Welfare Reform and Work Bill

Mark Durkan Excerpts

Tuesday 27th October 2015 Commons Chamber

[Mark Durkan (Foyle) (SDLP)]

rose—

[Damian Hinds]

If the hon. Gentleman will forgive me, I will not give way.

That is why the Government have proposed changes to child tax credit and to the child element of universal credit, as set out in clauses 11 and 12 respectively. The Government will look at the important issues around exemptions through secondary legislation, which is a better way of dealing with these matters. Indeed, we discussed when that could be done in Committee with proper reflection and working together with stakeholders and experts.

I also wish to make it clear that the changes will not affect families already receiving the child and family elements before 6 April 2017 and who remain on benefit after that date, including such families who subsequently leave universal credit for a period of less than six months, and families who make a new claim to universal credit and who have been in receipt of tax credits for more than two children or qualifying young persons in the past six months. In addition, the Government will continue to support larger families through child benefit, which is paid for all qualifying children in a household, and paid at a higher rate for the first child.

In conclusion, the amendments oppose our clear mandate to find £12 billion of welfare savings and to restore fairness to the system by ensuring that work always pays. In making these changes, we have balanced the vital task of bringing spending under control while ensuring that the support is there for those who need it most. I therefore urge hon. Members to withdraw their new clause.

Question put, That the clause be read a Second time.

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[Mark Durkan (Foyle) (SDLP)]

Like other Opposition Members, I will oppose the Bill, because it does not meet the claims that the Government are making for it about making work pay. It will penalise people in work. Most of all, it will penalise families. It will penalise not just work but parenthood. The Minister told us that it is about making sure that families have to make the same choices as others. However, the two-child rule will not apply to childcare payments, and that means that up to £2,000 per child will be paid to relatively well-off people in employment, who will continue to get those payments for as many as children as they want. Only poorer families will be penalised by the two-child rule. That is just one of the injustices and inequities for which—

Oral Answers to Questions

Mark Durkan Excerpts

Tuesday 27th October 2015 Commons Chamber

[Mr Osborne]

We have published an impact assessment, an equalities assessment and a distributional analysis of the measures we produced in the Budget. None of those were ever produced by any Labour Chancellor, so we continue to provide the information that people seek. What matters above all is getting the central judgment right about fixing our economy, making sure we deal with our deficit, and going on delivering economic security for the people the right hon. Lady represents.

[Mark Durkan (Foyle) (SDLP)]

The Chancellor is fond of telling us about 2 million more people in employment, and then he usually does a little facial lap of honour of the Chamber. Has he estimated how many of those 2 million people would be hit by his proposed changes to tax credits? How many would he be comfortable with still hitting in any revised changes?

[Mr Osborne]

The measures to save welfare—as I say, we will help with the transition—come alongside the increase in the national living wage, the increase in the personal allowance and the action we have taken to cut social rents. They are all part of a package that is delivering economic security to the people in Northern Ireland and across the United Kingdom. The hon. Gentleman remembers what the situation was like five or six years ago in Northern Ireland: high unemployment, a lack of business investment and people looking for work. Now we are in a situation where jobs are being created and people are finding work. Do I say that everything has been done that needs to be done? Absolutely not. We have more to do to bring jobs and investment to Northern Ireland. Let us work together to make that happen.

Finance Bill

Mark Durkan Excerpts

Monday 26th October 2015 Commons Chamber

[Rob Marris]

That is in the interests of having some clarity as to when this should kick-in. The Government could do it now if they chose. They do not need primary legislation to do it, but the proposal for a review of inheritance tax is in the context of the Government now being five years behind the original projections made by the current Chancellor as to when we will be in surplus. We are giving the Chancellor a lot of latitude now. We hoped that there would not be draconian cuts, which are now being planned by the Government, to public spending and that we could, through adopting a growth strategy, get to a Budget surplus with no deficit earlier than 2019-20, but I fear we will not do so. So a review now is fine, but Labour Members are reasonable people and we are giving the Government lots of latitude. They ought to think again on this regressive tax, as on others.

[Mark Durkan (Foyle) (SDLP)]

On the issue of inheritance tax, does my hon. Friend recognise that it is odd that the Government in this Budget and in the language of the legislation have moved to do away with any concept of child poverty? They are moving on work and family tax credits with very little discussion on their part about the impact on children. When they talk about inheritance tax changes, they use the word “children” a lot, but of course the children they are talking about there are people who are well-off.

[Rob Marris]

My hon. Friend is quite right. If I may be so bold, in this context, the word “child” means people of around my age and that of my hon. Friend rather than minors. I wish the Government had paid a little more attention to minors and to child poverty. One of the achievements of the Labour Government was that child poverty fell significantly while we were in office. I regret, however, that that Labour Government, under Gordon Brown, cut inheritance tax by introducing the doubler—the Minister referred to this in Committee—whereby the £325,000 personal allowance could be utilised by the surviving spouse if the first spouse to die had not used that allowance. I expressed my regret about that at the time. At that point, when the threshold was around £300,000, only 6% of estates in England paid inheritance tax. Then the threshold was raised to £325,000, and then the doubling up came in. That was regressive and regrettable, but so be it: that is the regime that the coalition Government inherited.

Tax Credits

Mark Durkan Excerpts

Tuesday 20th October 2015 Commons Chamber

[Mark Durkan (Foyle) (SDLP)]

This measure is not just a penalty against work; it is also a penalty against parenthood. Clearly there is a divergence of view in this House. Conservative Members have a view about how policy should support family and children that is at complete variance with mine. We heard from the Chancellor on the day of the Budget that

“we on the Conservative Benches know that the wish to pass something on to your children is about the most basic, human and natural aspiration there is.”—[Official Report, 8 July 2015; Vol. 598, c. 330.]

Feeding children is an even more basic aspiration than that, as is nurturing children and giving them warmth when they need it. We are talking about somebody being able to aspire to work to bring home food to their children and support to their family. These are the people who are going to be hit by the measures the Conservatives are introducing, because it is the people working very hard and trying to do the best by their children and for their neighbours who will be betrayed by this measure.

I do not accept the nonsense we heard from Conservative Members, with some exceptions, who were more or less trying to tell us that low-paid workers should now be the acceptable casualties of a dogmatic imperative of austerity —they should not. Nor do I accept the somewhere-over-the-rainbow nonsense that some Conservative Members were giving us that, “It is all going to work out well. It will go so swimmingly and people are going to be so much better off when they see what they are going to get.” Clearly the way these measures have been brought forward will mean that people are going to suffer in the meantime. People will also lose jobs as well as lose income, because some of us are hearing from employers in some sectors that they will not be able to give the pay increases without doing damage to the payroll that they currently have.

Conservative Members need to realise that labels they put on this and all the clichés they come up with are not going to give buying power to the money they are leaving people with. Clichés will not be hard currency to support families who are being driven into poverty.

Finance Bill

Mark Durkan Excerpts

Tuesday 21st July 2015 Commons Chamber

[Mr Gauke]

Essentially, it is to ensure that the banking sector, which poses particular risks and which benefits from implicit guarantees, makes a fair contribution to the public finances. I hope that provides some clarity to my hon. Friend.

[Mark Durkan (Foyle) (SDLP)]

The Financial Secretary seems to imply that the banking levy, which was developed at the start of the previous Parliament, was essentially an ephemeral need that has now been taken care of by subsequent regulation. Banks have been able to cope with the fact that they have, essentially, a too big to fail subsidy—the VAT exemption. They have been able, with the levy, to absorb record-breaking fines for their own misbehaviour. Now he is saying that that is all to the good and that we do not need that same system of taking from the banks. Surely we do, though. They need to make a contribution to the public purse.

[Mr Gauke]

There is no disagreement over the need for a contribution from the banking sector towards the public purse. We have concluded that the better way to make that contribution is through a corporation tax surcharge, and that is what we are introducing. There was also a particular argument in 2010 about trying to influence behaviour, but, to some extent, that has now been addressed by a new regulatory regime. I agree that there is a need for a contribution. What we have here is a new surcharge on the banking sector, which performs precisely that task.

Britain’s insurance premium tax is also well below rates in many other countries, such as Germany, so this Bill proposes an increase to 9.5%. but that applies to only one fifth of all premiums. The Government are also committed to meeting their climate change objectives in a cost-effective way. Over the next five years, the climate change levy exemption for renewable energy is due to cost £4 billion, one third of which would subsidise overseas projects that bring no benefit to the UK. This Finance Bill therefore takes urgent action to stabilise CCL revenue.

Finally, to make the tax system fairer, the Bill restricts the amount of tax relief landlords can claim on property finance costs to the basic rate of income tax. That will ensure that landlords with the largest incomes no longer receive the most generous tax treatment. We are tackling tax avoidance by wealthy individuals and corporates, addressing imbalances in the tax system and taking bold steps to ensure that it remains fair.

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[Shabana Mahmood]

That question probably sounded more cutting in the development in the hon. Gentleman’s mind than in the delivery. [Interruption.] The hon. Member for Dudley South (Mike Wood) chunters from a sedentary position. He is welcome to intervene on me if he so wishes. I will be delighted to give way to him.

I say to the hon. Member for Bedford (Richard Fuller) and others that abstaining on Second Reading, as he well knows because he is a veteran of debates on Finance Bills, both in Committee and in the Chamber, does not mean that we will not press matters to a vote later in the Bill’s passage. Indeed, on the second sitting day in September we will be considering the Bill in Committee of the Whole House, where we will have tabled amendments, on which we will be voting, on other important measures including bank taxation, the climate change levy and the insurance premium tax. We can all have a lot of fun then when it comes to voting on amendments and debating them at great length.

[Mark Durkan]

Will the Opposition be supporting the reasoned amendment, opposing it or abstaining on it?

[Shabana Mahmood]

We will be abstaining on the reasoned amendment tabled by the Scottish National party. There are measures in the Bill that we definitely support. There are other measures that we wish to return to when the Bill receives detailed scrutiny in Committee of the Whole House and in Public Bill Committee, and we shall return to those issues and press some to a vote. On others, we will table probing amendments to gain greater understanding of the Government’s detailed intentions.

[Mark Durkan]

The Opposition Front Bench were saying similar things yesterday about the Welfare Reform and Work Bill, but they supported and tabled a reasoned amendment, so it is possible to abstain on a Bill but support a reasoned amendment. What is wrong with the reasoned amendment that would prevent the Opposition from supporting it?

[Shabana Mahmood]

I do not want to get into a tit-for-tat debate with the hon. Gentleman, but the SNP did not support our reasoned amendment last night. In my opinion, the measured and sensible way to take the Finance Bill forward, as we have done with previous Finance Bills in the previous Parliament, is to scrutinise it in detail. There are more opportunities with Finance Bills because we have Committee of the Whole House as well as the Public Bill Committee, and we shall press important measures in the Bill to a vote when we reach the latter stages of the Bill’s passage; but given that there are very important measures that we do support, it is important that we signal that by allowing the Bill a Second Reading.

One issue to which we will return in Committee of the Whole House is bank taxation. The Government will decrease the rate of the bank levy from January 2016 and will at the same time introduce a surcharge on profits of banks over a threshold of £25 million, which represents a switch from a tax on balance sheets to a tax on profits. Those measures are contained in clauses 16 and 17.

We will debate those in detail in Committee of the whole House in September, when we will seek to increase transparency regarding revenues from the banking sector. We will also push the Government for further details about the impact that these measures will have on the diversity of the financial sector, including any disproportionate impact on building societies. That is one of the things that people have been warning about since the measures in the Bill were unveiled.

As the Institute for Fiscal Studies has highlighted, by 2021 there will have been 13 tax rates in 10 years as the bank levy is gradually reduced from 0.21% to 0.1% by January 2021. This measure will cost £1.8 billion from 2021 onwards. Because from 2021 UK banks will be taxed on liabilities in the UK and not worldwide, that represents a fairly significant giveaway that it is important to test further in Committee. In contrast to what is happening to the bank levy, the 8% corporation tax surcharge, in effect, on bank profits from January 2016 raises £1.3 billion. There are a number of questions on the rationale for moving to this form of taxation for banks, as well as on the original intention of the bank levy and whether that will continue to be met in the new regime. It is important that hon. Members have the chance to test this further in Committee. The Minister will know that the bank levy was designed to discourage risky leverage, but whether it has been successful in doing so is a matter for some debate. Moving to a system of having a tax on profits possibly introduces a risk that there may be some discouragement from declaring UK profits. It will be important to analyse what risk that might pose in the banking sector.

There is a particular problem with regard to challenger banks, which were not subject to the bank levy but will fall within the new surcharge. Challenger banks are important for the overall health of the financial sector, because we need them to challenge the dominance of the big four or five banks. The Government will say, rightly, that the £25 million threshold is partly designed to prevent too much of the impact from being felt by challenger banks. Nevertheless, the Government will also be aware that a lot of the commentary since publication of the proposals has focused on the genuine concerns of challenger banks, which are worried that despite the £25 million threshold, they will still be disproportionately affected, with a significant impact on consumer choice as well. We will need to look at those issues further.

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[Lucy Frazer]

I gave way and I shall just continue.

[Mark Durkan]

rose—

[Lucy Frazer]

I shall continue. On society, it is very important that people are encouraged to work and that work pays. I agree with the director of the Living Wage Foundation that

“work should be the surest way out of poverty”.

That is what the Bill seeks to achieve.

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[Mark Durkan (Foyle) (SDLP)]

Mr Deputy Speaker, you and others have made the comment that today is a day on which a birthday has occurred, so before I have to, in response to interventions, may I say to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) breithlá sona dó? Go maire sé on lá.

I should also make an apology, because I missed a birthday yesterday in the debate on the Welfare Reform and Work Bill, which relates to the Budget measures.

[Mr MacNeil]

The hon. Gentleman gives me the opportunity to make a bilingual intervention—in Irish and in Scottish. Go raibh míle maith agat agus mòran taing.

[Mark Durkan]

We are getting far off the Finance Bill.

The Government told us that the Finance Bill should be taken as part of a whole suite of measures from the Budget, including those in the Welfare Reform and Work Bill. Yesterday, we missed the six-year birthday of the Second Reading debate on the Child Poverty Bill in 2009, when the then shadow Secretary of State for Work and Pensions, now the Home Secretary, said:

“When we talk about child poverty, we are also talking about family poverty. Children are poor because their parents are poor…I would almost like to change the name of the Bill from the Child Poverty Bill to the child and family poverty Bill.”—[Official Report, 20 July 2009; Vol. 496, c. 613.]

The measures in the Welfare Reform and Work Bill and the Budget tell us to forget that child poverty has anything to do with parental and household income, and that the Government are going to abolish definitions of child poverty. We heard from the Chancellor of the Exchequer today at Treasury questions that he believes the Budget is offering a contract: higher wages for less dependence on welfare. He said that people would support that contract. I think more people will see the con trick in what the Chancellor is doing than the contract.

[Alex Salmond]

It will not have escaped the hon. Gentleman’s notice that the Government seem to have run out of speakers on the Second Reading of the Finance Bill. Might that be because of the reality that thousands of families with children in every single constituency in this country are going to be worse off as a result of the Budget? Is that why the Tory party seems so unenthusiastic about supporting the Budget?

[Mark Durkan]

The right hon. Gentleman makes a very good point. I think many people will wonder about the paucity of attendance on the Benches at such an important debate today. We have been served notice that there will be various amendments in later stages of the Bill, but I think people would have expected a bigger attendance here today. Given the impact it will have on many people with marginal incomes and the consternation that many people feel about MPs’ pay increases and other matters, they will be wondering where everybody is.

[Mr MacNeil]

There are questions about where Labour and Tory Members are at the moment. Will the hon. Gentleman hazard a guess that they are perhaps off at merger talks?

[Mark Durkan]

Maybe they are away celebrating other people’s birthdays. [Laughter.] Maybe the hon. Gentleman, having had so many interventions, can now safely go and celebrate his. We all know he was here and not somewhere else.

In the provisions on the national living wage and some of the other early clauses, the Chancellor seems to be doing exactly what he decried his predecessors for doing: passing legislation to put restraints or constraints on himself. He is advertising in legislation his own behavioural discipline. It is the ultimate political selfie to put oneself into legislation. Some only last for the life of the Parliament, yet are being put into legislation. How gratuitous a political exercise is that? Perhaps that is why other hon. Members cannot see fit to indulge the Bill too much.

Government Members have said that the charter for budget responsibility is a key issue, which it is, but a key aspect of the charter is the welfare cap. In yesterday’s debate, we heard references to the benefits cap—there has been much discussion about the benefits cap, which affects households—but less attention has been paid to the overall implications of the welfare cap, which was first introduced as part of the charter last year. If we look at what the summer Budget, as opposed to the March Budget, does for the welfare cap over the next four years, we find some revealing figures. In the March Budget, the overall welfare cap for the UK for 2016-17 was £122.3 billion; in this Budget, it is £115.2 billion. For 2017-18, it was £124.8 billion in the March Budget; it is £114.6 billion in this Budget. It was £127 billion for 2018-19 in the March Budget, ahead of the election; it is £114 billion in the summer Budget, after the election. For 2019-20, it was £129.8 billion in the March Budget; in this summer Budget, it is £113.5 billion. Over those four spending years, that is a cumulative cut of £46.5 billion, as a result of the charter for budget responsibility and the welfare cap.

Many Opposition Members—or perhaps not many of us, as I think only 20-odd of us voted against the welfare cap when it was introduced—said that what the Treasury was bubble-wrapping as a neutral budgetary tool would turn into a vicious cuts weapon, and now we see it, in the name of the welfare cap. When there is so much discussion about the benefits cap, people forget that the real story is the welfare cap, and that will bear down on people in my constituency and lead to more conflict around the next wave of welfare reform when it comes to the Northern Ireland Assembly.

We heard earlier from the hon. Member for East Antrim (Sammy Wilson) and we heard yesterday what he thinks the implications of the cap will be. If he was still here, I would be saying to him directly that on this issue he and his party need to catch on; they have been wrong in the past, and it is a bit late to be scrambling now, when they have invited this very situation. Many of us told them that their support for the welfare cap, on top of their support for the last wave of welfare reform in the Assembly, would lead to this very situation, but they told us to forget about those concerns because there was nothing we could do about it.

[Alex Salmond]

Will the hon. Gentleman accept that Members from eight political parties last night voted against the welfare Bill, so perhaps it is a case of “better one sinner that repenteth”?

[Mark Durkan]

Yes, I certainly have no problem with that, and I welcome the breadth of opposition. I also welcome the depth of opposition I heard from some hon. Members who, because of their party’s Whips situation, did not vote but whom I know care passionately about a number of issues and have served notice that they will vote in the amendment stages. I hope, therefore, that we can go further in this Bill and yesterday’s Bill to build on that.

However, let us be clear: this Bill purports to cover more than just the issues that we discussed yesterday. Hon. Members have referred to the questions around corporation tax, and of course the Government have served notice that they are going to reduce it. I am someone who has supported the measures to give Northern Ireland the devolved capacity to vary the rate of corporation tax, and I have no issue or argument against that. Indeed, I predicted that one of the reasons why the Conservatives were so keen to devolve corporation tax was that they wanted to create an excuse or cover to do so in England and Wales as well.

However, although that can be welcome in Northern Ireland at one level, because it means that the cost of any variation in corporation tax for us will be less in time, let us be clear that, contrary to what the hon. Member for East Antrim said yesterday, it will not be parties such as mine holding these issues up; it will be the tactics and policies of the Government, who are trying to create a budgetary arm-lock on the devolved Executive. They are basically saying, “Unless you get your Assembly to pass the legislation that we want in respect of welfare reform, we are going to create budget stress”—which in turn will lead to a budget crisis, which in turn will become a political crisis—“as the price of your failure to do so.”

When we are locked in that budget crisis—which will be contrived and the result of the Government bullying us on welfare reform—they will then say, “You don’t have a balanced and sustainable budget; therefore, you’re not getting your corporation tax powers.” Just as the Government said they would not introduce the corporation tax Bill until they were satisfied with what it looked like the Assembly was going to do on welfare reform, so they have built in a clause for Northern Ireland in the Bill that says that, come 2017, they will not switch on the power unless they are satisfied that there is a balanced and sustainable budget.

When it comes to the outstanding measures in the Scotland Bill, I hope that hon. Members present in the Chamber will be mindful of the possible need for a clause to prevent the Treasury from adopting any such tactic on the dual exercise of welfare powers between Westminster and the Scottish Parliament, because the “twilight zone” difficulty that Northern Ireland has got into offers a very salient warning.

[Jim Shannon (Strangford) (DUP)]

I have the utmost respect for the hon. Gentleman, and he knows that, but the real reason why we have an impasse in Northern Ireland is the unfortunate delay from the SDLP in supporting the Stormont House agreement, which everyone signed up to. With that comes the delay in the corporation tax benefits for Northern Ireland. Surely it is time now for his party to honestly say, “Let’s support the Stormont House agreement, let’s get corporation tax back and let’s help everyone across the whole of the political spectrum in Northern Ireland.”

[Mark Durkan]

I would offer the hon. Gentleman the mutual observation of respect, but would also say, first, that we are not holding anything up. The legislation has already been passed. It provides for the switch-on of the powers in 2017. It is the Treasury that is imposing the condition, and let us remember that it is locked on to that condition in a way that is completely wrong and unwarranted. It is basically saying, “Yes, you have the nominal legislative power over welfare reform, but unless you do it exactly to our taste, as karaoke legislation, then we are going to interfere with your budget and claw back from the Barnett formula.” That is wrong. The Treasury has other ways of trying to control these things. If this is about welfare spending, then the Treasury already has a welfare cap that allows it to police welfare spending—literally—without creating budget stress within the Executive and between parties, so there is a different course that can be followed on all this.

As for some of the other provisions, I have no doubt that the Government will go further in their cuts to corporation tax. I know that they are saying that they want to get to 18% by 2020, but the Chancellor said in the second year of the last Parliament that there would be no more corporation tax cuts in that Parliament and of course there were. He is exactly lining up to do that again.

Let me touch on some of the other issues. The hon. Member for East Antrim rightly mentioned the road fund, in that the Chancellor said in his statement that the Government would have to work out exactly what would happen with the equivalent moneys in Northern Ireland—the money that would be raised in vehicle duties. However, I hope it is not the case that only the moneys raised directly in vehicle duties in Northern Ireland would be hypothecated for those purposes. Given the nature of our economy and the fact that many of the key commercial vehicles on our roads are not registered in Northern Ireland—many of those servicing many of our companies, not least in the retail sector, come from outside the region—and also, obviously, given our higher rurality, we have high relative overheads on roads, so we would need something more than that.

I asked the Financial Secretary earlier to clarify the position on banking because he seemed to be saying that the bank levy had largely served its purpose: the Government had to introduce it, but it was very much of its time, and now we needed to move on to something different. Let us recognise that although clause 18 rightly says that, in future, banks will not receive tax relief on expenses for compensation payments made to customers in respect of certain defined issues, until now the banks have been able to claim that tax relief. There is a catalogue of huge liabilities that they face because of their own wrongdoing, but they were able to absorb all that along with the bank levy, so it is not as though the bank levy was a serious burden to them.

Of course, the Government have responded to pressure from the likes of HSBC and StanChart, who have been saying that they will move if something is not done about the bank levy. So the Government have moved on the bank levy, but they are trying to tell the rest of us that that will be more than compensated for by the surcharge on corporation tax. If they reduce corporation tax by much more than they are currently advertising, that surcharge will not amount to as much. Given how they have rolled over on the bank levy, it is not very hard to canvass the suspicion that they will equally ameliorate the intended surcharge in response to the same threat.

On renewables, I do not intend to go on at anything like the same length or in the same colour as the hon. Member for East Antrim, but I want to make it clear that there is a different view from Northern Ireland. We see the Chancellor’s measures as directly interfering in our capacity to have a greener economy and to grow firms and businesses. It is a key target of the single electricity market in Ireland, north and south, to achieve over 40% supply from renewables. It is a key element in the grid investment that is needed. It is also a key aspect of the market, both north and south, to seek to export in terms of renewables. The Chancellor’s measures therefore fundamentally interfere in one of the growth sectors in Northern Ireland. It is a growth sector not only in terms of generation but in terms of renewable technologies, and the investment and export that goes with those. We take a fundamentally different view from that of the hon. Member for East Antrim. Let me be very clear: on issues such as contracts for difference, we have different politics, different starting points and different end points.

I agree with the hon. Gentleman on the age restriction on the national living wage; the fact that it does not apply to under-25s is grossly wrong. The whole concept of the national living wage as put forward by the Chancellor is not only an attempt to slightly enhance or rebadge the minimum wage; it is a blatant attempt to puncture the living wage, and to change its agenda and what is intended by it. That comes alongside other measures that we have discussed, such as changes to tax credits, which will directly take over £1,200 a year—over £100 a month—from people who are in work.

We are told that nobody who has more than two children at the moment will lose out as a result of the changes to the limits on child benefit; that will come later. If we are really to believe what Conservative Members were telling us earlier—that the number of children that people are having is an economic choice to do with the availability of tax credits and the eligibility for benefits—we need to hear from relevant Ministers how they will cope with the baby boom that we will have before April 2017, as people ensure that children are born in time to qualify for benefits. There will be either a race for benefits or a race for births, or both, if we believe half of what we heard across the way yesterday.

The new banking measures replace the big measures that were introduced by the Prime Minister and the Chancellor during the last Parliament, otherwise known as Project Merlin. A fairly effete bank levy was intended to sort out the banks and put manners on them. Now we have a new Project Merlin: the Chancellor seems to have decided to take key social policies from Merlin Entertainments. A family means two adults and two children, and no more. There is no deal for anyone who goes beyond that.

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[Damian Hinds]

The hon. Lady will know that we still intend to bring forward the cap. It has had to be delayed, but we intend to do it during this Parliament. The Budget delivers for all the people of this country, including those who work hard, save hard and want to be able to pass on an asset to their children. In the Bill, we introduce a new £175,000 per person transferable allowance when a person’s home is passed on at death to their children or grandchildren. With the allowance, married couples and civil partners can now pass on an estate worth up to £1 million before having to pay any inheritance tax.

[Mark Durkan]

Will the Minister give way?

[Damian Hinds]

I will not give way, if the hon. Gentleman will forgive me.

Productive businesses are the fundamental drivers of national growth. Back in 2010, our corporation tax rate was 28%. Over the course of the last Parliament, we reduced it to its current level of 20%, the joint lowest in the G20. We are reaping the rewards of that, with the UK growing faster than any other G7 economy in 2014. Now we will go further. Clause 7 cuts the rate to 19% in 2017 and to 18% in 2020. The cuts will save businesses a further £6.6 billion by 2021. In addition, clause 8 sets a new permanent level for the annual investment allowance. At £200,000, it is the highest ever permanent level.

We need to invest more in our roads, because their quality has fallen behind as a result of decades of under-investment. That is why we have the reform of vehicle excise duty, which supports the creation of a new roads fund and puts vehicle excise duty revenues on a long-term, sustainable footing.

To respond to the hon. Member for Brighton, Pavilion, the incentives will still be there to purchase lower-carbon vehicles in the first year rates. We know from research that people focus on the first year rate in particular when buying a car. We will do that while dealing with the unfairness that my hon. Friend the Member for Lewes rightly identified, whereby people driving a second-hand car can pay a lot more than those who can afford to buy a new model every couple of years.

It is right that banks make a fair contribution to the public finances that reflects the risk that they pose to the UK economy. That is why we introduced the bank levy in the last Parliament. The additional contribution needs to be balanced with consideration for the UK’s global competitiveness. Therefore, we are legislating for a package of measures that includes making sure that banks cannot profit from the fines they incur and the supplementary rate of tax. I reassure hon. Members about the impact on smaller challenger banks, which we greatly support. The way in which the charge is structured will ensure that they are not adversely or unduly affected.

This is an ambitious Finance Bill for an ambitious nation. It rewards work and investment, provides certainty and security for families and businesses, delivers significant tax reform, helps our economy to be even more competitive internationally, and ensures that the burden of fiscal consolidation is distributed fairly. The Finance Bill marks the next step forward in our long-term economic plan and I commend it to the House.

Question put, That the amendment be made.

Budget Resolutions and Economic Situation

Mark Durkan Excerpts

Monday 13th July 2015 Commons Chamber

[Mark Durkan (Foyle) (SDLP)]

It is a pleasure to follow the hon. Member for Bedford (Richard Fuller). Although I do not agree with many of his points, I note that—as always—he is careful to reflect what he has heard from his constituents and he makes his own particular points. It is also a pleasure to follow the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald), who made his maiden speech. He is probably the only Member who could accuse another Member of identity theft, hijacking and credit theft, and still comply with the rules of avoiding controversy in a maiden speech.

I cannot agree with what I have heard from some Conservative Members about the Budget. The hon. Member for Cannock Chase (Amanda Milling) said that she was proud to support the Budget because of the moral principle that people should always be better off in work. If that is the moral standard by which we are to test the Budget, then just as the hon. Member for Bedford has listened to his constituents, I have listened to mine who know that as a result of the Budget they will not be better off in work—they are in work and will be worse off because of the significant changes to tax credits, the overall changes and the particular changes to family size and the two-child policy.

Those are people who are hard working and who meet all the tests used in the past by the Government to define hard-working families, strivers and people who have made sacrifices. The region that I represent has very high unemployment and a low-pay profile—it is not as though those people choose to be in that type of employment with the pay that they receive and their dependency on tax credits. This is a wilful choice by the Chancellor: “These are the people who are to be punished. If we are going to balance the books, I am picking out those who have no choice but to work for those wages and need tax credits to support themselves and their families.” That is why I oppose this Budget.

In principle I support the concept of a living wage, and a good, working, national living wage would be a good thing. The Chancellor has used the national living wage not just—supposedly—to grab the headline of increasing the minimum wage, but also to try to puncture the concept of the living wage. The hon. Member for Bedford believes that the tax credit nettle had to be grasped because too many companies were abusing tax credits and paying people less than they should be paid, but there are other ways to tackle that. Let us do more to force through pay transparency in companies. We have talked a lot about trying to improve tax transparency for companies large and small, but we should be doing more on pay transparency as that would help to sort out those issues.

Strengthening and encouraging trade unions to bring forward more pay transparency would also help. If this is about tackling corporate abuse, we should do it at the level of those committing the abuse, not those people who are being “exploited”—in the terms of the hon. Member for Bedford—by companies and therefore have to depend on tax credits. Removing tax credits does not remove the exploitation faced by people on low pay. It makes people walk the plank into poverty simply so that somebody can say the nettle has been grasped. That is a miserable proposition.

I know that Conservative Members favour the benefits cap and placing an overall cap on what families can receive. We continue to oppose the benefits cap which, as we predicted, once introduced has been lowered. We are also seeing the start of regionalisation and a differentiation between London and the rest, and we know that at times people have flirted with the idea of further regionalisation.

As well as the benefits cap there is the welfare cap, and the two are sometimes confused. The welfare cap is generally ignored, but it was introduced by the Government to place a cap on the overall welfare budget across the UK. In the March Budget statement, the welfare cap for 2016-17 was set to be £122.3 billion, but the recent Budget placed it at £115.2 billion—a reduction of £7 billion between March and the summer. What a difference an election makes, yet the Government did not tell us they were doing that.

The 2017-18 benefit cap is down by £10.2 billion from £124.8 billion to £114.6 billion, and for 2019-20 it is down by £16.3 billion from £129.8 billion to £113.5 billion. We know that that will mean not only cuts to households or people with disabilities but cuts that hit spending power in economies such my constituency where, because of high unemployment, low wages and high levels of economic inactivity, people are dependent on benefits. There will be a cost not only to those family economies but to the local economy as well, and that is why I will oppose this Budget.

Tourism Industry and VAT

Mark Durkan Excerpts

Tuesday 17th March 2015 Westminster Hall

[Shabana Mahmood]

I am grateful to the hon. Gentleman for that intervention. I was just about to develop a point about the evidence presented by hon. Members in this debate, and how we will react to it if we form the next Labour Government and Treasury.

I start by recognising that cutting VAT is a significant monetary challenge. The Opposition are clear that we will put no unfunded promises in our manifesto, the basis on which we will seek election from the public in the coming weeks, and we will not borrow any more money for day-to-day spending. We note the evidence presented by hon. Members in this debate from notable academics who have considered the issue in detail. It has been cited in support of the argument by the Cut Tourism VAT campaign. From opposition, I am not in a position to assess that evidence in the same way that the Treasury can, as it has access to data sets that we do not, but I note the Minister’s answers to hon. Members in written parliamentary answers and oral answers during departmental question time in the House. He has said, on the basis of analysis undertaken by the Treasury, that a VAT cut for the sector would not produce sufficient economic growth to outweigh the consequent revenue shortfall. It would be helpful if in summing up, the Minister put more of that evidence on the record, if the position is the same as before.

[Mark Durkan (Foyle) (SDLP)]

I apologise for coming late; I was involved in the debate in the main Chamber. The hon. Lady says that the Opposition are unable to examine the figures, but during this Parliament the Opposition have posited that an overall decrease in VAT would encourage consumer spending on all sorts of important consumer goods. Does she not accept that there is evidence to suggest that the measure would at least help trap the multiplier in a more targeted way in areas that depend on the tourism economy?

[Shabana Mahmood]

The hon. Gentleman will know that in the early part of this Parliament, we proposed an alternative package to the Government as an immediate measure to stimulate the economy. It envisaged a temporary VAT cut, which at the time could have made a difference across the whole economy and might have meant being in a different position today. I note, though, that the previous Labour Government, when lobbied on the issue, felt that targeting the cut in the way then envisaged would not necessarily have produced the effects anticipated by hon. Members.

That is why it would be helpful to hear more from the Minister about current Treasury thinking and analysis of the available evidence. An incoming Labour Treasury would certainly want to consider all that evidence and see the analysis at first hand. In particular, we would want to understand the relationship between different measures that could be taken, including a potential VAT tax cut compared with, for example—the Government have also cited this in defence of their position—the employment allowance, a £2,000 rebate on employer national insurance contributions introduced by the Government earlier in this Parliament. I would also want to be convinced that we would achieve as close to 100% pass-through of such a big change if we were to start considering seriously the case for making it.

However, we return to the fact that if we cut VAT in that way, the most recent Office for National Statistics data from 2012 suggest an annual cost to the Exchequer of £11 billion to £12 billion. Those sums would have to be found elsewhere, and we as an incoming Labour Government would not be in a position to make that choice. So I cannot commit to a VAT cut of the nature called for by the campaign, although I can of course commit, if I become a Treasury Minister after the election in May, to assessing the analysis and all available evidence. I will also work with colleagues in the Department for Business, Innovation and Skills and the Department for Culture, Media and Sport to examine what else can be done to assist the tourism sector and ensure that it plays its full part in encouraging sustained and balanced economic growth. I am sure that the Cut Tourism VAT campaign will continue to make its case in full heart in the life of the next Parliament; it is certainly made up of doughty parliamentary campaigners. I look forward to engaging with them in much the same way that I know the Minister has engaged with them thus far in this Parliament.

Tourism is a hugely important sector to the UK. It is our fourth largest service industry; it employs 9.6% of the UK work force, or 3.1 million people; it generates 9% of the UK’s entire GDP; and in 2013 it contributed £127 billion to the economy. So, it is in everybody’s interests to ensure that the sector grows, thrives and continues to provide the jobs necessary for UK plc.

As I highlighted in our debate on tourism last year, there are other policy levers that can be pulled, without the cost implications that a VAT cut on tourism would entail, which would still be of real benefit to the sector. One of the most effective of those levers could be around immigration policy, particularly given the complexity around fees, visa applications and the monitoring required to make sure that people do not overstay their visa. The Government have made particular changes with respect to some countries, such as China. However, it is the case that other countries are deemed to be a high risk for potential overstaying but whose genuine visitors are often locked out. I see that in my own constituency with visitors who want to come from the Indian subcontinent, but the immigration officials almost take a first view that those people are more likely to overstay than not. Often, that is not the case. People want to come to the UK to see the land that their forefathers left their countries of origin for, and they wish to come and celebrate family events such as weddings. They will spend money here, and their British citizen relatives will spend money showing them a good time and showing them what Britain is all about. We should assist that process and not hold it back.

Therefore, although I cannot agree for the cut that has been called for, I commend the work of the Cut Tourism VAT campaign and the work of its supporters in the House. We will continue to work closely with the tourism sector and we look forward to hearing more from the campaigners in the future.

Corporation Tax (Northern Ireland) Bill

Mark Durkan Excerpts

Wednesday 4th March 2015 Commons Chamber

[Mark Durkan (Foyle) (SDLP)]

I beg to move amendment 1, page 64, line 30, after “by”, insert—

“(a) an insurance company (within the meaning given by section 65 of FA 2012),

(b) a building society as defined by the Building Societies Act 1986, or

(c) a credit union registered under the Credit Unions (Northern Ireland) Order 1985 or the Industrial and Provident Societies Act (Northern Ireland) 1969.”

It will not be lost on hon. Members when they see an amendment to clause 1 at page 64, line 30 just how long a clause 1 we are dealing with, as we found in Committee. The Bill is essentially all in clause 1 and the other clauses provide the trimmings.

In Committee, I and other hon. Members raised a number of issues through probing amendments and in clause stand part discussions. One issue that I raised was the position of credit unions in Northern Ireland. As we heard on Second Reading and as the Financial Secretary to the Treasury stressed in Committee, the Government, with the agreement of the parties in Northern Ireland, have been at pains to make sure that any move to devolve to the Assembly powers in respect of corporation tax would not invite any large artificial or contrived shifts by large parts of the financial services sector. Nobody has been in the market for making sure that banks and other major financial services businesses could in any way benefit from surfing on to the devolved corporation tax rate that would be available to Northern Ireland under the Bill. Everybody is ad idem on that.

There is, however, a concern that the exclusion of the financial services sector at large could lead to inadvertent discrimination against credit unions or mutual building societies that are wholly and solely based in Northern Ireland.

[Lady Hermon (North Down) (Ind)]

Will the hon. Gentleman take this opportunity to put on the record the very valuable contribution made by credit unions and mutual societies in Northern Ireland, which differs from that in the rest of the UK? In particular, can he give an idea of the number of savers and those who make use of credit unions and mutual societies?

[Mark Durkan]

Those are points that I shall touch on in my remarks, and I am sure that other right hon. and hon. Members will do so as well. By way of response to the hon. Lady, I make the point that there have been efforts over a number of years. When I chaired the Assembly’s Committee for Enterprise, Trade and Investment, we conducted an inquiry into credit unions in Northern Ireland, which have a very large membership base and a very strong savings base, far beyond those of credit unions here, which by comparison are merely developing.

The fact is that credit unions in Northern Ireland have been precluded from having as broad a range of services to offer their members, unlike credit unions here, and the key to broadening the range of services, of course, was to have credit unions in Northern Ireland regulated by the Financial Services Authority—subsequently the Financial Conduct Authority and the Prudential Regulation Authority.

However, while credit unions in Northern Ireland will be regulated from London institutions for those financial services, they still come under a devolved legislative window. That goes back to the Northern Ireland Act 1998, which deliberately ousted credit unions from the reserved power in relation to financial services through specific mention of the fact that devolution would include the Credit Unions (Northern Ireland) Order 1985. Credit unions are therefore in a sort of dual-control legislative and regulatory environment; they are registered under devolved legislation but regulated under financial services legislation of this Parliament, and rightly so.

However, that leads to some quirks and bumps in interpretation. A credit union Bill that would address some of those issues seems to be held up somewhere in the Assembly processes. In those circumstances credit unions are particularly concerned that they might become unintended casualties of some of the restrictions and exceptions that are rightly being introduced with the devolution of corporate tax by the Government and with the agreement of the parties in the Assembly.

[Ian Paisley (North Antrim) (DUP)]

Does the hon. Gentleman—indeed my hon. Friend—accept that in addition to that being grossly unfair to credit unions, mutuals such as the Progressive building society, which employs almost 200 people and operates solely in Northern Ireland, in fact its back office applies only to Northern Ireland, could end up being penalised by this legislation?

[Mark Durkan]

The hon. Gentleman is exactly right. I have to be honest that the slightly left-handed amendment I tabled in Committee could have introduced its own difficulties, as the Minister pointed out at the time. This less left-handed—I apologise to any cuiteogs in the House—amendment addresses the salient point in respect of credit unions and also takes in for the first time a point that I had overlooked in Committee: the position of a mutual building society based wholly and solely in Northern Ireland, such as the Progressive. This wider amendment, which thankfully has been seconded by the hon. Member for Belfast East (Naomi Long), is therefore designed to cater to both circumstances.

[Naomi Long (Belfast East) (Alliance)]

It is important to recognise—I think that the hon. Gentleman will agree—that the point of that exclusion was to prevent the kind of brass-plating whereby companies simply moved their headquarters to Northern Ireland without moving any economic activity or jobs. That is not the case with either credit unions or mutuals such as the Progressive, because they are based in Northern Ireland and work there, creating employment and investment.

[Mark Durkan]

I take that point fully. That is why I am so glad that the hon. Member has seconded the amendment and spoken so strongly to its main purpose.

[Dr William McCrea (South Antrim) (DUP)]

I can assure the hon. Gentleman that my right hon. and hon. Friends support his amendment, and I trust that the House will accept it.

[Mark Durkan]

I thank the hon. Gentleman for that support and endorsement and hope that the House will today accept at least the spirit, logic and compelling sense of the amendment.

As I said in my opening remarks, there is no argument from these Benches, or indeed from any of the parties in Northern Ireland, whether or not they are in the Executive or the Assembly, that large-scale financial services should be able to shift profits or any of their activities simply to net benefit from devolved corporation tax provisions. However, we want to ensure that legitimate, bona fide, not-for-profit mutualised activity is not penalised as a result of the restrictions that are rightly being included.

Credit unions and mutual building societies such as the Progressive have long-standing histories, have done nothing speculative, did not need any Government bail-out and had no questions about their books, or about anything else, so there is nothing untoward, whiffy or sniffy about any of their activities, because they were solid, prudent and sensible. There is absolutely no question but that the parties would want to see such organisations penalised and unable to benefit from the same sort of devolved tax rate that would be available to small and medium-sized enterprises. When we look at the scale of the individual credit unions—remember that they are regulated individually, not as some sort of conglomerate activity—we see that the idea that they would find themselves caught, for corporation tax purposes, in the same category as a large bank, for instance, is absolute nonsense.

However, there is a bit of a rub in this. I know that the credit unions and others have listened carefully to our proceedings on the Bill. For instance, on Second Reading the point was made that the provisions on some classes of back offices, even those working for financial services companies, could qualify for the devolved tax rate, and there seemed to be an inference that some of those lines had been drawn with particular operations in mind. For instance, Citigroup was mentioned on Second Reading, and it was suggested that we should all be assured that its jobs are protected and that that work would be subject to the devolved tax rate. That leads to a situation in which companies such as credit unions and the Progressive building society are saying, “Well, if the back office operations in Northern Ireland can qualify for the devolved tax rate, which obviously we hope will be lower, why should the back office jobs of the Progressive Building Society not qualify?”

The Progressive building society is being advised by Her Majesty’s Revenue and Customs that only 5% of its activity might qualify for the devolved tax rate, and it has been given no reason for that, other than that it seems to be the multiplier figure in the Bill. For no reason that anyone can understand or source, it has been told that only 5% of its activity might qualify. The Government are telling other financial services that they want them to work as hard as possible to maintain a high street presence, which the Progressive building society has done, including new investment in my constituency. It just seems bizarre that it should be penalised without a thought. That is why so many hon. Members are here to support the amendment.

[Ian Paisley]

Does that not really take the biscuit when the Progressive is told by the Treasury that only 5% of its back office will apply for an exemption? Its staff are scratching their heads, wondering what part of their work does not apply to Northern Ireland and to activity solely related to Northern Ireland.

[Mark Durkan]

Exactly. I take the hon. Gentleman’s point. There is no known rational basis for it. In circumstances in which we are talking about arrangements aimed at preventing any artifice on the part of companies, just coming up with such an arbitrary figure does not particularly help. In circumstances in which we see that larger firms can be advised and assured that their existing operations of large and hopefully growing scope will be covered by the new devolved tax rate and will not be caught in the exclusion of financial services, it seems strange that the financial services entities that are not for profit, which are not taking money out of Northern Ireland but recirculating it into the local economy, would be penalised.

[Lady Hermon]

I have been watching the Government Front Bench and I know that the Secretary of State for Northern Ireland, the Minister of State and the Financial Secretary have been listening very carefully to the hon. Gentleman, as they should. It would be helpful to us if any one of them intervened to explain how on earth only 5% of the back office work of the Progressive would qualify for an exemption under the Bill. I am sure that the hon. Gentleman would be delighted if they did so.

[Mark Durkan]

I would be absolutely delighted. I would gladly accommodate that intervention, and not just in one instalment—I am prepared to take it 5% at a time if the Minister is willing.

[The Financial Secretary to the Treasury (Mr David Gauke)]

Such is the invitation, I cannot refuse. This is a somewhat complex matter. I can assure hon. Members that I will set out the thinking behind the Bill’s provisions on financial services in terms of its principles and, in particular, the application of the 5% test relating to back-office functions. Hon. Members are making perfectly reasonable points, but rather than attempt to summarise a complex issue that needs to be put into context, may I ask them to be a little patient, and I will be keen to give a proper answer towards the end of the debate?

[Mark Durkan]

We await with bated breath the Minister’s great revelations and technical epiphanies.

Whatever the Financial Secretary says about the complex dimensions of this, there is nothing complex about the simple logic and justice of the proposition that wholly and solely-owned mutuals and credit unions should be able to benefit from a devolved tax rate.

[Ms Margaret Ritchie (South Down) (SDLP)]

Is my hon. Friend aware that the Assembly’s Committee for Enterprise, Trade and Investment, which he used to chair, is also supportive of the stance that he and other Northern Ireland Members are taking? It believes that mutual societies and credit unions based in Northern Ireland should be included within the Bill and able to avail themselves of the same reduced rates of corporation tax as other Northern Ireland-based organisations.

--- Later in debate ---

[Mark Durkan]

It is indeed the case that the Committee for Enterprise, Trade and Investment, through its chair, our party colleague Patsy McGlone, made a written representation to the Secretary of State that has been circulated to all Northern Ireland MPs on behalf of the Committee and is supported by all the parties on it. During my time on the Committee, all the parties worked to help navigate through the complexities of how we could alter the regulatory footing for credit unions in Northern Ireland so that they could offer more services, without abandoning the rightful devolved interest in relation to credit unions. The Committee’s representations have been endorsed with backing vocals from the Committee on Finance and Personnel in the form of a letter from its chairman, Daithí McKay. Again, the letter is on behalf of the whole Committee and supported by all the parties on it.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Gentleman alluded to this at the outset, but it might be beneficial to remind the Minister of the deep penetration of credit unions within Northern Ireland. There is a quantum of difference in relation to England, Scotland and Wales. There are tens of thousands of members of credit unions across Northern Ireland; they are an integral part of society and have been for decades.

[Mark Durkan]

I fully take the hon. Gentleman’s point. That was recently made apparent within the precincts of this Parliament when a delegation from the Irish League of Credit Unions gave evidence to the all-party group on credit unions, chaired by the hon. Member for Worcester (Mr Walker). The league pointed out that nearly 450,000 credit union members are accredited to it in Northern Ireland. The credit unions in Northern Ireland have total assets of over £1.2 billion.

Credit unions do not pay corporation tax on their lending activity—perhaps that was one of the misdirections in my original amendment in Committee—but they do pay it on their investments. There are issues about how the regulators have treated that in limiting some of the investments that they are able to make, although my conversations with regulators suggest that we may be turning a corner of understanding and a slightly more relaxed interpretation may be on the way. In 2012, credit unions in Northern Ireland paid £3.75 million in corporation tax on their investments. The three credit unions in my constituency alone pay between them over £0.5 million in corporation tax on their investments. That is a significant amount of money to them given that it purely goes back to their members in dividend payments. It is not going off to make profits by being speculatively invested in property or in any dubious market activities; it is staying very much within the traditional meat and drink of credit union activity, and rightly so. On that basis, it would be perverse to treat credit unions as being in the same category as a financial services corporation that may try to move in from London, Edinburgh or elsewhere in order to artificially avail itself of a devolved corporation tax rate.

[Mr Nigel Dodds (Belfast North) (DUP)]

We await the Minister’s more detailed explanation and context setting, but he said in Committee, on credit unions paying corporation tax on investment income and capital gains:

“As credit unions do not have a trade of lending money for corporation tax purposes, they are therefore neither explicitly included nor excluded from the Northern Ireland rate and as such are in no worse a position because of it.”––[Official Report, Corporation Tax (Northern Ireland) Public Bill Committee, 5 February 2015; c. 51.]

Can the hon. Gentleman help the House in dealing with the Minister’s point?

[Mark Durkan]

It was a bit of an enigma to some of us on the Committee. Although we asked the Minister about it, not much light was cast on the limbo status of credit unions whereby they are neither included nor excluded. Subsequently, I asked him about the power in clause 1, page 66, to amend the definitions of “excluded trade” or “excluded activity” or to make provision about the meaning of “back office activities”. That gives the Treasury a fair degree of leeway in making subsequent adjustments. I asked him whether that implied that some accommodation could be made regarding the particular sensitivities around credit unions—and now I add Northern Ireland-based mutuals, as we are all joined in making that case. I hope that he will be able to shed some light on that. If he can assure us that we are all working under a misapprehension and that our concerns can be allayed, then so much the better, but people want to see it clearly in the Bill and do not know why it should not be there.

The Northern Ireland credit unions fall within the legislative remit of the Assembly in respect of their registration and some of their activities, so it would be bizarre if it was denied the specific power to set their corporation tax rate in the same way that it would for SMEs, for example.

As credit unions are well embedded into the communities in which they are based, it just does not seem fair that they should be subjected to a corporation tax rate that is very different from the rate for the businesses they work alongside in those communities and neighbourhoods.

As we identify in the amendment, we want to extend the same consideration to the Progressive building society, for instance. Ministers may suggest that designing the clause to suit the particular circumstances of the Progressive building society would create the danger that we might somehow admit all sorts of others to the benefits of doing such activities. However, just as the details of regulations specify a threshold of business for small and medium-sized enterprises, the amount of employment, and the percentage of work time and expenses in Northern Ireland as opposed to elsewhere in the UK, so other measures could easily be built in to protect building societies and mutuals that wholly, solely or at least very largely base or centre their activities in Northern Ireland, rather than organisations that operate more widely and might artificially skew some operations to the north of Ireland to benefit from the corporation tax rates. If that is a concern or issue for Ministers, it could easily be accommodated.

It is clear that there is broad support on this issue from the parties in this House and from the wider range of parties in the Northern Ireland Assembly. Nobody intended, assumed or understood that credit unions and legitimate, bona fide locally based mutuals, such as the Progressive, would be caught in the Bill’s preclusions. We are seeking targeted and focused exceptions with the aim of ensuring that credit unions in Northern Ireland do not unduly pay corporation tax.

The amendment is an attempt by the parties to recognise that, unlike credit unions in Great Britain, which have been able to benefit from Government finance in the form of growth, development and modernisation funds over the years, credit unions in Northern Ireland have not benefited from direct funding. Credit unions in Northern Ireland are adjusting to the new regulatory obligations under the Financial Conduct Authority and the Prudential Regulation Authority, which have created issues of corporate governance, training and IT standards, but none of that has been funded or supported in any way. One compensation that we might, with due diligence, seek to extend to them would be to make sure that they are at least exempted from the higher rate of corporation tax that is meant to apply to big corporates and businesses in financial services. That is the salient point of the amendment.

I hope that the Financial Secretary will acknowledge that amendment 1 would not trigger any of the difficulties that he said would have arisen from the original amendment in Committee. The scope of this amendment extends beyond credit unions to take in other legitimate mutual organisations, such as the Progressive building society—in fact, that is the only one I can distinctly identify—and that is included for a purpose. I hope that the Financial Secretary and the Secretary of State, who has received representations from Committees of the Assembly, will show some understanding. I look forward to hearing any explanation but also, more importantly, any assurances about how the Government intend to respond to such issues as the Bill is taken forward and as its various rule-making powers are operated in future.

[Mr Gauke]

As we have heard, the amendment tabled by the hon. Members for Foyle (Mark Durkan) and for Belfast East (Naomi Long) aims to bring otherwise excluded trading profits of building societies and credit unions within the scope of the Northern Ireland rate of corporation tax. As it covers two different areas, I will respond to each in turn.

It may be helpful to remind the House that the design of the Northern Ireland regime has been guided by a set of principles agreed between the Northern Ireland Executive and the UK Government. The principles were agreed in the joint ministerial working group process in 2012. Once again, I am grateful to colleagues in the Executive for their co-operation and their constructive approach in those discussions.

--- Later in debate ---

[Mr Gauke]

The first point to make is that there are certain excluded activities. Lending and investment are excluded. Whether the entity concerned is a bank or a building society, if the activity is excluded, it is excluded. There is therefore a level playing field. Secondly, we are making provision for back-office services. It will be possible for a calculation to be made on the profit that is attributable to back-office functions by applying a 5% mark-up to the cost of those back-office functions. The lower corporation tax rate in Northern Ireland—assuming that it is lower—will apply to that. That will be of benefit to institutions, including building societies, in Northern Ireland.

I would also make the wider point, which has been made by the Northern Ireland Executive on many occasions, that the ability to set corporation tax rates will be good for the Northern Ireland economy. That is why the Northern Ireland Executive want the power. What is good for the Northern Ireland economy will presumably benefit institutions based in Northern Ireland, whether they be credit unions or building societies. That is the case that the Northern Ireland Executive have made to us.

When the Northern Ireland regime was designed, it was focused on trading income for very good reasons. Over the course of the debates in Committee, there has been a wide consensus that it is correct that it is focused on trading income. It would not be consistent with that approach for me to accept the amendment. I therefore urge the hon. Gentleman to withdraw it. If he presses it to the vote, I will advise Government Members to oppose it. I understand the widespread view, which has been articulated strongly this afternoon, on the importance of the credit union sector in Northern Ireland, but accepting the amendment would be a mistaken approach.

[Mark Durkan]

rose—

[Mr Gauke]

I will give way one last time if the hon. Gentleman wants me to, or perhaps he wishes to speak once I have sat down.

[Mark Durkan]

Maybe both.

[Mr Gauke]

I give way.

[Mark Durkan]

Will the Minister indicate whether the powers in proposed new sections 357XH and 357XI of the Corporation Tax Act 2010, which appear on page 66 of the Bill, might in any way address in practice some of the concerns that we have voiced, as he seemed to hint in Committee?

[Mr Gauke]

I return to the point that I have made about the fundamental structure or principles behind the devolution of corporation tax rate-setting powers to Northern Ireland. I have given a fairly lengthy response, because I thought that it was appropriate to put in context the 5% computation in respect of back-office functions. There is the ability to come back to that. As hon. Members are aware, the OECD is looking, as part of the base erosion and profit-shifting process, at how much profit can be attributed to back-office functions. If memory serves, it is looking at a range of 2% to 5%, so we are at the upper end of that. There is the ability to make adjustments if there is evidence that there should be a higher mark-up for back-office functions. There is flexibility on that point if the evidence is presented to us and a strong case is made. However, we believe that 5% is the right level.

With that explanation, I hope that the hon. Gentleman can be persuaded to withdraw his amendment. If not, we will oppose it and I will advise my colleagues to vote against it.

[Mark Durkan]

I am disappointed by the tone struck by the Minister, because Members present—from all parties and none—have made it clear that we are not here to beat up the Government about this issue but are here in a spirit of understanding from parties across the Executive and Assembly. The Minister has called the Executive in aid several times, and he said that negotiations between the Treasury and the Executive have been clear about focusing on trading activities. Nobody—officials or Ministers—who conducted those negotiations on the part of the Executive intended to characterise credit unions and the like of the Progressive building society as trading operations, because they do not trade for profit—they are not conventional commercial trading entities in that sense. One, as a mutual building society, is clearly putting all its money back into its operations, and it all goes into Northern Ireland—none of it is speculatively streamed elsewhere. None of it has been lost, and no cost has fallen on the Government purse in any way.

Similarly, credit unions are not in the business of trading as such, and there is no way that they would allow the provision in the Bill to be abused by anybody else to shift activities or profits. Under credit union legislation, credit unions in Northern Ireland must show a common bond that must be wholly within Northern Ireland. There will therefore be no question of abuse or of stuff being shifted or anything else. The argument that the Minister tried to make for building society considerations would not apply to credit unions—certainly not to those that operate under the Credit Unions (Northern Ireland) Order 1985 or any other Northern Ireland-specific legislation that might come through the Assembly in future.

The Minister made a number of points about definitional standards that have been used. He portrayed the Treasury’s understanding of those terms, but as I have indicated, I have no sense that that was the working understanding or definitive intent of the Executive. After all, letters that have come from two cross-party Assembly Committees do not seem to have met with any cautionary advice from their respective Departments, or by Ministers saying, “Oh no, don’t upset this; there is an understanding and you will upset a delicate arrangement. You’ll open the floodgates and there will be all sorts of unintended consequences.” Everybody seems to be on board with the spirit of the amendment, just as they are largely on board with the spirit of devolving corporation tax for certain businesses. Nobody has an issue with the concept that the Assembly will have control over the rates of corporation tax for qualifying businesses, and that the Treasury will remain in control over all the rules on that and other things such as allowances. People seem to broadly agree with that architecture.

Where parties are concerned about the detail it is because we want credit unions and Northern Ireland-based mutuals not to be treated in the same way as the corporate and possibly multinational financial services conglomerate that the Minister seems to have in mind—the kind of people he thinks might suspiciously or dubiously shift activities. That does not apply to wholly grown indigenous entities that are rooted in the community.

The investment activities of credit unions are not for any speculative purposes but are to ensure that credit unions—on the basis of the same thrift that they encourage for their members—are able to show thrift and due diligence at a corporate level, and ensure that they are in a strong position to assist their members. Credit unions in Northern Ireland do not assist their members just to save; they also have a good working track record in assisting people with problems such as debt. That is currently an issue, perhaps because regulators do not want credit unions to assist people with debt in the way they have sometimes done. Unlike advisers who perhaps assist people in debt by creating circumstances in which they walk away from the debt and get discharged under various agreements, credit unions help people to repay that debt. They are in a stronger position to do that when they rely not just on the savings of their members but on sound investments. Those sound investments go back into the workings of the credit unions, and ensure that they are able to meet the new obligations and regulatory standards for which they are not getting any financial support, unlike their counterparts in Great Britain. It seems only fair and sensible to allow them that consideration in terms of corporation tax.

The Minister talks about credit unions as trading activities, but let us compare them with activities of a similar size—with small and medium-sized enterprises—in Northern Ireland that operate in the same neighbourhoods and district centres. Why should credit unions be in a different category from neighbouring trading businesses? They do not regard themselves as trading in that conventional sense, so why should they be penalised and treated differently?

If the Minister does not want us to put the amendment to the vote, will he at least indicate that he is prepared to listen not just to what we are saying in the House, but to future conversations in the Executive? After this debate and discussions in Assembly Committees, I think the Executive will make it clear that they do not like being called in aid in the way the Minister did when he lined them up behind his arguments, which I do not believe Executive Ministers endorse.

Will the Minister look at the provision on powers on page 66 of the Bill? It states:

“The Treasury may by regulations amend this Chapter so as to alter the meaning of ‘excluded trade’ or ‘excluded activity’ for the purposes of this Part.

(2) Regulations under this section may only be made if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.

(3) Regulations under this section—

(a )may make different provision for different purposes;—”

that is essentially what we are saying—

“(b) may make incidental, supplemental, consequential and transitional provision and savings.”

New section 357XI continues:

“(1) The Treasury may by regulations make provision about the meaning of ‘back-office activities’ for the purposes of this Part.

(2) Regulations under this section may, in particular—

(a) specify activities that are, or are not, back-office activities, or

(b) specify circumstances in which activities are, or are not, to be regarded as back-office activities.

(3)Regulations under this section—

(a) may make different provision for different purposes;

(b) may make incidental, supplemental, consequential and transitional provision and savings.”

If the Treasury is accruing to itself the power to make adjustments, and to interpret and respond to behavioural issues and practices to anticipate possible interpretative challenges in the future, it must show that it is willing to listen to one sensible and compelling interpretive issue that has arisen.

We have identified a clear wrinkle in the Bill that is not intended by parties in the Executive or the Assembly at large, or by independent Members from Northern Ireland in this House. Understandably, given the way that the Bill was scrambled forward—we know the issue was there, hung around and went forward and back, and we are legislating in relatively short order—it takes time to give the issue more consideration. If the Government say that because some concerns about interpretive openings might arise they are not minded to accept the amendment, perhaps they will assure us that they will listen to the points that have been made.

The Secretary of State has heard from the Assembly Committees. I do not know what she intends to write to them, but if she writes in the same terms as those in which the Minister addressed the House, by quoting the Executive, she will find that a strong argument comes back. The parties will be saying, “How dare you quote us against our own representations? We have no part of it, and that was not what we understood or intended when we negotiated”

[Mr Gauke]

The Bill is based on the principle of separating trading activities from investment activities, and for a very good reason to do with profit-shifting risks and so on. The hon. Gentleman rightly points out that there is the capability to make amendments in future to regulatory powers and so on. It is not for me to bind the next Parliament, but those powers do exist so there is the ability to look at arguments. I hope he finds that reassuring. The only point I would make, and it is the point I made both in Committee and today, is that there is a very good reason, accepted by all, for a divide between trading profits and investment profits. If we were to break that rule—a principle that runs through all legislation here—it would raise a number of important questions on where to draw the line. I am sure he recognises that, but I had to make that point.

[Mark Durkan]

I take that point from the Minister; nevertheless, the provisions in the Bill that I just quoted allow the Treasury to draw and redraw that line in future. There is no argument in principle with that, even though we know that it may be arbitrary and capricious as well. It may well be the subject of representations when it happens, but we are asking for the spirit of that power to be used and even reflected in the Bill, if possible.

The point we need to go back to is that the Minister relies on the definition of trading activity. People will find it hard to see that the Government can, for a good and understandable reason, make sure—and want to declare on Second Reading—that something like the operations of Citigroup in the Titanic Quarter in Belfast are catered for. In spite of the fact that we are talking about international financial services activity, that will come under the devolved corporation tax rate, but somehow, under this handcuff the Minister is creating in the definition of trading activities, credit unions and mutual building societies such as the Progressive cannot be. That is what people see as disproportionate, artificial and unfair. The Assembly clearly wants to know that, when it has the power to set a corporation tax rate for small and medium-sized enterprises and has legislative power over credit unions, credit unions will pay the devolved rate of corporation tax on their investment income. That seems fair and reasonable in the overall scheme of things.

I hope the credit unions in Northern Ireland will continue to thrive and grow, and no doubt they will. However, at no point is the amount of money they will be paying in corporation tax or the amount of relief they will receive from the corporation tax rate going to bust the Assembly’s or the Exchequer’s budget. We are talking about clear, definable, workable and absorbable margins here. The money would be used for good and understandable purposes, and never sold for profit or given away in gross bonuses or anything else like that. The same applies in respect of the Progressive building society.

The Minister said that if I pressed the amendment to a Division he would vote against it. I do not want to create a complete lock-in on the issue. I do not want the Government to find themselves locked in on an argument they cannot climb down from. I just encourage the Secretary of State and the Financial Secretary, who are both here listening to the debate, to stay open not just to the arguments they have heard from me and other hon. Members today, but to listen very closely to the arguments they will be hearing from the Executive, the Assembly and the credit union sector in Northern Ireland—not just the credit unions that are members of the Irish League of Credit Unions, but the Ulster Federation of Credit Unions and other credit unions too.

The Minister has heard the arguments, although he has perhaps not listened to them as well as I would have wanted him to. I do not accept the points he has made in supposed rebuttal, because I do not think they stand up to the facts. I also do not think they stand up to some of the terminology used in the Bill. After all, the Minister on a previous occasion, as quoted by the right hon. Member for Belfast North (Mr Dodds), said that in the Bill as drafted they are neither included nor excluded from the devolved corporation tax rate. It seems very clear from what the Minister is saying today that for the purposes of the corporation tax they do pay on their investment income, they will definitely be excluded from the devolved corporation tax rate. The Minister seems to have left us in very little doubt about that, unless he wants to indicate that, under the powers outlined on page 66, that may be subject to other interpretation in the future. That is something I would certainly encourage if the Government are not prepared to accept my amendment, or any other amendment that I hope will be tabled in another place.

That said, I have no wish to press my amendment to a Division at this point, because I do not want to put people in that sort of difficulty. I want the Government to move on this, and I will not give the Government an excuse to embed their position. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Third Reading

--- Later in debate ---

[Mark Durkan]

I will probably differ in some emphasis and some recollection from the hon. Member for North Antrim (Ian Paisley), but I wish to begin on a point of absolute harmony, in offering thanks to the hon. Member for Tewkesbury (Mr Robertson) and all the members of the Northern Ireland Affairs Committee, who tilled this hard ground over quite some time, some years ago. The hon. Member for Tewkesbury has rightly been generous in acknowledging the role played by his colleague, the right hon. Member for North Shropshire (Mr Paterson), and I will do so, too.

The devolving of corporation tax to Northern Ireland has not always been the point of constant unanimity that it appears to be today. People did have different approaches and different concerns about it; back when we were negotiating the Belfast agreement or Good Friday agreement some of us wanted fiscal discretion as part of the devolved package, whereas most parties did not. My party was in the very small minority of those that did, and we were particularly clear about the corporation tax side of things. When we did get our institutions up and running, some of us argued the need for devolving corporation tax so that we could do more to maximise the north-south potential for inward investment on the island of Ireland, but many people resisted that idea of working with the south on inward investment. For that same reason, those people were very iffy about the idea of devolving corporation tax, as they felt that somehow it was going to separate Northern Ireland from the Union and be a chink in Unionism. I am very glad that, because of a variety of different experiences, positions have adjusted and moved on in that regard.

Reference has been made to the Varney review. When Sir David Varney was conducting the review of corporation tax issues under the previous Government, he made it clear that he was hearing different views from different parties in Northern Ireland and, in particular, from different Departments and from different Ministers. In fairness to the hon. Member for East Antrim (Sammy Wilson), he acknowledged that at times he had different views and different emphases on this issue, as it is understandable that a Minister of Finance and Personnel would have. I served in that office—I see that the right hon. Member for Belfast North (Mr Dodds) is in his place, too—so I am conscious of the fact that cautionary pieces of advice need to come from that office about what some of the consequences might be. When I was in that post, I used to tell people that as the Minister of Finance and Personnel I did not suffer from depression but I was a carrier. So I can accept that Ministers of Finance and Personnel perhaps did need to sound some cautionary note, but this seemed to go beyond those Ministers; I am glad that we now have a much stronger position on the devolution of corporation tax.

We also need to be clear that the devolution of corporation tax does not put the north—does not put the Assembly—on a par with the corporation tax powers of the Oireachtas. Although it allows the Assembly to set the rates for certain qualifying businesses, it does not allow it to decide who the qualifying businesses are, and the Assembly has no control over any of the other rules that attach to that. The Oireachtas has a very different arrangement. Even when moves are made in the Oireachtas on the “double Irish” situation, which are long overdue and right, we also see a targeted use of things. A bit like this Government’s use of the patent box, the Irish Government have introduced the knowledge box. So there are other ways in which they are going to target competitiveness, and incentivise particular industries and sectors.

That is one issue I wish to address at this point in examining the overall impact of the Bill, because too often the focus in Northern Ireland has been that devolving corporation tax would allow us better to compete with the south. We need to recognise that the competition landscape within these islands has changed. I acknowledge that a regional economic dynamic has been provided under this Government, through initiatives such as enterprise zones, city deals and growth deals, which are creating some drive, regional economic traction and city economic traction. If Northern Ireland relies just on corporation tax and does not look to some of those other tools that are helping to drive regional and local economic growth, we will lose out.

I represent a city where many people go to work across the border for companies that are benefiting from the 12.5% corporation tax rate. That proximity—this is in our travel-to-work area—does not mitigate the fact that my constituency has the highest registered unemployment of all the 650 constituencies represented in this House, which shows that a reduced corporation tax rate alone is not a magic bullet and does not solve everything. As has been said, including by the hon. Member for North Antrim, the south of Ireland’s approach is not just about corporation tax alone; it is about investment in infrastructure and in education, not least in third-level education. Even this week, as we see that the Irish Government’s revenues are up and things are shifting there, and they are looking at and talking about possibly adjusting the spending and tax profile, the Tanaiste, Joan Burton, is emphasising that if money can now be spent, it has to be focused on infrastructure and on education, particularly at the third level.

We see that emphasis in the south, but not in the north. We need to recognise that, with regard to the Stormont House agreement and the wider landscape, all that glisters is not gold. The fact is that the Assembly and the Executive will have a difficult Budget landscape over a number of years and there will be a price on the block grant. That was touched on by the hon. Member for Birmingham, Ladywood (Shabana Mahmood) when she referred to the letter from the Treasury to the Bill Committee—unfortunately, it arrived after the Bill Committee had completed its considerations. The letter, while reflecting the fact that negotiations with the Executive are ongoing, sets out a number of changes that will need to be made to the funding arrangements of Northern Ireland. I am talking about how the block grant will be set and how the Barnett formula will operate. More time needs to be taken to consider those wider consequentials and the implications for the devolved Budget.

In the Stormont House negotiations, I did question why we were not discussing the implications of a corporation tax rate cut or what the implications would be for the block grant. I was told by the First Minister that the rate cut was not an issue, that it would be modest and graduated and that it did not really need to come into our wider discussions about the strong budgetary pressures we were under. But that does not seem to be the case. His understanding and his reassurances were not reflected in the terms outlined by the Treasury Minister in the Bill Committee or in this letter and its attachments. There was an assumption that there would be a gradual working adjustment. In other words, there would not be a full hit in relation to the devolved envelope. But the Minister, both in Committee and in the letter, made it clear that the hit would be up front.

I joined the hon. Member for East Antrim—I understand that his absence is to do with the unfortunate bereavement experienced by the hon. Member for Strangford (Jim Shannon)—in questioning the arrangements. We asked about the working implications of the Executive’s Budget year on year and of the setting of the block grant. We wanted to know whether adjustments would have to be made to reflect higher or lower tax takes. In the letter from the Minister, which was sent on 16 February, we see that those adjustments may be made two or three years later, whenever the full tax yield is made. That creates uncertainty. Given that corporation tax is, as the Institute for Fiscal Studies has pointed out, sometimes volatile, there could be further implications that we should acknowledge. We should not say that we do not understand them or that they were someone else’s fault. We need to go into these things with our eyes open.

Let me turn now to the wider position of the Executive in relation to the operation of corporation tax. Under the Bill, the Treasury retains not just ownership of all the rule-making and interpretive powers, but the commencement power in relation to corporation tax. We know that the timetable is 2017, but, as we heard from the Minister in Committee, the Government will exercise that commencement power when they are satisfied that the Executive has a sustainable Budget.

Over the past couple of years, the Treasury has made it very clear that it judged the sustainability of the Executive’s Budget on whether the Assembly would pass welfare reform legislation. That legislation may not have been to the Assembly’s taste or of a devolved design, but they would have to pass it as a way of proving that they had a sustainable Budget. In 2017, the issue will be whether the Treasury will use that same power to impose policy choices on the Executive. In the Bill Committee, I specifically asked the Minister that question. Let us take the example of water charges. We know that the Executive have consistently tried to prevail on the Administration in Northern Ireland to move to direct water charges in one form or another. When I was a Minister, the then Chief Secretary to the Treasury, Paul Boateng, wrote to us at the Executive twice, asking that we make that commitment. The Executive, on my proposal, refused to do that. Various other ruses have been attempted. During the period of direct rule, Northern Ireland Water was essentially set up on a conveyor belt to privatisation. The question is whether the Treasury would abuse that power and say, “Just like we used to say that you had a sustainable Budget only when you had absorbed what we wanted you to do on welfare reform, we are saying now that you only have a sustainable Budget when we see you levying water charges, raising revenue in other areas or changing your policy in relation to student finances.” It could be linked again to welfare reform. After all, we are now locked into a welfare cap. Luckily, we are being given a lot of leeway in how the welfare cap operates at the minute. If the truth be told, the deal that was reached on welfare reform as part of the Stormont House agreement—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I will say to the hon. Gentleman the same as I said to the hon. Member for North Antrim (Ian Paisley), who spoke immediately before him: I have not been very strict in keeping him to the exact words of the Bill, but, as he knows very well, he is beginning to stray a little. I trust that, in concluding, he will address precisely the points in the Bill that relate to Third Reading.

[Mark Durkan]

I am sticking very much to the thrust and the purpose of the Bill. The Bill is presented as part of a suite of measures coming from the Stormont House agreement. That suite of measures included issues in relation to welfare reform. After all, we were told that there would be no Corporation Tax Bill unless there was agreement on welfare reform, so what I am saying is entirely consistent. Ministers have referred to these other measures when they have addressed this Bill, as have other hon. Members. The point goes to something that is in the Bill, which is the control that the Treasury will have over the commencement of this power and whether it uses that to impose other policy choices on the Assembly. Given that the welfare cap will be in place in the next Parliament—if it is supported both by the Government and the Opposition—it could well be a part of the working reference of the Treasury when it comes to make a judgment on Budget sustainability. In fairness, the Minister made the point in Committee that the judgment would be made on the sum of the Executive’s Budget parts and on a range of issues, but not on specific measures. He would not rule out it being used in that way. Again, in terms of due legislative diligence, all of us must have regard to how this might operate in practice. I am talking about not just some of the detailed rules as they affect businesses but how the overall Budgetary situation of the Executive is affected. There is no point in our popping corks about the legislative power over corporation tax that the Executive and the Assembly will have if we are not also alert to the very real budget constraints and the hard choices that might be imposed with that.

--- Later in debate ---

[Madam Deputy Speaker]

Order. Interventions are meant to be short. The hon. Lady has already spoken. It is perfectly in order for her to make an intervention, but it must be short, especially as she has, quite rightly, taken up the House’s time this afternoon. I politely indicated to the hon. Gentleman who has the Floor that he might consider drawing his remarks to a close. He chose to argue with me on the points I had made. I will speak less politely to him if he does not adhere to what I have said. He has spoken for a considerable time this afternoon. He is in order. He has the opportunity to conclude his speech. I am not saying that he must finish immediately now, but I am sure that he will give thought to other people in the Chamber.

[Mark Durkan]

I have no wish to argue with you now, Madam Deputy Speaker, but I must say that I was not arguing with you previously. I was simply clarifying the position and the background, as you have not had the privilege of sitting through all the debates on what was deemed relevant to the Bill and the wider Stormont House agreement.

The Executive and the Assembly will have to absorb the Bill’s wider implications. There are implications for the economy and for businesses, too. We have heard from many hon. Members that businesses are well seized of the need to try to take advantage of that. We have no problem with the regime on the balance between the rates and the rules, but we want to ensure that there is no undue assumption that the devolution of corporation tax to Northern Ireland alone will transform our economy. We need more investment in infrastructure and higher education and following the decisions in the Stormont House agreement it is not clear whether our borrowing power, which was originally designed for strategic capital, is now being used to pay for a voluntary exit scheme. There is an opportunity cost as regards the wider economic investments.

I do not wish to use the term long-term economic plan, but without addressing some of the other issues, including providing tools that compare with city deals, growth deals, enterprise zones and so on, and without a new level of commitment on third-level education and infrastructure, the Executive might well be getting the novelty of devolved corporation tax without strategic economic perspectives that are other than short term in nature.

[Madam Deputy Speaker]

I thank the hon. Gentleman for his courtesy and for not arguing with me.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Tax Avoidance

Mark Durkan Excerpts

Wednesday 11th February 2015 Commons Chamber

[Mr Gauke]

I will happily deal with that point. Indeed, if the hon. Gentleman will forgive me, I will turn to that very point in a moment or so. He raises a very fair question.

[Mark Durkan (Foyle) (SDLP)]

Will the hon. Gentleman also address the controlled foreign companies rules that were introduced by this Government? Those rules cost revenue here and in developing countries. Sir Martin Sorrell told “Newsnight” that they, and not the change in corporation tax, were the main reason why he was coming back from his business in Dublin.

[Mr Gauke]

The CFC regime is part of corporation tax. The hon. Gentleman makes my point for me. As a consequence of our changes to the controlled foreign companies regime, we are seeing businesses move operations back to the United Kingdom. It was not that long ago—2007 and 2008—when business after business was looking to move its head office out of the UK. That flow has not only been staunched but reversed. We are seeing businesses choosing to locate in the United Kingdom, which is good for business, a successful achievement for this country and something of which we should be proud.

The changes in accelerated payments will bring forward billions in tax revenue in the coming years to help us afford the public services on which the country depends. I am pleased to say that, since the introduction of accelerated payments only a few months ago, avoiders have already agreed to pay more than £185 million to the Exchequer’s coffers, and millions more is being collected from those who, having received their up-front bill, have conceded their tax position and settled.

As well as tackling the end users of tax avoidance, we have also introduced structural changes targeted at the small but persistent minority of promoters who peddle schemes that typically use concealment or misdescription. If those promoters do not change their behaviour voluntarily, HMRC now has powers to monitor, fine and publicly name them. All this has contributed to the fall in the use of tax avoidance schemes over this Parliament. The Opposition motion suggests several areas for further action—this Government will always give a fair hearing to measures that increase compliance and tackle evasion—but they have to be properly thought through and I am afraid that some of their suggestions simply do not pass that test.

Therefore, we will not be abolishing the intermediary relief in contract for difference trading. There is no way to raise sums of the kind mentioned by the Opposition without causing serious damage to London’s position as a global centre for listing companies, as was recognised back in 1997, when the measure was introduced, and again in 2007, when it was expanded. Yes, it is relevant that the Labour party was in government at the time.

Nor will we introduce a deeming test for self-employment in the construction industry. We considered that, but it was not practicable. Indeed, to be categorised as self-employed, a bricklayer would have had to supply their own bricks. Instead, we have addressed false self-employment in construction and other industries through the Finance Act 2014 measures on onshore intermediaries, raising £2.1 billion in the process.

The Opposition motion urges us to close the quoted eurobonds exemption loophole, but it is not a loophole. I have explained repeatedly to the hon. Member for Birmingham, Ladywood that that measure would create an administrative burden, but not raise money. I have even offered a meeting with officials to discuss that, which, once again, she has declined. She set out a new proposal, but it has been looked at and it is simply not practicable.

The Opposition might be trying to recover lost ground, given their failure to get on top of avoidance and evasion, but they have to do better than this. We have led the way not only domestically, but internationally. Let me deal with the point about multinational companies. We originated the base erosion and profit shifting, or BEPS, process and have set out our commitments to multilateral action through the G20 and the OECD. In last year’s autumn statement, my right hon. Friend the Chancellor announced UK action on two of the internationally agreed outputs of the BEPS project. We are introducing legislation to implement the G20-OECD agreed model for country-by-country reporting, which will require multinational companies to provide tax authorities with high-level information on profit, corporation tax paid and certain indicators of economic activity for risk assessment.

We are consulting on implementing the G20-OECD agreed rules for neutralising hybrid mismatch arrangements. We have gone further still to strengthen our defences against the erosion of the UK tax base. As a complement to the BEPS process, we have introduced the new diverted profits tax to counter the use of aggressive tax planning by large multinationals that seek to avoid paying tax in the UK on profits generated from economic activity here.

--- Later in debate ---

[Mark Durkan (Foyle) (SDLP)]

In following the hon. Member for Dover (Charlie Elphicke), I am conscious that it is usually Northern Ireland Members who are accused of rehearsing what has or has not happened over a period of decades and engaging in all sorts of historic “whataboutery”. This is one debate where that accusation will not fall to us, but I note the hon. Gentleman’s observations.

I do not disagree with all the hon. Gentleman’s points, not least those relating to wider international matters and the EU. The Financial Secretary put great emphasis on the Government’s commitment to legislating for country-by-country reporting, but we need EU and G20 countries to move seriously in that direction. However, some of the more notorious tax havens happen to be Crown dependencies or Overseas Territories, and various jurisdictions hide behind that as their reason for not moving on full country-by-country reporting. Similarly, we need more transparency on the linked question of beneficial ownership. If the Government are to class themselves as a world leader in the steps they are taking, they need to be leaning on various other countries more heavily.

It might help the Government to develop a better relationship with other EU member states, and one better appreciated by citizens across the EU, if they applied themselves to those questions, rather than the more turgid questions raised around renegotiation ahead of a referendum in 2017. We need public registers on beneficial ownership, but we also have to recognise that the proposals apply to only 10% of multinational companies—those with turnovers of more than €750 million—and that reporting will apply only to the headquarter jurisdictions by treaty. Even the much vaunted country-by-country reporting touches on only a fraction of the problem.

I have tabled questions to the Financial Secretary about other matters, including a spill-over analysis of tax rules and their impact on developing countries—Ireland and the Netherlands have now done them, but we need one from the UK as well. Contrary to the impression he gave, the controlled foreign company tax rule changes, introduced by this Government in 2015, have removed a protection from developing countries, as well as costing us in revenue. The CFC finance company partial exemption allows companies a 75% tax break on the internal profits they make from lending to related companies in tax havens. Surely that is an unfair exemption and should be curtailed.

People have raised concerns about the tax regime in Ireland, and I welcome the curbs on the double Irish and other arrangements, but several years ago, when Martin Sorrell announced on “Newsnight” that he was moving back to the UK from Ireland, he made it clear it was not just about the reduction in the headline rate of corporation tax; the key motive was the change in the CFC rules. He decided that the rules gave him greater tax comfort than the much criticised position in Ireland, which says something about the Government’s actual performance on tax.

I welcome the commitments on which the Government partly led at the G8 summit at Lough Erne, but we need more follow-through. We are not getting real traction in the BEPS process, and there is still too much evasion both within individual countries and jurisdictions and, more importantly, by many multinational companies.

Money Creation and Society

Mark Durkan Excerpts

Thursday 20th November 2014 Commons Chamber

[Mark Durkan (Foyle) (SDLP)]

I rise to endorse the very significant points made by hon. Members. In particular, I pay tribute to the hon. Member for Wycombe (Steve Baker) for securing the debate and for opening it so strongly. From hearing him speak in Public Bill Committees on banking reform and related questions, I know that he is dubious about our having almost feng shui arguments on the regulatory furniture when there are fundamental questions to be asked about the very foundations of the system. He amplified that point in his speech.

My right hon. Friend the Member for Oldham West and Royton (Mr Meacher) made the point that the whole approach to quantitative easing—several Members have questioned it at a number of levels—proves that the underlying logic of sovereign money creation is feasible and workable. It is strange that some of the people who would dispute or refute the case for sovereign money creation sometimes defend quantitative easing in its existing form and with its current features.

In many ways, quantitative easing has shown that if we are to use the facility of the state—in this situation, the state’s main tool is the Bank of England—to alter or prime the money supply in a particular way, we could choose a much better way of doing so than through quantitative easing. It is meant to have increased the money supply, but where have people felt that in terms of business credit, wages or the stimulus that consumer power can provide?

When we look back at the financial crash and its aftermath, we can see evidence—not just in the UK, but in Ireland and elsewhere—showing that much of what we were told about the worth or the wealth of various sectors in the economy up until the crash has turned out to be vacuous, while the poverty lying in its trail has been vicious. The worth or the wealth was not real, but the poverty is real. People in organisations such as Positive Money in the UK or Sensible Money in Ireland are therefore saying, rightly, that politics—those of us charged with overseeing public policy as it affects the economy—need to have more of a basic look at how we treat the banking system and at the very nature of money creation.

As someone who grew up in Northern Ireland, I am very used to the idea of having different banknotes—banks issuing their own money—but we do not think much about that, because we think that all that happens in the Bank of England or under its licence. As a member of the Financial Services Public Bill Committee and the Financial Services (Banking Reform) Public Bill Committee, it seems to me that although it has been recognised that some regulatory powers should go back to the Bank of England, the arrangements for regulation and the Bank of England’s role are still very cluttered.

In fact, in trying to correct the regulatory deficiencies that existed before the crash, there is a risk that we have perhaps created too many conflicting and confusing roles for the Bank of England. Given the various personages, different roles and job descriptions that attach to some of those committees, it seems to me that there is potential for clutter in the Treasury. The common denominator and reference point in the range of different committees and bodies and the things they do, is the Treasury. When the Treasury exercises its powers, influences judgments, and informs the criteria and considerations of those different committees under the Bank of England, there is not enough scrutiny or back play through Parliament.

I endorse the points made by other hon. Members about ensuring more accountability, whether through more formal reference to the Treasury Committee or some other hybrid, as suggested in an intervention on the right hon. Member for Oldham West and Royton. There should be more parliamentary insight—and definitely parliamentary oversight—on these matters. We cannot suddenly be shocked that all the confidence in various regulatory systems turned out to have been badly placed. That was our experience the last time, when people who now criticise the previous Government for not having had enough regulation were saying that there was too much regulation and calling for more deregulation.

If we in this Parliament have produced a new regulatory order, we must be prepared to face and follow through the questions that arise. It is not good enough to ensure that the issue returns to Parliament only the next time there is a crisis, when we will have to legislate again. We should do more to be on our watch. The hon. Member for Wycombe and other hon. Members who secured this debate have done us a service. We want more of a parliamentary watch window on these issues.

There is a necessary role for banks in the creation of money and quantitative easing, but we must entrust them with the right role and with the appropriate controls and disciplines. That is fundamental. It is not good or strong enough that we leave it to the whims of the banks and their lending—supposedly reinforced and stimulated by quantitative easing—to profile the performance of the economy.

If quantitative easing works on the basis of the Bank of England, through the asset purchase facility, essentially using money that it creates under quantitative easing to buy gilts from a pension fund whose bank account is with RBS—which in essence is owned by the Bank of England—then RBS’s bank account with the Bank of England goes up by the value of that gilt purchase. Simultaneously, the bank account of the pension fund goes up by that amount, and we are told that the UK money supply has increased. Yes, in theory the pension fund can purchase other assets—is that what is happening?—but while 1% of the big money holders and players appear to have been advantaged through quantitative easing, where is the trickledown to the rest of the economy? It is not there.

The sovereign money creation model seems to be primed much more specifically on a view of the total economy and providing a broad, stable and more balanced approach to stimulus and economic performance. We have had the slowest recovery coming out of a recession with quantitative easing. I do not say that to get some voice-activated reaction from the Government about how good the recovery and performance is, but in broader historical terms it is the slowest recovery, which also leaves questions about quantitative easing.

We heard from the Prime Minister about red warning lights on the dashboard of the world economy, and I wonder whether he would ever say that, to his mind, those warning lights include the degree to which global banks are now playing heavily in derivatives again, and there needs to be more action. That raises issues not just of regulation at national level, but at international level.