Finance (No. 2) Bill

Luke Graham Excerpts

2nd reading: House of Commons
Monday 11th December 2017 Commons Chamber

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

It is a pleasure to follow the hon. Member for Dumfries and Galloway (Mr Jack), because I am going to enjoy setting out for him why I believe he is mistaken in considering this Finance Bill to be the best that we can do for this country. I hope he was here to hear the remarks of my Front-Bench colleague, my hon. Friend the Member for Bootle (Peter Dowd), who set out some strong ideas about alternative ways to manage the public finances, and the remarks of my hon. Friend the Member for Harrow West (Gareth Thomas), a fellow member of the Co-operative party, who set out how the Co-operative’s approach to public finances is different.

I was struck by what the hon. Member for Dumfries and Galloway and several other Government Members said about their pride in how light and narrow the Bill is. Look at the country’s economic challenges; it sums up the Government perfectly that they should boast about how little they have to offer to tackle those challenges. They admit that this country has a productivity challenge—a long-overdue admission—but they have so little to offer to address it. They seem pleased to tell us that they are peaking their borrowing, rather than meeting the commitments made in 2010, when we all sat here and listened to the previous Chancellor tell us that austerity was the only way forward. Well, what a myth that has turned out to be. The Government are presiding over stagnating wages, meaning that my constituents will be lucky to see a pay rise within the next 10 years. Decades of austerity mean that we are a nation up to our eyeballs in personal debt—not by accident, but through this Government’s choices. We have not even begun to talk about the black hole of Brexit that is sucking both time and money from our Exchequer.

A light Finance Bill is not something to be proud of; it is indicative of a Government who are not serving the British public. The Government try to tell us that they are doing something about the massive housing crisis, but it is clear that their stamp duty proposals will simply push up house prices and do little for our constituents who have no savings and cannot get a deposit together to even begin to consider buying a property and paying stamp duty. The Bill will do nothing about the crisis in our private rented sector that is the cause of so much personal debt. People in our communities are now putting their mortgage or their rent on their credit cards in a desperate attempt to keep a roof above their head this Christmas.

People have the spectre of universal credit hovering over them, sucking out their time and energy as they try to make ends meet, because there is just too much month at the end of their money. We have not even begun to talk about the impact of the cuts on our public sector. My hon. Friend the Member for Harrow West ably pointed out the lack of police on our streets; we will lose 3,000 in London alone due to this Budget. Teachers are having to buy resources for their pupils. People need us to manage the public finances properly, which is what this Bill would do if it was meatier contribution to Britain’s future, but it is not.

I know what Government Members will say to Opposition Members: “Where would you find the money?”. I want to answer that question, say what this Bill could have done for the British public, and set out why the Government need to move from policy-based evidence making to evidence-based policy making by using impact assessments. These assessments are not necessarily popular, as we have seen from the Brexit Secretary, but they are absolutely the way forward when it comes to understanding what could be done for this country.

Let me turn first to one of the places where we could be saving money as a society. I know that Members on both sides of the House are worried about the private finance initiative, and all of us have seen its impact on the public finances. Governments of all colours have used private finance contracts; indeed, they continue to be used through private finance 2 schemes. We know that £1 billion of the money that should be going into our NHS will be leeched out in profits by private finance companies. That money could have built hospitals several times over, and could certainly deal with the crisis in NHS recruitment and the lack of resources in healthcare. I have called on the Government to learn the lessons of the Paradise papers and introduce a moratorium on public sector contracts going to such companies until we are clear about where their tax liabilities lie. However, I am disappointed that, yet again, Ministers have missed that opportunity.

As Ministers have pointed out, we will only get one such Bill a year in future through which to tackle how these companies operate. A small number of companies are leeching so much money out of our public services through the high costs of private finance contracts, and their high rates of returns and interest rates. Government Members can look at them as hire purchase agreements for the public sector. The Bill could have been the opportunity to set a clear red line for those companies, and to tell them that, instead of continuing to rip off our schools and our hospitals, we want them to come to the table to renegotiate contracts. The Bill could have been the opportunity to set up that moratorium, or to use the banking levy as a model for a windfall tax on such companies—a tax that could claim back the excessive profits that they are clearly making from the public sector. This is money that could have properly funded our police or gone towards ensuring that we pay our public sector workers properly, but we will all end up paying for that omission from this Bill. With the PF2 contracts coming online, it is clear that the Government have not learned the lessons about the cost of public sector borrowing that would have informed the Bill.

This Bill is being considered in the context of the Government having agreed to close the tax loophole whereby overseas-based companies sold UK commercial property without having to pay capital gains tax—what we called the magic money tree—but it has sadly become apparent since the Budget that the Government have not got to grips with the loophole. They think that they are going to raise only half a billion pounds, but it is clear, given the sums involved in commercial property sales in the UK, that we could be looking at £5 billion or £6 billion.

With this Bill, the Government could have learned the lessons of the Paradise papers, particularly as regards the loophole for companies that register properties in Luxembourg, because the Luxembourg treaties will allow those companies to avoid capital gains tax. I have repeatedly raised that with Ministers, because we know that our public sector desperately needs the £5.5 billion extra a year that properly closing the tax loophole could represent, yet Ministers seem not to care. They tell me that the Government’s policy is that

“all double taxation treaties should permit gains on the direct and indirect disposal of UK immovable property to be taxed in the UK.”

However, from their consultation document, I can see that they recognise that there is a loophole within their loophole. Paragraph 4.36 admits that Her Majesty’s Revenue and Customs understands that there is a problem if the properties are registered in Luxembourg. The Bill could have been the opportunity to address that and to state, “When we say we are going to close a tax loophole, we close it properly.” We know that £5.5 billion could make such a difference—but it will not. That is indicative of a Government who do not seem to do their homework.

That brings me on to why impact assessments matter so much, and why so many Members from Labour and other parties have been speaking about their importance, particularly when it comes to gender. One of the Minister’s colleagues actually suggested to me that the debate about gender impact assessments was a bit like the debate around foxhunting. Perhaps he confused fair game with the fairer sex; I am not quite sure. As a colloquialism, we have been calling this the lady data campaign, because it is about what happens when we start to identify the impact of policies on particular people.

There will be some, particularly on social media, who will roll their eyes at yet another one of those feminists getting up to bang on about women and all the special treatment they want. Let me be very clear: the point about lady data is a cold, hard economic argument. Bridging the UK gender pay gap has the potential to create an extra £150 billion a year in GDP by 2025, which is a 5% to 8% increase in GDP for all our regions. This should be a no-brainer for all concerned, but to be able to do that, we need better to understand where inequality lies in our society, and where individual policies help or hinder us in tackling it.

[Luke Graham (Ochil and South Perthshire) (Con)]

I support any measure to try to close the gap in gender equality of income. Does the hon. Lady welcome the moves made by this Government to introduce gender pay gap reporting, and to make it a legal obligation for all companies with more than 250 employees by April 2018?

[Stella Creasy]

I am so glad a new Member has raised one of the legacies of having an amazing feminist MP like my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman) in Government, fighting for gender pay gap reporting in the Equality Act 2010. I am glad to see the hon. Member for Ochil and South Perthshire (Luke Graham) nodding, because it is wonderful to see the feminist soul of so many Government Members coming through. I hope we can tempt them to support these measures.

The reality is that if the Government do not measure something, they cannot be held to account on what they are doing about it. That is the challenge we have. Good data keeps Governments honest and on track. For the avoidance of doubt, I am not suggesting that inequality in British society is about one single issue, or indeed about one single group. It is about understanding where inequality lies and where individual and collective policies will make a difference. That is why it matters. We do not live in an equal society, so particular policy measures, such as those that this Finance Bill introduces, will have a differential impact.

We might have the Equal Pay Act 1970 and the Equality Act, but equal pay is stagnating in Britain. Indeed, the figures for the past couple of years suggest that the gap is widening, not narrowing—crucially, among not just older women, but younger women. Among black and ethnic minority women, the gap is 26% for Pakistani and Bangladeshi women, and 24% for black African women. Women are twice as likely as men to receive the lowest pay. Only 36% of older women receive the full state pension. Therefore any finance measure that affects the tax and benefits situation in our country will have a differential impact.

Thankfully, organisations such as the Women’s Budget Group, the Fawcett Society, the Equality and Human Rights Commission, the Institute for Fiscal Studies and the Runnymede Trust have done what this Government have failed to do and started to identify the impact, so that we can understand just what the consequences are. Their research does not make happy reading for anybody who recognises that equality is one of the biggest economic motors we could have, and one of the best ways we could address the productivity gap in our society. Their figures show that this Government’s Budget will mean that women lose 10 times as much as they gain, with black and ethnic minority women losing 12 times as much.

What does that mean in practice? Forty-three per cent. of people do not earn enough to reach the tax threshold as it is—66% of them are women, and 41% of them have dependent children. When the Government raise the higher rate threshold, 73% of the beneficiaries are men. When we change corporation tax, we have to recognise that we do it in an environment in which shareholders, business owners and managers are disproportionately men. Men benefit more.

This is not about being a victim. This is not about pleading for special treatment. This is about understanding what measures the Government are introducing and how they are making it harder for us to unlock the potential of 51% of our society. It is about having a better economy and a better society, because there is a link between diversity and prosperity.

I am tired of people who eye-roll at this, and of Government Members who see this as being like foxhunting. Frankly, even if they do not get the strong economic or social case for this, they are legally required to do it. The public sector equality duty was introduced in 2011, and it means that the Government have to not just manage these things but do something about them. That includes being able to track the difference they are making, yet this Government have still failed to do any equality impact assessment, let alone a cumulative one. The only equality impact assessments that are published are in the tax information and impact notes, which have a sentence or two buried away in line 324b saying that most of the Government’s policies have little impact at all, or denying any impact. There has certainly been no impact assessment on things like alcohol excise duty rates or fuel duty giveaways—two policies that, again, have a differential impact on men and women.

We have not even begun to talk about the public sector pay cap, and Members on both sides of the House recognise that, when two thirds of our public sector workforce are women, a failure to pay the public sector properly clearly pushes more women into poverty. We can argue about the underlying inequalities that might cause the environment in which these policies operate, and we can argue about the policies’ impact, but we cannot let this Government get away either with saying that they cannot do these calculations when others such as the IFS have, or with arguing that any inequality caused by policies in a Finance Bill will be offset by spending in another Bill. It simply does not make sense. If they cannot measure it, how can they decide it is being offset by something else? That is why it is time that we had this data. [Interruption.]

I understand that the Government Whip, the hon. Member for Beverley and Holderness (Graham Stuart), would like me to sit down. I am sorry to disappoint him, but 51% of this population are being held back by a Government who do not even know what damage they are doing, and 100% of us deserve better. The way we do that is by holding this Government to account on the public sector equality duty, which says that the Government have a legal duty before making any decisions. It is not enough to consider the impact on equality afterwards. The duty is ongoing, and it is about not just a buried report once in a while, but consistent impact assessments. The duty also says it cannot be delegated—that Ministers cannot leave it to somebody else to figure out what damage they are doing. It also says that, when a problem has been identified, the Government have to act, and that a lack of resources—having just set out where the Government can get some resources, I do not accept there is a lack of them—is not an excuse.

These are examples of how this Budget and this Finance Bill are failing this country. We are in denial of some of the major challenges we face on productivity. This is about having the information so that we can understand how we can make better choices, and about how we have a Government who seem unconcerned that they are breaching the public sector equality duty. That is indicative of a wider problem facing the British public. They have a Government who, right now, have run out of ideas, who are lacking in leadership and who are struggling under the weight of Brexit, but we all know who is going to pay. It is the men and women in our communities who are struggling with debt—the men and women in households who are being disproportionately hit by Government policy.

Inequality is expensive for us all. All of Britain is held back when talent is held back because it is living in poverty. I hope I have shown that there is money to be found and data to be collected if there is a political will. The Brexit Secretary says that he does not have to be very clever to do his job, but I believe the British public do need competency. If they cannot get it from the Government Benches, they can certainly find it on the Labour Benches.

--- Later in debate ---

[Luke Graham (Ochil and South Perthshire) (Con)]

I rise to speak in support of both the content and the intent of this Finance Bill. As I said in a previous debate, a Budget is not simply a piece of accounting but a statement of intent by the Government for the coming year. As a new Member, it was an honour to lobby and to argue on behalf of my constituents and to be able to see, on 22 November, that the Government had delivered for all of our constituencies in Scotland. I thank my right hon. Friend the Financial Secretary for that.

I wish to take a moment to reiterate the key areas in which the UK Government have delivered for those of us who represent Scottish constituencies: a duty freeze for the Scotch whisky industry; a tax break for the oil and gas industry through the transferable tax history scheme; and a funding commitment to a number of city deals across Scotland, including for my constituency of Ochil and South Perthshire with the Tay cities deal and the Stirling and Clackmannanshire city deal.

Finally, and perhaps most significantly, the Chancellor removed the VAT payments for the Scottish police and fire services, which are worth an estimated £35 million to £40 million a year. That in particular should not be underestimated. The Scottish police and fire services were liable to pay VAT in the first place only due to the centralisation of the services by the Scottish National party Administration in Edinburgh. Since that centralisation, the cost to Scotland and its key services has been £140 million.

[Alison Thewliss]

Will the hon. Gentleman give way?

[Luke Graham]

Not just now. I wish to make more progress.

That decision was made in the face of warnings. It was an entirely political decision, fuelled by the SNP’s central belt bias and obsessive power-grabbing in Edinburgh. It therefore fell to the Scottish Conservative group to fight for Scotland and to the Conservative Chancellor to rectify those extremely damaging errors inflicted on Scotland by the SNP.

Having been shown who is truly “stronger for Scotland”, the SNP has made it its mission to undermine the hard-won successes for Scotland and to dismiss the efforts of the Conservative group here in Westminster and the Conservative Government, who have helped to deliver so much for Scotland. We all know why it has done so: it does not fit in with its narrative of grievance for the Conservatives not only to act in the best interests of their constituents and to have them at heart, but to deliver on those interests.

Ahead of Thursday’s Scottish Budget, we can all safely expect the SNP Administration in Edinburgh to carry on with their shameless Westminster finger-pointing, blaming Westminster for giving them the exemption on VAT; chastising Westminster for giving them the “wrong” money; and demanding even more from the Scottish people in the form of tax increases imposed by Holyrood.

Those are all significant broad-brush statements, but I wish to go into some detail about what the measures in the Budget mean for our constituencies in Scotland. For those who are not familiar with the hugely beneficial impact of the Barnett formula in Scotland, let me explain that Scotland benefits to the tune of £1,750 per head by remaining a part of the United Kingdom. It is also worth reminding Members that, in practice, that represents a higher rate of spending per head than England and Wales. Before we get into a dispute about figures, let me tell the House that those statistics are from the SNP’s own Government expenditure and Revenue Scotland figures. In addition, we very much welcome the £600 million more that will be spent on rail, which is an increase on the last spending period.

[Stephen Kerr]

Does my hon. Friend agree that those are indeed the dividends of the Union?

[Luke Graham]

I could not agree more, and I will go further into those dividends shortly.

The Government have delivered an additional £2 billion to Scotland in the Budget, which should be a reason to rejoice. However, they are being criticised by SNP Members. [Interruption.] The House can hear them trying to talk me down now, which is not a surprise, because no matter how high the price or how good the deal, the SNP is not satisfied. It reminds me of the Roald Dahl story, “Charlie and the Chocolate Factory”. We have the political manifestation of Veruca Salt sat just across from us; SNP Members go from room to room, shouting what they want and demanding more and more, yet they are never satisfied. Conservative Members have heard the interests of our constituents and we have delivered for them.

[Alison Thewliss]

Does the hon. Gentleman not accept that the Government are actually creating far more families like Charlie Bucket’s, with old people huddling together in bed because they cannot afford to live?

[Luke Graham]

I could not disagree more. More money is going directly to frontline services, and we are lowering taxes for the working families who are most in need, so the hon. Lady will see that Charlie and Grandpa are on the Government side tonight, not the SNP side.

As we look ahead to the Scottish Budget on Thursday, colleagues in this House and in Holyrood will be waiting with bated breath to learn precisely how the SNP plans to pass the additional money to local authorities for the roll-out of broadband and other key areas of investment that it has thus far undermined. To see how contradictory some of the SNP’s behaviour is, it is worth looking at how the party misuses the powers it has, refusing to pass some of the increases in the block grant to education and health funding—matters that are explicitly devolved. As we heard in the Budget, the block grant has increased to more than £31.1 billion, which is a real-terms increase over the spending review period and up from £27 billion in 2011-12. What does that mean for our constituents? Well, we have a breakdown of how devolved spending is carried out in public services, thanks to Jim Gallagher. Under the SNP, NHS Scotland is underfunded and understaffed. Health spending in Scotland has increased more slowly than in England over the past 10 years, growing by 34% compared with 50%. Per head, that translates to spending growth of 39% in England but only 28% in Scotland.

SNP Members may complain about Tory austerity, but their argument does not stack up. Her Majesty’s Treasury figures show that total health spending increased by 9% in England between 2011-12 and 2015-16, but only by 3.4% in Scotland over the same period. After 20 years of devolution and 10 years of an SNP Administration, people living in Scotland still have the lowest life expectancy in the United Kingdom. That is a damning indictment of the financial choices the SNP has taken in Holyrood with funding from this place. I could go on, but I am conscious of time.

[Chris Stephens (Glasgow South West) (SNP)]

Please do.

[Luke Graham]

Well, education is another area that I could touch on. Reading scores and mathematics and science results are down in Scotland since 2006. England and Northern Ireland now outperform Scotland in every category.

[Kirsty Blackman]

Will the hon. Gentleman give way?

[Luke Graham]

I will not, because I am conscious of time.

Under the SNP, more money goes in but fewer services are delivered. With a record like that, it is disappointing for Conservative Members that SNP Members stand in this Chamber and criticise what this Budget has delivered for Scotland. There is £2 billion extra for Scotland.

[Kirsty Blackman]

No, there is not.

[Luke Graham]

Yes, there is, and there is a real-terms increase, as the hon. Lady knows. There has been a whisky duty freeze, and police and fire service VAT has been returned to Scotland. Those are good things. I hope that colleagues in all parties in Holyrood can use this funding productively and work constructively so that the two levels of Scottish government can work together and deliver for their constituents.