Public Sector Pay

Margaret Ferrier Excerpts

Thursday 13th July 2023 Commons Chamber

[John Glen]

I say respectfully to the hon. Lady that we have taken a number of interventions and made a number of decisions across the board, and that does not just mean a single percentage—I set out the percentages across different workforces in some detail—and sometimes, such as within education, those distributions are designed to give more uplift to those at the lower levels. I am happy to correspond with her on anything specific that she wants to bring to my attention, obviously within the devolution framework.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

I thank the Chief Secretary for his statement. The average time that it takes a first-time buyer to save for a deposit has climbed to a record high of 10 years, often meaning that only the most privileged in society can afford to get a foot on the housing ladder. With wages stagnating and high rents hindering saving, what steps are the Government taking to support individuals wishing to purchase their first property?

[John Glen]

The Government have an extensive programme led by the Secretary of State for Levelling Up, Housing and Communities. I am sure that he would be happy to set out the further work he is doing in advance of the autumn statement.

Business Banking Resolution Service

Margaret Ferrier Excerpts

Tuesday 11th July 2023 Westminster Hall

[Mr William Wragg (Hazel Grove) (Con)]

I beg to move,

That this House has considered the Business Banking Resolution Service.

It is an extraordinary pleasure to serve under your chairmanship, Mr Pritchard, and to welcome the Minister, shadow Ministers—the hon. Member for Hampstead and Kilburn (Tulip Siddiq) and the right hon. Member for Dundee East (Stewart Hosie)—and an extremely able Parliamentary Private Secretary, the hon. Member for Totnes (Anthony Mangnall), who will no doubt pass notes diligently.

I hope to outline how and why the Business Banking Resolution Service has failed to restore trust between small and medium-sized enterprises and their lenders, or to resolve a meaningful number of complaints. I also hope to outline alternative proposals that might achieve those goals. According to “Scale up to level up”, a 2021 report by the all-party parliamentary group on fair business banking, 73% of small businesses would rather grow more slowly than borrow. That is a worrying trend that needs to be reversed.

Empowering businesses to borrow with confidence can only be good news for our economy. A healthy SME lending market depends on trust and confidence that things will be put right if they go wrong. As has been stated in this place many times, most transactions between businesses and their financial service providers, including the majority of commercial lending, are neither regulated nor covered by consumer protection laws. The power imbalance between SMEs and banks and other large financial firms leaves small businesses vulnerable to poor treatment. It is, therefore, vital that SMEs have access to independent and effective dispute resolution services when they are in dispute with their lenders. The Treasury Committee’s 2018 “SME Finance” report was clear on that:

“We must introduce a system for dispute resolution and redress that gives the UK’s SMEs the confidence to engage with financial services providers, safe in the knowledge that they are not vulnerable to exploitation and mistreatment.”

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

I congratulate the hon. Member on securing this debate. Support for the BBRS is limited; many have stated that a new alternative resolution scheme should be created. Does the hon. Member agree that any new scheme should seek not to burden the tribunal system, by requiring parties first to seek agreement through mediation services?

[Mr Wragg]

The hon. Lady makes a valid, important and sensible point. I will touch on a suggestion towards the end of my remarks.

In the course of its inquiry, the Treasury Committee considered the long-standing and very large gap in provision of a financial dispute resolution service for SMEs, between those eligible to refer a complaint to the Financial Ombudsman Service and those with access to enough money, appropriate legal representation, and sufficient courage and time to be able to sue their bank. A similar shortfall was identified in the APPG’s “Fair Business Banking for All” report.

--- Later in debate ---

[Mr Wragg]

I am afraid that the hon. Gentleman highlights one of many cases across our constituencies. I perfectly well understand his constituent’s sense of injustice. Hopefully this debate will at least give us an idea of the way forward.

The BBRS followed from the Walker review, commissioned by UK Finance, which identified a gap in dispute resolution and recommended that a voluntary scheme be established. It recommended action to deal with legacy disputes and contemporary complaints by providing speedy resolution for larger SMEs’ ongoing financial complaints. A proposal to set up a financial services tribunal was made at the time by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) and the Treasury Committee in its 2018 report. The Treasury Committee report noted strong cross-party support for the proposal. For a number of reasons, including a lack of parliamentary time and the significant costs involved, the Walker review did not support the creation of a tribunal.

The BBRS was also established to ensure the excesses of the financial crisis were not repeated, and that record keeping and data flows about SMEs can be used to monitor bank behaviour and culture, and can provide an early warning system for customer mistreatment. That was a key purpose of the Walker review, beyond providing a new mechanism for dispute resolution.

A 2019 letter to Stephen Jones, the then CEO of UK Finance, the then Chancellor of the Exchequer, Philip Hammond, made Her Majesty’s Government’s position on the nascent scheme abundantly clear. It stated:

“If it transpires that the scheme is not bringing resolution to a meaningful number of complaints…then I would expect there to be further discussions around the scope of and eligibility for the backward-looking scheme.”

That gets to the nub of the issue.

[Margaret Ferrier]

Despite forecasts that more than 60,000 legacy cases would be eligible for review, take-up and financial payouts have been minimal. Does the hon. Gentleman agree that further action must be taken to support businesses in bringing forward legacy claims, and that there should be a six-year time window?

[Mr Wragg]

As ever in these debates, the quality of interventions is superb. The hon. Lady pre-empts exactly what I was going to say. If she will forgive me, I will come on to that in a moment, but her point is perfectly valid.

It may not surprise anyone following the story closely to learn that the BBRS has failed to resolve a meaningful number of complaints. By the former Chancellor’s standards, I think it is fair to say that the BBRS has been an abject failure and has certainly not given UK SMEs confidence to engage with financial service providers.

As just mentioned by the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier), it was estimated by the then chief executive of UK Finance that more than 60,000 historical complaints would be eligible for review. However, by May of this year, the BBRS had made direct adjudications on just 28 cases resulting in financial awards. In that same time, it has been involved—whatever “involved” means—in the award of 56 financial settlements between banks and claimants. That includes cases where the dispute has resulted in a settlement following, but not necessarily because of, the involvement of BBRS. Even being generous, the BBRS has been involved in a maximum of just 84 financial awards in nearly two years out of an estimated potential of 60,000. Plainly, the quantity of resolved cases is very disappointing, to say the least.

Naturally, that raises questions about value for money. The BBRS cost more than £40 million to set up. By May of this year, according to its own data:

“Substantially more than £1 million of financial awards have been made to SMEs as a result of BBRS intervention so far”.

In other words, a maximum of between £1 million and £2 million has been paid out since the launch of the BBRS. Bear in mind that it cost £40 million to set up. Would it not have been easier to simply divide that £40 million and dish it out randomly? The BBRS has proved to be very poor value for money.

The primary issue behind these abysmal figures is the design of the scheme itself. Heavily restrictive eligibility criteria have locked out and timed out almost all credible claims from businesses, and there is no indication of any willingness from the BBRS or the banks to address this. The chair of the BBRS SME liaison panel—an advisory body set up to give SMEs a voice within the service—resigned in March this year, stating:

“The very low numbers of cases resolved by the BBRS and the banks suggest an inflexible system, and I do not detect the necessary willingness and imagination within the existing system to resolve this.”

Another fitting quote from an unnamed source close to the scheme was reported in The Times in May 2022. They eloquently put it as follows:

“Saying BBRS needs an overhaul is like saying that a tank that’s been blown up could do with a service. It’s completely defective.”

The specific concerns about eligibility are fourfold. First, the current point of valuation of turnover is the date at which the complaint was first made by the SME to its bank. This allows the bank to artificially distress companies’ assets to below £1 million, and therefore out of the scope of the BBRS, before the complaint is made to the bank. Instead, the point of valuation of turnover should be made at the point at which the bank’s alleged act or omission initially occurs.

Secondly, complaints eligible for the Financial Ombudsman Service are not eligible for the BBRS. However, the FOS has a wider purpose than strictly to resolve disputes. There may be a peripheral element of a historical SME claim that either qualifies it for consideration by the FOS or has been the recipient of such consideration. In this case, the applicant would be precluded from the BBRS, although it may meet the other criteria.

Thirdly, eligibility regarding size of business thresholds is too strict. Property developers, landlords and others cannot meet the current BBRS eligibility minimum business size criteria, even if they set out to do so. Fourthly, on balance sheet limits, currently businesses are assessed on gross business assets rather than net business assets. This is restricting and illogical, because it is not representative of the true size of the business, as it includes the costs that are due to be deducted from the balance sheet in the short term.

As I have already alluded to, the chair of the advisory SME panel resigned earlier this year after proposals put forward to reform the eligibility criteria were consistently rejected or ignored. This prompted the BBRS to unilaterally dissolve the panel. As I said at the time, this was a rather shocking and cynical move. The BBRS established an advisory panel to feed SME concerns about the service back to the BBRS. The concerns raised were ignored, and the proposals were rejected out of hand. When it appeared that the panel might be publicly critical, the panel was shut down. For those now unrepresented SMEs, that must have felt like a complete stitch-up.

The BBRS is indeed winding down—though I question whether it ever got into swing. The historical complaints process closed in February, and the contemporary complaints process will continue only until the end of this year. The reason that I am here—I surmise that colleagues are here for the same reason—is to put it to parliamentarians that the process has been a failure. We simply cannot make the same mistakes again. As I hope I have illustrated, the BBRS has been a waste of time and money and has certainly not resolved a meaningful number of disputes. If anything, many SMEs’ experiences with the BBRS have served only to further erode their trust in the financial services sector.

As has been suggested in the past, a financial services tribunal, with a statutory footing, could be the solution. I commend the idea to my hon. Friend the Minister. Such a body would be modelled on employment tribunals and be a genuinely independent organisation with legal teeth. The creation of a tribunal would have a dramatic effect on the power imbalance inherent in disputes between businesses and large financial institutions, echoing the transformation in employer-employee relationships brought about by the introduction of employment tribunals. That must be accompanied by an amendment to section 138D of the Financial Services and Markets Act 2000, to enhance the legal rights of SMEs. Those changes will be significant in ensuring that SMEs have access to justice. Indeed, as the Treasury Select Committee stated in 2018:

“Taken together, these changes will ensure that the UK’s small businesses will no longer be denied justice, as so many have been in the past.”

Ultimately, the BBRS has failed to achieve its aim of providing meaningful redress in a fair and independent way. As an alternative, the proposal for a financial services tribunal, endorsed by the Treasury Committee and by the all-party group on fair business banking, which I have the pleasure of co-chairing, must be seriously considered. We owe it to the brilliant SMEs in each of our constituencies to create a lending environment in which they can thrive and drive our national economy forwards.

--- Later in debate ---

[Stewart Hosie]

They ought to be in people’s thinking. The figure of 60,000 is commonly used. Of course, the eligibility criteria include that they must not be eligible for the FOS scheme, as was very properly referred to by the hon. Member for Hazel Grove. However, let us assume that it is a big number, in the tens of thousands, and let us hope that, at the very least, businesses do not fall through the cracks between this service and the FOS. It would be a different problem entirely if people were not eligible for any kind of access to at least one of the redress systems.

The hon. Member for Hazelgrove laid out a bit of the background. I want to go through some of that again briefly, given that it is quite important in terms of what the Government may choose to do next. The BBRS was set up in 2018 to help SMEs resolve disputes with their banks free of charge. Many high street banks, including Lloyds, NatWest and HSBC, took part in the scheme, and it has been operating—although I use that word loosely—since 2021. It was created after a spate of banking scandals involving the mistreatment of thousands of companies, including, as we know, the Royal Bank of Scotland’s GRG, and similar operations at other banks in the aftermath of the 2009-10 financial crash.

The eligibility criteria, which have been mentioned, are that the dispute must have occurred after 1 April 2019, and that the SME must have an annual turnover of up to £10 million per annum and a balance sheet of up to £7.5 million, and must not be eligible to take the complaint to the Financial Ombudsman Service. Many stakeholders have noted that the scheme has not been successful in helping SMEs to resolve their disputes, despite costing—as we have heard—tens of millions of pounds to set up, which was paid for by the industry. One of the main issues with the scheme is the narrow eligibility criteria for SMEs to use the service. The recent figure was only 35, but even 50 or 60 would still represent a tiny fraction of the number that could be resolved.

[Margaret Ferrier]

When the Business Banking Resolution Service was introduced, it was marketed as an accessible service. However, data shows that, by March last year, only 776 businesses had registered with the BBRS. Does the right hon. Member agree that this suggests that either the Business Banking Resolution Service was difficult to use or, alternatively, the service was not publicised effectively?

[Stewart Hosie]

It could be a combination of both, although it is instructive that Andy Agathangelou, the founder of the Transparency Task Force, called the BBRS an “abysmal failure” that is not “fit for purpose”, so I certainly think that the opaqueness and lack of advertising might be significant factors in how few businesses have sought to use it and what happened to those that did. He also said that some small businesses are “convinced” that the BBRS is

“a mechanism through which banks have found justification for not making payments”.

Even if that is not true, if the perception among the SME community is that the service, which was put in place to resolve their disputes, is being used for contrary purposes, that alone would be a huge problem for the BBRS.

Oral Answers to Questions

Margaret Ferrier Excerpts

Tuesday 9th May 2023 Commons Chamber

[Victoria Atkins]

I am sure that I am joined by all Members of the House in thanking my hon. Friend for her interest in ensuring that we have hairdressers in 15 years’ time. We recognise the important role that hairdressing salons play in the education and training of apprenticeships. Indeed, funding for employer-led apprenticeships will grow to £2.7 billion in 2024-25, which will help to pay for the cost of training and assessment. However, she is quite right to pinpoint the need for those participating in the hairdressing industry to ensure that they are following the rules correctly. It is not their choice; there are very strict criteria, and they must make sure that they follow them. I very much look forward to discussing this in further detail with my hon. Friend later this week or next week.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

The hair and beauty industry is characterised by a high percentage of female entrepreneurs and young people. However, that workforce continues to be at risk of disguised employment. What steps are Ministers taking to ensure that self-employed individuals are aware of their tax expectations so that women and young people can continue to thrive in that sector?

[Victoria Atkins]

Is it not wonderful that we have so many women setting up their own businesses and taking that step into entrepreneurship? [Interruption.] Oh, there is chuntering from those on the Labour Benches; they seem to disagree. The hon. Lady is right that we should ensure that we help entrepreneurs, whether male or female, to understand the rules when it comes to tax. That is why we provide guidance and support for customers to help them understand employment status, and we have agreed guidelines specifically with the National Federation of Hairdressers to help it communicate with its industry about which rules apply to which hairdressers.

Oral Answers to Questions

Margaret Ferrier Excerpts

Tuesday 21st March 2023 Commons Chamber

[Jeremy Hunt]

That is exactly why I wrote to Ofgem. Wholesale gas prices are now lower than they were before the Ukraine invasion. The hon. Lady is right to say it is not a regulated market and I want to find out from Ofgem what it thinks should happen to avoid precisely the problem she talks about.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

Many pubs and breweries are locked into energy bill contracts that are staggeringly high, and they are calling for an opportunity to renegotiate them. What further support will Ministers offer the sector with its energy bills, particularly recognising the financial impact that the increase in alcohol duty will have?

[Jeremy Hunt]

We are doing a great deal. As the hon. Lady will know, we set up a new scheme, the energy bills discount scheme, to help businesses in the coming year. As I mentioned to my hon. Friend the Member for York Outer (Julian Sturdy), we are also giving them 75% relief on their business rates. We will continue to do everything we can for this very important sector.

--- Later in debate ---

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

Industry stakeholders have been clear that Ministers must now focus on long-term solutions to support people with ongoing high energy prices through improved home energy efficiency. What steps will Ministers take to support households with the rising costs of energy in the long term?

[The Exchequer Secretary to the Treasury (James Cartlidge)]

The hon. Lady makes an excellent point. We have put in place a huge amount of support to help people through this immediate challenge with their energy bills, but we do need to think long term. That is why the Chancellor has put in place the 15% target to reduce energy consumption in both domestic and non-domestic buildings, but alongside that, and crucially, we have to increase the supply of UK energy, both renewables and in the North sea.

Cash Acceptance

Margaret Ferrier Excerpts

Monday 20th March 2023 Westminster Hall

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

I beg to move,

That this House has considered e-petitions 605030 and 622284, relating to the acceptance of cash.

It is genuinely a pleasure to serve under your chairmanship, Ms Bardell. The petitions before us attracted more than 58,500 signatures between them, having closed on 5 July 2022 and 10 March this year respectively. I thank the creators and signatories of the two petitions. Their actions have meant we are here today to debate an issue that is clearly of interest and concern to many people across the UK.

The petitioners call on the Government to:

“Make it illegal for retailers and services to decline cash payments”,

and to:

“Require all businesses and public services to accept cash payments”,

with the exception of internet-based businesses. They argue:

“Not everyone wants a digital trail and others simply cannot pay by card.”

The petitioners expressed concern about cashless payments creating an “enforced dependency on banks” and a

“threat to privacy as people cannot make anonymous payments.”

They stated:

“If we wish to uphold freedom of choice and the right to privacy, it is imperative that we protect the use of cash.”

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

In response to the Petitions Committee’s online survey, 61% of respondents said that they use cash to help with budgeting and, in the light of the cost of living crisis, by way of tracking their spending. Does my hon. Friend agree that the UK Government must recognise and protect cash as a tool that helps people to survive the cost of living crisis?

[Martyn Day]

My hon. Friend makes a good point. Indeed, I emphasise that it is essential not only for many people who budget, but for those on lower incomes, the elderly and those with disabilities, who need that facility the most.

--- Later in debate ---

[Martyn Day]

The hon. Member makes a very good point on which I wholeheartedly agree. As I said, 6% of adults use cash payment for almost everything. That figure increases to 9% of those in the most vulnerable circumstances. I shall return later to the impact of cash refusal on the most vulnerable in our society.

Although the covid-19 pandemic undoubtedly affected payment habits, there has been both a sustained, albeit partial, recovery and a stabilisation in trends around the use of cash, as noted by the Bank of England in its third quarter bulletin in 2022. The Bank also noted that the value of bank notes in circulation remains close to an historic high, reflecting the fact that up to 60% of the population are holding more cash as a store of value.

Beyond freedom of choice, there are other clear benefits to using cash. One benefit for retailers is that unlike card schemes, for which they must pay set-up and transaction fees to providers, with cash every penny goes to them. Another benefit that should not be underestimated is the role that cash can play when other payment methods fail, as the hon. Member for East Londonderry (Mr Campbell) illustrated. I am sure that many of our constituents have had the experience of being unable to use online services or cards in the face of card rejection, IT glitches or system outages.

I can give an example from my own life, when I visited a friend who was recovering from surgery in hospital. I stopped for fuel on the way, which was lucky for me because although I had no cash in my pocket, my card was accepted, and when I got to their house I had an email from my bank telling me that it thought there had been a suspicious card transaction so my card had been stopped; had I tried to buy fuel on the way home, I would have had no means of paying for it. Cash is essential.

[Margaret Ferrier]

Figures show that 70% of people prefer to use cash because they are concerned about the privacy of alternative forms of payments, and 49% said they used cash because of concerns about fraud. Does my hon. Friend understand the worries that a move to a cashless society could militate against consumer privacy and may leave sectors of society more vulnerable to fraud?

[Martyn Day]

I agree entirely with my hon. Friend’s good points. It appears to be something that concerns very many people. Research from Which? has shown that 82% of Scottish consumers are likely to keep cash in case electronic payments are down.

--- Later in debate ---

[Martyn Day]

Absolutely; the hon. Gentleman makes a good point, for which I thank him. I am flabbergasted that a bank is not dealing with cash—it beggars belief.

The issues raised need to be addressed, but protecting access to cash is not the same as protecting the right to use cash—a right that, for many, amounts to an absolute necessity. For some of our constituents, not being able to use cash is a profound barrier in everyday life. Cash can be a vital means of budgeting. As noted in the 2019 access to cash review, that is especially true for those on lower incomes. The 2022 cash census identified that there are cash users who are highly dependent on cash for budgeting and would struggle to swich to digital payments. It concluded that 15 million people in the UK use cash to budget. That is backed up by the responses to the Petitions Committee survey: 61% of respondents stated that they use cash to budget.

Earlier, I touched on the impact of cash refusal on vulnerable groups, to which I now return. The access to cash review drew a stark conclusion. It identified that more than 8 million adults in the UK

“would struggle to cope in a cashless society. For many people in the UK, using cash is not a matter of choice, but of necessity.”

It highlighted that

“poverty is the biggest indicator of cash dependency”.

Dependence on cash is closely tied to barriers to digital connectivity—for example, for those living in rural areas and those with low or no digital engagement.

In its 2022 policy briefing on the subject, Age Scotland raised the importance of cash for older people. It highlighted that many on low or fixed incomes prefer to use cash to budget. It also noted that

“140,000 adults in Scotland do not have bank accounts”,

and that

“34%...of over 60s in Scotland do not use the internet”.

Furthermore, a 2020 survey by the Financial Conduct Authority explored the relationship between cash usage and factors including education, health and wealth. It noted that 26% of those in poor health use cash to a great extent, and that some people with physical or cognitive disabilities find payment methods other than cash difficult to use.

[Margaret Ferrier]

My hon. Friend is generous to give way again. It has been reported that about 10% of people have been unable to pay for medical supplies with cash. We know that older people and those with some physical and mental health problems prefer using cash. Is my hon. Friend concerned that certain societal groups may be at risk of being unable to access the medical care they require if they cannot pay with cash?

[Martyn Day]

That is a valid concern that I hope the Minister will address when he responds to the debate.

Some 8% of respondents to the Petitions Committee survey said that they had a physical or mental health issue that made using alternatives to cash difficult. The issues included bipolar disorder, anxiety disorder, depression, arthritis, visual impairment, cognitive disability and strokes. It is reasonable to conclude, therefore, that the impact of cash refusal is felt acutely by those on lower incomes, those who experience barriers to digital payments, those who are disabled, and those with physical or mental health conditions. Indeed, the Government acknowledge that in their response, stating that they want to ensure that vulnerable people

“have appropriate access to banking”

and payment services.

However, to reiterate my earlier point, protecting access to banking and payment provisions, although important, does not address the issue of cash acceptance. There is growing evidence that cash refusal is becoming a very real issue. The covid-19 pandemic has undoubtedly accelerated the cashless trend. As Which? research has shown, the pandemic led to an increase in the number of retailers that refuse to accept cash. The cash census similarly found that as the economy reopened in the summer of 2020, retailers were increasingly going cashless, with 42% of people reporting that they had visited a shop that did not accept cash in July 2020.

The results of the Petitions Committee’s survey also make for stark reading: 77% of respondents said that a business had refused to let them purchase something with cash, with the most common refusals of cash coming from restaurants, takeaways and transport; and 88% said that cash refusal had a large or moderate impact on them, describing feelings of embarrassment or anxiety as a result.

Our daily lives are filled with examples of the cashless trend as the consumer experience becomes increasingly dominated by technology, from bus companies encouraging people to use contactless payments to card-only self-checkout machines in supermarkets. However, the march towards cashless risks the exclusion of a great many people and a profound and negative impact on their lives.

The Government’s current position of focusing on infrastructure but ultimately leaving the decision in respect of cash acceptance to individual businesses simply does not go far enough. It is essential that gaps in the provision of banking facilities are addressed so that people can access cash easily in their community and small business owners do not have to travel many miles to access deposit facilities. However, that alone does not guarantee cash acceptance. It is a difficult issue for many businesses, especially where the ability to deposit cash might involve lengthy journeys away from their business.

The Association of Convenience Stores advises that 60% of transactions in independent convenience stores are paid in cash, and that 99% of shops in its sector continue to accept cash, with retailers striving to give customers access to their preferred payment options. While supporting access to cash to facilitate financial inclusion, the ACS would rather the decision on what payment methods to accept be left to individual businesses and not mandated by the Government, whereas an overwhelming 98% of respondents to the Petitions Committee survey agreed with the petitioners that shops and services should be required to accept cash. This is clearly an issue that affects and concerns many of our constituents, customers and businesses alike. The Government need a plan to ensure that those dependent on cash are not left behind, and part of that must be about protecting their right to use cash.

The UK Cash Supply Alliance has called for businesses to be required by law to accept cash payments for in-person services equivalent to the maximum value of contactless transactions. In their response, the Government talk a lot about what is reasonable—“reasonable access”, “reasonable provision” and so on. Ensuring that individuals and businesses have easy and convenient access to banking facilities is not only reasonable but essential, and a requirement to accept cash for lower-value transactions is also reasonable. To have the certainty that when we walk into a shop or restaurant our cash will be accepted is reasonable and, for many, vital. The Government can and must act to protect access to cash, the ability to use that cash, and the ability of businesses to easily deposit that cash. Those are very much connected issues, and they must be equally addressed.

This is a complex issue, and I am aware that I have touched on a lot of different factors in a short space of time. Indeed, I could have touched on many other factors, but I look forward to comments from other Members. I have covered some factors in more detail than others, and I look forward to the Government’s response at the end of the debate.

[Duncan Baker (North Norfolk) (Con)]

I thank the hon. Member for Linlithgow and East Falkirk (Martyn Day) for such a good speech, and for hosting today’s debate. We are discussing a topic that I find greatly interesting. In a previous life—not many Members realise this—I was a businessman, but also a postmaster, or at least I had the legal title of a postmaster. As such, understanding retailing as I do, access to cash is an absolute necessity in all parts of society, particularly, as has been mentioned, in rural communities. It is therefore important that we discuss the thorny issue, which has already been touched on, of the wilful negligence of banks in closing their branches on our high streets up and down the country, despite all of the changing public behaviour, and the issue of traders accepting cash as payment.

Despite the advances of technology and those changing consumer behaviour patterns, it is clear to me that the acceptance of cash should remain an option for the foreseeable future. The country at large, and the public, are simply not in a position to close that door off. All the research that has ever been conducted in this area shows that people must be able to still access cash.

In 2021, I presented my own Banking Services (Post Offices) Bill. It did not get very far, but, nevertheless, the intention was to try to ensure that banks were required to offer banking services for their customers, including the provision of cash, via the post office network. The 11,500 post office branches on our high streets seemed like absolutely the right place to be the authorised financial services dealer to enable cash to always be accessed on our high streets.

[Margaret Ferrier]

Cambuslang, in my constituency, was honoured to host a bank hub, through the pilot scheme between post offices and the high street banks, to help protect community access to cash at a time when more and more banks were facing closure on local high streets. The hub on Cambuslang’s Main Street has been a great success and very popular with constituents. Does the hon. Member agree that more bank hubs could and should be funded for communities in need?

[Duncan Baker]

I thank the hon. Member for her question. Yes, bank hubs would be a very good idea. The Minister will probably correct me, but I believe that the Government have initiated putting bank hubs in throughout the country. However, my point about using the post office network is that it is already there. There are already 11,500 post offices on our high streets.

Instead of a sweetheart deal with banking services between the Post Office and the Government, we should legislate, and make it legally binding that post offices must always be allowed to offer banking services, so that we do not have some bank, at the drop of a hat, withdrawing its services because it does not like the deal that it is getting from the Post Office. We should set it in stone so that people and consumers always have that offering on the high street.

The European Central Bank found that cash remained the most frequent method of payment in 2022, at 59%. Despite that, and all of the research that we have outlined, we continue to see a steady decline of bank branches on our high streets. In 2021, 736 bank branches closed throughout the UK. From my constituency, I remember some of closures proposed by Barclays. The reason for closing was that the research indicated a drop in footfall. I said to the bank team that presented the findings, “We have had lockdown; consumers have not been able to go to the bank. You cannot possibly use a drop off in footfall as an excuse to shut a bank branch when the public have been prohibited from even accessing our towns and villages.” It was absolute madness.

In the east of England specifically, we saw a 39% decrease in the number of banks between 2012 and 2022. The far-reaching impacts that this has had, especially in areas where many older people live—I have the oldest demographic in the entire country—cause huge concern throughout my constituency and other rural areas, because all the research shows that the vulnerable and elderly are simply not able to go cashless at this moment in time.

I witnessed at first hand the serious impact of last year’s Barclays bank closure in my home town of Holt, where I was born, despite the fact that we are a centre for retail in the area. We have a huge number of visitors coming to Holt, and Barclays was the last bank in the town to close. Cue pandemonium for a retirement area with elderly people—a vibrant market town that is rich with many retail shops—who were left with no ability to do their banking, which affects not just residents and businesses but visitors, who also need access to cash. Luckily, we were able to use a banking hub, exactly as the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) suggested, to try to safeguard people needing access to cash.

The research suggests that 10 million people would struggle to cope in a cashless society. Many of them are on low incomes and are older, but they also include people who have disabilities or ill health and those who run small businesses—a plethora of people across society. By preserving the physical infrastructure, whether through a post office or a banking hub, we also preserve the right for the most vulnerable to use cash, to make sure that they too can be looked after.

I was a retailer at one stage, so I appreciate traders’ attitudes towards accepting cash, which can become expensive. The banks make it expensive and more difficult for people to do their banking. If banks shut, people have to use courier services, which charge, and there is a delay in deposits coming into the bank. I understand that it is far easier to stop using cash, but that does not mean that it is the right thing to do. Limiting the acceptance of cash payments puts pressure on people, who can become financially excluded. It may be very difficult for the Government to enforce the preservation of cash payments in a free market, but they should be straining every sinew to incentivise providers and make sure that they continue to accept cash.

The access to cash review provided some sensible and feasible recommendations to help keep cash payments an option for the foreseeable future, and I am sure the Minister will have looked at it. The crux of all this is that I recognise that, at some point—one day—cash will begin to fizzle out, but it is fundamental that we help consumers for as long as physically possible, because it is necessary. It is not about stifling technology or progression. It is a fundamental basic requirement that millions and millions of people up and down the country still need access to cash.

The use of cash will always play a vital role for many people—for budgeting and for people who may have poor spending habits, because it is a great way to help people manage their bills. Keeping cash as a viable option will help to support those on low incomes and vulnerable people, as well as our high streets and small businesses. I do not think that cash should be something that we begin to dismiss and wind down. The crux of this is about not only keeping cash in circulation, but making sure that the Government play their part in ensuring that there is a proper, viable infrastructure for cash to circulate, which means doing something to legislate for the banks, whose corporate social responsibility has gone out of the window as they have closed as many branches as they can around the country. That has to be something we address as well.

--- Later in debate ---

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

Let me begin by thanking my hon. Friend the Member for Linlithgow and East Falkirk (Martyn Day) for his excellent exposition of the challenges that we face. This e-petition debate calling for the legal right to use cash payments in shops and requiring all businesses and public services to accept cash payments is very important. Since I was first elected, repeated concerns have been expressed about the decline of our cash infrastructure and the need to preserve it. I have spoken in every single debate on this matter, along with the hon. Member for Blackpool North and Cleveleys (Paul Maynard), yet here we are again. It feels like we are banging our heads against a wall as we face, with increasing urgency, the existential crisis facing our cash infrastructure.

The arguments are well rehearsed, and have been again today. There is no denying that, as a result of changes wrought by the covid pandemic, the future of cash is even more uncertain. Many of us in this Chamber and beyond fear that its demise has been accelerated. Ultimately, this is a debate about inclusion—financial inclusion—and consumer choice. The situation becomes ever more urgent with every debate that we have on this issue and with each passing day. I wish to pay tribute to and commend the Scottish Affairs Committee for its report, which is a most informative and constructive contribution to the wider debate.

From the outset, it is important to underline the fact that the right to use cash, as the hon. Member for Blackpool North and Cleveleys said, cannot be separated from free access to cash. There is no point in legally ensuring the right to use cash if there is no reasonable access to cash. It is important to remember that, in Scotland, this debate takes place in the context of bank closures. This matters, because without access to cash it is simply not possible to use cash. That cannot be said too often. Fifty three per cent of Scotland’s bank branches have closed. In my constituency, the situation is nothing less than appalling. Kilbirnie has no bank. Beith has no bank. Dalry has no bank. West Kilbride has no bank. Kilwinning has no bank. Stevenston has no bank. Ardrossan has no bank. Indeed, in the whole of my constituency only Saltcoats, Largs and Isle of Arran have a bank branch. If we are to protect the cash infrastructure, we need a two-pronged approach: protecting access to cash and protecting the legal right to use cash.

Overall, Scotland has suffered the highest percentage loss of bank branches among all the nations in the UK. It is against that backdrop that any debate about access to cash and the use of cash must take place. Alongside this, we see our post offices under threat, as postmasters struggle to make even the minimum wage. In all the towns in my constituency, the post offices—those towns have no banks—play a vital role in supporting our cash infrastructure, because the banks have washed their hands of the matter. Yet, as an example, the town centre in Kilwinning has now lost its post office. Although Post Office Ltd is working hard to find a sub-postmaster to take on the franchise, it is proving very challenging because it is so hard to turn a profit or even make minimum wage for the franchisee. Of course, it is true to say that the last Labour Government closed down a whole slew of post offices, including many in my constituency, and stripped others of the services that they were able to deliver. All this has been exacerbated by the winding down of the energy support on which post offices currently rely.

Of course, it would help if the banks paid postmasters properly for the work they do on the banks’ behalf as they abandon our towns. Banks must value postmasters, who are picking up the pieces left behind by doing the banks’ work for them and for insufficient remuneration. The situation is simply unacceptable and has placed an unsustainable burden on postmasters, and I look forward to hearing the Minister’s thoughts on that specific matter.

As if all this was not enough, we see a worrying decline in cash machines, especially free-to-use cash machines, in communities across Scotland. This is especially so in rural areas, as we have heard. The Centre for Social Justice recently found that 38% of people on low incomes report having faced cash machine charges, compared with 17% of all consumers. That is what you call a poverty premium: the exploitative practice of placing a disproportionate number of pay-to-use cash machines in our most socioeconomically challenged communities.

Access to cash is vital if we are to demand, as we should and do, that there be a legal right to use cash, and there must be a requirement that all businesses and public services should accept cash. As we have heard, the vast majority of us use cash often and when it is convenient to do so. Indeed, for many rural dwellers, there may be little choice due to digital challenges, which may be exacerbated by the weather, as we have seen in recent weeks, as well as by technical glitches, which can strike without warning at any time. For the most vulnerable customers, there must be the option to access and use cash if that is what they require and is most convenient for them.

The Financial Conduct Authority has found that over 1 million adults in the UK do not have a bank account. There are also many who struggle to manage budgets electronically, and others who simply prefer to manage their daily transactions in cash, such as older people and those on a budget. They would face financial exclusion if our cash infrastructure is allowed to deteriorate further. We know that many consumers were unable to buy what they needed during covid, and that 38% were turned away when trying to buy food from shops using cash. What happens to those who have no alternative to cash payments? Are they to be abandoned? What happened to the customer being king?

Anyone who has ever faced any level of financial difficulty knows that, when this is the case, banks cancel credit cards and advice centres giving debt advice advise clients to cut their cards in half. They do that to help people control their spending and manage their budget better, because we know that using plastic can often lead to losing track and overspending.

[Margaret Ferrier]

Research has shown that carrying cash can help people with gambling issues to budget, avoid debt and better control their habits. By contrast, it is harder for people to retain control and keep track of their spending while using debit cards. Does the hon. Lady agree that the UK Government must ensure that cash remains a viable payment method to safeguard against the risks of gambling harm?

[Patricia Gibson]

Yes, and we expect gambling companies to step up and take greater responsibility for the harm that gambling outlets can cause. Of course, we know that there are more ways to gamble on high streets in socioeconomically deprived communities than in better-off communities, which is another scandal that we really should debate another day.

People actually handling cash and seeing in real time what money they are spending is critical to helping them budget—even more so when budgets are under so much pressure and are so much more precarious during this cost of living crisis, when everything costs more each time we go to the supermarket.

There is, of course, another side to this. Electronic payments incur a cost for firms, especially those making many small transactions. The UK Government should seek to address that to help to support our overall cash infrastructure. It is not right that businesses should have to pay those fees. While the provisions of the Financial Services and Markets Bill, which grants new powers to the Financial Conduct Authority over the UK’s largest banks and building societies to ensure that cash withdrawal and deposit facilities are available in communities across the country, were welcome, as many people have said in this debate, we need more detail. We need to know how that will work in practice. Again, I am hoping that the Minister will tell us more about that when he responds.

However, it is and has been clear for a long, long time—it was made even clearer as we tried to get back to normal after the pandemic—for a range of reasons that have been well rehearsed today and previously that consumers want and need the choice to pay for goods and services in cash. Consumers must not be forced down a cashless road which they do not want or are simply unable to go down. The Government should uphold that right and protect our cash infrastructure for all the sound reasons debated today. They should enshrine that right in legislation, which is becoming increasingly necessary.

Fundamental to all this is protecting free access to cash in all our communities. Financial inclusion matters, and the Government have a moral duty to uphold that in principle as well as in practice.

Energy Suppliers: Customer Credit

Margaret Ferrier Excerpts

Wednesday 22nd February 2023 Westminster Hall

[Drew Hendry]

My hon. Friend is exactly right. It speaks to the way the cards are stacked against consumers and users in favour of the energy companies. The position that people find themselves in does not seem to be met with any sympathy across the industry—it is just a fact of life; they are collateral in the game of business. That is not the way we should look at people. As I said, people are turning appliances off even when they are in credit with the energy companies.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

Customers have reported being made to jump through hoops to get their credit back, and the only rules for timescales implemented by Ofgem apply when accounts are closed. Does the hon. Member agree that Ofgem should have the power to be stricter with suppliers, in line with its purpose to protect customers?

[Drew Hendry]

The hon. Lady is absolutely right. I will spend a bit of time later talking about Ofgem and powers that the Government might take forward in relation to working with Ofgem.

As I said, people are turning things off even when they are in credit. I believe every Member of this House should be more concerned that the property of customers of energy companies is being held hostage, without the explicit permission of those customers; the money does not belong to the energy companies. Things should and must change.

I started this campaign in January. By coincidence, Alex Lawson, a Guardian journalist, did some research into the subject and uncovered the fact that

“suppliers had hoarded an estimated £9 billion of customer cash by November last year”.

In his investigation, he pointed out that Centrica had £400 million of customer deposits; Octopus Energy had £660 million; and E.ON, OVO Energy, EDF and ScottishPower refused to say how much money they had from customers whose accounts were in credit. It is not the energy companies’ money.

I contacted the suppliers in preparation for the debate. The response I received from Utilita about high credit balances defended its customer service and the way it looks after its customers, but I was struck by a paragraph in which it said:

“Other companies such as Ovo, Octopus and Bulb have significant customer credit balances in their accounts. Indeed Octopus recently published its accounts for the year ending March 2022 in which it shows £221 million—strange to have such high credit balances at the end of winter! Perhaps their ‘innovative practices’ are not working as intended. The article by George Nixon that appeared in the Times on Saturday 28th January 2023, ‘How to get your money back from your energy supplier’ mentioned virtually all the larger suppliers (all of which had either minor or no weaknesses in their direct debit processes according to Ofgem).”

I am not giving Utilita a free pass, but it is telling that it is willing to make that comment.

In the highlands and islands, a great number of people subscribe to what used to be called the hydro board. When Scottish and Southern Electricity Networks took that over, many accounts simply transferred, and OVO Energy recently took over all those accounts. Because of that, I may receive a particularly high number of complaints about practices at OVO, so I state that at the outset. At the start of the pandemic, OVO received an £8.9 million fine for communication and billing issues. As mentioned, OVO has declined to give an average customer credit balance. Again I state: that is not its money and it is refusing to tell us how much it has.

My inbox shows that constituents’ problems with OVO are manifest regarding billing and metering. I have picked a sample of messages from people who have come to me, one of whom has allowed me to use their name and details, for which I am grateful. To get through to OVO, many of my constituents have had to spend up to

“4.5 hours on hold on the telephone.”

This is a company that says there are simple things people can do to sort their accounts.

OVO will not send some customers monthly bills, insisting that “Total Heating with Total Control” bills are provided quarterly. One constituent received three bills in one month: one showed that they owed £680, which they paid; one showed £300 in credit; and another in the same month said that they owed £1,000. I will return to this issue, because it is an important factor in the way these companies work with people’s money. They have consistently failed to fix faulty meters, with 18 months of changed dates and timeframes in one case.

The constituent I mentioned, to whom I am very grateful, is Mrs Frances Raw, who is a widow on a state pension. The Minister will be aware that the state pension is £611.64 per month. She has been asked to pay more than £236 a month, and the company wants to raise her direct debit. It thinks that she is going to use more energy, which is the justification for putting up her direct debit, but Mrs Raw is sitting on a credit balance of £1,796.36.

By any measure, it is a disgrace to put somebody under that kind of pressure. It is a failure in a duty to care, and a failure to do good business; and it is a failure that it is not being properly regulated, as we need to prevent that happening to people such as Mrs Raw. She has been brave enough to allow me to use her name, and I thank her one more time. I know how difficult it is for constituents to come forward and say they have an issue, and that it is okay to talk about it. It is very rare for people to do that, and I am extremely grateful to her.

Mrs Raw’s problems do not stop there. OVO keeps delaying changing her Total Heating with Total Control meter as well. This is destined to continue. I met Mrs Raw and she asked me if it would be possible to get some of her money back. I said, “No, Mrs Raw, you are entitled to all of your money back.” That is what everybody should get in these circumstances. It should not be a matter of someone begging to get their money back; it should happen automatically.

[Drew Hendry]

My hon. Friend makes a terrific point, which has been running through my mind. When these companies hold customers’ money, they are using it for whatever purpose they might have, rather than the customers being able to earn interest or pay their bills. These companies may well be using it for gaining their own interest. Some people might consider that theft. Some people might consider that using other people’s money to benefit themselves, without the permission of the people who own the money. That is not good enough. It is not their money; it is the customers’ money and it belongs with them.

[Margaret Ferrier]

The hon. Member makes a very good point. These companies are using that customer credit as spending capital. Does he agree that it could be propping up unstable or unsuitable business models? That is why they are reliant on that money, but at the end of the day it belongs to the consumer.

[Drew Hendry]

The hon. Lady makes a good point. There has been a great deal of debate in the industry about the practice of ringfencing, and whether that should be carried forward. I might touch on that shortly. The fact is that this money is being used in an incorrect way, whether it is propping up a company or aiding a company that needs it to survive, in a way that is not normal in business.

Notwithstanding the good point made by the hon. Lady, it is almost beside the point. The fact is that this money should not be used by companies, without the explicit permission of the people who have that money with them. Do not forget, they are not offering a shareholding to those customers. They are not saying, “Because you have a credit, as other people might have a credit with our company and have bought shares, we will give you back a dividend.” They are not applying any dividend. They are just keeping the money, and it is not their money.

I have some personal experience with OVO because, having started this campaign and looked into what was happening, I studied my own account, and lo and behold, I had a credit sitting on my account that I was not aware of, so I did some digging around. I have a smart meter that was installed and, despite several complaints and even a change of meter, OVO has still not been able to rectify the issue, so I have some sympathy for people who are not getting correct readings and are getting incorrect bills.

Oral Answers to Questions

Margaret Ferrier Excerpts

Tuesday 7th February 2023 Commons Chamber

[Jeremy Hunt]

I am very happy to do that for my hon. Friend. The flexibilities that we have since leaving the EU mean that we are able to do the Solvency II reforms, which mean that potentially £100 billion of extra investment will go into UK companies. Indeed, the whole of the Edinburgh reforms give us the opportunity to rethink our regulatory structures so that we do not just remain the world’s second largest exporter of financial services, but go from strength to strength.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

Concerns have been raised that legislation furthering deregulation of the financial sector is paving the way for an economic crash. Revocation of rules on commodity trading is a key concern. What steps has the Chancellor taken to ensure the Financial Services and Markets Bill, when passed, does not cause economic mayhem?

[Jeremy Hunt]

We have taken enormous trouble in our Edinburgh reforms package to make sure that we learn the lessons of the 2008 financial crash, but I would say to the hon. Member that financial services employ 21,000 people in Scotland. In fact, we called this set of reforms the Edinburgh reforms because they will be good not just for London, but for the whole of the UK.

High Income Child Benefit Charge

Margaret Ferrier Excerpts

Thursday 2nd February 2023 Westminster Hall

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

I beg to move,

That this House has considered the High Income Child Benefit Charge.

It is a pleasure to serve under your chairmanship, Mr Stringer. I put on record my thanks to the hon. Members who supported my application for this debate, and to the Backbench Business Committee for granting it and the Minister for attending.

I invite the House to consider the unfairness of the high income child benefit charge, and the ineffectiveness of its administration. The high income child benefit charge, which for brevity I will forthwith refer to as “the charge”, has its origins in the 2010 Conservative party conference, when George Osborne—the Chancellor at the time—proposed withdrawing child benefit, a previously universal benefit, from higher-rate taxpayers. One might initially approach that as a reasonable proposal; however, the reality is that the charge has consequences for some who do not consider themselves to be on a high income, as it ignores family size, how many earners are in the household, and what disposable income is available after basic needs such as food, housing and energy costs are all met.

Mr Osborne modified his proposals in the 2012 Budget, and went on to announce that, from January 2013, child benefit would be clawed back from families when the highest earner had an adjusted net income of between £50,000 and £60,000. The detail of how the adjusted net income works after taking account of any gift aid or pension contributions, and how those with a £60,000 adjusted net income effectively lose all entitlement to child benefit, was well set out in Westminster Hall by the hon. Member for South Thanet (Craig Mackinlay) during a debate that he secured on the charge in 2019.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

I congratulate my hon. Friend on securing this debate. The high income child benefit charge is too complicated, which leads to many households that are entitled to child benefit not claiming it. What they may not realise is that not claiming means that they do not accrue the national insurance credits that claimants are given until a child turns 12, impacting on state pension and other benefits if one parent is not working. Does my hon. Friend share my concerns about that knock-on effect?

[Martyn Day]

I do indeed share my hon. Friend’s concerns, and I will come on to them in my speech, although she has summed them up more succinctly than I have in the verbiage I am about to read.

In the previous debate, the hon. Member for South Thanet said that he had

“not found figures for how much the clawback and the lack of take-up of child benefit have saved the Treasury”—[Official Report, 3 September 2019; Vol. 664, c. 60WH.]

but estimated it to be £2 billion to £3 billion a year. I would be interested to know from the Minister whether the hon. Member’s estimate was accurate; I will return to the financial implications of the charge later. The hon. Member went on to say that its administration was

“a salutary lesson in how not to withdraw a universal benefit through the tax system. What we have on the statute book, which runs to many tens of pages of tax law, is the truly mad basis of trying to claw back a benefit. It is not related to overall family income, which many people describe as one of the real drawbacks of the system.”—[Official Report, 3 September 2019; Vol. 664, c. 63WH.]

I have several constituents who agree with the hon. Member—indeed, this goes to the heart of why the charge is seen as unfair. One of my constituents, Andrew Malloy, summed it up when he asked why a family with one parent earning £50,100 could be hit with a tax payback, while a family with two parents earning over £49,000 each was not affected. He has a valid point: a household with a total income of over £99,000 can still receive its full entitlement to child benefit. Shaun Boyle also struggles to understand why that is the rule, as households earning much more than his are entitled to benefits that his household is not. After deliberations, he concludes that

“this cannot be a fair system.”

From my questioning and research, I am inclined to agree with him entirely.

David Stuart is another constituent who stopped his child benefit payments in 2018 after only becoming aware of the high income tax threshold when his second child was born in November 2017. However, that did not stop His Majesty’s Revenue and Customs pursuing him for an overpayment of £6,000 with interest and five years of penalties covering the years from 2016 to 2020 for his two children. I raised David’s case directly with HMRC. It agreed it had made an error both in its assessment and in asking him to contact the child benefit office to get proof of the cessation. The HMRC respondent added:

“I will be providing feedback to the business in order to learn from our mistakes and avoid the same from happening again in the future.”

So far, so good. But David had to contact me again just last month as he had once again been asked to provide proof of how much child benefit had been paid. It therefore appears no action was taken to rectify the failings highlighted in his initial complaint, which HMRC said it was going to address.

David also raised the Wilkes case with me, on which the Court of Appeal ruled on 7 December last year. For those not familiar with the case, it addressed whether HMRC could impose the charge by means of “discovery assessments”, which allow HMRC to demand tax outside of the normal four-year assessment limit. The Court of Appeal conclusively determined that HMRC was wrong to impose the charge by discovery assessments—not just in the Wilkes case but on hundreds of thousands of taxpayers in the UK.

Yet a retrospective change in tax law that was announced by the then Chancellor, the right hon. Member for Richmond (Yorks) (Rishi Sunak), in his 2021 Budget, which was then enacted in sections 97 to 99 of the Finance Act 2022, meant that HMRC ensured in advance of the Wilkes judgment that the hundreds of thousands of other taxpayers who were similarly subjected to the charge discovery assessments could not benefit from the Wilkes case.

As David’s case was delayed awaiting the Court of Appeal judgment, he has now received a further discovery assessment for the charge between the 2016 and 2018 tax years. Understandably, he is “totally miffed” that one person’s case was upheld against HMRC, yet HMRC can continue to pursue others in exactly the same circumstances. In light of the Wilkes case, David hopes that today’s debate will shine a light on the poor handling and unfairness of the discovery assessments.

Another constituent, Stephen Waldron, calls the charge “wholly unfair” because child benefit is a payment to support people with the additional cost of raising a family. Stephen also says the charge is “unjust” because it is not based on a household’s total income. He has questioned why, when people decide to pool their resources and live and raise a family together, does the charge not reflect that? Perhaps the Minister can answer that question for Stephen today.

It was 2006 when Stephen first claimed child benefit. In 2013 he received a letter to advise he was not entitled to it, but it continued to be paid over the next seven years by HMRC, who then reclaimed it and blamed Stephen for not telling it. What really upset Stephen was that the demand for over £8,200 included interest and a 20% penalty for “failure to notify” the tax office to file a self-assessment for all those years, despite HMRC being fully aware of his household’s finances.

The circumstances of Stephen’s experience with HMRC over the charge was robustly argued in the 2019 debate, yet nearly two years later HMRC has not dealt with the previous criticisms of its practices. Things worsened for Stephen and many others as the clawback came in the midst of the covid-19 pandemic at a time when job stability was under one of its greatest threats, and he had to use his “safety net savings” to pay the demand.

I fully appreciate that the abbreviated examples of my constituents that I have highlighted today do not reflect the sense of injustice and stress that they have felt. None the less, it is important that the empirical impact of such an unfair policy is illustrated by individual experiences.

I have been tabling parliamentary questions on the charge since April 2019, after it was first brought to my attention. The answers I received at that time stated:

“If total household income was taken into account, information on the incomes of everyone in each of the eight million households receiving Child Benefit would need to be collected and would effectively introduce a new means test. The Government’s approach withdraws Child Benefit from those on high incomes, whilst having no impact on the majority of claimants.”

That implies that the charge affects only a minority. On means testing, the answering Minister in the 2019 debate stated that this would create

“a substantial administrative burden on both the state and families.”—[Official Report, 3 September 2019; Vol. 664, c. 73WH.]

However, we should not forget that the increase in the number of self-assessments that the charge creates brings its own administrative burden.

Another written answer, which referred to the £50,000 and £60,000 thresholds, said:

“The Government believes these are currently the correct level for the HICBC thresholds, but as with all elements of tax policy this remains under review as part of its annual Budget process.”

Those answers are in keeping with the response to a petition I presented in October 2021, which urged the UK Government to re-examine the charge policy to address the disparities it creates and ensure that any revised threshold was aligned with the basic-rate tax threshold. The basic rate of tax breached the £50,000 threshold on 6 April 2022 and thereby brought basic rate taxpayers within the scope of the charge. It is therefore operating beyond its original policy objective to affect higher rate taxpayers.

After presenting the petition and receiving the Government’s response, I was contacted by a non-constituent who works in financial services, thanking me for presenting the petition as it was

“of national interest to any tax payer who earns over £50,000 GROSS per annum”.

They went on to refer to the Government’s response as seeming to say that it was

“too hard to calculate for little benefit”,

and suggested that indexing the base threshold of £50,000

“would be a simple but effective solution to hundreds of thousands of households.”

I am aware of a letter from the Treasury, dated 26 January 2023, that dismisses the suggestion to index the threshold of the charge as it

“only affects a minority of Child Benefit claimants whilst helping to ensure the fiscal position remains sustainable.”

It appears that the Treasury’s position is somewhat conflicted. On the one hand, it thinks the threshold that was set for the charge 10 years ago is regarded as “high income”, and on the other it thinks it is acceptable for the basic rate tax band to breach this threshold.

Another tax-related conflict arising from the charge is that, although ignoring total household income and focusing on the single or only highest earner, at the same time it breaches the principle of independent taxation. It just does not add up to me.

That brings me back to the financial implications of the charge. When claiming child benefit, an affected individual can receive child benefit payments and pay the charge at the end of each tax year by means of self-assessment, and that is the case even if they are employed and normally pay their tax through pay as you earn. Alternatively, they can claim child benefit, but choose not to receive the payments and hence not pay the charge. That is known as “opting out”, and that is what my constituents David and Stephen, whom I mentioned earlier, have chosen to do. However, opting out impacts tax revenue going into the Treasury, with the most recent available figures showing a £15 million drop between the tax years 2013-14 and 2019-20. If the Minister is able to give figures for how much the clawback and the lack of take-up of child benefit have saved the Treasury, it would be helpful to know that the drop in tax revenue has also been accounted for in any figures that might have been found.

The drop in revenue is surprising when we consider that 7,000 more individuals have declared a liability for the charge over the same period. I would be interested to hear any explanation for that anomaly. The most recent available figures also show that the number of people who opted out of receiving child benefit increased by 252,000 between 31 August 2013 and the same date in 2021. That is 252,000 more families being impacted by the charge over an eight-year period. By my reckoning that is a rapidly growing minority, but a minority is what the Treasury’s response from 26 January still insists it is.

Of course, those figures do not account for those who do not make a claim for child benefit. Not everyone with a gross adjusted net income of £50,000 will go through the process of claiming child benefit, which effectively signs them up to completing a yearly self-assessment for the charge.

The latest data on child benefit from August 2021 shows a decrease of 122,000 families claiming child benefit when compared with the previous year, which equates to 215,000 children. Many people will see claiming child benefit as a complete waste of time and effort for little or no gain, or they will simply not make the claim to avoid finding themselves in a position similar to my constituent David, who was pursued for a period that he had opted out of. Therein lies a danger, because those who do not make a claim to child benefit due to the thresholds of the charge, will lose out on vital national insurance credits that protect their entitlement to contributory benefits, not least the state pension. That situation invariably affects many women.

There is also the scenario that, for various reasons, not everyone is aware of what their partner earns, respecting the principle of independent taxation. That further deters those people from making a claim for child benefit and, again, it is mainly women who lose out. Will the Minister advise me today if there is any way for women, or indeed affected men, caught in those circumstances to make a retrospective claim for national insurance credits? If not, can that be rectified at the earliest opportunity?

Another unintended consequence of not claiming child benefit is that the child is not then automatically allocated a national insurance number when they reach the age of 16. The scale of that future impact can only be imagined if we use the latest data on child benefit that shows that that will affect 215,000 children in just one year.

Referring to the number of families who claim child benefit, the latest child benefit statistics state

“following the introduction of the HICBC in January 2013, these figures decreased sharply…Following the sharp decrease in August 2013, there has been a downward trend in the number of families and children for whom Child Benefit payment is received. In August 2021, the number of children for whom Child Benefit payment is received is at its lowest level since HM Revenue & Customs (HMRC) began producing these statistics in 2003.”

Given the passage of time since its introduction and the constraints of the current economic climate, does the Minister not agree that it is time to address the many failings of the unfair high income child benefit charge? Is it not time to finally review this flawed policy, make it fit for purpose and thereby truly support households with children?

Ultimately, the best solution to meet the needs of families in my constituency is for the full powers of social security and taxation to be in the hands of the Scottish Parliament. Meanwhile, I hope the Minister will join me, my constituents and organisations such as Child Poverty Action Group in calling for making child benefit a universal benefit again, restoring the value of child benefit and increasing the take-up of child benefit. At the very least, will the Minister commit to reviewing the current policy?

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member for Linlithgow and East Falkirk (Martyn Day) on raising the issue here today. I try to come to Westminster Hall as often as I can, but when I saw the subject of the debate I was very keen to come along and support the hon. Gentleman. I congratulate him on setting the scene so well.

I want to specifically focus on the child benefit threshold. As the hon. Gentleman mentioned, one person could earn £52,000 and their partner could earn £10,000, and they would be disadvantaged. However, partners who both earn £49,000 do not have the same issue. That is an anomaly that we have to try to address.

My party discussed this issue at our parliamentary meeting last Tuesday. We have a slot to move a ten-minute rule motion, and we are minded to bring forward this matter when the time comes. I have raised the issue in the Chamber on numerous occasions, as has my right hon. Friend the Member for East Antrim (Sammy Wilson).

I am pleased to see the Minister in her place—I always am, by the way. I know she always tries to give us a response that helps with where we are, so I await her response with anticipation—no pressure, Minister. We are pleased to see her here and we look forward to her contribution.

The cost of living crisis has had a detrimental impact on people’s finances across the whole of the United Kingdom of Great Britain and Northern Ireland. I have spoken in countless debates on this issue. Those who are struggling the most—working families—are among those who cannot make ends meet.

Child benefit is a great benefit. It was designed to be a helping hand, but instead the concept has become a hindrance for working-class families, and even some who were previously considered to be working class and are trying their best to provide their children with all they can. I am a grandparent now, but when we were endeavouring as parents, we tried to give our children as much as we could, as every parent would. That was not to spoil them, but to give them the opportunities that we perhaps did not have when we were younger.

[Margaret Ferrier]

The hon. Gentleman mentioned the cost of living crisis. The fact that the charge is not uprated in line with inflation means that thousands of liable families are losing part of the child benefit that they are entitled to. Does he agree that this must be swiftly addressed?

[Jim Shannon]

I thank the hon. Lady for her intervention; yes, I do agree. Later in my contribution I will ask for the very same thing, because I think it is important that we do so.

We were hoping to present a ten-minute rule motion on this issue in the near future. Our slot is probably in July of this year. I and my party feel that it is grossly unfair that the child benefit cap has remained the same for 10 years, while the price of bread has risen by 30% in Northern Ireland in this year alone. The cost of the diesel needed for people to get to work is up by 30p a litre from 2013, or 20%, while those who invested in electric cars have seen the price of electricity consumption increase from an average of £577 in 2013, with a current price cap of £2,500. Increases are not limited to those essentials. The Government’s retaining of the cap is nothing more than another squeeze of the middle class through taxes. The real burden falls on the middle class, and I, my party and others will do all we can to battle that.

I am pleased to see the shadow Minister, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), in her place, and I look forward to her contribution. No doubt she and others will be saying the same thing.

I am attempting to bring about a change that I encourage the Government to consider. I find it extremely unfair that two parents could be on £49,000 a year and receive child benefit, but one parent can be on £10,000 and the other on £52,000 and they must pay an additional tax charge as a result. That anomaly is critical. A family on £98,000 are okay, but a family on £62,000 are not because one parent earns over the £49,000 or £49,500.

Another issue is that working families feel unable to take a pay rise because they would lose their child benefit and be worse off. I know families who were offered a wage increase from £49,500 and said, “Actually, I’m going be worse off,” and did not take it, so it is a fact of life for many.

A conversation took place in my office just last week on this subject. I always like to put the issues that we debate to my staff members, who give me their perspective. When we discussed it, they said that £50,000 sounded like a very decent yearly income, and it is, but when the cost of living is taken into consideration, these statistics are nowhere near as realistic as they seem. In addition, the high income child benefit charge is collected completely though a self-assessment, whereby individuals who are liable to pay it are required to find an annual tax return and, if they do not do so, they may be charged legal penalties for failing to register their liability and to pay their charge through their tax return, as some 180,000 families have had to do.

It has got to the stage where even families who are entitled to child support are opting out for fear that they will be hit with tax returns that they should have done but perhaps were unaware of. For my generation and the one after that, that was not a problem; we went to work, we received our child benefit, whatever it was, and we were thankful for it. There has been no uplift to the individual salary allowance since 2013—that is 10 years. There has been uncontrollable inflation since 2013, but no uplift for parents.

The Child Poverty Action Group has been in touch with my office, stating that benefit freezes and sub-inflationary upratings mean that child benefit has lost 30% of its value since 2010. One way that can be fixed is for the Government to increase child benefit by just £20 a week per child. That would pull half a million children out of poverty—the very issue that the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) referred to.

I said earlier that more families are choosing to opt out of child benefits due to the tax self-assessment that must be done. Covid also played a part in the reduction in the number of people applying for child benefit, mainly because parents were unable to register new births due to lockdown and there was reduced contact between parents and health visitors. Now that we are more or less out of that era, efforts should be made to reverse that trend.

Many Members, and more importantly many of our constituents, have raised issues about child benefits. No parent should have to sacrifice good work or a pay rise to get the full amount. That is ludicrous. No parent should have to get an accountant to fill in a separate tax return if they earn over £50,000. We must do more to support those parents through child benefits. More importantly, we must ensure that children are protected and that poverty statistics are dealt with. This has become a critical issue in my office, which is why my party is considering introducing a ten-minute rule Bill on it in July. I am sure the hon. Member for Linlithgow and East Falkirk will be one of the signatories when the time comes. We are asking the Minister for some more compassion, understanding and sympathy, given that the process denies some people what they should have by right.

IMF Economic Outlook

Margaret Ferrier Excerpts

Tuesday 31st January 2023 Commons Chamber

[James Cartlidge]

The hon. Gentleman knows there is enormous benefit to Wales from being part of the United Kingdom. I have set out the many ways that we are boosting this country, and I gave the example of the changes to Solvency II regulations. They will hopefully see a significant increase in infrastructure investment, which will be of massive benefit to every part of the United Kingdom, including Wales.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

Often it is the retail and hospitality sectors that are hit the hardest during economic slowdown, particularly companies trading in non-essential goods and services. What specific support is being considered for such businesses to ensure that redundancies are minimised and jobs are protected?

[James Cartlidge]

The hon. Lady makes a very good substantive economic point, which is that when inflationary pressures are higher, as they are at the moment, it is discretionary consumption that comes under pressure—and that means, for example, demand in pubs and shops and so on. I can confirm that we have taken huge steps to support hospitality, as we did in the pandemic. We recently announced that the 50% reduction in business rates would be extended by another year and go up to 75%. I announced in December a six-month extension to the freeze in alcohol duty, but hospitality is an important sector that is creating jobs, and we want to see what more we can do to support it.

Autumn Statement

Margaret Ferrier Excerpts

Thursday 17th November 2022 Commons Chamber

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

I thank the Chancellor for his statement, and for remaining in the Chamber to answer all the Members’ questions—especially the last question!

I wrote to the Chancellor on behalf of my constituents about the triple lock, and I thank him for listening to their pleas, but a decade of benefit cuts has meant that families are struggling financially. Will the Chancellor consider allowing families to access more of their benefit entitlement in the face of the cost of living crisis, and will he reduce the maximum amount that can be deducted from universal credit for debt repayments at least to 15% of the standard allowance?

[Jeremy Hunt]

I thank the hon. Lady for her patience in waiting all this time to ask her question. The issues that she has raised are going to be looked at by the Secretary of State for Work and Pensions in the review that he is conducting for the Prime Minister on the increase in the number of economically inactive adults and what we can do to improve incentives, but today we have announced—exceptionally—an increase in the benefit cap to ensure that the families who depend most on the benefits system are given all the extra help that we are promising today.