Finance (No. 3) Bill

Kirsty Blackman Excerpts

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

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move amendment 6, page 2, line 24, leave out subsection (4).

This amendment would take out provisions removing the legal link between the personal allowance and the national minimum wage.

[The Chairman of Ways and Means (Sir Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Clauses 5 and 6 stand part.

Clauses 8 to 10 stand part.

Clause 38 stand part.

That schedule 15 be the Fifteenth schedule to the Bill.

Clauses 39 to 42 stand part.

New clause 1—Additional rate threshold and supplementary rate—

“The Chancellor of the Exchequer must, no later than 5 April 2019, lay before the House of Commons a distributional analysis of—

(a) the effect of reducing the threshold for the additional rate to £80,000, and

(b) the effect of introducing a supplementary rate of income tax, charged at a rate of 50%, above a threshold of £125,000.”

New clause 2—Impact of provisions of section 5 on child poverty and equality—

“(1) The Chancellor of the Exchequer must review the impact of the provisions of section 5 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the impact of the changes made by section 5 on—

(a) households at different levels of income,

(b) people with protected characteristics (within the meaning of the Equality Act 2010),

(c) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010,

(d) different parts of the United Kingdom and different regions of England, and

(e) levels of relative and absolute child poverty in the United Kingdom.

(3) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

‘regions of England’ has the same meaning as that used by the Office for National Statistics.”

New clause 3—Review of the effectiveness of entrepreneurs’ relief—

“(1) Within twelve months of the passing of this Act, the Chancellor of the Exchequer must review the effectiveness of the changes made to entrepreneurs’ relief by Schedule 15, against the stated policy aims of that relief.

(2) A review under this section must consider—

(a) the overall number of entrepreneurs in the UK,

(b) the annual cost of entrepreneurs’ relief,

(c) the annual number of claimants per year,

(d) the average cost of relief paid per claim, and

(e) the impact on productivity in the UK economy.”

New clause 7—Review of changes to entrepreneurs’ relief—

“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to entrepreneur’s relief by Schedule 15 to this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider—

(a) the effects of the provisions on business investment,

(b) the effects of the provisions on employment, and

(c) the effects of the provisions on productivity.

(3) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

‘regions of England’ has the same meaning as that used by the Office for National Statistics.”

This new clause would require a review of the impact on investment of the changes made to entrepreneurs’ relief which extend the minimum qualifying period from 12 months to 2 years.

New clause 8—Review of geographical effects of provisions of section 9—

“The Chancellor of the Exchequer must review the differential geographical effects of the changes made by section 9 and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This new clause would require a geographical impact assessment of income tax exemptions relating to private use of an emergency vehicle.

New clause 9—Report on consultation on certain provisions of this Act—

“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).

(2) Those provisions are—

(a) section 5,

(b) section 6,

(c) section 8,

(d) section 9,

(e) section 10,

(f) Schedule 15,

(g) section 39

(h) section 40,

(i) section 41, and

(j) section 42.

(3) A report under this section must specify in respect of each provision listed in subsection (2)—

(a) whether a version of the provision was published in draft,

(b) if so, whether changes were made as a result of consultation on the draft, and

(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”

This new clause would require a report on the consultation undertaken on certain provisions of this Act – alongside new clauses 11, 13 and 15.

New clause 18—Review of public health and poverty effects of Basic Rate Limit and Personal Allowance—

“(1) The Chancellor of the Exchequer must review the public health and poverty effects of the provisions of section 5 to this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider—

(a) the effects of those provisions on the levels of relative and absolute poverty in the UK,

(b) the effects of those provisions on life expectancy and healthy life expectancy in the UK, and

(c) the implications for the public finances of the public health effects of those provisions.”

New clause 19—Personal allowance—

“The Chancellor of the Exchequer must, no later than 5 April 2019, lay before the House of Commons an analysis of the distributional and other effects of a personal allowance in 2019-20 of £12,750.”

This new clause would require a distributional analysis of the effect of increasing the personal allowance to £12,750.

[Kirsty Blackman]

What a pleasure it is, Mr Deputy Speaker, to speak first in this debate. I very much appreciate the way the selection has worked out in my favour today. I rise to speak to amendment 6 and new clauses 7, 8, 9 and 19 in my name and the names of my SNP colleagues. For the avoidance of doubt, should the Opposition press new clause 1, new clause 3, or new clause 18, we will support them.

As I am sure that you, Mr Deputy Speaker, and those on the Treasury Bench will be unsurprised to hear, I would like to start by raising my concerns about the process. It is the case that the personal allowance is reserved while matters relating to the upper limit of basic rate taxation are devolved. I therefore have issues with the way that clause 5 is constructed. I request, as I did on Second Reading, that in future years these two sections of the Finance Bill are split and considered separately. I hope that the Minister and officials will take that on board in drafting future Finance Bills. It would make the debate cleaner and easier to follow for MPs and for those outside the House. As I have said previously, there are real issues with the way that the House scrutinises both tax and spending measures, and this would be a simple change that would ensure that better scrutiny could be brought to bear on these matters.

Amendment 6 would take out provisions removing the legal link between the personal allowance and the national minimum wage. The legal link between the two was put in place to kick in in years where the personal allowance was below £12,500. I have two concerns with the removal of this link. First, we have no guarantee that the personal allowance will not in future be reduced to less than £12,500, because this House cannot bind a future House of Commons and a future Government might decide to reduce, rather than increase, the personal allowance.

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[Alison Thewliss (Glasgow Central) (SNP)]

I of course support my hon. Friend’s point on increasing the minimum wage for under-25s. Is she aware that the gap between the rate for 16 and 17-year-olds and the higher rate has widened over the past three years?

[Kirsty Blackman]

I am not surprised that that has happened, because any Government who believe that a 16-year-old can live on less than an over 25-year-old are not going to make rational decisions in relation to pay for those at the younger end of the age spectrum. It would be a very good move if the UK Government were to change their policy and move to a situation where 16 and 17-year-olds, and those all the way up to 25, and in fact those over 25, were paid an amount they could actually live on, rather than an amount that does not enable them to buy the day-to-day essentials.

[Richard Graham (Gloucester) (Con)]

This is a small, but I think important, point: does the hon. Lady accept that that minimum level is exactly what it says—a minimum level? Many people, including my apprentice, earn far more than that, but if we set the level much higher, we are likely to reduce the number of opportunities available to 16 and 17-year-olds.

[Kirsty Blackman]

I do not believe that that is true. I know somebody who went for a job interview, and at the end of it they were offered the job. The person offering them the job actually said, “How old are you, because I want to see how little I can pay you?” Those decisions are being taken because of the discriminatory nature of the way the minimum wage is set. What we should have—and this is an argument I have made to the Government on a huge number of occasions on a number of different things—is a situation where those on the bottom of the pile are protected first, and then we should get rid of discriminatory practices where people might discriminate against 16 and 17-year-olds. I would raise the bar, rather than lower it; that is generally an argument I have made to the UK Government.

New clause 19, which we hope to push to a vote today, proposes that the Chancellor brings forward a report that analyses the distributional and other effects of a rise in the personal allowance to £12,750 in 2019-20. It is Scottish National party policy that the personal allowance be raised to £12,750. Given the increasing, and staggering, levels of in-work poverty, given the UN report criticising the UK Government’s implementation of austerity, and given the fact that millions of families across the UK have savings of less than £100, increasing the personal allowance even by a small amount will have an impact on the individuals and families who are struggling the most.

It is no incentive to work if we know that when we work we will still not be able to get out of all-consuming poverty. We need a UK Government who recognise that those who earn the least are suffering the most. In Scotland, the SNP has recognised that and we have made progressive changes to the tax system.

I do not want to live in a country where children are going hungry. The UK Government have got their head firmly in the sand on this issue. I do not understand how they can continue along this track when we are having people come into our surgeries in tears because they have not eaten in days.

[Mr Jim Cunningham (Coventry South) (Lab)]

The hon. Lady is right. There are probably between 3 million and 4 million people in this country on poverty wages and a large number of them are driven to use food banks. Food banks were introduced for people waiting to get their refugee status sorted out, not for this purpose. Does the hon. Lady agree that they have, however, now become an institution in this country?

[Kirsty Blackman]

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

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

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

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

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

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

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

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

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

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

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

[Julian Knight (Solihull) (Con)]

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

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[Leo Docherty]

This is not a debate on universal credit. This is actually about job creation. That is the more important point when it comes to entrepreneurs’ relief.

[Kirsty Blackman]

New clauses 3 and 7 both ask the Government to say exactly what the effect of entrepreneurs’ relief will be. Does the hon. Gentleman agree that it would be best for reliefs to be targeted to ensure that the most jobs are created, the most people benefit and the most businesses can grow as a result of the changes? Does he therefore agree that it would be good for the Government to explain why their proposal is better than any other proposals?

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We know the age-old truth, that Labour will not stop there. Their recklessness would consume far more than they profess. Just like their predecessors, they will not stop with the so-called privileged few. In time, they will widen the net, broaden the base and drag more and more into punitive taxation to feed the habit of the wanton and the insatiable. Labour’s true message to the millions of hard-working people up and down our United Kingdom is that in the end, they will come not just for the better off; they will come for you. We will continue to stand up for hard-working families up and down our country, with plans that work and an economy that delivers. I commend these clauses to the Committee.

[Kirsty Blackman]

This has been an interesting and wide-ranging debate, although I cannot say that I share the enthusiasm of the First Deputy Chairman of Ways and Means (Dame Eleanor Laing) for Cicero.

I want to pick up the comments of Government Members about hard-working people. They regularly use that term to mean people who are earning above the higher rate threshold, and it sounds as though they are saying that people who are on the minimum wage—people who are retail workers, hospitality workers, carers, cleaners—do not work hard, when in fact they do. They work incredibly hard, and our lives would not be the same if it were not for those people working incredibly hard on the minimum wage. We will push new clause 19 to a vote for that reason.

Lastly, I beg to ask leave to withdraw amendment 6.

Amendment, by leave, withdrawn.



Question put, That the clause stand part of the Bill.

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I have no doubt that the analysis the Treasury will produce, having conceded on this amendment, will be one of the ways by which we give ourselves and the country the chance to have an informed debate on the most important question to have faced this country in over half a century.

[Kirsty Blackman]

I rise to speak in favour of SNP amendments 7 to 10 and new clauses 10 and 11. I would also like to mention amendments 14, 15, 22, 20 and 2 and new clause 17, all of which we would be comfortable supporting, if any of them are pushed to the vote.

There has been a lengthy discussion across the Committee on trade deals. People are confusing free trade agreements and trade deals. It is perfectly possible to make arrangements that improve the flow of trade without signing an FTA; they are two very separate things. It is not understood widely enough that any trade agreement between countries involves compromise. Whatever is signed up to between, let’s say, the UK and the USA will involve the UK having to give some things away as well as gaining something.

The consultation on trade deals looked at trade deals with New Zealand and Australia, with the comprehensive and progressive agreement for trans-pacific partnership, and with the US. However, despite the fact that UK Government Members have talked about how important our trade is with countries such as South Korea and how fast it has grown, the Government have not consulted on that and they did not do so because we have those trade deals already, as a member of the EU. That is why our trade has grown so quickly with South Korea.

Thank you for your indulgence, Dame Rosie. I will move now to the actual subject of the debate. Our amendment 7 asks that clause 89 be subject to the affirmative resolution procedure. I appreciate that the Minister has put a list in the Library, and I will take a look at the list of tax changes he proposes to make under the clause, but I am on the Committee that is sifting the statutory instruments the Government are bringing forward, and some of those SIs that the Government think should be taken under the negative procedure should never have been so proposed. Some are fairly dramatic changes to the law—to powers or new institutions, for example—and yet are being put to the statutory instrument sifting Committee as negative instruments.

I hope that the Minister will forgive me, but I do not trust the Government to introduce only measures in the category that we believe should be subject to the negative procedure. I will look carefully at that list, but I will still press amendment 7, because, given my experience of Ministers, I do not yet have the level of comfort that I need.

[Robert Jenrick]

I hope that in due course the hon. Lady will have an opportunity to read the letter that is in the Library and see that these are truly minor technical amendments, changing, for example, a reference to the EU to a reference to the EU and the UK, and a reference to euros to a reference to pounds sterling. I hope that, in due course, she will be comfortable with those minor technical changes.

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[Kirsty Blackman]

As I have said, I will definitely read the letter. However, I draw the Minister’s attention to the House of Lords Committee that met, I understand, on 17 November—or possibly not, as that was at the weekend, but very recently—to discuss the Finance Bill 2019. Someone drew my attention to an article by Wendy Bradley, which talks about HMRC’s powers and about power creep. Wendy Brady says that

“it is incumbent on Parliament to determine whether the powers it has given HMRC are sufficient and being exercised correctly”.

That, in my view, is important in relation not just to HMRC, but to the powers of the Treasury and the powers of Ministers. I think it important for Parliament to consider what delegated authority we are handing over, whether to the Minister, to the Treasury, to the Chancellor, or to HMRC directly. As I have said before, the Government do not adequately review these matters, publicise those reviews and repeat them regularly. It is important to have a handle on this, especially now, when so much delegated authority is being given to various institutions. It is important for someone to have an idea of how much power has been taken away from Parliament and ceded to those institutions and for there to be a regular review of whether it is still necessary for it to be in their hands.

Let me now say something about the release of the analysis and the changes that the Minister has said he will make. I praise the hon. Member for Streatham (Chuka Umunna) for his work and his amendment and for creating the real change that we have seen in the Government’s position today. It is important for us to be able to support and trust that analysis—to believe that it is accurate. Mention of the OBR was positive in that regard, because people trust that the OBR is an impartial observer of these matters.

The hon. Member for Ochil and South Perthshire (Luke Graham) initiated a debate in Westminster Hall about the OBR’s remit, and I found it incredibly interesting. I learnt a huge amount about the workings of other organisations around the world. We do not have an organisation that reviews Government policy impartially across the board because the OBR’s remit is so tight, being confined to scrutiny of budgetary matters. I was pleased to support the hon. Gentleman that day. Widening the OBR’s remit would be extremely useful, because, as I have said, people out there trust the OBR to get this right.

A status quo baseline against which all the options should be compared is important, and I am pleased that the Minister referred to it. What was said about whether the analysis will be produced in good time was also important, especially given the lack of time that we had to scrutinise the Bill and the short period during which it was in our hands before we had to talk about it on Second Reading. It was only published on the Wednesday, and then we had to stand up and talk about it on the Monday. Let me say again that if the Government want us to trust, they need to gain that trust, and they must therefore produce legislation in what is actually good time, rather than what they say is good time.

Obviously, everything in the Bill is a prediction. Everything in the Red Book is a prediction for future years. Everything that the Government predict, in terms of their tax take for the changes to entrepreneurs relief or anything else in the Red Book, is a prediction. We have to work on that basis, but we must have the best possible predictions, and, as I have said, they must be looked at by an impartial observer so that we can be absolutely sure that they are as close to accurate—or as close to a best guess—as they can possibly be.

[Jonathan Edwards]

A number of Members have talked about the upcoming votes being the most important votes that we will ever undertake as Members of Parliament. Does the hon. Lady therefore agree that it is vital that the independent assessment should be published in the public domain, so that our constituents can understand the decisions that we are making? We should not have to have one of those Reading Room scenarios, as we did with previous assessments.

[Kirsty Blackman]

I agree. The Reading Room provided for the cross-Whitehall analysis was not fit for purpose, in that I could not go there and mull over the papers in the way that I would normally do. Generally, if I am presented with a Finance Bill, for example, I will sit at home and read it. That is what I like to do on a Saturday night. I will sit at home and read these things. We have to be able to access any analysis that is published in a way that suits us, and releasing it publicly would be the best possible way to do this. Another reason for doing that is that the external stakeholders could provide their comments in the best possible way, so I entirely support the hon. Gentleman’s suggestion.

New clause 11 asks for a report on the consultations that have, or have not, been carried out in relation to the tax measures. As I said on Second Reading, not enough of the tax measures in the Bill were consulted on this year. I understand that there were more such consultations in previous years. If we do not want the Government to have to row back next year because they have screwed something up as a result of inadequate consultation, it will be important for these tax measures to be published and consulted on and for us to get the expert advice that we need from the stakeholders.

Clause 90 is just bizarre. I read it, and then I had to go back and read it again because I could not believe that a clause would give the Government the power to spend whatever they liked. It does not cap the spend on the emissions reduction trading scheme’s preparatory expenditure. I was genuinely confused about how the Government could propose that. The clause will give the Government carte blanche. Our amendment 9 and our new clause 10 ask for a Commons resolution and an expenditure review before that expenditure can take place. We think it reasonable—and I am sure the general public would think it reasonable—that if the Government want to spend money on something, they should tell us how much they intend to spend.

The Government are spending money to stand still. This is a cost, and the Government have to spend the money for things to be exactly the same after Brexit as they are today. It is a cost that we would not have if we were not leaving the European Union. The Minister talked about the estimates process. I am pleased that he is as interested and excited by the estimates process as I am. I talk on the estimates whenever I possibly can. There are two parts to the estimates process: one in February and the other in July. I am not sure whether this money counts as in-year spend or as part of next year’s spend. We might be able to discuss it in February, which would be great, because at least that would be before we leave the EU. However, if it is classed as next year’s expenditure, we might not be able to discuss it until July, by which point the money will have been spent.

[Patrick Grady (Glasgow North) (SNP)]

We can discuss this all we like during the estimates process, but does my hon. Friend agree that it is incredibly difficult to actually vote on any of this? Despite all the promises made when the English votes for English laws system was introduced, it really is impossible for Members of Parliament to have a say on specific aspects of Government spending through the estimates process.

[Kirsty Blackman]

That is absolutely the case. The Minister’s comments about the lack of ability to scrutinise spend in the Finance Bill were incredibly illuminating. The reality is that we cannot adequately scrutinise or amend spend anywhere. I was talking to some people about the Budget process and the Finance Bill in the last couple of weeks, and about how the two fit together. I explained that we discuss tax in the Finance Bill, but that we do not discuss spend until the estimates process. Some spending measures will come through, at which point we will sanction them. For example, if the immigration Bill comes forward, we would imagine that it would have some spend associated with it, and we will debate that spend at that time. But a huge proportion of the billions of pounds that the Government spend on a regular basis is only ever discussed during the departmental estimates, which we cannot amend or change. I do not understand how we can have a Parliament that is supposed to be so powerful and supposed to be taking back control when we do not have control over Government spend, which is surely fundamental to how the Government behave.

Draft Double Taxation Relief and International Tax Enforcement (Guernsey) Order 2018 Draft Double Taxation Relief and International Tax Enforcement (Isle of Man) Order 2018 Draft Double Taxation Relief and International Tax Enforcement (Jersey) Order 2018

Kirsty Blackman Excerpts

Tuesday 13th November 2018 General Committees

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to be here, Mr McCabe. This is a nice warm-up for all the time that we look forward to spending together in a room like this considering the Finance Bill.

I align myself with most of the comments made by my colleague, the hon. Member for Oxford East, particularly about beneficial ownership. She always asks difficult questions of the Minister, who is left scribbling and trying to come up with the answers. Hopefully, he will have them and we will all leave here happy as a result, but I am not sure that that will happen. In relation the UK’s ability to tackle tax avoidance and evasion, some changes have not been made despite the fact that they have been called for in this place. I would like to highlight a 2017 European Parliament report that said that

“most of the offshore structures revealed in the Panama Papers were set up from Luxembourg, the United Kingdom and Cyprus”.

The UK is one of the three countries specifically mentioned, which shows that there is still a long way to go before it can be recognised as somewhere that does not incentivise these kinds of things and does not allow them to happen.

The Scottish National party has a strong track record in relation to our work on Scottish limited partnerships, and we are still waiting for change in relation to our support for the Magnitsky changes and the work that we have done on that. Finally, to pick up on a point made by the Opposition spokesperson, there is not much point having an international agreement if we do not use it. Some of the agreements that have been made and signed have not come into force. If the double taxation treaties that are discussed in the explanatory notes come into force, particularly on transparency-related issues, it is important that the Government come back to us with information about how regularly the information sharing was used. If there are problems and tax avoidance is going on, but the Government do not use the measures in the Bill that has been introduced to obtain the information that they need to tackle tax avoidance, that would be a major concern. If the orders are introduced—the Government currently have a working majority, so that is possible—it is important that the Government commit to return to the House and report on the application of the arrangements, particularly in relation to the new information-sharing provisions. It is important that we do not just do the right thing but are seen to be doing the right thing. It would give Opposition parties some comfort if we had a commitment from the Government.

Finance (No. 3) Bill

Kirsty Blackman Excerpts

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

[Kirsty Blackman (Aberdeen North) (SNP)]

It is great to be back here, speaking in another Finance Bill debate—especially when we know that yet another is likely to be just around the corner, in March, if there is a no-deal Brexit and there then has to be what the Chancellor euphemistically calls “a fiscal event”.

As we heard from the hon. Member for Bootle (Peter Dowd), this Budget was a continuation of austerity. We continue to have the benefits freeze, we continue to have the rape clause, and we continue to have cuts in Government Departments. The Scottish Government fiscal resource block grant allocation will have been cut by 6.9% in real terms between 2010-11 and next year, and the Barnett allocation for health has not been passed on in full, despite repeated assurances from the Government that it would be.

Next week we will get into the nitty-gritty of the Finance Bill. Breaking with the tradition so far in the debate, I am going to talk a lot about the measures that are in the Bill, and about some of the aspects that concern me. I shall talk a fair bit about process as well. As the hon. Member for Bootle said, there have been real issues in relation to process, in this Bill more than in previous Finance Bills.

Paper copies of the Bill were not made available until Wednesday, when the House was in recess and those of us who do not live in London were mostly not in London. I had to go to the people in the Vote Office and ask them to post a copy to me. They did post it to me, which was terribly kind of them. However, I had already had to ensure that the Scottish National party’s reasoned amendment was tabled before I had seen any copy of the Bill, let alone a paper copy. The process was not fit for purpose. It is not right that we should have to table amendments before seeing a Bill, and I implore the Minister to ensure that it does not happen again. If it does, we will protest even more vociferously.

There are other issues relating to process. The Chartered Institute of Taxation has said:

“Just 37 of the 90 substantive clauses in the Bill, and 12 of the 19 lengthy schedules, were included in the draft bill published for consultation over the summer.”

It is unusual for so few measures to be consulted on, but what is even more unusual is the timescale. The Government are expecting external organisations to digest clauses that they have never seen before and then to comment on them, in advance of the Committee of the whole House, which we expect to be on Monday and Tuesday next week. Having had the Bill in their hands for less than a week and a half, they will be expected to make serious suggestions for improving it. Let us not forget that the purpose of the scrutiny is to try to make the legislation better. In fact, the Government have pointed out that two measures in the Finance Bill exist to correct errors made in previous years. The Government made errors in previous years when there was a more lengthy consultation process for most of the measures, so I contend that there are likely to be even more errors in this Finance Bill, given that it has not had external scrutiny due to tight timescales.

On that point—the Minister probably knows what I am going to say now—we need to have evidence sessions in the Public Bill Committee. If we are not going to have enough time for appropriate scrutiny in writing that is provided to MPs in advance, it is even more important, especially this year, that external organisations give evidence in the Public Bill Committee. I will move an amendment to that effect when we come to the programme motion. Members across the House have voiced support for the Committee taking public evidence. The problems raised by the Government regarding the fact that we will already have had Committee of the whole House by that point are realistic ones when it comes to the measures going before a Committee of the whole House, but we would still benefit from scrutiny of the measures that are going to Public Bill Committee. If the Minister could find a way, through the programme motion, for the Public Bill Committee to begin with an evidence session including organisations such as the Chartered Institute of Taxation and the Association of Accounting Technicians, it would be incredibly appropriate and even more necessary than usual this year.

As is noted in the Opposition amendment, there is no amendment of the law resolution, which means that any amendments to the Budget have to be tight in relation to the Budget resolutions. That means that we table an awful lot of amendments saying, “We’re calling for a review into this”, and then the Government stand up in the Public Bill Committee and say, “Why would we do a review? You’re only calling for a review. You’re not calling for anything tangible.” But we cannot call for anything tangible because the Government have tied our hands. I have made this point before and I will make it again: the Government must remember that they will not be in government forever. When they are in opposition and the same thing is being done to them, they will be standing up and complaining about it. They have caused this problem and opened these floodgates, and it is really bad for transparency and scrutiny if they keep behaving like this.

Clause 5 is about the personal allowance and the basic rate allowance, and the Government have chosen not to separate out the reserved and devolved matters in this clause. Now, I get that we have not had this devolved situation for particularly long, so this may be an oversight by the Government, but I implore them to ensure that in future years these matters are dealt with in separate clauses. It would be easy for them to do that. Indeed, it would also be easier for Mr Speaker, because he would be able to certify one part as English votes for English laws and not the other part, which is a reserved competency in relation to the personal allowance. This would make scrutiny and read-across better. It would just be a better process of making tax law if these two things were separated out. I ask that these points are taken into account the next time we have a Finance Bill, whether that is in March, October or November next year.

I sit on the European Statutory Instruments Committee, which is currently looking at the proposed negative instruments—it is riveting, honestly. As with lots of the legislation that is coming through just now, the Brexit clauses in the Bill allow the Minister further delegated powers. In fact, one of these clauses allows the Government to set spend for a new tax in relation to current pricing, without saying what that spend would be—I think that is around clause 80. The right hon. Member for Wokingham (John Redwood) talked about taking back control, but parts of this legislation allow the Government more control and more unfettered power. It would actually be more sensible for this House to take decisions over how much spending should be allocated in this regard, rather than giving Ministers more control.

As hon. Members would expect, I am going to mention fixed odds betting terminals. The Government say that they cannot lower the stakes from April next year because it would not give companies enough time to prepare adequately for the changes required, yet they expect companies to prepare adequately for Brexit by April next year, despite not actually having told companies what Brexit will involve. If the Government are serious about making changes to fixed odds betting terminals, they need to stop listening to the lobby on this and start taking into account the public health benefits of the changes.

[Karen Lee]

Does the hon. Lady agree that the delay in introducing the cut to the maximum stake on fixed odds betting terminals will lead to an increased number of people developing gambling addictions, getting into debt and, in the case of problem gamblers, even taking their own lives?

--- Later in debate ---

[Kirsty Blackman]

I agree with the hon. Lady. There is a clear health impact to lowering the stakes. Making the changes in April, rather than next October, will have a genuine impact on the health of a huge number of individuals.

[Richard Graham (Gloucester) (Con)]

I am very clearly on the record as having supported changing the tariff that people can spend on fixed odds betting terminals from £100 to £2; it is absolutely the right thing to do. Let me be clear that it is quite extraordinary for a Labour Member to stand up and start lecturing the Government on having made an incredibly important and valuable change to legislation that rights the wrong of this fixed odds betting terminals—

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Order. Mr Graham, you have been here long enough to know that we have short interventions; you do not need me to tell you that. If you want to speak, I will put you on the list, but we must have short interventions.

[Kirsty Blackman]

I should say that I am not from the Labour party. The Government’s reasoning for the delay is what concerns me, especially when it is completely the opposite of the reasoning they are using about Brexit, where they are saying, “It’s fine. Everybody has heaps of time to prepare—loads of time.”

I thank the Government for the changes to transferable tax history. They have worked very well with the industry to ensure that late-life oil and gas assets can be exploited for longer. I first raised this issue in March 2016, so I am very glad that the Government are now moving on it. However, this is not the whole picture. It is appreciated that this change has been made, as it will have a small but positive effect. I am pleased that this measure has come through, but we still have not seen the oil and gas sector deal, nor have we seen proper unequivocal support for carbon capture and storage. I want the Government to make louder noises about carbon capture and storage, and they need to after pulling the rug from under the feet of the industry three years ago. They need to be even louder and more vociferous in their support because the industry has been stung. The companies that were keen to take part in carbon capture and storage have been stung by the decisions of the previous Chancellor, so the Government need to be as clear as possible about support for carbon capture, utilisation and storage, which is a real industry for the future.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

My hon. Friend correctly said that we have not seen an oil and gas sector deal. Is that not disgraceful considering that the Red Book shows that, over the lifetime of this Parliament, the industry is going to bring in an extra £6 billion of tax revenue. Instead, the Chancellor stood up and bragged that he is holding the tax at the current level for the oil and gas industry, instead of actually working to get an oil and gas sector deal?

[Kirsty Blackman]

The sooner that deal can be announced and that commitment can be made by the UK Government, the better for the industry. Confidence is still shoogly just now, and although that confidence is rebuilding, we need clear commitments for the industry and the clear support of the UK Government so that the industry feels more secure and takes decisions on investment and exploration. That is why signing a sector deal as soon as possible would be hugely appreciated.

More generally, one of the things that infuriates and frustrates me about this UK Government particularly is that they think that if they stand up and invent a new definition for something, it will immediately become true. They have decided that if they say “living wage” instead of “minimum wage”, people will actually be able to live on it. That is not how it works. People still cannot live on it, even if the Government call it a living wage, and that is especially the case for the under-25s, who are not eligible for the living wage. It does not cost someone who is 24 less to live than someone who is 25. The Government need to get rid of those differential rates.

The UK Government say that they have ended austerity. By anyone else’s definition, they have not ended austerity. Just because they say, “We’ve ended austerity,” it does not mean that they have actually ended austerity. There are still cuts to Government Departments. There is still the benefits freeze. We still have all those issues.

[Leo Docherty]

Will the hon. Lady give way?

[Kirsty Blackman]

Not just now. In terms of the economic growth forecasts that the OBR has apparently made—

[Chris Philp]

Will the hon. Lady give way?

[Kirsty Blackman]

I am not taking any more interventions.

The OBR has made economic growth forecasts on the basis of a smooth and orderly Brexit. It has not made economic growth forecasts on the basis of us crashing out in a no-deal scenario, so its forecasts are only worth anything if the Government can strike a deal, as the Chancellor knows, which is why he has spoken about another fiscal event coming.

Frictionless trade is not frictionless just because the Government call it frictionless. If a good has to be stopped at the border, if somebody has to fill in an additional form or if there is any delay, that is not frictionless trade. Just because the Government say, “This is frictionless trade,” it does not mean that it is actually frictionless trade.

The Government need to improve their processes around the Finance Bill. This year has been the worst in terms of those processes, and they have to improve. The Government could do that by ensuring that we take evidence at the Public Bill Committee.

The Government have to actually do the things they say they are doing. If they say they are going to give Scotland the Barnett consequentials for health, they should give it the Barnett consequentials for health. If they say they are ending austerity, they should end austerity. If they say they are putting in place a living wage, they should put in place a living wage.

Lastly, if the Government are talking about tax cuts, they need to look at the situation in Scotland. The figures I have from the Library say that around half of taxpayers in England pay more than they would if they lived in Scotland, and that half of taxpayers are the people who earn the least, not the most. The UK Government should look at what the Scottish Government are doing and learn some lessons.

[Several hon. Members rose—]

--- Later in debate ---

[Sir Vince Cable]

I think there are separate sets of figures, but I thank the hon. Gentleman for his clarification. His first point is particularly interesting, and I thank him for his rapid desktop research. His figures suggest there is potentially a very big tax increase in the pipeline, which is one of the assumptions in the Budget that was not spelled out on Budget day.

[Kirsty Blackman]

Last year’s Red Book explicitly mentioned the impact of immigration and population change on public sector borrowing, and it said that, as the population increased with net migration increasing, public sector net debt would fall. Does the right hon. Gentleman share my concerns about the likely impact of a future immigration Bill on the public finances?

[Sir Vince Cable]

Yes. All the evidence we have shows that net migration has had a positive effect not only on the economy, in per capita terms, but on Government revenue because, by and large, these are young people who work and pay tax revenue to the Government. I totally share the hon. Lady’s concerns about future immigration legislation.

--- Later in debate ---

[Andrew Bowie]

As is being said from a sedentary position behind me, I think the total amount of money by which somebody in Scotland will be better off, if they are below a certain level, is about £24 a year. What the SNP is doing is punishing aspiration and stopping people—[Interruption.] As is being shouted from behind me, it is gesture politics. The SNP is punishing the entrepreneurs and the wealth creators that we need to attract to Scotland, especially to the north-east of Scotland. I could go on, but I will not because I have a lot to get through.

We are hearing exactly what we heard two weeks ago from the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry)—doom and gloom. This is the politics of gripe and grievance, and SNP Members cannot even find it within themselves tonight to welcome the huge strides that we have taken in supporting the oil and gas sector since 2014. I share the frustration of the hon. Member for Aberdeen North (Kirsty Blackman) about the oil and gas sector, although I would say that that is an issue for the Department for Business, Energy and Industrial Strategy, rather than the Treasury right now. But no reference was made to the welcome given by Oil and Gas UK or indeed by individual companies in that sector for our commitment to the stable regulatory and fiscal regime that, since 2014, has made the North sea one of the most attractive basins in the world in which to invest. I think that is something all representatives from Scotland, especially from the north-east of Scotland, should celebrate and thank this Government for.

As well as slashing income tax for millions of people, the Bill will implement a number of indirect tax cuts, such as the freezing of duty rates on beer, on ciders and most of all on whisky. This is a measure that we Scottish Conservatives have lobbied on relentlessly, and it will be a great boost to our local breweries and distilleries, such as Deeside Brewery in Banchory and Royal Lochnagar at Balmoral, both of which I have the honour of representing in this place.

There are freezes to support our haulage sector—heavy goods vehicles duty will be frozen for 2019-20. I am sure the importance of this freeze to the British haulage industry will be obvious to everyone as we prepare to leave the European Union. I have a dream that one day these vehicles will be able to transport Scotch whisky, which we as a Government are supporting; Aberdeen Angus beef from farms that are championed by the Conservatives, but abandoned by the SNP; and Peterhead haddock fished from this new sea of opportunity, with us out of the common fisheries policy, being delivered by this Government, along the Aberdeen western peripheral route, if the Scottish Government ever manage to resolve the mess they have got into on that road and do so without wasting even more of Scottish taxpayers’ hard-earned cash.

[Kirsty Blackman]

If we do get this wonderful Aberdeenshire produce—it is the best in the world, I would suggest—on to lorries and they drive down to Dover but are then not able to cross the channel, what does the hon. Gentleman expect will happen to the Peterhead haddock?

--- Later in debate ---

[Kirsty Blackman]

What does the hon. Gentleman say to the half of English taxpayers who would pay less tax if they were to live in Scotland?

[Bill Grant]

I take the hon. Lady’s point, but I understand that the saving she refers to is very modest to the tune of £24 a year for some, which equates to less than 50p a week. It is a step in the right direction, but a very small step and hardly a progressive tax system. As one whose mother cleaned other people’s houses and made beds at Butlin’s on Saturdays, I am not minded to accept lectures on poverty from Scottish National party Members.

I disagree with the suggestion that the Budget failed to provide funding for a social security system that treats people with dignity and respect. The Chancellor was listening. The entire ethos of the evidence-based and empowering system of universal credit is that work should always pay, and that work brings with it dignity and respect. No one can disagree with that. The dignity of work is important to all constituents in all parts of the United Kingdom.

The Bill will facilitate an additional £1.7 billion per annum being invested to increase work allowances by £1,000 from April 2019. I hear Opposition Members cry “More!” Everyone’s an Oliver—they want more, more. That “more” has to be earned and this Government have an economy that works and is earning more.

Oral Answers to Questions

Kirsty Blackman Excerpts

Tuesday 6th November 2018 Commons Chamber

[Mel Stride]

We take a very balanced approach to the economy, which of course includes ensuring that we stick rigorously to our fiscal rules. We have met the two intermediate rules a full three years early. We continue to bear down on the deficit, and debt as a percentage of GDP will continue to fall throughout every year of this Parliament.

[Kirsty Blackman (Aberdeen North) (SNP)]

Each additional EU citizen working in Scotland contributes £10,400 to Government revenue. What assessment has the Minister made of the reduction in tax revenue as a result of the ending of free movement?

[Mel Stride]

I am sorry to keep reverting to the same answer, but it is effectively the same question that I keep being asked: “What will the analysis look like when the deal is concluded?” Of course that prompts the question of what exactly the deal will be. In the fullness of time, when the deal is agreed, we will come back to the House with a full analysis.

[Kirsty Blackman]

Her Majesty’s Revenue and Customs can collect customs duties only if it has a working customs system, so how is the roll-out of the customs declaration service going? How is HMRC going to achieve the Government’s commitment in the Red Book to halve the time it takes to apply for customs trusted trader status?

[Mel Stride]

The hon. Lady raises the issue of the CDS system. The current expectation is that that will be fully functioning by the end of March next year, which means we therefore have a robust back-up in the extension of the CHIEF—Customs Handling of Import and Export Freight—system. This is to make sure that that gears up for the huge increase in the number of customs declarations that will need to be made in a no-deal situation. We will of course continue to work hard on that matter.

EU Customs Union and Draft Withdrawal Agreement: Cost

Kirsty Blackman Excerpts

Monday 22nd October 2018 Commons Chamber

[John Glen]

I have set forward the Government’s position with respect to the negotiation and the idea about a modest extension in terms of months. It will be for the Secretary of State and the Prime Minister to update the House sooner, but I acknowledge my right hon. Friend’s point with respect to the opportunities that exist beyond the EU in terms of finding a settlement that gives us the freedom to develop our trading relationships.

[Kirsty Blackman (Aberdeen North) (SNP)]

I was going to start my question by thanking the Chancellor for coming and answering questions on the cost of Brexit, but it is not the Chancellor who is here and I am afraid that the Economic Secretary is not doing a very good job of answering the questions on the cost. Can he tell us please: in the event of no agreement on staying in the customs union and the single market, what will be the loss in productivity to businesses in the UK and in Northern Ireland specifically and how many redundancies does he expect to see in Northern Ireland and in the UK? What is the loss cost to the UK economy of the EU citizens who have chosen not to come here or who have chosen to leave as a direct result of the Brexit vote? Lastly, if he truly believes that we would be better off as a result of the UK leaving the EU without being in the customs union or the single market, can he tell us what his models say about how much better off each of us will be?

[John Glen]

No, I cannot give the hon. Lady a cash figure for every member of the United Kingdom, but what I can say is that the Government and the Treasury are determined to make preparations for all eventualities. That is why we are preparing 70 statutory instruments to take through this House in the event of a no deal. The EU should be very clear that we are going to be ready for all eventualities while being committed to negotiating the best possible outcome, as directed by the British people two years ago.

Business Banking Fraud

Kirsty Blackman Excerpts

Tuesday 9th October 2018 Westminster Hall

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I thank the hon. Member for Hazel Grove (Mr Wragg) for being here. I am not going to say it is a pleasure to take part in this debate, because I do not think we should still be having these debates. The hon. Member for Beckenham (Bob Stewart) is absolutely correct: this subject has been discussed in the House so often, because so many of us have been approached by constituents, that we should not still be at this stage.

A number of hon. Members have raised issues that their constituents have brought to them and that, to me, scream of illegality. People have had things signed against their will, bank accounts opened in their name, or money taken from their bank accounts. Companies have been gone after because they are asset-rich; in Scotland, that particularly affected agricultural businesses, for example, because they had large assets that the bank could chase after. It baffles me that there have not been convictions in relation to those things, because I do not understand how they are not illegal.

Given the number of Members who have come forward about this matter, not all of our constituents can possibly be coming to us with falsehoods. So many people have been affected by this that it absolutely must be true. That was one of the most difficult things for individuals to come to terms with: I heard people talking about the fact that they were going through a total nightmare, and they did not understand how this could possibly be happening to them. In fact, they believed it could not be happening to them and that something must have gone horribly wrong. That has not helped to make sure that many people can come forward.

I will raise a few issues that the Scottish National party is asking to be addressed. I will focus a little on GRG, because that is the organisation that the majority of Scottish constituents have been hit by, but we have also had constituents hit by HSBC, Lloyds and Clydesdale. We believe that the UK Government need to pick up where the FCA has failed in relation to the comprehensive review of banking culture. The FCA produced a discussion document, but that is not enough. If the FCA cannot do these things comprehensively, the UK Government can step in, take action and make sure that positive changes are made to banking culture, because it is not the case that banks are now perfect.

The SNP will continue to call for the UK Government to create a permanent commercial financial dispute resolution platform to alleviate the suffering of victims of mis-selling. Given the issues that have been raised today, we will continue to say that asking victims of mis-selling to take the banks to court is totally inappropriate, and financially unworkable in the vast majority of cases. If the Government could step in and create that commercial financial dispute resolution platform, individuals would welcome that.

The UK Government have had a significant stake in RBS, and could have done more to highlight the issues there have been in that organisation and to ensure that RBS has told the truth. The internal resolution mechanisms that RBS has put in place could have been stronger and easier for individuals to navigate—particularly given the consequential loss issues involved, it has been very hard for constituents to access justice.

As the hon. Member for Thirsk and Malton (Kevin Hollinrake) said, it is vital that banks lend to small businesses, both for our economy and for those small businesses. These issues have had an economic impact on growth, because businesses have not been able to grow and be successful. There has been a huge impact on individuals’ lives. There has been homelessness, there have been marriage breakdowns and there have been suicides. I have spoken previously about my cousin and her family. She, her husband and their four children were made homeless as a result of what RBS GRG did to them, because they had an agricultural farm, and that farm was an asset that could be taken from them. A constituent also came to me who had suffered huge personal tragedy, as well as financial tragedy, as a result of what happened specifically with RBS GRG.

I have already said that people do not come forward. That is because of the confidentiality clauses that they have had to sign, because they are embarrassed, as has been mentioned, or because they are suffering from financial ruin and have enough to worry about without trying to take on a massive financial institution as an individual. More could be done so that those individuals get justice.

To conclude, we should have a comprehensive review of banking culture and a permanent commercial financial dispute resolution platform. The Government need to take action now so that this can never happen again.

Oral Answers to Questions

Kirsty Blackman Excerpts

Tuesday 11th September 2018 Commons Chamber

[John Glen]

The Chancellor has set out in successive Budgets our commitment to invest in this economy with the national productivity plan. We must recognise that we need affordable investment, and we have found out over the past 24 hours that the Opposition’s plans are confused. If £500 billion is just a down payment and the start of the investment, where will it end? Is that affordable?

[Kirsty Blackman (Aberdeen North) (SNP)]

Let us have some facts. The OBR predicts that unsecured household debt will reach 47% of income by 2021. The last peak was 45% in 2007. Families are using credit to pay for essential items. The people who are going to food banks are often in work, because work is not paying. What is the Treasury going to do? Will Ministers admit that austerity has created this mess?

[John Glen]

The Government are creating the conditions for growth and raising the national living wage. When I visited Glasgow just a few weeks ago, it was encouraging to see the constructive way that the 1st Class Credit Union and Sharon MacPherson of Scotcash are working with the poorest to help them when they are in difficulty.

[Kirsty Blackman]

I am really pleased that the Chancellor said that he will consider visiting a local pub. Will he consider coming to the Community Food Initiatives North East food bank in my constituency, which has today called for more food because its shelves are empty? If he was to come and visit a food bank such as CFINE’s, he would find out at first hand the effect that Tory UK Government policies are having on individuals up and down the country. The Minister cannot stand there and say that employment is up when the reality is that people are poorer than ever.

[John Glen]

I will take no lectures from the hon. Lady about food banks. The Trussell Trust was founded in my constituency. I have a dialogue with the charity, which has done a great deal to assist many people up and down the country, and I am proud of its work.

Office for Budget Responsibility

Kirsty Blackman Excerpts

Tuesday 24th July 2018 Westminster Hall

[Luke Graham]

I do. That kind of objective analysis from the OBR could help to inform and shape some of our public debate. It could certainly make sure that policy debates in the House are informed by substantive, objective figures that would hopefully have cross-party support.

Finally, the OBR is responsible for scrutinising the Government’s tax and welfare policy costings, which it does at each Budget. The Government provide draft costings in the run-up to each statement, which are subjected to detailed scrutiny and challenge. The OBR also states in each “Economic and fiscal outlook” report and in the “Policy costings” document whether it endorses the Government’s published costings as reasonable central estimates and whether it would use them in its forecast. It also gives each costing an uncertainty rating, based on the data underpinning it, the complexity of the modelling involved and the possible behavioural impact of the policy.

Those five major roles all focus on the UK-wide public finances. However, the Government have also asked the OBR to forecast the receipts from taxes that they have devolved—or intend to devolve—to the devolved Administrations. It is therefore clear that the OBR already has an extensive remit, with a great deal of responsibilities, not only to deliver information to the Government, but to ensure accuracy so that that information is reliable enough that the Government can make acceptable fiscal decisions.

On the earlier point about the OBR’s performance, it has forecast, on average, within 0.3% accuracy of actual economic growth over the past seven years. While the exact accuracy in any given year has of course varied, the OBR has, to its credit, sustained an accurate reporting standard over a significant period of time. If anything, it has slightly underestimated economic growth in its predictions, showing a propensity for conservative estimates, which does it much credit. Indeed, the one outlier in its predictions is from 2013. For that year, it predicted a slowing of growth, but, in fact, thanks to the Conservative-led coalition Government’s policies, we experienced a 2.1% growth rate. It is worth noting that, without that outlier, the OBR has achieved accuracy to 0.1% in its predictions. That is a sound endorsement of its expertise.

Why do I believe that we should extend the OBR’s powers? First, it is worth remembering that independent budgetary offices are well established and well respected in other countries. In the Netherlands, the Bureau for Economy Policy Analysis, the CPB, has been in place since 1945. It is fully independent; it has its own legal mandate and an independent executive and advisory committee. Research is carried out on the CPB’s own initiative or at the request of the Government, Parliament, individual Members of Parliament, national trade unions or employers’ federations. It analyses the effects of current and future Government policies, and it is responsible for producing quarterly economic forecasts, as well as a spring forecast and a macroeconomic outlook, which is published alongside that country’s Budget in September. Taken as a whole, those forecasts provide a basis for extended socioeconomic decision making in the Netherlands.

The CPB analyses policy proposals, but also evaluates the effects of policy measures that have already been implemented. Since the early 1950s, the bureau has been analysing the costs and benefits of large infrastructure projects. It also conducts research in a wide range of areas, including, but not exclusively, the economic effects of ageing, globalisation, healthcare, education, the financial crisis and the regulation of markets.

Since 1986, the CPB has offered political parties an analysis of the economic effects of the policy proposals in their election manifestos. The plans of the participating parties are analysed identically, which offers voters a comprehensive tool for comparison of the parties and contributes to the transparency of the election process.

However, it was during a visit by the Public Accounts Committee to our American counterparts earlier this year that the idea of expanding the OBR’s remit came to me. During the visit, we learned about the Congressional Budget Office—a similar independent fiscal advisory organisation—based in Congress, in Washington DC. The CBO was created by the Congressional Budget and Impoundment Control Act 1974 as a non-partisan agency that produces independent analysis of budgetary and economic issues to support the congressional budget process. Interestingly, the CBO was based on the Californian Legislative Analyst’s Office, which manages the state budget in a non-partisan manner. To this day, the CBO provides analysis for state and local government where congressional committees report on legislation that applies to those levels of government.

The CBO’s mission is to help Congress to make effective budget and economic policy. The CBO discharges a number of key responsibilities, and I want to examine a few of them in greater depth. First, in broad practical terms, each year the agency’s economists and budget analysts produce reports and hundreds of cost estimates for proposed legislation. The CBO does not make policy recommendations; its reports and other instruments, which summarise the methodology underlying the analysis, help to inform policy decisions and the debates that subsequently take place in Congress.

If we look a little deeper into that, we see that among the CBO’s statutory requirements is the production of certain reports, the best known of which is the annual “Budget and Economic Outlook”. That report includes the CBO’s baseline budgetary and economic projections. The CBO is also required by law to produce a formal cost estimate for nearly every Bill approved by a full committee of either the House of Representatives or the Senate. Those cost estimates are only advisory. They can, but do not have to, be used to enforce budgetary rules or targets. Moreover, the CBO does not enforce such budgetary rules, although its work informs them; the budget committees enforce the rules. The power still lies with the politicians, but they are making much more informed choices.

It is important to remember that it is Congress that sets the CBO’s priorities; it is not the President, either of the major political parties or the CBO itself. However, I understand from conversations with counterparts in the United States that the CBO has become more open to the majority and minority leadership—both sides—in the House of Representatives and the Senate putting forward proposals to or making requests of the CBO. The CBO follows processes specified in statute or developed by the agency in concert with the budget committees and the congressional leadership. The CBO’s chief responsibility under what is known as the Budget Act is to help the budget committees with the matters under their jurisdiction.

For the CBO to be able to provide analysis to the breadth of recipients described, its analysis must be objective, impartial and non-partisan. The CBO achieves that by refusing to make any policy recommendations and by hiring people on the basis of their expertise and without regard to political affiliation. Analysts are required to conduct objective analysis, regardless of their own personal views. Strict rules to prevent employees from having financial conflicts of interest and to limit their political activities are enforced. That is in line with the requirements for our own civil service.

Importantly, the reports by the CBO are designed to reflect the full range of experts’ views, as it is required to present the likely consequences of proposals being considered by Congress. By their nature, the estimates are uncertain, but the estimates provided are in the middle of the distribution of potential outcomes. The CBO also undertakes a range of dynamic modelling. It will look not just at the impact of one policy and assume ceteris paribus that the rest of the world is held constant; it will also look at the impact that that one variable will have on other policies, to provide a more complete scenario forecast and recommendations to the various committees.

[Kirsty Blackman (Aberdeen North) (SNP)]

The hon. Gentleman is making a very interesting speech. When the Government here announce that they will put in place a particular measure—a tax relief, for example—and that it will raise such and such revenue or cost such and such, I am concerned that that number is not then properly checked to prove whether the measure did or did not. Does the CBO check policies afterwards to work out whether its forecasting was accurate?

[Luke Graham]

I thank the hon. Lady for her question. I believe that the CBO does do that and I will certainly come back to her on that point. When we were looking at some of the benefits, tracking after legislation was also, I believe, in the remit of the CBO, but I am more than happy to write to the hon. Lady to confirm that. I agree that what she refers to is incredibly important. Just in the year that I have been in the House, I have seen the pace at which Westminster moves. Policies flare up in the House of Commons; there is an enormous amount of press and focus on them; and two months later, they are almost entirely forgotten. Having some recourse is essential. Of course, that does exist through the Public Accounts Committee—and, in America, through the similar budget review committees. That is usually where the costs and benefits analysis to check whether policies have worked takes place, so this may be one less task for the OBR. It could certainly help to provide some of the analysis, but that task would probably fall more within the remit, certainly in the United Kingdom, of the National Audit Office, as opposed to an extended OBR, so that we keep the division of labour.

--- Later in debate ---

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Gray.

I thank the hon. Member for Ochil and South Perthshire (Luke Graham) for securing this debate and the Backbench Business Committee for agreeing to it. I particularly thank the hon. Gentleman because his speech was not terribly partisan but just laid out the facts, which is important, and I will attempt to do the same.

First, I will give a bit of context about the Scottish Fiscal Commission and what it does, so that we are all aware of the situation regarding budgetary scrutiny in Scotland, and then I will talk about some of the things that the hon. Gentleman talked about.

The Scottish Fiscal Commission is structurally and operationally independent of the Scottish Government, and it produces robust forecasts about devolved revenues, spending and onshore GDP. The interesting thing about it is that because it was formed fairly recently, we can talk about how it was formed and the decisions that were made about it. When the Scottish Government proposed it and introduced the Bill to create it, they engaged with MSPs and the proposed commission to ensure that the strongest fiscal commission possible was created. In Scotland, we sought to learn from international experience in designing the legislative proposals, and we reflected on the work of the OECD and the International Monetary Fund.

The proposals for the Scottish Fiscal Commission recognised that there was not a one-size-fits-all model for fiscal councils. I think that is part of what we are discussing now; the debate is not so much about a one-size-fits-all model as about the best possible structure for a fiscal commission, given how the UK operates and how the UK Parliament operates, and about whether the hon. Gentleman’s proposals actually fit with the way our democracy works and make sense for us.

The Bill to create the Scottish Fiscal Commission expressly provided that it would not be subject to the direction or control of any member of the Scottish Government in performing its functions, and it would be directly accountable to the Scottish Parliament. The Bill also gave the commission the full freedom to determine how it scrutinised forecasts, and protected it from any actual or perceived direction or interference from the Government in carrying out that scrutiny. That is really important, and it is part of what we have discussed today, in terms of the genuine separation between the Government and fiscal forecasting. If we are to have what has been said is the position of the Congressional Budget Office and agreement from all parties that the Office for Budget Responsibility is non-partisan, we need that very clear separation; the OBR clearly needs to be an independent body.

It was interesting to hear about the situation in America and Australia in relation to how those countries’ fiscal commissions operate. However, it would be particularly useful—I am always suggesting this when policies or suggestions are put forward—to hear about countries in which these things do not work, so that we would be aware of any potential pitfalls before we make any decisions. It is always useful to consider how things operate differently in different countries—where these commissions work and where they do not work—so that the pros and cons can be assessed before any decision is made about any changes.

Regarding where things are different, it would be useful to look at other fiscal commissions to see whether their scrutiny works. Whatever any organisation does, there is an accusation of bias, and my particular concern about the OBR is that it would be difficult for it to be in a situation where it was not accused of being biased and that it would find it hard to find that middle ground, if you like. Generally, my view is that the right middle ground is when people on both sides are disagreeing with someone or something and saying that they are wrong—if that happens, they have probably found something there. That is certainly the position that most politicians find themselves in. However, it would be difficult for the OBR to prove that it can strike that balance.

[Luke Graham]

The hon. Lady is making a very valid point. I just want to refer back to my speech, where I looked at some of the results of OBR forecasts. On average, when we take out the one outlier for 2013, the OBR is actually only 0.1% off, and that was the result of it working on a more conservative basis and underestimating growth. So perhaps we can let the facts speak for themselves, which will help to build credibility, both for the OBR and the Scottish Fiscal Commission, which she has mentioned—obviously, they already work together.

[Kirsty Blackman]

Absolutely. I am definitely not saying that extending the remit of the OBR is impossible; I am just suggesting that it would be a difficult task for the OBR, particularly if it was forecasting on the basis of individual policies, which it has not done to any great extent in the past. That would be a new place for the OBR to prove its worth and to prove it is non-partisan. However, as I say, I do not want to say that that is an impossible task; I am just suggesting that it is a difficult one and that the OBR would probably take time to find its feet in performing it.

Looking at individual policies and their wider impact would be a very good thing to do. We should consider the fact that we have had so many Finance Bills; even in my three years as an MP, the Finance Bills have kept coming and coming. In each of those Finance Bills, there are changes to legislation; sometimes there is new legislation, and sometimes there are changes to legislation. However, I do not feel that we have adequate information about exactly what the full impact of those changes to legislation will be.

For example, in the last few years, the Government have increased insurance premium tax, and there has not been particularly wide-ranging analysis—certainly not independent analysis—of the cost of that change. It is all well and good for the Association of British Insurers to produce a forecast of that cost, but I assume people would argue that such a forecast might be biased. Equally, it is all well and good for the UK Government to produce an analysis, but, again, people would assume that that analysis was biased.

So we have a situation where there is not an independent forecast of exactly what the cost of increasing insurance premium tax will be. If increasing insurance premium tax means that individuals could no longer afford to pay their insurance, might such individuals become homeless, and would the state have to step in to help them? If that happened, there would be an additional cost that was perhaps not accounted for in the Government’s forecast of how much additional revenue would be created. Consequently, looking in-depth at such policies would be very important.

Policies such as the bedroom tax could be considered. In considering the reduction in benefits for individuals who have an additional bedroom, we must ask what the resulting cost of that policy will be. It perhaps saves the Government money, because people will choose to downsize rather than live in properties that are too big for them. Actually, the evidence perhaps bears out that that does not happen nearly as much as the Government predicted it would. People would perhaps also have to move away from their communities and the support mechanisms they have around them, so there would be an additional cost for the state, as it would have to pay for the lack of support structures that those people have around them if they move. There are incredibly wide ramifications with some of the costs of such a change, so it would be good to have an organisation such as the OBR—if it could be proven to be independent in this regard—looking at the wide-ranging impacts of a policy and examining the draft clauses for the Finance Bill later this year.

I think there is a clause in the upcoming Finance Bill—I think it is clause 31 or clause 32—in relation to VAT interest accrual payments. Basically, the Government proposal is that Her Majesty’s Revenue and Customs will no longer pay interest on repayments that it is due to pay to VAT-paying organisations that have overpaid their VAT. I am not clear what the wider ramifications of that will be. Will it cause cash-flow problems for small businesses? I do not know, but for me to be reliant on the Government’s forecast on that issue would cause me some issues, because I would be concerned that the Government’s forecast might be biased.

As I have said already, I am similarly concerned that organisations with a vested interest might have a biased position in this regard. It would be very good to see an unbiased perspective on some of these proposals, particularly, as I mentioned, because of the number of Finance Bills there have been and the number of tweaks they have made to policies. I have yet to see a Finance Bill that has not made changes to benefits in kind for people who have vehicles for their work. Now, in the grand scheme of things, not that many people have vehicles for their work, but the fact that every single Finance Bill tweaks the legislation means that there was something wrong with the legislation in the first place, and it is also difficult for us to consider the potential ramifications, because we are not getting extensive information about these things.

Finally, I just want to highlight another issue. In my intervention earlier, I asked whether the policies the Government have put forward have produced the outcomes the Government said they would. I appreciate the point of view of the hon. Member for Ochil and South Perthshire, and the Public Accounts Committee does a huge amount of work, getting through an incredible amount of information and producing very good reports. Perhaps it is my feeling as an MP that I am not saying to the PAC, “How about you check out this tax relief and whether it has had the impact the Government said it would.” With some of the tax reliefs that have come through in the past, I have asked the Treasury, “Can you tell me whether this tax relief has made the saving, or had the additional cost, you suggested it would?” Generally, it comes back with, “Oh yes, we keep all reliefs under regular review,” but it does not provide me with the tangible information I would like so that I can be assured that the position the Government took, and the case they made, were the correct ones, so that, if they make a similar case in the future, we can agree or disagree with it. That is really important.

I still think there is an issue with the information the Government provide to the OBR, regarding not just the post-situation, after policies comes through, but before they come through. I want to read some statements from the OBR’s 2017 “Economic and fiscal outlook” and elsewhere:

“We asked the Government if it wished to provide any additional information on its current policies in respect of Brexit…it directed us to the Prime Minister’s Florence speech from September and a white paper on trade policy published in February.”

About the Brexit negotiations, it said:

“we still have no meaningful basis on which to form a judgment as to their final outcome and upon which we can then condition our forecast.”

It is all well and good to argue for the OBR to have a wider remit, and I am not opposed to the idea—it is interesting, and we should explore it further to see how it might work—but the OBR can make good forecasts only if it is provided with good information from the UK Government. I get that the UK Government have very much struggled to convince all their MPs to support any proposal on Brexit, but if the OBR had the flexibility to say, “This would be the fiscal outcome if the Government chose this path, and this would be the outcome if they chose this other path,” that would help parliamentarians make the correct decisions about how to go forward.

I was shocked when I read that 2017 Office for Budget Responsibility “Economic and fiscal outlook”, and as soon as I heard about this debate, I immediately thought of those words. It was as if the OBR was having to act with one hand tied behind its back, regarding forecasting. Whatever the situation, and whether or not the OBR is further reformed to look at specific policies—I am not opposed to that—we must ensure that the quality of information that the UK Government provide to the OBR to make good forecasts is better. They should provide as much information as possible, and if they cannot provide information on their policies, they should ensure that the OBR has the flexibility to make forecasts on two, or three, potential outcomes, so that parliamentarians, during the Budget, or any spending process, can make better decisions.

--- Later in debate ---

[Robert Jenrick]

I would not characterise the IFS’s criticisms of the Labour party’s manifesto as “small”. They were pretty fundamental; the remarks I have just described speak for themselves. The IFS did analyse the policies of the Conservative party in the lead-up to the last manifesto, but let us stick to the question before us today, and apologies to you, Mr Gray, for deviating from it.

A number of arguments have been made today for widening the remit of the OBR. Over previous years, such arguments have been looked at in some detail. Back in 2014, Robert Chote wrote in response to Andrew Tyrie, now Lord Tyrie, who at the time was Chair of the Treasury Committee, setting out his views on the matter. He said that, while some of those arguments undoubtedly had merit and deserved proper consideration by the Government and by Parliament, it was important that we consider

“the significant practical issues that would need to be addressed”.

Let me briefly set out some of those, which we would all need to consider.

My hon. Friend the Member for Ochil and South Perthshire referred to the US Congressional Budget Office. That is a good comparison, although the US system varies from our ours in a number of ways—in particular, Congressmen, Congresswomen and Senators have a much greater ability than Members of the House to initiate legislation that carries with it significant financial implications. However, it is worth considering the remit of the CBO, and its capacity.

The CBO undertakes analytical work in-house and has around 235 members of staff, with an annual budget of around $50 million. In comparison, the Office for Budget Responsibility has just 27 members of staff and costs us around £2.5 million. The OBR is clearly dwarfed in comparison. Although that is not in itself a reason not to proceed, we would have to consider the financial consequences of doing so.

The CBO is required by law to produce cost estimates for nearly every Bill approved by a full budget committee of either the House or the Senate, and produced 740 such formal costings last year, so a significant amount of work would be required. It is worth pointing out that the CBO does not—this is perhaps a more relevant comparison for some of the issues we have discussed this morning—evaluate the costings of candidates for Congress, or indeed of presidential candidates. Clearly, to increase the remit of the OBR would require it to have a significantly larger operation.

Undertaking Opposition costings as part of the parliamentary process would have important implications for the OBR and departmental resources in all Departments, including the Treasury, but the greatest impact would be felt were it to be involved in manifesto costings. The time that the OBR and Departments needed to produce costings would pose very particular difficulties during general elections, some of which are unplanned. It is difficult to see how parties could be afforded the customary flexibility in developing their manifestos until a relatively late stage in the election process, to reflect the public debate in the run-up to the election. Instead, they might have to submit detailed proposals two or three months ahead of a general election. Of course, we could consider that, but we would have to consider carefully the implications for the general election process and the way we have traditionally approached that.

The policies in scope for OBR costings also differ in type from the policies that have dominated the political debate. The detailed costing process at fiscal events covers only tax and welfare policies, which are clearly very important and a significant element of general elections, but are not all the issues reflected in a general election or all the policies in manifestos.

The other point to note is that the OBR does not produce the work in-house. It relies on detailed data produced for it by Departments, including the Treasury, which are then submitted to the OBR for scrutiny and analysis. As the hon. Member for Aberdeen North (Kirsty Blackman) said, the quality of the information is extremely important. Civil servants in Departments would be required to work through political parties’ manifestos and then provide high-quality approved data to the OBR, with which it could do its usual costings.

[Kirsty Blackman]

I do not think that the problems the Minister raises are insurmountable; they could be overcome. A concern that I perhaps should have mentioned in my speech is how the OBR decides which policies it will look at, and which it will not. It could be accused of bias if it looked only at Labour party policies, for example, and not very many Conservative party polices. If the OBR were to be expanded, I would like to see a public consultation on what its expanded remit should be and which policies it should therefore look at.

[Robert Jenrick]

Were the OBR to see its remit extended, that would be a matter for Parliament. It would be debated extensively within Parliament.

To finish my point on civil servants, there is an important matter of principle here. Civil servants would have to undertake detailed costings and provide data on Opposition policies—we should all acknowledge that that would represent a significant constitutional development for the UK. We would have to be willing to do that in the knowledge of its consequences.

To answer other points raised in the debate, the OBR does, to some extent, look at the effectiveness of policies. For example, it re-costs policies at each fiscal event, and it looks again at tax policies that arose in previous fiscal events at each subsequent Budget. It does not evaluate the individual effectiveness of the policy, but evaluates only its fiscal consequences, although the National Audit Office and the Public Accounts Committee, as well as Select Committees, have the ability to do that—and do so, very well.

The hon. Member for Oxford East (Anneliese Dodds) raised a point about the OBR’s remit with regard to the environment. The Government are interested in how we can ensure that the Treasury takes account of climate change and other important factors. One example of our action is commissioning Professor Dieter Helm to carry out an important review for us and to take forward the idea, still in its infancy, of how we as a country could create natural capital accounts. We are very keen to work that through in the coming years.

This has been a helpful debate. It is important for Parliament to review the OBR at this moment. We have conducted two internal reviews in the Treasury, both of which concluded that the remit is sufficient. We do not intend to change it at present, but it has been helpful to hear views from a number of Members and we will of course give careful consideration to those views in the future.

Taxation (Cross-border Trade) Bill

Kirsty Blackman Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 16th July 2018 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

Given that there may not be a Third Reading, I will start very briefly with some thank yous. I would like to thank Scott Taylor, one of our researchers. I would also like to thank the work of the Public Bill Office, particularly that of Colin Lee and Gail Poulton, who have been absolutely excellent in their support to all of us who have been here throughout the passage of the Bill.

I want to talk about the history of the Bill and how we got to this point. We had the Committee stage earlier this year. On the Saturday morning after it finished, and almost out of the blue, the UK Government announced that they would not be entering into a customs union. They clearly did not think it through, bringing out the announcement at the most stupid time: after all the debates in Committee. It was totally ill-thought-out.

We then had the Chequers agreement on 6 July. The White Paper was published on 12 July, which Members will note was the day after the amendments were tabled to this Report stage of the Bill—we all had to table our amendments before we had actually seen the White Paper. I thank the Minister for coming to Westminster Hall to give us some level of reassurance, but pretty much all the reassurance he could give was, “Please look at the White Paper that’s coming out on Thursday.” It has, therefore, been really difficult to prepare for the Bill. It has been really difficult to write this speech, trying to game exactly what is going to happen tonight. I am still not clear.

There are too many factions in this House. We have the UK Government, the Conservative remainers, the European Research Group, the Democratic Unionist party, the Labour leavers, the Labour remainers and the Labour Front Bench. The UK Government will not support things put forward by anybody who supports remain. The Labour Front Bench will not support anything put forward by the Conservative remainers. The members of the ERG will not support anything put forward by anybody except themselves. The Democratic Unionist party will support whatever the UK Government tell it to, on the basis that it is being paid to do so. It is a complete shambles. Trying to do anything sensible in this House is incredibly difficult, especially given that we know there is a majority for a customs union among the Members of this House. Despite that, we are going to end up in a situation where members of the ERG, who believe in the polar opposite of a customs union, are having their amendments accepted. When the rest of us put forward anything vaguely sensible, our amendments are not accepted.

This is certainly not about sovereignty for the people or sovereignty for Parliament; it is about sovereignty for a very small group of elite Tories who want to have their say. The Government are letting them have their say. I could not be more angry about the fact that the ERG’s amendments are apparently going to be accepted. I do not want to direct all my ire at those on the Government Front Bench. Those on the Labour Front Bench need to be absolutely clear on their position. They need to be clear that they will support the softest possible Brexit. If they are talking about a jobs-first Brexit, they need to recognise the benefits of the customs union and the single market. They have the opportunity to do that tonight by supporting some of the amendments that have been tabled by those who support a soft Brexit.

The Scottish National party does not support fully a number of amendments that we plan to vote for tonight. Our position is that Scotland voted to remain in the EU, so we would like to remain in the EU. Scotland supports remaining in the single market and the customs union, so the SNP will support anything that keeps us in the single market and the customs union. In the absence of those options being on the table, we will do what we can to protect the economic and cultural interests of the whole United Kingdom. Even though some of the amendments are not brilliant, we will vote for anything that makes Brexit slightly softer than the Brexit that is being proposed. I needed to make it clear that just because we support an amendment here does not mean that it is a preferred option. It means that it is not quite as bad as some of the other options.

I make it clear that I will press new clause 16, in my name and the names of my colleagues, and I would also like to speak in favour of our other amendments. The SNP position is crystal clear, as I said. The UK Government position is not. I welcome some clarity that is given in the White Paper that was published after Chequers, but I have major concerns about some of it. It mentions specifically a trusted trader scheme. On the trusted trader scheme that we have—the authorised economic operator scheme—I have raised concern after concern about it, and I am not the only one; organisations such as the British Chambers of Commerce have, too. If there is to be an expanded trusted trader scheme, it needs to actually work. It needs to be applicable to small businesses and businesses need to be able to access that scheme. We are now at the stage that businesses should know what those schemes are. If the Government are going to bring them forward, they need to do so as quickly as they possibly can so that businesses can be clear on what basis they will be trading in future. That is really important.

I am pleased to see that diagonal accumulation has been recognised in the Chequers agreement. I have been talking about it for some time, and I am really glad that it has been recognised and that we will have a situation where we will possibly still be able to export cars to South Korea, because that is really important for our car industry. I am pleased that the Government have now made it clear that they are pursuing that.

Protective geographical indicators are also mentioned in the Chequers White Paper. I am slightly concerned about the way the Government are going on this. It would be very good to have more information around that. A PGI scheme that applies only to the UK and does not recognise EU PGIs is a bit of a problem, so we need more clarity from the UK Government on how they intend the PGI scheme to work. I know that there is a negotiation, but if we could have their point of view first, that would be very useful.

I want to briefly mention some of the other meat in the Bill and something that the British Retail Consortium brought to us. It encapsulated some of the issues with the Bill very neatly. It said that there are not yet agreements on security, transit, haulage, VAT and people and that we need mutual recognition on veterinary, health and other checks with the EU. It seems that the Government are pursuing some of this, so that is good news. We need investment in IT systems to deliver the customs declaration system. Again, I am still not convinced that this will come through in time, so if the Minister could give reassurance that it will, I would very much appreciate it. We need co-ordination between agencies at ports and borders, as well as investment and capacity and staff at ports. The Government have not done enough on both those things. They have not put the extra resource into ports. They have not told ports how they will be administering these things in the future. If ports are going to have to massively increase their staff numbers, they need to know now how they will do that.

On queuing, a two-minute delay at Dover will create a 17-mile queue, so it is not as though Operation Stack will just happen as normal. This will not be Operation Stack. It will be an incredibly large version of it, and Operation Stack was bad enough. The BRC also mentioned AEOs, particularly in relation to small and medium-sized enterprises. All those things are still concerns about the Bill and I will raise them on Third Reading, if we have a Third Reading debate, because I do not believe that the Bill is fit for purpose as it is.

I specifically want to talk about the new clauses from the ERG. If the UK Government are bound to accept them, we have a very, very severe problem. I have major issues with new clauses 36 and 37 and amendments 72 and 73. New clause 36 relates to reciprocity. Page 13 of the Chequers agreement says:

“At the core of the UK’s proposal is the establishment by the UK and the EU of a free trade area for goods.”

It then goes on to make clear on page 17 that

“the UK is not proposing that the EU applies the UK’s tariffs and trade policy at its border for goods intended for the UK.”

This new clause directly contradicts that.

What is the point in having a White Paper released on a Thursday if the Government are going to ignore it on Monday? I do not understand how we can be in that position. How can businesses know where we are going if the Government do not even know where they are going? For the Government to be accepting amendments by a group of around 14—who knows how many of them there are?—ERG members to get a hard Brexit is absolutely ridiculous. If there is going to be a Brexit, we need a Brexit that does what the Labour party suggests it should do: protects jobs. We need the Labour party to support a Brexit that protects jobs as well, not just us.

The Bill is a mess. It does not do what it set out to do, which is replicate the union customs code, and it does not now do what the Chequers agreement said it would on Friday. We need everybody in the House, from all the various factions I mentioned earlier, to get behind proposals that protect jobs and the sovereignty of the people, not just the sovereignty of an elite few.

[Peter Dowd (Bootle) (Lab)]

I read the White Paper on the train home on Thursday, if only out of a sense of morbid curiosity, but following the Prime Minister’s capitulation to the Brexiteers today, that curiosity has turned to a sense of the macabre. To begin with, we had the woman in the bunker with the blacked-out windows saying we were outward facing. Are we? This from the Prime Minister who invented a hostile environment for the Windrush generation and for disabled people claiming their rightful benefits and whose Government have been on the wrong side of the law more times than Arthur Daley.

The Prime Minister went on to state that we had a dynamic and innovative economy. Do we? Our economy is 35% less productive than Germany’s; we invest less and we have the most regionally imbalanced economy in Europe. Growth is sluggish and inflation stubborn. And on it goes—it gets more surreal. She says we live by common values of openness and tolerance for others and the rule of law. Really? The only thing the Conservative party is open to and tolerant of is big fat donations from Russian oligarchs. But here is where it gets really interesting. When she speaks about sticking to our principles, one has to wonder which principles she is referring to—the ones she referred to yesterday and which are enshrined in the White Paper or those she holds this afternoon, which tear the White Paper to shreds. Perhaps the Minister can enlighten us.

The Prime Minister wanted to deliver an ambition to “once and for all” strengthen our communities, our Union, our democracy and our place in the world. I will take those claims one by one: our communities have been ripped apart by austerity; our Union is in danger from Ministers out of touch with the needs of any nation and afraid to move away from their desks in case someone else takes it; our democracy is threatened by swathes of Henry VIII powers; and our place in the world is a laughing stock due to the Prime Minister’s supine sycophancy to Donald Trump, who humiliated her.

The White Paper—what is left of it—came from the pen of a Prime Minister obsessed with silly soundbites. She used to talk about “Labour’s magic money tree” until she wanted a magic money tree of her own with which to bribe the Democratic Unionist party, when that phrase was quickly ditched. What about the infamous “strong and stable” mantra? It turned out to be more like a strong and stable smell of panic during the election and was ditched as well. Finally, it seems that this White Paper has also been ditched.

As for Northern Ireland, I present, the buffer zone—a 10-mile-wide area along the entire boundary between Northern Ireland and the Republic. Under the EU’s trading rules, to be operational this buffer would have to be policed on both sides of the 10-mile divide. Did we really spend decades trying to get rid of divides in Northern Ireland only to resurrect them? I think not. As for the facilitated customs arrangement, we are not clear what about it constitutes a partnership, as it would effectively leave UK customs officials working to maintain a customs union that we are no longer a part of.

Regardless of who is responsible for managing the duties, it remains unclear how the FCA would be frictionless. Presumably, the final destination of goods would have to be queried as they enter the UK. This would slow down the passage of goods across our borders and prevent intricate supply chains from functioning properly. It would lead to waste, uncertainty and expense for business, to higher prices for consumers and to job losses and production moving abroad, as the right hon. Member for Broxtowe (Anna Soubry) pointed out. In that regard, the comments from the hon. Member for Gainsborough (Sir Edward Leigh) were unconscionable.

What about the UK border? Does the Minister expect checks to be in place to ensure that goods that claim the UK as their final destination are not diverted into the EU once they arrive? Presumably, we would need customs checks and controls between the EU and the UK to reconcile goods to documents when, for example, UK anti-dumping duties exceed those applicable on import. Can the Minister clarify? Can he tell us how many trusted traders—the Tories using the word “trusted”; that’s a laugh, isn’t it?—are currently registered with the Government’s scheme and how many they believe will be registered by the end of the transition period?

Of course, all this can be avoided if the House chooses to support Labour’s clear and pragmatic solution to the issues of frictionless trade within the EU and preventing a hard border in Northern Ireland. New clause 11 presents Labour’s practical solution to the problems that have confounded the Conservatives. In our new clause, we call on the Government to negotiate a new customs union with the European Union, to be in place when we leave the current customs union at the end of the transition period. That is the only way to ensure that we can have frictionless trade with our largest trading partner and help to prevent a hard border between Northern Ireland and the Republic. It is what business needs and producers want, and it is what would most benefit the public.

Leaving the EU: Customs Arrangements

Kirsty Blackman Excerpts

Tuesday 10th July 2018 Westminster Hall

[Stephen Hammond]

The hon. Gentleman may well be right. We cannot know what will happen. We can see tensions already and they may result in different outcomes. We have some certainty about various procedures with those nations because they are members of the EU, but we cannot have the same certainty with other countries that present that fated opportunity.

Whether we like it or not, our economy is extraordinarily and almost inextricably interlinked with the EU’s, with manufacturers benefiting from the complex supply chains. If we were to put up barriers between the UK and the EU by leaving the single market, or by having no comprehensive customs arrangement, we would have to be sure that any new trade deal could make up for putting those barriers in place.

[Kirsty Blackman (Aberdeen North) (SNP)]

Will the hon. Gentleman give way?

[Paul Girvan (South Antrim) (DUP)]

Will the hon. Gentleman give way?

[Stephen Hammond]

A panoply of choice! I will give way to the hon. Lady and then the hon. Gentleman.

[Kirsty Blackman]

To return to the hon. Gentleman’s welcome of the Chequers plan, could he give more detail about that and how he thinks it will actually work? I have concerns that it may not be workable at all.

[Stephen Hammond]

As I have said several times, we do not know the detail, but we should welcome three things: first, that there is a plan, because we are a long way into the process; secondly, that it attempts to put in place a UK-EU free trade area; and thirdly, that there is a common rulebook. As I explained earlier, we cannot just solve the customs part; we need to solve the standards issue as well, because if we do not, we will not be able to trade the products that we want to trade even if we have the best customs arrangements.

None of us has yet seen any of the detail. Some of us will cautiously welcome the plan as a starting point for establishing a free trade area, and some of us will be a bit more positive. We have not yet seen the reaction from others, but I hope they realise that it is an opening offer from the Government that needs to be looked at sensibly.

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[Kirsty Blackman (Aberdeen North) (SNP)]

On that note, Mr Streeter, I thank you for chairing the debate and congratulate the hon. Member for Wimbledon (Stephen Hammond) on securing it. I also want to mention the fact that there are quite a lot of people in the Public Gallery, which is unusual. It is good for people to see that debate in this place can be respectful and that it can be conducted without shouting as we perhaps do at Prime Minister’s questions. It might be fairly dry, but the issues we are debating are important to businesses in our constituencies. I will save most of the particularly lengthy speech that I could make for the debate on the Taxation (Cross-border Trade) Bill next week. I am sure that the two Front Benchers have heard most of it already anyway. As repetition is encouraged in this place they will be delighted to hear it again next week.

You will not be surprised to hear, Mr Streeter, that the SNP’s position is that we should stay in the EU. Scotland voted to stay in the EU, and I believe that is in the best interests of people in Scotland. That is not just because people voted to remain, but because I passionately believe that being a member of the EU has helped us culturally, and also had a huge economic benefit. If we cannot stay in the EU, I think we should stay in the single market and customs union. A number of issues about staying in the customs union have been rehashed and discussed in this debate and I will mention a few of them, but first I wish to comment briefly on the Chequers plan.

The Chequers plan should have been published before article 50 was triggered, and we should have had this level of certainty about the UK Government’s future plans at that stage. Businesses are worried about what will happen—in a recent poll, mainly small businesses said that they are using only in-house expertise to plan for what will happen post-Brexit. They are not bringing in any specialist knowledge, which is a problem. At this point, however, they cannot bring in specialist knowledge to help them plan, because we do not know what will happen. Even the plan from the UK Government—the Chequers agreement, as I am sure it will be known—provides no certainty because we do not yet have an agreement with the EU, which is fundamental. This is a negotiation, and we need certainty for businesses so that they can work out what customs arrangements will look like.

The hon. Member for Wimbledon spoke at length about some of the bureaucracy involved, and that is a key issue in leaving the customs union. He gave the statistic of £4 billion a year in extra bureaucracy, which is a phenomenal amount of money. If a two-minute delay at Dover becomes a 17-mile queue, that would be totally unmanageable, but there are not yet any plans. The UK Government issued a written statement about the possibility of creating extra lorry parks, but that will not cut it. We will need significant infrastructure investment for any delay to be manageable, which is a real issue.

I will come on to rules of origin checks, but phytosanitary and animal health checks will also be required at the border, which is a particular issue for the agricultural industry. As everybody knows, Scottish food is the best in the world, and being able to export it to the EU is incredibly important to us. Someone who is exporting langoustine to the EU does not want it to sit in a lorry for even an extra hour, because it will not be in a very edible state once it gets there. There is therefore a real concern about the possible impact on the quality of our exported food if there is any sort of delay.

Non-tariff barriers and rules of origin are important. The hon. Member for Eddisbury (Antoinette Sandbach) raised a point about rules of origin that I have mentioned previously, and in particular the rolling over of the EU’s current free trade agreements with third countries. It is incredibly important to ensure that those free trade agreements include cumulation, so that when cars are sold that do not meet the 65% content rule—for example, if they are being exported to South Korea—cumulation of EU content with UK content can be included to allow that free trade agreement to continue. If those free trade agreements are not rolled over with an element of cumulation, on the day that the UK leaves the EU we will no longer be able to export cars to South Korea. That will be an issue for other countries as well, but the car industry has that 65% figure, which is important.

Although the UK has a system of authorised economic operators, its system does not have the same flexibility to allow someone to become an AEO that exists in some other countries. The UK Government have said that being an authorised economic operator will help with exporting, which it will. However, that AEO system needs to be more flexible and ensure that people can more easily fulfil the requirements to become an AEO. If there are any additional customs barriers to those that currently exist, many more people will need to apply to become an AEO and have less friction in their trade.

There is not yet clarity on how rules of origin will look, or on filling in the form, and I am slightly concerned that that was omitted from the Customs Bill. At the moment, the British Chambers of Commerce has things such as certified rules of origin, but the Bill does not state what our rules of origin form will look like, or whether the UK Government will create a form that business can fill in to replicate the EUR 1 form. Obviously, we cannot continue to use the EUR 1 form because we will be outside the EU, but the Government need to copy and paste it in, and it would be good if they could give certainty to businesses about what that form is likely to look like, so that they know with what they will be expected to comply.

We are told that the benefit of leaving the customs union is that we will be able to strike free trade agreements, but earlier the point was made pretty comprehensively about how low those free trade agreements will be. Earlier this year The Sun published an article called “Vote for bargains”, which it later corrected. It was put out by members of the European Research Group, and it stated that there would be a £1 reduction in the price of butter as a result of us leaving the EU and being able to reduce our tariffs. In reality, only 0.23% of the butter that we import comes from outside the EU, and that comes from New Zealand. It does involve a tariff, but it is only 0.23% of the butter that we import. Crashing out without a trade deal and having tariffs on EU butter would be a real problem for the UK. My best guess is that rather than £1, we are looking at a saving of a couple of pence, but that would be only for companies that export butter from New Zealand because it is not sold in any retail way that I could find.

The article also stated that there would be a £44 saving on a TV from South Korea. Given that the EU has a trade deal with South Korea that includes zero tariffs on such goods, it is important for us to challenge such assertions when they are made. Misinformation is being spread about the cost of tariffs, but in reality that cost is minimal compared with the huge cost of non-tariff barriers. As the hon. Member for Bishop Auckland (Helen Goodman) said, if the gravity model comes into play, we do far more trade with the EU than with anybody else. If a country has a free trade agreement with another country, it will have some regulatory alignment with that other country; it will not be free to make all its own rules because it will have to sign up to some of that country’s regulations—we have already discussed chlorinated chicken, for example. It is not the case that the UK will be a sovereign nation that is able to make all its own rules; that is not how free trade agreements work—they involve give and take.

I think the customs union is vital. The Chequers agreement does not solve many of the issues that we have been discussing, or give certainty to businesses. It is also likely to be unacceptable to the EU and it does not solve the problem of Northern Ireland because of issues with technology. Next week, during discussion on the Taxation (Cross-border Trade) Bill, we will have the opportunity to vote on an amendment tabled by the right hon. Member for Broxtowe (Anna Soubry), which states that the UK’s negotiating position should be that we stay in the customs union. It is vital that Members support that amendment, and I think we have a majority in the House of Commons for that. If that is not the will of the people, I do not know what is.

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[The Financial Secretary to the Treasury (Mel Stride)]

I will certainly leave two minutes for my hon. Friend the Member for Wimbledon (Stephen Hammond).

It is a pleasure to serve under your chairmanship again, Mr Streeter. It is also a pleasure to follow the hon. Member for Stalybridge and Hyde (Jonathan Reynolds). I believe we might be facing each other next week on another occasion. There seems to be a sense that something is happening on Monday or Tuesday next week. I also congratulate my hon. Friend the Member for Wimbledon on securing the debate.

As many have suggested, it might be worth me injecting as much clarity as I can on the Government’s position. While Members made extremely valid and well-put points about the downsides of an arrangement in which we perhaps have no deal and there is a hard border between us and the EU27, I am not so sure that the merits of the proposition that the Cabinet agreed at Chequers have come through.

As we all know, the main problem with a hard border or even with the maximum facilitation arrangements is that we would have a border between ourselves and the EU27. We would have various degrees of friction that we would seek to reduce under the max fac model through various facilitations and the use of technology, but we know there would be costs associated with that kind of arrangement. That is why at the Chequers meeting we wisely moved towards something that works much better in that respect. In terms of the cost of the kinds of frictions we might have with some of the scenarios that have been conjured up this afternoon, the head of HMRC tallied the cost of the additional customs declarations that would have to be entered into as a consequence of a border between ourselves and the EU27 at about £20 billion a year. Those are not insignificant costs to business, which the Government most certainly recognise.

The model we are now looking at is a facilitated customs arrangement, where we will act effectively as the agent for the European Union at our borders when it comes to goods coming through the UK into the EU. We will be collecting the European Union’s tariff at that point. For goods going directly into the United Kingdom for consumption or end use in our jurisdiction, we would apply the UK tariff at that point.

We would also have a common rulebook, which means that for regulation pertaining to goods and agricultural products, we would not, at least initially, have any regulatory misalignment between ourselves and the EU27. The significance of that is that we will therefore not require border and customs arrangements between ourselves and the EU27, and indeed between Northern Ireland and the Irish Republic.

[Kirsty Blackman]

On goods that are coming in from a third country, how will the Government work out on which bits of a shipment to charge the UK tariff, and on which bits to charge the EU tariff?

[Mel Stride]

I point the hon. Lady to her question about the White Paper. There will be more detail to come on just those kinds of questions, and of course much of this will remain to be negotiated. Our estimate is that the vast majority—well in excess of 90%—of goods coming in could be charged directly at the border as an EU good, or would be non-tariff anyway under both EU and UK arrangements, or face the UK tariff accordingly. A very small proportion might fall into the category to which she refers.