Self-employed Persons: Financial Support

Kevin Hollinrake Excerpts

Tuesday 24th March 2020 Commons Chamber

[Steve Barclay]

As the hon. Gentleman’s earlier question in Treasury questions suggested, that is not the sole consideration. It is a question of what the operational delivery issues may be: for example, we do not hold details of people’s bank accounts, so how would we do it? It is how we roll this out, but we recognise his wider point that there are immediate issues for many self-employed people. That is what we are actively working on, and that is what my right hon Friend the Chancellor is engaged on in further meetings today. As I said in my previous answer, we hope to bring proposals forward in the coming days.

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

My right hon. Friend mentioned earlier the business interruption loan scheme. Will he confirm that all self-employed people will have access to it and that they will not have to give personal guarantees? Will the Government widen the scheme to include institutions such as OakNorth and Aldermore, which are currently excluded from eligibility?

[Steve Barclay]

We are looking into that, but it is available as of now. It goes up to £5 million and my understanding is that it does not require personal guarantees. If it is any different, I will come back to him on that point.

Contingencies Fund Bill

Kevin Hollinrake Excerpts

Committee stage & 2nd reading & 2nd reading: House of Commons & Committee: 1st sitting & Committee: 1st sitting: House of Commons
Tuesday 24th March 2020 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

May I start by assuring the Treasury Bench that the official Opposition will support this Bill? I support the Government throughout, obviously, but as the Minister might expect, we will be constructively critical as well throughout the process.

This Bill, as the Minister says, will enable the Government to access the resources to tackle the crisis. I have to say, there is a sense of irony here, because only three months ago I hoped to be bringing forward a Bill for about £250 billion as well, for long-term investment in our infrastructure—but that is another story. It probably would have been supported as well, because it was infrastructure spend. Anyway, we will support this Bill, but we have the opportunity to raise some issues on the way in which the resources will be applied—forgive me if I do that.

We recognise that this is the gravest crisis facing our country that any of us in this House has known. We are debating matters of life and death, and the proposals that we make now and the decisions that we need to take in the coming months obviously deserve scrutiny, and that scrutiny should be welcomed on all sides. Last night, the Prime Minister was right to call for people to stay at home to protect our NHS and to save lives. We called for enforcement measures yesterday morning, and the Mayor of London and many others have been making private representations for greater clarity and greater action.

Clear and detailed guidance to employers and workers is needed on which workplaces should close. As we saw in the earlier response to the statement, a lack of clarity remains about certain operations, particularly within the construction sector. We have received reports from unions, particularly those representing construction workers, that there is utter confusion on the ground at the moment about what operations should be maintained and which workers should be on site. For anyone who has been anywhere near the construction industry or worked on site at any time in their lives, things have not changed that much in recent years. These workers also work in some of the most insanitary conditions, so we have to ensure that they are properly protected.

The Chancellor and the Government must act immediately so that every single worker has a protected income. We discussed that earlier today. We want to ensure that every single household is secure in their home, whether they rent or mortgage, so that no one who makes the right choice to stay at home faces hardship. Last week, the Chancellor set out an unprecedented scheme to underwrite 80% of the wages of all workers “furloughed”—as he put it—promising that no redundancies or lay-offs were needed and that the Government would do, “Whatever it takes”. Today is the time to deliver, with clarity and security for everybody, including our most vulnerable, whatever it takes to keep them protected and safe. That is why we are supporting this Bill to enable the resources to be available.

Last night, the Prime Minister effectively shut down every non-essential business. I want the Chancellor and Treasury Front Bench to make it clear now that every single worker, in every single one of those businesses, will be covered by the 80% income protection scheme, and that if, as a result of that 20% cut in incomes, they fall below the thresholds for universal credit or housing benefit, they will be eligible for top-ups. I ask the question, will the Government consider setting a national minimum wage floor for the income protection schemes? That would protect the lowest paid, because 80% of low pay might result in some people being paid below the national minimum wage.

Will we now get more clarity on exactly when the income protection scheme will be operational? Will the Government also condemn employers such as Wetherspoon that have now stopped wage payments and told employees that those will not resume until the end of April? Some senior members of the Government have an influence over that particular employer, so we would welcome the Government making it clear to that employer that that he should pay his staff and that he should close so that that company can play its part in protecting the health of our community.

The Government cannot act only for workers who are furloughed. They must also step up for the many who will be having their hours reduced but not stopped altogether, by topping them up to at least 80% of their regular wage, or through some other scheme. When the Minister responds, will he clarify what will be the protection for workers who have been put on short time?

Sadly, many workers have already been laid off as a result of this terrible virus. The Secretary of State for Health and Social Care was extremely candid and honest last week when he said that he could not live on the £94.25 per week statutory sick pay. I do not think any of us can. How can the Government expect entire families to afford a week’s shop on that sort of income? Will the Government therefore increase the appallingly low level of statutory sick pay and ensure that all workers are eligible for it? So many are not at the moment. Will they also increase the £73 rate of jobseeker’s allowance and employment support allowance for disabled people? Will they also look at the even lower rate of carer’s allowance? Carers are expected to live on £66 a week.

As we discussed earlier today, there are 5 million self-employed workers in this country, many of whom cannot work from home. We desperately need a scheme that will be ready for them soon. It needs to guarantee them the 80% of income that others have been guaranteed. Whether it is a cabbie, a childminder, an actor or a plumber, there are battalions of self-employed out there who need their security. We need confirmation that a scheme will be brought forward not within days but within hours, to give them that assurance.

We also urge the Government to work with the construction industry and the trade unions to find a solution that covers the particularities of that sector—we have pointed them out before—with workers employed through payroll companies and umbrella companies. Most of them are forced into self-employment, and often exploitative self-employment of the worst sort.

I turn to housing. We welcome the moves to protect mortgage holders, with payment holidays now put in place for mortgagees, but we need the same security for renters and for the Government to understand the difference. For a renter, a rent holiday is not the same as a mortgage holiday. Rent is paid continuously during a tenancy, while mortgages have a fixed term, meaning that repayment terms can be simply extend. It is therefore important that the Government act to ensure that rents are paid, not merely that payments are suspended for this period.

We are extremely disappointed by the legislation published yesterday. Frankly, many believe that the Prime Minister has broken his promise to the country’s 20 million renters in 8.5 million households. It was not an evictions ban, as the Prime Minister promised. That legislation will not stop people losing their homes as a result of the virus; as my right hon. Friend the shadow Secretary of State for Housing, Communities and Local Government said, it just gives them some extra time to pack their bags. To be frank, it is just not good enough. The Government must look again; we urge them to look again.

There are also wider problems. Over recent years, austerity cuts have lessened the value of support available via housing benefit. The Government must immediately suspend the benefit cap and rid us of the bedroom tax that has affected so many families. We welcome the moves announced last week on local housing allowance, but the Government must go further and restore the local housing allowance from the 30th percentile back to the 50th percentile of market rates, as it was before 2010.

People will have made rental decisions based on their incomes, and they should not be penalised by the unforeseeable impact of the coronavirus, when we are asking people to lock themselves away. Now is not the time for families to be downsizing or sofa surfing with parents, grandparents or friends in cramped conditions. Many of us represent constituencies where overcrowding has become the plague of modern existence.

May I briefly pay tribute to the Mayor of London, Sadiq Khan? His team has worked tirelessly and creatively in securing hotel accommodation to get London’s rough sleepers off the streets, though we would like to know more about the duration and the cost of the deal that the Government have procured with hotels. It is important that the Government act to keep households in their homes so that that attachment to work, school and study can continue seamlessly at the conclusion of this extraordinary period. We cannot have a situation in which, at the end of this, tenants have either depleted all their savings or, worse, have amassed large and unpayable bills. If this is the case, the Government will be deferring evictions only a few months down the road, so the suspension of evictions for private and social tenants should be extended, we believe, from three months to six months. Shelter has estimated that as many as 20,000 eviction proceedings are already in progress and will go ahead over the next three months unless the Government take action to stop them, and they must be stopped. When the Financial Secretary to the Treasury rises to his feet, he must be clear that there will be no evictions of any kind during this period.

In addition, we also believe it necessary to suspend all bailiff proceedings for the same period. Practically speaking, there are clear health and safety issues about bailiffs entering the homes of families who may be self-isolating. Furthermore, what measures is the Chancellor proposing for suspending payments of household utility bills? That was raised in the discussions this morning and we will support measures that are brought forward. During this period, we cannot have bailiffs and we cannot have disconnections of water, energy or internet.

What are the Government doing about those without internet access? Many people in our communities rely on libraries to access the internet, but now those libraries are closing. What measures will the Government bring in to ensure that people can get online, whether for benefit services or to maintain some form of social contact? These are huge demands being placed on the civil service, and I pay tribute to all those public servants throughout our public administration who are working day and night to establish these schemes. They are not often praised, but they are in this situation.

The civil service has been depleted by a decade of austerity. As extra demands are placed on, for example, Her Majesty’s Revenue and Customs and the Department for Work and Pensions, other civil servants are being redeployed. Are those recently retired or made redundant from the service being asked to come back to assist, just as we have invited other professionals to come back into the NHS?

Will the Minister also confirm that the current round of HMRC office closures and redundancies will at least be paused, if not reversed, at this stage? What adaptations have been made for those working in the mass call centres of HMRC and the DWP? Is the telephony technology there for them to work at home? Is there greater social distancing within the call centres themselves? We all know that universal credit cannot cope now, but its roll-out was again delayed in the Budget. Millions more households are becoming eligible for universal credit, housing benefit and other payments, so are the Government confident that the system can cope with this increased demand, because the feedback that we are getting from our constituents on the frontline is that they find it impossible because of the long waits to get through and have their case dealt with successfully. No one is blaming the civil servants; it is about resources and investment.

What are the Government doing to encourage businesses to take up business interruption loans, when some businesses see loans as less effective than grants for keeping them afloat? Is there potential for increasing the level of grants and extending their range? Have the Government considered our proposal that such loan agreements should include job retention clauses, which would mean that when businesses receive a loan, they can give workers the security they need in the knowledge that they will not lose their jobs? It is not much to ask of a business receiving financial support from the Government in this way that they work towards our overall objectives.

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

The difficulty with what the right hon. Gentleman suggests is that most businesses do not know the extent of this crisis and the impact it will have on them. It is impossible at this point to determine exactly how long this will last or how deep a recession might be. Is he not asking the impossible of businesses?

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[Bim Afolami (Hitchin and Harpenden) (Con)]

This Bill, as the Minister said, shows decisive leadership by the Government and, indeed, by the whole House. It is supported by the Opposition parties. As the Minister explained, this is really a cash flow Bill. It is not a provision at this juncture for the extra £266 billion of Government spending for Departments; it is an advance to those Departments.

The first question I ask the Minister is, bearing in mind the advance, what is the Treasury’s current estimate of how much extra it thinks it will be borrowing when we come to estimates in July? That is something the House would like to consider and start thinking about.

Another point related to the fiscal and monetary management of this crisis, which I think this Government have done admirably, is whether the Treasury has done any thinking about the Government balance sheet, and in particular the balance sheet that will be looked at by international sovereign investors. Bearing in mind that this crisis is affecting every country in the world, have they done any thinking with our partners on whether money spent relating to this particular crisis may be somehow itemised differently on the balance sheet, rather than just being lumped in with all the other Government spending that may have taken place? If we could somehow delineate crisis spending and normal spending, that may well help investors, this House and anybody else in the future in trying to assess the fiscal health of this country and others. I think that is something the Treasury should consider.

However, there is a broader issue here. This is obviously thought about as primarily a global health crisis, but many people think about the economic impacts, and that is indeed correct. However, the health crisis and the economic crisis are intertwined, and I will focus, as so many in the House have today, on the self-employed, although this issue does not relate just to them.

This virus requires us to do social distancing, which is a phrase all of us have become so familiar with, although I do not think any of us knew it existed up until two to three months ago—all I can say is, bring back Brexit. To save lives, we are having to shut down major parts of the economy, and for people to save their own lives and the lives of others, they are having to shut down their personal economic activity. These people have families, houses and responsibilities; if they do not feel that they can meet those responsibilities, some may choose to take the path we have asked them not to take. Some may choose to do the risky thing and not what they know to be right, because they are caught in this difficult conflict between health and wealth. The job of any Government in a responsible society—indeed, this Government have met this challenge—is to make sure nobody is faced with that choice. I think that principle has underpinned all of the response from the Treasury and should continue to underpin it when the Treasury comes out with its proposals for self-employed workers.

I have a couple of specific questions for the Minister. I have been contacted by many constituents who are trying to use the business interruption loan scheme. Could the limit on unsecured lending be extended above £250,000? Many constituents have told me that they have been asked for personal guarantees above that threshold by the banks. Quite understandably, many are not willing to provide personal guarantees. Indeed, one asked me, “Bim, would you give a personal guarantee on a £500,000 or £1 million loan?” I said I could not say in all honesty that I would. Will the Minister consider extending that threshold for unsecured lending above £250,000—perhaps to £500,000 or £1 million?

[Kevin Hollinrake]

That is an interesting point. The position is not clear on the website, and it does need clarification, but I think that loans over £250,000 are ones that businesses could not get security for. This is the Government standing behind businesses that do not have other forms of security. I think that below £250,000 is where people can ask for reasonable security. However, my hon. Friend’s point about a personal guarantee is key, because it will deter many people from applying for these loans.

[Bim Afolami]

I thank my hon. Friend for that point. More broadly, the key question for the Minister is whether the Treasury is willing to adapt the scheme over the coming days and weeks as we hear more about the distinct problems and difficulties that there may be with it. That is not to quibble with the fundamentals of the scheme; it is a good scheme, and we need to recognise—indeed, I want to put on record—the fact that it was put together in record time. That is an incredibly difficult thing to do, and we need to give officials and Ministers credit for what they have managed to achieve, but let us try to improve the scheme so that it can be useful to more people, and addressing the issue I have raised is one way of doing so.

The final point I want to make is about tech start-ups—early-stage businesses. These are not necessarily all over the country; they tend to be concentrated in certain parts of the country. Indeed, I have several people who work for them in my constituency. The hon. Member for Hackney South and Shoreditch (Meg Hillier) cannot be here today, but I have been speaking with her, and there are many of these companies in her constituency. The nature of the support package that has been outlined is not particularly helpful for this type of company, because typically an early stage tech start-up deliberately incurs up-front losses as a result of heavy investment in research and product development. Such companies tend to rely on equity rather than debt funding, so the package that has been put in place is less helpful to them. The investors that back them usually back several dozen such companies and do not have enough cash to put into all their portfolios or their portfolio businesses. There is, therefore, a problem—a specific problem, but an important one, because although the number of the jobs in the sector is about 6,000 to 10,000, these are the companies that drive innovation and will drive the creation of tens if not hundreds of thousands of jobs in the future. Bearing in mind the Government’s ambition for the country, we need to safeguard these businesses as much as we can.

I have been discussing with many in the sector a proposal to join with the British Business Bank to put together a £300 million not-for-profit fund—not a fund that will take management fees or try to make any money—to invest in roughly 600 start-ups, to provide working capital for nine or more months. I ask the Financial Secretary or one of his colleagues to consider meeting me and industry representatives to see whether we can get that sort of thing going. It is a specific sector of the economy, but an extremely important one.

Everyone recognises the enormity of the challenge. Everyone recognises the speed and complexity of what we have to do. The money in this short Bill is critical, but in the coming days—especially if Parliament is to rise by the end of this week—we need to do what we can to improve the schemes as much as possible. Once Parliament is out and does not sit for however long it may be, it will be much harder for Members to do that. I ask the Minister to take those points into account.

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

I am delighted to speak in this debate and to follow the hon. Member for Gordon (Richard Thomson), who made some salient points. I endorse his tribute to the NHS and to all our public sector workers. I do not know if anybody has seen the news recently, but a terrible tragedy has happened in Spain, where elderly people in care homes were abandoned and left to die in their care homes by the staff. I cannot believe that would ever happen in the UK, and I think it shows how brave many of the people working in our public sector are when faced with these terrible crises.

I should first draw the House’s attention to my entry in the Register of Members’ Financial Interests, as I always do on these occasions. As well as being a Member of Parliament trying to stand up for the interests of my constituents—many businesses have contacted me over the last few days and weeks—I look at these matters from a business perspective. I have been involved in that business for 30 years, and when we had a board meeting on Friday, the first conversation we had—I guess like many businesses—was not about cuts to the number of people we employ, but about how much we could cut our salaries as board directors by. I think most board directors have an appropriately sensible approach to this. We all know this is going to be a very difficult crisis for many businesses. I pay tribute to the Treasury, the Chancellor and the Financial Secretary for putting together a package of support that is unheralded—not just in its size, but in its comprehensive nature and the speed with which it has been delivered.

The job retention scheme in particular was a massive relief to many business people. Back in 2008, we were faced with taking our workforce down from 200 people to 65 within 12 months, as the bottom fell out of our business and out of the market. The most destructive aspect of that—aside from the terrible human cost of sitting down with people with whom one had worked in some cases for decades and telling them that the business could no longer afford to employ them—was that it cost a huge amount of money to make them redundant. That puts the business in a critical condition, which means that more people have to be made redundant. I do not begrudge anybody the redundancy payments that were due, but for a private business that is a very difficult thing to have to do.

The job retention scheme insulates many businesses from that, because instead of having to lay people off or make them redundant, the business can say to them, “You can stay at home at the moment. You’ll continue to be paid a fair amount to get you through this short-term crisis, then we’ll bring you back into the fold.” That eases the financial pressure on the business in an important way. It is a really excellent scheme. There are of course some missing details, which I know we will get in good time, in particular whether earnings will include things such as commission and whether the Government payment will include things such as national insurance. Many businesses have questions that I am sure will be answered in good time.

The other element of the package is the business rate grant scheme, which many businesses have welcomed. Of course, many self-employed people, including sole traders and freelancers, are outside the scheme—a point that I will touch on in a second.

I want to raise one or two points about the business interruption loan scheme. Obviously we want as many businesses as possible to take advantage of the scheme, but one big concern is about security. The scheme is based on the enterprise finance guarantee scheme, which included personal guarantees. I understand that the new scheme will not include them—I have been told that from the Dispatch Box today on an urgent question—but it would be helpful if the British Business Bank website said clearly that that is the case. It does not say that at the moment, which could deter some people from applying in the first place. All it says is that security can be taken

“At the discretion of the lender”.

I have had personal guarantees for most of my business life, and I think most people would expect a business person to have some skin in the game, but this is a different situation. It is very difficult to quantify the impact of this crisis on a business. The Government have rightly stated that there will be no personal guarantees, which I assume means that people’s family homes should not be put up for security either. That being the case, it would be helpful to clarify that point, because that would increase demand.

The other point is that at the moment the banks eligible for that scheme number about 40, but there are many outside it. Those not eligible for the previous British Business Bank scheme, the EFG, will not qualify for access to the current scheme. Therefore, customers of OakNorth, Aldermore or one of the many alternative providers in the marketplace today cannot access the scheme. The normal process for applying for that scheme is somewhere between six and 18 months, which is clearly far too long. I think that the Treasury has committed to try to accelerate that process—or the British Business Bank has—but it will still take a matter of weeks, and businesses cannot wait weeks for this money. They need it in a matter of days.

It is absolutely essential that we get that support to businesses now, so I politely ask the Minister whether he will look at that and perhaps get the Bank of England to set up a new scheme directly with some of those lenders, many of which are very bona fide lenders. Of course, the right checks and balances have to be in place, but these are authorised, regulated banks, so it would be good to ensure that all lenders can get finance to all customers.

The other thing about how business will view this crisis is how long it is likely to last. Businesses are much more likely to take a loan, from anywhere, if they think they can get through this and quantify the losses or how long their revenue will be affected. I worry about the current situation, because we are telling people that they can go to work as long as they cannot work from home and as long as they socially distance themselves when they get there. I think that was one reason for the confusion and why Filey in my constituency and many other beautiful market towns were packed out with visitors, who felt they could go to those beautiful places and socially distance themselves while they were there, which clearly they cannot if there are too many people there. It is the same in a workplace environment. I can see that, because of the uncertainty about who can actually go to work—we have not restricted it to key workers or essential workers, to my understanding—lots of people are building houses on construction sites and whatever else they are doing. They are going to work because they cannot work from home and they feel they can socially distance.

From a business point of view, I would personally prefer to have a complete lockdown for 30 days. We know that, in China, after a full lockdown for 14 days, cases peaked, and after 30 days, cases stopped, and all the coffee shops, Starbucks, Apple and the car dealerships opened again. That gives us hope that we can tackle and defeat this virus within 30 days, if we do the right thing. If we are equivocal about it and it is confusing, people will continue to go to work and continue to spread the virus.

From my business perspective, a short, sharp shock is much more appealing. I would know that, if I applied for a business loan from the new scheme, I could quantify how much I would need, if I had the confidence that the timescale would be limited in that way.

I have a couple of other points that I think would be useful. Ideally, the Government should not have to step in to support businesses at any point in time. The markets should deliver that themselves, with finance coming from banks or investors through to businesses. Venture capital trusts have limits on how much they can put into businesses—up to £5 million on an annual basis and £12 million as a lifetime limit into a particular business. Because of the unprecedented nature of this crisis, it would be useful to double those limits so that venture capital trusts, which invest in many good businesses, can see those businesses through a tough time. Otherwise they will not be able to get the extra money into those businesses that they need. It could be a temporary change, and it would potentially save many businesses.

On the self-employed, we have understandably heard lots of calls for more help for the sole trader. Many different people in my constituency have contacted me. They desperately need some help, and I do understand that. Within that cohort are some very vulnerable people, including mortgage prisoners. I have corresponded with many mortgage prisoners, as have other hon. Members, and many are self-employed. They are in a particular situation in that their earnings are being very badly damaged now, and they have been paying huge mortgage rates for too long. Many of the mortgage prisoners’ loans have been sold to non-UK lenders—inactive lenders—and the regulatory oversight of those lenders is much reduced compared with UK lenders. In my view, it is an absolute disgrace that we allow UK mortgage customers’ loans to be sold to a foreign entity, over which we do not have the same oversight, so we cannot properly control the activities of those lenders. We need to bring all those lenders within the same regulatory scope. Some of those mortgage prisoners are on very high standard variable rates of around 5%, and even up to 6%. It is simply unfair . A year or two ago, we brought in a standard variable rate cap in the energy sector. I wonder whether the Minister could look to do the same thing in this sector to ensure that those people are treated fairly.

I do a lot of work with the all-party group on fair business banking. Most bankers do the right thing—the vast majority of banks and bankers I meet and have banked with over more than 30 years in business have looked after my business fairly. Clearly, that does not always happen, given the 2008 scandal in small business banking. It is time now for the banks to do the right thing and to work with the Government on the business interruption scheme.

Another issue is that the rates that banks charge on personal loans and overdrafts are not coming down, despite the reduction in base rate—in fact, quite the opposite. The Financial Conduct Authority, in its wisdom, decided that everyone who had an overdraft should pay the same whether it was an authorised overdraft or an unauthorised overdraft. It told the banks that they could not penalise people for unauthorised overdrafts, so everyone has to pay the same. The rate for authorised overdrafts used to be somewhere between 3% and 15%, and unauthorised overdrafts used to have a fixed daily charge and a much higher rate. So the banks made them all the same, and here are the rates being charged today for authorised and unauthorised loans: First Direct, 39.9%; HSBC, 39.9%; Lloyds Banking Group, 39.9%; Nationwide, 39.9%; and NatWest, 39.5%. It is simply disgraceful. Everybody is paying the higher rate. It smacks of a cartel, as well as profiteering and overcharging.

[Jim Shannon (Strangford) (DUP)]

Last Friday, four or five businesses in my constituency came to see me, looking for help because of the coronavirus. The first constituent told me that he had asked for his loans to be reduced, but the bank—I will not say which one it was—said, “No, what we’ll do is charge you £100 for each amount of money that you’ve borrowed, and then we’ll charge you interest at 6% on top of that.” Does the hon. Gentleman agree that, in these difficult times, that is totally outrageous? The banks should be there to help, not to take advantage.

[Kevin Hollinrake]

I thank the hon. Gentleman for that contribution, and indeed for all the work he does on the all-party parliamentary group on fair business banking and for the many speeches he has made on the matter. I absolutely agree. The two best things that I have heard the Treasury say over the past two weeks—and there have been many—are, “We will do whatever it takes” and, “We are all in this together.” The banks should take that approach as well. I and many other Members of the House will be watching to make sure that this time the banks do the right thing and restore their reputation.

[John McDonnell]

The hon. Gentleman has done some sterling work on this, so would he like to comment on the figures that are coming out on 6 April and the interest rates for overdrafts from HSBC, First Direct, M&S Bank and TSB? Nationwide have already gone there, with an increase from 9.99% to 39.9%. What does he think about that?

[Kevin Hollinrake]

I think it is an absolute disgrace. I do not think that the FCA saw it coming, which is one of the flaws of the regulator. The FCA has been criticised many times in this place, including by the right hon. Gentleman. It told the banks, “Right, you’re not going to charge anybody any more than anyone else is.” But that let them all put their rates up to the highest level. It is exploitative and absolutely outrageous.

The banks need to look at this as a sector and start to treat their customers fairly, which of course is a basic requirement of the principles of banking, so the FCA should step in and look at this. In fact, I think it should be the subject of an inquiry by the Competition and Markets Authority. The fact that the rates are not just high, but all the same, smacks of directors getting together in a room and agreeing a figure. It cannot be a coincidence that all the rates are exactly the same in this supposedly competitive market.

On commercial loans, it is right that the Government have negotiated with the banks to give mortgage holidays, which of course have to be paid back but nevertheless give borrowers vital breathing space. I think the same is true of some commercial loans, but the banks are saying, “We’ll give you a holiday only on the payment of the principal, not the interest.” Those paying for a commercial loan are paying much more on the interest than they are on the principal, which again seems grossly unfair if we are all in this together.

We are going to work together to try to get through this, so I call on the banks to look at this again, to be fair and to rebuild their reputation. The final way they could do that is by suspending legal action, certainly in relation to residential repossessions but also for repossessions against businesses. They should show forbearance and use the business banking resolution service—I am one of the people who have been working on that in recent months—which will be like a super ombudsman for banking disputes. They should defer any issues they have with their customers until that service is properly established, so that those complaints can be resolved fairly—fair to the bank and fair to the customer.

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[Sir Edward Davey]

The hon. Gentleman makes a really important point, and backs up the thrust of what I am trying to say. The banks have been given access to free money. They are being looked after by the Bank of England through this extension of the Bank of England’s balance sheet, so they are doing okay. So why are they not stepping up to help the rest of the economy? There are some really quite serious questions on this issue. I hope that the Government say in response to this debate that they, the Bank of England and the Financial Conduct Authority are going to look at this situation, because it is just not good enough. I want to work on a cross-party basis on this issue, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) said; this is vital to all of us, and we need to send a message to those who are running the banks that we are expecting them to step up. It is time that they did their duty, right?

I actually want to come to my speech, because that was just a response to the hon. Member for Hitchin and Harpenden (Bim Afolami). I want to talk about the Bill in front of us—I know that is a bit unusual—as well as the supply process of which it is a part, and then I will give some thoughts on the economy.

On the Bill, will the Minister tell us why the Treasury chose to change the percentage limit of the contingencies fund, which is normally set at 2% of total authorised expenditure in the preceding year, to 50% until the end of 2020-21? In absolute figures, the amount before this Bill would have been £10.7 billion. That has gone up to £266 billion. I hope that the Minister can explain why. It does not seem unreasonable, given the pressures on Departments, but it is quite a big change. I am not against it—let me be clear that I will be supporting the Bill today—but it would be good to put on the record, for the House and for history, why that figure has been chosen. When people look at this situation in the future, they will need to know why that decision was taken.

The Minister said in his opening remarks that this was not an increase in expenditure. Well, I hope that he meant to say that it is an increase in expenditure in that it takes account of commitments that the Chancellor has made both in the Budget and since the Budget. If I have understood correctly, there is a big increase in expenditure because we need one—for the health service, our social care system and other parts of our public services that need the cash now.

I have another question for the Minister. If these contingencies are being given to Departments so that they have the cash they need, is the money also being given to local authorities? I want to underline this point: local authorities are on the frontline now, and they are having to spend money all the time on a whole range of things that are completely unbudgeted for. They are confused about the proposals for business rates, whether they are going to get any income in, what money they have to give out and all the rest of it. Local authorities are slightly unclear about what is happening. I hope that there will be genuine desire and action on behalf of the Treasury to get some money out—on account, if you like—to them so that they have the cash flow to ensure that they can provide the extra services that they are being asked to provide. It is essential that we hear that local authorities are getting the support that the Whitehall Departments seem to be getting.

I said that I also wanted to talk about the supply process. This legislation is part of the almost anachronistic supply process in this House. I am afraid that I am a bit of a geek on this. In 2000, I wrote a pamphlet called “Making MPs Work For Our Money: Reforming Parliament’s Role In Budget Scrutiny”. It is a cure for insomnia, so I do not necessarily suggest people read it, but in it I tried to argue that this House does not really have sovereignty over the Budget. We look at these Bills when they come along and we nod them through, but our processes of examining draft budgets and estimates are shocking. In my pamphlet, I made the comparison with all the OECD countries, and this House has the worst processes for examining draft budgets and measures such as this Bill—that is worrying. I do not wish to resurrect the Brexit debate, but it was supposed to be about parliamentary sovereignty and I used to say, “I wish we had some.” That is because this House rarely, if ever, looks at the estimates properly, analyses them in Select Committees and makes proposals about draft spending decisions. Other Parliaments do those things quite easily—the Swedish and New Zealand Parliaments are good models. Our approach undermines the value for money and undermines what we are here for, and we really need to look at the estimates procedure.

That is why this Bill looks so weird in many ways; it is called the Contingencies Fund Bill and we are not used to doing this sort of thing, because we have given up control over supply—it is just nodded through. The last time MPs voted against a spending request of the Government was in 1919, more than 100 years ago We have given up properly controlling the draft estimates. Although I will be supporting the Bill tonight, because it is really important that we let this one through, I just want to say to the Minister that I hope we can reflect on this. I raised this issue when I was in government and tried to get the then Chancellor to look at it. There was a flurry of excitement and then the dead hand of the Treasury said, “No way, we are not giving up control.” That was the wrong move, because control can be exercised with greater transparency. I hope that that may be one thing that comes from this experience in this emergency situation.

Let me end with some reflections on the economy, where we are at and the lessons we are taking. I talked about the importance of the banks really delivering, given the agreement with the Government and the Bank of England. That is probably the most essential message from me tonight. There are some longer-term things and possibly some relatively short-term things to address, one of which is the way we do the Bank of England’s quantitative easing. That is monetary policy, where we are, in effect, printing money and sending it out. That happened after the 2008 crash and it is happening now. I am not against it, but I just say that the way it works is not some sort of technical, politically neutral, value-neutral system; it has implications for economic equality in this country, because the money tends to go to people in the City—the financial institutions. It does not go to ordinary people and ordinary businesses. So if we are going to get things right this time and have quantitative easing, I urge the Minister to let us have a debate about how those mechanisms actually work, because in crises we do not want economic inequality worse; we want to make it better. These technical things sound as though they are available only for pointy-heads in the Treasury, but quantitative easing is a political issue and we have not debated that. It has massive social and economic consequences, and we need to make sure that there is democratic accountability on them, and that they are properly understood and work in the interests of society.

[Kevin Hollinrake]

Has that not been solved to some extent with the job-retention scheme, because the Government will issue bonds to fund that scheme, they will be bought by asset managers and the QE will buy those assets off the asset managers? That is the circular nature of that scheme. So this time round, as the Prime Minister said a few days ago, the support would be directed at the people, in terms of keeping them in work and in pay, rather than simply funding the banks. To a certain extent, this time QE does support jobs and real people.

[Sir Edward Davey]

The hon. Gentleman has a point and he is right to take me up on that. I think that there is an improvement, but I do not think we have debated this in the context of QE and the monetary side of the policy response. I think we need to do that, because we need to unpick some deep issues here and I do not think this House has understood that. Although I am a big fan of the independent Bank of England, and I do not think we should interfere with the setting of interest rates, I do think QE raises some political questions which are not technical and require accountability.

[Sir Edward Davey]

I half agree with the hon. Gentleman, but I do not think inflation is going to be the problem; people have not got any money. This form of QE is often called helicopter money and perhaps that is the right move now, and we need to be debating it.

I have a final comment to make and then I will sit down. When we reflect in a few months on this crisis and what has gone on, we will have to look at some of the underlying assumptions of our economic models. I am not saying that we should rip them up—I do not believe that at all—but how the state underpins and works with the market is really important. What I mean by that is that there is an assumption that the market can do it all, that the market is fantastic and that Governments should come out of the way, but markets only exist because of Governments. Regulations and laws make markets and there have always been those.

[Kevin Hollinrake]

indicated dissent.

[Sir Edward Davey]

The hon. Gentleman is shaking his head. Without rules and regulations on competition, on fair play for employees and on consumer protections, markets will not work. Where there is no consumer protection, consumers do not have faith in the products and services being provided, so the markets cannot work. I absolutely think that we need to reflect on that, because I do not think that the model has been working well enough. I will end on that comment, because I hope that we will learn from this and have a proper debate about how our economy will work in future.

--- Later in debate ---

[Christian Matheson (City of Chester) (Lab)]

I want to start by echoing the sentiments expressed by my hon. Friends, and particularly my right hon. Friend the Member for Hayes and Harlington (John McDonnell). The urgent need for provisions to support the self-employed gets greater by the day, and my concern is that desperation is turning to anger. The “What about us?” sentiment will be driving that anger, understandably, and making the situation a whole lot worse. I urge Ministers to bring that support forward.

We are also promised support for renters in both the social sector and private rented sector. That has not happened yet. Again, as days and weeks go by, the desperation and uncertainty become greater, and I urge Ministers to bring that forward. My right hon. Friend was right about the Government apparently going back on a commitment to bring forward provisions to ban evictions. If someone is evicted, where are they going to go at the moment? There is no reason at all why that provision should not be brought forward. If we are serious that people have to stay at home, let them stay at home by making sure that they are not evicted. It shows either misjudgment in making the promise in the first place, or misjudgment and bad faith in breaking that promise. I urge Ministers to take that back to the Prime Minister and ask him to make a change.

My hon. Friend the Member for Blaydon (Liz Twist) was absolutely correct in what she said about charities. In Cheshire West and Chester, we have brought together Cheshire West and Chester Council, West Cheshire Voluntary Action and lots of charities and church groups to try to provide a co-ordinated service to all those who need support at the moment. But as my hon. Friend said, the charities are running out of money because their commercial activities are running down, which is affecting their income. That is calling into question their ability to deliver services to the most vulnerable, which they do much of the time and which is often taken for granted. Right now, with everyone expected to stay at home, the ability of charities to deliver those services is perhaps limited anyway, but as this situation hopefully gets better, we will look to charities to get those services up and running straightaway. At the moment, without the support for charities, their ability to do that is diminished.

[Kevin Hollinrake]

May I take the hon. Gentleman back to his point on rented accommodation? He is right that at the moment, all landlords should show forbearance when people are in difficult financial circumstances, and the Coronavirus Bill will increase the notice period to end an assured shorthold tenancy from two to three months. He is a fair man, so does he agree that we must be fair to both sides? If a tenant is unfairly withholding rent from a landlord, and it takes eight months to get a case to court at the moment, that is not very fair on the landlord. We have to be fair to both sides.

[Christian Matheson]

I do accept that, but that would be the case in normal circumstances anyway. We are talking about giving people peace of mind during this national crisis and ensuring that people do not even have to live with the worry of being chucked out on the street or into temporary accommodation. That is my concern.

My right hon. Friend the Member for Hayes and Harlington reflected on his childhood in Liverpool and on his priest considering him to be a lapsed Catholic. That reminded me of my mum and dad, who also grew up in Liverpool, albeit a couple of decades or more before my right hon. Friend. The formative period of their childhood was the second world war, when they were both young children, suffering the bombings in Liverpool and the uncertainty of the war. We all know that the second world war in Europe ended formally on 7 May 1945, but my mum and dad did not know that—they had no idea when the hostilities would end and things might start to get better. Listening to my right hon. Friend, I reflected that that is the situation in which we find ourselves now.

We have no idea how long this crisis is likely to last. That uncertainty drives desperation, anxiety and as the hon. Member for Hitchin and Harpenden (Bim Afolami) and my good friend the hon. Member for Thirsk and Malton (Kevin Hollinrake) said, business uncertainty. That is why it is essential that the Government are clear in their statements and oblige other businesses—we have talked about the banks; I want to consider insurance companies—to ensure that they play their part. If we cannot plan ahead, we will not know how to address the problems, and it cannot simply be down to the Government.

I make that point because insurance companies are not living up to their obligations. I know of businesses in Chester that have been told that their business contributions to insurance do not apply because coronavirus was not a notifiable disease at the time of the outbreak or because the Government had only suggested, as was the case last week, that events did not take place rather than saying that they must not take place. As I mentioned at Question Time, for events, conferences and sports that have a long lead-in time to prepare, it would help if the Government were clearer now that those businesses could not get back up and running for four or six months and that insurance companies should ensure that their policies kick in.

--- Later in debate ---

[Bill Esterson (Sefton Central) (Lab)]

Desperation was the word used a number of times by my hon. Friend the Member for City of Chester (Christian Matheson) and, prior to him, my hon. Friend the Member for Blaydon (Liz Twist). It sums up the feeling of many people for many reasons. I think it also underpins what the hon. Member for Hitchin and Harpenden (Bim Afolami) did. I wish he was two metres from the Minister to demonstrate good social distancing in this place. He was right. This debate is about improving the schemes as far as we are able to do so, as part of our contribution to scrutinising the Bill.

My first point, which was mentioned by my right hon. Friend the Member for Hayes and Harlington (John McDonnell), is about construction sites. We have all seen the pictures, and some of us have passed examples today, of construction workers working in big numbers in close proximity. That cannot be right and it is certainly not what was intended by the Prime Minister’s guidance. Perhaps the Minister can take that point on board and consider how that situation might be prevented. It is a very serious matter, not just for those workers but in terms of spreading the virus elsewhere. We must all remember that, even if we are fit and healthy and do not become sick ourselves, it is not about the individual, but who we pass it on to.

On banks and loans, the problem, as has been stated by a number of Members, is that loans mean debt which cannot be repaid without the certainty of an income. My hon. Friend the Member for City of Chester just made the point about us not knowing the end date. If people do not know the end date, they will not be able to plan to pay the loans back. That is a real problem. If we then add on the uncertainty of having to provide personal guarantees, it becomes extremely problematic for many businesses to take advantage of the loan scheme. The suggestions made by Members for how the loan scheme might operate are really important, and it is really important that the Government go away and look into them.

On the behaviour of banks, in other debates we have heard descriptions of pharmacists and food retailers hiking up prices. The banks are doing exactly the same thing with interest rates. That cannot be allowed to continue. I thought the right hon. Member for Kingston and Surbiton (Sir Edward Davey) was going to suggest nationalising the banks as a way forward. He was at one stage channelling his inner Marxist for the benefit of some in the Chamber. [Interruption.] There is agreement from my right hon. Friend the Member for Hayes and Harlington on the Front Bench. The point is that the taxpayer bailed out the banks. People paid the money back through higher interest rates in the financial crisis. They are now about to repeat that behaviour at a much more dangerous and difficult time in our history. There has to be intervention by the Treasury, in whatever shape or form, to prevent that and to ensure that the banks behave responsibly, provide support and do not put apply onerous terms, whether through personal guarantees or ultra-high extortionate rates of interest.

There is also the trust issue. Businesses do not want to borrow because of their past experiences. During the financial crisis when I was running a business, I had the experience of having my overdraft facility recalled overnight. We were lucky that we were able to cover that out of personal savings, but very many businesses were not able to do so and went to the wall. People suffered grievously—some took their own lives. We have debated that many times in this Chamber, and we do not want a repeat of that over the coming months and years after the immediate crisis has passed. I therefore urge the Government to intervene now to get that right.

As well as taking advantage of the Government’s employee retention scheme, businesses will need to pay additional costs such as rents and insurances. My hon. Friend the Member for City of Chester made the point that businesses are being told that they do not qualify for business continuity insurance. The same applies to income protection for the self-employed and small business owners, because this disease did not exist when their policies were written. Those issues need attention. The vast sum of money that the Government are making available provides the opportunity to look at some of the other costs for businesses to see whether there can be help beyond that suggested for employees. Grants are certainly a part of that. Given how long this situation might last, the size of the grants will need to be constantly reviewed so that they are sufficient.

[Kevin Hollinrake]

The hon. Gentleman makes a very good point about grants. The biggest grant, of course, is the job retention scheme—that is a grant. It is Government funded, and there is no requirement for employers to pay anything towards it unless they want to do so, and they can top it up to that 20%. Therefore, will he concede that the scheme is a very important initiative by the Government and that it will be welcomed by many businesses?

[Bill Esterson]

Absolutely. It is important, and I certainly welcome it. None the less, there are some challenges with it. The fact that it is not available for the March payroll is a big problem for many businesses. We have already seen a significant number of businesses close and many workers laid off who will not now be eligible to be part of that scheme. The Government, totally understandably, have used examples of furlough schemes elsewhere in the world, but it will be difficult for the scheme to deal with the nature and the scale of this crisis.

Loan Charge 2019: Sir Amyas Morse Review

Kevin Hollinrake Excerpts

Thursday 19th March 2020 Commons Chamber

[Mr Davis]

I thank the right hon. Gentleman—I nearly called him my right hon. Friend, from my days on the Public Accounts Committee.

When financial advisers and accountants could not understand the law, when employers could not understand the law, and when the courts could not agree on the law until 2017, how could an ordinary layperson possibly have understood the law?

The Supreme Court’s eventual decision, overturning three decisions before it, reflects changing national attitudes on the responsibility of the taxpayer—the point the right hon. Gentleman has just lighted on. As a result, one organisation representing the professions involved explicitly changed its guidance to its members. It said:

“Members must not create, encourage or promote tax planning arrangements or structures that…set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation and/or…are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation.”

In what year was that changed guidance handed out by the professions? 2017.

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

My right hon. Friend is making some very good points, which I agree with. However, does he not agree that if something looks too good to be true, it usually is? In my business, we have been brought this kind of scheme a number of times by our advisers over the last 30 years, maybe with a barrister’s letter saying, “Don’t worry. It’ll be fine. You can reduce your tax bill hugely by adopting this scheme.” We have always rejected them because we knew the risk. Does my right hon. Friend agree that there is a requirement on the individual who subscribes to one of these schemes to make sure they understand the risks and that there is no guarantee the scheme will actually reduce their tax burden?

[Mr Davis]

My hon. Friend is, of course, a skilled businessman; he knows what he is doing, and he is across this sort of thing—it is his job to be across it—but I am not so sure we could say that about a locum nurse or a social worker. This issue was actually at the centre of Sir Amyas Morse’s arguments. He took the view that the attitude from 2017 should apply back to 2010, even though the law was not clear. He took the view that the principle of a taxpayer’s responsibility for their own tax affairs must be upheld. That is the point my hon. Friend is making, and it is right—but only when the law is clear. That means that the Government have a responsibility to make the law clear and not to punish ordinary, hard-working taxpayers when Ministers fail to live up to that responsibility.

HMRC itself seems to disagree on the importance of the taxpayer’s responsibility. Why do I say that? Because until 2014, it did not approach the individual taxpayers; it approached the advisers. It approached the companies that insisted—they did not ask, but they insisted—that these locums and social workers took up this option. HMRC went to the advisers until 2014—until the issue suddenly started to become quite controversial.

Last year, the Prime Minister himself commented on this issue. He said:

“The real culprits in this matter, if I may say so, are not so much the individuals themselves who have decided to use the loan charge as a way of minimising their tax exposure. It’s the people who advised them that it was a sensible thing to do. In my view, we should find a way of going after them.”

That is the Prime Minister’s view, and I happen to agree, unusually.

Economic Update

Kevin Hollinrake Excerpts

Tuesday 17th March 2020 Commons Chamber

[Rishi Sunak]

My right hon. Friend the Chief Secretary is talking to all Departments about the resources that they require to get through these challenging few months.

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

I warmly welcome this package of support for small businesses, which has been warmly welcomed by a number of businesspeople who have already contacted me. The business interruption loan scheme is a key part of this, but some lenders cannot access that scheme because they are not registered with the British Business Bank, and it would take months for them to do so. Will the Chancellor act now to ensure that all lenders can access that scheme?

[Rishi Sunak]

I thank my hon. Friend for his comments. He is right: we want this scheme to be available through as many branches and outlets as possible. We are urgently working with the Prudential Regulation Authority to see whether we can onboard new providers at pace. He will understand that there are regulatory requirements, but we are seeing what we can do to speed that up.

Public Sector Exit Payments (Limitation) Bill

Kevin Hollinrake Excerpts

Friday 13th March 2020 Commons Chamber

[Sir Christopher Chope]

The right hon. Gentleman is absolutely right about that. That is why organisations such as the TaxPayers Alliance are trying to work with the general public to raise the profile of these subjects. What is happening is a concerted fraud upon the taxpayer by these officials, who are cosying up to each other and ensuring that they are the only people who do not suffer as a result of their own incompetence.

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

In one of my small local councils, Hambleton District Council, two officials have had pay-offs in excess of £300,000 over the past three years. One of them was only earning £100,000—“only”, he says. The local authority says that it wants the measures brought forward so that it can cap future payments. Does my hon. Friend not agree that it is high time that we did that?

[Sir Christopher Chope]

Absolutely, I agree with that. Of course, the Government said that pending the implementation of the regulations, they would ask the public sector to comply with the spirit of them and the primary legislation that had been passed, but I am afraid that is almost impossible for local councillors and, indeed, the Government to do in practice, because we need to have the law in place. That is why I hope we will hear from the Chief Secretary that we will get the law on the statute book later this year so that public sector exit payments are limited to £95,000.

Clause 2 of my Bill suggests that we should give notice to all people who might be thinking of getting ahead of the game that they would be subject to the provisions of the Bill in respect of any public sector exit payments agreed after 1 April 2020. I do not know whether the Chief Secretary thinks that to be a sensible safeguard, but I hope it will find favour.

It is ridiculous that we should have to legislate to force the Government to introduce regulations. Many new colleagues are here today. I should tell them that on Fridays the Government often promise the earth and never deliver. My right hon. Friend the Member for East Yorkshire (Sir Greg Knight) introduced a Bill to deal with rogue parking operators last year. It got on to the statute book and everyone thought that the Parking (Code of Practice) Act 2019 meant that we would get rid of rogue parking operators. It may be months or years before anything effective is done in regulations.

Tax Avoidance and Evasion

Kevin Hollinrake Excerpts

Tuesday 25th February 2020 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move,

That this House notes that the tax gap, the difference between the amount of tax that should be paid to HMRC and what is actually paid, has been estimated at between a minimum of £35 billion and £90 billion; believes that successive Conservative governments have failed to address tax avoidance and evasion while making savage cuts to public services and undermining the social security net; further notes that the Tax Justice Network has described the UK as backsliding on financial transparency; is concerned by reports of the Conservative Party’s links with individuals and companies that have engaged in tax avoidance; and calls for the proper funding of public services after a decade of austerity and for robust action to tackle tax avoidance and evasion.

With a Budget in just over a fortnight, over the coming days we will be setting out an agenda of issues that we believe the Government need to address to tackle the social and climate emergencies that our country now faces. And yes, there is a social emergency in many of our communities. Yesterday, my hon. Friend the Member for Leicester South (Jonathan Ashworth), the shadow Health Secretary, exposed the appalling levels of health inequality across the regions of our country. Today, the Marmot report shows what he described as the “shocking” results of 10 years of austerity: life expectancy has stalled for the first time in more than 100 years, and has even been reversed for the most deprived within our community, women in particular.

Yesterday, the hon. Member for Denton and Reddish (Andrew Gwynne), the shadow Secretary of State for Communities and Local Government revealed the scandalous impact of cuts to local councils—for example, the impact they have had on the services desperately needed to keep our children safe. This afternoon, my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley), the shadow Minister for mental health and social care, will describe the immense suffering and distress caused by the cuts in social care imposed by this Government. Members will remember the report only last year, reporting that 87 people died each day before actually receiving the care they needed.

At present, we have a Government who, on this evidence, have proved to be incapable of providing care for our people, of housing our people, of feeding them or of providing the work that will lift them and their families out of poverty. There is a lot of hyped-up talk about the big expenditure numbers that might be associated with the coming Budget. What we are interested in is outcomes, and the impact on the wellbeing of our people. These will be the key tests of the forthcoming Budget. Will it really end austerity? Will it really reverse the decade of austerity cuts that have been imposed on our community by this Government? Will it ensure that our people are properly cared for, properly housed, properly fed and lifted out of poverty? Alongside all of this, in a week when we have seen the Prime Minister’s failure to respond to the flooding that has damaged so many of our people’s lives, the overriding test is: will this Budget tackle the existential threat of climate change?

It is interesting that, contrary to virtually all the advice from mainstream economists 10 years ago, the newly elected Conservative Government took the political decision to impose austerity cuts on our community. As we have repeatedly said, it was a political choice, not an economic necessity. The alternative was to ensure that we had a fair taxation system to fund our social infra- structure, and that we borrowed to invest in our physical infrastructure to grow our way out of recession. The reality is rather that the neo-liberal ideologues simply could not let the economic crisis go to waste. They seized the opportunity to launch their experiment to downsize the role of the state through cuts, outsourcing and privatisation. This was linked to ever more restrictions to reduce the effectiveness of trade unions to represent their members and to shift the balance of power between capital and labour in the workplace.

The result has been that virtually every area of our public services is in crisis, with the slowest growth in wages in 200 years, 8 million of our people in working households in poverty and over 4 million of our children in poverty. The UN rapporteur has described levels of destitution in our country and the treatment of disabled people as an abuse of human rights. The Government’s alibi for austerity was the global financial crisis, even though Government spending was never a cause of that crash. Now, 12 years on, the Government no longer have that fake alibi for the cuts. It is clear the Tories do not just want to shrink public services and cut public sector jobs in the short term; they want to downsize our public services for good—as the Institute for Fiscal Studies has said, baking austerity into Government.

All this suffering, all this hardship, all this holding back the potential of a near-generation of our people would have been rendered completely unnecessary if we had had a fair taxation system and had invested in our economy. A fair taxation system starts with ensuring that people and corporations pay their taxes. That patently is not the case at the moment. There is much talk about levelling up; well, let us start with levelling up the rules of taxation and the amount many of the rich and the corporations pay in taxes.

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

Surely the right hon. Gentleman will be aware that the top 1% of earners in this country now contribute about 29.6% of all taxation, whereas in 2009-10 the figure was only about 25%. How can he say that is a failure?

[John McDonnell]

They pay that much because they earn so much more than everybody else, but the other issue, and it relates—[Interruption.] Let me finish. We have this debate time and again. The hon. Gentleman is referring to income tax, but when we take into account overall taxation we see that the poorest-paid in our country are paying about 40% of their income while the richest are paying around 34% of their income. It is the poorest who are hit hardest, it is the poorest who have shouldered the burden of austerity, and it is the poorest whose life expectancies are being reduced at the moment. That cannot be right; surely to God no one in this House was elected to ensure that life expectancy for the poorest stagnates and for some goes backwards.

--- Later in debate ---

[Steve Barclay]

It is always good, 10 days into the job, to get specific challenging questions on the detail, but to answer that question—and I do not want to tempt hon. Members who usually come with in detailed questions such as that—the tax has raised £5 billion in additional revenue. On this occasion, I can satisfy the House, but I do not want to tempt fate with too many colleagues on this outing.

It is interesting that attitudes in large companies are changing. I am sure that there will be Members who will want them to change further, but since 2013 the proportion of large businesses agreeing that tax avoidance is acceptable has more than halved, moving from 45% to 21%. There is clearly more to do, but that shows a change in attitude within many large companies.

[Kevin Hollinrake]

One of the measures that the Government introduced in 2017 was a corporate offence of failing to prevent tax evasion, which certainly has had an effect on advisers. Will my right hon. Friend consider expanding that failure to prevent offence to include economic crime and money laundering, which would further narrow the tax gap?

[Steve Barclay]

As my hon. Friend will know, before coming to the House I worked in the field of trying to prevent money laundering in our financial institutions. As a principle, we are always keen to look at that, but he is right to draw attention to the measures that we have taken, including on the professional responsibilities of advisers, whether that relates to the property business—in businesses linked to his previous senior business experience —or accountants, lawyers and others.

--- Later in debate ---

[Steve Barclay]

The target is a gap that is as narrow as possible, and I do not think HMRC’s commitment to that can be questioned. As I have said, the gap is now at a record low, but I entirely share my hon. Friend’s desire for us continue our efforts to reduce it further, because there is a common purpose: to reinvest that money in levelling up all parts of the United Kingdom and in our public services.

Part of this requires domestic action, but part of the action must be international. That is why in the 2018 Budget we announced 21 measures forecast to raise a further £2.1 billion by 2023-24, including measures to bear down on those using offshore structures to hide their profits and avoid tax; it is why the UK is at the forefront of international action to address global tax avoidance and evasion, including the OECD’s base erosion and profit shifting project, which seeks to align the taxation of profits with the underlying economic activities and value creation; and, indeed, it is why in 2016 we led the world with the first public registry of company beneficial ownership in the G20, to provide for analysis of suspicious patterns of behaviour, and to disclose inconsistencies in supposedly factual information and reveal wrongdoing.

[Kevin Hollinrake]

This is not just about the money. It is also about a fair and level playing field for everyone in the country. We know that Google turns over about 10 billion quid in the UK, we know that its international profit margin is about 22% and that 19% corporation tax on that should be £418 million, and we know that it pays about £67 million. Will all the additional measures that my right hon. Friend has described, along with those previously implemented, narrow that gap so that everyone pays a fair amount of tax?

[Steve Barclay]

My hon. Friend has been in the House long enough to know that Treasury Ministers will not comment on individual companies. However, there is a wider principle, which I think was reflected in the shadow Chancellor’s opening remarks and on which there is agreement across the House. We all want the tax gap to be narrowed, and we celebrate the HMRC’s work in achieving a near record low, but we continue to think about what further measures can be taken, and I have described to the House a wide range of measures taken by the Government in recent years.

It is in everyone’s interests that we continue to crack down on evasion and avoidance and continue to narrow the tax gap. Doing so will allow us to invest in services, and to level up and unleash the potential of every corner of the United Kingdom. That is why we have done everything that we have done so far, it is why we will continue to keep searching for improvements, and it is why we will continue to invest in HMRC’s powers following the forthcoming comprehensive spending review.

--- Later in debate ---

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

It is a pleasure to follow the hon. Member for Coventry South (Zarah Sultana). I share some of her concerns about ensuring that those with the broadest shoulders pay the most, following the lead of the shadow Chancellor, but it is useful to look at the facts. An interesting survey was carried out by PricewaterhouseCoopers and the BBC on the nations that have the highest proportion of tax on high earners, looking at people earning a quarter of a million pounds a year. The UK is the third highest taxing country in the world—only Italy and India are higher. The hon. Member for Stalybridge and Hyde (Jonathan Reynolds) shakes his head, but he can google that. We should clamp down on tax avoidance and tax evasion, but we cannot raise the taxes we want without the negative consequences of people shifting that wealth and income elsewhere.

[Peter Grant]

The shadow Chancellor said at the beginning of the debate that tax is about a lot more than just income tax. Can the hon. Gentleman confirm whether the statistic he just cited relates to all taxes paid by wealthy individuals or only income tax? Does he agree that, if he is only talking about income tax, that statistic is highly misleading?

[Kevin Hollinrake]

It related to income tax. [Interruption.] The point I was making was about income tax. The shadow Chancellor talked about raising taxes from the people who earn the most, and I was simply responding to that point. I have said in the Chamber many times that we should clamp down on tax avoidance and tax evasion.

The shadow Chancellor strikes me as the failed football manager turned TV pundit—having lost all his games by a wide margin, he suddenly complains when the incumbent manager is only winning his games 1-0. This Government have done far more to collect avoided and evaded taxes than the previous Administration—that is a fact. We can choose our opinions, but we cannot choose our facts. We need to go further. This is not just about the money; it is about creating a fair and level playing field and building confidence in the system, so that SMEs, which are the lifeblood of our economy and business, feel that they are not playing in a rigged game. It cannot be like that.

It is utterly wrong that we should countenance tax avoidance, because it undermines the level playing field for SMEs, and that has a tangible effect. For example, the Johnston Press, which owns The Yorkshire Post and many other titles around the country, was turning over £177 million in advertising revenue in 2008, and today, that figure is £22 million. There has been a transfer of revenue from areas such as regional press to online advertising, and particularly Google. Johnston Press will have paid its fair share of taxes, as most companies of that size do. Internationally, Google turns over about £100 billion. We know that around 10% of its turnover is in the UK—that is a stated fact—which is £10 billion. Its international profit margin is 22%, which means that it makes £2.2 billion. It should be paying £418 million in corporation tax at 19%, but it pays £67 million. That is simply iniquitous. It cannot be right, and it cannot be sustainable.

I am delighted that the Economic Secretary to the Treasury is on the Front Bench, because I want to give another example of where we are not maintaining a fair and level playing field. It relates to some of our banks and Cerberus. UK lenders who pay UK tax have sold their loan books to inactive lenders who work offshore and do not pay corporation tax or operate on the same regulatory playing field. Cerberus, which has bought loan books off Northern Rock and UK Asset Resolution, plays by a completely different set of rules. Its costs are therefore lower, which means that it can afford to pay more for those loan books. It does not properly look after its customers, nor does it have the responsibility to look after them and treat them fairly. We have to make an extra effort to ensure that everybody operates on a fair and level playing field. Cerberus paid £15,000 in corporation tax on six subsidiaries in 2015, despite working on a 20% profit margin.

In terms of my own business experience, our business grew to a point where we were making a reasonable profit. Our adviser—a normal accountant, not one of the big four—said, “How about trying this scheme to avoid tax?” It was perfectly legal, but we refused to take that option, because we did not think that it was right. We need to work harder with advisers and promoters to ensure that everybody pays their fair share of tax. The Government use the big four in many ways and take their advice, and it seems wrong that those very companies then go to large multinational companies and others and show them how to avoid tax.

One of the solutions is country-by-country reporting. We have a precedent for that, with the bookmakers’ point of consumption tax. The Labour party came up with a ruse that involved charging businesses in terms of where their economic activity, people and premises are, and there is very much a basis for that. We need to ensure that what the Government have done through the digital services tax and diverted profits tax narrows the gap for companies such as Google and Facebook.

We need to implement some other key measures, including on transparency about overseas entities and ownership of property, which is a way to avoid tax and move money around the world illegally and unfairly. We need to see measures on beneficial ownership in overseas territories brought forward to 2023. Finally, a corporate offence of failure to prevent economic crime and money laundering would reduce the amount of money that is illegally shifted out of the UK into foreign jurisdictions and increase the amount of tax that is paid.

Oral Answers to Questions

Kevin Hollinrake Excerpts

Tuesday 11th February 2020 Commons Chamber

[Sajid Javid]

Let me tell the hon. Lady what we have seen under 10 years of Tory rule, after Labour’s great recession. We have had nine consecutive years of growth. We have an economy that is nearly 17% bigger than it was in 2010, and 3.9 million jobs have been created—I would think that a party that calls itself the Labour party would welcome that. Unemployment is at its lowest level for 45 years, and according to the International Monetary Fund, our economy will grow faster this year than those of Italy, Japan, France and Germany.

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

Small and medium-sized enterprises are critical to economic opportunity and would undoubtedly benefit from greater access to business finance, yet challenger banks suffer from the same capital requirements as larger banks, despite the fact that they do not present the same systemic risk. Will my right hon. Friend say what he might be able to do to change that situation?

[Sajid Javid]

This is something that I have discussed with regulators. My hon. Friend is right in his general point about challenger banks and the risks that they may or may not represent. It is right that we take a fresh look at this because having more competition in the banking sector is a good thing, especially for SMEs.

Lloyds, HBOS and the Cranston Review

Kevin Hollinrake Excerpts

Tuesday 4th February 2020 Westminster Hall

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

I beg to move,

That this House has considered Lloyds, HBOS and the Cranston review.

It is a pleasure to see you in the Chair, Mr Hollobone. I think this is the second time I have spoken under your chairmanship about banking matters. This story is at least as shocking as the last one we discussed.

The story starts back in 2007, when Nikki and Paul Turner, who were then customers of HBOS, told the bank of a huge fraud in its organisation that was affecting them and many other customers. The bank denied all knowledge of the fraud. It sought to suppress the evidence that Nikki and Paul Turner had and to ensure they could not speak out by trying on 22 occasions to repossess their home. Without the Turners, I do not think we would be here today, but they found out, and their determination has brought these matters to this point. The fraud was finally proven in court in 2017, 10 years later—imagine those 10 years of denial.

Despite the fraud happening within HBOS, which was part of Lloyds Banking Group by that point, we were willing and happy for Lloyds to take on its own customer review and compensation scheme for those victims, many of whom had been denied any justice and had it denied to them that any fraud was going on whatsoever. Lloyds set up the Lloyds Bank customer review, also known as the Griggs review because it was headed by Professor Griggs, who was appointed by Lloyds to undertake compensation payments to victims.

The Turners were compensated, but they decided to help other people navigate the Griggs process. They formed an organisation called the SME Alliance, which has been proactive in making sure that people get justice. Not only did they warn Lloyds about the initial fraud; they started to warn Lloyds about how unfair the Griggs review was and how partial the process was to the interests of the bank. In fact, they went as far as commissioning their own review of the review, undertaken by Jonathan Laidlaw in 2018-19, which endorsed the Turners’ findings and said that the process was truly unfair and partial to the interests of the bank

Throughout the process, others were warning Lloyds that the Griggs review and the scheme was completely unfair. Following all those calls and the Laidlaw review, the Minister kindly supported those calls and commissioned a review, carried out by Sir Ross Cranston.

[Tonia Antoniazzi (Gower) (Lab)]

We have had many reviews and redress schemes in different forms over the past eight years. Does the hon. Gentleman agree that to provide comfort to people, the methodology of those reviews should be independently tested against the benchmarks that Sir Ross set out in his report?

[Kevin Hollinrake]

The hon. Member is absolutely right. The biggest learning we have is that the whole process must be independent. It simply cannot be fair to have any review carried out within the bank’s boundaries that provides compensation for victims. It must be independent and independently verified. I very much appreciate her work and support on the all-party parliamentary group on fair business banking.

The all-party group, which I co-chair, made many calls saying that the process simply was not right. The Minister supported those calls, and we commissioned a review. Andrew Bailey, head of the Financial Conduct Authority , and the future Governor of the Bank of England, engaged in constructive collaboration with us and made an excellent choice of reviewer in Sir Ross Cranston, who has done a tremendous job. Most importantly, he got every stakeholder round the table before he properly commenced the review. He consulted us on many occasions, and we had great confidence in his ability to assess properly whether the review was fair.

Sir Ross’s findings were shocking—that is, shocking to anyone not familiar with the process. Anybody familiar with it, whether a victim or victims’ support group, knew exactly what he would say. We should be very grateful to him. It is a long report, but its essence is that: the Griggs review did not deliver fair or reasonable offers of compensation; it was not open or transparent; it had serious shortcomings; it took too adversarial an approach to assessing consequential loss; and, crucially, its design meant that it could never deliver fair and reasonable outcomes. Those were his findings.

We are pleased that the chief executive of Lloyds, António Horta-Osório, has written to us and the victims, and he met us. He has apologised unreservedly for the bank’s conduct in the review and committed himself personally to getting this right. It should not have been a surprise to anyone—he had been warned on many occasions that the process was flawed. Nobody should be surprised about the result if we allow a business to mark its own homework—it shows a fatal misunderstanding of how businesses operate. I speak as a businessperson who has been in business for 28 years and is still in business today. I do not think I should be allowed to regulate my business or regulate where I have customer complaints; independent oversight is critical.

Milton Friedman, the leading economist, once said that the social responsibility of business is

“simply to increase its profit”.

Warren Buffett recently said that the Government have to play their part in modifying the market system. We cannot simply leave this stuff to business; we must ensure independent oversight and fair regulation. Business is not afraid of regulation; it just wants stable, fair regulation, not over-regulation.

A bank found guilty in court of defrauding its own customers, which denied that fraud and even disgracefully mistreated whistleblower Sally Masterton in her efforts to keep the fraud out of the public eye, is allowed to compensate its victims, through its own process. The lessons we learn from the process are not just about how to compensate victims fairly and give them justice for their mistreatment but about how the regulators have dealt with it. We undermine our system of free market capitalism if we let these powerful and dominant capitalists go unchecked.

I will briefly list some of the representations that the all-party group has made over the years. My predecessor as chair wrote in February 2017 to António Horta-Osório about Lloyds’s plan to take forward the review. He said that there were unacceptable exclusion clauses, the process would be poor when it came to the consequential loss and it was critical that redress was transparent, balanced and legally binding. That was three years ago. We recommended the use of an independent process through the Chartered Institute of Arbitrators which would have been much fairer.

We did not leave it there. Over the past three years, I have had many meetings with the senior management team at Lloyds—I recently met the chief executive—including Lord Blackwell, the chair of Lloyds, as has the director of policy for the all-party group, Heather Buchanan. There has been much correspondence between us. In July 2018, we wrote again to Lloyds and said that the victims were still being treated with contempt. The reply from Lloyds—from Adrian White, the chief operating officer—said:

“We strongly believe that the offers made are both fair and reasonable.”

That demonstrates the institutional arrogance of Lloyds and the wider sector, as people were constantly pointing out that the review was not fair. Any protests about the process were simply ignored. For us, it is not that the bank did not know about it; it simply chose to ignore us and many others.

The key is where we go now. Perhaps this is not the first step, but it is incredibly important that the FCA undertakes an investigation under the senior managers regime on both the Griggs review and the people responsible for that review within Lloyds. Lloyds must take responsibility for the review and other things connected to the whole saga, including the disgraceful treatment of Sally Masterton, the whistleblower, who was mistreated for five years. She was discredited by Lloyds to the FCA, for which she was finally compensated in 2018, yet nobody has been held to account for the mistreatment of a whistleblower pointing out some of these very issues.

Another thing we will need to look at is the people who are not part of Lloyds but are connected to the review. The legal advisers Herbert Smith Freehills are clear that they misled the Financial Conduct Authority about Sally Masterton, the whistleblower. They advised Lloyds on the establishment of the Griggs review, on its operation and on some legal points incorrectly, according to Sir Ross Cranston. It is unthinkable that Herbert Smith Freehills should have any influence on the future redress scheme. That must be an absolute minimum; it cannot happen as we go forward. They should also be the subject of an investigation by the Solicitors Regulation Authority.

The Cranston review offers us a crucial opportunity; it is a watershed moment. It is not just about Lloyds but about the wider banking sector.

[Kirsten Oswald (East Renfrewshire) (SNP)]

Is the hon. Gentleman aware that a freedom of information request to the Financial Ombudsman Service showed that, between 2015 and 2018, complaints about Clydesdale Bank, now Virgin Money, were disproportionately high in comparison with their larger competitors? There were 404 complaints in total and, worryingly, the percentage of those upheld was only 13%. Does he agree that it is time for the chief executive officer of Virgin Money, as a self-professed challenger to the status quo, to step up and make sure that these legacy cases are dealt with?

[Kevin Hollinrake]

I absolutely agree with the hon. Lady. This is not just about Lloyds. A number of independent reviews have taken place, but they have been undertaken by the relevant banks. That simply cannot be right, in terms of justice for victims or their feeling that justice has been done. Justice being seen to be done is a basic principle that, it seems, the banking sector does not have to adhere to.

When the APPG was initially talking about future redress, it proposed a financial services tribunal, similar to an employment tribunal, where there would be no adverse costs, so a claim could be taken forward more easily. That would help to reduce the power imbalance between banks and businesses. A comment that came back from one of those commissioning the review on behalf of UK Finance, the banking representative organisation, was that the courts were not the right place for banking disputes to be settled. Well, they are the right place for the rest of us to settle disputes—that is what our system is built upon.

We need impartial, independent processes. I will talk about the right process for that moving forward, because there is an obvious new alternative approach we can take.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

I pay tribute to the hon. Gentleman for the way in which he has championed justice for those wronged by Lloyds. He is right to describe this case as one of the worst examples of corporate abuse that many of us in this House can remember. Would he be attracted by the consumer ombudsman model? In this case it was not consumers who were primarily affected, but consumer ombudsmen in other countries—crucially, those with class action powers—can bring actions against big businesses that are guilty of the type of behaviour that the hon. Gentleman describes, on behalf of both consumers and small businesses. Would that not be a powerful addition to the regulatory field and help to hold big banks to justice?

[Kevin Hollinrake]

The hon. Gentleman makes an interesting point, although that is not a model I am familiar with. Class actions are definitely opportunities that are not well exploited the UK because of our legal system. I would be keen to talk to him further about that approach.

Within our system we have the Financial Ombudsman Service, which does not necessarily have the best reputation, although I know the hon. Gentleman is talking about something different. It is a problem that whoever is overseeing cases has to be competent and have the right understanding, because there are complex cases that take into account issues around complicated banking products. We have to ensure that the calibre of arbitration or adjudication is at the right level—I will say more about that shortly. We certainly need reform. Moving forward, we think we have a good solution, but we need to continue to improve on that.

This is not just about Lloyds. There are a number of other redress schemes for banking malpractice and mistreatment that have already been conducted by relevant banks. Banks were the principal arbiters of deciding how much compensation people were allowed to have relating to the interest rate swaps schemes and interest rate hedging products, many of which had a devastating effect on businesses. The debates that we have had about the Royal Bank of Scotland, over the past months and years, have raised similar problems about the mistreatment of small businesses. There are problems with their review process and with others, as other hon. Members have said.

I will describe cases that put that into perspective. The first person to write to me about a business banking dispute was Jon Welsby from Filey, when I first became a Member of Parliament. He showed me a huge file of evidence about his business, but the dispute came down to quite a simple problem. He had been sold a swap by Lloyds bank—they were sold by many different banks—that had had a devastating effect on the interest rates he had to pay. The amount he had to pay rose from about £5,000 a month to £17,000—perversely, as interest rates fell, as that was the way swaps worked. He was given direct losses, but he was not assessed as being due any consequential losses by the bank-led review. He was able to gather together the resources to take his claim to court. It was a £10 million claim, although I am not clear exactly how much he received, as he settled out of court. He was able to settle the claim, whereas most people cannot get the money together to take their claim to court. He had had his claim assessed by the bank and was not happy with it, but because he had the money to get to court, it was settled for a much higher figure. It cannot be right that the only people accessing justice are those with the wherewithal to get to court. Given that imbalance of power, people would need millions of pounds to take a bank to court. It is simply unfair.

The constituent of my hon. Friend the Member for Beckenham (Bob Stewart), Dean D’Eye, came to us about the RBS Global Restructuring Group scheme. He had a property development business and loans to the value of around 60%. He never missed a payment to RBS. He was sold a swap, which damaged his business, but the key moment came when money from a property sale he had made, to add cash flow to his current account, was taken away by the bank and used to reduce debt. According to Mr D’Eye, that broke the agreement and had a devastating impact on his business.

[Bob Stewart (Beckenham) (Con)]

It did not just affect Dean D’Eye but it deeply affected his father, who was almost bankrupted and lost his home.

[Kevin Hollinrake]

Absolutely, and we see that time and time again. It is not just about businesses or jobs—although clearly businesses and jobs are lost—but about the effect on people’s lives. I understand that as a business person myself. My business has been my life. If somebody had taken my business away from me in those circumstances, I do not know how I would have coped.

The Minister may say that many cases are not proven or that the banks may write with various reasons why claims are wrong. That is why we do not put the APPG forward as an arbiter of whether the customer or the bank is right in such cases. We do not think the APPG, the victims or the banks should play that role; it must be somebody entirely independent. As I have said before, we recommended a tribunal approach to solving this imbalance of power. What my hon. Friend the Minister has managed to bring about is something new, called the Business Banking Resolution Service, which we think is a great step forward. We in the APPG have been working with the BBRS for the past year. It will mean that we can look at historical cases and at cases going forward, and at larger businesses too. It is absolutely the right thing, and we believe that the method of adjudication is good.

Our concern is, of course, as I have discussed with the Minister on many occasions, that that approach excludes people who have been through other independent bank-led reviews, which we think is wrong. We think the banks should look at such cases again where there is material evidence that something has not been settled fairly, but with the BBRS as a fallback. We think that is fair, and that should go for all victims of all bank-led remediation schemes who feel there is still a case to answer.

We also think there are other issues that need to be dealt with within the Lloyds Bank Review, certainly on eligibility. The review had very tight restrictions on eligibility: the victim had to have dealt directly with one of the two people convicted of the direct fraud, Lynden Scourfield or Mark Dobson. We think that is an unfair restriction. Lloyds has made ex gratia payments—I think £65,000 in total—that are only allocated to certain people who have been through that scheme or are assessed as being appropriate to go through that scheme, which, again, we think is unfair. Lloyds should look again at that.

We see a lot of people now putting their cases forward for the Business Banking Resolution Services. Our constituents who have these kinds of problem can put their cases forward, and we urge them to do so, but when they do, while their cases are being assessed, we think the bank should declare a moratorium or a stay of proceedings on any cases going through that process.

To conclude, we see this as a crucial opportunity, not only for Lloyds to get this right now, but for the wider business-banking relationship. We are very grateful to the Minister for the steps he has taken, both in appointing Sir Ross Cranston and on the Business Banking Resolution Service. We very much thank Sir Ross Cranston for his excellent work. We see this as a crucial opportunity to restore confidence in the free market system, to ensure that individual victims have access to justice and compensation and to improve the appetite for SMEs to borrow, start businesses and grow them, thereby giving a timely boost to UK plc. Let us ensure that we do not waste the opportunity.

[Mr Philip Hollobone (in the Chair)]

The debate can last until 5.30 pm. If there are any Back-Bench contributions I can take those, but I need to call the Front Benches no later than 5.7 pm. The guideline limits are five minutes for the SNP, five minutes for Her Majesty’s Opposition and 10 minutes for the Minister, and then Mr Hollinrake has a few minutes to sum up the debate at the end. The latest intelligence I have received is that we are expecting Divisions at 5.30 pm, but that they might come earlier. Members will know that if a Division comes during the debate, we have to adjourn for 15 minutes or half an hour, so Members might want to be mindful of speeding up their contributions to ensure that we finish the debate before a Division occurs.

--- Later in debate ---

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I am grateful, Mr Hollobone, for giving me the chance to respond to this debate. I thank the hon. Member for Thirsk and Malton (Kevin Hollinrake) for securing this debate and the all-party parliamentary group on fair business banking for all its efforts to secure justice for victims of banking fraud and misconduct.

The hon. Gentleman has made clear the significance of the Cranston review in reconsidering the process by which banks compensate business customers where there has been historical misconduct. I add my voice to his. Strangely, this is now a positive story: we finally have the review we all wanted, although the journey to get here has been fairly tortuous.

Everyone here has been involved in these issues for some time. In my time as the shadow City Minister I have had to become familiar with and speak about an appalling litany of complaints about how business customers have been treated, not multinational businesses, but the small businesses that we would all recognise as the backbone of our constituencies and this country. The stories have been of livelihoods and relationships destroyed, and of entrepreneurs and companies losing family businesses they have spent years building.

We are here to discuss Lloyds. The HBOS Reading issues were clearly an issue of criminal liability in that bank. In the wider sector we have discussed a whole range of unacceptable conduct: the mis-selling of interest rates and hedging products, the mistreatment of companies in distress by pushing them into restructuring, and the unscrupulous sales of loan books to vulture funds. That is why the question of how redress happens has become so important.

Research shows that a frighteningly small number of small businesses in this country believe that their bank will do the right thing by them. Given the reports detailing the historical conduct we have discussed, we cannot blame them. We must all improve on that. Whether we are politicians, banks or businesses, this lack of confidence is not in our interest. We need to be able to tell our constituents that there is a level playing field when they find themselves in conflict with their bank, and that there is a path to fairness, justice and proper redress.

Too often, in recent years, the response from banks to us has been, “Systems are in place and we believe they are fair. All the historical issues have been sufficiently dealt with.” This report has shown unequivocally that not to be the case, vindicating those of us who have campaigned in this area for years, particularly the hon. Member for Thirsk and Malton.

It is not acceptable for industry to equivocate on this any longer and, to use the hon. Gentleman’s phrase, to mark its own homework. Key problems identified in the Cranston review include the lack of independence in assessing complaints and the benchmark for compensation being so high that no customer could hope to meet it. It is important that we, as parliamentarians, learn the lessons from these observations and embed those principles in any new schemes. I look forward to the Minister’s response to the review.

There are other avenues we must continue to consider, to get to the root of this problem. I believe we should consider a full public inquiry into business banking scandals. This review is about the shortcomings of one bank compensation scheme, but it emphasises the importance of investigating all areas of misconduct, not just to ensure that victims get fair compensation—that is the minimum—but to identify systemic problems at the root of these scandals, to prevent them happening again. That could be challenging to us as parliamentarians.

I always worry that the model of banking in this country, whether for customers or small businesses, effectively relies on upselling products, so we do not really pay for the cost of our banking services, and therefore we have business models where products must be sold on to banking customers. Perhaps we need to look at that. We must continue to work towards the success of the business banking resolution scheme, to assess how successful it is in addressing these problems.

[Kevin Hollinrake]

The hon. Gentleman makes a good point about products and services being sold to consumers and businesses. The royal commission in Australia determined that one of the biggest drivers of mistreatment of businesses and consumers was the incentives paid to people at the sharp end to sell those products. The hon. Gentleman is absolutely right. A public inquiry might well identify where this is going so badly wrong.

[Jonathan Reynolds]

I am grateful to the hon. Gentleman for his intervention. We must look at the issue that he raises. In some ways, we have already addressed some of the things that the Australians had not yet got round to, as the scope was different, but that must be part of the conversation, because we can go back, decade after decade, and find historical problems in the sector. Clearly, something is happening, whether it involves the incentives for staff or the structure of the sector, that we might want to change.

I mentioned the business banking resolution scheme. Historically, I have always supported an independent tribunal system and I still believe that that proposal has merit, but perhaps we need to revisit regularly the BBRS’s work to ensure that it is getting the results that it requires in the timeframe.

My final point is on whistleblowers. Sally Masterton was mentioned. She was treated disgracefully. Other countries have much stronger protection for whistleblowers. I think we could look at that issue. If I were, as I have always wanted to be, in the Minister’s place, responding to the debate, I would want us to take that forward, to ensure that we really had an appropriate system that addressed all the needs.

--- Later in debate ---

[Kevin Hollinrake]

I am grateful to you, Mr Hollobone, for calling me again, and to the Minister for his comments.

Sir Ross Cranston has left a tremendous legacy with his report, and I am very pleased to hear that the Minister thinks similarly. This matter is not just about this individual review process—the Griggs review. An industry benchmark should be set on how to do things and how not to do them, and on what “good” looks like. The Minister is absolutely right that all banks should look back again at their processes and reviews, and make sure they have got things right.

The other thing we need to learn from this matter is that when these processes—these redress schemes—are set up, we have to put the victims at the heart of them; we have got to get the stakeholders at the heart of them. Lloyds did not do that and nor did Royal Bank of Scotland. Sir Ross, more than anybody else, has done that, which must be the lesson that we learn.

I will conclude by saying that Churchill once said of the Americans that they always do the right thing but only after they have tried all the alternatives. That is what we must consider when we try to hold businesses to account; we must assume that they are not going to do the right thing. They are many very decent people in the banking sector and in business more widely, but we simply cannot trust that people will do the right thing. People do what is inspected and not what is expected, so we must absolutely make sure that we do our bit. I know the Treasury will do its bit to try and ensure that we get this matter right, but the FCA, the BBRS and all those different stakeholders need to ensure this time that we get things right.

Question put and agreed to.

Resolved,

That this House has considered Lloyds, HBOS and the Cranston review.

Growth Strategy

Kevin Hollinrake Excerpts

Tuesday 21st January 2020 Westminster Hall

[John Redwood]

Indeed, and I welcome the emphasis placed on that by the Prime Minister and Ministers. I hope that we can give them some more ideas on how that can become realistic policy. I am just setting the scene: there has been a big change in the aim of policy, which I warmly welcome. I suggest to the Minister and others that lower taxes might be an important way of trying to develop that aim. The experiment conducted on both sides of the Atlantic seems to suggest that countries with the ambition and desire to cut taxes on working incomes and businesses will experience more growth and success. We have seen a lot of money repatriated to the United States of America by big businesses, which now find the tax rates acceptable and therefore do not require the same legal structures—I am sure they were behaving legally—to keep the money offshore or not to pay taxes for the time being in the United States.

The United Kingdom Government have, even during difficult times, decided on lower corporation tax rates. I think we have a competitive corporation tax structure. Our lack of tax competitiveness rests in the treatment of individuals and income, and employment costs, rather than corporation tax, where we have done a good job relative to continental Europe. We are benefiting from that. It was good to hear it announced this week that the UK is now the third preferred destination for technology investment after only the United States and China—two economies much larger than our own—and that we are attracting more investment than the combined totals of France and Germany, so we must be getting something right in our approach to business investment and the taxation of business profits.

The Government have already set out a new fiscal framework, which I welcome, because they understand that it is not sufficient just to set a new aim for policy—they need a fiscal framework to deliver it. They have directly addressed the issue of state debt, saying that they will not spend money on revenue matters that is not covered by taxation—a prudent control on the situation—but they have also said that there is nothing wrong with the budget deficit expanding from just over 1% to 3%, if the purpose is for good investment, especially given the very low rates that the Government now have to pay to borrow money.

I think that is a sensible compromise that gives us a bit of scope in the public sector. I trust it will also leave us scope to lower tax rates, which is important for getting extra growth from the private sector, where much of the growth will come from. Today, the Government’s 10-year borrowing rate—if they needed to borrow more money from the market—is 0.63%. One would assume that the public sector can find investment projects and get a return considerably above 0.63%, so I fully endorse what they are trying to do.

I hope we can accept the new policy aims and the new fiscal framework, which give us flexibility, and think about what additional policies the Government might need to adopt to boost that growth rate. I have been predicting for some time that we would have a marked slowdown in the United Kingdom, as a result of the fiscal tightening that we have experienced until now and the monetary tightening that the Bank of England has implemented. It has been very curious that the Bank of England has detached itself from the world’s central banks over this recent very marked slowdown in world activity. The slowdown was led by an actual recession in manufacturing in most parts of the world; the centre of the storm has been in the motor industry, but it has also extended more widely into the consumer and service areas.

The rest of the world’s central banks are busily fighting that, and so we have seen a succession of interest rate cuts in countries with interest rates that could still be cut. We have also seen a resumption of quantitative easing programmes in the European Union, after it perhaps rather foolishly abandoned them at the end of the previous year; we have seen continuous large quantitative easing programmes in Japan; and in China, we have seen a big reduction in the required capital of banks, so that those banks can lend more to the private sector and expand China’s economy, which has also slowed quite markedly.

I suggest to the Treasury Front-Bench team that they look very carefully at the centre of the downturn that we have seen worldwide and mirrored here in the United Kingdom, and in particular at the motor industry. The motor industry was hit by higher taxes on consumers in China; it was hit by changed emission regulations on the continent of Europe; it was hit in the United Kingdom by increases in vehicle excise duty in the 2017 Budget; and it was also held back by Bank of England guidance warning banks against lending too much money for car purchases, in a market where practically everybody buys a car on credit, rather than their having the cash to pay the considerable sums that cars cost these days. So there was a very predictable slowing of the UK car market, in parallel with the slowing going on elsewhere.

That was compounded by the fact that the UK had been incredibly successful at building a very large diesel car industry, and in particular a diesel car engine-making industry in the United Kingdom, just in time for the EU and the UK to become very hostile to diesels and send out the message that people really should not buy diesels, and that in future diesels may even be taxed or regulated off the road. There could also be new controls on diesels, with the Government, in common with the EU and other Governments, wanting people to buy electric cars before they felt confident enough in electric cars, or before the prices of electric cars come down to a more realistic level for them to be a feasible opportunity for people. So we have seen in the UK, as in China and in Europe, a big decline in the sale of traditional diesels, and there has not been an off-set in sufficient numbers by the new vehicles that are being introduced.

So the Government need to look at the car industry and recognise that the issues affecting it are a combination of taxation, availability of credit, and messages about what kind of car people are allowed to buy and drive. The industry needs to be given some time to complete the transition that Governments want, and it is not yet in a state where it can sell enough electric cars to immediately replace the lost capacity that it is experiencing on diesels.

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

I thank my right hon. Friend for securing this very important and wide-ranging debate. He mentioned the car industry, which is largely based in the north-east of England, but it based itself there because clear incentives for it to do so were provided by the Government at the time. Does he agree that if we are going to rebalance this economy and level it up, we will need some incentives for businesses to start up in or relocate to some of these areas?

[John Redwood]

Yes, I am happy for there to be attractive reasons why people should go to the parts of the economy that have been less heavily invested in and that are less pressurised. However, with cars the issue is demand; there is not enough demand for the very good cars that the industry currently makes. The Government want to change the kind of cars that people buy, but it will take time for Britain, or anywhere else for that matter, to be able to produce the millions of electric cars that the Government want us to buy, at a price and to a specification that people like.

So, this is a top-down revolution and the public are not yet fully engaged in it in the way that the Government would like them to be. When polled, the public say that electric cars are a very good idea. However, when they are then asked, “Well, when are you buying your electric car?”, the answer is, “Well, not yet. Not me. I want a better subsidy on the car, I want a lower price, I want a higher range”—whatever it is.

There are still issues about engaging the public, which is why we are getting this industrial dislocation. China has experienced exactly the same thing and one would have thought that China would have continuous growth in cars, because it is coming from a much lower level of car ownership and individual income. However, even in China car volume is down, because of the regulatory changes and the dislocation involved in going from traditional product to electric product.

In addition, the Minister and his colleagues should look at the issue of property. Property is a very important part of the UK economy. It is often an asset base for people to borrow against in order to develop their business, and it is often the main way in which individuals hold their personal wealth. By buying a house on a mortgage and gradually paying the mortgage off, property often becomes people’s principal asset, which gives them some wealth and financial stability.

However, we have a property market in the UK that has been damaged by the very high stamp duties that were introduced under the previous Government, and the Government should look at that issue very carefully. I do not think that the Government are even maximising the revenues from stamp duties, and it might not be a bad idea for them to ask, “What are the rates that would maximise the revenues?” At the higher price levels in property, transactions have been very badly affected; indeed, they have been massively reduced by the very high rates at the top end of the market. So, the Treasury constantly has to revise down its forecasts of how much revenue it collects from stamp duty.

A more free-flowing property market would be a very good thing, because it would create all sorts of other work for people who are in the refurbishment and removals business, and above all it would allow people to fit their property needs more closely to the property that they have. A lot of potential switching in the market is being frustrated: some people have houses too big for them but they do not fancy paying the stamp duty on the trade-down property, and other people would like a bigger property, but the stamp duty would be just such a big addition to the higher price that they would have to pay for that property.

[John Redwood]

Most people buy a house because they want somewhere to live that is theirs, and that they can then do up and change in the way they see fit, subject to planning. But yes, of course, it is also a way of holding wealth, and I repeat what I said: for many people it becomes their largest single asset. I do not think that is a bad thing. I do not think that people are treating their main property as a trading counter; it is where they wish to live, and they will only move when they want a different house, mainly for living purposes. People would only be able to buy property speculatively if the property was their second or third house, and not many people are in the fortunate position of having such wealth.

There is no absolute protection against house prices going down; they do from time to time, as the hon. Member for Glenrothes (Peter Grant) pointed out. However, if someone’s aim is to live in a house long term, and if they have taken out an affordable mortgage, temporary fluctuations in house prices are not life-threatening or wealth-threatening to any worrying extent, and they will just live through the period when house prices dip because there has been a recession, or whatever.

Fortunately, we do not seem to be looking at such a situation in the immediate future, and it is very important that we have a growth strategy, so that the slowdown in the economy that we have experienced in recent months is turned around quickly and does not become something worse, which could have negative consequences in the way that the hon. Gentleman talked about.

So my No.1 message to the Government is not to underestimate the damage that clumsy taxes can do, and they may even end up costing the Treasury, as stamp duty has done, because it is not collecting as much as it should. That is probably the case with vehicle excise duty as well, because of the volume impact on new cars, which relates to a whole series of factors; it does not just relate to the vehicle excise duty, but that was another complication in the situation.

As the Minister has this particular responsibility, I urge him to look again at IR35. We want a very flexible economy in which people can choose flexible employment, rather than have it forced on them. We have had a relatively flexible small business sector, but it is being damaged by the top-down imposition of the IR35 rules. I hear all sorts of stories from across the country of people having to stop their contracting business or losing contracts because the big companies that might employ them are worried they might get dragged into a retrospective tax increase in employer and employee national insurance. That is damaging the small contracting sector, and I urge the Government not to carry on doing that when we want to encourage more self-employment and allow self-employed people to go on to build bigger businesses.

One of the Office for National Statistics figures I saw recently, which I found fascinating, was that in London there are more than 1,500 businesses per 10,000 people, whereas in the lower income parts of the country there are half that number. There is a huge gap between the volume of enterprise in London, which is the richest part of the country in terms of average incomes, and much of the rest of the country, where incomes could be higher. It is not easy to break into why there are so many more businesses in London. In part, it is because people are better off and have more spending money—demand is important in setting up a business—but it is also to do with the general business environment and the concentration of people, talent, enterprise and spending power that we see in the capital. We need to do something similar in other parts of the country. Building more businesses is crucial, and IR35 is getting in the way of doing that.

Some 4.5 million people in the country who work for themselves do not have any employees, and they are afraid of taking on an extra employee because of the implications, whether for regulation, tax or otherwise, or because they think it will be too difficult to manage. We need to look at that step up in building a business, when someone goes from just working for themselves to having an employee or two. It is important that we make that step as easy as possible, because if another million self-employed people decided that they wanted a single employee, that would be transformational. That would obviously create a lot of extra demand in the labour market.

We need to look at taxes on employment and the complications of employment. Anything that the Government can do to reduce the tax on employment is a very good idea. We cannot collect tax revenue just by taxing things we do not like, but where we have a choice, it is better to tax things we do not like rather than things we do like. All parties in the House like the ideas of well-paid jobs and of more work, so we need to work away in Government to see how we can reduce the burden of taxes on work such as the apprentice levy, the national insurance levy on both the employee and the employer and other concealed taxes on work.

We also need to look at taxes on entrepreneurship. A larger population of people who have great ideas, who can change markets and who can persuade others that they have something people might want to buy is vital to the process of creating a more prosperous United Kingdom. We need to ensure that the offer on capital gains tax in particular is a fair one. People who have built a business over the years should not feel that they will be taxed again on it all, because they have been taxed on the activity in the business. Capital gains has to be a fair regime, and I urge the Government to keep the enterprise allowance arrangements so that entrepreneurs can keep a lot of the benefits from building their business.

It is said that our productivity performance in recent years has been disappointing and that that is a puzzle. I do not quite understand why it is a puzzle; it is exactly what we would expect. We have had a major reduction in North sea oil output. The way the figures are calculated means that it is one of the most productive sectors, because labour productivity is based on the amount of revenue or value-added generated by an individual, and an individual in the oil industry produces a huge amount of revenue due to the windfall element in the oil price. We had a very big squeeze on many of the activities in the City that were apparently profitable before 2008. Those activities flattered the productivity figures, but some of the profits turned out not to be genuine, and a lot of them have been squeezed out. Again, a high-earning, apparently highly productive part of the economy has gone through a big change, and we have lost that.

We have been a successful economy—this is a strength—in creating lots of new jobs, but a lot of them are relatively low paid so they do not score very well under productivity scoring. If we compare our productivity with that for continental countries with unemployment rates two or three times as high as ours, their productivity is higher, because people we are employing on low pay here would be unemployed there, and the unemployed do not count in the productivity figures—they are just ignored as if they do not exist.

[Kevin Hollinrake]

My right hon. Friend is making some very good points, but is productivity not principally a regional problem? The gross value added per capita in London is about £50,000 a year. In the north-east, the north-west and Yorkshire, it is about £20,000 a year. Is that not where we have to level up, because that would drive productivity right across the UK?

[John Redwood]

I agree, and one of the things I hope will happen as we pursue policies that spread prosperity more widely is that some of the higher value-added activities that people come to London for will be carried out in other cities around the country. If somebody established a manufacturing business in a great northern city, it would be good if they had their media advice, public relations, legal advice, accountancy advice, consultancy advice and all the rest of it from firms in northern cities that specialised in those things, rather than the current model, where many of them come to London to take advantage of the excellent business and professional services available there.

In attracting more industry to the northern and western cities and towns, we need also to be conscious of encouraging the cluster of service businesses around them that can add value in other ways. In modern manufacturing, a lot of the traditional work is now done by machines and robots, so the individual plant does not attract a large number of jobs; the jobs are in all the other things—marketing, PR, services, legal, accountancy, invoicing and so forth—and we want to make sure that enough of those jobs come with the factory to the local area. That is where we have to see what other policies we need to put in place to spread such jobs more widely around the country.

The productivity puzzle is also caused by the public sector not innovating enough and not raising its productivity. It has been noticeable under Labour and Conservative Governments and the coalition that public sector productivity has stalled. That is disappointing, and we have a large public sector, so we need to get the Government to direct their attention to that, because the one bit of the productivity puzzle they can actually manage is the public sector, and Ministers have various powers to encourage and promote innovation.

I was interested to hear the Secretary of State for Health and Social Care talking last night about the role of innovation, new ideas and smaller businesses in the health service. There is huge scope for better partnership between innovative smaller and medium-sized companies and the public sector. The current contracting rules do not work well for many small businesses. It is difficult, because often the public sector wants a large solution for an awful lot of locations, and the small business can only handle so much and cannot scale up quickly enough. I hope that the Government will have another look at how the best of the private sector can be harnessed for the productivity increase we need from better innovation and better technology in big areas of the public services.

We must make sure that we see the technological revolution as a potential friend and not a potential threat. I was quite surprised this morning when reading the background papers for Davos—a meeting that I was not invited to and did not want to go to—to see how negative they were about technology. It was seen as a threat to be tamed and slowed down; as something that was going to destroy jobs and be very disruptive. It talked about the endless dislocations, whereas the public see much of technology as their friend. Why does America have huge success with trillion-dollar companies? Some of them are, and some of them seem to be trillion-dollar companies. Where have Facebook, Apple, Amazon and Netflix got their strength from? They have got it because they have public support. It is all very well for a politician to say, “They are wrong about this and wrong about that, and we need to regulate them and stop them doing this”, but it is a bottom-up revolution that we should not ignore. Those are things that people want. They have completely changed how people lead their lives.

People now go out to restaurants together and sit there with their iPods or smartphones not talking to each other. I am not sure that that is a great development for human relationships, but it shows that the technology has been transformative for people’s lives. They have much more instant information and much more ability to communicate to set out their views. It is not just what the BBC tells us; it is what we push back through social media these days, which some of us welcome. So we have a new model, and there is a danger that the Davos elite see it as a threat to their control over everybody. They are getting out of touch with what the public want. We should broadly welcome the technological revolution. I understand that a lot of our constituents like its services and products. We need to learn to live with it and co-operate with it in a sensible way.

As we come out of the EU, there are huge opportunities for us. Contrary to the misleading comments that some people have made, I have always taken the view that we can be better off as we leave the EU, not worse off. I have never understood why people are so negative about it all. I will simply end with a few obvious points about how we can be better off in certain areas. We can have a much bigger fishing industry. I hope it will be a prime task this year to create the conditions for that. We certainly do not want to keep on sacrificing our fish to over-exploitation by continental trawlers. We want to land more of our own fish while having a good conservation policy for stocks as a total, and that should then lead to onshore activities for fish processing and food manufacturers based on the excellent fish stock that we have available.

There are huge opportunities in farming. A lot of people would like to buy more local produce for all sorts of reasons. We like to support local farms. We are conscious of wanting to cut down food miles. We often like the flavours and benefits of locally produced food. We can do more of that, and there are ways in which, as we come out of the common agricultural policy, we could aim to get back to the levels of self-sufficiency in food that we enjoyed before our period in the common agricultural policy lowered it quite considerably.

We should also concentrate on our defence industries. We are making a commitment to spend more each year on defence so that we are more secure, but we are not truly secure unless we can make all the weapons and defence goods that we need in time of war. We must not be dependent on other people’s technology that we cannot access independently, or on imports over perilous sea lanes in times of conflict. We need to be able to scale up, and I urge all those involved in defence to see a big opportunity for us to make more of our own defence equipment. We should certainly make sure that we have control so that if the need ever arose, which I hope it does not, we would be able to scale up quickly without major issues.

I have gone on for rather a long time and I know that colleagues wish to debate these matters, so I will leave my other ideas for another time, but my conclusions are that we should not underestimate the damage that high tax rates do; that we should not underestimate the ability to generate more revenue, if we are brave on tax rates, by getting them down; and that we should pay particular attention to the big ticket items—homes and cars—that have been damaged by a variety of negative forces in recent years. I say a big thank you for the change in fiscal strategy. I hope that the Bank of England will join the party in wanting to promote growth as well, because that would make a considerable difference. It has been going in the wrong direction for some time, unfortunately. Let us make sure that all the obvious opportunities from Brexit, particularly in sectors that have been under strong EU control, are grasped warmly because they would give us some early wins.

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

It is a pleasure to speak in the debate; I congratulate my right hon. Friend the Member for Wokingham (John Redwood) on introducing it.

I will start with a modern-day parable from a book called “The 7 Habits of Highly Effective People”. A man is walking through a wood and comes across a lumberjack who is trying to saw down a tree and not getting very far. He walks up to the lumberjack, taps him on the shoulder and says, “Excuse me. Your saw is blunt. You’d be better off stopping and sharpening it.” The lumberjack says, “No, no—don’t bother me. I’m sawing down the tree.” He tries again: “Excuse me. Just sharpen your saw and you’ll cut that tree down much more quickly.” The lumberjack says, “I haven’t got time to sharpen the saw.”

That parable has stood me in good stead in my business. I draw the House’s attention to my entry in the Register of Members’ Financial Interests, as I am still in business today. The most expensive and the most vital resource of any business is the people who work in it. It is important always to ensure that they are not working with worn-out tools, and that they are effective and as productive as possible.

The key to the UK growth strategy has to be productivity. I do not disagree with my right hon. Friend: it is a simple issue to solve. However, it will require significant investment, both from the public sector and, crucially, from the private sector. Public sector investment alone will simply not do it.

The reality is that across the north and the midlands we have been working with worn-out tools for too long. According to Andy Haldane, the chief economist at the Bank of England, of the six factors that drive prosperity and productivity the No. 1 factor is connectivity. Large swathes of the country, particularly the north and the midlands, but virtually all regions outside London and the south-east, are very poorly connected. That is because we have underspent in those areas for too long. I know that our excellent Minister will say that the Government are now investing equal amounts in the north as in other parts of the country. That is true to some extent, in terms of central investment. However, other regions, particularly London and the south-east, are very good at aggregating different forms of investment, including private sector and local authority spending. If we add all that up, for every £1 that is spent on infrastructure per capita in the north, about £3 is spent in London and the south-east. That is why those regions are phenomenally productive and therefore phenomenally prosperous. When I talk about more public sector investment, it is not about a grievance that we in the north or the midlands have not had our fair share; it is about sound economics.

I will quote a few leading economists, beginning with Lord O’Neill, a former cities Minister who was also the chief economist at Goldman Sachs at one point. He was an ardent remainer, but said that being in or out of the EU was

“not the most important thing”;

the most important thing was

“our productivity performance and our geographic inequality”.

Andy Haldane highlighted in a recent speech exactly the same figures as my hon. Friend the Member for Derby North (Amanda Solloway): the gap in average incomes between the richest and poorest regions is now larger than it has been at any time since the early 20th century. Amazingly, as my hon. Friend said, the prosperity gap in average incomes between the richest and poorest regions is about 2.5 times, and that figure is almost identical to the gross value added per person, which is the productivity measure. If we drive productivity, we drive prosperity around the country. That would not only help UK plc’s tax receipts, which pay for all our public services, but would level up throughout the UK. I love the phrase “level up”; it is what we should have been doing for decades. The fact that we have not been investing right across the country is not a failure of this Government, but a failure of Governments of all persuasions over decades.

However, the economist David Smith recently made a very interesting point in The Sunday Times regarding the Government’s grand plans to invest more across the country. In his words,

“public investment works only when it operates in harmony with private investment.”

That mirrors an article written by Mark Littlewood of the Institute of Economic Affairs. Members will be aware of some of his articles; he is not really a big spender, and when he was discussing the Government’s planned investment in infrastructure around the UK, he was quite scathing. He asked why, if this is such a wonderful idea and it is going to produce such a good return, MPs do not invest their pensions in it. One of the examples he gives of why this might not be the right thing to do, which I disagree with, is Doncaster. He writes that Doncaster is one of the best connected towns in the country, yet it is not very prosperous, so connectivity alone will not do the job. Public sector investment alone will not do the job.

However, I totally support what I think the Government are planning, which is to invest about £100 billion to £120 billion in the economy over the next few decades. I very much hope that they will support Transport for the North’s £120 billion 30-year plan to deliver projects such as Northern Powerhouse Rail, all the way from the east coast to the west coast, as well as lots of smaller projects such as the dualling of the A64 in my constituency, which are equally vital.

We need to incentivise private sector investment; this cannot just be about taxpayers’ money. If we look at what was done in eastern Germany during the reunification of that country, a huge amount of public sector money was put into East Germany, but the German Government also created incentives for businesses to relocate or start up in eastern Germany. It was a very simple measure, but over time, it was phenomenally successful. I absolutely agree with my hon. Friend the Member for Derby North about free ports and enterprise zones, and tax incentives for businesses to move to those regions.

My right hon. Friend the Member for Wokingham said rightly that the number of businesses set up per capita in London is way higher than in the north. I would like to see a SME revolution across the north; many more small businesses need to be set up, and the No. 1 factor in businesses setting up is access to finance. A troubling story in The Times today stated that the reduction in lending to SMEs in the north is five times greater than in London. That trend is going the wrong way at the moment, and we need to make sure that SMEs right across the country have access to finance.

As many hon. Members know, I am very concerned about the concentration of business lending among four big banks in the UK. That is completely the opposite of what has happened in places such as Germany, where there are 1,500 mutual banks across the SME sector. We should certainly consider encouraging regional mutual banks, in order to make sure that SMEs have access to capital, and should also consider whether public sector procurement should favour more local SMEs. Preston City Council has done an excellent exercise, spending more money with SMEs and less with some larger companies, because that council knows that SMEs spend much more of their money in the local community. It is a virtuous circle.

We should also decentralise agencies’ jobs and spread some of those public sector jobs around the country. I do not know whether the House of Lords will come to York—I think probably not—but decentralising jobs away from our wonderful capital and right across the country has to be the right thing to do. Finally, we should devolve powers and money so that we can get excellent local mayors, such as Ben Houchen in the Tees Valley. We want more people like him, including a York city region mayor and a Leeds city region mayor, so that we can devolve powers and money back to people who really understand the local communities and are willing to undertake a revolution in how we structure our economy, making sure that we get not only more public sector investment, but more private sector investment.

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[Kevin Hollinrake]

The hon. Lady makes a fair point, but she must understand the starting position. The great financial crash was much more severe in the UK in relative terms than in any other developed country.

[Anneliese Dodds]

It was more severe, for reasons that I will come back to later that relate to some of the hon. Member’s work on the balance of investment in our economy and the impact that the slowdown had particularly on our property industry, which is such a significant part of our economy and which led to that particularly severe impact. We should not forget about that.

The very slow recovery has also been in evidence when it comes to living standards. Real wages are still not, on average, at the levels they were back in 2008. That is another significant difference between the UK and many comparable nations and one that we should not forget.

I welcome some of the discussion that we have had on productivity, which underlies some of the brakes on the growth rates that we would have liked to have seen in recent years. On the drivers of our productivity issues, other nations that are highly dependent on oil revenue, for example, have not necessarily seen the same kind of slowdown in productivity growth. Norway, for example, has much lower working hours than the UK and some people have linked issues of work-life balance to productivity as well—but that is just an aside.

It is critical that we look at the points about skills that the hon. Members for Strangford (Jim Shannon) and for Glenrothes (Peter Grant) rightly made. We have seen significant change to further education in recent years; major cuts have been made to colleges and sixth forms. I welcome the fact that the Government seem to be changing tack in that regard; it is absolutely critical that they do so, because when I talk to firms, the biggest issue they tend to mention is the lack of a skilled workforce, so we really need to focus on that.

We also need to talk about investment, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) rightly mentioned—both public and private investment. We have seen some negative developments in that regard, particularly in areas that are critical to future growth. Clean energy investments have plummeted since 2015. In 2018, annual clean energy investment was at its lowest level since 2008. There are a range of factors, but I would include the regulatory uncertainty in the sector. We have seen some big changes over time, and we need certainty.

We need to have an appropriate environment for small businesses and to encourage entrepreneurship; I agree with some of what the right hon. Member for Wokingham said about threshold effects. We need to learn from other countries. It is possible to calibrate the tax system far more closely to profits and to not have big cut-offs, such as those we have, for example, in relation to VAT. I would encourage Her Majesty’s Revenue and Customs to look at that as the tax collection authority—if it has the resource to do so, which is a significant issue.

On IR35, the elephant in the room is that our unemployment regulations are not calibrated with tax regulations; definitions are not the same in the two systems. I have not seen the kind of grasp of that issue that I had hoped for from the Government. IR35 and other measures are trying to plaster over some of the issues caused by the lack of consistency in definitions, but we need a longer term approach from Government.

The right hon. Member for Wokingham spoke in some detail about tax cuts. On corporation tax, some of the changes we have seen in the US have resulted from funds being moved out of tax havens—let us call a spade a spade here—but they have also resulted from much more aggressive pursuance of corporation tax equivalents by the US authorities. When it comes to the UK case—this seems to be a debate that we have just about every day in this House; I suspect that it is getting slightly boring for people reading Hansard—the evidence indicates, and commentators have said time and again, that the reduced rate of corporation tax has not led to increased growth in investment in the UK and that it has coincided with a reduction in the growth of investment and, above all, with a significant reduction in revenue, which has a knock-on impact on the possibility of boosting skills and so forth, and other drivers of productivity.

I think the UK population is very aware of that situation. The recent British Social Attitudes survey indicated that 60% of people want to see taxes boosted, if that could lead to more sustainable public finances and spending. Only 4% of people want to see them fall.

On the issue of free ports, which was mentioned by the hon. Member for Derby North, we need to tread with care and look at the research and the international evidence, much of which indicates that those kinds of structures can be very good at moving economic activity around but they are not always as good at promoting new economic activity—it tends to be the factor endowment in different areas that will promote development sustainably, the level of skills in the workforce and the level of investment in plant and so on. I very much enjoyed the hon. Member’s speech, particularly her focus on regional disparities; the hon. Member for Thirsk and Malton also concentrated on that. We need to go much further. It is a shame that we have not seen a commitment from the Government to shift economic activity that is under their control to other areas. Labour said during the election that we would like to see part of the Bank of England being moved up to Birmingham. I hope that we might see some more bold measures coming from the UK Government in that regard.

In relation to the claims that tax cuts will necessarily promote investment in economic activity, when it comes to the drivers of entrepreneurship among less well-off people, it is actually regulatory measures that can really make the difference—for example, minimum wages and rights at work.

Finally, on the comments by the right hon. Member for Wokingham about the drivers of risks in the world economy and the activities of the Bank, I was surprised that he did not make any mention of the impact of tariffs and so on in China and the US on the automotive industry. Most commentators would say that they played a significant part, and they would also talk about the fact that the wiggle room for policy activity by the Bank is of course reduced by the very low interest rates that we have. That is a significant issue for the UK, where we have that rather unbalanced situation with so much economic activity tied up in property.

Oral Answers to Questions

Kevin Hollinrake Excerpts

Tuesday 7th January 2020 Commons Chamber

[Mr Clarke]

I thank the right hon. Gentleman for his question. We are clear that this is a central priority for the Budget in March. Obviously, I am not going to disclose details of that today, but the Government have a clean growth strategy. We are clear that green finance lies at the heart of the UK’s offer to the world, and obviously that goes for both the private and public sectors; we need to bring together the whole strength of the country to make a truly radical offer.

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

3. What fiscal steps he is taking to increase productivity throughout the UK economy.

[Stephen Hammond (Wimbledon) (Con)]

7. What fiscal steps he is taking to increase productivity throughout the UK economy.

--- Later in debate ---

[The Chancellor of the Exchequer (Sajid Javid)]

Increasing productivity is the best way to boost wages, improve living standards and enhance prosperity. We have worked hard to build a stronger, fairer economy, dealing with the deficit, helping to get people into work, and cutting taxes for families and businesses. We will continue to invest responsibly, including by investing billions more in infrastructure, creating a new national skills fund and boosting investment in research and development. We will invest to unleash the potential of the whole country, so that no place is left behind.

[Kevin Hollinrake]

Productivity is damaged if SMEs feel that there is no fair system for resolving disputes with their bank, yet the eligibility rules for the new Business Banking Resolution Service exclude 85% of historical claims, including, incredibly, those that have been through the recently discredited Lloyds bank customer review. Will the Chancellor meet me to discuss how we make this fit for purpose and not simply a fig leaf to cover past banking malpractice?