Bank Resolution (Recapitalisation) Bill [Lords]

Kit Malthouse Excerpts

2nd reading
Wednesday 22nd January 2025 Commons Chamber

[Kit Malthouse (North West Hampshire) (Con)]

I draw attention to my entry in the Register of Members’ Financial Interests. I have no desire to detain the House for long, but I have some questions that I hope the Economic Secretary can address, continuing our conversation in the Delegated Legislation Committee earlier this week.

The Economic Secretary and I are both alumni of TheCityUK, so she will know that what financial services want most of all is certainty of regulation and decision making. They need to know that the playing field is level and predictable. While we are all patting ourselves on the back about Silicon Valley Bank, the consensus that everyone did a good job makes me slightly suspicious.

The Bank of England effectively made three decisions during the unravelling of Silicon Valley Bank that I want to put on the Economic Secretary’s desk for her to consider. Is more certainty required from the Bank of England on the triggering of those decisions?

First, the Bank of England denied Silicon Valley Bank short-term funding. SVB UK was solvent, as it would have to be as a UK subsidiary regulated by the Bank of England. It applied for £1.8 billion of short-term funding when it became clear that its parent company was in trouble. That funding was denied by the Bank of England, and I do not think there has ever been any significant examination of why the Bank took that decision.

Obviously, there was a run on Silicon Valley Bank, with depositors seeking to pull out their money, and the bank was unable to honour those withdrawals, which is why it applied for short-term funding. A possible alternative route could have been a temporary freeze on withdrawals and/or the provision of short-term funding, which could have allowed the bank to remain solvent in the UK. Understanding what triggered that decision, and how other banks in similar circumstances might be handled by the Bank of England in future, is key.

Secondly, as the shadow Minister said, the Bank of England initially decided to put Silicon Valley Bank UK into insolvency and rely on the £85,000 depositor guarantee and the £170,000 joint depositor guarantee. We do not know why the Bank changed its mind.

[Emma Reynolds]

I can tell I am going to enjoy discussing these matters with the right hon. Gentleman. I have looked into this since our exchange on Monday, and I want to clarify what happened on the Friday before the Monday in March 2023. The Bank of England issued a statement on the Friday evening saying that it intended to apply to the court to place SVB UK Ltd into a bank insolvency procedure, absent any meaningful further information. However, a buyer came forward over the weekend, which is what changed between the Friday and the Monday. It was judged to be both in the public interest and in the interest of SVB UK customers that this resolution on the Monday morning was preferable to the insolvency procedure that had been announced on the Friday.

[Kit Malthouse]

That is useful information about the Bank’s decision making. However, the Bank still decided to go for insolvency prior to a resolution mechanism. I find it hard to see that, within that 36-hour period, it had not canvassed whether there was a market for the bank. My point remains: if I were an investor or an overseas bank trying to establish and invest significant funds in a UK branch, I would like to understand why the Bank of England makes these decisions, and the criteria and parameters by which it is likely to make a decision either way. Then, of course, the final decision was taken to sell or transfer the bank to HSBC—for a minimal consideration, I think. I really want to understand what value was placed on that bank going to HSBC, as opposed to any of the other banks that might have been bidding for it.

At the heart of this is my worry about competition. When a bank is put in this resolution position, obviously it needs to move to another bank that has significant assets and can fulfil the rightful demands of its depositors to withdraw their funds. That will naturally be a bigger bank, and there is a possibility—although hopefully this will not happen, as we will not use resolution very often—that small, higher-risk challenger banks will find themselves unable to obtain short-term funding from the Bank of England because of their size, and will therefore be gobbled up by the leviathans of the banking system. Over time, there might be a natural move back towards where we were prior to all these challenger banks appearing—to having four or five massive banks that dominate the system in an uncompetitive way.

I am asking the Minister not necessarily to change the legislation, but to consider setting out in a code of conduct what consideration the Bank of England has to give to the competitive landscape when it is resolving a bank. When it transfers one small bank to another small bank as part of a resolution, for example, that wheel might be oiled with a bit of short-term funding, in the interests of maintaining that competitive landscape. The cost of that should not fall on the taxpayer; effectively, it should be a loan for repayment. One of the benefits, if you like, of the 2007-08 crash—one of the silver linings of that cloud—is that we have a much more diverse banking landscape than before. There was recognition that having these huge organisations that crash the entire global economy if they fail was dangerous for the western economy, and that a much more diverse landscape was therefore desirable. The problem with that, obviously, is that there is more inherent risk in those smaller banks. If there is more inherent risk, we are likely to see more resolution, and in time we may end up back where we were.

I support the Bill. I think that resolution is exactly the right way to go, and we should obviate the risk to the taxpayer. There are also negatives to the system, though, so I hope that the Minister, who I am sure will do the job with aplomb, will think carefully about the impact on the world of the Bank of England’s decision making and predictability; about what the Bank can do to provide transparency, whether through a code of conduct or indicators of practice; and about the impact of resolution on competition.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Minister.

Draft Silicon Valley Bank UK Limited Compensation Scheme Order 2024

Kit Malthouse Excerpts

Monday 20th January 2025 General Committees

[Kit Malthouse (North West Hampshire) (Con)]

I have no wish to detain the Committee, but I do have some questions about the particular process we are discussing, not least because, as I understand it, it was the first time that the Bank of England had used its resolution powers as they currently stand. What happened has wider implications that we need to think about for the health of financial services in the City of London.

My first question is this: could the Minister confirm that there is no litigation outstanding either in the UK, or contemplated in the UK or in the United States, that this measure seeks to obviate? If that is the case, will she elaborate a little more about the decision making of the Bank of England during the process? Although she outlined what happened at a very high level, she did not fill in all the detail. For example, as I understand it, Silicon Valley Bank UK Ltd, the subsidiary, was a perfectly solvent banking entity within the UK. It applied for £1.8 billion of liquidity funding to the Bank of England when its parent was getting into trouble. A decision was made by the Bank of England at that point to deny funding to that bank. Has there been any review of that decision? Is the Treasury aware of why the funding was not made available? What assessment was made by the Bank? In future, if other banks apply for similar liquidity funding when overseas parents are in distress, what criteria will be applied so that everybody knows exactly what they are doing?

The Bank then initially made a decision to put SVB UK into an insolvency procedure—it did not immediately go for resolution—and in that insolvency procedure, obviously depositors were due to get their £85,000 as guaranteed, or £170,000 for joint accounts. But something changed over the weekend, because by the Monday, the Bank had changed its tune and was going for what has now resulted, which is the sale to HSBC for nothing. Do we know why it made that initial decision? My guess is that it changed its mind because the depositors went nuts. Lots of tech start-ups had large deposits with that SVB UK, and much of it had been money raised from shareholders. There was obviously quite a lot of political intervention, but what were the influences on the Bank’s decision making? If it changed its mind because the Treasury, the PRA or the FCA said that it should change its mind, why was its initial decision therefore deficient? What does that say about the Bank of England’s decision making?

Finally, given that that was the first time that those powers were used, I wonder whether there has been a review by the Treasury—as one might expect in such a petri dish experiment situation with such a valuable industry—as to whether what happened was overall beneficial both to the UK economy and to financial services. The Minister will understand that financial services are extremely valuable to this country and that anything that creates a sense of instability will detract from the attraction of the UK for financial services. The structure of Silicon Valley Bank, specifically—that it had a subsidiary in the UK, rather than a branch—was meant to promote the sense of stability and independence of regulation that would, in theory, have allowed it to trade independently.

All those questions need to be asked. If there has not been a review, I would be grateful if the Minister, given that she is new to the job, might acquaint herself with the issues in a little more detail and satisfy herself that this measure is not a negative for overseas banks establishing branches here, because since this situation, I cannot see —I have had a look, although I may have missed it—that any overseas bank has done so. If they have not, is this why?

[Emma Reynolds]

I thank the shadow Minister, the hon. Member for Wyre Forest, for his kind words—we will be spending a lot of time together this week. I also thank him for what he said about shareholders and the principle of risk and return. We know that there is a correlation between the risk taken and the return due, but that does not always work out. Proportionate regulation encourages considered risk-taking, which we are in favour of; we want to see entrepreneurship in our economy. Maybe this is a more philosophical debate that we could have on another occasion, but I agree with a lot of what he said about shareholders providing scrutiny. We certainly should not criticise them for being shareholders, because we need good shareholders for the functioning of the economy.

Let me turn to the remarks of the right hon. Member for North West Hampshire and attempt to answer all of his questions. Obviously, I was not in the Treasury that weekend—one of his colleagues was—so if he wants a very detailed description of those events, he probably should speak to the shadow Business Secretary, the hon. Member for Arundel and South Downs (Andrew Griffith). That is my first recommendation.

Secondly, there is certainly no litigation in this case. It is for the Bank of England, as the independent regulator, to weigh up and balance the different trade-offs involved in this sort of decision making. I cannot speak for the Bank of England, but I point out to him that only 14% of deposits would have been covered by the financial services compensation scheme. He might think that that would have been a better eventuality.

[Kit Malthouse]

That is not what I am implying at all. In this instance, I think that resolution was the right thing to do. What I am saying is that the Bank of England’s first decision, on the Friday, was to go for an insolvency and only pay out 14% of the deposits. It was only after pressure was brought to bear on a supposedly independent bank over the weekend that the strategy was changed to a resolution and the bank was transferred to HSBC. In fact, the Bank of England issued a press release to the effect that it was putting the bank into the insolvency procedure, and then over the weekend changed its mind. I am asking about the integrity and quality of the Bank of England’s decision-making procedure, given that it initially proposed to do exactly what the Minister says should not have happened.

[Emma Reynolds]

I cannot speak for the independent Bank of England, so I gently suggest to the right hon. Gentleman that if he has questions or concerns about the timing of the issuing of a press release on the Friday in March 2023, he should convey them to the Bank of England.

I will take up the right hon. Gentleman’s recommendation to look into the issue more closely, but I also gently say to him that—due to the work of officials in the PRA, the Bank of England and indeed the Treasury—overall we had a good outcome, because by the Monday morning, before the markets opened, we had a smooth transfer from SVB UK into HSBC. My point is that in the end depositors were in a much better position on the Monday morning than they had been on the Friday; regardless of the choreography, we got to the right outcome in the end.

I think that there has been consideration of the resolution process, although not necessarily of the timing of the events mentioned by the right hon. Gentleman. Indeed, on Wednesday, myself, the shadow Minister—the hon. Member for Wyre Forest—and other hon. Members here present will debate the Bank Resolution (Recapitalisation) Bill on Second Reading. That Bill has already been through the Lords. It seeks to ensure that in cases such as this one, we are protecting taxpayers. Indeed, what was good about this case was that SVB UK was in a relatively good economic position, but I could envisage a situation where that was not the case, and we will discuss such issues on Wednesday.

I commend the order to the Committee.

Question put and agreed to.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Kit Malthouse Excerpts

Committee of the whole House & 3rd reading
Tuesday 17th December 2024 Commons Chamber

[Gareth Davies]

I agree completely with my hon. Friend, who has once again made a very astute intervention. It marries very clearly with what we have seen in business confidence. He mentioned the record since the pandemic. Business confidence has tanked to low levels that we have not seen since the economy had to be shut down during the pandemic. A survey by the CBI, which makes for stark reading, says that 62% of businesses have said that they will have to reduce recruitment, while 48% have said that they will be reducing existing staff levels. That is all because this Bill will impact them in ways they never imagined and were never told about. Whether businesses freeze or cut jobs, or, as the Chartered Institute of Taxation has warned, shift employees to a self-employed basis, or, even worse, offshore workers to overseas destinations, the potential impact on employment should absolutely worry us all.

That is why we have tabled new clause 1, which would require the Chancellor to publish an assessment of the impact of this tax rise on the employment rate within a year of the passage of the Act. It is not controversial; it just seeks clarification and an assessment.

[Kit Malthouse (North West Hampshire) (Con)]

This impact assessment is extremely important, not least because at a macro level—given that the UK is essentially a services-based economy in which human capital is the most expensive fixed cost, effectively—there is no way to escape this tax. Unlike corporation tax, which is levied on profits, this tax is levied whether a business is making a profit or not; businesses that have been marginal but struggling may well be forced into a loss, and may therefore choose to close down. It therefore has to be essential that we look backwards, if this tax goes ahead, and ask what the impact has been from a services point of view.

[Gareth Davies]

That was a classic case of how to make an intervention, because it added to the debate. I had not mentioned that point, but my right hon. Friend is absolutely right. The impact on employers, who will pay the tax whether they are profitable or not, is absolutely right. That is, again, not something I think the Government have fully appreciated.

Finance Bill

Kit Malthouse Excerpts

Committee of the whole House
Wednesday 11th December 2024 Commons Chamber

Clause 51 makes the same rate increases as clause 50, but applies to land transactions with an effective date on or after 1 April 2025. These two clauses will provide an advantage for first-time buyers and those moving home, helping to support home ownership. The OBR-certified costing estimates that increasing the higher rates for additional dwellings by 2 percentage points is expected to result in 130,000 additional transactions over the next five years by first-time buyers and other people buying a primary residence.

[Kit Malthouse (North West Hampshire) (Con)]

I am grateful to the Minister for giving way, but I am surprised she has not declared her interest because I believe she is herself a landlord. She presumably owns another property, so to cast aspersions on people who do as some kind of plague is, I think, a little unfair.

I assume from this measure that the Minister would expect there to be some impact on the rental market. This is designed to deter people from becoming landlords. Given that 90-odd per cent of our rental properties in the UK are owned by people who have two or fewer properties, what is the scale of the impact she is expecting? How many people are likely to either exit being a landlord or, particularly in somewhere like London, not bother being a landlord at all? What will be the wider impact given that in the capital, such as where she represents, lots of people have no option but to rent, because they are unable to accumulate the deposit required to buy a property at an inflated value? Are we going to see fewer rental properties in the capital?

[Tulip Siddiq]

I thank the right hon. Gentleman for his intervention. I am a landlord, and that is absolutely declared in my entry in the Register of Members’ Financial Interests. If I was meant to declare it for the purposes of this debate, I do apologise, but it is referenced very clearly in my entry. I would say that, as a landlord, I am very happy to pay extra tax if it is necessary to fix the foundations of our economy.

I do not agree with the right hon. Gentleman’s assessment of London. I think we are more resilient than that, especially in Camden, and I think we will be fine.

Clauses 50 and 51 will provide an advantage for first-time buyers and those moving home, and it will help to support home ownership. The OBR-certified costing estimates that increasing the higher rates for additional dwellings by 2 percentage points is expected to result in 130,000 additional transactions over the next five years by first-time buyers and others buying a primary residence. I hope that addresses some of the concerns of Conservative Members.

Clause 52 introduces special transitional rules to ensure no additional tax is payable for land transactions substantially performed before 1 April 2025. In most cases, SDLT is charged at the point of completion in the property-buying process. In some cases, however, such as where the buyer has performed their purchase by paying for the property or taking possession of it, the tax is chargeable at that earlier point. The clause in question ensures that buyers who have performed their transactions will not pay more tax as a result of the changes in rates brought about by clauses 50 and 51 when they complete their purchase.

Clause 53 increases from 15% to 17% the single rate of SDLT payable by companies and other non-natural persons when purchasing dwellings worth more than £500,000. The single rate of SDLT was introduced alongside the annual tax on enveloped dwellings to deter the practice of buying and owning UK residential properties within a corporate wrapper by increasing the rate companies pay. The single rate applies where companies and other non-natural persons buy a dwelling for more than £500,000 that they do not intend to use for a relievable purpose such as renting the property or developing it. Increasing the single rate keeps it aligned with the highest rate of tax paid on purchases of the most expensive residential properties, so that the tax remains effective as a deterrent to enveloping.

In summary, increasing the higher rates of SDLT will ensure that those looking to move house or purchase their first property have a greater advantage over second home buyers, landlords, and companies purchasing dwellings. The measure will raise more money than the manifesto policy, and go further to rebalance the housing market. The changes will raise £310 million per year by 2029-30, which will be used to support the Government’s first steps and other priorities.

--- Later in debate ---

[James Wild]

I do. This is just another example of the impact of the Bill. The impact assessments, such as they are, are incredibly thin and do not get into the detail of the measures and the complications that arise. They are, I would say, wholly inadequate. Under clauses 50 to 53, taxes on property purchases will, as the Minister said, go up by £310 million. Clauses 50 and 51 increase the rate for additional dwellings, such as buy-to-let and residential properties, from 3% to 5%. Nationwide estimates that that could bring extra costs of £4,000 on the purchase of a typical rental home. At least clause 52 ensures that if transactions have been substantially performed before the increases come in, no additional tax will be charged. Clause 53 amends the single rate on purchases by companies of dwellings for more than £500,000. Let us not forget that the Government have also chosen not to renew the nil-rate stamp duty threshold, which is currently £250,000 but will halve to £125,000—I do not think the Economic Secretary to the Treasury mentioned that.

As I said, experts have warned that the changes could have damaging effects on the rental market, making it less attractive to provide homes for private rent; rents could increase as a result of the limited supply. Every hon. Member will know from their constituency the huge demand for rental properties. According to Zoopla, on average around 21 people are chasing every property that is put up for rent. This tax will do nothing to encourage the supply of new, decent, rented housing.

[Kit Malthouse]

I hope that the shadow Minister shares my surprise at the Minister agreeing to pay the stamp duty retrospectively on her flat. Let us hope that the cheque makes its way to HMRC. When stamp duty reaches penal rates, it not only diverts people away from becoming landlords, but means they may operate differently. Is there not a strong possibility that we might see a large number of properties in places such as London owned by foreign corporations that are domiciled in other jurisdictions? Transfer of those properties could take place by transferring the corporation’s ownership in the Isle of Man or the Caymans or somewhere like that. That would mean that no stamp duty was payable at all on the transfer of the property. If that proliferated, we might find that large numbers of properties in the UK were owned by overseas entities, precisely because of the penal taxation here.

[James Wild]

My right hon. Friend makes an interesting point, and I bow to his knowledge of the situation in London, which is far greater than mine. Our new clauses are about reviewing the impact of the measure, partly so that if we saw such activity, which would go against the Government’s objectives and weaken the rental market, action could be taken. I hope that the Government will look at the evidence.

The Institute for Fiscal Studies has also criticised the change, stating:

“It again reduces transactions, increases again the bias in favour of owner occupation, and against renting, and at least part of the consequence will be to reduce the supply of rental housing and so increase rents.”

The National Residential Landlords Association has said that the tax changes in the Budget will make it less attractive to provide homes for private rent. It has warned that the measure will exacerbate the shortfall that Members will all be familiar with, and an assessment it commissioned a couple of years ago showed that increasing the rate to 5% could lead to the loss of more than 500,000 private rented homes over 10 years.

--- Later in debate ---

[Tulip Siddiq]

I have to admit that I have found this debate a little baffling, given some of the arguments made from the Opposition Front Benches. However, I will respond to some of them now.

[Kit Malthouse]

Our concern is that there has been no assessment of the impact on the rental market. All that the Opposition new clauses are asking for is a review, because no evidence has been adduced in this debate. There are three people who have spoken in this debate who have second properties—who are landlords—and that is completely fine. What we are saying is that there will be an impact on future landlords and on future behaviour from this tax, as there was from the tax that was introduced by the previous Government.

The second thing to say—forgive me for the slightly extended intervention, Madam Chair—is that when the Government are setting levels of tax, there is an optimal point at which to levy tax in order to collect the maximum revenue, beyond which it starts to become penal and has a deterrent effect on activity. I suppose what we are saying is that we have got this far, and wish to go no further.

VAT: Independent Schools

Kit Malthouse Excerpts

Tuesday 8th October 2024 Commons Chamber

[Damian Hinds]

My right hon. Friend is correct: substantial export earnings come from the sector, and from a globally mobile set of families. But I would go further; in addition to the direct export earnings effect, there is also an indirect effect. For companies deciding where to site their European headquarters, English education is a big factor. That is partly because of our brilliant state schools, which have improved so much over the past 14 years, but the availability of independent schools is also a factor.

[Kit Malthouse (North West Hampshire) (Con)]

The shadow Secretary of State makes a strong point about the sanctity of zero-rating VAT for education. I am concerned that children’s clothes, which are currently exempt from VAT, may be the next target. Notwithstanding the impact that the change to VAT will have on individual families, does he agree that private and prep schools—my constituency has five—are enormous employers of people involved in building maintenance, such as electricians and plumbers, and that the impact on the wider economy could well be profound?

[Mr Speaker]

Order. I remind Members to look towards the Chair when they are speaking, or what they say will not be picked up by the mics; I then struggle to hear them. I know that the Minister was struggling as well. If Members keep the chatter down, it will help us both.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Education (Stephen Morgan)]

I thank the Opposition for bringing forward the debate. While the focus has been on private schools and the implications of the planned tax changes, it has allowed us to consider what is important in education. It is important to support the aspirations of all young people and their parents, and it is essential that all young people receive a good education in a safe and supportive environment.

It is certainly true that many parents choose to seek that provision in the private sector. The Government will always support their right to choose where to educate their children, but most parents do not have that choice, and all parents have high aspirations for their children. We therefore need to prioritise our efforts and consider how we can better serve the 94% of children in our state-funded schools.

Ending the tax breaks on VAT and business rates for private schools is a necessary decision to drive high and rising standards across our state schools and give every young person the best start in life. It will generate additional funding to help improve public services, including the Government’s commitments relating to children and young people.

This money will allow the Government to expand early years childcare for all by opening 3,000 new nurseries, thus helping parents back to work. The Government will recruit 6,500 new teachers and improve teacher and headteacher training as part of restoring teaching to the career of choice for the very best graduates. The Treasury is of course responsible for tax policy and has led on the publication of the draft legislation and technical consultation since July. As the Exchequer Secretary set out, VAT will apply to tuition and boarding fees charged by private schools for terms starting on or after 1 January 2025. It is right that we end tax breaks as soon as possible to raise the funding needed to deliver those educational priorities. The Treasury is assessing the impact of these changes in advance of the Budget. The independent Office for Budget Responsibility will certify the Government’s costings for these measures at the Budget and that will also include the interaction with other VAT receipts.

[Kit Malthouse]

Will the Minister give way?

[Stephen Morgan]

I am going to make some progress. The right hon. Gentleman spoke earlier. I know that many Members are concerned about children with SEND. [Interruption.] Members can shout as much as they like, but I have some really important points to make about SEND. I know I speak for the country—the right hon. Gentleman certainly does not. I assure Members that the Treasury has sought to ensure that these changes do not disadvantage pupils who need provision that is unavailable in the state sector.

Let me be clear: pupils who need a local authority-funded place in a private school, including those with a local authority-funded EHCP, will not be affected by the changes. That is because local authorities are able to reclaim VAT when they are charged. For other pupils, this change should not mean that they will automatically face 20% higher fees. The Government expect private schools to take steps to minimise fee increases, including through reclaiming VAT incurred in supplying education and boarding. I also note that IFS analysis shows that the number of children in private schools has remained steady despite a 20% real-terms increase in average private school fees since 2020 and a 55% rise since 2003.

Members from both sides of the House mentioned transfers to the state-funded sector. There are always some pupils moving between the private and state-funded school sectors. Approximately 50 maintained private schools close every year, for a range of reasons. Where schools do close, pupils may transfer to another private school or move into the state sector. We simply do not accept, in the case of recent closures, that this has had any connection to our policy on VAT. Quite simply, the evidence does not bear that out. The number of pupils who might switch following these changes represents a very small proportion of overall pupil numbers in the state sector. Any displacement is likely to take place over several years, and will mostly come from parents choosing not to place their children in the private sector to begin with, rather than children leaving the private sector. All children of compulsory school age are entitled to a state-funded school place if they need one. I understand that moving schools can be a challenging experience, and local authorities and schools already have processes to support pupils moving between schools.

A number of Members also raised concerns about capacity. There are always a range of pressures on state-funded school places, and the Department for Education works to support local authorities to ensure that every local area has sufficient places for children who need them. That is business as usual and local authorities and schools already have a range of options to increase capacity where it is needed. We are confident that the state sector will be able to accommodate any additional pupils and that there will not be a significant impact on state education as a whole.

I congratulate my hon. Friend the Member for North East Derbyshire (Louise Jones) on her maiden speech. I know she will be a real champion for children and young people in her community. I also welcome my hon. Friend the Member for Bury North (Mr Frith) back to this place and congratulate my hon. Friend the Member for Glasgow East (John Grady) on his maiden speech—he spoke eloquently and with passion about his constituency and the needs of his constituents. It was also a real pleasure to hear the maiden speech from the hon. Member for Isle of Wight East (Joe Robertson), who described so well his beautiful constituency, a place I enjoyed holidaying in as a child. I look forward to working with him on issues affecting the Solent region. My hon. Friend the Member for Tipton and Wednesbury (Antonia Bance) gave an excellent maiden speech. It was evident that she will be a strong voice in this place, nationally and for her community. I congratulate the hon. Member for Horsham (John Milne) on his maiden speech, and I wish him well on his unexpected new role in this place and on delivering opportunity for all.

The hon. Member for South Shropshire (Stuart Anderson) and others mentioned military families; I know that colleagues in the Ministry of Defence and the Foreign, Commonwealth and Development Office will closely monitor the impact on affected military families, considering support via the continuity of education allowance scheme. Small faith schools were raised by a few Members; those schools meet the needs of dedicated faith communities, often at low cost. I know that Treasury colleagues have met representatives from those schools to ensure fairness. A number of right hon. and hon. Members spoke about the impact assessment. As my hon. Friend the Exchequer Secretary to the Treasury set out, we are considering the impact of the policies and will publish a tax information and impact note at the Budget in the usual way.

In conclusion, this Government were elected to deliver change across our country, not least in our schools. Our mission to break down the barriers to opportunity is exactly what our country needs. This party is showing that education is once again at the forefront of national life. I urge Members across the House to demonstrate that by voting against the motion.

Question put.

The House proceeded to a Division.

Winter Fuel Payment

Kit Malthouse Excerpts

Tuesday 10th September 2024 Commons Chamber

[James Murray]

I am going to make some progress.

The Opposition did not like to be reminded of their legacy when they were in government, but let us have a look, shall we? What do they have to show for their years of reckless overspending? A failed asylum system, prisons at breaking point, more than 1 million people waiting for council homes, 4 million children growing up in poverty, and more than 7.5 million people on NHS waiting lists. This Government and every Member of this House who stood on my party’s manifesto were elected to turn things around.

[Kit Malthouse (North West Hampshire) (Con)]

Yesterday, in the other place, the Transport Minister cast doubt on the continuation of travel concessions for pensioners, which has caused significant alarm in my constituency and others. Notwithstanding the discussion we are having today, could the Minister reassure us that travel concessions for pensioners will continue under a Labour Government?

[James Murray]

I thank the right hon. Gentleman for his intervention. The Chancellor will take all decisions in the Budget on 30 October—[Interruption.] Let me make one important point to him as we approach the Budget on 30 October: we know there are going to be difficult decisions that we have to take in the Budget and, frankly, that is a direct consequence of the decisions taken by him and his colleagues when they were in government.

Public Spending: Inheritance

Kit Malthouse Excerpts

Monday 29th July 2024 Commons Chamber

[Rachel Reeves]

My hon. Friend is right. The people of Rother Valley will be shocked and appalled by the gross mismanagement of public finances, including a £6.4 billion overspend on asylum. That is why we are getting a grip on the public finances and public spending to put them on a firmer footing.

[Kit Malthouse (North West Hampshire) (Con)]

I congratulate you on your ascension, Madam Deputy Speaker. The right hon. Lady says she is keen on transparency. Can she confirm to the House that she had extensive access talks with senior civil servants in the Treasury in the run-up to the general election? It might be helpful, for transparency purposes, if she could lay the minutes of those meetings in the House of Commons for the rest of the House to understand. I am also concerned about the issue of misleading estimates being laid before the House. May I suggest, for the elucidation of Members, that she asks the permanent secretary at the Treasury, and the permanent secretaries of those Departments impacted by the decisions she has made today, to confirm to the House in writing that none of the information that should have been in the estimates was not included—if they were correct, was it included?—so we can see for ourselves whether she is covering up?

[Rachel Reeves]

The cover-up was from those on the Opposition Benches. The sooner we get an apology to the British people, the better.

--- Later in debate ---

[Madam Deputy Speaker (Caroline Nokes)]

The hon. Member will know that the Chair is not responsible for the content of contributions made by Ministers, but I am sure that his concern has been heard on the Government Benches. I am sure that if an error has been made in this instance, the Minister will seek to correct it as quickly as possible. It is for the Government to decide on the estimates that they put before the House.

[Kit Malthouse]

Further to that point of order, Madam Deputy Speaker. The Chancellor of the Exchequer made certain assertions about timing during her statement. However, we know from the media that the contents of the statement were briefed to The Guardian at 8.58 pm on Thursday, just after the estimates had been voted on. While I understand that the Chair is not responsible for the content of what is said at the Dispatch Box, the Chair is responsible for the integrity of documents that are laid before the House and on which we vote and rely. May I ask whether this is a matter for the Prime Minister in his governance of the ministerial code, or for the Commissioner for Standards in his upholding of standards in the House? Prima facie, in the absence of any evidence from the Chancellor, it looks as if we have all been misled.

[Madam Deputy Speaker]

The right hon. Member will know as well as I do that that is not for the Chair to decide. It is for the Government to decide what they put in their estimates and in documents that are published.

Economy, Welfare and Public Services

Kit Malthouse Excerpts

Monday 22nd July 2024 Commons Chamber

[Rachel Reeves]

I have been compared to a lot of things, Madam Deputy Speaker, but I have never been compared to Joseph Stalin.

Our approach is a brownfield-first approach. We will reintroduce those mandatory targets; of course it is up to local authorities and local communities to decide where the housing should be built, but the answer cannot always be no. If the answer is always no, we will continue as we are, with home ownership declining and mortgages and rents going through the roof. On the Government side of the House, we are not willing to tolerate that.

This King’s Speech shows that we are getting to work. As my right hon. Friend the Prime Minister set out, our programme for government is founded on principles of security, fairness and opportunity. Our No. 1 mission is to secure sustained economic growth in our great country through a new partnership between Government, business and working people that prioritises wealth creation for all of our communities.

We will fix the foundations of our economy so we can rebuild Britain and make every part of our country better off. There are a number of important pieces of legislation in the King’s Speech that will help us to grow the economy. In this speech, I will focus on three in particular: the Budget Responsibility Bill to restore economic stability, the national wealth fund Bill to drive investments and the pension schemes Bill to reform our economy. Those Bills speak not just to our programme for government, but also to trust in politics. They show that we will govern as we campaigned and that we will meet our promises to the British people.

In the election campaign, I said the first step we would take would be to restore economic stability, because stability is the precondition to a healthy, growing economy. It is how we keep taxes, inflation and mortgages as low as possible. After years of irresponsibility, we are putting our economy on firm ground once again. We introduced the new Budget Responsibility Bill on Thursday to deliver on our manifesto commitment to introduce a fiscal lock so that I can keep an iron grip on our country’s finances.

[Kit Malthouse (North West Hampshire) (Con)]

The Chancellor and I sat on the Treasury Committee together many years ago, and she will know from our time together that economics is as much art as it is science. Given that she is effectively giving a veto over economic policy to the OBR through this Bill, she must recognise that we need to understand what the people in the OBR believe, what their theories of economics are and what principles they attach themselves to. What further scrutiny of the chair of the OBR and the people doing the forecast will be available to this House, given that effectively they will be co-Chancellor with her during the next few years?

[Rachel Reeves]

The Treasury Committee, as the right hon. Gentleman knows, can call in the chair and other members of the Office for Budget Responsibility, but his comments show exactly why we need this Bill: so that never again can we have a repeat of the mini Budget. The Bill will require every announcement that makes significant permanent changes to tax and spending to be subject to an independent assessment by the Office for Budget Responsibility. Why? Because unfunded, reckless commitments do not just threaten our public finances; they threaten people’s incomes and they threaten people’s mortgages. We saw that in the wake of the mini-Budget presided over by the former Member for South West Norfolk. I understand that she has taken umbrage in recent days at the idea that that episode was disastrous. Well, if any Conservative Member would like to dispute that fact today, I would be more than happy to give way. [Hon. Members: “Come on then!”] They cheered it at the time, but they are not cheering it now, and I do not imagine that they would put it on their leaflets.

The Conservatives should be ashamed of what they did because people up and down the country are still paying the price for the chaos that they caused. We say: never again. The Budget Responsibility Bill will enshrine that commitment in law.

--- Later in debate ---

[Rachel Reeves]

I thank the hon. Gentleman for that intervention. One of the biggest challenges people face with getting a mortgage is building up the deposit. That is why we have committed to a mortgage guarantee scheme, to help those people who cannot rely on the bank of mum and dad to get on the housing ladder. That is a really important commitment, as is our commitment to build the homes: unless we build more homes, home ownership will continue to go backwards, as it did over the past few years.

Alongside stability and investment in our economy must come reform, because delivering economic growth requires tough choices. It means taking on vested interests and confronting issues that politicians have too often avoided. The last Government refused to engage with those choices, and refused to level with the British people about what was required. This Government will be different. We have already demonstrated that through a series of reforms to our planning system, and are bringing forward further legislation in the King’s Speech to get Britain building.

Today, I want to focus on another area of our economy where reform is vital: our pension schemes. People across our country work hard to save for the future; they want a better, more secure retirement with the most generous pension possible. At the same time, British businesses with high growth potential need capital to support their expansion. Pension funds are at the heart of this. There will soon be over £800 billion of assets in defined contribution pension schemes, but for too long, those assets have not been targeted towards UK markets. That has impacted British savers, and it has impacted British business.

The last Government also said that this was a problem, and I welcome that acknowledgement, but they never introduced the legislation needed to make the change. We believe in deeds, not words, so we will strengthen investment from private pension providers by bringing forward the pension schemes Bill in the King’s Speech. It will boost pension pots by over £11,000 through a new and improved value for money framework. Through an investment shift in DC schemes, just a 1% shift in asset allocation could deliver £8 billion of new productive investment into the UK economy.

To ensure that the Bill is as strong as possible, I am today launching a pensions investment review, led by the first ever joint Commons Minister appointed between the Treasury and the Department for Work and Pensions—my hon. Friend the Member for Wycombe (Emma Reynolds), the Pensions Minister. This will include a review of the local government pension scheme, the seventh largest pension fund in the world, to ensure it is getting the best value from the savings of nearly 7 million public sector workers, the majority of whom are women and the majority of whom are low-paid. They deserve a pension that is working for them. Together, these reforms will kick-start economic growth by unlocking investment that has been tied up for too long.

[Kit Malthouse]

Will the right hon. Lady give way?

[Rachel Reeves]

I have already given way to the right hon. Gentleman.

Draft Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023

Kit Malthouse Excerpts

Wednesday 5th July 2023 General Committees

[Kit Malthouse (North West Hampshire) (Con)]

It is always a pleasure to see you in command, Ms McVey.

This is a seemingly innocuous and small slip of paper, but I want to raise a number of issues about which the Committee needs to be aware. First, anybody who is familiar with schedule 5 of the Consumer Rights Act 2015 will know that the implications of entering trading standards into the schedule can and will be profound. The schedule contains some draconian powers—powers that are now to be bestowed on trading standards—which have caused alarm pretty much ever since Gordon Brown amalgamated Customs and Excise with the Inland Revenue.

As a scholar of Daphne du Maurier, Ms McVey, you will know that the excise men, as they used to be known, have historically, since 300 or 400 years ago, had significant powers to deal with smuggling. With that came a culture in the then Customs and Excise of a slightly brutal approach towards their customer base. They were well used to smashing their way into warehouses without a warrant and could demand all sorts of documentation without any cause for suspicion. I am afraid that the amalgamation of Customs and Excise with the Revenue meant that that culture, which was a little bit like Japanese knotweed, infected the whole of what is now HMRC, to the extent that we do not now see a professional organisation that sits down with other professionals in the accountancy or legal profession and decides what is due. Instead, we see more of a brutal, demanding and aggressive organisation.

Unfortunately, through the schedule, the powers have been spread to other organisations, such as district councils and the Competition and Markets Authority, and we are now giving those powers to trading standards. For example, schedule 5 includes the power for an enforcement or investigation organisation to enter premises without a warrant. There is no requirement to go to a judge and offer any evidence as to why the organisation needs to enter those premises; it can just enter. The only restriction is that those premises, as I try to remind myself from the Act, cannot be wholly or largely residential, but I am not sure who makes that decision.

As my right hon. Friend the Member for East Yorkshire said, an awful lot of corner shop owners will be affected by this legislation, many of whom live above the shop, as my great-grandparents did in Harrogate. The question of who decides whether that premise—that corner shop—is largely or wholly residential will be an interesting one for the enforcement authorities to consider. I can see situations where they may well smash their way into a corner shop and there is a perfectly innocent family sleeping upstairs who will be traumatised by their entry. This is a draconian set of powers.

Similarly, there is the ability to demand documentation without any suspicion or recourse to law whatsoever. Much of it can be suspicionless, as far as I can tell from the Act. I ask colleagues to be under no illusion: this seemingly innocuous bit of paper is actually conferring significant powers on trading standards and we should not underestimate that.

[Sir Greg Knight]

Could not the concerns that my right hon. Friend raises be addressed by the Government in the guidance they will issue in due course?

[Kit Malthouse]

They certainly could be. This bit of legislation will go through today and I hope the Government will take those things into account. The explanatory memorandum states that respondents to the consultation were in favour, but I am not sure about the wider group. For example, I would be interested to know the view of the Association of Convenience Stores on the wider acquisition of the powers and the fact that they are being given to trading standards. My right hon. Friend is quite right; that could be addressed in the guidance. As I say, I want nobody to be under any illusions about what we are doing here.

Secondly, while this is an attack on the sale of illicit tobacco at the front end, I would be interested to know what the Minister is doing at the most vulnerable point for the smuggling of illicit tobacco: the border. We are seeing large amounts of illicit tobacco coming through the post, for example. It is mailed in packages from overseas through fast parcel delivery, often through the Royal Mail warehouse at Langley, near Heathrow.

I do not know whether colleagues know this, but that warehouse takes in 100% of overseas mail coming by Royal Mail route, and the ability to scan parcels quickly there is very restricted. We have never invested in proper parcel scanning at that facility, and those who would smuggle these goods—which, of course, can now be bought online and shipped from overseas—recognise the weakness in that route. I would love to see some of the £10 billion we are raising from tobacco every year invested in enforcement at the border, rather than it all being hived off to subsidise other activity. If we were really serious about stopping this trade, we would concentrate on the most vulnerable point, which is this funnel at the border where we could detect a lot of it.

Thirdly, this is yet another step in the phoney war against smoking that is taking place in this country. We never take what strikes me as the brave step of doing something imaginative to phase out smoking. We nip, we tuck, we chisel away, and we try to scratch the surface. We make life difficult for often marginal businesses such as corner shops, which are almost regulated out of existence now—they all have to have sliding doors in front of cigarettes and cannot display them in certain places—and yet we are not brave enough to do what other countries have done, which is to progressively raise the age at which people can buy cigarettes.

If we did that year after year, in time, only the over-60s or over-70s would be able to buy cigarettes, and we would have effectively phased them out in a generation. I do not understand why successive Governments have not been brave enough to do that, given the appalling statistics that the Minister mentioned. I speak as somebody who lost two grandparents and my grandmother’s twin sister to smoking-related cancer; both twins died of smoking-related cancer. I have seen the effects for myself, and I wish we could be braver about it and do something sensible, rather than running this phoney skirmish war that drags in so many innocent, struggling businesses.

The final point I want to raise is about the impact on local government. As the hon. Member for Erith and Thamesmead said, trading standards is not what it was. It is hard enough for consumers to get the attention of trading standards on anything these days. All our postbags will have been filled with letters from people who are frustrated by the fact that trading standards is not addressing their issue.

The explanatory memorandum says that there will be no impact on local government, stating:

“There is no, or no significant, impact on the public sector.”

If this measure is going to be effective, and if we are going to have all these inspections and regulation, surely this must fall within the additional burdens doctrine. Greater capacity must be given to trading standards to deal with this issue. If not, what part of its work is going to give? Where will the activity come from that the Minister now expects to be expended on illegal tobacco? We cannot just expect trading standards to expend ever more activity for the same number of heads and bodies and hours worked. If the Government really want this to be effective—and I have to say, I have my doubts—where will the extra capacity come from?

--- Later in debate ---

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

It is a pleasure belatedly to serve under your chairmanship for the first time, Ms McVey. I am possibly going to shock the Committee in many ways by saying that I agree with much of what the right hon. Member for North West Hampshire has said. He and I might come from different ends of the political spectrum, but we share an interest in local regulation and in doing that in a proportionate fashion, because we have seen at first hand what happens when it does not work.

I am possibly the only person here who served on the Committee that considered the Consumer Rights Act 2015, in that halcyon era in which we in this place were looking at good regulation, rather than having no regulation at all. I want to ask the Minister a set of questions that follow up what the right hon. Gentleman was talking about, and I agree with him that there was a good reason for not including trading standards on the list of bodies that were to have powers under that legislation.

At the time, we felt that the powers were quite strong, and we recognised that the comparator bodies—the others that had the powers, such as the Competition and Markets Authority and the Financial Conduct Authority—were about whole markets. This statutory instrument is very much about a local power and local trading standards. Indeed, it now looks as though trading standards will have stronger powers than local police forces to do searches.

There might be good reasons for that owing to the nature of the trade that trading standards is trying to tackle, and I want to come to that subject, but the Minister did not say anything about, for example, what has been done to monitor the use of the powers over the past eight years. Will he say what we know about when there have been raids, what happened and how the use of the powers is monitored? The difference between market-wide powers and locally applied powers could be very strong.

The next point I want to follow up is the capacity of trading standards to make good on this measure. It is one thing to confer powers, but quite another to have the people to implement them. We know that spending on trading standards fell by 52% between 2009 and 2019. In some areas of the country, there are no trading standards officers at all. Liverpool Council, for example, no longer has a trading standards department because something had to give considering how little money the Government have given the council to run services.

Most local authorities have just one qualified trading standards officer, but if we are to give people stronger powers than the police, we want them to be qualified people who understand the remit and understand why they are being given the powers. Again, I ask the Minister to say something about whether additional funding is going to be given. If this measure generates the impact that we want it to generate in tackling the illegal cigarette trade, revenue will be raised that could go into trading standards.

My colleagues in trading standards do a fantastic job trying to tackle the crimes that, after all, are the crimes that most of our constituents come to us about most of the time, and they would want to see more investment in trading standards. A £16 billion cut in the core revenues of trading standards means that there will not be the officers to use these powers, and certainly not officers trained to use the powers sensitively, unless there is investment.

There is a final point on which I would like to hear more from the Minister, which is the trade we are trying to tackle. We know that 21% of cigarettes sold in the UK are illicit. This is an international trade—gangs, funding and all sorts of criminal activities in our communities. Putting trading standards officers on the frontline of tackling that trade is a bold move owing to the nature of the people with whom they might be interacting. What conversations has the Minister had with the National Crime Agency?

[Kit Malthouse]

There is an unproven statement that much of the trade is organised crime, but I know from my time at the Home Office that this is a low-margin business. I am not convinced that the volume is coming through via organised crime; I think it is coming through in fast parcels—small packages from overseas. That is why I am so keen to see some kind of intervention at the border, and I worry slightly that the more we talk about organised crime and gangs, the more the effort gets put in that direction, whereas a huge volume is coming through orders on the internet.

[Stella Creasy]

We were so close to having unanimity in this place about the nature of the challenge. I think it is both. The right hon. Gentleman says that there are small packages—I was going to ask the Minister to say a bit more about what conversations he has had with Border Force—but the Lords Justice and Home Affairs Committee investigation into the matter set out that international gangs were involved. One German-Russian gang made £50 million over several years by importing cigarettes into the UK.

We are therefore potentially asking trading standards officers to interact with very serious and dangerous people, and it is important that this House does not ask trading standards to be the blue line in our local communities. If we are to ask trading standards officers to take on this serious trade—packages might be one piece of investigation work—to enter properties and to take on organised crime, they need support. Will the Minister say more about the conversations that he has had with the National Crime Agency or Border Force about how to keep trading standards officers safe? Everybody agrees that we want to tackle this trade and everybody wants more investment in trading standards. We will all support the draft order, but I hope that the Minister understands that those of us who wrote the original legislation have some concerns about what we are asking of a service that has been stripped bare over the last 13 years.

[Gareth Davies]

Many excellent points have been raised, and I will do my best to address as many of them as possible.

First, the Labour party spokesperson, the hon. Member for Erith and Thamesmead, asked about the timing of the measure. One of the reasons for the timing of the measure is that the track and trace system that was implemented in 2019 needed time to bed in. We wanted it to get working. It was only in 2020 that we started the consultation on sanctions, and, now that the track and trace system is in place, we are in a position to execute on that.

The hon. Lady asked about the £1 million grant, which was to launch Operation CeCe. The money was provided in the 2020 Budget, and it has resulted in £7 million of illicit tobacco products coming off the streets of the UK. It has been a tremendous success, and we have now committed to extending the operation to 2025 with additional funding of £800,000.

The hon. Lady asked about resourcing, which was a common theme in the contributions of my right hon. Friend the Member for North West Hampshire and the hon. Member for Walthamstow. I will come to the powers of trading standards in a minute, but the key aim of the draft order is to change how trading standards operates with HMRC. Trading standards will gather information and refer cases to HMRC for sanctions to be administered, and HMRC will administer all the penalties. We are not giving trading standards additional powers. It is not required even to execute on the track and trace regulations. It is up to trading standards, but we are asking it to gather information that could then be provided to HMRC. That is why we feel that there is no additional burden on trading standards; if anything, much of the burden of administering the penalties is on HMRC.

The hon. Member for Erith and Thamesmead asked about the review of the policies. All policies remain under review, but HMRC and Border Force will be producing a new strategy on tackling illicit tobacco later this year, and I expect this policy and the success of Operation CeCe to form part of it.

As usual, my right hon. Friend the Member for North West Hampshire makes some incredibly insightful points that are based on his extensive experience. As I pointed out, trading standards is already covered by schedule 5 to the Consumer Rights Act. The draft order is about changing the approach to enforcement so that it is focused on track and trace. To date, it has been focused on the amount of illicit tobacco that has been found, and we have found that organisations and individuals have been holding a small amount of illicit tobacco to avoid significant penalties. The measure will change the approach so that new measures and regulations are tied to the 2019 track and trace regulations, and it will provide additional penalties and enforcement mechanisms for HMRC.

[Kit Malthouse]

I am no lawyer, and maybe I am reading this wrong. I acknowledge that schedule 5 already includes local weights and measures authorities. That is not necessarily the full extent of the powers of trading standards. I accept that, in legislation, it has the powers to smash its way into premises in pursuit of weights and measures issues, but it do not have those powers in anything else. My reading of the legislation is that it expands that power beyond weights and measures and into the regulation of tobacco. Its current ability to demand documents and enter without a warrant is being expanded so as to include enforcement of tobacco regulations. I do not think that that part of its work is currently included. If it were, why is the measure necessary?

[Gareth Davies]

This measure is necessary, first, to increase the penalty up to £10,000 for HMRC; secondly, to give trading standards the ability to share data with HMRC, which was not previously the case; and, thirdly, to shift the focus on to track and trace and away from the amount of illicit tobacco that is found. Trading standards is empowered to gather information and refer cases to HMRC for further investigation. I can write to my right hon. Friend on his specific point on weights and measures—he will forgive me for not having the same mastery of detail as him on that point. I hope the three points I mentioned clarify what we are seeking to do with this specific measure.

My right hon. Friend quite rightly asked about the border, where typically a lot of illicit tobacco enters our country. HMRC and Border Force work very closely together. As I mentioned in response to the hon. Member for Erith and Thamesmead, a new strategy will be published this year to outline how HMRC and Border Force interact and what more they can do to tackle illicit tobacco coming into our country. I can tell my right hon. Friend that 8 million cigarettes were seized between 2015 and 2021, and so there is a reasonably effective operation in place, but they can always do more.

[Kit Malthouse]

I recall that Border Force ran a competition looking for fast scanning technology. It awarded some money to a series of companies and there was some prize—I have in mind £1.5 million—for whoever could come up with this ability to whizz parcels through and scan them at speed. When I visited Langley, there were just two standard airport scanners, one of which was on the blink, for something like 1 million parcels a day, which is nuts. When he writes to us, will the Minister also update us on where that competition has got to?

[Gareth Davies]

I am very happy to do that. I am not familiar with that particular case.

The principle is right, in terms of ensuring that tobacco is tracked. We have a similar system for alcohol. The whole point of track and trace is to ensure that, from the point of manufacture to the point of sale, we are tracking and monitoring where illicit tobacco is going. We believe that will be an important way of bringing down the illicit trade that riddles our country and many countries in the world.

My right hon. Friend also asked about tackling smoking. That is an issue that unites the whole House. We all want to see smoking rates come down. He may describe the measures we have taken to date as piecemeal—I do not want to put words in his mouth—but they have had success. We have a prevalence rate of 13%, which means that 13% of our country smoke. That is lower than many countries and has come down quite significantly in recent years.

Some of the measures we are taking are based on the Khan review, which recommended the use of vaping to bring people off tobacco smoking. We are providing 1 million vaping kits for those who wish to come off smoking. Duty, as I said in my opening remarks, is a key way in which we can disincentivise the smoking of tobacco. We can always go further and I welcome the challenge.

[Kit Malthouse]

I mean, sliding doors are bonkers, right?

[Gareth Davies]

I very much welcome the challenge, and I can imagine that my right hon. Friend will be right there with us as we announce further measures in the Department of Health and Social Care.

Finally, the hon. Member for Walthamstow asked about the powers. I hope that I have addressed many of those points already, in terms of trading standards not gathering additional powers but seeking to work more closely on data sharing with HMRC, which will have the burden of executing and administering the additional penalties that we are able to operate today.

The hon. Lady quite rightly asked how we are keeping trading standards officers safe. We are in constant discussions with Border Force. We have not had discussions with the National Crime Agency, but I will write to her on what discussions have taken place across Government. The safety of trading standards officers is not directly related or relevant to this order, but the hon. Lady is right to raise it at any opportunity, because we want those who are gathering information with a view to prosecution and penalty execution to be as safe as possible. I expect them to work closely with local police officers wherever they deem a danger to exist.

The sale of illicit tobacco undermines public health policy by offering a cheaper option to those who might otherwise see price as a reason to stop smoking. It damages legitimate businesses and makes tobacco more accessible to children. The evasion of tobacco duty also has a significant impact on our economy and a negative impact on public health, legitimate businesses and overall public safety. It cheats the Exchequer of revenues of billions of pounds each year, and it blunts the effectiveness of tobacco duty as a tool to reduce smoking. This amendment to the Consumer Rights Act is important in tackling the trade in illicit tobacco. These changes will facilitate the UK Government in their objectives to protect public health, raise revenue and combat organised crime.

I hope that the Committee has found today’s sitting informative. I am certainly grateful for the interventions made and speeches contributed. I commend the order to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023.

Finance (No. 2) Bill

Kit Malthouse Excerpts

Report stage
Tuesday 20th June 2023 Commons Chamber

[James Murray]

I thank the hon. Lady, I think, for that intervention. I am trying to work out exactly what point was being made there, but I think the overall point is clear. There is concern from all sides at £1 billion a year of public money being spent on a blanket change, rather than something targeted at NHS doctors.

That failure to spend public money wisely is evident again in the Bill’s proposal to reduce air passenger duty for domestic flights, the impact of which our new clause 10 seeks to uncover. Again, at a time when public finances are under severe pressure, household budgets are being stretched in all directions and the cost of inaction on climate change grows by the day, it is baffling that a tax cut for frequent flyers is the Government’s priority for spending public money.

[Kit Malthouse (North West Hampshire) (Con)]

I just want to take the hon. Gentleman back, if I may, to the point he made on pensions. Can he not see the difficulty of having a specific regime for NHS doctors? For example, if he were to bring in a specific regime, would it apply to doctors who also work in the private sector? What would happen if an NHS doctor changed career and became an accountant? There are other areas where we have difficulty securing the services of public servants beyond a certain point, for example judges, prison governors or senior police officers. Is he proposing that each of those areas should have their own specific scheme and that therefore we should build a sort of rats’ nest of complexity around pensions?

[James Murray]

I thank the right hon. Gentleman for his comments, but I feel he is misguided in claiming that it is somehow only Labour calling for a doctors-only pension scheme to be investigated. I referred to the Chair of the Treasury Committee, but I could also refer to the current Chancellor—the current Chancellor—who less than a year ago suggested that we should go for a doctors-only scheme. All we are asking is for the current Chancellor to do what he told himself to do less than a year ago and investigate the possibilities. That is important, because that is how we spend public money wisely.

To return to air passenger duty, Ministers may try to point out, when we discuss it later in the debate, that the lower rate of domestic air passenger duty has been accompanied by the introduction of an ultra long-haul rate. But when taken together, the air passenger duty changes in the Bill are set to cost the taxpayer an additional £35 million a year. That cannot be the right priority for spending public money. In Committee, we tried to get to the bottom of why this tax cut is being prioritised.

--- Later in debate ---

[Harriett Baldwin]

I rise to speak to new clause 2 and amendment 7, which were tabled in my name and those of all the other members of the cross-party Treasury Committee.

“Taxes are far too complex.”

Those are not my words but the words of the Chancellor of the Exchequer when he gave evidence to our Committee. The amendments to which I am speaking would give legislative effect to the recommendations of the report we published last week on the work of the Office of Tax Simplification. The report is on the Table, and I encourage all hon. and right hon. Members to read it.

Across the House, I think we can all agree that, regardless of the level of tax, the tax system itself has become far too complex. To give an example, as a result of the Committee’s current inquiry on tax reliefs, we have finally found out how many tax reliefs there are in the tax code—1,180. The unnecessary complexity in our tax code makes the tax system expensive and difficult for HMRC to administer, makes the tax system confusing and makes it difficult for taxpayers to understand the choices on offer and the consequences of those choices for their after-tax income.

A complex tax system can be hugely costly for taxpayers and for those responsible for compliance with the tax code. The Financial Secretary to the Treasury was kind enough to give evidence to our Committee on the VAT system last week, and she described it as the “most complex” part of the tax system. VAT creates a crippling compliance burden for small businesses and, as a result, there is a massive pile-up of companies just underneath that £85,000 turnover threshold. This shows that small, potentially dynamic, growing businesses—the engines of our economy—would rather stay under the threshold than deal with the VAT system.

Unfortunately, the VAT threshold is far from the only cliff edge in our tax and benefits systems. At worst, these cliff edges result in people being worse off for earning more money. In recent evidence to a joint session of the Treasury Committee and the Work and Pensions Committee, we heard how people can suddenly find themselves much worse off, after losing entitlements such as free school meals and council tax support, when they earn only a little more money. Indeed, next winter a person who earns an extra £1 will take home £900 less because they lose the cost of living support entitlement, which we reflected in a recent report. People would actually be better off by working less, or perhaps not working at all, and surely that is something we do not want to see in our tax and benefits systems.

[Kit Malthouse]

My hon. Friend is making a powerful point, but does she accept that complexity can lead to gaming of the system? It often feels as if the accountancy profession and tax planners are streets ahead of the Revenue, to the extent that we now have to have a general anti-avoidance measure so that, if they find something we do not like, they are not allowed to do it, even though it may be within the rules. That is a direct product of this complexity, which is creating a whole other industry around finding loopholes.

[Harriett Baldwin]

I agree with my right hon. Friend’s excellent point. Not only do the wealthiest get the best tax advice, but general financial advice has now become so expensive in this country that only 8% of our constituents can afford to pay for it.