Cross-border Trade and Accounting

Luke Graham Excerpts

Wednesday 30th October 2019 Commons Chamber

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

It is a pleasure to have secured this Adjournment debate on the exciting topic of accounting systems in cross-border trade. I know the House is racked with anticipation for this debate, as shown by the packed Benches, so I am looking forward to it.

I have to admit that, because of the potential for there being debates on the European Union (Withdrawal Agreement) Bill this week, I thought that cross-border trade would be a hot topic, and that this Adjournment debate would provide an opportunity for colleagues, especially those from Scotland and Northern Ireland, to talk through some of the issues in greater detail. Obviously, events have overtaken us and we are not quite in that situation, so I will continue with the debate but take a slightly different angle. I shall talk about the development of accounting systems, and refer to some of the work by Her Majesty’s Revenue and Customs on Making Tax Digital, and about HMRC’s support for small and medium-sized businesses. I refer Members to my entry in the Register of Members’ Financial Interests.

While on secondment from Marks & Spencer, I had the great fortune to work for the Prince’s Trust’s Accounting for Sustainability project, which is dedicated to using accountants to try to help to solve social and environmental issues. Indeed, His Royal Highness Prince Charles believes that accountants are the key to saving the world: by changing the data that is used in day-to-day business and in organisations, they can help to steer better decision making—

[The Financial Secretary to the Treasury (Jesse Norman)]

rose—

[Luke Graham]

Is the Minister on his feet?

[Bob Stewart (Beckenham) (Con)]

He is going for a drink.

[Luke Graham]

I hope it is whisky; we will be here for a while.

Accountants can help us with some of our biggest social and environmental challenges. In the current context, with Brexit on the horizon, I thought this debate would be useful, and later in my speech I shall come to the issues relating to trade between Northern Ireland and Great Britain.

Let me give a little background on accounting systems—the non-accountants in the room can tune in now, because this is the exciting bit. Accounting has come a long way since it was established centuries ago: we had the evolution of double-entry bookkeeping from the original ledgers; we then had some base computing in the 19th century, and then more into the 20th century; and we now have the far more advanced accounting systems that we use today. During my previous life, before I entered the House, I was lucky enough to use a range of different systems, on which I shall touch in just a minute.

One of the Government’s greatest advances in the use of accounting systems to help on the domestic front was the Making Tax Digital scheme. Unfortunately, like many others, I was greatly upset by the fact that the Government had to defer some of their plans to make tax digital because of the advent of Brexit and the consumption of Government time by Brexit preparations. Making tax digital and using accounting systems, whether for small or large businesses, is important because it makes us more efficient and more productive, and it can lead to better decision making for companies right across the United Kingdom. That is vital.

Whether someone is a single trader in Portsmouth, working for the global manager in Edinburgh, or working for a large multinational in London, accounting systems can really give them the transparency of data that they need. They are also environmentally friendly, because as accounting systems develop, we are able to move away from paper receipts and invoices and towards electronic records, which makes interactions between individual companies, customers and suppliers far easier, more efficient and more effective. As a result, the real benefit will be for the entire country, because not only will companies grow, but it will contribute to our productivity and thus our GDP.

Another important point is that as companies are developing, intangibles and intangible assets are becoming more and more important in their valuation. In fact, just a few years ago it was recognised that around 80% of the value of the S&P 500 is in intangible assets rather than tangible assets. That is why the development of accounting systems is so important: we need to be able not only to capture the value of our physical assets, and use the traditional accounting fair-value methods to make sure that those assets are held at the right value, but to look at new methods of valuing intangibles, because the intangibles of brands and, to a certain extent, intellectual property, along with other new technological advancements, mean that it is increasingly the case that less and less of companies’ value is being captured on our stock exchanges, and that obviously has an impact on the prices that are traded and the returns that can be made by companies and customers throughout the country.

As I said earlier, a number of systems have come into the accounting sphere that can help smaller businesses to improve and be more effective. One of them is Xero and another is QuickBooks, and there is also Oracle for large companies. I should say, for the sake of fairness, that plenty of other accounting systems are available. The point of these systems is to make sure that, from the base transaction and from the base-level accounts receivable and accounts payable systems, right the way up to the highest-level strategic decision making, managers and users of the information have the correct information —the one source of truth—and that there is consistency in the data right the way through the organisation. That is for the benefit not just of the actual company, but of HMRC and our Government. The better the records we receive, the more accurate the accounts are and the more accurately we can calculate the tax take for those companies as well. Obviously, it is always a good thing that not only should taxes be low, but companies and individuals pay the taxes that they do indeed owe.

In the current context, as we move between accounting systems, I would like to apply some of this to the discussions that we have been having on Northern Ireland. The reason why I take this leap—some might see it that way—is that many of the accounting systems that are imported now are connected to HMRC to help companies and individuals file their tax returns. They are also connected to HMRC for the purpose of VAT filing. As we know with Northern Ireland, VAT and customs have been a key issue in the new withdrawal agreement, and I will explore that a little bit more—hopefully with help from my colleague from Northern Ireland.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for bringing this matter forward. It is a very important initiative. It is just a pity that it is coming at this time, given where we are. Does he understand that these systems, which create a digital border in Northern Ireland and, indeed, in the Republic of Ireland, have been in place since the peace walls came down? That is a fair while ago. Such an approach is, and can be, both sensible and prudent for the region and could be something that happens elsewhere.

[Luke Graham]

I thank my hon. Friend for his intervention. He is quite right. There is a number of those accounting systems, but there is also a number of other systems and structures in place in Northern Ireland. I have to be honest about this. Although I have engaged with some of his colleagues on this over the past two years, many Members in this House and the broader public are still ignorant of the matter. It would, I think, be to the benefit of the House if some of these issues were explored in greater detail and in greater depth, so that Members can make more educated decisions, especially when we are working on such controversial issues as withdrawal from the EU, and as we start mapping out our future trading relationship with Europe. As he will recognise, this will also be important when we have new free trade agreements with other countries around the world—whether they are the rollover agreements that are coming across from the EU or, indeed, new trade agreements such as those with the United States of America. I will touch on that matter in just a moment.

[Bob Stewart (Beckenham) (Con)]

I thank my good friend for allowing me to intervene on him. Let me follow up on the point from the hon. Member for Strangford (Jim Shannon). Presumably, this digital accounting system will not just be routed into HMRC for tax purposes, but could quite easily be pushed sideways to the Border Force. What we are actually talking about is minimising the paperwork for crossing a border, and that is terribly important.

[Luke Graham]

My hon. Friend is almost making me skip over certain parts of my speech, so I appreciate his intervention. He is quite right. One of the key systems that is currently used is the VAT information exchange system. Under the current withdrawal agreement proposals, it will still be open to Northern Ireland. At the moment, I am not sure whether it will be open to other parts of the United Kingdom, but I recommend that it should be. Through that system, companies and member states are able to co-ordinate VAT returns. It also enables the simplification of those VAT returns between different member states. There have been concerns about the system, certainly in the area of fraud, especially when parts are moving between different areas of member states, but the system is still a good one and will be open to Northern Ireland. That is one of the very good things that is contained within the withdrawal agreement as it stands at the moment.

I did have one question on the issue of VAT. Although VIES will be available to Northern Ireland, as I have said, will it be available to the rest of the UK? Furthermore, one point that I would like someone to explain—it may not be the Financial Secretary to the Treasury today, but certainly I hope that it comes out in further debates—is related to the terms found in the withdrawal agreement when it talks about Northern Ireland being outside EU law in relation to VAT, but also about EU VAT law being applicable in Northern Ireland. Greater transparency in the details around this issue and also in the details around the application of the customs code would help a great deal for debates in this House, which inevitably will take place when, hopefully, we return here in December.

Therefore, as I have said, there are a number of systems available. What is even better is that private business and enterprise are catching up with some of these systems and complementing them. As I mentioned earlier, the evolution of accounting systems that are used by some of these smaller companies and larger companies can then obviously work with systems such as VIES, which means that Government, customers and suppliers can all work together to make sure that there is more efficient and effective record keeping, better tax collection and— hopefully—better revenues and profits for all those involved. As I said, I would love to get some more clarification either from the Treasury Minister himself or from a Brexit Minister in the near future.

This is not just an issue for the United Kingdom and the EU. I had the great fortune to work in China and the United States before I came to this place, and was able to see some of their tax collection and accounting systems in progress. China is an enormous country of over 1 billion people, but a significant amount of accounting records are still kept in paper format—this was back in 2008, so some of the new software was not available then—and everything is signed off by an original chop. For those who do not know, that is a traditional stamp. A record, fapiao or receipt needs a traditional ink chop to be recognised for accounting purposes; multiply that by over 1 billion people, and it becomes more of an issue.

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Motion made, and Question proposed, That this House do now adjourn.—(Colin Clark.)

[Luke Graham]

As a result, I found that we were not able to get the level of transparency and speed of information when we were working right across China—certainly in a multinational company with lots of subsidiaries—as quickly as one would hope in the 21st century, although I know that China is leading the way in many technological advances.

Some of these walls and barriers can also be seen in the United States of America. As many people will know, the United States of America is a federal system. Therefore, companies operating in America often have to file individual city, state and federal tax returns. The US does not have VAT. It has sales tax, which varies as between different parts of the country. This puts an additional burden on individual businesses and increases their costs. It benefits accountants and lawyers, but does not necessarily benefit the revenues and profits of companies. If a company is based in New York, it will have a New York tax return as well as a federal one, and if it has operations in different parts of the United States, it may indeed have to submit sales tax and other taxes in those other states, and then aggregate it all together. That means extra costs and extra burdens.

I hope that the Minister will be able to reassure me that no matter how far we go with devolution in our country, we do not turn to the more federal system whereby we erect more transactional barriers between different parts of the United Kingdom. I do not think businesses, consumers or suppliers want that. We need to ensure that we use accounting systems to make the flow of trade easier, rather than erecting more walls and bureaucracy.

Accounting systems are also incredibly important for cross-border trade because the more open and secure they can be, and the more internationally verifiable they are, the higher levels of trust there will be between customers, suppliers and Governments all around the world. If a Government are entering a new trade agreement with a different country—or indeed the customers and suppliers of that country are engaging in new trade after a new free trade agreement has been signed—having the accounting systems installed and developed means that they have a common way of working. That means that deals can be struck more quickly and sales can be far more profitable.

Let me turn to my ask of the Government. The Conservative and Unionist party has always been the party of business. Brexit has obviously taken an enormous amount of Government time. When Parliament is returned—and I hope that I and my hon. Friends on these Benches will also be returned, as well as the hon. Member for Strangford (Jim Shannon)—I hope that we will start putting more Government time and effort into progressing systems such as Making Tax Digital, and providing training and incentive programmes to small and large companies so that they invest in their systems. That will mean that they will have more efficient and effective trade, and can make the most of the great trade deals that the Minister is looking to implement when we return to this place and leave the EU.

Better accounting systems would also be great for UK consumer rights, because they provide a greater level of transparency, detail and trust. As I am sure the House will appreciate, in the 21st century trust is an enormous issue for consumers in the United Kingdom and around the world. The greater levels of transparency that companies can provide about their products and ways of operating—whether with regard to tangible assets, intangible assets, sales receipts or the taxes they are paying—the greater the faith that consumers will have in them. I can see my hon. Friend the Member for Stirling (Stephen Kerr) smiling at me. He will have received, as I have, many emails from people complaining about multinationals such as Amazon not paying the right amount of tax. I know that they use efficient accounting systems and I am sure that the Government are working with them to try to make sure that when tax is owed it is paid. Accounting systems can provide that level of transparency to give customers faith that where sales are made, the right level of taxes are paid as well. That is the case both for large and small businesses.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

I have to say that this is the most passionate speech on accountancy I have ever heard. I am slightly amused by, or in awe of, the idea that accountancy can save the world. To underline my hon. Friend’s point, technology removes operational burdens from business and boosts productivity. Is he going to come on to, or will he comment on, the barriers that are stopping more companies taking up the benefits that he is articulating so very clearly?

[Luke Graham]

My hon. Friend makes a very good point. The Minister will be well versed in some of the reports and debates on Making Tax Digital. A lot of these barriers were articulated at that time. One key area will be costs. Sometimes the cost of pieces of accounting software is very low, perhaps a couple of hundred pounds or so, but for a small company it is still an additional cost. The other obstacle that customers and companies will face is knowledge of the accounting software. Even in a large multinational business, many of the executives on the board, and many of the managers, have no knowledge of their accounting system. They are only focused on simple outputs and do not necessarily know what is underneath the bonnet. With modern cars, as we all know, that often leads to more costly and more complicated servicing when the time comes. That is great news for finance directors but not such great news for operational directors.

[Bob Stewart]

In the nicest way, I think that my hon. Friend is such a know-all on this subject that he has just talked himself into becoming a junior or even a middle-ranking Brexit Minister after the election.

[Luke Graham]

I thank my hon. Friend for that intervention—I think. As my record will show, I am very much in favour of more international co-operation, and I hope that we will be doing that when we come back.

Accounting systems can really help with cross-border trade, from small companies to large multinationals. As I hope I have laid out in this short speech, they have been used in places such as Northern Ireland, and they can be discussed in some of our debates when, hopefully, we return to this place. It will be useful for the Government to use some of these systems as they negotiate new trade with other countries all around the world. The Government are very fond of saying that they want a global Britain and that our exit from the EU will allow us to expand over new horizons. I therefore hope that after this speech and the debate that follows, the Minister realises that it may well be accountants who have the key to that global Britain.

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[Craig Mackinlay]

I would go against that. I think my hon. Friend will find that the digital trail is more likely to be there than the old paper trail. It is rather like my hon. Friend’s tweet from 10 years ago: it is still there, and it will be with him for a lifetime. This gives us an opportunity to have greater audit accountability. I take his point about the big four auditors, but we are talking about volumes of transactions that are mind-blowing, and to ask an auditor—I declare an interest: I am an auditor, and I still hold registration—to be responsible for every jot of every transaction lacks an understanding of what the audit process is all about.

I will return to the point I was making, because I know that the Minister will want to speak for some time. I was talking about the fact that things are not completely frictionless today. If I sell, as a VAT-registered entity in the UK, to another VAT-registered entity, it is not frictionless. That transaction has to be recorded on both sides, and it will find its way through Making Tax Digital on to a VAT return, so the trail is there. If I sell to an EU company, a level of complication comes into play, because I have to obtain an EU registration number, and I can then zero-rate that transaction. On the other side, they have to do a reverse charge to recreate that VAT for themselves and claim it back. It is a burdensome system, whichever way we look at it. Whether or not a business is partially exempt, at the end of the day, the transaction looks the same, but it is not frictionless; it is far from it.

A big trader with transactions of more than £250,000 going out to the EU and more than £1.5 million coming in enters the ambit of the Intrastat system, which is quite burdensome. A business has to classify each and every commodity that it is selling abroad, according to an Intrastat classification nomenclature. If one were to look on the UK Trade Info website, they would find that there are literally thousands of lines of code. One really must ask whether this is bureaucracy gone mad. I was looking at the website as I was listening to the very worthwhile speech by my hon. Friend the Member for Ochil and South Perthshire. There is a different code for frozen lamb carcases and half carcases from frozen meat of lamb. One wonders why we have such a complex system.

This is all done electronically, and it comes down to trust. When we buy something in a shop, there is not a man from HMRC at the counter making sure that the transaction finds its way on to a VAT return, just as not every single transaction across EU borders is checked. But those records and proof of a good being transferred have to be maintained for six years. Again, this is not a frictionless system.

The issue of trust is very relevant to the Republic-Northern Ireland border. There are massive excise duties across that border. There are different currencies and a different VAT rate. Corporation tax is different, and income tax is different. There are a vast number of different things going on. I always give the example of the Jameson lorry that trundles from the Republic across the border into the north and perhaps then over to GB, and the Bushmills lorry going from Northern Ireland across the border to the south. There is no physical border infrastructure, yet there are hundreds of thousands of pounds of potential differences in the excisable duties. These lorries are never stopped, however, because there is trust, and that is the route to solving this problem.

Many people will say they have concerns about VAT losses across the border. There are such concerns, but again, this is based on trust. I consider that the amount of excise losses even today, during our membership of the European Union, must be of very great interest to the Financial Secretary to the Treasury. Let us just consider the cigarette trade, in which cigarettes come across the border from Poland at £2.50 a packet versus a UK cigarette price of about £10 or more, yet we accept those losses because individuals are allowed to bring in as many of these products as they please. That obviously feeds into a black market, and I can assure the Financial Secretary that those are just the cigarette trade excise losses. We have chosen as a country—for good or evil, but that is a debate for another day—that such evil products should have a very high rate of excise in the UK for health reasons, and we find that a good percentage of cigarettes for sale in the UK come in from other EU countries.

I am very pleased that my hon. Friend the Member for Ochil and South Perthshire mentioned that the US has a federal system. The US is often held up as the land of the free, as it is called, but I do not think that holds very true of Uncle Sam. The level of bureaucracy in running a business in the US is infinitely higher than in running one in the UK. I was quite intrigued to learn that if an individual in California decides to buy goods on eBay or whatever site they please from a low-tax state such as Dakota, they have to do a personal return for a transaction above a certain size monthly or quarterly, and actually return the equivalent of the sales tax—VAT, in other words—that the Californian authorities have lost because they have taken their trade outside California. These things are solvable.

I really wish the hon. Member for Strangford (Jim Shannon) was still in his place, because I understand the Northern Ireland concerns. As with anything in the profession of accounting or of running a business, when there is change, everybody puts their hands up in the air and says, “We’ll never get to grips with this. I’m retiring. I’m giving up. It’s all too complicated.” That applies to the real-time information for PAYE that we imposed some years ago—there were the same concerns—or auto-enrolment for pensions, but we get on with it.

[Luke Graham]

My hon. Friend is making a very strong point about taxation returns and the problems in Northern Ireland. Does he agree with me that some of the simplest solutions can be the best? Some of the best tax regimes are in places such as Hong Kong where there are flat taxes, which are simple and elegant. He talked about some of the complications in the US, which has a tax code that runs to some 75,000 pages, so it is said, whereas the UK’s had about 17,000 pages in 2015.

[Craig Mackinlay]

That is a topic for a wider debate, which I have often considered. The UK tax code does not have 17,000 pages; it has been rather well expanded to 22,000 pages. When we compare that with the tax code of Hong Kong, which runs to 350 pages, we can see the difference. When I was a councillor on Medway Council, we had a document on the localisation of council tax that ran to 370 pages. I wondered how on earth the entire tax code of a very successful and vibrant economy such as Hong Kong could run to 350 pages, yet Medway Council, which I served on, managed to get a 370 page document just to consider the localisation of council tax.

I know the Minister will want me to conclude, Madam Deputy Speaker, and I do not want to take up any more of his time, but the fact is that these things can be solved through the trust that exists today and the digital returns that exist today, including internationally. The concerns that our friends in the Democratic Unionist party have about a future trading bureaucracy are real, but once this is in operation, they will fade away, and people will get used to the new system within a very short time. I thank my hon. Friend the Member for Ochil and South Perthshire for bringing forward this debate, and I look forward to hearing from the Minister.

The Economy

Luke Graham Excerpts

Thursday 24th October 2019 Commons Chamber

[Sajid Javid]

I agree with the hon. Gentleman that the banks should think carefully about their responsibilities to all communities, and the Economic Secretary to the Treasury met the chief executive of Barclays just today to discuss that very issue.

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

I welcome my right hon. Friend’s announcements on infrastructure and broadband, which will also apply to Scotland. Will he also confirm that we were spending around £20 billion more on interest payments when the Conservatives and Liberal Democrats came into government? Those interest payments were going to international bondholders, so the friends of the international bankers and financiers are, in fact, in the Labour party, not the Conservatives.

[Sajid Javid]

My hon. Friend is right. A Labour Chancellor deregulated banking and created a light-touch system, and we all paid the price.

I want to compare my approach to infrastructure with Labour’s. I am going to invest in new infrastructure that will grow the economy. Labour would borrow hundreds of billions to renationalise productive assets and then run them into the ground. I want to unleash all the talent and expertise of the private sector. Labour says—I quote the shadow Chancellor here—that business is the “enemy” and would tax it into submission. I will do all my work within a careful and credible fiscal framework; Labour would simply waste the money just like last time.

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[Kirsty Blackman (Aberdeen North) (SNP)]

I am not standing up to make a job application, as some people have suggested. In fact, we are trying to work ourselves out of a job by securing an independent Scotland, not one that has to send representatives to this place.

I take this opportunity to introduce amendment (h), in the names of my right hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford), the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts)—the leader of Plaid Cymru in the House of Commons—and many other SNP Members.

This place has been nothing short of chaotic over the past few weeks and, in fact, over the past three years. If Members are looking on in horror at the childish behaviour of the UK Government, I can only imagine how people out there are feeling as they watch the utter chaos created by the actions of this Tory Government.

This year’s Queen’s Speech comes in the most turbulent and uncertain times these isles have seen in decades. In the pursuit of a hard Tory Brexit that rips us out of the single market, the Scottish economy is already £3 billion smaller than if none of this had been foisted upon us by this Government. UK in a Changing Europe estimates that GDP per capita will be some 6.4% lower in the long run compared with the UK remaining in the EU. That represents, on average, every person in these isles missing out on £2,000 of income each year.

This deal proposes the loss of the single market. The world’s largest economic bloc gives businesses in Britain access to 500 million customers, with no barriers, no tariffs and no local legislation to worry about. It is no surprise that nearly half our exports go to other EU nations. Those exports are linked to 3 million jobs in the UK. Today, almost 80% of British jobs are in the services sector, a sector with £226 billion of exports, nearly half of which go to Europe.

“I can see why some people want to leave the EU. Arguments about national identity and sovereignty pack an emotional punch. But for anyone who cares about British jobs, it comes down to one key question. Do businesses want the benefits and security of continued access to the Single Market, or the instability and uncertainty of a lost decade?”

Those are not my words but the words of the Chancellor of the Exchequer, who is now willing to tip businesses into that lost decade in pursuit of this hard Tory Brexit.

[Luke Graham]

The hon. Lady talks about childish behaviour, but it was, of course, the SNP that walked out of proceedings in this House rather than participate in debate.

On her point about tipping over the economy, I would say that my right hon. Friend the Chancellor of the Exchequer understands the irony of a nationalist standing up in this House to talk about leaving an internal market, costing billions of pounds, when that is the SNP’s reason for existence.

[Kirsty Blackman]

The SNP only walked out of this place because our leader was chucked out. We followed him out because we were standing up for the rights of the Scottish Parliament to stand up against the power grab this place was foisting on us.

A Panelbase poll came out a couple of weeks ago showing that more people in Scotland believe they would be better off in an independent Scotland within the EU than in broken Brexit Britain. We are winning the economic argument, and the Conservatives are losing it.

The Conservatives know they are losing the economic argument, which is why they are unwilling to publish an economic impact assessment of this deal. They are unwilling to allow the Office for Budget Responsibility to publish the figures on what will happen to the economy as a result of the Prime Minister’s Brexit deal. That is why they are wavering about the date of the Budget. If the Chancellor would confirm that the Budget will be on 6 November and that the OBR’s figures will be published, that would be welcome news, but he does not seem keen to see those figures come forward.

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

It is a pleasure to speak in this debate. I obviously want to praise the Government for their Queen’s Speech. Some of today’s announcements on infrastructure and broadband will bring real benefits to Scotland, actually delivering where the devolved authorities have failed on so many measures—failing on their R100 targets, failing on their landfill targets, failing on their education targets, failing on their mental health targets. Even in areas that are exclusively devolved, the SNP continues to underperform, and that is why it is so important that the UK Government make it clear that they are there for every constituent in Scotland, as they are for those in England, Wales, Northern Ireland and anywhere else in our United Kingdom and overseas territories.

Unsurprisingly, we will talk about Scotland, and we have been talking about Scotland today, but I shall focus on some aspects in the Queen’s Speech that will improve our infrastructure and help boost our productivity. The broadband investment and the increase that, hopefully, will be coming through the shared rural network will help increase mobile connectivity in the most hard-to-reach parts of my constituency and also further north up into the islands. It will also give us the opportunity for further investment in our local communities, which I will come on to in just a minute.

Labour Members were taking issue with the economic literacy and performance of the United Kingdom Government. I would just like to say that, even in spite of some of the issues and challenges that are exposed through Brexit—let us face it, GDP growth has slowed since the referendum was announced in 2015—the UK is still performing pretty strongly in a European context. Its performance is still stronger than that of Germany, which is not facing Brexit and is a well-known advanced economy. So I do not think Brexit is the cause of all our ills. It is also not right to blame any of our European partners for some of the structural weaknesses in our country, such as our productivity and labour market capacity, which, of course, we need to increase.

The Queen’s Speech is important and the Budget will be even more important in showing my constituents why the UK Government actually work for them. Yes, over the past two years, we delivered the VAT changes to get £35 million back for our police and fire services; yes, we corrected the historical injustice of 2013 to make sure that our farmers got the right amount of convergence funding, and got £50 million on top of that to put us on a fair footing looking forward, so our agricultural and rural communities get the funding they deserve; and yes, in this last spending review alone, we got £1.2 billion more put to the Scottish block fund, which is more than we received in EU structural funding between 2010 and 2016. That shows the value of the United Kingdom and the performance of this United Kingdom Government.

Meanwhile, back in Edinburgh, we have a Government who continuously underperform. Business confidence has been trailing behind that in the rest of the UK since before 2014, and we have a £1 billion tax gap that was exposed just in the last year. So the SNP consistently asks for more powers, but every time it gets them it underperforms. On economics, we have that £1 billion tax gap and, as I have said, business confidence is way behind the rest of the UK. On welfare, we were told that a welfare agency could be established within 18 months, yet it has been deferred for over seven years. So the SNP is completely underperforming for our constituents.

It is vital for my constituents to understand that the UK Government are there for them. Whether in our rural towns such as Crieff or in former industrial areas such as Alloa and other towns in Clackmannanshire, it is clear the Government mean to deliver. I hope that in the Budget they will expand the stronger towns fund to Scotland, and I also hope they will continue to look at the Budget references and proposals from the Scottish Conservative and Unionist group, which will support our whisky industry, help our rural towns and communities and give us the opportunity to show that, actually, when our Government work together—central, devolved and local—we can perform for all our constituents and be proud to be Scottish and British together.

Oral Answers to Questions

Luke Graham Excerpts

Tuesday 1st October 2019 Commons Chamber

[Mr Clarke]

That was a truly ingenious question. Of course, the UK shared prosperity fund is really important. We continue to make good progress on its design. Ministry of Housing, Communities and Local Government officials have so far held 26 engagement events across the UK with over 500 representatives from a breadth of sectors. This is something that, obviously, has massive implications for Wales, and we are very happy to ensure that we engage everyone in that process.

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

The Moray growth deal, like the Clackmannanshire and Tay Cities growth deals, is bringing unprecedented investment into Scotland. Are the Minister and the Treasury considering reprofiling the investment over 10 years, as opposed to 15, as the local councils are asking me to do, so that we can get this investment and this transformational change in our communities?

[Mr Clarke]

I thank my hon. Friend for that question. Clearly, we want to see this investment move forward as quickly as possible. If he wants to raise that matter with us and indeed with the Secretary for Scotland, we can certainly talk about it, but I obviously cannot make any commitments here today.

No-deal Brexit: Short Positions against the Pound

Luke Graham Excerpts

Monday 30th September 2019 Commons Chamber

[Mr Clarke]

To the best of my knowledge, we have not commissioned specialist advice on the housing market. If I am incorrect, I will ensure that that is set out in writing to the hon. Lady. It is very clear that the UK housing market is in its most robust condition for many years. Indeed, we are now building many multiples of the situation we inherited in 2009, when house building had well nigh stagnated. Of course, many of the problems faced in our housing market stem from the disastrous failure of the last Labour Government to build enough homes in the first place.

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

Uncertainty hits not only the London markets but the markets in Edinburgh and elsewhere across the United Kingdom. Does my hon. Friend agree that the best way to end this uncertainty is to vote for a deal, as he did back in March?

[Mr Clarke]

I thank my hon. Friend for his question. Yes, I did vote for a deal on 29 March, and I did so because I feared losing Brexit altogether. I think that was a real risk at that point, and it remains a real risk now, thanks to the antics of the Opposition. If only all of Scotland was as well represented as those areas represented by the Scottish Conservatives, who of course have adopted a totally sensible and unifying position, which is that we should get on and deliver, as one country, what our one country voted for.

Spending Round 2019

Luke Graham Excerpts

Wednesday 4th September 2019 Commons Chamber

[Sajid Javid]

I will say two things on that to the right hon. Gentleman. First, as I said in reply to a previous question, for welfare and the DWP today’s settlement covers only day-to-day resource spending and, as he will know, most spending on benefits is not day-to-day resource spending. Secondly, to answer his question on how this spending round will help people in such vulnerable positions, what I have announced today underlines the fundamental economic strength, and that will bring more confidence, meaning our economy can continue to grow and continue to generate jobs—and jobs will always continue to be the best sustainable way out of poverty.

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

I welcome the Chancellor’s statement, including the £1.2 billion extra that will be coming to Scotland, which is an increase on the real-terms increase we already received in the Budget last year. May I especially thank him for the £160 million that will be coming back to our constituencies in rural funding, which was demanded by NFU Scotland and requested by my constituents, and is delivered by the Scottish Conservatives, with his help?

[Sajid Javid]

My hon. Friend is right on every count; it has been delivered by Scottish Conservatives, and may I take this opportunity to thank him for all the representations that he made to me, along with his colleagues, and for achieving this result? It just shows that Scottish Conservatives really care about their constituents, unlike the SNP.

High Speed 2

Luke Graham Excerpts

Wednesday 10th July 2019 Westminster Hall

[Liam Byrne]

Precisely. If we measure what we treasure, and if we treasure jobs, HS2 is, frankly, a project that we need.

However, that is not all I treasure; I also treasure tangible action to decarbonise our economy and our region. I want the west midlands to lead the first zero carbon revolution. Back in 1712, when the Newcomen engine was demonstrated up at Dudley castle, we sparked the carbon revolution the first time around. We need a radical plan that allows us to move trucks off the road and on to rail. Only with the capacity that comes with HS2 can we reopen 36 new freight lines that can take a million lorries off the road each year. We cannot de-clog the M6, the M5 or the M42 unless we get that freight off the road. It is impossible to see how we can drive forward the decarbonisation of a sector that contributes 40% of our carbon emissions each year if we do not drive ahead with HS2.

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

I share the right hon. Gentleman’s aspirations, but for Scotland. To meet the UK-wide net zero carbon targets we have set for 2050, we need to make sure that these new rail lines work for the entire country. Does he agree that we need to review HS2, not only on its business case, but on making sure that it works for the entire United Kingdom and connects the powerhouses in the midlands with the true northern powerhouse, which is of course Scotland?

[Liam Byrne]

I am all for that, so long as it does not introduce a moment of delay in driving this forward. Frankly, our economy cannot have any further delay.

I treasure a project that puts the west midlands at the centre of this economy. I particularly treasure the speed, which will result in a journey time of something like 65 minutes from Birmingham International to Canary Wharf, the most important business site in the country, via the connection at Old Oak Common.

The right hon. Member for South Northamptonshire advanced the traditional bang-for-buck argument, which is that if we got rid of HS2, there would be plenty of bucks left for other kinds of projects. I have to say that that is not fiscal realpolitik at all. The fiscal realpolitik will mean that money currently earmarked for HS2 will be quickly absorbed into other projects, and Opposition Members will be forgiven for worrying that it will disappear into the £10 billion-a-year tax cut proposed by the right hon. Member for Uxbridge and South Ruislip (Boris Johnson).

The right hon. Member for South Northamptonshire was right to demand choices, but the choices that she proposes are wrong. The real strategic transport choice that this country must confront is not between HS2 and other rail network lines, but between planes and trains. We should drive ahead with HS2 and cancel the ludicrous decision to build a third runway at Heathrow airport for £14 billion. We could use half that money to build a high-speed loop and take passengers from Heathrow to Birmingham, where there is already untapped capacity for 17 million passenger movements a year.

Around the world, a trillion-dollar high-speed rail revolution is under way, and we are being left behind. It is time that this country got on with it.

--- Later in debate ---

[Luke Graham]

One of my constituents, who was recognised as a whistleblower on HS2 and was featured on the “Panorama” programme, cited several problems with the assumptions used in the original business case. What are the Government doing to address those issues? They were raised and it went to the Public Accounts Committee. There are a number of follow-up questions still to be answered.

[Ms Ghani]

We are given a tight deadline to respond to any Select Committee. We respond as much as we can to the deadlines provided. I will go on to address the business case.

Devolved Administrations: Borrowing Powers

Luke Graham Excerpts

Tuesday 9th July 2019 Westminster Hall

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

I beg to move,

That this House has considered borrowing powers for devolved administrations.

It is a pleasure to serve under your chairmanship, Sir Gary. I thank the House for allowing this important debate on the borrowing powers of the devolved authorities across the United Kingdom. People might be wondering, “Why have this debate?” We have a packed audience here to listen to it, which shows the importance of the powers and why they matter so much for our constituents. If people do not realise how much the powers matter, hopefully this timely debate will help them to see that.

Funding is often contested. Speaking as a Scottish MP, and as I am sure colleagues will attest, there is confusion about the powers available for tax raising and borrowing, as well as about where the funding comes from—Westminster, Edinburgh or a local authority. That stands in Wales and Northern Ireland as well. In my constituency of Ochil and South Perthshire, recently a Barnett consequential for the high street and towns fund was denied. Representatives of the devolved Administration in Edinburgh said that there was no Barnett consequential, and that the funding came from Edinburgh. It is important to have this debate to discuss exactly where the money comes from, and the powers that devolved Administrations have throughout the United Kingdom.

There is also some confusion on social media; I am sure cross-party colleagues will agree. When funding plans are welcomed or criticised, there are often such comments as “Scotland has no powers to borrow any funds”. Today’s debate will hopefully be an opportunity to demystify the borrowing powers of the devolved Administrations and some of the funding routes across the United Kingdom. I hope that it will make the situation clearer and will raise the debate to a higher standard right across the UK—in Westminster, Edinburgh and at local authority level.

I start with the facts. All devolved Administrations can borrow. That includes Scotland, Wales, Northern Ireland, and even some of the devolved areas in England, although powers and the amounts vary across the devolved Administrations. I will attempt to make things clear for constituents and those who want to learn more about our financial settlements. Those powers will often be split into two parts: capital, going to assets, and resource spending, which is more cash-based.

My focus is very much on Scotland. I have some live examples, and I am sure colleagues will have interventions to make. In Scotland, local public revenue raises about £60 billion, which is about 8% of UK GDP. Expenditure stands at just over £73 billion, which is about 9.3% of the UK’s spend, so there is a gap of about £13 billion between what we raise in Scotland, including the oil and gas revenue that is often quoted, and what we spend. That gap is bridged by central Government, by other tax revenue raised in Westminster from across the United Kingdom.

What powers does Scotland have for additional tax raising and borrowing? Tax-varying powers have existed since devolution started. We had some flexibility over the penny on income tax. Obviously, our powers increased through the Scotland Acts 2012 and 2016, and we now have powers to vary the income tax bands—powers that the Scottish National party Administration in Edinburgh have used. They have lowered taxes for those earning under £26,990. If someone earns less than that threshold, they are now about £20 better off per year. That is about 38p better off per week—very helpful if someone wants to buy a Tunnock’s Teacake. Someone who is in the higher tax band will be charged about £1,500 more than other taxpayers in the United Kingdom.

[Mr Philip Hollobone in the Chair]

That is a significant point. Not all the higher-rate taxpayers in Scotland—about 14% of Scottish taxpayers—are ludicrously wealthy; the people who fall into that tax band will be teachers, doctors—some will be nurses—and public servants, as well as some very hard-working private sector workers. They should have their hard work rewarded; they should not be penalised for being in Scotland.

We want to attract more people to Scotland. As my hon. Friend the Member for Angus (Kirstene Hair) has brought up many times, this issue is especially important for our armed forces. Everywhere else around the world, they pay the Westminster rate of tax. It is only in Scotland that they are penalised and have to pay additional tax for being based there. Being based in Scotland is, of course, a benefit, and that benefit should not be eroded by the tax system imposed on them by Edinburgh. Thankfully, due to the work of my colleagues and the Government, that tax impact has now been neutralised, and members of the armed forces will now pay no more tax in Scotland than they do in other parts of the United Kingdom.

Devolved Administrations can borrow. Scotland can borrow about £3 billion for capital and about £1.75 billion for resources. What does “resources” mean? Breaking it down, it means that if we are a bit short in our cash flow in Scotland, we can borrow up to £500 million for cash. About £300 million is for forecast errors, and we see some of those coming through at the moment. There is a fantastic National Audit Office and Public Accounts Committee report on devolved income tax collection in Scotland. It makes for fantastic night-time reading; it clearly outlines some of the difficulties and costs of having additional income tax rates in Scotland.

[Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)]

The hon. Gentleman is making a good point about the limited borrowing powers in the Scottish Parliament, which do not match the growing taxation powers. Yesterday, the Foreign Secretary ruled out more economic powers for the Scottish Parliament in his Tory leadership bid. Would the hon. Gentleman agree that the Scottish Parliament needs greater borrowing powers to invest in the Scottish economy?

[Luke Graham]

In short, no. We should use the borrowing powers that we already have. The SNP Administration underspent by a reported £450 million in the last year; that shows that the proper economic programme is not being put forward for Scotland. They are not delivering for us. We have the power to vary tax rates, we have additional borrowing powers, and we do not have half the risks and responsibilities that the Treasury in London has to bear, yet in each of the next four years, we are forecast to underperform, compared with the rest of the UK. Going back a year, we were the lowest performing economy in the OECD and out of the G20 advanced economies.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

The hon. Gentleman makes an important point about the capacity for surplus borrowing. The Scottish Government have used only about half of the capacity in that borrowing envelope. He will also note the huge, disproportionate cuts to local government. I understand that Government funding has been cut in Scotland by about 2.8% in the last decade, but 7.5% cuts have been imposed on local government. That has had a huge impact on the provision of municipal services. Why on earth are all the borrowing powers not being used, including issuing bonds to maximise the capital capacity of local government and to ensure we minimise the negative effects of austerity on local government?

[Luke Graham]

I thank the hon. Gentleman for his intervention. I could not agree more. What I cannot understand is the clamour and constant push for powers from the SNP, who have been saying, “We want more powers; we need them.” We have the borrowing powers. We have the tax-varying powers. We have flexibility over the business rates. We have flexibility over council tax. It is Edinburgh that decides how much our local authorities get. Just like the hon. Gentleman, I have experienced my local authority being underfunded in a way that has meant that education and general maintenance in our counties has suffered. I cannot understand it either. I wish a representative from the SNP was here to put the SNP’s case for those cuts and its economic programme. Unfortunately, the SNP is completely absent from a very important debate.

[Ian Murray (Edinburgh South) (Lab)]

I congratulate the hon. Gentleman on securing this debate. These are the kind of debates we should be having to set the record straight about what is happening in Scotland and its fiscal position. He mentioned the Scottish Government’s underspend. I believe that they have returned more than £2 billion in the last four years in underspend. On the borrowing requirement, I understand that the Hong Kong dollar is an independent currency, but it is supported by reserves of double the GDP of Hong Kong. That means that if an independent Scotland were to set up its own currency, it would require somewhere in the region of £360 billion of reserves to support that currency. Where would Scotland get that from?

[Luke Graham]

I wish SNP Members were here to say how they would meet those responsibilities. I will not speak on behalf of the Scottish Labour party or the Scottish Liberal Democrats, but we are parties who support and respect devolution. We are the parties who are trying to make devolution work more effectively. That is why we are having these debates and changing the machinery of government to try to make it work more effectively. The SNP is the only party that does not believe in devolution. That is why it is not involved in these debates and why its members are not here today. All they care about is separation.

As the hon. Gentleman rightly points out, the SNP has not faced up to some of the responsibilities and costs of that separation. That is illustrated by the underspend. Some £100 million is somehow being rolled forward as part of setting up a new social security agency. That was agreed in 2016. We want to look at how to best serve our constituents. We do not want to be state building; we want to make sure that our constituents get the benefits that they need. Rather than spending £100 million-plus on setting up a new social security agency, which means our constituents will have to stop at three or four places to get the benefits they require, I would prefer to use that money to top up the benefits, and use current Department for Work and Pensions systems to ensure that constituents get the money they need. Our constituents would benefit, but we would not have to go through state building, and we would not have to spend money when it is not required. As I am sure the Chair appreciates, welfare is an incredibly complicated area of policy, and the systems that have supported our welfare state have been in development for over 60 years.

On the borrowing powers that we have on the resources side, there is power to borrow up to £300 million for forecast error. That is important, because as Derek Mackay, the Finance Secretary in the Scottish Government, recently outlined, their income tax forecast is down by around £1 billion. Again, this might be something that we should be debating in Westminster and Holyrood. The forecast error borrowing allowance is around £300 million, and it already looks like there will be a £1 billion gap. How will we bridge that responsibly without increasing taxes for people in Scotland, or irresponsibly having to go back to Westminster?

[Mr Sweeney]

The hon. Gentleman knows that I am certainly a staunch critic of this Government’s social security policies. However, he will be aware of the scope of powers available to the Scottish Government to deliver a system in Scotland that is qualitatively, as well as quantitatively, different. For example, ending the two-child cap in Scotland costs around £60 million, which is a fraction of the £500 million revenue underspend in Scotland, and would not even mean dipping into the available borrowing powers. What does the hon. Gentleman think are the motives behind not using those powers?

[Luke Graham]

I would not be so bold as to speak on behalf of the SNP—I do not think the party would like it. I can theorise that the SNP has not prepared for some of those powers and is not ready for them. Looking at the recent Fraser of Allander Institute report on the welfare and tax powers being given to Holyrood, we see that there are significant structural and programme changes that need to take place before those powers can be used effectively. I am sure the hon. Gentleman appreciates and welcomes some of the changes that the new Work and Pensions Secretary has made to the two-child cap policy. It is an issue that I have debated since I was elected to this place, and certainly before.

Welfare powers are available, and I am at a loss to understand why the SNP has not used them when it is so critical of a lot of my Government’s policies in this area. If the party is so critical, and the Scottish Administration have the powers, I do not understand why they have not used them in the time that they have had them. They have been supported centrally by the Department for Work and Pensions in Westminster. The SNP told us in 2014 that it would take only 18 months to establish Scotland as a completely separate state, so I do not understand why it takes seven-plus years to try to get a basic social security system for our constituents.

The other £600 million that is available for resource funding is protection for a Scotland-specific shock. Should our GDP fall to 1% below the rest of the UK, we could borrow an additional £600 million to try to prevent any additional hardship for our constituents and to support our public services in the way they need.

As I touched on earlier, it is important to note that even with all those powers and the levers at the disposal of the devolved Administration in Edinburgh, we are still looking at an economic performance over the next four years that trails behind that of the rest of the UK. After more than 12 years of an SNP Administration, we have to ask why. It is not just that they disagree with policy coming from Westminster; it is that they have powers but are not making devolution work. This is not good or bad devolution; it is dysfunctional devolution. I hope every colleague in the House will work with me and MSP colleagues to try to improve that.

We have three tiers of government in Scotland, or four if we include community councils: our local authorities, the Administration in Edinburgh, and central Government in Westminster. As an MP, I am determined to ensure that they work as effectively as possible.

[Mr Sweeney]

Further to the point on the possible motivation, does he share the view that if the Scottish Government were to deploy all those powers fully, it might in some way diminish the appetite for independence? After all, a majority of Scots agree that the United Kingdom is over-centralised, but if they were to see devolution fully deployed and fully activated, it might well address any dissatisfaction that they had with the current system.

[Luke Graham]

It feels wrong to bash the SNP when its Members are not here to respond, but this is another clear example of the SNP putting the nationalist interest above the national interest. We could be using those powers to serve our constituents today, rather than deferring their use for years and years to further grievance and stoke the flames on social media.

Why is this important? Why did I apply for this debate on borrowing? It is so important because of the underspend that, as I said, has been widely reported. It was £450 million last year. It has certainly had a real impact in my constituency, which covers two council areas: Clackmannanshire, which is the smallest county in Scotland, and part of Perth and Kinross, which is in one of the largest counties in Scotland. We have seen impacts on frontline services. In Perth and Kinross, teacher numbers have reduced. We have had to increase waste charges, and we have had a 3% increase in council tax. In Clackmannanshire, we had the threat of closure of two primary schools, which I and council colleagues were against. We had the threat of closure of the Alloa Leisure Bowl, a reduction in our secondary school supplies and a 4% increase in council tax.

Given that the SNP argues for all those powers and makes such a stand about being stronger for Scotland, it cannot make such an argument in this place and then be absolutely weaker for our local authorities and let down our public services, children and communities in such a colossal way. As I said, the underspend could well be justified. If SNP Members were here—I was hoping to have a bit of a debate with them—they could justify it by saying they were carrying some spending forward to future years, as we said about the welfare and social security agency. We might disagree with that, but at least it could be justification. As colleagues will hopefully realise, and as I have argued, given the borrowing powers that exist, the development of the Scotland reserve, and the increase in block grant coming from Westminster, there is no need for huge underspends in the Scottish budget. We simply do not need them. We can use the borrowing powers when we need to. For example, should there be a Scotland-specific shock, we could access £600 million if we needed emergency cash for our frontline services. We can actually spend the money we need now, so why cut our local authorities when it is clearly not needed?

[Ian Murray]

The hon. Gentleman is making a very powerful argument. I know he might disagree with the policy issue, but there is a principle issue. The Scottish Government have full powers to do something about issues that they talk about a lot, such as the WASPI—Women Against State Pension Inequality Campaign—women and the rape clause in universal credit. They have the powers and a massive underspend, but they refuse to do anything.

[Luke Graham]

That is exactly my point. It is one of the main reasons I wanted to have this debate. Again, it is one thing to criticise on social media, but another to write letters to a paper when it is a one-sided argument. I applied for this debate because I wanted all parties to be here, and to have the opportunity to justify underspending by nearly half a billion pounds and then standing up in the Chamber and criticising the Prime Minister, the Government and often Opposition party leaders for their lack of policy and lack of caring for our constituents. That is inconsistent, it is indefensible economics, and it is unbecoming of MPs and a political party that sits in this Parliament.

[Kirstene Hair (Angus) (Con)]

I thank my hon. Friend for securing this important debate. Does he agree that it was quite telling that when there was word of the UK Government’s potential direct spending in Scotland, the Scottish National party was running scared? It is the only party I know that would run scared from somebody else wanting to deliver further funding in Scotland. It just shows that this is not about money. Everything the Scottish National party does is down to playing politics with policy and people’s lives; it is not about getting the best for Scotland.

[Luke Graham]

I could not agree more. The whole point of being an MP is that we put people before politics. I have certainly been critical of my Government on issues of spending—I know my hon. Friend has, too—and Members of the Opposition have certainly been critical about getting funding for Scotland, be it in block grant or city deals. We have made the arguments and posed the difficult questions time and again in this place. As I am sure my hon. Friend the Minister appreciates, we will continue to do so in a future Administration.

[Mr Sweeney]

We have had an interesting exchange of views on this matter. On the use of powers and the logical disconnect between the rhetoric in this place and how it plays out in governance in Scotland, the Daily Record has recently been reporting on the scourge of drug-related deaths in Scotland, which are at epidemic levels and are a real national emergency. How can the SNP reconcile the rhetoric about the need for the Home Office to change its views on the Misuse of Drugs Act 1971—I agree with that—with cutting addiction services in Glasgow by a quarter? How can that possibly help?

[Luke Graham]

The hon. Gentleman will have seen at first hand the impact of some of those cuts in his constituency, just as I have seen their impact on frontline services in mine. No Government are perfect and no party is perfect—I respect that—but the whole point of these debates is to discuss the issues, come forward with facts, put forward arguments, fight for our constituents and, at election time, convince them that we are the best people to represent them, and that we have the best ideas and arguments. That is why I secured this debate.

If an hon. Member or a colleague in Holyrood were Finance Secretary, rather than underspending by £450 million and putting £100 million into the social security agency, they could have invested £294 million, which is what COSLA—the Convention of Scottish Local Authorities—has requested for inflationary increases in council spending. They could have uplifted that by 10% or so to help close the funding gap in Clackmannanshire and Perth and Kinross, and they would still have had around £100 million left to put into a reserve for a rainy day, if that were genuinely their intention.

I will wrap up as I am conscious that the Minister wants to respond. I hope that he will support me and other colleagues in taking a more mature approach to funding and borrowing in our United Kingdom, to ensure that devolved parts of the United Kingdom are not separate, and to ensure that central Government engage with all levels of government, so that there is appropriate borrowing and spending, and funding goes directly to the frontline public services that need it.

As colleagues have mentioned before in such debates, balance sheets and borrowing do not sound all that exciting, but every single number on the balance sheet represents an opportunity for an education, or for investment in the NHS and social care. It is vital that we get the facts out there and have a mature and appropriate debate. I hope that my hon. Friend the Minister will support us in that.

Beer Taxation and Pubs

Luke Graham Excerpts

Thursday 28th March 2019 Commons Chamber

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

It is a pleasure to follow the hon. Member for Chesterfield (Toby Perkins). As a nation we need to have a balanced approach to the provision of alcoholic drinks, their sale, their taxation and the licensing of pubs. I will take this opportunity to make a cautionary remark: it is well publicised that there are proven consumption levels that should not be exceeded in order to minimise the risks to our health. The key is to enjoy drink in moderation and, best of all, in the local pub.

Our pubs provide a social meeting place, encouraging people to meet and converse with others in convivial surroundings. The majority of pubs in Scotland are convivial— although some may not be—and an important part of our infrastructure. In the United Kingdom, pubs and drinks producers are also major employers, with approximately 900,000 employees. Many of those businesses—and of course the consumer—will benefit from the rates discount of one third for small retailers in England and Wales from April 2019, and in Scotland we have had the small business bonus for a number of years, which has been of great assistance, but neither scheme goes far enough to assist pubs. Another good thing is the freezing of beer, cider and spirits duty for yet another year—I thank the Chancellor very much for that.

I have previously expressed my support for the freeze on duty, given my constituency includes Grants of Girvan, producing whisky and Hendricks gin, Caledonian Bottlers in Cumnock, and the small Ayr Brewing Company, which produces excellent real ales consumed and enjoyed by many.

Even though we are discussing beer, it would be remiss of me not to mention the Scottish whisky industry, which remains a great British success story. Exports are worth some £4 billion per annum, comprising almost a fifth of the UK’s food and drink exports. Duties on alcoholic drinks are forecast to raise £12.3 billion in 2018-19. Surely the Chancellor has a bit of wiggle room for some kindness towards the pub trade.

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

My hon. Friend makes a good point about the whisky industry which the Government have supported so well by freezing the duty for the last two years. For a constituency such as mine, which has Diageo, Strathearn distillery and others, that provides vital support, domestically and with exports. Does he agree that our pubs supply not only great drinks but fantastic food, like the Kirkstyle Inn in Dunning in my constituency? That food can bring families in and, combined with local music, can make the pub the heart of the community.

[Bill Grant]

I completely agree, and pubs are great outlets for locally grown produce which we can be very proud of in the UK, in particular in Scotland.

As with all good news, there is a negative. One of our local businesses raised concerns with me recently about post duty point dilution and the proposed ban on this. I am aware that it will hit some businesses hard and cost them dearly to maintain their standards, only to fund the Exchequer, where their methods involve this practice. I ask the Minister to consider whether any flexibility can be applied when the legislation is drafted this year.

Sadly, pubs are still closing. In the village of Patna in my constituency, we have gone from four pubs to one over the last 15 years, in Drongan from three to one and in Rankinston, the village of my birth, we have had no pub for many years. We have seen the sad demise of these much loved institutions. Indeed, in the last decade almost a quarter of UK pubs have closed. However, it is not all bad news—in Cumnock, the 1906 Bar in the square has just been refurbished and reopened as an excellent eatery and pub. The Kirkton Inn in Dalrymple—you may know it, Madam Deputy Speaker—has recently been purchased and refurbished. The owners have breathed life back into and it is now an excellent pub and eatery. I wish individuals behind those business ventures every success.

There are many reasons for pub closures, including lifestyle choices, supermarket prices and ease of purchase from convenience stores. Despite the temptation of the aforementioned, I very much enjoy supporting my local pubs, but I cannot be the saviour of every pub—we all need to participate. If we want them, we have to use them, although as always the beer should be consumed in moderation.

The issue of business rates comes up constantly, and I have been approached by bar owners and publicans in my constituency who are concerned by the cost, despite the small business bonus scheme. They face long delays when they appeal their rates, and they find it very hard. CAMRA has long campaigned to reduce the rates for pubs. How often can we repeatedly punish these wee facilities in rural communities and towns and treat them as a cash cow for taxation? We need to take a serious look at the issue.

Communities still value their local pubs and eateries as part of the social fabric of towns and villages. I recognise the work the Government have undertaken recently, but I urge the Minister to continue to recognise the value of pubs, the employment they create and the safe, supervised environment they provide for the consumption of alcohol and engaging with others. We cannot afford to lose many more and it is vital that the value of pubs to the local community is reflected in the taxation applied.

Santander Closures and Local Communities

Luke Graham Excerpts

Thursday 14th February 2019 Westminster Hall

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

It is a pleasure to speak in this debate, Mr Rosindell. I congratulate my fellow Instagram lover, the hon. Member for Glasgow East (David Linden), on securing this debate. We have more in common that just posting fun pictures.

Banks are a really important part of our communities. When they close they leave a hole not only in our high street, but in our community as well. The reasons for that have been stated to a considerable extend in this debate already. I am deeply concerned about Santander’s decision to close branches at the scale proposed. In the area that I represent, it intends to close the New George Street branch on 5 December this year, which is quite some Christmas present for local customers, and it is not good for the staff who will lose their jobs just before the festive season.

In Plymouth we like to think that we have a special connection with Santander because we are one of only two places in the country where you can actually get a ferry to Santander, so to see the closure of branches in Plymouth is deeply worrying, and what that means has not been lost on the good folk of Plymouth.

Who do we need to aim this debate at? The remarks made by Members of all parties have been focused on the banks, but I want to focus on the Government, because the banks have had a good kicking already and certainly my fellow Devon MP, the hon. Member for Tiverton and Honiton (Neil Parish), did a very good job of explaining why banks deserve a good kicking at times. However, we need to be cautious about what can be done to reverse the decline in branches on our high streets.

We need to make sure that people can access the services they need and that the personal touch is there, but I believe that there is something missing from this debate so far: consideration of the social purpose of banking. Banking has a financial purpose: it enables us to trade, to borrow, to invest, to save, but the social purpose is also important. It is about pooling risk, coming together, having access and being able to speak to someone to get advice on borrowing, investment and saving, and making sure we get the best financial products, but all that diminishes hugely when branches close.

I am a big fan of online banking and challenger banks. I really like my hot coral Monzo card. I like the way that I can access financial services online and in many cases get a better and faster service than I can get elsewhere—but I am not the same as everyone. We need a market within our financial services that recognises that online banking and quick dynamic services in the modern age need to sit alongside traditional high street banking that is fit for purpose. There is no better example of that than on Mutley Plain in Plymouth. I use Mutley Plain as an example because I know that the Minister was a Conservative candidate in Plymouth before he found his current seat, so he will know Mutley Plain well. When he was a candidate, Mutley Plain was full of banks. It now has hardly any banks. We have seen HSBC, Halifax, Lloyds, Barclays and NatWest all leave Mutley Plain, effectively leaving the entire community without banking services.

Not only has the community been left without the ability to access a cash machine or to get advice, but people have been left without the ability to go in and speak to someone. That is why we need to look at the importance of local banks and local services. The banks need to rediscover their social purpose. It is not sufficient to have social purpose in PR and marketing if it does not extend from the communications department through to the boardroom and the branches themselves.

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

The hon. Gentleman is making a poignant and strong speech. I could not agree with him more about spending corporate social responsibility funds to support the communities and customers that the banks are meant to serve. Does he agree with me that they should spend less money on fancy advertising and sports sponsorship and more money on keeping branches open in rural and deprived urban areas?

[Luke Pollard]

I am grateful for that intervention. We should ask the Minister to look at that suggestion. The Government have the power of regulation in legislation, but they also have strong soft power in terms of encouraging the banks to do the right thing. We need to recognise that customers—each of us as a customer of a bank and the people we represent—also have soft power in relation to where we choose to bank and who we choose to bank with.

When we talk about what options are available to us, it is important to recognise that the post office is an option only when we have a post office. Equally, internet banking is only an option when someone has access to the internet. There is sometimes an assumption in this place that everyone has access to the internet. That is not true. In places such as Plymouth, where we have high levels of poverty and deprivation, not everyone has access to the internet. Not everyone has a mobile phone with data allowance that allows them to access data. With the closure of libraries in recent years, free access provision through library services is also not always available. If the Post Office network and the library network is to be a genuine and meaningful alternative, we need to make sure that they can be accessed. We must not fall into the middle-class trap of thinking that everyone has the same as the people who largely populate the House of Commons. That is certainly not true in Plymouth and it is a point that we need to address.

I asked people on my Facebook page a few days ago about their experiences of banks closing. The most powerful testimonies come from people with disabilities, for whom the ability to access a local banking service is not just about the service they should have as a normal human being, but is about the additional support that they need and deserve to access those services, which cannot be provided by someone at the end of the phone or a few clicks away on the internet. They need a real human being to interact with. That was the case for so many people who spoke to me and gave me their stories and views about what we need to do. I turn back to the Minister. Where do we go from here?

There is a real risk that whole communities will lose access to banking services, because banks are closing progressively. Today’s debate is about the decisions of Santander. A few months ago, it might have been about other banks, and in a few months’ time, it will probably be about other financial service providers. What is the safety net? What is the minimum guarantee that the Government believe that we should have?

The idea about banking hubs is a good one. In Plymouth, we are doing something similar in bringing together health and wellbeing services. City centre hubs will bring together all the aspects of the public estate that need a front door in the city centre, and I hope the Department of Health and Social Care will fund that. The principle applies to financial services, just as it does to dentistry, GP services, sexual health and mental health provision, and we should look at that.

One element of hub services is about using empty buildings. My hon. Friend the Member for Ynys Môn (Albert Owen) talked about empty buildings. In many cases, the buildings left vacant by banks still have an ongoing lease—they are still paying for the lease of the buildings. There should be questions about the social purpose of an empty building, and about how we as parliamentarians can put pressure on, as we have done on empty homes, to rediscover the social purpose of empty buildings with an ongoing lease.

The post office network has been mentioned, which reminded me of a visit I made to the Efford Road post office in Compton ward in my constituency, just before Christmas. I spoke to Michael Zheng, the postmaster of that small but well-loved post office. He described how since the banks have closed locally, he has taken on the financial transactions for local shops and has huge amounts of cash deposited with him, but the contract for local post offices for processing cash transactions has changed recently, which means that in many cases it is not viable for him as an employer to pay someone to spend the time processing the cash in and out and providing banking services for local businesses; the agreement between his local business and the Post Office no longer makes that worthwhile. That needs to be looked at.

The health of our high street depends not only on shops where people want to spend their money, banks where they can access their money, borrow and save, a culture where people can enjoy shops, and restaurants where they can eat and drink. We need to look at how we repurpose the high street in those terms, but there are also regulatory protections that deserve consideration. We are not in a normal time for Conservative party thinking in respect of allowing the free market to do its thing on high streets, where financial services can come and go as they please. We are now seeing the forced financial exclusion of people in our communities because banks are exiting our high streets. That demands a different approach, which we need to identify before we get to the point where we have lost banks entirely from our high streets.

There are alternatives and there are models of investment in our high streets. I mention in particular South West Mutual, a co-operative that has formed in the four counties of the far south-west to provide high-street banking services on a mutual model. As the big multinational banking giants are exiting our high streets, in many cases, it is the small mutuals—the people with social purpose—that are coming to replace them. I commend the work that South West Mutual is doing. I love it when it says:

“We believe that bank managers who know their communities well make the best lending decisions, and we are committed to providing branch facilities so that you can choose how you want to bank.”

That is precisely the type of ethos we need to see lived and breathed by those big financial giants, not just the mutuals. If we keep seeing TV adverts from big banks telling us just how much they care about us and our communities at the same time as they close our banks, more people will take their custom away from those banks, and rightly so. We deserve better, they deserve better, and our high streets and our communities deserve better than the high PR spend trying to tell us something different from the lived experience of far too many people in our communities.

--- Later in debate ---

[Mr Sweeney]

I accept that observation. To be fair, my interaction with a physical branch is limited, because I have adopted new technology—I suppose it is because I am a millennial. I use the banking app for TSB, despite some recent difficulties with the transfer from Lloyds TSB using the banking technology. The only time I visited a branch for any substantial business was when I took out a mortgage in Dennistoun about three years ago. The hon. Gentleman makes the point that if we are going to cut the cloth, we will create almost a self-fulfilling prophecy by stripping out key banking services such as mortgage provision, which is a great problem.

[Luke Graham]

The hon. Gentleman is making a very solid point about deprivation. Some of his branches, and my branch in Alloa, are in some of the most deprived parts of our country, yet they are having services taken away. When Santander and other banks consider branch closures, they look at levels of deprivation in a constituency and they have an index. Does the hon. Gentleman agree that the index should be made public and that we should put the access to banking standards on a statutory footing, so that these closures can be subject to real consultations and be far more transparent?

[Mr Sweeney]

A rare collegial moment for the Chamber, perhaps. I agree entirely, and I was just about to come on to that issue.

When I met with Santander management last week to discuss the closure of the Springburn branch, I made the observation, “I recognise exactly why you’re doing this.” They did not deny it. I also said, “Yes, there needs to be total visibility about the economic impact and the disparity in terms of the demographics of where these bank closures are happening, because there is no visibility of that pattern.” This was recognised long ago: in the 1970s in America, there was a practice called red-lining, which involved American banks deliberately blacklisting poorer communities and withdrawing banking services.

In 1977, the Carter Administration passed the Community Reinvestment Act. As a result, commercial banks in America are obliged to redistribute their profits into sponsoring co-operative banking services and mutuals, and to promote credit unions. There is therefore a much more diverse range of banking services as a result of direct Government intervention to redistribute those services, which dates back to the 1970s. As a result of the Community Reinvestment Act, Santander will invest £11 billion in sponsoring co-operative banking, mutuals and other sustainable banking activity. That is a hefty redistribution and is in stark contrast with what happens in the United Kingdom, where there is no legislative imperative for banks to do it. We need to address that yawning chasm in legislation.

I made the point to the Santander management that the root cause of a lot of these problems is the increasing monopolisation of the banking sector in the UK. We have five major clearing banks, which hold 85% of all current accounts. By comparison, in Germany there are 400 local Sparkassen banks and over 1,000 co-operative banks. Clearly the picture there is very different, because there is legislation in place to redistribute the holding of capital in the banking system, so it is done more sustainably and is more responsive to local communities and to sectors of industry. As a result, Germany has a much healthier and more balanced economy.

I also made the point that Santander’s origins lie in the Abbey National, which was demutualised in 1989, the year I was born. We have seen a pattern of demutualisation across the banking sector, which has been negative for the UK economy. I would seek legislation to reverse the demutualisation of the British banking system.

Sport in the UK

Luke Graham Excerpts

Monday 4th February 2019 Commons Chamber

[Douglas Ross (Moray) (Con)]

It is a great pleasure to follow the hon. Member for Cardiff Central (Jo Stevens), particularly because she mentioned a number of people involved in sport, including volunteers. As a referee, I was very pleased that she mentioned referees, although she then mentioned others involved in sport, including hotdog sellers. Many things are said before and after “referee” when people describe me, but I have never heard “hotdog seller” before, so that is a new one. At this point, I remind the House of my declaration in the Register of Members’ Financial Interests, as a qualified Scottish Football Association referee; I also officiate for UEFA and FIFA.

I want first to focus on a point made by the hon. Member for Paisley and Renfrewshire North (Gavin Newlands) about facilities, because facilities are extremely important to all our communities. In the last week, I have raised a number of points about budget cuts, so today I do not want to get into the politics of the budget cuts, who is to blame, and how we can fund things more or less centrally in Scotland or through Westminster. I want to highlight the major impact that budget cuts are having on facilities in Moray. When our swimming pools in Keith and Lossiemouth are under threat, I stand with the hundreds of campaigners who went to a public meeting in Lossiemouth and are signing petitions to save their swimming pool in Keith.

The Active Schools programme is hugely important in Moray, and a number of parents and others have contacted me since Moray Council has decided to axe the programme. The programme is a partnership between councils and sportscotland, with the aim of promoting more and higher-quality opportunities to take part in sport. In 2017-18, over 90,000 participant sessions in Moray were held through Active Schools, with 35% of all school pupils in Moray participating in the sessions. Some 50% of those in my former council area of the Milne’s associated school group were involved in the Active Schools programme. There are 487 people involved in delivering these sessions, 93% of whom are volunteers.

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

My hon. Friend is talking about budget cuts. In Clackmannanshire, we are facing cuts to Alloa leisure bowl, which is the only remaining public swimming pool in the county. Does he agree that we should be saving and investing in these facilities to give these opportunities to our young and old people, not taking them away?

[Douglas Ross]

I fully endorse my hon. Friend’s point.

If the Active Schools programme is taken away, that will devastate our communities and our young people. Sportscotland is giving £272,000 in the next financial year to Moray Council to run this and other sports programmes, and that funding is under threat if we ultimately do away with Active Schools.

In speaking about facilities in Moray that face potential closure, I also want to highlight what will be a great addition to our facilities in Moray—Moray sports centre. It will be built in 364 days, and delivered on time and on budget. It will cost £8.4 million, with £8.15 million of that investment coming from the Moray Sports Trust and £250,000 from sportscotland. It will be a great facility with eight courts allowing for regional-level competition in many sports. That is really needed in Moray, as I am sure it is in other communities. Athletes young and old often have to travel to Inverness and, more often, further afield to Aberdeen, to train several times a week, so having a facility like that is a huge breakthrough for sport in Moray. It is more than 30 years since a major new public sports facility was built in Moray. I really pay tribute to Sandy Adam, Kathryn Evans, Grant Wright and everyone else involved in constructing this outstanding facility, which will be opened later this year and will be a huge benefit to the local area.

There are many things that I would like to have spoken about, but time is clearly constrained, so, as a football referee, I want to focus on football and refereeing. We have already heard about the Scottish women’s team qualifying for this year’s World cup in September. That was a great achievement for Scottish sports stars and for our women’s team. I know that everyone in the country will be getting behind the team later this year at the finals. There will also be a derby match between England and Scotland that will, I am sure, allow for interesting debates across the Chamber as it is being played. It is great to see women’s football doing so well in Scotland and across the UK. If I may, I will make a quick pitch for the reception I am hosting on Wednesday night to promote opportunities for women and girls in the football industry. I hope that the Minister, the shadow Minister and the SNP spokesperson could perhaps come to that event. Many people are going to be speaking there, and we really have to do everything we can to promote having more women in football and in sport generally.

On football refereeing, I could speak not just for five minutes but for five hours and maybe even for five days. We do not mention refereeing enough. Without the referees, and indeed the other officials, there is no football. We are quite often derided for our decisions, but it is quite simply the fact, in any sport, that without officials that sport cannot take place. Without a Deputy Speaker in the Speaker’s Chair, this debate cannot take place. That shows how important it is to have someone neutral keeping an eye on the time and on the behaviour of the participants. When I was a Member of the Scottish Parliament, I led a debate on our Scottish officials who had been selected to represent Scotland at Euro 2016. It is important when our sports stars—the men and women who play the sports—qualify for international tournaments, but when we have officials who are selected to represent their country, whether they be tennis umpires or snooker referees, we should celebrate that as well.