption.] The Minister says from a sedentary position that they already do this, but clearly they do not, given the levels of debt that people are getting into. We need to recognise that it is possible for affordability checks to deal with the potential cost of the goods—the doubling of prices—rather than the minimum that someone could pay. They should deal with the maximum that someone could pay.

My hon. Friend the Member for Makerfield made a powerful point about breathing space. The companies do not give people breathing space when they get into financial difficulty. We want the Government to make a commitment to end fees for debt management. The fact that people have to pay to get out of debt compounds the issue, and I would like a time scale for that change. We recognise that the debt advice industry needs to grow. We would like the Government to use the levy—in fact, to double the levy on the companies—to pay for that. The Minister may want to take up that idea; I do not know. However, we all know that having to pay to get out of debt extends the debt. It makes it harder for people to get into a debt-management agreement. With the companies we are talking about, it would be good to stop the clock once people start the process of getting a debt-management agreement, so that no more interest would be accrued, and there would be no more pressure, visits or BrightHouse knocks on the door.

I encourage the Minister to go further and talk to his colleagues in the Department for Work and Pensions about a reinstitution of the social fund—funding for alternative ways in which people could get white goods in particular. I am sure that the Minister will know from his constituency that people cannot go without a washing machine or cooker. We may disagree about iPads but we can certainly agree that there is a case for basic white goods to be provided.

It would be helpful to hear from the Minister about the commitment that the Government made last year to reviewing personal debt. We have not seen any further information, so will he update us on that review and the work that is being done? There is also the issue of how credit histories are affected by this form of predatory lending, because, even if customers get out of payments required for an individual credit agreement, if that affects their future ability to borrow and to go to alternative or mainstream providers, there is a problem.

[Jim Shannon]

I apologise again for not being here for the whole debate. I am conscious of how many good groups there are—I have them in my area—such as the citizens advice bureaux, Christians Against Poverty, the Churches and many others. They offer good advice and can often come to an agreement with the hire purchase companies or mortgage groups to reduce the fees to a payment system that is manageable. Does the hon. Lady think that it is important to recognise what such groups do to help people in poverty and debt?

[Stella Creasy]

The hon. Gentleman pre-empts my final point, which is that what we really want is an alternative, but for an alternative to exist, it has to be funded, because this is not a fair fight. What I have noticed, as we have exerted pressure on the Government to tackle the payday lending industry, is that it is retreating from our high streets but that it is being replaced by the rent-to-own industry. This industry and legal loan sharking have evolved because there is no reform. We need an industry that works, because we need people to be able to borrow in this way to make ends meet—because they are not earning enough—and we need to end legal loan sharking by reforming the way in which these companies operate. That requires alternatives. However, our credit unions, housing providers and alternative forms of financing are struggling in an environment in which these companies are making a great deal of money from exploiting people. That is why it is right that the Government not only step in and are much tougher about regulating—learning the lesson of capping the cost of credit by capping what these companies can charge—but look at how we support the alternatives to grow and how we can level the playing field.

My final point is about the particular case for mainstream credit providers. Will the Minister commit to talking to mainstream credit providers, particularly to our banks, to ask them to review how many of their customers have entered into these agreements? I think he would be surprised—just as we found with payday lending companies—that half a million customers from one bank alone, who could have gone to it for a personal loan, were going to payday lenders. We need to make the case that these forms of lending and problems with debt are now so mainstream in Britain and so much part of modern life that there is a case not to see this as separate, small industry but part and parcel of how we help people to make ends meet. The mainstream credit providers have a vested interest in working with credit unions and providers—the Hoot credit union, for example—who do alternative forms of white goods provision to help their customers, because the consequences for the mainstream providers will become apparent when people default on their mortgages and personal loans.

This is not an either/or any more. We have to end legal loan sharking in Britain in its many forms. I hope that the Minister will take in good faith those examples of things that he could do now and accept what the priorities are. I look forward to a positive response from him and hope he will join the Opposition, as the cuckoo in the nest, in saying: let us end predatory lending in Britain once and for all.

Tax Credits (Working Families)

Jim Shannon Excerpts

Tuesday 7th July 2015 Commons Chamber

[Mr Gauke]

I do not accept that argument. On the question of the fear of further crises and so on, we need to ensure that the public finances are on a sound footing, recognising that there will be times at which there will be turbulence in the economy. This is one of the differences we had at the general election. The Government recognise that we have to be serious about getting debt down, which is why we believe that there should be a surplus in normal years. If the Opposition are coming to that view, I welcome it, but their refusal to consider a role for the welfare budget in making a contribution towards reducing the deficit suggests that their heart is not in it.

[Jim Shannon (Strangford) (DUP)]

In 1998, tax credits were introduced for two reasons—low wages and the high cost of living. They enabled the proportion of children in poverty to be reduced from 35% to 19%. Barnardo’s in Northern Ireland has expressed concerns about welfare reforms, particularly to tax credits. It says that 160,000 families will find themselves in child poverty as a result. How would the Minister answer that and reassure Barnardo’s and me as an elected representative that that will not happen?

[Mr Gauke]

We need a fair and sustainable welfare system. Five years ago we inherited a welfare system that was not working for people throughout our country. Those who worked hard found more and more of their earnings being taken away to support a welfare system that was dangerously out of control. On tax credits alone, in 2010-11, nominal spending had increased by an extraordinary 180% compared with the benefits they replaced. Worse, the benefits system as it stood created the most perverse incentive of all: for some people it made financial sense to choose to live on benefits rather than earn a living. It rewarded doing the wrong thing, punished doing the right thing, alienated millions of hard-working people and let down millions more. It was financially and morally unsustainable.

Scotland Bill

Jim Shannon Excerpts

Monday 29th June 2015 Commons Chamber

[Mr Gauke]

There are arguments and different views as to the economic impact of cutting APD. We are legislating to devolve this to Scotland, and I am sure the hon. Gentleman will be supporting this legislation. That move is also part of the Smith commission arrangements. It has potential knock-on effects for regional airports, particularly those close to the Scottish border. As I say, we are reviewing our options there and will report later in the summer.

[Jim Shannon (Strangford) (DUP)]

One advantage of the reduction in APD that we have been able to achieve in Northern Ireland is on the main flight between Belfast Aldergrove and New York city. That flight is well used, it has made Aldergrove’s position more powerful and it has connected the United States and Northern Ireland—I could say more. That is just an example from Northern Ireland, and the effect of one flight could be replicated across the whole United Kingdom.

[Mr Gauke]

Again, the hon. Gentleman is making a particular case. There are particular circumstances applying to that flight to the US, especially the competition that existed from the Republic of Ireland, which was why steps were taken on that point. As I say, we will be setting out options—

European Union (Finance) Bill

Jim Shannon Excerpts

Tuesday 23rd June 2015 Commons Chamber

[Barbara Keeley]

I hesitate to say that I think we agree on this point, but I think we do. [Interruption.] All right, then: we enthusiastically agree on this point. It is very clear indeed that, particularly with youth unemployment, we have a serious problem. It is a problem throughout the EU. We must spend more on that and we must find a way of doing so. Although the Minister spoke at great length, he did not tell us at any point what the difference would be between the ongoing review in the EU and the existing commitments. We want to send a very strong message. Until the Bill is passed, it is our last chance for a considerable period to make these points strongly to the EU, and we believe that we should do so.

[Jim Shannon (Strangford) (DUP)]

One issue that concerns me in the area that I represent is the fishing industry. There is to be a review of the common fisheries policy. One thing that could come off the back of that is our young people getting jobs in the boats, because up until now they have not been encouraged to do so. We need not just a better common fisheries policy, but encouragement and incentives for our young people to take the jobs in the local fishing boats, and thereby create employment and prosperity for them as well. Does the hon. Lady agree?

[Barbara Keeley]

Indeed. We have focused a great deal on agricultural spending and the CAP, but I do not think any of us would say that there has been a fair deal for people in the fishing industry. Fisheries policy, in many places, has been a disaster and has caused great problems for our fishing industry. It is a shame and a pity if, as I think is the case, young people no longer believe that they can have a career in fisheries.

--- Later in debate ---

[Mr Rees-Mogg]

The speech by the right hon. Member for Gordon (Alex Salmond) is tremendously important and gets to the heart of one of the issues we have with the common agricultural policy, although, not surprisingly, I look at it in a different way from the question of socialism and land holdings that the SNP is going for.

The issue, as has been discussed in the European Scrutiny Committee, is that over the years our farmers have increasingly become so efficient and large that there has been a good deal of consolidation. That applies very much in my constituency among dairy farmers. The number of dairy farms has reduced significantly and they are bigger farms proportionately, but European subsidies tend to go to smaller farms disproportionately. Therefore, we find that British farmers are disadvantaged. I entirely agree with the right hon. Gentleman that if, under a system of farming subsidies and a competitive framework, that means that people are getting handouts from the European Union, British farmers—farmers in the United Kingdom—do not get the equivalent subsidies to farmers on the continent, they are disadvantaged because their cost base is automatically higher and their profitability is reduced. Therefore, when we are arguing for careful consideration, overview and oversight of expenditure in the European Union, and reductions in the common agricultural policy, we have to ensure that the cuts are made in a way that is fair to the UK farmer. Even if our end objective is the entire elimination of agricultural subsidies, it must be done in a way—

[Jim Shannon]

As I am sure the hon. Gentleman is well aware, the farms in Northern Ireland are smaller. They are greater today than they were, say, 20 years ago, but they are still not big in comparison with those on the UK mainland. Does he agree that there needs to be consideration for the farms in Northern Ireland, particularly in my constituency of Strangford? He seems to be referring to farms that are very large. In Northern Ireland, we have farms with an average of 150 acres.

[Mr Rees-Mogg]

I am very sympathetic to farmers and I ought to declare an interest as I have a little land in Somerset, although sadly not a great deal and I do not farm directly. If I did, I would certainly count as a very, very small farmer. In the past a slice has been taken from the biggest receivers of European subsidies, so the farms that have been the most consolidated and efficient lose subsidies at a faster rate than other farms. I think that protection is already in place—

--- Later in debate ---

[Kelvin Hopkins]

The right hon. Gentleman makes a strong point. That is one of my red lines, and I shall put that case to the Prime Minister when I have an opportunity. I have said that many times before in the Chamber.

[Jim Shannon]

As I said earlier, I represent the constituency of Strangford, and the fishing industry is particularly important to me. We have had a cod recovery programme in the Irish sea for the past 10 to 12 years, and there are greater numbers of cod than there have ever been during that time and the fish are bigger. However, Europe restricts our fishermen’s ability to fish those cod. That is an example of why we need a new common fisheries policy that local people can control and have an input in.

[The Temporary Chair (Hywel Williams)]

Order. I hope that the hon. Member for Luton North (Kelvin Hopkins) will not go too far down that line of discussion.

European Union Referendum Bill

Jim Shannon Excerpts

Tuesday 16th June 2015 Commons Chamber

[Mr Rees-Mogg]

My hon. Friend is absolutely right. It would be against the conditions of receipt of that money to use the money to campaign for a member state to leave the European Union.

Some very influential bodies in this country receive money from the European Union. My hon. Friend the Member for Harwich and North Essex (Mr Jenkin) said that the CBI receives money from the European Union. We know that the CBI is in part funded by Europe. It is therefore under an obligation either to return that money or to support the objectives of the European Union. When the director-general of the BBC came before the European Scrutiny Committee, he was asked about the money the BBC received from the European Union and the strings that that may have attached. Even the most impartial and highly regarded bodies in our establishment receive money from the European Union, and they take on certain obligations in return.

My hon. Friend the Member for Sherwood (Mark Spencer) made a very good point about what happens to farmers in receipt of subsidies that have come from the European Union. Are they then prohibited from giving money to the Conservative party to campaign in the referendum? No, of course not. He may well be right that the amendment needs improving to ensure that people are not captured by mistake.

[Jim Shannon (Strangford) (DUP)]

The hon. Gentleman refers to farmers and their obligations. Is he aware that the National Farmers Union in the UK is suggesting to its members that they should stay in the European Union and is asking them to vote accordingly? Does he have concerns, as I do, about that?

[Mr Rees-Mogg]

I do indeed. I have no idea whether the NFU receives any money from the European Union. If it did, it would be under an obligation to support the objectives of the European Union.

It is a very insidious aspect of how the EU operates. It is why it likes to put its stars up everywhere: to show us what wonderful things Mother Europe is doing to help us and enforcing compliance with its view of the world. We want to make sure that our referendum is held absolutely fairly, without that influence. In terms of that fairness, I want to come on to the debate on schedule 1 stand part. It is schedule 15, referred to in schedule 1 to this Bill, that comes to the issue of section 125, the exemption from which removes the whole purdah question for the Government.

I have every confidence that the Prime Minister will lead the no campaign. He will come back and say that what is in the interests of this country, if the renegotiation is not exceptional, is that we leave. He has indicated that in speeches and I admire him for making his views so clear. When he does that, I do not want him to be helped by legerdemain. I do not want the no campaign to benefit from the Government being able to use all their resources to get me what I am likely to want in those circumstances. The right hon. Member for Gordon (Alex Salmond) expects the reverse. He thinks, I happen to think naively, that the Government will come back and wish to campaign for a yes vote. He likewise does not wish to see them being able to use all the powers at the disposal of the Government to push for what they want.

Those powers are considerable. The ability of the arms of central and local government to influence the media and public opinion and to use its PR resources, press officers and administrative and logistical machinery to help one side or the other is considerable. Whichever side of the argument one falls on, it must be right to hope that the referendum will be more than just a staging post in the discussion about Europe, and that it will help put our relationship with Europe on a firm footing that can last for decades rather than weeks. We do not want anyone on either side feeling that the result was so flawed, because of how it was carried out, that we need another referendum.

Tourism Industry and VAT

Jim Shannon Excerpts

Tuesday 17th March 2015 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to speak in this debate, and I thank the hon. Member for Ceredigion (Mr Williams) for securing it. None the less, it is a source of frustration that we have previously debated this issue. We are in jeopardy of missing a fantastic opportunity for all our communities; that has been the thrust of every comment so far.

I declare an interest, because I represent one of the most idyllic and beautiful constituencies in the United Kingdom, if not the world. Although I realise that every Member present is envious—I do not doubt that for a second—I hope they will keep an open mind on VAT reduction, which could help their constituencies to thrive, just as it would help my constituency of Strangford. Today we celebrate St Patrick, the patron saint of Ireland, north and south, and it is always a pleasure to do so. It was my pleasure last week to attend Champ UK’s annual St Patrick’s day event, at which I heard Tourism Ireland’s fantastic news about the increasing attractiveness of Northern Ireland as a tourist destination. Tourists seem to gravitate towards the Republic of Ireland, but the Northern Ireland Statistics and Research Agency states that total overseas visitors to Northern Ireland for the first nine months of 2014 grew by 3%, which is a welcome development. However, we in Northern Ireland still fall foul of the Republic of Ireland’s 9% VAT rate, which was set in 2011.

[David Simpson (Upper Bann) (DUP)]

Across the United Kingdom and Northern Ireland, our golf clubs provide fantastic accommodation and food, but there is a distortion of VAT payments between proprietary clubs and member-run clubs. Surely that anomaly should be addressed. Doing so would create more employment and would be good for tourism.

[Jim Shannon]

My hon. Friend is right. Hospitality services—golf clubs, hotels, restaurants and attractions—all suffer as a result of VAT on tourism, and it is important that we try to address the situation. That feeling is particularly tangible in Northern Ireland because we share a border with the Republic, which has a much lower VAT rate. Although we have seen an improvement in visitor numbers over the past year, which is good news, the benefits of a VAT reduction might have assisted those numbers even further. We are four years behind the Republic in implementing this decision, and I ask why. There has been a long-running campaign by the hospitality industry in the United Kingdom to reduce the VAT rate below the standard of 20% for services supplied to tourists, and I re-emphasise the importance of that industry to our economy. Tourism makes up 10% of Northern Ireland’s GDP and provides 40,000 jobs, and the sector is still growing.

[Roger Williams (Brecon and Radnorshire) (LD)]

Does the hon. Gentleman agree that one of the main challenges for tourism in our constituencies is extending the tourist season? A reduction in VAT would make weekend breaks and mini-breaks all the more affordable and attractive.

[Jim Shannon]

That illustrates the case for a VAT reduction. The tourist industry gives so much to us: it gives us global status as a destination, and growth. The industry aims to create more jobs, improve services and enhance the hospitality experience for which the UK is renowned.

The British Hospitality Association, when questioning operators within the industry, received some incredible responses, of which I am sure the Minister is aware. Some 82% of respondents said that, in the event of a reduction in VAT, they would invest more in the service they supply; 67% would create further employment positions; 57% would provide more training; and just under half would increase wages. There is a clear indication from the tourism industry that it could do a lot more. Although I recognise that there are concerns about the restrictions on the room for manoeuvre on public expenditure, a decision to reduce VAT would have long-term benefits, not least of which would be tourism spending spilling over into all areas of the economy in Strangford, across Northern Ireland and across the United Kingdom.

It is important to rectify youth unemployment, and we can do that by expanding the tourism sector. In Northern Ireland we have a large number of enthusiastic young people who are taking tourism, catering and hospitality courses in a number of our South Eastern Regional colleges. There is clear interest and growth in the sector, and all we need to do is kick-start the sector. My local South Eastern Regional college in Ards in my Strangford constituency is training young people to an exceptionally high standard, and it is important to maintain excellence in this area. The launch of the Diageo tourism and hospitality academy, run by Belfast metropolitan college, is another indication of what we can do.

The Cut Tourism VAT campaign emphasises that British families and international visitors who choose a British holiday will pay almost three times as much VAT as they would in a French or German break, and twice as much VAT as they would in a break in Italy, Spain or the Republic of Ireland. Reducing VAT for tourism would help to lower prices all round, and it would incentivise families to take an annual trip that they might otherwise be reconsidering.

I have attended a number of events organised by Pubs of Ulster, and I believe that we should support the UK-wide Cut Tourism VAT campaign. Northern Ireland is home to some 10 breweries, and my constituency of Strangford is home to 63 pubs that support 672 jobs, 138 of which are for 16 to 24-year-olds, whom we should be encouraging. We have the attractions, restaurants, bars and locations, and it is now time to ensure that we can offer even more by asking the Minister genuinely and sincerely to consider reducing VAT.

--- Later in debate ---

[Shabana Mahmood]

I thank my hon. Friend. I hate to get people’s constituency names wrong, so I am glad to have got it right on this occasion. He made the point that it is Welsh tourism week, and Welsh Members of Parliament from various parties have been well represented in this debate. I recognise his long history of campaigning on this issue, and particularly his focus on the number of jobs and the amount of economic growth that such a change could create in his constituency and the Welsh economy as a whole. I fully expect him to continue lobbying Labour colleagues and a future Labour Treasury on the issue, as he has done alongside others throughout this Parliament, but I am afraid that I will disappoint him and other hon. Members throughout the House once again by not making a commitment that the next Labour Government will reduce VAT for the tourism sector in the way that they envisage.

[Jim Shannon]

If the shadow Minister is giving us a blanket no, can she give us an assurance that whatever happens after 7 May, if Labour is in power, it will consider it? If the Government applied to Europe, they could get a reduction. At least if we knew that it would happen, a move would be made. Let us see what happens.

[Shabana Mahmood]

I am grateful to the hon. Gentleman for that intervention. I was just about to develop a point about the evidence presented by hon. Members in this debate, and how we will react to it if we form the next Labour Government and Treasury.

I start by recognising that cutting VAT is a significant monetary challenge. The Opposition are clear that we will put no unfunded promises in our manifesto, the basis on which we will seek election from the public in the coming weeks, and we will not borrow any more money for day-to-day spending. We note the evidence presented by hon. Members in this debate from notable academics who have considered the issue in detail. It has been cited in support of the argument by the Cut Tourism VAT campaign. From opposition, I am not in a position to assess that evidence in the same way that the Treasury can, as it has access to data sets that we do not, but I note the Minister’s answers to hon. Members in written parliamentary answers and oral answers during departmental question time in the House. He has said, on the basis of analysis undertaken by the Treasury, that a VAT cut for the sector would not produce sufficient economic growth to outweigh the consequent revenue shortfall. It would be helpful if in summing up, the Minister put more of that evidence on the record, if the position is the same as before.

--- Later in debate ---

[Mr Gauke]

The point that I am making is that the number of tourists in both countries has increased at largely the same rate, at a time when one of them has reduced VAT and the other has not. Of course, these matters can be somewhat complex and there are many factors to consider, and when it comes to tourism matters, and particularly matters affecting in-bound tourists, we should not forget the importance of the exchange rate. It is very significant and, of course, recently the exchange rate has gone in different directions.

[Jim Shannon]

Will the Minister give way?

[Mr Gauke]

I am conscious that, although we have a little bit of time left because of the earlier Division, I should make progress. However, I will give way to the hon. Gentleman.

[Jim Shannon]

If the Minister wants a comparison, he should compare the Republic of Ireland and Northern Ireland. Clearly, the number of visitors to the Republic of Ireland has grown enormously above the number visiting Northern Ireland. That is a clear example of the advantage of a reduced VAT rate. We could all take advantage of that if it happened across the whole of the United Kingdom, and particularly in Northern Ireland.

[Mr Gauke]

As I say, a comparison of the Republic of Ireland with the UK as a whole suggests that there is not a big difference. Indeed, I understand that there has been a pretty positive increase in the number of tourists to Northern Ireland specifically in recent years.

All hon. Members will be aware that this Government’s priority is to tackle our budget deficit decisively but fairly and to restore confidence in our economy. The Government have concluded that a VAT cut would not produce sufficient economic growth to outweigh the revenue shortfall. I have not seen any new conclusive evidence that has led me to revisit that conclusion. So at present the Government have no plans to introduce a VAT cut for this sector.

I reassure hon. Members that the Government recognise the importance of the tourism industry and we remain committed to a wide range of other measures to support the sector. For example, to date we have invested more than £129 million through VisitBritain and VisitEngland, to market great British holiday destinations at home and abroad. This has already leveraged significant private sector investment of more than £84 million. We have announced a £10 million tourism in the north fund in the next financial year. We have announced £2 million in the next financial year, to help promote our cities and regions overseas as part of the GREAT campaign, through VisitEngland.

The tourist industry has benefited from other policies introduced by this Government. I thank my hon. Friend the Member for Aberconwy (Guto Bebb) for making this point. For example, capping business rates and doubling business rates relief benefits the retail and hospitality sector by a considerable sum. Those sectors have benefited from the introduction of the employment allowance and will benefit from the abolition of employer's national insurance contributions for under-21s and for apprentices under 25.

Diverted Profits Tax

Jim Shannon Excerpts

Wednesday 7th January 2015 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Member for Amber Valley (Nigel Mills) for giving us the opportunity to contribute to the debate. It is always a pleasure to speak on such issues. It is nice to see the shadow Minister in her place. More importantly, it is nice to see the Minister in her place, because we have conversed and supported each other in many debates in Westminster Hall. It is nice to see her back in a ministerial position. I look forward to her response, which will be worth listening to.

The public anger has been immense over this issue. If there is one thing that nyarks people, to use an Ulster Scotsism, in my part of this country, it is the issue of tax avoidance—big companies making money and not making the contribution they should.

We welcome the Chancellor’s introduction of the new tax; we are pleased to see it. Many of the companies that hit the headlines back in 2012—they are not all UK-owned—have been in and out of the news ever since, which infuriates people. The Chancellor said that this new legislation will bring in £1 billion over five years, although others have said that they are not sure whether it is workable. When the Minister replies, will she give us an idea of how it will work and how we can make those companies accountable?

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

Does my hon. Friend agree that although the proposed legislation is welcome, we need to take account of what was said earlier? The director of the Oxford University Centre for Business Taxation said:

“The fundamental problem is the structure of the international tax system”.

In addition to this legislation, we need international co-ordination to prevent people from brass plating.

[Jim Shannon]

My hon. Friend and colleague is on the button. Although it is good that we have the legislative change, we need co-operation among countries across the world so we can work together to address this issue.

This new legislation aims to ensure that people pay tax. There are various safeguards that, as my hon. Friend and colleague said, we need to see in place. We need to work better with other countries across the world. We also need to ensure that businesses that are pursued wrongly are not affected.

The legislation is for larger companies. It concerns what is referred to as artificially diverted profits, and that is exactly what it is. Foreign companies must have UK sales of at least £10 million, and if the UK activity would be considered a small or medium-sized company for UK accounting purposes, this new law does not apply, so there are some important concessions.

Finally, the tax provision examines whether UK costs have been inflated or UK sales have been reduced, which is another way of artificially diverting the figures. We must look at whether there is a tax mismatch between what seems likely should have been reported in the UK and what is reported in a foreign company. We need clarification on those issues from the Minister. The hon. Member for Amber Valley set the scene well in his introduction.

Although £10 million might seem like a lot of money, I will put it in perspective. In 2011, Starbucks, a global company that has come into disrepute again for not paying any tax—its coffee is lovely but there is an issue to address elsewhere—made £398 million in UK sales alone. I used the word “nyark” earlier. It nyarks us greatly that companies can make that much turnover and not pay a considerable amount of tax.

[Dr William McCrea (South Antrim) (DUP)]

Does my hon. Friend accept that doing nothing is not acceptable? However, as questions have been asked about the new scheme that the Chancellor spoke about, is it not best that we look at those questions and ensure that the legislation that is being introduced will tackle the problem we face?

[Jim Shannon]

My hon. Friend is absolutely right. We need to have legislation in place that enables us to oversee the loopholes that have been outlined. We are all hoping that the Minister will tell us how it will work in her response. I hope she will address the questions that have been asked.

Starbucks employs 8,500 people in the UK, so it makes a contribution in employment, wages and associated taxes, but it pays no corporation tax. Amazon, another global company, employs 15,000 staff in the UK and reported sales of £3.35 billion in 2011, as well as profits of £74 million, but it paid only £1.8 million in corporation tax. That annoys me greatly. Google, one of our favourite search engines, made £396 million in 2011 and paid only £6 million in corporation tax. Some of the companies have of course been stung into making tax contributions, although those have been minimal.

An article by Joseph Brothers that I read last month in the magazine Tax Notes International sums up the subject of the earlier intervention by my hon. Friend the Member for Upper Bann (David Simpson) on brass plating. Brothers suggested that Apple, reacting to a threat by the Irish Government to shut down one of their lucrative, corporate-friendly, tax-avoiding laws, would switch strategies to escape taxes in Ireland. He wrote that the so-called “Double Irish” might soon be replaced by a new “Bermuda Triangle”: instead of ships and planes mysteriously disappearing in it, it would be a triangle of tax treaties between Ireland, the Netherlands and Bermuda, exploiting rules that do not quite align and creating the space for profits to vanish, at least to the eyes of the Internal Revenue Service auditors.

If that strategy works, Google and others are likely to follow suit. The outcome could well be that the big corporate tax dodgers achieve what a noted tax lawyer calls “stateless income”: siphoning profit out of high-tax countries in Europe, Japan and North America and moving it around under tax treaties until it is not subject to any tax, because any profits are being reported in a non-existent country called “nowhere”. That is the bottom line of what could happen if our legislation is not correct and if the loopholes, disparities and open questions are not dealt with.

I am using those three companies as examples, but there are many others. Unfortunately, a common trend is filtering down through to a large number of companies. At the end of the day, we must remember that UK-based companies pay corporation tax on their taxable profits wherever those are made. It is only right, therefore, that foreign companies pay tax in the UK on profits made in this country. We must make it clear that the UK is not a country to come to for freeloading. Those are the issues.

Many British-based global companies do pay their taxes. They are concerned that the new legislation might give HMRC too much discretion. Furthermore, as the head of the tax policy unit of KPMG here in the UK noted in the company’s latest annual tax competitiveness survey, companies value “stability” and “simplicity”, but unfortunately, one criticism of the proposed legislation is that it does not offer simplicity. Many questions therefore need to be answered and much transparency applied to ensure that the legislation, while welcome—we have to take a step in the right direction—can work in practice.

The aims of the legislation are admirable as well as necessary. In a recent poll of more than 500 accounting and small business professionals, taken immediately after the Chancellor’s autumn statement, 56% of respondents said that the most significant tax announcement in the speech was the one about the diverted profits tax. Many, perhaps all of us—if not the companies trying to avoid the measure—welcome it, but we need to be sure that everything is in place.

Will the Minister tell us about another issue raised by the hon. Member for Amber Valley: the IT equipment necessary to ensure that expertise is in place? There is also the question of the resourcing of moneys. I understand that the initial set-up will cost £2.3 million in staffing for the first year and £1 million per year thereafter. At a time of HMRC cuts, of which we are all aware in every area, perhaps the Minister will indicate whether provision has been made for the IT equipment and the necessary staffing resources to ensure implementation.

It is of course important to remember that big businesses are always welcome in the UK and, as other Members have said, we do not intend to turn any away. We want companies to be based in the United Kingdom, but we, like everyone else, want them to make their contribution to the tax system. It is always extremely pleasing to hear that another company has made the decision to expand in the UK, and we are seeing a lot of that at the moment in Belfast. It is good to have those companies providing employment opportunities and taxes, and spending money so that our economy in Northern Ireland grows. That is super news for local people, local business and the local economy. It is also vital, however, that those big companies pay their way, otherwise it is not so lucrative after all for local businesses, people and economies. Instead, the money will simply stay in the hands of the global giants.

Will the Minister say what steps the Government will take to deal with the tax havens in the Isle of Man and the Channel Islands? Will we have some influence there, or access to information? Gone are the days when money was hidden under the mattress, the bed or the floorboards; people now put it overseas in tax havens. Will the Minister give some indication of the direction of policy?

[Nigel Mills]

I am keen to check the view of the hon. Gentleman’s party. In the event that Northern Ireland chooses to reduce its corporation tax rate, does he agree that Northern Ireland should not use that lower rate to attract artificial income into Belfast, as the Irish did in the Republic? The lower rate should be for the purposes of getting real jobs and real substance into Belfast, instead of dragging profit out of the UK mainland, perhaps through the financing of intellectual property companies or other ways of artificially moving tax.

[Jim Shannon]

The hon. Gentleman will find that my party, through the Northern Ireland Assembly and the First Minister, will hold an upstanding position in working the policy. We will not be developing into a tax haven. We want to see real jobs for real people on the ground. That is the way forward, and it is what we support.

We are pleased to have the Minister in her place today. Responsibility for answering our questions and for how this will work lies very much with her Department. We are committed to having the new legislation in place, I hope by 1 April. We want the big companies to be brought into line and made accountable for tax avoidance. We want the issue of the tax havens over which we have control to be dealt with, and for our neighbours in the Republic of Ireland to have the same opportunity. In addition, we have to look at the global picture, because although legislative change may take place in this country, what will really make it work is how we interact with other countries.

BMI Pension Fund Compensation

Jim Shannon Excerpts

Wednesday 17th December 2014 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

I appreciate the opportunity to make a small contribution to the debate, Mr Sanders.

I thank the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) for bringing this matter forward. He clearly set out the scene for us all. Hon. Members are here because our constituents have expressed concern. We are aware of people from Northern Ireland who are equally disadvantaged because of what has taken place. This debate is of the utmost importance, because it deals with people’s futures and livelihoods. These are the kinds of issues that Members of Parliament ought to deliberate upon.

In 2012, the parent group of British Airways and Iberia, International Airlines Group, struck a deal with Lufthansa, the then parent group of BMI, to buy the company. The attraction of BMI lay in its control of 9% of the valuable slots at London Heathrow. That sets the scene. The matter then became difficult, and BMI employees found themselves disadvantaged. Originally, they thought the deal was a good one, but it clearly turned out not to be.

The deal saw former BMI staff lose £177 million from their pensions, because it was structured so that IAG could avoid taking on BMI’s final salary pension scheme, which was placed into the Pension Protection Fund. I am deeply disappointed that the Pension Protection Fund has not been able to act strongly on behalf of BMI staff. When the Minister replies, she may wish to address that issue.

That arrangement meant that about 3,700 BMI staff and pilots lost at least 10% of their savings, as the PPF pays only 90% of a pension, up to a maximum of £27,000 a year. The hon. Gentleman gave the example of just one person, which shows the magnitude of the figures.

[Mark Lazarowicz]

Perhaps I should explain that my understanding is that the Lufthansa compensation was graduated in such a way that those with the biggest pension losses got the least compensation. At the top end, only 10% or 20% of the losses were compensated for, and the rest was lost entirely. Those with long service suffered the worst.

[Jim Shannon]

I thank the hon. Gentleman for his explanation, which helps to clarify the matter.

As a good-will gesture, Lufthansa agreed to pay £84 million in compensation, which staff were offered as a one-off cash payment or which could be added to a defined contribution pension scheme. However, staff were then informed that any cash payments would be taxed. Clearly, there is an issue there. Lufthansa was also advised that it would not have to pay national insurance on cash payments, even though members of the BMI pension scheme were not direct employees of the German airline.

Understandably, that has caused a lot of frustration among former BMI employees. As far as they are concerned, they worked for x years and paid x into a pension scheme, which they are now entitled to, but because of dealings between the parent companies, they are now to lose out. We are here for justice and fair play for our constituents and for those who have been disadvantaged.

At the time, BALPA, the pilot’s union, said:

“Pilots in bmi are rightly outraged that their pensions are to be significantly reduced. These pilots have invested their careers in this airline, and a large proportion of their salary in its pension scheme.”

That is how its members felt, and they still feel that way, because the issue has not been sorted out.

The BMI Pensions Action Group was set up to seek justice for employees who were disadvantaged by the company buy-over. When the possibility of BMI’s sale first arose in autumn 2011, BALPA sought assurances, and reassuring noises were made by Lufthansa, which said that there was nothing to worry about, and the UK Pensions Regulator said it had powers to hold companies to account. Members of the scheme received no communications after December 2011, when Lufthansa said it was going to retain the pension obligation. Those in the scheme were led to believe that they were okay, but they clearly were not.

[Mr McKenzie]

The hon. Gentleman is making some good points. I am sure he will agree that the people involved have been shabbily treated. Here we see another example of people being asked to prepare for their retirement and old age, but when they near that point, their pension is ripped from their grasp. Perhaps the Minister could take the issue away—we are talking about 4,000 people, not 4 million—and look again at the issue of taxation being applied to what compensation people have received.

[Jim Shannon]

The hon. Gentleman’s point is clear. It is disgraceful that those whom we represent have been treated shabbily, to use his terminology. Like the hon. Member for Edinburgh North and Leith and my right hon. Friend the Member for Belfast North (Mr Dodds), I ask the Minister to review the situation, because we are talking about 4,000 employees. The Government did that for Equitable Life, even though they said they could not. Members asked in Westminster Hall for that to happen—every one of us here today was probably here for Equitable Life’s members, and we are here today for the 4,000 BMI workers who have been disadvantaged.

[Mark Lazarowicz]

The Minister might be nervous about how much we are asking to be given away, and it might assist her if I say that the 4,000 is the figure for all the scheme members, some of whom will have been below the Pension Protection Fund cap. All the members have an interest, and they all deserve justice of course, but those who have been particularly badly hit are relatively few in number.

[Jim Shannon]

The Minister has been listening intently to Members’ interventions, and we know that she takes all the detail on board and responds. We look forward to her response, and we hope we can get answers to the questions we are asking. If we do, that would be good news.

The Sunday Telegraph said BMI pensioners are facing a “double whammy”. They have not only lost out on payments, but now face tax and national insurance payments on what should be straightforward compensation. That is completely unacceptable, and I am glad that we have the opportunity today to say that on behalf of our constituents and those who have contacted us.

We are dealing with people’s livelihoods in what are difficult financial times. As the hon. Gentleman suggested in his intervention, the figures involved are not substantial financially, but they have an impact on a great many people. In some way, these 4,000 people are disadvantaged. They have conscientiously paid into a pension scheme, only to be told that they will not get as much as they were initially promised or what they are due. To top it off, when they were actually offered cash payments, they were told those would be subject to tax. They were almost dragged into the system, but they then found themselves in a difficult position. We must work with the unions to resolve these issues, because these people are being treated unjustly. There are also implications for other pension schemes.

In conclusion, I implore the Minister to take on board the comments made by the right hon. and hon. Members who have spoken and those who will speak later. On behalf of my constituents and other constituents in Northern Ireland, I ask the Minister to review the situation and give scheme members the moneys they should be getting. That is what justice cries for, and that is what we wish to see.

[Mr Adrian Sanders (in the Chair)]

I call Graeme Morrice.