Coronavirus Grant Schemes: Fraud

Kevin Hollinrake Excerpts

Tuesday 18th January 2022 Commons Chamber

[John Glen]

I thank the right hon. Gentleman for his comments, which I am very happy to address. First, we are not writing anything off. The figures quoted are what we expect that taxpayer protection taskforce to recover in the next two years in which it will exist. HMRC has longer to address fraud in the schemes, which it will do in the context of wider compliance activity. HMRC did not produce the figure of £4.3 billion. I understand that it was an inference made by journalists who subtracted £1.5 billion from the estimate of the amount to be recovered by the taxpayer protection taskforce from the £5.8 billion estimated as error and fraud in 2020-21. That was published and Jim Harra and others from HMRC publicised all this before Christmas—in November. HMRC simply used the same numbers in a “mythbuster” article to be published later this week.

Those are the facts. There is nothing new here today, but I would like to address some of the underlying concerns. The right hon. Gentleman is absolutely right to say that fraud is unacceptable. We think that, which is why—as I said in my opening remarks—in March last year, the Chancellor dedicated £100 million to employ 1,265 people from HMRC to undertake these fraud checks and to bear down on the fraud. We have had 13,000 one-to-one inquiries and sent 75,000 letters to those thought to have incorrectly claimed.

I point out to the right hon. Gentleman, however, that many of these schemes were stood up, refined and adapted very quickly. In order to meet the needs of individuals, the self-employed and businesses up and down the country, £81.2 billion of payments were made across the three main schemes. Although I recognise that there has been an element of fraud, the Government have never been complacent about that. Grants for employees and businesses used data on HMRC systems. The design of the scheme was informed by expert advice from HMRC, which has extensive knowledge and understanding of where errors and fraud risks lay. We have implemented post-payment compliance to identify and recover overpayment, and we have invoked automated controls into digital claim processes, which have prevented 100,000 ineligible, mistaken claims.

The Government are not complacent at all about error and fraud. We will continue to bear down on it, and I urge Members of the House and members of the public to continue to contact HMRC, as they have done, as we seek to maximise the recovery of moneys lost.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I say to the Opposition that it is the easiest job in the world to stand on the sidelines and criticise, but what would they have done? Would they have waited and left businesses in peril? Would they have done that in search of the perfect? Some £407 billion has gone to businesses, the vast majority of which went to the right places. Of course there will be lessons to learn, but if the same situation happens again, will my hon. Friend prioritise the needs of business, rather than making the perfect the enemy of the good?

[John Glen]

I thank my hon. Friend for the clear point behind his question. We were straining every sinew in the Treasury to get money out as quickly as possible. On 14 April 2020, a Labour party press release stated:

“It is clear that additional action needs to be taken to increase the take-up of the different measures. We have called for urgent action…as take-up is worryingly low.”

That is why we intervened to change the design of the bounce back loan scheme and to make it 100% backed to get the money out quickly—£46 billion to 1.5 million businesses. I am sure that lessons can be learnt from what we have done—absolutely they can—but the principle of getting that money out and designing schemes with HMRC’s excellent input during that period was imperative for the Government.

Covid-19: Government Support for Business

Kevin Hollinrake Excerpts

Thursday 16th December 2021 Commons Chamber

[John Glen]

Of course discussions will take place across government. The hon. Gentleman draws attention to the transport sector, where of course significant support has been given. However, I take on board his point.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I welcome the fact that the Minister and the Chancellor are meeting those in the hospitality sector this afternoon. There is no doubt that they are suffering because of some of the mixed messages we have heard in the past few days. The obvious places to help them would be by looking at VAT again, potentially reducing it back to the 5% rate until the end of March, and at the recovery loan scheme. As the Minister knows, the original schemes—bounce back loans and the Coronavirus Business Interruption Loan Scheme—did not require a forward viability test, whereas the recovery loan scheme does. It is very difficult for those in hospitality at the moment to demonstrate forward-looking viability for their businesses, so will the Minister look again at the scheme and look to reform it so that businesses can access this vital financial support?

[John Glen]

As ever, my hon. Friend brings sensible and credible points to the Chamber on these matters. He is very familiar with the different aspects of small and medium-sized enterprise financing. The recovery loan scheme, operational until June next year, gives a 70% guarantee to lenders, but of course we will look at all those measures in the round, and I look forward to our meeting later today on other matters.

Greenwashing in Finance

Kevin Hollinrake Excerpts

Tuesday 14th December 2021 Westminster Hall

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I beg to move,

That this House has considered tackling greenwashing in finance.

It is a pleasure to serve under your chairmanship, Sir Edward. I am grateful to my hon. Friend the Member for Kensington (Felicity Buchan), who has passed responsibility for this debate to me as she is unable to attend. Subject to the House’s confirmation this evening, I am happy to say that I will replace her on the Treasury Committee, where she has done such fine work.

On the face of it, greenwashing sounds pretty trivial. The Treasury Committee provides a lot of very interesting information on the subject in its report of April 2021. Chris Cummings of the Investment Association described it to the Committee as

“finding something that looks a bit green and promoting it as a green success story”.

People may say, “Well, companies do that all the time, don’t they? They exaggerate their marketing claims and it doesn’t sound like too big a problem.” But, unchecked, it is a massive problem because finance has a huge role to play in decarbonising our whole economy, not just the financial part of it.

I will give some useful examples of greenwashing. BP got into trouble a year or two ago for promoting its green credentials by saying that it was putting solar panels on all its service stations. The reality, however, is that at that time BP was 96% focused on oil and gas exploration in its investment and economic activity. I very much hope—and I am sure that this will be the case—that BP will decarbonise its organisation over the coming years. Nevertheless, its claim can clearly be described as greenwashing.

McDonald’s said that it had moved from plastic to paper straws. However, the paper straws were not recyclable, and neither were many of the containers used in its products. Coca-Cola claimed to be one of the most environmentally friendly organisations on the planet, yet it is the No.1 plastic polluter on the planet. We need to ensure that there is clear evidence about which companies are green and which are not.

Of course, all these companies form part of the investment strategy for many of the important fund managers for which the UK is famous. Tracker funds are particularly popular among investors, particularly unsophisticated investors. A couple of years ago The Guardian reported on an environmental, social and governance-related tracker fund that included two of the world’s largest oil and gas companies. We must ensure independent verification of claims of green credentials.

On the positive side, the fact that companies are making these claims at least gives cause for hope that this issue is important to the investor community. If people think there is a market for this, if we can get the independent criteria right for the future, and if green credentials can be easily and objectively ascertained, there will be a lot of cash flow.

Indeed, that is what happened when the Government introduced their green bonds, which were hugely over-subscribed. That was great and it shows that people are keen to invest in things that can contribute to decarbonisation and a cleaner planet. Indeed, the experience has been similar in just about every jurisdiction and nation that has offered opportunities to invest in green companies and funds, with schemes being over-subscribed.

People choose what to invest in based on their principles. They are keen to support this part of the economy, so they want to be sure that they are investing in something that is green. The difficult with greenwashing, however, is that the investment might not be green; if independently verified, that would result in significant disappointment. Fund managers and finance houses invest cash on behalf of others in these companies. Many people make such investments because they want to contribute to decarbonisation, so it is tremendously important that the cash flows to the right companies—namely, those that are green and that are transitioning to a greener position.

The other big issue is risk. If somebody had invested in one of the top four US coal producers back in 2010, the current market capitalisation of those companies would mean that the value of that investment had reduced by 99% over the past 11 years. There is a big risk in investing in something that might become a stranded asset because of our transition to a greener environment. The difficulty, of course, is that it is the smaller, less sophisticated investors who are more likely be caught in that trap.

In evidence to the Treasury Committee only this week, Charles Randell, chair of the Financial Conduct Authority, said that the marketing of green funds and investment opportunities was open to scammers to hijack. Therefore, while people think they are doing the right thing by investing in the right areas, others are piggybacking on that to create new opportunities to scam the general public.

The UK has a huge role to play in financing the transition to a green zero-carbon future. It is one of the leading financial centres in the world, managing about £10 trillion in assets, contributing about £132 billion to our annual economic activity and about 7% of our GDP. Its role in this area, providing the finance for decarbonisation, is hugely important. That is why this conversation is hugely important,—because we need the cash flow to go to the right places for decarbonisation. The finance sector has a huge role to play, so we need to ensure that those are bona fide green investments.

Although the UK is a world leader in finance generally, it is too early to say that we are a world leader in green finance. We are doing many things that are moving in the right direction, but it is too early to say that, certainly according to the conversations I have had with people from the City, and there will be independent verification of that as we go along. We need to ensure that we take the right steps in future to make sure that we are a world leader not just in finance but in green finance. It is too early to say that today.

The UK Government have done much good work in this area, with the green bonds I referred to earlier and the UK Green Investment Group, which will pump-prime investment into green technologies. Indeed, the Chancellor has set out that the UK will become the world’s first net zero-aligned financial centre, which is very welcome.

There is clearly big UK demand. In evidence to the Treasury Committee, the FCA chief executive said that in the coming years about 33% of fund manager investments would be into ESG, which is very welcome news. However, according to a recent investor survey, 80% of investors quoted the lack of disclosure and consistent definitions of green as a drawback to their ability to invest in the right areas. We need clarity so that fund managers and consumers clearly understand what is properly green and what is just greenwashed—in other words, that people get what they think they are buying.

The Government’s work on green taxonomy—how investments are categorised in different corporations—is welcome. They have set up the green technical advisory group to look at that. There will be climate-related financial disclosures by 2023 for the largest companies and more information by 2025. Some of the larger pension funds are already required to provide that information in their annual reports. There are also mandatory transition plans. All of those things are good UK domestic innovations, but this stuff needs to be international, not just national. Our broad rules are based on what happens in the EU, but the Government have set out that we are going to move on from there and set up a more challenging regime that is more pertinent to the UK domestic situation.

The EU has already set out its position in some areas and has completed its first phase of setting standards, but there are questions about whether it is aligned to the 1.5° warming target. Also, according to the criteria, gas is potentially permanently allowed rather than seen as a transition fuel, and nuclear is also included. Is that based on science or has this been the subject of lobbying by certain sectors? Such questions need to be answered.

The key is to make sure that the measures by which we judge green investments are standardised and harmonised internationally, with proper data and metrics behind them so that we do not compare apples with pears. We need to be able to tell whether they are proper green investments. There are different kinds of green investments. For example, there are investment funds that invest purely in green technologies such as renewables, and others that invest in ones that are transitioning from one technology to the other, which could be just as important as the green technologies themselves.

I am interested to hear the Minister’s perspective on this, but I am not entirely clear on who will draw up the rules. As I have said, I am sure that the green tech advisory group will be charged with a lot of the responsibility, but I would appreciate more information on whether the FCA and the Treasury will be working together on this.

I have some questions for the Minister. We have worked together on lots of different things and I look forward to talking to him about this issue in the coming days, weeks and months. Who will do the standardisation and harmonisation? When will it happen? What will it cover in terms of labelling the standards themselves and the benchmarks? Will those standards include scope 3 emissions, meaning not just the scope 1 direct emissions from the organisations but those from their supply chain and customer base? Will the criteria be measured against the 1.5° target? There are mandatory transition plans for our largest FTSE 100 companies by 2023; when will the rest of the economy be required to look at those mandatory transition plans?

Finally, I have a word of caution about unintended consequences. We want to minimise the risk of stranded assets. We need to make sure that companies and fund managers have a glide path so that they understand the transition period, adjust for the future, make strategic investments and not be left high and dry by a sudden change in policy. It is incredibly important that we take businesses with us. Even businesses that are considered brown today may be green tomorrow, and they need to be given the right period of time to decarbonise, because they too could be a very important part of our future decarbonisation plans and strategy.

Oral Answers to Questions

Kevin Hollinrake Excerpts

Tuesday 7th December 2021 Commons Chamber

[Rishi Sunak]

Forgive me, Mr Speaker; I should have welcomed the right hon. Gentleman to his new position. I look forward to working with him in his new role.

With regard to the winter and energy prices, of course many people are anxious about inflation. It is something that we are grappling with. What I will say to people is that we have put in place multiple interventions to help with those costs, notably the household support fund—half a billion pounds to help millions of our most vulnerable. That comes on top of our existing support, whether it is for pensioners or for those on lower incomes, to help with energy bills that were already in place. This Government remain committed to helping people with the cost of living. I assure the right hon. Gentleman that we will continue to look at the situation carefully.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Regional mutual banks are a feature of all the other G7 economies, which have much lower levels of regional inequality. They are key to the provision of small and medium-sized enterprise finance. We have a number around the UK that are ready to go, led by experienced professionals; all they need is some pump-prime funding. Will my right hon. Friend agree to meet me to discuss this very exciting policy area?

[Rishi Sunak]

I am always delighted to meet my hon. Friend and neighbour, and if we could do that in north Yorkshire, it would be fantastic. He is right—as he always is—to champion the need for small and medium-sized enterprises to have access to the finance that they need, and if he has come up with yet another idea to ensure that that happens, I should be delighted to learn more.

Dormant Assets Bill [Lords]

Kevin Hollinrake Excerpts

2nd reading
Monday 6th December 2021 Commons Chamber

[John Glen]

I thank my hon. Friend for that point—a legitimate point that will be raised in different ways across the country during the consultation, and one on which the Secretary of State will need to reflect in due course before an order is laid.

It is vital that we afford everyone a fair and open opportunity to have their say, so the Government plan to launch the first public consultation, which will last for at least 12 weeks after the Bill receives Royal Assent. Until we have launched the consultation and fully considered the responses, the Government are not prepared to make decisions or commitments on the ways in which future funds will be used in England. To do so would clearly undermine the validity and transparency of the consultation exercise.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Under the current legislation—the Charities Act 2011—urban regeneration is one of the areas that distributions are allowed to go into, but it is not clear whether they can go to, for example, a regional mutual bank. As my hon. Friend knows, the all-party parliamentary group on fair business banking is strongly in favour of that. Could the point be clarified in the Bill to facilitate a quicker move to fund those regional mutuals?

[John Glen]

In short, no; that will not feature on the face of the Bill. However, my hon. Friend is a doughty advocate for that cause, and I am sure he will make a hearty contribution to the consultation which will inform the Government’s response in respect of those future parameters.

Mindful of time and the need for contributions from so many Members on both sides of the House, I will end by reiterating that the Government are committed to supporting industry efforts to reunite more owners with lost money, and to provide a practical way for unclaimed and unwanted funds to be put to good use. The dormant assets scheme has achieved that, and we are determined to ensure that it continues to be a success. I hope that the Bill will command cross-party support this evening, and that we will be able to work together on expanding the scheme to unlock hundreds of millions of pounds more for good causes throughout the country in the years to come. I commend the Bill to the House.

--- Later in debate ---

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak in this debate. I am supportive of the Bill and the widening of the jurisdiction of the legislation.

As I said in an earlier intervention, my brief remarks will be centred on community banks, which, as both Ministers on the Front Bench—my hon. Friends the Economic Secretary to the Treasury and the Under-Secretary of State for Digital, Culture, Media and Sport, the Member for Mid Worcestershire (Nigel Huddleston)—know, the all-party parliamentary group on fair business banking believes are at the heart of social purpose. Indeed, the APPG’s recent “Scale up to level up” report makes the case for regional mutual banks and community development financial institutions, which could—and in the case of CDFIs do—play an important role in fairness, making sure that we level up properly, and in regional distribution in terms of regional recovery.

Let us look at how regional mutual banks worked in Germany after the most recent financial crisis. In the five-year period between 2008 and 2013, UK commercial banks withdrew financing to small and medium-sized enterprises by around 25%, whereas in the same period co-operative and community banks in Germany increased lending to SMEs by 20%. That was an incredibly important time for SMEs—they need funding to get through crises of that kind—and co-operative and community banks take a different approach to lending. Commercial banks are important in the UK but regional mutual banks could play an important role by getting patient capital to where it is really needed, which is to SMEs and the productive economy.

Regional mutual banks are not just a feature of Germany, and this is not just a romantic ideal; they are very much part of every G7 economy, with the US, Germany and Japan being examples of where they work very effectively. They are not currently part of the UK banking sector—they used to be—but the APPG sees them as crucial to levelling up because they can have a genuine regional focus.

Similarly, there are some very good examples of CDFIs. A business enterprise fund in Bradford, Yorkshire, is key to making sure that people who are financially excluded are financially included. Regional mutuals are full-service banks. CDFIs are not full-service banks, but they make sure that people on low incomes are properly banked, which again works very much on a relationship-based approach. They also lend quite significantly to small and medium-sized enterprises.

There are 50 CDFIs around the country. They rely very much on grants and loans rather than getting money from the markets, so it is incredibly important that they see more funds going into them. I see this as a real opportunity for some of our less well-off communities to thrive in the future. These organisations are sector-based, making sure, for example, that people from black, Asian and minority ethnic communities and women are properly supported.

One very good example of how CDFIs work is Prima Bakeries in Cornwall, which is featured in our report, “Scale Up to Level Up”. At the time, the business had 19 employees. It was refused banking from its high street bank, so it went to its local CDFI, South West Investment Group, which lent it the money it needed to get through. It now has 96 people employed in that organisation. That shows how CFDIs take a different, relationship-based approach, rather than simply looking at the pure numbers, which the big banks tend to do.

It would be very simple for us to try to expand the current legislation—I take on board my hon. Friend the Minister’s comments about going through a consultation. The difficulty with consultations is the time that they take. I know that it is a 12-week consultation, but this kind of stuff might take months or years to implement. It is quite clear from section 3(2)(c) of the Charities Act 2011 that urban regeneration is an area that qualifies for the distribution of dormant assets, but the people who distribute them, Big Society Capital and Fair4All Finance, currently think that regional mutuals and CDFIs do not qualify for those funds.

If we could put something into the legislation, a simple clarification rather than a wider consultation, on the basis that these sectors could be funded through dormant assets—I know that there will lots of different people trying to pitch for all kinds of different things—it would mean money going to those organisations much more quickly. If they are key to levelling up, which I absolutely believe they are, it would be good to see that consultation. We are looking for about £100 million to pump-prime these organisations with this funding. I will table an amendment to the legislation to discuss this at a later stage, because it would be better to expedite this issue than wait for a long-term consultation. No doubt we will have more time to discuss that at a later stage.

[Several hon. Members rose—]

Budget Resolutions

Kevin Hollinrake Excerpts

Wednesday 27th October 2021 Commons Chamber

[Dame Meg Hillier]

I completely agree with my hon. Friend, and I hope the Chancellor does, too. I hope the Treasury is acknowledging the lessons that have been learned. We were very tolerant on the Public Accounts Committee, as we understood that spending in those early days would be challenging and money might be spent in the wrong way. The ventilator challenge, for example, means we now have ventilators that will not be used, but it was the right thing to do at the time because that is what the Government thought they needed, and any Minister in that position would have considered making such decisions.

Test and trace is one example where money kept following money without clear outcomes, without clear challenge and without a clear approach to spending taxpayers’ money. These are eyewatering sums. When we think of the NHS backlog, there have obviously been pre-announcements on NHS funding, but there is still so much work to be done to make sure that patients get the treatment they need. The money spent on test and trace could have been much better spent on the backlog.

Once again, we have heard very little about the detail of housing policy. The Government have promised to build 1 million homes over this Parliament, a statement that the Chancellor repeated. There had been a promise of 300,000 homes a year, so the figure is shifting. One hopes it means that the homes will be built eventually, but the Red Book confirms that, of the £11.5 billion that has already been allocated, £7 billion or so is owed from the spending review onward. That is enough to deliver 180,000 affordable homes, and we can add the 160,000 homes being built through mayoral combined authority and local authority funding. We are still getting very low figures.

The affordability of affordable housing, of course, depends on a person’s income. In my constituency, people in receipt of housing benefit, including housing benefit through universal credit, cannot rent a three or four-bedroom property because the rents are above the cap. That is just the market in Hackney South and Shoreditch and across the borough. It is impossible to buy. More people rent privately than own their own home, and more people rent social housing than both of those combined. Those in generation rent and those who cannot get on the waiting list for social housing are left in limbo. They are left out in the cold. Where is the levelling-up agenda for them?

The Father of the House mentioned the terrible issue of dangerous cladding on tower blocks, and this Budget only reconfirms the existing £5 billion set aside for remediation. This is the biggest consumer and regulatory failure in a generation, and many of my constituents, like many people across the country, are living in unsaleable homes. I should declare my interest, as I live in one, too, although my developer has shouldered the entire cost. As the Father of the House said, we need more developers to take that on.

The £5 billion is about a third of what is needed to sort it out. I am the Chair of the Public Accounts Committee, so I do not want to see money given out willy-nilly, but if the remediation is not funded now, there will be no confidence in the sector to get started. Even as somebody who lives in a property surrounded by scaffolding right now, and as an early adopter because the developer paid, it will take many years before the remediation is delivered. For those who have not got to that point, we are talking about well over a decade before this problem will be solved. It is about certainty of funding from the Government. As the Father of the House said, there are ways of getting this money back from developers. We need to be more imaginative. I challenge the Chancellor to work with his Cabinet colleagues on that.

There was some mention of street homelessness in the Budget. Getting “Everybody In” was a covid success story; let us not squander that opportunity for the lack of a bit of funding now. The money to make sure that people get into the 6,000 new homes that are supposed to be provided for people who are sleeping rough on the streets needs to be delivered. If it is not and they go back on the streets, it will end up costing the taxpayer and the Exchequer considerably more. The Department for Levelling Up, Housing and Communities—I hope I have got the new title right—has been slow to confirm the figures on progress, so it is right that the Treasury should keep an eye on how the money going into that Department is spent and on whether it will actually deliver those homes, which will, as I say, save the taxpayer money in the end.

I could speak at length about the cost-of-living issue but, given the time, I shall touch only on the main issue. Universal credit has been cut by £20. I welcome the offer to revise the taper, but it will affect only those who are in work and rather plays into a negative narrative that some people are scrounging off the state. People have lost their jobs during the covid pandemic. People have struggled to get back into work, despite the situation not being as bad as some had predicted. On top of that, we see fuel prices increasing, energy bills going through the roof and inflation. That £20 a week is still a real issue for people.

According to the Red Book there will be a 3% real-terms increase in local government funding over the spending review period, but that comes on the back of cuts of up to 40% or more in some boroughs over the past decade. Since 2019, we have seen an increase year-on-year, but 2019 is only two years ago; let us not forget the deep and swingeing cuts to local government, which has proved itself an effective deliverer of vital services during covid but cannot be squeezed further. We are still nowhere near to the previous levels of funding.

On school funding, there is another smoke-and-mirrors promise. Again, increases are talked about, but after years of cuts. Per-pupil funding is still way lower than it was in 2010 and we are only inching back up to that level. A Public Accounts Committee report showed that the per-pupil increase is lower for pupils in the most-deprived areas and much higher for those in the least-deprived areas, thereby widening the gap in funding. The gap in attainment between the least-deprived and the most-deprived was narrowing, but we now see it growing as a result of covid. This is not the time to cut funding, or to reduce funding even if it is not seen as a cut. It is clever how the Government try to present it, but let us be clear that in effect we are talking about a cut to the poorest, with money going to the wealthier pupils.

The Government have also promised a £30,000-a-year salary for teachers; as far as I can see, having read the Red Book quickly, there is not enough in the settlement for schools to pay for that even if, now that the pay freeze has been lifted, the basic pay increase is taken on board—and we do not yet know what that will be.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The hon. Lady mentions having read the Red Book and says there is no new money for housing, but the Red Book announces

“an additional £1.8 billion for housing supply”

and for the regeneration of brownfield land; is that not new money?

[Dame Meg Hillier]

It is not clear to me that it is new money. I have acknowledged the figures for housing on brownfield sites and other housing, but let us be clear: the Government promised 1 million new homes over the Parliament, and they had said 300,000 a year, so they are already watering down the promise on the number of homes. Crucially, there is no figure for proper affordable housing that is actually affordable, so many of my constituents who are priced out of the private rented market and home ownership have no option. There is a real gap there and, as I have said, it is not levelling up for many of my constituents.

As I was saying, even if the pay review bodies come forward with an increase to the basic pay for teachers, as we expect they might, it will be very hard for schools. In effect, it will mean cuts to the number of teachers and to other school services to pay for that promised salary, because there is not enough money in the pot to be carved up all ways. Even the catch-up money will not cover that issue.

Let us look at the detail over the coming days and weeks. The flourish with which the Chancellor finished at the Dispatch Box will wither away as we see the reality that this Budget does not exactly deliver everything that he has promised.

--- Later in debate ---

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the hon. Member for Feltham and Heston (Seema Malhotra), although I have to say that I did not expect more from the Budget—I came here today fearing the worst. I expected to see some pretty dire public finances, and to be fair we have seen some pretty dire numbers. The deficits for the last financial year and the current year total £500 billion, and we will still be running a deficit this year of about £130 billion.

However, we have managed to forecast to balance the books in the financial year after next. I could not possibly have expected that we could go from the economic storm that we suffered back to a balanced situation less than a couple of years after the end of the pandemic. That is a tremendous achievement and it shows how successful the Government’s measures to save the economy have been over the past 18 months that we can even forecast that position. Even if that forecast is a bit optimistic, I was expecting years and years of deficit, and was wondering how we were going to fill it with spending cuts and tax rises. It looks, thankfully, like we will not need them.

We are forecasting the end of the deficit the year after next despite the Budget increasing the deficit by £25 billion. The measures we see are tax rises of about £12.5 billion and spending increases forecast to be about £38 billion. The spending envelope is actually being relaxed while we are balancing the books—quite a tremendous achievement. It probably shows, however, how key some of the sensitivities are in the forecast that we need to deliver the economic growth to drive tax receipts, otherwise those numbers just will not work.

We need to focus on what more we can do to increase the long-term trend in the rate of growth. What we are seeing by the end of the forecast period, well under 2%, will not be sufficient to deliver the public finances that we all want to see. That is why we need to make sure that the very welcome measures to increase investment, improve skills and boost productivity are driven through and made to work.

There was much good news in the Budget. Most of it was trailed well in advance. More money for the NHS will be hugely welcomed across Amber Valley. The rise in the living wage will be welcomed by people earning low wages. The end of the public sector pay freeze is the right thing to do. We had a year of it. I understand why we needed it in the middle of the crisis, but we cannot leave people worse off in real terms given the rise in bills.

I especially welcome the reduction in the universal credit taper. If I could just gently tick the Government off, that is not a tax rise. It is not a marginal tax rate. If we really wanted to say what the marginal tax rate was and we included that, we would have to add the 55% new taper rate, the 13% national insurance rate and the 20% income tax rate for those earning over £12,000, leaving an 88% marginal tax rate. I suspect that is not what the Government are trying to tell us, and nobody really believes that people can move into work from benefits and not have any reduction in their benefits. It is quite right that there is a reduction, so I am not sure that it was helpful to present this as a tax cut. It is a welcome reduction in the taper rate, which will ensure that work pays, but we should be careful in the presentation of that.

I have been one of those arguing to keep the £20-a-week uplift. We would have had a much better system if the benefit had started in the right place and then tapered off at the right rate. It is clearly welcome that the Chancellor has found £2 billion a year to improve the taper rate and make sure that we can be certain for everyone that work will always pay and that they will be materially better off if they take work, get more hours and get higher pay. That is hugely welcome.

I also welcome the fact that the Government, in our post-Brexit world, are starting to tweak the tax system so that we can use our post-Brexit freedoms. The reduction in the draft beer duty rate is sensible. On the domestic air passenger duty rate, it is absolutely right that people should be able to fly within their own country at a lower tax rate than when they fly overseas. That is what used to be the case until 20 years ago, when we were forced to change.

I even welcome small measures such as the plan to take away the right to offset losses incurred across Europe from UK corporation tax. That is a sensible measure. There is no reason why a loss that someone incurs overseas should reduce their UK tax bill. There are other measures that we had to introduce to be compliant with EU rules, which we could now reform. We had to take away a collection of tax avoidance measures because they did not comply with EU rules; we can now reinstate them and protect our tax. I urge the Government to continue that trend.

I welcome the changes to the research and development rules, the increased investment and the tweaks to the R&D tax incentives. It is right that when we give people a tax incentive, that work is done in the UK. Actually, it is more important that the fruits of that research are owned in the UK, that the intellectual property produced is owned and exploited here, and that the research generates jobs and tax revenues here. I urge the Government to introduce the detail behind those changes and to add a rule that says, “If you are going to claim that tax credit, the IP produced needs to be owned in the UK for you to get it.” That will be more important in the long run than where the research was carried out. If the Minister wants some clues on how to draft such a measure, he should know that I moved an amendment to that effect about 10 years ago during consideration of the Finance Bill. He can check the history.

[Kevin Hollinrake]

On the universal credit taper rate change, my hon. Friend says it is not a tax cut. It will cost the Exchequer £2 billion to do it, so it is a tax cut in that way. On national insurance and personal tax thresholds, for people who are below those figures, the extra taxation he mentioned—the 20% and the 13%—will not apply.

[Nigel Mills]

I am grateful to my hon. Friend for his intervention. I agree with his point, but actually we cannot say that every spending increase is a tax cut. That makes no sense. This is an increase in welfare spend; universal credit is not a tax. By improving the taper rate, we are not changing tax. That is not the case. It is not a factual statement, nor is it helpful for people who need to understand their own financial position to believe that description. I am sure my hon. Friend knows that many people who are entitled to universal credit earn more than £12,000 and therefore pay income tax and national insurance. That is not an unusual situation to be in.

I shall conclude so that I comply with the Chair’s strictures on time. This is a hugely powerful Budget that sets the country in the right direction. It shows a welcome improvement in the public finances and delivers on many of the priorities of my constituents. I wholeheartedly welcome it.

--- Later in debate ---

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak after my hon. Friend the Member for Basildon and Billericay (Mr Baron). I agree with many of his comments, particularly those on the cladding scandal, which I have been involved in considering as a Select Committee member since 14 June 2017. I definitely agree that we need to go further on the issue.

I very much welcome the Budget, as my hon. Friend did, although not just what is in it. I welcome the optimism with which the Budget was presented, and I welcome the way it was contrasted with the pessimism of the Opposition parties. We are a party that believes in the future of this country and the individuals within it, and we believe that we can make a genuine difference to their lives.

We must bear it in mind that the Budget is set against a backdrop of the reduction in the size of the economy that began 18 months ago, which was the sharpest contraction in any of our lifetimes. As a consequence of the Government’s interventions, that contraction has been followed by the fastest growth in the economy we have seen in our lifetimes. That has certainly put us back on a par with countries that people said were doing better than us through the crisis, such as Germany. The effects on GDP and on unemployment have produced far better outcomes for us than many people predicted.

We must put that in context. The huge economic fallout from covid was totally unexpected, although we were ready to deal with the economic fallout caused by leaving the EU. I voted to remain, but never argued that our economy could not succeed outside the EU. There were going to be short-term challenges, as we have seen to some extent, but, rightly, the Government have seen that in moments of crisis there are moments of opportunity. That is exactly the way we should approach this, and the move to a higher wage, higher skilled economy is absolutely right. The key to that is having control over immigration, which we never could have had within the EU.

Owing to that and owing to the covid crisis—principally because of the covid crisis—we have some real pinch points in our economy right now. There are labour shortages across the economy; this is not just about HGV drivers. Almost every sector I speak to is having labour difficulties, not least in Thirsk and Malton. There are difficulties in some of our pig supply chains and our pig farmers are having real problems in getting the pigs off the farms and into the meat processing plants because there are shortages of some workers, who farmers would normally get from further afield. That is due to Brexit to a certain extent but is mainly down to covid.

The other big issue that we must confront and which we will be dealing with for some time yet is inflation. Predictions of inflation topping at 4% seem likely, so that will cause some pressure for people, particularly those on low incomes. Nevertheless, both issues—labour shortages and inflation—are short term and they will be resolved in time.

The longer-term issues we must deal with involve demographics and the ageing population. That is good news as it means we are living longer, but the ageing population will put huge pressure on the taxpayer. The OBR is not always accurate, but its central prediction is that, owing to the cost of healthcare, social care and pensions, our debt to GDP ratio, which is 100% of GDP, will be 400% by 2060 if we do not change our system of taxation. That is a frightening thought for the Treasury, but it is something the Treasury will have to confront and deal with.

Rather than throwing lots of money at everything without expecting to raise taxes, or criticising tax increases to pay for our spending, as the Opposition do, the Treasury has taken a sensible, balanced view. It is balancing day-to-day payments and shifting the burden away from taxpayers’ earnings, so that it is subsidised not through the tax system, but through employers paying more to employ people, while people keep more of the money—hence the universal credit taper, which I absolutely welcome. As co-chair of the all-party parliamentary group on poverty, I think it is a far better use of taxpayers’ money to provide a greater incentive to work, rather than simply paying people through other taxpayers’ contributions to their income. That is absolutely the right way forward.

If we are to head off the prospect of our debt being 400% of our GDP, it is critical that as well as making work pay, we get the economy growing. To do that, we have to make business pay. That has been my life—I started up a business—but there are so many benefits: not just the opportunities for businesspeople, but the fantastic effect on the consumer. The best way to drive down prices and drive up services for consumers is to have more competition. In my experience, having started a small business that we grew into a larger business, the one thing that makes us more competitive is competition. That is the key: a competitive economic environment. That is what we have to try to engender.

Hon. Members have talked about cutting regulation and making it simpler to establish a business. I support all those things, as long as we put sensible protections in place, but the No. 1 thing that we can do to engender a positive business environment is to have a fair and level playing field. It encourages more entrants; it encourages people with all kinds of business model to start up and scale up. Businesses want a fair and level playing field and simple and stable taxation.

I welcome what the Chancellor has done on alcohol duties: a simpler, more stable alcohol taxation system is absolutely right. There has been a massive simplification, and I would like to see the same principle applied to one of the biggest barriers to a competitive environment and to a fair and level playing field in our business world today: business rates. Business rates create a massive distortion between physical and online retailers, which is deeply unhelpful.

The Government have done a lot—I think that they have put about £11.6 billion into easing the burden on lots of business sectors—but that still creates winners and losers. Whenever reliefs, much as I welcome them, are put in place, people will fall on either side. I know that the measures are only short-term, so we need longer-term reform, as many hon. Members have said.

There seems to be a debate about online sales tax, and the Government seem potentially to be heading down that road. The Opposition say that the digital services tax should be increased sixfold, which I have to say I think is a bonkers idea. It will hit very few retailers, or even hit marketplaces only. When the levy was put in place, Amazon added it straight to the cost of goods; the Opposition’s proposed increase would be added straight to the cost to consumers. It is absolutely wrong to do things in that way, but I welcome at least the efforts to solve the problem.

I believe that we should scrap business rates completely. The system is completely archaic; I absolutely believe what the Labour party says about that. In my view, we already have an online sales tax: it is called VAT. A simple solution—not easy, but simple—would be to add the £25 billion cost to VAT while lowering the threshold for VAT registration.

[Alex Cunningham (Stockton North) (Lab)]

indicated dissent.

[Kevin Hollinrake]

Well, I am happy to have a debate. Perhaps the hon. Gentleman should think about what I am saying, rather than simply ruling it out. It would create a fair and level playing field, it would raise the same amount, and it would mean online retailers trading in exactly the same way as physical retailers. It would be a simple solution to a very thorny problem.

I sympathise with the Treasury, because this is not easy. To my mind, the Opposition solution is totally unworkable.

Health and Social Care Levy

Kevin Hollinrake Excerpts

1st reading
Wednesday 8th September 2021 Commons Chamber

[Rachel Reeves]

I would go further than my hon. Friend: neither of those things were true, because the Government have no plan for social care and we have a tax increase. The sad truth at the heart of this so-called health and social care levy is that it will not deliver on social care for at least three years from now, and even then it is uncertain when the Government might allow some money to trickle down. Under the Prime Minister’s plan, many will still face the threat, as my right hon. and learned Friend the Leader of the Opposition set out today, of selling their home to fund care. Many of those with a house worth £186,000—that includes many constituents of Conservative Members—will still have to sell their home to fund £86,000, within the cap. That is before the costs of living in a care home. How does the Minister expect his constituents to pay for care without selling their home? I will happily take an intervention from him—

[Kevin Hollinrake (Thirsk and Malton) (Con)]

rose—

[Rachel Reeves]

Perhaps the hon. Member for Thirsk and Malton (Kevin Hollinrake) will explain what he put in his manifesto to his constituents.

[Kevin Hollinrake]

I was delighted to sit on the Housing, Communities and Local Government Committee—the Chair of the Committee is in his place now—during its joint inquiry with the Health and Social Care Committee. Some 24 Committee members, 12 of whom were Opposition Members, recommended a solution based on national insurance. The shadow Secretary of State for Health and Social Care also proposes a solution based on national insurance. Why does the hon. Lady now say that that is the wrong option, and what is her plan if it is the wrong option?

[Rachel Reeves]

We should be looking at all forms of income, not just income from people who go out to work. A landlord who rents out a number of properties will pay nothing, whereas his tenants in work will. That is not fair, and that is why we cannot support the motion this evening. The Minister told us three important things today.

--- Later in debate ---

[Alison Thewliss]

My hon. Friend speaks the absolute truth. There is a huge contrast between what the Government propose and what is already being delivered in Scotland.

Some have said, “What’s your alternative?” Well, fixing England’s social care crisis is not for the SNP to decide, quite frankly. Having heard evidence when I sat on the Select Committee on Communities and Local Government some years ago, I know that successive UK Governments have failed to act and have ignored the evidence as difficulties mounted. Now the Prime Minister has come to this House in haste, shamelessly using covid as cover.

[Kevin Hollinrake]

Will the hon. Lady give way?

[Alison Thewliss]

I will, because we served on the Communities and Local Government Committee together.

[Kevin Hollinrake]

I am very grateful. In respect of the sufficiency of Scottish social care budgets, there is now an 11-week wait in parts of Scotland for discharge from hospital into a care home. Is the hon. Lady honestly saying that she does not need extra resources for Scottish health and social care?

[Alison Thewliss]

The hon. Gentleman should look at the comparative figures in his own constituency. I am not saying for one second, and I would never say, that everything in Scotland is perfect, but we are making good progress on that, and we intend to make more progress.

The social care funding announced by the Government may in the end amount to as little as 20% raised by this tax hike, and not even for a few years. The British Association of Social Workers has said that this raises more questions than answers, and that it needs the funding for services right now, not at some point in the future. The early analysis across the board today demonstrates that the sheen is already coming off this policy. In contrast, the SNP has used its time in government to introduce health and social care integration, self-directed support and the Carers (Scotland) Act 2016. We have health and social care partnerships on the ground working away to deliver more integrated services to our constituents. Free personal care has been available in Scotland for adults aged 65 or over since 2002, extended in 2019—as was pointed out by my hon. Friend the Member for Central Ayrshire (Dr Whitford)—to people of all ages who require it. Yesterday the Scottish Government’s programme for government set out the timetable for establishing our national care service, the most significant public service reform since the creation of the NHS.

This is a Westminster power grab on devolved healthcare and the democratic institutions of Scotland, Wales and Northern Ireland. The Government are taxing our people to pay for their chaotic mishandling of health and social care in England. They are undermining our recovery by putting a tax in employers. They are punishing working people on low pay by cutting their universal credit and hiking taxes on their meagre wages. This is no Union dividend, as the Prime Minister likes to claim; it is a Union dead end, and the people of Scotland must have the choice to take the fastest road out of here to independence.

--- Later in debate ---

[Mr Betts]

I have made my position clear on the extent to which local government has been unfairly cut compared with other parts of the public sector.

Across the piece, local councils of all political persuasions have done a brilliant job of protecting their communities over the past few years. They have done it by giving priority to social care, but that has still meant real-terms cuts due to the demographics, with more older people, with people with learning disabilities living longer and with increased costs and demand for children’s social care—demand for the latter two has gone up faster than the demand for elderly care over the past few years.

In protecting social care, there have still been real-terms cuts. There are 1 million more elderly people not getting care who would have received it in the past. Other services, such as parks, libraries, buses and highway safety, have all been cut by up to 50% in local authorities across the country. We are repeatedly asking our constituents to pay increased council tax, often for care services they are not receiving, when the services they do receive are being cut to shreds. That is the reality.

As representatives of both parties in the local government sector said to the Select Committee on Housing, Communities and Local Government, we cannot sort out the funding problems in local government without sorting out the funding problems in social care. That is the reality.

We are in the middle of a Select Committee inquiry, and we will be taking evidence from Ministers. I hope they will start to explain to us how the care plan will solve that problem. The Housing, Communities and Local Government Committee and the Health and Social Care Committee have received estimates that the funding gap for social care alone is between £2.5 billion and £4 billion a year, which does nothing to restore services to the level they should be at or to address the real problems of low pay, which will eventually destroy the service because it will not be able to recruit people as alternative jobs, such as at Amazon, pay so much more. That is simply the reality.

How much money will come from the levy? Paragraph 30 is the only bit that talks about money: £5.5 billion over three years. The gap is between £2.5 billion and £4 billion a year, yet we know the £5.5 billion has to fund: the cap and floor system, which will be at least half of it, maybe more; and the £500 million for workforce training, which is welcome. The money goes nowhere near funding the current gap, let alone bringing about any improvements or bringing people into the social care system who are currently excluded. It just does not do it.

The Government have said they will

“ensure local authorities have access to sustainable funding for core budgets at the spending review”.

All will be revealed in the spending review, but the key bit is that the Government say they expect

“demographic and unit cost pressures”

will be met

“through council tax, social care precept”.

We have had 5% council tax increases year on year, and a lot of it has been to fund social care, so we are going to get above-inflation council tax increases again, are we? If we say national insurance payments are regressive, council tax is now regressive, too. That is the reality.

[Kevin Hollinrake]

Will the hon. Gentleman give way?

[Mr Betts]

Yes, I will give way, because I think the hon. Gentleman will ask me about the Select Committee’s 2018 report. Am I correct?

[Kevin Hollinrake]

Yes, the hon. Gentleman is absolutely right. As always, he is making some very good points. I thoroughly enjoyed my time with him on the Select Committee.

We did two reports on social care, and we made a recommendation in 2018 to fund social care through the national insurance system. Does the hon. Gentleman still support that recommendation?

[Mr Betts]

Yes. However, may I just say to the hon. Gentleman that it was a slightly different recommendation from what the Government are proposing now? I have our report here, just by chance—I thought I might be asked the question. We talked about the rate at which national insurance would be paid—this was to cover the points that the right hon. Member for Rossendale and Darwen (Jake Berry) made about low-paid areas. We talked about paying right the way up the income scale. We talked about extending it to pensions and unearned income, and about it not being paid for by the under-40s, who have been really badly hit by this pandemic, and we ought to be doing our best to protect them. In paragraph 95, we also made the important point that people should not have to sell their homes to pay for social care and proposed instead

“that a specified additional amount of Inheritance Tax should be levied”.

We all agreed to that. That system is a lot fairer; people would pay according to the value of their home and it would not be that people in constituencies such as the right hon. Gentleman’s, where house prices are relatively low, end up paying a bigger percentage of the value of their home to fund care than people in areas with higher house prices. I stand by that recommendation. It is a different proposal from the one the Government are now putting forward.

I want to come back to the point for the Minister. There is a crisis in social care, and we have all got that; we all have constituents come to us begging for social care. They are really concerned about having to sell their home, but sometimes it is about not being able to get into a care home or get the care at home they need. Most social care should be delivered in the home where people live. The reality is that there simply is not a proposal in this so-called “plan” to give local authorities that money that is needed to both fund the existing gap and to extend social care to the many people who have been denied it because of the cuts in the past few years. Furthermore, the alternatives will be: bigger rises in council tax—the Government have almost signalled that in this report; or further devastating cuts to other services received by most of our constituents, who do not get social care but have to pay for it. This is a recipe for disaster. Eventually, when it works through, everyone will see that there is no plan for social care here, because there is no funding for social care that will deliver the sort of social care system we all want to see.

--- Later in debate ---

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to follow my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton). I absolutely agree with him that the Government’s proposal is probably the least worst option.

When it comes to this debate, I feel saddest for the many constituents who have come up to me in recent years and said, “When it comes to the big issues—the issues of national interest—why is it that you lot can’t work together and come up with a solution?” Clearly, this issue is of huge national interest and has been debated in this House many times over recent decades. I have been involved in debates dozens of times in the six years I have been here. I blame colleagues from either side of the House—from both the Labour and Conservative parties. Whether it is the “death tax” or the “dementia tax”, people have come forward with proposals only to be rubbished by the other side for political purposes.

The reality is that this issue is one of many challenges that we are going to face over the next few decades. According to the Office for Budget Responsibility, if we do not change our tax system, our debt-to-GDP ratio will be 400% of GDP by 2060, because of pension, healthcare and social care costs. We must sort out this issue on a cross-party basis so that we have a long-term solution.

The reality is that we have had cross-party consensus. As I have said several times in the past couple of days, I have taken part in two Select Committee inquiries on the issue, the most recent a joint inquiry by the Health and Social Care Committee and the Housing, Communities and Local Government Committee. There were 24 Members on those two Select Committees, 12 of whom were from the Opposition Benches, and we strongly recommended a solution based on national insurance. We can of course argue about some of the detail of the national insurance proposal, which has been changed in some positive ways over recent days, but simply to dismiss it out of hand for political purposes is irresponsible. I understand that the shadow Minister for social care, the hon. Member for Leicester West (Liz Kendall), has also proposed a solution based on national insurance. It does not make sense simply to say for political purposes that the proposal is wrong—

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

indicated dissent.

[Kevin Hollinrake]

The shadow Minister on the Front Bench can shake her head, but that is the reality behind the proposal. The Chair of the Housing, Communities and Local Government Committee, the hon. Member for Sheffield South East (Mr Betts), said clearly that he still supported a solution based on national insurance.

I agree with my hon. Friend the Member for Stoke-on-Trent South that this solution is the least worst option, but we can develop better solutions down the line. I agree with my hon. Friend the Member for Bexhill and Battle (Huw Merriman) that the German solution is better. In Germany, they came together across party lines, based on the national interest, to solve this issue. It was very similar in respect of employer and employee. The key benefit of the German solution is that when a person comes to be defined as in need of care, instead of the local authority allocating care, they can choose to take a monthly cash payment, so they can pay a relative, a neighbour or whoever to care for them. A person can be cared for by the people who know them the best, who understand them the best and love them the most, which must be better than some of the stories that we hear about care providers who give a pretty poor service, with a 15-minute package now and then.

This must be a better solution, but I have one concern. I understand why the scheme has been brought forward like this, using national insurance. It is because it is quick and easy, and we need the money today, but the concern is about hypothecation, which many Members have mentioned. This was a social care levy, but already some of it is going to the health service. That is our understanding at the start. Hypothecated taxes simply do not work, and we see that time and again. It would be better to develop this into a proper social insurance system with not-for-profit providers, so that it does not go into the private sector, but instead the money could be paid in on a proper hypothecated basis to deal with the long-term problem of social care.

--- Later in debate ---

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

It is customary when closing a debate to say that we have had a good debate, and indeed we have, but what has been most striking is how inadequate a basis it has been for a change of this magnitude to the tax system of our country. I intend to come back to that point.

We have heard a number of extremely sharp and insightful contributions, including from my hon. Friends the Members for Wallasey (Dame Angela Eagle) and for Nottingham East (Nadia Whittome), who talked very powerfully about how what has been set out does nothing to improve the working conditions facing social care workers, many of whom will now themselves be facing a tax rise. I would just like to say that it is wonderful to see my hon. Friend the Member for Nottingham East back in her place in this House.

We have heard contributions from the Chair of the Public Accounts Committee, my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier), and the Chair of the Housing, Communities and Local Government Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), who asked very important questions of Ministers. We did not get answers to those questions, and I hope the Chief Secretary will address the really important points that were raised. I will touch on those a little later.

We also heard from my hon. Friends the Members for Birmingham, Selly Oak (Steve McCabe), for Eltham (Clive Efford), for Bedford (Mohammad Yasin), for Brighton, Kemptown (Lloyd Russell-Moyle), for Bristol South (Karin Smyth), for Lewisham East (Janet Daby) and for Hornsey and Wood Green (Catherine West). They covered a range of different points, but they were all clear that this does not represent a proper plan for the NHS or for social care. It is, instead, a broken promise. Two and a half million working households will be hit by the Tory double whammy of cuts to universal credit and an increase in national insurance.

Understandably, I have focused on contributions from Labour Members, and I am sad that, except for a few Conservative Members—notably the right hon. Member for Rossendale and Darwen (Jake Berry)—many of those who bravely stated their reservations over the weekend to the Sunday newspapers have been strangely silent this evening. I hoped we might have heard from whichever Tory MP said that putting up national insurance would be “morally and economically wrong”, and that:

“It kicks in at a low level…If you get all your income from investments and property you don’t pay a penny, but if you work your guts out for minimum wage you get clobbered.”

I could not agree more.

[Kevin Hollinrake]

That point about rental income has been made on a number of occasions. If someone holds their properties in a limited company and they take their profits through dividends, those dividends are taxed to include the social care levy. Will the hon. Lady put the record straight and accept that that is the case?

[Bridget Phillipson]

It is ludicrous that a landlord will be paying not a single penny more, but their tenants—many of them perhaps working in the NHS or social care—are about to be clobbered by a tax rise. Some 95% of what is to be raised from this measure will come from working people and businesses. What the hon. Gentleman says is simply not right. I understand that one former Cabinet Minister used perhaps more colourful language this afternoon, and I will not test your patience, Madam Deputy Speaker, by repeating exactly what they said. Safe to say, however, that he or she is not a fan of this Tory tax hike.

It is usual for major fiscal events in the House to be timetabled in advance. Indeed, this week the Chancellor put us all on notice of a comprehensive spending review and an autumn Budget at the end of next month. It is also usual for major fiscal events to be accompanied by independent and thorough scrutiny by the Office for Budget Responsibility. It is usual for those forecasts to be published alongside the Government’s plans, so that all Members of the House can understand, in detail, what they are voting for and how it will affect the public finances, the livelihoods of our constituents and the success of the economy.

The OBR’s typically thorough work back in March produced a report with more than 130 charts and tables, but the flimsy document produced by the Government yesterday had just three. I recall when some Government Members were sticklers for the rights of this House, and sticklers for procedure and proper time to debate and consider changes that will have a huge impact on our society and the shape of our economy. It seems that those days are long gone. The change we are being asked to vote through tonight is not being introduced in this extraordinary form because that is right for the country. The House knows that. It is because it is the right approach for the Prime Minister: announcement on Tuesday, vote on Wednesday, and perhaps a reshuffle later this week—Back-Bench rebellion averted. That is no way to run a country.

Let us be clear about what is happening. This House is being asked to approve, with almost no notice, an extra £11.4 billion of taxation on workers and businesses, and an extra £600 million of dividend taxes—95% of the new revenue is to come from taxing jobs and earnings. When this Government need income, they do not turn first to those with assets, stocks and shares and property, or to those with the broadest shoulders who can afford a little more. No, they turn to working people: to those who work hard to earn their income, and their employers. They break a solemn promise that every Government Member made to the people of this country. That is a choice, and it is not a choice that the Labour party would make.

Two other major questions emerge from the contributions today. Where is the Government’s actual plan? We need a real plan for social care, not a few numbered paragraphs and a handful of case studies. Labour’s priority would be to give older and disabled people the chance to live the life they choose, shifting the focus of support towards prevention and early help. Let us not forget in this place that around half of the social care budget supports working-age adults with disabilities. They are far too often overlooked in discussions about social care, and the Government’s announcement does nothing for them.

Alongside a strong and skilled social care workforce, Labour would deliver a new deal for care workers to create a well-motivated and properly rewarded workforce, with clear support for unpaid carers—the very people who got us through the last 18 months, whom we clapped and claimed to care about. There is absolutely no sign of that plan here today or in the documents published yesterday. The document that the Government published yesterday is strikingly poor on the practicalities of delivery, not just for social care but for our NHS too.

Our national health service was chronically overstretched long before the pandemic hit. We entered the pandemic with over 100,000 vacancies. By March this year, there were 5 million people on waiting lists for NHS treatment—waiting longer for cancer care, longer for vital surgery, longer for mental health support. What we have been given today is not a plan; it is the promise—another promise—of a plan to follow. The Minister could not even tell us what the impact would be on waiting times. He could not tell us what it meant for local authorities on the frontline. He could not give us details of how public sector bodies are expected to meet the cost. It is not a plan; it is just a tax rise.

Much of today’s debate has focused on whether it is the right sort of tax rise. Sometimes it is easy to focus on the fiscal aspects and forget the economic aspects. Our recovery is still fragile. Businesses are under enormous pressure. We all know it; many are yet to fully reopen, and many are not yet operating at full capacity. Yet the Chancellor has been putting up council tax, he is slashing universal credit, he is freezing income tax thresholds—he is sucking demand out of our economy at the worst possible time.

The shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves), set out powerfully what these measures mean for working people, but this is a series of hammer blows for firms, too. Small businesses, struggling to get back on track after a terrible 18 months, have been clear, in the words of the Federation of Small Businesses, that this is “precisely the wrong moment” to be putting up the cost of taking on and retaining staff. The FSB estimates that these changes could mean an extra 50,000 people out of work.

This is the wrong process to agree the wrong tax at the wrong time. It will not deliver what is promised for our health and social care sectors. The Health Secretary cannot even tell us whether it will clear the NHS backlog in this Parliament. It will not give social care the resources it needs in the next three years. There is not a plan for reform of social care. This tax rise will not create more and better-paid jobs in the wider economy, it is not fair across the regions, it will not end people having to sell their homes to fund their care, and it will not help our economic recovery. The Prime Minister cannot even guarantee that it is the last unfair tax rise of this Parliament. Tonight, we are not voting for a plan to fix social care. There isn’t one. We are voting on the third Tory tax rise on working people, and we will oppose it.

National Insurance Contributions Bill

Kevin Hollinrake Excerpts

3rd reading
Monday 6th September 2021 Commons Chamber

[Richard Thomson]

I rise to support amendments 1 and 2 and new clauses 1 to 3 in my name.

I went over the reasoning for these amendments in some detail on Second Reading and in Committee, so I am sure the House will be relieved to hear that I do not intend to go into quite that level of detail again. The arguments I made then still stand, that the Government should not forgo tax revenues or give advantages to some businesses that are not available to others in terms of national insurance exemptions without securing meaningful commitments in return and in advance.

For that reason, we believe reciprocal benefits should be baked in from the start, both in the strategic economic objectives that we presume are being sought and in ensuring the very best employer behaviour, so that we are incentivising the kind of corporate behaviour that we want to see and encouraging future manufacturing to develop in that way.

We particularly wish to see greenports evolve—greenports are the Scottish Government’s model for freeports—to help tackle the climate crisis and to ensure the protection of workers’ rights. SNP amendments 1 and 2 would help to ensure that freeports and greenports do not end up contributing to a race to the bottom on workers’ rights and broader standards.

New clauses 1 and 2 get to the heart of the matter, by ensuring that employers within the designated freeports pay, as a minimum, a living wage to all staff they employ; by setting out how businesses can ensure that no goods passing through freeports are in any way the product of, or have benefited from the contribution of, slave labour; by setting out how freeports can contribute towards achieving legally binding climate change commitments; and by ensuring that the environmental impact of freeports is properly considered in each case, so that they can be seen as an exemplar, rather than simply being compliant with existing legislation.

We believe firmly that if national insurance exemptions are to be made available, they should be for enterprises that are helping us to transition towards a low-carbon economy. In those new clauses, we have specified two categories of manufacture—wind turbines and electric vehicles—that we consider should be covered. The opportunity is inherent within new clause 2 for the Secretary of State to designate a much wider range of products that also can contribute towards that objective.

We have a choice here: we can grant these incentives and hope—this depends on one’s political taste—that we let 1,000 flowers bloom or that the invisible hand of the market will somehow deliver the economic and social objectives being sought; or, with some judicious framing of the Bill, we can help to increase the likelihood of achieving a set of positive outcomes from those objectives.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I understand the purpose behind the new clause, but new clause 1 refers to “green manufacturing companies”, whereas new clause 2 talks about manufacturing products that “include” wind turbines and electric vehicles. So could those companies not undertake all kinds of very polluting activities within their business but still qualify for the exemption for all their employees if they make some wind turbines and electric vehicles? That is how this seems to be drafted.

[Richard Thomson]

I thank the hon. Gentleman for that intervention, but I do not believe that is the outcome. If we are looking to incentivise, these are a substantial set of incentives, and they have to be for the promotion of what I have described. A phrase that may be familiar in his Thirsk and Malton constituency is, “You shouldn’t get owt for nowt”. That is simply the intention here: to make sure we are getting these objectives that are being sought.

[Kevin Hollinrake]

They say that the road to hell is paved with good intentions. The intention may be something different, but the way the new clauses are drafted and the fact that new clause 2 says “include” means that so long as a company does some of those things, it could burn coal to produce electricity and still qualify under the new clause. That is the position as far as I can ascertain, but the hon. Gentleman may be able to explain the difference.

[Richard Thomson]

As I say, the hon. Gentleman and I will have to agree to disagree on that. If the Minister or the Government do not believe the new clause can meet the objectives in the way I have set out, it is open to them to try to achieve those objectives in some other way. I have no huge expectation of this new clause making it into the Bill, but the intention is clear, the new clause is clear and the Government should be using this incentive to drive exactly the sort of outcome I have set out.

On new clause 3, the Scottish Government are to be commended for the way in which they have sought to recognise the contribution of our health and social care heroes and how they have responded magnificently throughout the pandemic. It remains a source of great disappointment that the UK Government have not followed suit or supported that by allowing one-off payments to be made free of tax and national insurance, instead treating them as a top-up to wages rather than as a bonus. Rather than having the Scottish Government gross up those payments, as the Minister has previously argued should happen, surely it would be better if the UK Government were simply to exempt the payments from NI. I am certain that if that power was devolved to the Scottish Government to exercise, that is exactly what the Scottish Government would do. This shows the limitations of the current devolved fiscal settlement and the requirement to operate within what are, in essence, fixed budgets, which would make it impossible for the Scottish Government to make those payments net without impacting on other spending lines.

Financial Conduct Authority and Blackmore Bond plc

Kevin Hollinrake Excerpts

Wednesday 30th June 2021 Commons Chamber

[Peter Grant (Glenrothes) (SNP)]

Before we adjourn, I wish to draw the attention of the House to the collapse last year of Blackmore Bond plc and in particular to look at what the Financial Conduct Authority did, what it could have done, and what it failed to do to prevent this.

Blackmore Bond plc was incorporated in July 2016, went into administration in May 2020, and has since gone into liquidation. Between October 2016 and November 2018, it raised £46 million in loans, known as mini-bonds, almost all of it from small-scale individual investors. They were repeatedly told that their investment was guaranteed to be paid back on time with regular interest payments. By the time the joint administrators had disentangled the company’s financial affairs, it was obvious that none of that £46 million was left to repay the bond holders. Their “guaranteed” investment of £46 million had been reduced to nothing.

Obviously, primary responsibility for that must lie with the company’s directors, Phillip Nunn and Patrick McCreesh, who were also the joint owners not only of Blackmore Bond but of about two dozen related companies. I will disclose some information later that may help Members to understand just how culpable I believe those two are. However, whether their conduct is found, in due course, to be criminal, civilly unlawful or just downright despicable, the scandal yet again raises serious questions about the regulatory framework that allowed Nunn and McCreesh to persuade people to put money they could not afford to lose into high-risk investments where losing everything was always a possibility.

In fact, an experienced investment adviser, looking at the promotional material the company sent out, could only conclude that losing everything was not only a possibility but almost inevitable. That is probably why the directors of Blackmore Bond did not approach investment houses or experienced investors; they deliberately targeted people they thought would be an easy touch.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The hon. Gentleman mentions the regulatory framework, and I am sure that he will go on to say whether he feels there were also shortcomings from the regulator itself in this case. The FCA’s attention was drawn to the boiler-room tactics of Blackmore Bond and the fact that it was pretty much a Ponzi scheme back in March 2017, yet three years later the company was still operating. It is simply unacceptable that the FCA should have taken that approach and not been more proactive.

[Peter Grant]

For the second time in a few days, the hon. Gentleman has managed to read my notes a couple of paragraphs ahead of me. I am going to come on to that.

My concerns cover not just the Financial Conduct Authority but other regulators, such as Companies House, the Insolvency Service, the Financial Reporting Council and the professional bodies that regulate the audit of limited companies. Of those, only the FCA falls directly under the remit of the Treasury, so that is what I will focus on tonight, but I will continue to apply for debates so that the part played by other regulators can be examined.

--- Later in debate ---

[John Glen]

I have set out the record as the FCA has presented it. I am sure that the hon. Gentleman will wish to continue correspondence with the FCA on some of those unresolved matters. However, I do make the distinction between the different responsibilities that the FCA has with regard to the different actors in this case.

It is only right that we do our utmost to minimise the chance of episodes like Blackmore Bond taking place in future, so I want to turn to the regulation of mini-bonds and the steps we are taking to safeguard consumers, which was a key focus of the hon. Gentleman’s remarks. I want to be clear to the House that the Government are committed to ensuring that the financial services sector is well regulated and consumers are adequately protected. That is why in April we launched a consultation that includes proposals to bring the issuance of mini-bonds into regulation. This follows the action taken by the FCA to ban the promotion of high-risk mini-bonds. This work is the culmination of a review into the regulation of mini-bonds that I announced in May 2019, and it delivers on one of the recommendations of Dame Elizabeth Gloster’s recent report. The consultation closes next month, in July, after which the Government hope to bring forward plans to legislate in the autumn.

The hon. Member for Glenrothes also referred to the financial promotions regime, and I think that underlying that was a concern about what the Government are doing to improve the efficacy of the regime. We continue to keep the legislative framework underpinning the regulation of financial promotions under review, including whether it is suitable for the digital age. The Government have set out our intention to bring forward legislation to create a regulatory gateway for authorised firms approving the promotion of unauthorised firms. That change is designed to strengthen the regime by ensuring that the firms able to approve financial promotions are limited to those with the relevant expertise to do so. The FCA will be able to better identify when a financial promotion has breached the restriction and take action accordingly.

[Kevin Hollinrake]

The Minister is doing a lot to close down opportunities for these scams, but there is a further way that we could take this forward, which we have discussed. Google has today said that it will ensure that all firms advertising on its platform are regulated firms. We could require that of all platforms and all firms that provide an internet channel, for example through the online harms Bill, so that all internet advertising in this area is regulated.

[John Glen]

I thank my hon. Friend for his intervention. He speaks with some authority on these matters. There is a process that will continue, as he knows, through the scrutiny of that legislative vehicle. We do need to make sure that, overall, including through the Department for Digital, Culture, Media and Sport’s online advertising review, we come out at the right place in dealing with these significant challenges for consumers.

As well as introducing new legislation to protect savers, it is right that our regulator also closely examines its own operations, to ensure that it can protect consumers as effectively as possible. As a result, the Government welcome the FCA’s ongoing transformation programme, which is introducing reforms that will fundamentally change the way it works. The programme will help the regulator become more efficient and effective by, among other things, enhancing its use of technology in order to make interventions earlier, which clearly is desirable.

It is heartening to see that significant steps have already been taken. Those include important structural changes within the organisation, as well as the appointment of the FCA’s first chief data information and intelligence officer. I particularly welcome this focus on improving the FCA’s use of data and analytics, which will improve the efficiency and speed with which the regulator can act.

These are serious matters, and we have spoken about the number of our constituents who have been adversely affected. I regularly meet the FCA’s chief executive, Nikhil Rathi, to discuss the transformation programme and monitor progress. There can be no complacency. This is a complex area where financial services are evolving all the time, as are fraudulent activities. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) mentioned the innovation announced today by Google, which is a welcome step, but we will need to look at these matters and at the experience through different cases, such as the Blackmore Bond, in order to get this right.

I close by reiterating my deep sympathies to all those who have suffered as a result of the Blackmore scheme. As a Government, we recognise that financial services are constantly evolving and the regulatory system must, therefore, be ready to respond. As I have highlighted this evening, we are committed to a process of continuous improvement in all dimensions to ensure our regulations benefit both UK consumers and the wider economy.

National Insurance Contributions Bill

Kevin Hollinrake Excerpts

2nd reading
Monday 14th June 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

Thank you, Madam Deputy Speaker, for the opportunity to speak about this Bill on behalf of the Opposition. We will not oppose the Bill on Second Reading. Indeed, we support the intention behind many of its measures. However, I would like to take this opportunity to raise important questions with Ministers about some of the approaches they have decided to take.

As we know, clauses 1 to 5 would introduce a new zero rate of secondary class 1 national insurance contributions for employers taking on employees in a freeport. The zero rate would apply from April 2022, and it would allow employers to claim relief on the earnings of eligible employees up to £25,000 per year for three years. As the House will recall from the Report stage of the recent Finance Bill, my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare) made it clear that we want every region and nation of the UK to succeed whether or not it has a freeport. We want secure new jobs with better pay to be created right across the country, and we want to support and protect British businesses and industries. Freeports may be part of the solution to increasing trade and investment across the UK, but we note that the International Trade Committee concluded in its recent report on UK freeports, published on 20 April, that

“it remains to be seen how successful freeports will be at achieving this objective.”

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Just to clarify, the hon. Member says that freeports might be part of the solution—to levelling up, I guess—but does he therefore support freeports or does he agree with his colleague in the shadow Treasury team, the shadow Chief Secretary to the Treasury, the hon. Member for Houghton and Sunderland South (Bridget Phillipson), who has said that they are “economically illiterate”?

[James Murray]

I was awaiting the hon. Gentleman’s intervention—I was definitely expecting it given the recent debates we have had in this place—and if he will wait just one moment, I will get on to setting out our position on freeports in more detail.

We were concerned at the recent Report stage of the Finance Bill that the Government themselves seemed to show a lack of certainty by voting against our simple amendment to the Finance Bill that would have seen the success of each individual freeport transparently evaluated. As I am sure the hon. Gentleman will remember, we wanted each freeport to be judged against the key tests of whether, across the country, they lead to any net increase in jobs, deliver improvements in training and skills for local residents, produce tangible transport and infrastructure improvements beyond the port itself and will be adequately protected against the risks of tax evasion, smuggling and criminal activity. It is disappointing that the Government voted against the transparent evaluation of their proposed freeports. Not only would this have enabled us to judge their success, but some of the factors we highlighted in our tests would in fact make investment in freeports more attractive to businesses.

Indeed, in response to the Government’s own consultation on freeports last year, many respondents argued that

“although tax incentives can be a significant driver behind businesses investing within an area, they were not usually the sole determinant.”

The Government’s summary of responses went on to explain:

“Some respondents also indicated the success of tax incentives was partially dependent on local factors, especially the quality of transport infrastructure and the skills and availability of local labour.”

As we consider the tax relief before us today, it is therefore important to remind the Government not to ignore the other aspects of the operation of freeports that may be key to their success.

On this tax relief, I would like to ask Ministers to address three specific points that arise from the Bill. First, while relief to employer’s national insurance contributions may be a reasonable part of a tax incentive package along with other tax incentive measures, it is hard to understand why this relief is conditional on employment not commencing until 6 April 2022. As the Chartered Institute of Taxation has pointed out, with freeports expected to start operating in 2021, that would surely hamper freeport employers this year and perhaps create perverse incentives about delaying the start of an employee’s work. I would be grateful if the Exchequer Secretary set out in her response the Government’s reasoning behind this condition on accessing the relief.

Secondly, clause 8 of the Bill enables the Government to set an upper secondary threshold for employer class 1 national insurance contributions specifically in relation to freeport employees—and, indeed, for armed forces veterans, which I will turn to shortly. In practice, this means that employers do not need to pay NICs until an employee’s earnings pass that threshold. We note that the upper secondary threshold for freeport employees will, according to a policy paper published by the Government on 12 May, be set at £25,000 for 2022-23. That is substantially less than the equivalent thresholds for employers’ relief for under-21s and apprentices, which is £50,270 in 2021-22. Just to be clear, this means that employers do not need to pay any NICs for under-21s and apprentices earning up to just over £50,000 a year, but they will have to pay contributions for freeport employees next year if they earn more than £25,000. It would be helpful to understand the Government’s rationale for picking this figure. According to the Office for National Statistics, the median income in all those local authority areas where the eight freeport sites are located is greater than £25,000, with the figures ranging from £25,200 in Kingston upon Hull, within the Humber freeport, to £33,200 in Thurrock, within the Thames freeport. I therefore ask the Exchequer Secretary to explain why the relief for freeport employers is set below median pay in all freeport areas and why this rate is half of that for those employing under-21s and apprentices.

Thirdly, as the plans for freeports stand, businesses taking advantage of their tax incentives will still pay corporation tax. British businesses that pay their fair share of tax will find it very hard to understand why the Chancellor has been for so long so lukewarm about a new, global minimum corporate tax rate to stop large multinationals undercutting them by exploiting tax havens around the world. The Chancellor welcomed the rate being cut from the original 21% proposed by President Biden down to 15%, even though that would cost Britain £131 million a week and leave British businesses being undercut. When I have asked the Financial Secretary before about the Government’s position, he said he did not think

“it is appropriate for Ministers to comment on tax policy in flight”.—[Official Report, 28 April 2021; Vol. 693, c. 418.]

Now, however, the outcomes of the G7 Finance Ministers’ meeting and the Carbis Bay summit are public, so perhaps his colleague, the Exchequer Secretary, could explain why the UK Government’s position has been to back a rate of 15%.

Let me move on to other measures in the Bill. As we have heard, an important relief, covered by clauses 6 and 7—

--- Later in debate ---

[James Murray]

As the right hon. Gentleman well knows, I have set out many times that we believe that there should be a deal on both pillar 1 and pillar 2. However, pillar 2 stands to generate a huge amount of revenue for British public services and to stop a few large multinationals avoiding paying their fair share of tax and thereby undercutting British businesses that are paying their fair share of tax.

The Minister keeps referring to the idea that it is inappropriate for him to comment on the British Government’s position. The position is there in public, following the G7 Finance Ministers’ meeting and the G7 summit over the weekend. People have a right to know what our Government were arguing for and we can arrive at no conclusion other than that the British Government were at least lukewarm and perhaps even against the tax rate being set at 21% because it has fallen to 15%, thereby losing out on £131 million a week, meaning that we are potentially missing a once-in-a-generation opportunity for a truly ambitious global tax deal.

[Kevin Hollinrake]

Will the hon. Gentleman give way?

[James Murray]

Certainly. I am conscious, Madam Deputy Speaker, that this is not all entirely within the frame of the Bill, but I give way to the hon. Gentleman.

[Kevin Hollinrake]

The hon. Gentleman does keep mentioning it. Just on the point about corporation tax, he seems to imply that somehow we are in favour of lower corporation tax, but he is aware that the Government are increasing corporation tax from 19% to 25%. On pillar 2 and pillar 1, I have heard him at the Dispatch Box on numerous occasions urging the Government to sign up to a deal that was only on pillar 2. It did not involve pillar 1, so how can he say now that he was in favour of a wider negotiated agreement? That is not what he was saying at all.

[James Murray]

I am surprised—because the hon. Gentleman always seems to be here when I am speaking at the Dispatch Box—that he does not seem to remember me advocating for a deal on pillar 1 and pillar 2. I will happily send him the reference in Hansard after this meeting so he can refresh his memory. The point here is that we have President Biden suggesting 21% in pillar 2 as an ambitious global deal. We had the British Government being at least lukewarm and potentially anti the proposal of 21%. We have now settled on a position where it has dropped to 15%, and we will not cease pushing the Government to be more ambitious in what they seek to achieve, because this will mean that Britain will lose out on £131 million a week that could be invested in our public services and British businesses will continue to be undercut by a few large multinationals that do not pay their fair share of tax.

I will move on to other measures in the Bill. As I was saying, there is an important relief, covered by clauses 6 and 7, that sets out to help service personnel leaving the armed forces back into work. This is a vital issue. Veterans deserve the full support of the Government as they seek civilian employment after their service to our country. It is crucial to make sure that all veterans get the support they need. I noted that the Government’s consultation document for this measure refers to an existing career transition package to service personnel leaving the armed forces and explains how 6% of veterans accessing the service remain unemployed for up to a year after leaving the armed forces. We believe that this relief on employers’ national insurance contributions is a positive step, and we hope it will particularly help the 6% of veterans who the Government acknowledge are not benefiting from the current service on offer.

We recognise that this measure may not, on its own, be enough to get everyone into work, so I would like to ask the Exchequer Secretary to set out what further help the Government are offering the 6% of veterans, in particular, who need greater support. We also want to make sure that the employers’ relief is as effective as possible, so I ask why the employers’ relief for veterans is 12 months, which is much less than the relief for employers in freeports, which is 36 months. Perhaps the Exchequer Secretary could explain the Government’s thinking in setting the relief for just one year rather than three years, in line with the approach taken for employers in freeports.

Moving on to further measures in the Bill, clause 10 provides a national insurance contributions exemption for payments made under a self-isolation support scheme. Ministers will know that we in the Opposition have been calling on the Government to expand eligibility for this scheme for some time. It is crucial that people who need support to self-isolate receive it, so we welcome any steps that make the system of self-isolation payments more effective and subject to less administrative burden.

We note that the Government introduced secondary legislation to exempt self-isolation support scheme payments from class 1 and 1A national insurance contributions in October 2020 for England and January 2021 for Scotland and Wales. We recognise that the measure in front of us, which exempts self-isolation support scheme payments from class 2 and class 4 national insurance contributions, will bring the treatment of the self-employed in line with the employed. We also recognise that it will be retrospective for the year 2020-21, and so can be reflected in the relevant tax returns.

Can the Minister explain, however, why the exemption for class 2 and class 4 contributions was not implemented earlier, in line with the exemption for class 1 contributions? If the class 2 and class 4 exemptions had been announced earlier, that could have given much-needed certainty to self-employed people at an earlier point in the outbreak. I would be grateful if the Exchequer Secretary explained why that did not happen.

Finally, clause 11 widens existing regulation-making powers so that regulations can be made for national insurance to mirror the amendments to the disclosure of tax avoidance schemes procedures in the Finance Act 2021. Under DOTAS, introduced by the Government in 2004, promoters of tax avoidance schemes are required to notify the tax authorities of any new scheme they are planning to offer taxpayers. The measure in clause 11 and its counterpart in the recent Finance Act aim to help HMRC obtain details earlier than it can now where promoters fail to provide information about their avoidance under DOTAS.

We welcome any measures that help HMRC track tax avoidance schemes, and we believe it is crucial that it targets the promoters of such schemes. I therefore want to use this opportunity to ask Ministers how effective they think the measures that flow from clause 11 will be. As they may know, the Chartered Institute of Taxation believes that there is a hard core of between 20 and 30 promoters, identified by HMRC, who clearly do not play by the rules. Do Ministers recognise that number? If so, I would be grateful if the Exchequer Secretary set out what goals HMRC has to clamp down on those 20 to 30 hard-core promoters. Are there any targets, and are there dates by which Ministers expect the number of hard-core promoters at large to fall substantially?

As I set out at the beginning of my remarks, we will not oppose this Bill today. Indeed, we support the intention behind many of its measures. As I have explained, however, we have a number of questions about the design of the measures in it, and I look forward to the Exchequer Secretary addressing them directly in her reply. We want to see effective measures in place to support British businesses, jobs in every part of this country and veterans seeking work. On this Second Reading and in later stages of the Bill, we will be pushing the Government to make sure that is the case.

--- Later in debate ---

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak in this debate. When we talk about levelling up, we tend to think about things such as new railways or roads, or the dualling of carriageways such as the A64 in my constituency, which is long overdue, of course. It is absolutely right that we should think about those things—they are important—but they are just part of the picture.

Really, levelling up is about one very important thing: prosperity. We cannot achieve prosperity in some of the places that fall well behind the average income in this country without a combination of private sector and public sector investment. That is what the Bill is about—incentives for the private sector to invest.

Those are much needed, particularly in areas such as the north-east, which borders my constituency. In relative terms, the gap in productivity and economic output per person between London and the south-east, and the north-east, is as large as the gap between East Germany and West Germany prior to reunification. It took three decades and $2 trillion to narrow that gap, and it is still not fully narrowed, so this is a huge undertaking. To achieve what it has achieved so far, Germany required not just public sector investment—the roads and railways—but incentives for businesses to start up and scale up in East Germany.

Mark Littlewood, chief executive of the Institute of Economic Affairs, pointed that out in an interesting article in The Times a few months ago. He asked why, if prosperity is all about connectivity—roads and railways—Doncaster is not more prosperous. Doncaster, which you are obviously well aware of, Madam Deputy Speaker, is very well connected in terms of transport links, but in terms of prosperity it leaves much to be desired. That is what this is all about: freeports will create incentives for businesses, small and large, to relocate to those areas, or to start in those areas and grow.

That is why I am a little confused by some aspects of the Opposition’s approach. One of their shadow Treasury Ministers said that freeports are “economically illiterate”. Tell that to Teesside, which expects to create 18,000 jobs due to its freeport status. That is far from illiterate. The incentives are not just the waiving of national insurance contributions for employers, but things such as buildings allowances, capital allowances and stamp duty exemptions.

Of course, it required our leaving the EU to bring about this legislation, because the freeports that we are contemplating are far more comprehensive than the ones that could be delivered in the EU, particularly, as my hon. Friend the Member for Brecon and Radnorshire (Fay Jones) said, with things such as inverted tariffs, which are not an issue for us with freeports, and the very restrictive state aid regime in the EU.

Teesside freeport, my nearest, will be 4,500 acres. Ben Houchen, the very good Mayor of the Tees Valley, has established the South Tees Development Corporation. We heard the interesting news today that Northumberland Estates may be interested in bringing forward a bid for much of the Teesside freeport region on the back of these incentives. That is proof, if it were needed, that private sector capital will come in and invest in those regions. Of course, public sector capital is important, but Governments do not always have a great track record of allocating capital in the most efficient way, whereas those in the private sector are much more likely, because it is their money they are putting down, to allocate that capital reasonably. So I very much support the measures to exempt employers from paying national insurance contributions up to £25,000.

The other thing I would like to talk briefly about is in part 3 of the Bill. It covers the disclosure of issues around national insurance in relation to the arrangements for contribution avoidance for promoters of tax avoidance schemes. The Government have done much to clamp down on tax avoidance, with the digital services tax, the diverted profits tax and the recent negotiations at the G7 on minimum corporation tax, as well as a number of measures in the Finance Bill to clamp down on these tax avoidance promoters, which are absolutely key.

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. In my own business background, the only time a tax avoidance scheme was ever discussed in our businesses was when our own advisers—our own accountants—came to us with a tax avoidance scheme. It looked pretty contrived, in our view, and it was not something for us at all. We were very clear about that. It is clear, I feel, that these advisers—these promoters—are the ones who are principally responsible for the number of schemes that are being used to avoid tax in the UK.

I know that the Government have done much on this, including in the Finance Bill, and that they are consulting on further changes. However, I am also an officer and vice-chair of the all-party parliamentary group on anti-corruption and responsible tax, along with the right hon. Member for Barking (Dame Margaret Hodge), my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) and my hon. Friend the Member for Amber Valley (Nigel Mills), and the Minister will have heard us talk a number of times about a double reasonable test for tax promoters and the schemes that they are promoting. Indeed, he was kind enough to attend a roundtable on the issue. It would work very simply, and I often use the loan charge as an example. At the moment, the requirement, as I understand it, is that a promoter considers a scheme reasonable. I could argue that I thought a scheme was reasonable, and someone else could do the same, and a court could decide whether it was reasonable or not, but if it was not reasonable, I could still argue that, in my judgment, I thought it was reasonable.

We are seeking to bring forward a change in the form of a double reasonable test: would a reasonable person have considered that scheme reasonable? A promoter might offer a highly contrived underlying scheme behind a loan charge, in which someone would move their money into an offshore jurisdiction and bring it back as a loan, on which they would pay no tax. That is a highly contrived scheme. I could argue that I thought it was reasonable, but a court could not possibly decide that a reasonable person would describe that scheme as reasonable. In that way, it would be far easier for HMRC to take forward prosecutions against promoters to stop this stuff happening in the first place. So I ask the Minister to consider that proposal again; I know that he is fully aware of it. On that note, I wish the Bill a quick and easy passage through the House.