Finance (No. 3) Bill

Julian Knight Excerpts

Committee: 2nd sitting: House of Commons
Tuesday 20th November 2018 Commons Chamber

[Anneliese Dodds]

I will go on to talk about the assumptions that the Government currently use to calculate that tax gap, and the hon. Gentleman will learn that their claims to have massively reduced the amount of tax avoidance through that measure are potentially questionable, to say the least. Perhaps after we have had that discussion, we will see whether he still holds to that assessment.

[Julian Knight (Solihull) (Con)]

While we wait for the hon. Lady to congratulate the Government on closing the tax gap, will she recognise that many of the steps taken in the Bill have to be taken in a way that is mindful of how international tax systems work and how we need to ensure that the tax we are gathering does not lead to companies leaving the UK and trading to it from international jurisdictions?

[Anneliese Dodds]

Of course we need a business-friendly tax environment, but we should also recognise, just as I find when I talk to many international businesses, as I do in my shadow ministerial position, that the vast majority of businesses want to be compliant. Sadly, a small number of firms are not necessarily complying with the letter of the law and some are also not complying with the spirit of the law. That is leading to a situation where our public services are starved of the funding we need, which has a huge impact on business, as I am sure the hon. Gentleman is aware through his discussions with businesses in his constituency.

Let me return to the matter of overseas territories, which strangely appear to be referred to in pictorial form in material released by Conservative central office. This Government were forced kicking and screaming by this House to require our overseas territories to produce public registers of beneficial ownership, but I understand that all that has happened since the vote that forced that change in policy is one conference call, leading to a vague commitment to convene a technical working group—but it is not going to meet until 2019. So we have had many months since that vote in this House but almost no action. In addition, rather than fulfil the commitments the Opposition were given that our Government would work with Crown dependencies towards transparency, tax treaties were presented to this House last week that included no such provisions whatsoever.

The Minister has, as ever, opined that his Government have reduced the tax gap, and indeed other Members have just referred to that. I am sure, however, that he will not illuminate us with the fact that his Government’s tax gap measure excludes the costs of profit shifting and that it starts from the assumption that companies are declaring the correct amount of tax, which surely begs the question. The tax gap for this Government is assessed on the basis of whether Her Majesty’s Revenue and Customs has found errors or evidence of avoidance on tax returns, an approach that has rightly been criticised by the Public Accounts Committee, given that it leads to a situation where much of the tax lost through avoidance simply does not count as part of the tax gap. The Government’s tax gap does not appear to include cases of avoidance or evasion that do not fall under existing legislation, so it fails to capture numerous loopholes that continue to be exploited simply because they are exactly that: loopholes.

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[James Cartlidge]

rose—

[Julian Knight]

rose—

[Anneliese Dodds]

My goodness—who to choose!

Finance (No. 3) Bill

Julian Knight Excerpts

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

[Kirsty Blackman]

I absolutely agree and will come on to food banks, but on refugees and those seeking leave to remain in the UK, these are the people I see in my surgeries in the highest levels of poverty. They cannot work because the UK Government are not allowing them to, even though they have a valid immigration application. Concerns have been raised with me about individuals whose children are literally starving as a result of the UK Government saying that they cannot work or have recourse to public funds. This is a hostile environment that is impacting directly on the lives of children. The UK Government need to rethink. The bar should be set where children are not starving as a result, and then we can take action against those who are trying to swizz the system.

The only decent meal that some children receive is the meal that they have at school. The UK Government cannot continue to say that food bank use is increasing in European countries too, as if that somehow makes it okay. They have a responsibility to step up and to change the tax system, the minimum wage and the social security system to ensure that no child ever goes hungry.

Our new clause 7 would require a review of the impact on investment of changes to entrepreneurs’ relief, which extend the minimum qualifying period from 12 months to two years. Given that we have Brexit hanging over us and the massive uncertainty that that brings, putting another hurdle in the way of businesses is probably not the right course of action. Both the Chartered Institute of Taxation and the Association of Taxation Technicians have raised concerns about the unintended consequences of the change. I believe that a review is the only sensible option going forward. The Treasury regularly makes tax changes, but it does not regularly review their effectiveness, even after they have been in place for a number of years, and when it does it rarely makes those reviews public. It is all well and good to think that something may have a certain effect, but it is necessary to check whether the intended effect has come about. If such changes are made, a review should be undertaken regularly—certainly in the following two years—and it should be made public, in the interests of transparency and good policy making, so that everybody can see not just that the change has taken place, but what its effect has been, so that we are up front and honest and everybody is clear.

New clause 8 concerns the geographical effect of clause 9. The UK Government often fail to recognise the rurality of many of Scotland’s communities, and I am not clear that this change will not have a significant effect on those in our most remote communities. These are places where it is hard to get the staff we need for our life-saving services and where depopulation is a real and ever-present concern. They are also places that will be hit incredibly hard by ending freedom of movement. Given the hit to our crofters over the convergence uplift that was supposed to be given to rural communities in Scotland but was allocated elsewhere, it is clear that the UK Government are not prioritising our rural communities. They need to sense-check any such proposals and change them to ensure that they do not cause further difficulty for those living in our most remote areas, not just in Scotland but in other areas of the UK where being far from centres of population is an issue.

New clause 9 would require a report on the consultation undertaken on certain provisions of the Bill. Glyn Fullelove, the chair of the Chartered Institute of Taxation’s technical committee, has been critical of a number of measures in the Bill that were not previously consulted on, saying:

“The effects of inadequate scrutiny in the past are visible in the amount of tinkering in the new Bill”.

That is something I raised on Second Reading. He goes on:

“would all these tweaks have been necessary if there had been adequate consultation and more thorough scrutiny in the first place?”

If the Government intend to take back control, they need to ensure that control is in the hands of MPs, with adequate advice provided by expert stakeholders. It cannot be appropriate for tax changes to be drafted by officials and put into a Bill by the UK Government, with no opportunity for stakeholders to give oral evidence, no amendment of the law resolution and a total lack of a review of these clauses. That is not a sensible way to run anything, let alone a country. I have severe concerns about this part of the Bill. My concerns are mostly about transparency and process, as well as the lack of scrutiny of many of the measures.

In relation to the changes to personal allowance, the Government have not been progressive. We would expect that from a Conservative Government, but if they look up the road in Scotland, they will see that the changes that we have made have benefited the people at the bottom of the pile. The UK Government need to do more to benefit those people.

Lastly, the UK Government need to take seriously the fact that the personal allowance is not devolved to Scotland but the basic rate is, and changes need to be made. I would appreciate it if the Minister committed to considering making changes in the drafting of the Bill to separate out the devolved and reserved issues, so that we can have proper debates and better read-across, so that we can have transparency in the discussion of tax and spend in this place and so that we can make better laws as a result.

[Julian Knight (Solihull) (Con)]

It is an enormous pleasure to speak in this Committee stage of the Finance (No.3) Bill, and it is an even greater pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman) in today’s debate. There are always many responses to a Budget and a Finance Act, and people often look at them and pull them apart over time. In this case, however, I think most people would say that the Budget and Finance Bill have been tremendously well received among financial commentators and many pressure groups. One of the areas that have been most well received is the bringing forward by a year of the increases to personal allowances. The increase to £12,500 for basic rate taxpayers and £50,000 for the higher—40p—taxpayers will make a direct impact on the lives of 32 million of our fellow residents.

[Leo Docherty (Aldershot) (Con)]

Is my hon. Friend absolutely delighted, as I am, that this means that a basic rate taxpayer is paying some £1,200 less in tax, on an annual basis, than they were in 2010?

[Julian Knight]

My hon. Friend is correct. The very recent change will benefit basic rate taxpayers to the tune of £120 a year—a direct tax cut for millions of hard-working Britons—and that is to be welcomed.

[Rebecca Pow (Taunton Deane) (Con)]

Does my hon. Friend—I nearly called him my right hon. Friend, but he is not yet; perhaps he will be in the future—agree that the difference in the figures is stark? The personal allowance was £6,475 when this policy kicked in in 2010, and it has gone way up to £12,500. Surely, that is of huge benefit to the people we want to give more money to.

[Julian Knight]

I thank my hon. Friend for that short intervention. She makes a really good point, and it is almost the next point that I was going to make. The personal allowance will have nearly doubled in just eight short years. That is against a backdrop of trying to get the public finances under control from a debt of £152 billion a year—11% of GDP—which is an astronomical level outside wartime. It represents a real achievement for the Government to have been able to put this amount of money into the pockets of millions of hard-working Britons each year, so that their living standards can rise, despite the difficult decisions we have had to make.

Members from all parts of the House will probably know that I am no particular lover of the Liberal Democrats, and I am pleased to say that in my constituency of Solihull, we are now 24,000 votes ahead of them. However, I pay tribute to them in one respect. In the 2010 coalition agreement, we took on board what the Lib Dems had been proposing, and it was an excellent idea. I am pleased that the Conservative party was open enough to take on that idea and follow it through, from the coalition agreement, to raise those standards of living and raise personal allowances. I pay tribute to that sort of ideas process from the coalition. We have carried it on, as we see it as a key way in which to reduce inequality and expand opportunity.

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[Julian Knight]

My hon. Friend is completely correct. The realities are that the more tax people keep in their pockets—the more of their earnings they keep, without that money going through the Government filter—the more efficient it is, the better it is for the economy, and the better it is for what is known as the multiplier effect through a local economy. My hon. Friend’s on-the-ground view, reported here in Committee, is testament to why the process really benefits high streets and wider local economies.

[Rebecca Pow]

My hon. Friend has not yet touched on this, but the Government have kept down the corporation tax rate. Does he agree that in areas such as the south-west, where productivity is on average lower than it is in the rest of the country, it is crucial that we leave more money in local businesses so that they can invest, which will help with skills and eventually raise productivity?

[Julian Knight]

My hon. Friend is absolutely correct. Not only does cutting corporation tax increase the tax take, as we know, but in the round it allows companies to employ more people—I think that it has made a major contribution to the jobs miracle in this country—which then feeds through the taxation system and the multiplier and into the economy more widely, thereby boosting growth and productivity, plus the tax take down the line.

The abolition of stamp duty for first-time buyers of shared ownership properties worth more than £300,000 is an important step for our economy and for strivers in our country. We all know the difficulties that come about in respect of home ownership. I got my first home when I was 31—many years ago, I hasten to add—but I had to buy outside London to get on to the ladder. Even then, people were making enormous sacrifices to find their way on to the property ladder.

Frankly, the situation that I faced is nothing compared with what younger people face now. Not only is it now more difficult in respect of having the income required to get the amount of loan needed to buy, but many people have to rely on what is known as the bank of mum and dad. All that has a damaging effect on equality in our society and the passing down of wealth through the generations if we end up in a situation where those who gain housing wealth do so only if their fathers or mothers had that housing wealth themselves.

[Alex Burghart (Brentwood and Ongar) (Con)]

My hon. Friend is giving an important speech. Does he agree that in this context it is extremely important that we have embarked on the biggest programme of house building since the 1950s?

[Julian Knight]

That is exactly right. The point may not be specifically germane to the amendments we are debating, but my hon. Friend is absolutely correct about the context. This is just part of one strand of the strategy that we have to bring about an increase not only in home ownership but in the number of properties available to rent and basically for housing throughout the country. We know from the number of households that are forming that we need to build much more than we are building. This measure is part of considering the issues in the round, so I congratulate the Government in that respect.

We are now seeing the effects of things such as Help to Buy and of measures that—pardon the pun—build on Help to Buy, such as the abolition of stamp duty for shared ownership properties worth more than £300,000. According to the Financial Times—such an august newspaper that it never actually employed me—the rate of home ownership among first-time buyers is now at its highest in a decade. There is a long way to go before we get anywhere near where we were in the 1980s, for instance, but it has been a remarkable turnaround compared with where we were in 2010. The abolition of stamp duty for these properties sends a strong message, not only to people in shared ownership homes but to people more generally, that opportunities are out there and that we will help them by not imposing stamp duty.

Let me turn to tax fairness for individuals, which, I think, overarches the clauses and amendments to the Bill. We would not know this from hearing some of the arguments in this place, but the tax gap in the UK is one of the lowest in the developed world. That does not mean that there is not more to be done. Although we took some first steps in this Budget with internet companies and with organisations such as Amazon, everyone recognises that we need to go further, and we hope to move together in an international context to ensure tax fairness.

Since 2010, we have seen a cracking down on evasion—for example, in film investment schemes and schemes that collectively invest in property to avoid stamp duty. There has been a real concentration by Her Majesty’s Revenue and Customs and Treasury Ministers to ensure that people are aware that everyone should be paying their fair share in society. The hon. Member for Aberdeen North (Kirsty Blackman) mentioned tax equality and how much people are paying at the top end. I find it very telling that the top 1% in our society currently pay 28% of the tax, whereas the top 10% pay 60% of the tax. People would not believe that given the discussions that go on so often. However, this Government have done more towards closing that tax gap and towards ensuring equality in the tax system than anyone else in my lifetime. They have been very laser-like in their focus, and they should be congratulated on that.

[Stephanie Peacock (Barnsley East) (Lab)]

Does the hon. Gentleman agree that that gap will get wider if answers to my written questions are correct? In answer to a parliamentary question that I tabled, the Government admitted that the majority of their tax cuts would go to upper-rate taxpayers. Is that not exactly why we need the Government to publish the distributional impact of the tax cuts they are making?

[Julian Knight]

I am afraid that I really do not see the hon. Lady’s point. What I do see is the fact that we are giving tax cuts to 32 million people across the board, and, instead of being so churlish, the Labour party should welcome that.

[Leo Docherty]

Does my hon. Friend agree that the hon. Lady should check Hansard to see my question of a few moments ago in which I said that, since 2010, a basic rate taxpayer will pay £1,200 less in tax, which clearly shows that this Government are on the side of the hardest working?

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[Julian Knight]

My hon. Friend answered the hon. Lady’s intervention better than I did, so I do welcome what he said.

Let me sum up. In its treatment of tax thresholds and stamp duty, the Bill lays out a fairer tax system. It is a tax system predicated on a better society, and it is a system where people who can pay have to pay their fair share, but where that is achieved without being punitive and without, frankly, trying to put dogma over the reality of the situation.

[Peter Dowd (Bootle) (Lab)]

I am glad to have this opportunity to debate the issues surrounding new clauses 1, 2 and 3 in my name and the names of others in the Committee of the whole House, and to discuss them in the context of the Government’s attempts to distract attention from their woes. We have just had a lesson in voodoo economics from the hon. Member for Solihull (Julian Knight).

Members need to pay attention to Labour’s proposals in relation to new clauses 1, 2 and 3, but I must first point out that, in response to the Government’s authoritarian restrictions on amending this Bill, we had asked whether the entire legislation could be debated on the Floor of this House. That would at least have ensured a scintilla of constructive discussion among Members on the whole Bill. Alas, our request was denied by the Government, and we are left yet again asking for reviews and assessments as set out in our new clauses. It is important none the less to get these issues about child poverty out into the open. The Government increasingly seek to implement their austerity agenda—for that is what it is—behind closed doors. They will no doubt see our new clauses as an irritant that would highlight the differences between a slash-and-burn approach to public services by the Government juxtaposed with a policy of investment, renewal and rebuilding from this party based on a fair taxation system, as identified in our new clauses.

The Government have practised their manoeuvres in Committees that they have stitched up to give themselves the majority, which they do not deserve, and they do not have the guts to allow proper amendments to their Bill. No Minister has had the decency to defend that position and it is pretty pathetic. The electorate did not give them that mandate, but they arrogantly take it in any event, so it is important that we debate and tease out the issues that we have set out in new clauses 1, 2 and 3.

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[Richard Graham]

It is a pleasure to follow the hon. Member for Bootle (Peter Dowd), although there were moments during his speech when I found myself wondering whether history was being rewritten in a remarkably creative way.

The changes that the Government have proposed come against a background of remarkable achievement in cutting the deficit by four fifths, reducing the unemployment rate to its lowest since the 1970s, giving 32 million people tax cuts and taking 1.7 million out of income tax altogether. Some of those things were denied by the hon. Gentleman, who claimed at one point that the rich were only getting richer. I think it therefore falls to me to offer a few statistics to put his comments into context.

The first comes from the Institute for Fiscal Studies analysis of what went on under the previous Labour Government. The hon. Gentleman, who is chuntering with his colleague the shadow Chancellor, should focus on that IFS analysis. The independent analysis from the IFS shows very clearly that on most measures income inequality during the 13 years of the previous Labour Government went up. Part of the reason for that was explained, helpfully, by the hon. Member for Norwich South (Clive Lewis) in an interesting interview with The Guardian the other day. He pointed out that the attitude of the previous Labour Government was, to quote the former deputy Prime Minister, Lord Mandelson, “intensely relaxed” about the filthy rich. The hon. Member for Norwich South rightly went on to say that during the 13 years of the Labour Government:

“The huge fortunes of those at the very top…were left almost untouched.”

That is why the work done by this Government, which for example includes scrapping child benefit in 2013 for those earning over £50,000, has led to the lowest tax gap for a very long time. The percentage of income tax paid by the top 1% has doubled under the Conservative Government. The hon. Member for Bootle therefore needs to think hard about that IFS analysis. Income inequality went up under the 13 years of the Labour Government and it has gone down in eight years under the Conservatives.

There are other points worth highlighting. For example, people on lower and middle incomes actually have more money in their pockets now than at the start of the financial crisis under the previous Labour Government. The gap, as I pointed out, between those on the lowest and highest incomes is lower than it was when the Labour Government left power in 2010. In fact, income inequality is now close to its lowest point since 1986. That is a remarkable achievement. Over the past 30 years, which include 13 of a Labour Government, income inequality narrowed sharply under this Conservative Government.

Labour Members have made a lot of points about employment, so it is worth highlighting that the growth in employment benefits most the poorest 20% of households. The employment rate is now up by more than seven percentage points on where it was before the financial crisis under Labour in 2007. Thanks to the national living wage, the income of the lowest earners has actually grown by almost 5% since 2015, higher than at any other point across the earnings distribution. The actual situation today in our economy for those working is therefore very different from that painted by those on the Opposition Benches and by the hon. Gentleman.

A crucial and major difference between the Labour party and the Government is on taxing business. The uncomfortable truth for Opposition Members who would like to tax business more is that since the Government cut corporation tax in 2010 receipts have gone up by 50%, generating an extra £20 billion in 2016 over what was generated in 2010. The extra £20 billion we found for the NHS above inflation for this five-year period does not come from nowhere; it comes from increased receipts and growth in the economy. That extra £20 billion raised from corporation tax, as a result of cutting corporation tax, is one of the critical economic differences between those on the Government side of the House and those on the Opposition side. The Opposition still believe that if they tax businesses more they will get more tax. The truth, however, is that if we tax businesses less we incentivise business and entrepreneurs, generating more tax receipts to put into our vital public services.

[Julian Knight]

Does my hon. Friend recognise that £20 billion happens to be exactly the same amount of extra money that the Government have pledged to put into our national health service?

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[Leo Docherty]

It is an honourto follow the right hon. Member for Twickenham (Sir Vince Cable).

I welcome the Bill. As we consider the amendments, we are faced with a stark choice that faces all politicians and members of the public when they consider the basic question of how we manage our economy and how we manage tax and spending. It is the stark choice between responsibility and recklessness. If we cast our eyes back over the last eight years, we see the benefits of the responsible, balanced approach of the Conservatives. Since 2010 the deficit has decreased by 80%, and the economy has grown for eight consecutive years, by a total of 17%. Unemployment is at its lowest rate since 1975—the year before I was born—and the Government are managing to boost public spending while simultaneously cutting tax. I am particularly pleased about the almost doubling of basic-rate tax relief: those on the basic rate are paying £1,205 less every year than they were paying in 2010, which is a tremendous step forward.

[Julian Knight]

The increases in the minimum wage and the living wage have also had a fundamental impact on the earning capacity of people at the lower end of the income scale in our society.

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[Leo Docherty]

I am grateful to you, Sir Lindsay. I will come back more pertinently and conclude by bringing the debate back to the effect on small businesses. I hugely welcome the cut in business rates in the Finance Bill.

[Julian Knight]

Enterprise relief is the subject of one of the amendments. Does my hon. Friend agree that it is wrong-headed to say that only 52,000 people would benefit from the said changes proposed in the Bill? Does he agree that we should take account of the fact that many employees and others will benefit from entrepreneurs bringing about these businesses, and does he therefore support the changes to enterprise relief?

[Leo Docherty]

I am wholehearted in my support for the changes to entrepreneurs’ relief. I was in my constituency of Aldershot on Friday, visiting one of the many small and medium-sized enterprises that are the backbone of our economy there. Gemini Tec is one of the leading manufacturers of short circuit boards in the country, and that business is successful because of the entrepreneurs who have been driving it forward for the past 40 years. They do not ask any special favours from the Government. Indeed, they want the Government to keep out of their way and let them thrive. However, if the Government can in some way create an ecosystem and an atmosphere, through measures such as entrepreneurs’ relief, that is wholeheartedly to be commended. We have a tradition of tremendous innovation and creativity—not least in Aldershot, north Hampshire, the Blackwater Valley and Farnborough—and this drives a lot of the job creation that we are now seeing in this country. As I have said, this has led to the lowest rates of unemployment since 1975, the year before I was born.

Finance (No. 3) Bill

Julian Knight Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[John Redwood (Wokingham) (Con)]

I have declared my business interests in the Register of Members’ Financial Interests.

In the third quarter of this year, the United Kingdom economy grew considerably faster than the euroland economy, which is very welcome. It is a timely reminder that since 2010, under first the coalition and then the Conservative Governments, we have seen conditions created in which there has been rapid jobs growth, a general expansion and improvement in profitability and investment, and some return to the better growth rates we saw before the crash at the end of the last decade.

We also see, however, that in the third quarter the United States economy grew considerably faster than the United Kingdom economy, and the reason is simple. The US has decided on a bold tax reform and reduction programme, which has injected a large amount of extra money into the economy, allowing families and individuals to spend more of their own money without having to give so much to the state, and allowing companies to keep more of their profits. As a result, more American corporations have repatriated their profits to the US, where they then pay the reduced tax rates and either invest that money, give wage rises or better remunerate their shareholders to encourage yet more investment. That model is clearly working. The tax reductions are the main reason the US has experienced much better growth this year than either the EU or the UK.

The Government should not be complacent. While we have so far had a long-lasting and moderate-paced recovery, which is welcome, and a very good jobs recovery, which is extremely welcome, although it gets little credit from the Opposition, policy now is too restrictive. We have an exceptionally tight monetary policy—the tightest of anywhere in the advanced world. We have had two interest rate rises; the ending of all new quantitative easing; the removal of all special facilities from the Bank of England to the clearing banks to lend more money for enterprise and good purposes; much stricter rules to commercial banks that have been very effective in leading to big reductions in new car loans and mortgages for the higher-priced properties; and of course the attack on the buy-to-let sector in the 2016 Budget. This is quite a big monetary tightening.

At the same time, there is still a tough fiscal tightening. What worries me—and clearly the Chancellor, too, given some of the actions in the Budget—is that the fiscal tightening was even tighter this year than was planned. Between the March figures and those in this Budget, an extra £12 billion was taken out of the economy and put into the public sector, mainly through extra tax revenues, but also a bit through the shortfall in the planned spending increases. That is quite a severe extra negative adjustment to impose on an economy that we are already trying to throttle with a very tight monetary policy. I fear that the relatively good growth figures of the third quarter will be slowed by these twin actions.

Now let me praise the Chancellor. He is absolutely right to say that the fiscal squeeze was getting too tight and to take action to try to relax the involuntary fiscal squeeze next year, but he is not doing anything much this year. I would like to see something over the winter as well, because the involuntary tightening is unreasonable. That said, the measures he has introduced to relax the fiscal position a bit are very welcome. With my colleagues on these Benches, I strongly welcome the early fulfilment of the promise on tax thresholds. It was a bold promise, and it is good to see it met, as it is a good way of allowing many more hard-working individuals and families to keep more of the money they earn.

[Julian Knight (Solihull) (Con)]

Does my right hon. Friend also recognise that the idea that people on the higher rate of tax are somehow storing their money away in the Cayman Islands is an absolute nonsense. These are hard-working people—often people such as locum GPs and deputy headmasters. Normal working people are being caught in this tax trap.

[John Redwood]

That is right. Many people who have been relatively successful and got to more senior positions are now being caught by quite penal taxes. I would like to see, in either this or a future Budget, more progressive work done to cut the tax rates to raise more revenue. That has come out very well so far on the Government Benches. We all strongly support what the Government have done on corporation tax rates, which have come down a long way and are coming down further. That boldness has been rewarded with a 50% increase in revenue—an increase that the Opposition do not want. They want to put the rate back up to avoid that increase in revenue. [Interruption.] They nod and say it would not happen, but it does happen. It happens every time they get into office: they put the rates up, tax revenue falls, and we have to come in and lower rates again, but we also have the problem of dealing with the extra borrowing.

[John Redwood]

We disagree.

Let us take another tax where very clearly a lower rate has produced a lot more revenue: the higher rate of income tax. Labour wisely kept the highest rate of income tax at 40% throughout most of its time in government, knowing it was the way to attract people with money into the country, to attract investors and entrepreneurs, and to encourage people to take more risks. It set a more penal rate just as it left office, as a kind of tax trap for the Conservatives. When the Conservative Chancellor eventually summoned up the courage to lower the rate from 50% to 45%, there was a big surge in revenue.

As one of my colleagues has already pointed out, there was an even bigger surge in revenue when a previous Conservative Government cut the rate from 80% in two stages to 40%. The amount of tax went up in cash terms and in real terms, and the amount of tax paid as a proportion of the total by those on the top rate went up. It was a win, win, win. I would urge the Chancellor to reconsider reducing it back down to 40% because he would collect more revenue and provide that stimulus to enterprise.

I hope that the Government will think again about a couple of tax rises that have been deeply damaging to our economy. The first is the rise in car tax, or vehicle excise duty. The graph showing car sales and output in the UK was increasing progressively between the Brexit vote and the spring Budget of 2017, but it then fell very sharply, and we now have a serious problem. The tax attack on diesel cars, allied to the threat of more controls on diesels, has been particularly damaging. Governments of both persuasions have gone out of their way to attract a lot of inward investment, and new investment, in diesel output and diesel vehicles. They encouraged that, only then to kick the props away and make such investment very difficult.

[Julian Knight]

Germany has started to row back and introduce “clean diesel”.

[John Redwood]

Indeed. Modern diesel engines are much cleaner, and are comparable to petrol engines. The Government have damaged our industry needlessly, and that, along with the squeeze on car loans, has led to a sharp drop in car output, which is not welcome.

The other issue is stamp duty. The Government have cut it for many people, which is extremely welcome, and I am pleased that they are continuing the trend so that houses can become more affordable for those who do not own them. However, we need to think about people who are trying to buy a different house, perhaps to move up the property ladder in expensive parts of the country; we need to think about the impact of transactions at the dearer end on chains and on people buying cheaper houses; and we need to think about the workloads of removal firms, estate agents, decorators and so forth.

I think that the Government have overdone the tax attack at the top. The market has become ossified, and they must be losing quite a lot of revenue. As the Red Book shows, they are having to scale back the stamp duty revenue forecast, and I am sure that that is to do with the damage that the tax attack has done in relation to the more expensive properties.

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[Sir Vince Cable]

That was at the heart of the Dilnot proposals that Lib Dem Ministers sponsored and supported in government. If that is the idea, we do not have any problem.

On the income tax changes, and particularly the lifting of the higher-rate threshold at a cost of about £1.3 billion, I certainly do not regard people on £50,000 a year as rich—they have a lower income than we do, among other things—and, in an ideal world in which there was plenty of tax revenue and the economy was booming, lifting the threshold would be perfectly reasonable, but given other priorities it is a bad choice. As it happens, that £1.3 billion is equal to the shortfall between the amount of money the previous Chancellor took from universal credit two years ago and the amount that was reinstated this year. Filling that shortfall would be a much better use of the funding.

[Julian Knight]

Has the right hon. Gentleman thought about the effect of fiscal drag on productivity? The fact is that, as more people get into the higher-rate tax bracket, the less productive they may become, which lowers tax receipts and lowers productivity in the economy.

[Sir Vince Cable]

It is a good policy, in general, to eliminate fiscal drag, and the Government should do that. But it is a question of priorities, and the disparity between standard-rate taxpayers, who stand to gain £130 a year from this measure, and upper-rate taxpayers, who stand to get £800 a year, reflects the Government’s priorities, which are completely wrong.

It would be less bad if the Chancellor had been willing to tackle something that he acknowledges is a problem, which is the expense of the reliefs given to higher-rate taxpayers through the pension system. He described the pension tax relief, which costs the Treasury £25 billion a year, as “eye-wateringly expensive”. We started to approach it in coalition, and, in a difficult fiscal situation, this is something that the Government should be addressing here, but they are not. However fair-minded we want to be to all groups of taxpayers, it is very clear that this is a political gesture. The social priorities are completely wrong.

It is very welcome that there has been a big relief for shopkeepers and others through the business rates system, but it does not address the underlying problem that business rates are a bad tax—they tax improvement in property. The Liberal Democrats and some of the think-tanks have been associated with another proposal, and it would not be difficult to replace the business rates system with a tax on commercial landowners. That would be a much simpler system, as there are far fewer landowners than there are people who pay commercial rates. It would be much more equitable, and it would not discourage business improvement. Currently if a factory installs machinery, it makes itself eligible for higher commercial rates. This is a thoroughly bad system, and extreme Treasury conservatism is why the problem is not being addressed.

One thing the Government have done, which is positive, is attempt to deal with the digital sector, but I reinforce the point made by the hon. Member for Dundee East (Stewart Hosie) that the magnitudes involved are very small. We are talking about £5 million next year, rising to £440 million, in a context where the National Audit Office, not a political body, has estimated that the retail sector in the UK had lost £9 billion of revenue as a result of competition from internet platform companies—in essence, we are talking about eBay and Amazon. The disproportion is enormous and the measure, although welcome, is very weak.

To conclude, there are a lot of small, sensible things in this Budget—I do not want to be grudging about them—but the big picture is dire, and the big Budget judgment, which is about giving priority to reducing income tax, is fundamentally wrong.

--- Later in debate ---

[Julian Knight (Solihull) (Con)]

Thank you, Mr Deputy Speaker, for letting me speak a bit earlier than I expected. It is a great pleasure to be called so early and I will not abuse that generosity by speaking for too long, because I know that many colleagues want to speak in the debate. I just wish to cover a few areas that have come up in the debate and the Budget more generally: first, the higher rate tax thresholds, which have been mentioned by many hon. Members; secondly, corporation tax and small businesses; thirdly, debt, which my right hon. Friend the Member for Wokingham (John Redwood) spoke about so interestingly; and, finally, fuel duty and car taxes more generally, which is pertinent to my constituency, with its 9,500 car workers.

On the higher rate tax, I was interested in what was said by the right hon. Member for Twickenham (Sir Vince Cable), who is no longer in his place. There is an amendment in the name of all the Liberal Democrats and it is good to see them here this evening in such numbers. The amendment mentioned the

“provision for a £1.3 billion tax cut for higher earners”.

I pressed the right hon. Gentleman to explain what that would actually mean for productivity and for what we term fiscal drag, a term first used when Gordon Brown was Chancellor of the Exchequer. It happened in the early part of the Labour Government, which came to office in 1997, and was eased over time. In 2010, it was decided, as an issue of morality, that we would also freeze the higher rate of income tax at the threshold. The reality is, however, that in the long term that has quite a damaging effect on the economy. It means that people are being brought into the higher rate of tax who really should not be there. I know that in my constituency there will be, for example, deputy headteachers, locum GPs and middle managers in local government who are paying the higher rate of tax. They would not have done so within the last generation, but they do now.

When people—this applies in the private sector as well—who pay the higher rate of tax are offered any extra work or overtime, they make a calculation: “Do I take that or do I trade that off against what my tax will be as a result of this?” If people are being charged too much tax at this marginal rate, that reduces productivity, and that, in itself, has a damaging effect on the economy. As my hon. Friend the Member for Dover (Charlie Elphicke) mentioned, in 1987, the then Chancellor, Nigel Lawson, lowered the rate of tax from 60p in the pound to 40p in the pound—and guess what? We actually took more tax in as a result.

This is a fundamental point that also applies to corporation tax. Labour Members have made their views very clear in that they would like a restitution of the rate of 26% for large businesses and 21% for small businesses. However, with regard to corporation tax, the proof of the pudding is in the eating—that is, employment. As my hon. Friend the Member for Cheltenham (Alex Chalk) said, the unemployment rate in the UK is 4%. I grew up in a town in the north of England in the 1980s, when the unemployment rate was about 25%. We went through a horrendous recession in our light industrial town. We could not even dream of a rate of 4% at that time. In the EU, unemployment is 8%, on average, and it is 9% in France. My hon. Friend also mentioned Italy and Spain. Think about all those lost opportunities and lost lives through high unemployment. This beds down in communities—I have seen it for myself. The way in which we bring about a culture of work and of higher employment is fundamental to the development not just of productivity but of our society itself.

[Alex Chalk]

Does my hon. Friend agree that unemployment has such a crushing effect on self-esteem and self-worth, and that that is one of the key reasons we should celebrate increased employment—not just for the sake of statistics but because of the individuals whose life chances lie behind them?

[Julian Knight]

I thank my hon. Friend for his intervention—that is absolutely true. If someone is unemployed for 18 months, they are often unemployed for the very long term—for the rest of their life, in some instances. It ruins lives, shortens lives and makes those lives more miserable.

The way in which we have approached corporation tax is absolutely correct. On small business rate relief, my hon. Friend, again—I do not wish to just copy his speech—talked about how that had been very well received in his business community and on his high street. It is a blessed relief that will bring a much-needed boost to our small businesses and to our high streets, which we have to nurture. We cannot have the high street of just the bookmaker, the pub next door, and the charity shop—although charity shops do very valuable work. We need diversity in the high street, not just in terms of retail but living space, opportunity, health and social services.

On debt, as I said in the Budget debate, with a ratio of 82% to GDP, we really should not give ourselves a pat on the back. It is not a good place to be at all. It makes us less likely and less able to effectively withstand the winds of global recession that happen on a cyclical basis. However, we have chosen a path by which, over time, we bring that under control. There are two ways to reduce the GDP-to-debt ratio: through productivity or inflation. The choice of British Governments, for years and years, was inflation. Inflation is a fool’s errand: it destroys living standards and destroys savings. The second approach is productivity. I am really pleased to see in the Red Book that many elements of this Budget really focus and home in on productivity, but we need to keep that going. We need a step change in our economy in this respect.

I turn to what I call car taxes. As the vice-chair of the APPG on fair fuel, and the former chair of said august APPG, I am absolutely delighted to see the freeze in fuel duty. However, I want to make a point about diesel cars in this respect. That is not, obviously, just because my constituency has 9,500 workers in this sector and 93% of the engines that come off the track are diesel cars. We have seen a 45% fall in diesel sales, and that hurts the Exchequer.

This problem originated in Wolfsburg. The irony is that the Germans are now changing their approach with regard to diesel, so the originators of the difficulty within the diesel market are now looking at the market and saying, “Hold on a minute—we need to ensure that clean, modern diesels are supported.” We have a higher excise duty on modern, clean diesels. According to the AA, 270 of the diesel cars currently tested are now within tolerance in that respect. If we have this disincentive, people will hold on to their older cars for longer. These cars can run for a quarter of a million miles—I know; I have one. That means that the older EU5 and EU4 engines will stay on the road longer and pollute more. We need to get really smart about this and construct the tax system to support all modern petrol and diesel engines while, at the same time, aiding the transition towards new technologies.

On the Budget as a whole, it is quite remarkable to note, as a former personal finance journalist, how we used to have a merry time pulling Budgets apart. We could almost guarantee that, by the end of the first day, we would have something to go at the Government on. With this one, that is not the case. That is a testament to the Chancellor and the team. I will be absolutely delighted to vote for this Bill tonight.

Oral Answers to Questions

Julian Knight Excerpts

Tuesday 6th November 2018 Commons Chamber

[Mr Speaker]

I do not think we have heard from Mr Knight.

[Julian Knight (Solihull) (Con)]

Thank you, Mr Speaker.

This morning, the European Automobile Manufacturers Association released research demonstrating that all 270 new-generation diesel vehicles tested to date are below the emissions threshold on the road. In the light of this, will the Treasury team meet me and other colleagues to discuss how we can construct a road tax system that promotes clean diesel over old diesel and protects 9,000 jobs in my constituency?

[Robert Jenrick]

I would be very happy to meet my hon. Friend, who I know is a champion for Jaguar Land Rover. I hope it will reassure him to know that I will discuss these issues with the chief executive of that company later today.

Financial Guidance and Claims Bill [Lords]

Julian Knight Excerpts

3rd reading: House of Commons & Report: 3rd sitting: House of Commons
Tuesday 24th April 2018 Commons Chamber

[Gareth Thomas]

My hon. Friend makes a good point.

In the United States, federal banking regulators regularly assess how banks are meeting local credit needs. Their assessments affect the way in which the banks are allowed to expand, merge, do acquisitions and so on. Banks can get credits towards their assessments if they invest in community banks or credit unions. Not surprisingly, both the community banking movement and the credit union movement are in even better health in the US than they are here.

Santander, HSBC and Barclays all operate in the United States, where they release far more data on lending, down to postcode level, than they do here. So surely the questions for this House are: why are they not willing to do that here, too; and, as I believe, should they be forced to do so? Last October, Santander announced an $11 billion, five-year settlement on lending and community development in eastern parts of the United States, which is the market in which it operates. That represented a 50% increase in its Community Reinvestment Act-related activity. No such equivalent increase has been announced here in the UK. The Community Reinvestment Act has cross-party support in the US, being backed by Republicans and Democrats alike, including for its data disclosure requirements. If Ministers are not prepared to accept my amendments, I would wish, with your permission, Madam Deputy Speaker, to press amendment 1 to a Division. These amendments are not onerous. Banks and other lenders record this data, and although a little work would be needed so that the information could be released in a useful format, a similar system works particularly well in the United States. In turn, the disclosure of lending details could help the single financial guidance body to make more effective choices.

I shall deal briefly with amendment 31. One key challenge for the single financial guidance body will be, as we all know, to help those who need loans, for whatever reason, to access the cheapest products—those offered by credit unions fall into that category. Surely the SFGB should be mapping where credit unions exist and what further action can be taken to promote the take-up of their services by those who are most in need. Credit unions have very low administration costs. They simply do not have the megabucks of a major bank or a payday lender’s marketing department, so many of those who most need the support that credit unions can offer are often unaware of the services they provide. Surely another challenge for the House is to work out how we help credit unions to make more information available about the products on offer. I know that Ministers are sympathetic to efforts to expand the credit union sector, so I ask them to give specific attention to thinking about what further steps can be taken to help the credit union movement to expand and to support the SFGB in achieving that aim.

[Julian Knight (Solihull) (Con)]

I refer Members to my entry in the Register of Members’ Financial Interests. I completely agree with what the hon. Gentleman says about credit unions. Does he agree that one key aspect of trying to promote them is improving their professionalism, IT and this information, and using the potential for workplace credit unions? Should we not try to bring this through the workplace and payroll?

[Gareth Thomas]

I agree with that point, which is why it has been encouraging over the past 10 to 15 years to see Departments beginning to do their bit to encourage the workplace take-up of credit unions. I hope the Economic Secretary may be able to tell me that Her Majesty’s Revenue and Customs will follow this trend soon, but the point about trying to increase professionalism is well made. Again, it would be good to hear commitments from Ministers that some of the problems that credit unions face due to poor regulation by the Financial Conduct Authority will be dealt with.

Telecommunications Infrastructure (Relief from Non-Domestic Rates) Bill

Julian Knight Excerpts

3rd reading: House of Commons & Committee: 1st sitting: House of Commons & Report stage: House of Commons
Tuesday 5th September 2017 Commons Chamber

[Julian Knight (Solihull) (Con)]

I thank the Minister for giving way—he is being most generous in allowing interventions. In 2015 and last year, Solihull enjoyed a higher growth rate than China, but it is still one of the poorest areas for broadband provision, particularly business provision. The Minister can imagine what more could be achieved if we had better broadband, so the Bill is very welcome, as is the £60 million in targeted tax relief. Does he agree that the relief will not only boost Solihull’s economy but key in to the midlands engine, which is absolutely at the heart of UK growth and productivity?

[Mr Jones]

My hon. Friend is a keen advocate and supporter of the businesses of Solihull. My understanding is that, by the end of the current roll-out period, 91% of properties will have been reached by superfast broadband. However, the Bill will incentivise providers to roll out more direct fibre services to all parts of the country. Hopefully, businesses and individuals in Solihull will also benefit from the provisions in the Bill.

Through these powers, we will target the relief on operators of telecoms networks who deploy—I have reiterated this point a number of times for the sake of clarity—new fibre on their networks. The proposals will incentivise and reward operators who invest in the fibre network.

These concepts have not been defined before for business rates. The powers in the clauses will therefore allow us to develop definitions with experts in the telecoms and business rates sectors. By taking this approach, we can ensure that we accurately capture in the relief only those parts of the telecoms network that comprise new fibre, which has been a significant concern of right hon. and hon. Members.

Balancing the Public Finances

Julian Knight Excerpts

Tuesday 11th July 2017 Westminster Hall

[Mr Harper]

My hon. Friend sets out clearly what has happened in the past, and I want to spend a little time on the challenges facing us in the future, but it is worth looking at the economic record. We did not make the decisions and get the success we have had easily; they were contested, and our political opponents challenged us every step of the way. But we have been successful, which gives us the credibility to talk about facing the challenges of the future.

When we came to power in 2010, the budget deficit was the equivalent of just under 10% of the size of the economy, at £150 billion a year. According to the most recent set of actual figures, we have reduced the cash deficit to £46 billion—down by 70%—and the deficit as a proportion of the size of the economy is down by 75% to 2.5%. That is a significant achievement, and it means that in this Parliament the size of our stock of national debt as a proportion of the size of the economy will start to fall. That is incredibly important for the future.

[Julian Knight (Solihull) (Con)]

I congratulate my right hon. Friend on securing this incredibly important debate. The impact is not simply one of taxes and of borrowing and spending, but of Government spending on personal finances, which has a massive impact because of interest rates and personal interest rates. If we let borrowing get out of control, interest rates in the real economy would rise. That is when we have repossessions, and that then is when we have a depression.

[Mr Harper]

My hon. Friend is absolutely right. If we let the public finances get out of control, interest rates would rise and hard-pressed families who are having to make difficult decisions would see the cost of their mortgages and other debts go up, which would not make their lives any easier at all.

Let us consider the impact of controlling the public finances on the real economy. If we look at growth, at how fast the economy has grown over the past seven years, we see that our economic performance among the G7 largest countries in the world has been second only to that of the United States. Interestingly, we have grown our economy at almost double the rate of our nearest neighbour, France. In 2014 and 2016 we were the fastest growing G7 country, and the joint fastest in 2015. That is an impressive record. I mention that because our political opponents often pretend that balancing the public finances has not worked, but in generating economic growth it absolutely has worked.

Economy and Jobs

Julian Knight Excerpts

Thursday 29th June 2017 Commons Chamber

[John McDonnell]

I will come on to that. Household debt is at a record level. Why? Because wages are so low, yet housing costs, and other costs with inflation rising, are biting hard for working families. It is no wonder that they have to resort to increased levels of debt just to get by. Those are the JAMs—the “just about managing”, who were supposed to be protected in the last Budget.

[Julian Knight (Solihull) (Con)]

Does the shadow Chancellor understand the very basic economic point that the ability to borrow relies on confidence? If the individual institution that is lending someone money has no confidence that they will be able to repay it, the interest rate will go up. If we do not have the correct economic policy in place for the correct borrowing, we will end up with higher interest rates.

[John McDonnell]

I am not sure that that adds to the sum of human knowledge.

--- Later in debate ---

[Julian Knight (Solihull) (Con)]

I congratulate everyone who has made their maiden speech today—we have heard some excellent speeches.

If you will indulge me for a moment, Mr Speaker, I would like to make a brief dedication to my predecessor, John Taylor, who sadly passed away during the campaign. I am sure many Members of the House will have happy memories of John, who was a thoroughly decent man and a very good friend to me.

John and I would often talk about the economy, and about Solihull and the growth we have seen there. That growth is not to be taken for granted. Often, people suggest that Solihull is prosperous so it can afford to pay more in tax, and that sort of thing, but the reality is that Solihull is built on entrepreneurship. Since 2010, we have seen a 60% fall in unemployment, and in 2015 we had a GDP growth rate faster than China’s.

However, about 10 days out from the date of the general election, I started to get calls from local businesses that had become deeply concerned as they saw the polls narrow. The reason for their concern was the uncosted spending plans of the Labour party. Their real concern was that everything in the economy is based on the public finances and that without proper public finances and confidence, interest rates rise, and we end up with credit crunches and repossessions, which really feeds through to the real economy.

We should remember that controlling the public finances is not a left versus right cliché about a generous welfare state against a low-tax economy. Putting our public services on a sustainable financial footing is about making sure they are still here in 20 years’ time and addressing the intergenerational injustices built into our current funding model.

It is well known in policy-making circles that there is a time bomb under the welfare state. Our ageing population means that we will be supporting more and more claimants on the system on the back of a proportionally shrinking working-age population. This is not sustainable. Moreover, we not only continue to finance social spending through debt, heaping fresh burdens on the next generation, but hurt living standards today as interest rates rise and squeeze real incomes. On top of that, the Government have to employ cost-controlling measures such as the public sector pay cap, putting even more pressure on incomes. This is long on pain but short on gain, and no substitute, in the long term, for the substantial reform that has to take place.

This election has been widely touted as one where the young began to make their voice heard. That is a really welcome development, and I am sure that as democrats, Members in all parts of the House welcome this new engagement from the young. However, we as Conservatives must convince them that their best bet is not reckless, regressive giveaways such as scrapping tuition fees, but a party that will deliver jobs, a strong economy, sustainable public services that they can rely on, and a fairer balance of taxation between the generations. Tackling the deficit is absolutely essential to building a country that works for everyone. It makes a real difference to lives out there. If we lose sight of that now, I am afraid that we are lost economically. We have to think now that the decisions we make will not just impact on the next five years but will set a pattern for the decades ahead.

Oral Answers to Questions

Julian Knight Excerpts

Tuesday 25th October 2016 Commons Chamber

[Mr Speaker]

I wish the hon. Member for Solihull (Julian Knight) a speedy recovery. He may ask his question from his seat.

[Julian Knight (Solihull) (Con)]

Thank you, Mr Speaker. The Chancellor will be well aware that the west midlands has a trade surplus with China, thanks to Jaguar Land Rover in Solihull and wider manufacturing. On their visits to BRIC nations, previous Chancellors have been keen to trumpet business in the northern powerhouse. Will this Chancellor help the cogs of the midlands engine to turn by taking west midlands businesses with him on future visits?

[Mr Hammond]

Indeed I will. It is an important part of the role of a Chancellor to act as a champion for businesses in the north and the midlands, and to draw the attention of inward investors such as the Chinese and the Indians, who are already heavily invested in the west midlands, to the opportunities that exist in the UK beyond London and the south-east. Such opportunities are not always as obvious to foreign investors as those that exist in London.

Centenary of the Battle of the Somme

Julian Knight Excerpts

Wednesday 29th June 2016 Commons Chamber

[Dr Murrison]

The hon. Gentleman is absolutely right, and I suspect he will have closely followed the programme over the past two years and will continue to monitor it closely over the next two years, leading up to armistice in 2018.

As I was gazing over Scapa Flow a few weeks ago, I wondered how many seamen in Jellicoe’s grand fleet, or in Scheer’s high seas fleet, would have guessed that their countrymen would be spending most of the ensuing 100 years as the closest of allies, united in the most powerful alliance that the world has ever seen. On Friday, we will be standing shoulder to shoulder with another friend and ally at a very special Anglo-French place, the Thiepval monument on the Somme, in the lee of which there are 300 French and 300 British graves. It is a special place; a haunting place. It was Lutyens’s great triumph—a monument to the missing, but more than that: an enduring monument to the unity, I think, of Europeans, and particularly our unity with our closest continental neighbours.

At this time of historic opportunity and risk, let us make the centenary’s legacy one of amity and concord in our European neighbourhood. Here at home, too, we are desperately in need of a coming-together moment. The Somme vigil on Thursday night, and the silence at 7.30 on Friday morning, will, I hope, facilitate such moments of quiet reflection.

[Julian Knight (Solihull) (Con)]

My hon. Friend is making a powerful speech, which is worthy of this occasion. Does he agree that one of the most encouraging developments of the last few years is the greater respect that is shown to our armed forces, and, in particular, the armed forces covenant? Is our country not coming together to a greater extent than ever to mark the dedication and service of our armed forces?

[Dr Murrison]

I agree with my hon. Friend. One of the things that has struck me while I have been doing this work is how much added value there is in the presence of a serviceman from today’s Army on the battlefield tours that we have been running, and in seeing the faces of the young people for whom the tours were principally designed. One understands that they get it—in that moment, they get it—and there is a bridge between today’s servicemen and those who served 100 years ago. That is very powerful.

I am very pleased to see that so many colleagues from Northern Ireland are present. As I was preparing my speech, I asked myself, “Who can I reasonably expect to see in the House during this debate?” I am not surprised, and I am not disappointed. May I pre-empt some of the remarks of Northern Ireland Members by saying that there is nowhere in these islands where the force of the Great War is more keenly felt, or, indeed, where I have felt that more value has been extracted as a result of this centenary commemoration? The way in which communities have been pulled together by sharing history that is so often complex and nuanced has been a joy to behold.

When prominent republicans feel comfortable telling us about their relatives’ wartime service in the British Army, when members of the nationalist community—as guests of the Somme Association at the Somme Museum in County Down—proudly show us their grandfathers’ Great War medals, when the Irish Ambassador lays a wreath at the Cenotaph for the first time, and when the Commonwealth War Graves Commission unveils a Cross of Sacrifice in Glasnevin cemetery in the shadow of Daniel O’Connell’s tomb, we know that something good is afoot. If this is a centenary looking for a legacy, it need look no further. We should remember that a Somme that saw the Ulstermen’s heroic storming of the Schwaben Redoubt also saw the 16th (Irish) Division’s Guillemont and Ginchy. The Somme narrative, once heavily partisan, is now becoming a shared history. On Friday, President Higgins will occupy a place of honour before the Thiepval monument, which carries the names of so many from what were, by the time it was built, two separate polities on the island of Ireland.

Remembrance is hard-wired into the four-year centenary, but what does remembrance of the Somme actually mean now, today, given that its participants would have been long since deceased in any event? I look forward to hearing the views of young people the length and breadth of the country who will be taking part in the series of Great War school debates that were successfully opened last night in Manchester.

The perspective of youth on the causes, conduct and consequences of conflict is so important to our future, but for me remembrance means reflecting on loss and missed opportunity. Our society now is the poorer for the fallen not having enriched the last century through arts, science, medicine, business, even politics. We lost the famous men honoured in their generation, the glory of their time, cited in “Ecclesiasticus”, which many of us will have read out on Remembrance Sunday. Society is the poorer also for the loss of men who would otherwise have lived out their lives in relative obscurity. “Ecclesiasticus” mentions them too. It is the poorer because of the children who were never born to all those great uncles, children whose names were never etched in stone and whose number was never counted among the casualties. In all that hopeful, bright, missed opportunity, how bitterly ironic that one participant in the battle survived—the very distillation of evil, a corporal in the Bavarian army who would march the world to an even greater war of misery two decades later, a war that history will judge to be inseparable from the first.

Steinbrecher was right. The Somme has become a byword for tragedy, pointlessness and waste, but we should never lose sight of the achievements of our predecessors. Be proud of them. Be proud of Britain’s first citizen army. The butcher’s bill may have turned out to be impossibly high, but they were doing the right thing in a just cause. That they were acting against Europe’s then general disturber of the peace was nobly and magnanimously acknowledged at the start of the centenary by the President of Germany, a modern, forward-looking country still tortured by its past.

What was going on in the heads of Kitchener’s young men? In 1916, many of them would not have had the vote. Their families would not have enjoyed the equity in a rich country or public goods that today we assume as our birthright. What then motivated them? If the rallying cry in 1916 was “King and Country” or “Gott, Kaiser und Vaterland”, the glue was loyalty to your mates. If love for country was the headline, the text was written in pride—pride for town, for village, for neighbourhood and for family. But above all it was the ultimate team spirit, the instinct to do the right thing by fellow creatures united in adversity and a common cause. That is why men went over the top in July 1916. That is why they endured unspeakable horrors. That is why they fought and died on the Somme on a truly industrial scale. But ask those who have served in the wars of the 21st century, the sort of conflict that we will be debating, again and at last, next week. They will say the same. A gentler age would have called it love for your oppo. In today’s terms, it is loyalty to your mates.

Nowhere is that better shown than in the Pals battalions of Kitchener’s volunteer army, a phenomenon that is a byword for the pathos of the Somme. That magisterial work, “The First World War” by my late constituent and near neighbour Sir John Keegan, ends with this:

“Men whom the trenches cast into intimacy entered into bonds of mutual dependency and sacrifice of self stronger than any of the friendships made in peace and better times. That is the ultimate mystery of the First World War. If we could understand its loves, as well as its hates, we would be nearer understanding the mystery of human life.”

Steinbrecher survived the Somme, but was killed in action the following year. By then, with the Americans entering the war, the tide had turned. Another German officer, Captain von Hentig, described the Somme as

“the muddy grave of the German field army”

and so it was. But peace came, and Europe’s politicians failed, a betrayal of the fallen and a reminder of our heavy responsibility.

--- Later in debate ---

[Julian Knight (Solihull) (Con)]

It is a great privilege to follow the hon. Member for Strangford (Jim Shannon). July 1 1916 was the bloodiest day for the British Army and the start of our bloodiest battle. As nations applied the lessons of the industrial revolution to the battlefield, there were casualty rates of 20,000 a day—60,000 casualties on the first day—and nearly 1 million men were killed over the course of the several months of the battle. Those rates are slightly numbing. How do you put faces to close on 1 million men? How can you prevent so many tragedies from becoming, as the saying has it, mere statistics?

In my constituency of Solihull, we have a strong connection with our history—many Members have reflected on the history of their own constituencies. On 1 July, the mayor will be hosting our borough’s own commemoration of this pivotal battle, next to a replica trench in the grounds of Kingshurst academy. That will bring history to life for a new generation. I always find with younger people that they have a real, deep respect when faced with the sacrifices of our forebears and have real empathy for what they went through.

I would like to pay tribute to the men and women from my community who paid the ultimate price during the Battle of the Somme and during the Great War. There is not time enough to list them all: 24 Solihull men—Silhillians—died on the first day of the battle, and 127 would die before it concluded in November. Solihull was a very small place then in comparison with now, so we can imagine the impact on the community. Many hon. Members have mentioned that in relation to their own communities. These were people everyone knew. I remember the names I have seen and taken note of on the local war memorial: William Bolton, Charles Frost, Charles Haynes, David Jelfs, Clive Latch and Claud Wilks. Also listed are three members of the same family: Albert, Henry and Sidney Britt, all of whom served and died during the Great War. We are very lucky to live in a country where it is difficult to imagine any family suffering so terribly in a war. However, perhaps these days such things are becoming all too more frequent in our civilian lives.

For every man who died, another came home with life-changing injuries to a society ill prepared for them. This centenary offers us an important opportunity, amidst the sadness and respect, to recognise how far we have come in our treatment of veterans. This is not just about medical science, although that has come an astonishing distance since the Somme, as society has applied the same innovative genius to healing men as it once did to killing them. It is also about our much greater understanding of the mental and spiritual traumas that war inflicts on those who serve.

I am pleased that our country is making great strides towards improved mental health support for our servicemen and women, but we still have a long way to go and for many years our progress was too slow in that regard. I always think it is a great shame in our society that many of those who are homeless are former armed services personnel. I will do my best to support those efforts in my role as a Member of Parliament.

Of course, the age of total war meant that the wounds and risks were not borne by soldiers alone. A huge number of courageous men and women on all sides served in medical and technical positions, which were essential to the war effort. My right hon. Friend the Member for Broadland (Mr Simpson) mentioned that many of the shells fired at the Somme were dud. It was very much a testament to the women of this country working in the munitions factories that they made such a difference in improving the quality of the armaments, thereby helping to deliver victory. So let me pay tribute to them now, especially to the extraordinary women who overcame great prejudice to play their vital part. Even before the sheer scale of the slaughter, the authorities had invited them to serve in a wide range of important roles.

Events like this centenary remind us not only how lucky we are to live in an age when mass mechanised warfare is seemingly not imminent but of the incalculable debt all of us owe to the men and women of our armed forces today.