Tourism Industry and VAT

Nick Harvey Excerpts

Tuesday 17th March 2015 Westminster Hall

[John Pugh (Southport) (LD)]

I congratulate my hon. Friend the Member for Ceredigion (Mr Williams) not only on securing this debate but on having campaigned vigorously for years on this theme.

I have only one point to make. I was standing in Strangers yesterday holding up a placard about VAT and tourism while pointing at a screen. I chanced to ask the person who had asked me to do that, when he put his camera down, how long the campaign had been running for. He said that it had been running for about 18 years, to his knowledge. Hon. Members can imagine people from the industry trooping into the Treasury during those 18 years to speak to stony-faced mandarins, who find reasons for inaction. Ministers will have come and gone during that time, but the Treasury’s line will be familiar to the people lobbying it.

I am sure that, in those discussions, the Treasury will have heard good words, such as “growth”, “expansion”, “development” and “jobs”, and phrases it does not want to hear, such as “forfeit of revenue”, “loss of income” and so on. However, a counter-argument has always been put, which I could put in terms of a Laffer curve if I actually understood what a Laffer curve was. In simple terms, the counter-argument is that if there is development and growth, there will be more taxpayers, and more business will be done, so there will be more revenue and other gains, such as regeneration, which other Members have spoken about. The real choice, as far as the Treasury is concerned, is between getting more tax at a lower rate from more people, and getting more tax at a higher rate from fewer people.

That seems to be the hard choice the Treasury faces, and it is at best cost-neutral. I am not sure that it is cost-neutral in the short term—no one has suggested that, I think—but it certainly is in the long term, and it has other benefits, including regeneration and reviving areas such as the south-west and north-west.

[Sir Nick Harvey (North Devon) (LD)]

With five visits being made outwards from the UK for every two incoming visits, would there not be an additional benefit, of improving the balance of trade?

[John Pugh]

Indeed. Many persuasive arguments would suggest a net benefit to the Treasury from what we propose.

Treasury scepticism is not wholly unreasonable, but it can be allayed. I do not think that international comparisons console the Treasury especially; perhaps the thinking is that such comparisons relate to foreign places where the world functions differently, and tax regimes and people’s behaviour are different, and therefore the Treasury is not satisfied by ample international evidence. Certainly it will not be satisfied by research, however good, commissioned by the industry.

There is a way forward, however. The solution is not simply inaction. The Treasury could commission its own independent research, on a basis agreeable to the industry. That would be a huge step forward—some progress in relation to the past 18 or 19 years. It would be a step along the path of evidence-led policy—a good step to take. We would all be amazed if tomorrow the Chancellor said that he had decided to cut VAT for tourism. We would fall about and do more than wave our Order Papers—we would go into paroxysms. However, he could, if he wanted, do something that would cost nothing and might attract a great deal of good will: he could say, “We will have some independent research commissioned on this very difficult subject on which Parliament has occupied itself for some considerable time.” That would lay the ghost to rest and bottom out the issue.

Why should the Chancellor not do that? It would be an intelligent reaction to the plausible and effective argument that has been put by a crucial industry employing many more people than is ordinarily to be expected. If the Chancellor does not do that, he could be embarrassed later by someone moving an amendment to require the exact same thing. I have little doubt that it would be carried, as there is widespread support in the House for such research.

UK Film Investment (Tax Relief)

Nick Harvey Excerpts

Tuesday 16th December 2014 Westminster Hall

[Sir Nick Harvey (North Devon) (LD)]

I am delighted to take the opportunity today to draw the House’s attention to the serious and widespread misapprehension about the current status of the tax affairs of those who, between 1997 and 2007, invested in the increasingly successful UK film industry, at the encouragement and incentivisation of the British Government. There is a general perception, perpetuated by the media and encouraged by Her Majesty’s Revenue and Customs, that all those who invested in UK film between those years did so for the purposes of tax avoidance, rather than as genuine investments.

On 22 October this year, I raised the matter at Prime Minister’s Question Time, and the Prime Minister gave a telling response. He said that

“the things…being investigated are abuses and were known to be abuses at the time when people entered into them.”—[Official Report, 22 October 2014; Vol. 586, c. 899.]

I find that rather a worrying statement. It rather suggests that the Government have made up their mind on these partnerships, on the basis of very little evidence and next to no attempts to engage with those involved. If it is ultimately ruled that the schemes are not in order, many investors could find themselves liable for tax bills of up to 10 times their original investment. The financial stress caused by sudden and unexpected demands from HMRC is proving ruinous in some cases. I have heard accounts of marriages breaking down and people becoming sick with worry, and the consequences should be clearly understood by all those involved.

There has been no engagement with the partnerships to discuss the situation nor any attempts to engage in meaningful settlement talks, despite a settlement opportunity letter being issued to partners at the beginning of last year. Today, I would like to ask the Minister to look again at the situation and urge HMRC to bring this business to a conclusion. The lack of information and engagement has been woeful, and I would hope that in many cases, investigations can be concluded or dropped outright, or at least, that a settlement can be reached.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

I congratulate the hon. Gentleman on securing this debate. We desperately need investment in entertainment, culture and the arts. The one bright light of the recent autumn statement was the expansion of the enterprise investment scheme up to the full level of private investment. The opportunities for investment in film, theatre and all sorts of productions in a time of austerity is wonderful, and it would be a pity if what he is pinpointing ruined all that.

[Sir Nick Harvey]

I entirely agree with the hon. Gentleman. This takes us back to 1997, in the midst of the “Cool Britannia” era, in which stars of film and pop attended parties at Nos. 10 and 11 Downing street and the then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), introduced a full tax relief on investment in small-scale British films in order to encourage investment and promote growth in the British film industry.

Encouraged by a report called “A Bigger Picture” from the UK film policy review group, the Government established a 100% write-off for tax purposes on the completion of films with budgets of £15 million or less. In real terms, that meant that sale and leaseback deals for smaller films would become financially viable, vastly stimulating the market. Those reliefs were known as section 42 relief, in place from 1992, and section 48 relief, in place from 1997. They lasted for 10 years until 2007 and were arguably a large success: the size of the industry increased from £1.7 billion in 1997 to £3.2 billion in 2008; the number of films made in Britain doubled over the period and 46,000 new jobs were created.

In the Budget in March 2004, the then Chancellor was able to report on the successes of the reliefs. He said that “a minority of” third parties had abused them, but he did not see the need for an “anti-avoidance rule”, saying simply that he thought that “loopholes” needed to be closed. However, other partnerships, including the 74 Movision film partnerships, applied the terms of the Films Act 1985 and the Financial Services and Markets Act 2000 scrupulously.

The Movision film partnerships were established between 2002 and 2004, entirely in accordance with the law and with significantly different arrangements from the “minority” that was commented upon by the then Chancellor. Furthermore, the Movision film partnerships, which were established with approximately £50 million of subscription capital raised from approximately 500 partners, with an average investment of £50,000 a head, produced 13 British films and acquired another 14 British films. Those films would not have been made without the involvement of the Movision film partnerships. In the end, the partners did exactly what the Government had asked them to do; they invested in British films and claimed their tax reliefs.

[Mr Sheerman]

The hon. Gentleman is making the point brilliantly clearly. I was born in Shepperton and when I was a youngster, my family worked in Shepperton studios, and I am passionate, as he is, about the film industry. The people who misused the tax relief were a tiny minority. Most of them have done really good stuff. “The Scottsboro Boys” is a big success at the moment—one of my constituent’s sons is a star of it. This is how that production was done. Small films and big films are being produced in this way. I beg the Minister: please do not spoil that, because this is the future of the film industry in Britain.

[Sir Nick Harvey]

I entirely agree with what the hon. Gentleman says. I think that this policy was a success and that one can visibly judge the tangible uplift in small film producing in Britain during the period that the tax relief existed. I think that the then Chancellor was right in March 2004 when he observed—this is widely recognised—that a minority of partnerships were abusing the tax relief, but they were a minority. This is the point: it is completely inexplicable and totally unacceptable that 10 years later, HMRC is treating the whole lot of them as though they were crooks, and when the Prime Minister gets up to respond at Prime Minister’s questions, he has in his folder a brief that says that all those involved were involved in abuse, and that they knew at the time that they were engaged in it. That is completely different from the experience of the Movision partners to whom I have talked and of my own constituent on whose behalf I have taken an interest in the subject.

[Tim Farron (Westmorland and Lonsdale) (LD)]

Does my hon. Friend agree that the important thing is to consider the future of the film industry and particularly the young people who are involved in it? Whatever is the case, it is certainly not the fault of young people looking for a future in the film industry. I spoke to a young man—a Kendal college film student—called Emilio Methven on Friday. He did a survey of his fellow students over the weekend, and they want investment in the film industry going forward and more apprenticeships. They want the UK Government to demonstrate that in backing the UK film industry, they are going to back UK film students. They do not want a sense of there being a retrospective potential attack on the film industry that makes their future much harder to establish.

[Sir Nick Harvey]

My hon. Friend makes a series of very good points. These small films are something that Britain is good at. We have an international reputation in it and the developing creative industries in this country are something that we should celebrate, and yet investment in film is an inherently precarious thing to do. If it had not been, it would not have been necessary to contemplate these sorts of tax reliefs in the first place. The reality is that this scheme was almost too much of a success. It ended up costing more in tax reliefs than had been anticipated at the outset. However, as my hon. Friend says, young people up and down the country are engaged as students and as workers in the early stages of careers in the creative industries, and it would be a very backward step if the UK Government, the Treasury and HMRC were seen to be having a crusade against this industry at the very time when we should be encouraging it further and trying to ensure that more jobs are created in this area in years to come.

Anyone who has looked at this matter will understand that a minority of those involved had, arguably, been seeking to avoid tax rather than to invest in film. There are companies—for example, Icebreaker and Eclipse 35—that have been ruled to have abused the reliefs. Rulings have been made and money has been clawed back. However, I believe that the majority, including Movision, acted in good faith, and they are now being tarred with the same brush in the eyes of HMRC, which is refusing to give them the reliefs and challenging the availability of them to those that claimed them.

HMRC’s current position is that all compliant Movision partners who entered into investment in terms of their tax returns are under inquiry for all years ending from 5 April 2003 onwards. Hon. Members will be aware of how rarely retrospective legislation is passed, yet in effect that is what HMRC is doing by applying regulations in such a way that they are having a retrospective impact on these genuine film partnerships, as they were formed and invested in before 2007, and the abolition of section 42 and 48 relief. However, the sticking point is that HMRC will not engage with the partnerships either to discuss the rationale behind its position or to engage in any meaningful settlement talks. Many of its actions could even be viewed as obstructive. HMRC’s inquiries into Movision have been going on for 10 years—since 2004. When HMRC asked Movision how it incurred 100% production expenditure on films, Movision responded in detail on 11 December 2006. HMRC did not respond to that until June 2013—more than six years later. That is completely unacceptable.

It subsequently transpired that HMRC had had a resolution discussion embargo in place from 2010 to 2013, but had chosen not to inform anyone about that; none of the partnerships was aware of it. Why was that? What was the purpose of the embargo? What benefit did it afford to HMRC or the taxpayer?

In 2013, HMRC trialled an alternative dispute resolution and found it to be successful. Following that, it offered a 55% settlement to all partners. Many phoned back and at first were told that HMRC would get back to them after 10 days. Those who phoned later were told six weeks and then two months, and those who rang after that were told that the settlement team had been disbanded—with no explanation.

Movision has made two settlement offers to HMRC: one for £2.4 million and another for £3.95 million. It was told by HMRC that its offers were unsatisfactory, but not why, which obviously makes it very difficult for it to negotiate. The latest development, in the last fortnight, is that HMRC has issued a new embargo on discussions with film partnerships if the partnership has investment in films via anything similar to sale and leaseback. Sale and leaseback is a perfectly conventional method of generating financing whereby the owner of an asset sells the asset but then leases the asset back from the inquirer, thus freeing up some capital. It is commonly used in financing films, and HMRC recognises it in its own business manuals. It is unclear why the embargo has been issued, but it will certainly delay even further any meaningful discussions.

As I said at the outset, there remains a misapprehension about film tax relief. I fully understand the importance and, indeed, the necessity of putting a stop to tax avoidance. That is more pressing than ever in the current financial climate. It is clear that a light needs to be shone on these partnerships. HMRC needs to take immediate steps to identify those who were genuine investors as opposed to those who cynically abused the tax system. The Treasury must be clear that film partnerships that applied the correct legal procedures before 2007 are and remain eligible for the tax reliefs that they were promised by Her Majesty’s Government. With 65,000 cases of tax avoidance identified and a record 27,000 tax disputes waiting to be heard at tribunal, it seems clear that HMRC should be either prosecuting or moving towards a settlement with partnerships.

As I said, for the 500 partners involved in the Movision scheme, the average individual subscription was just £50,000. We are not talking about the super-rich; we are not talking about pop stars and footballers, who are advised on how to seek opportunities for aggressive tax avoidance. With every year that passes, the impact on some of the partners, with the HMRC sword of Damocles hanging over them, will worsen. Many have already become ill, suffering nervous breakdowns and stress-induced illnesses, and have seen marriages and businesses fail. That is a very high price to pay for responding to the call of “Cool Britannia”. Furthermore, it will no doubt make investors less likely to make use of current tax reliefs to invest in industries that the Government want to grow, of the sort that the hon. Member for Huddersfield (Mr Sheerman) suggested, and let us not forget that that is how this whole business started.

HMRC should stop prevaricating and engage with the film partnerships to resolve the inquiries. That should include the aim of either settling or prosecuting within two years, because this has already gone on long enough. I hope that the Minister will consider the steps needed to bring clarity out of the current chaos and rectify unfairness caused to genuine partnerships and investors.

--- Later in debate ---

[Mr Gauke]

The hon. Gentleman is nothing if not consistent; I have never known him to fail to take the opportunity to extol the virtues of crowdfunding and some of the other measures that we are taking. The point that I am making is that we have a film tax relief system that is working well and attracting investment. Nothing in what I am about to say should undermine that.

Our system is working, but I cannot, unfortunately, say the same about all investment under the film relief that was in place before 2007. The old relief was heavily exploited by partnerships of wealthy individuals. Typically, they sought to obtain tax relief out of all proportion to their economic investment. Many schemes used artificial and contrived arrangements to create excessive tax claims. In short, investors abused the relief to try to dodge paying their fair share of tax.

My hon. Friend the Member for North Devon argued that the old legislation was working well. The previous Government took significant legislative action over a number of years to try to prevent the various forms of abuse that were occurring, but they concluded in 2007 that they had to scrap the old regime and replaced it with a much better scheme that now works. HMRC is actively investigating and countering schemes under the old regime about which it has concerns.

[Sir Nick Harvey]

I am not dissenting from the Minister’s proposition that the post-2007 arrangement has been better than the arrangement that ran for the previous 10 years. Nor would I take issue with his assertion that there was some abuse of the previous system. However, when he says that investors used those schemes for the purposes of tax avoidance, is he seriously contending that every single investor who availed themselves of a tax relief that the Government had created was doing so for tax avoidance purposes, or does he accept that there were good and bad among those investors? Will HMRC please do more to distinguish between the two?

[Mr Gauke]

HMRC is not taking a blanket approach to all such schemes, and I will return to that point in a moment.

It might be helpful if I set out some of the problems with the old regime. At the extreme, the situation was so bad that some films were produced solely for the purpose of avoidance schemes, and they were never destined for release beyond the minimal qualifying requirements. Other schemes involved genuine commercial films, but the structure of the financing was designed to generate tax relief in excess of the scheme user’s genuine economic investment. Alongside the schemes that used the relief, other avoidance schemes were created that happened to use films as the avoidance vehicle of choice, even though they did not rely on the specific film relief.

Everyone should be clear that the use of films for tax avoidance is bad for the reputation of the UK film industry. I suspect that there is no dispute among us on that point. Such avoidance is unfair on the vast majority of the public who pay their fair share of tax, and it is correct for HMRC to tackle avoidance in whatever form it takes. HMRC has a strong track record in the courts, winning about 80% of tax avoidance schemes that go to litigation. In 2013-14, HMRC’s 30 wins protected some £2.7 billion of tax. HMRC has a strong track record of defeating film schemes in court. It is right for HMRC to challenge avoidance schemes, because that is its job, but it has not taken a blanket approach of opposing all schemes that involve the old film tax relief. If someone believes that HMRC’s view on a scheme is wrong, they can take the matter to the courts for a decision.

My hon. Friend the Member for North Devon has raised the concern that HMRC has not always worked the case properly. I cannot comment on specific cases or schemes, but let me reassure him that the resolution of existing tax avoidance schemes is a top priority for HMRC. During the past year, HMRC has created a dedicated counter-avoidance directorate, bringing together technical, policy and operational expertise from across the Department in one place to concentrate focus on tackling marketed tax avoidance. The Government have consistently supported HMRC’s work to counter marketed tax avoidance by introducing new legislation and investing in its resources.

That brings me to this year’s Budget, in which the Chancellor announced that from 17 July 2014, individuals and businesses involved in tax avoidance schemes must pay HMRC the disputed amount of tax up front while the dispute is being resolved. That new power, which is called accelerated payments, came into force as part of the Finance Act 2014, and it removes the cash flow advantage that those who deliberately try to bend the tax rules by avoiding tax previously had over the majority of taxpayers who pay their tax up front.

I am pleased to say that the collection of tax from avoiders has accelerated enormously since the introduction this year of accelerated payments, and avoiders have already agreed to pay more than £30 million since Parliament introduced that measure. It is quite right that the users of avoidance schemes involving films or film relief should also pay up front.

Finance Bill

Nick Harvey Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Helen Goodman]

I should like to speak to new clause 5 and new schedule 4 on the theatre tax relief and to set this in the context of the current state of British theatre.

The Government’s own documents point out that the film tax credit introduced by the previous Labour Government has been a significant success. In answer to written questions from my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), the Government have told us that the film tax credit has supported 1,200 films, provides 46,000 jobs, and has brought in £1 billion of investment. Obviously, therefore, a theatre tax relief is a good idea in principle, but it is worth considering whether the drafting of the new clause will achieve all the desired objectives. If it is not drafted sufficiently generously, the positive benefits to the theatre industry and to the British economy will not be achieved, but if it is drafted too loosely, it can become open to abuse. In either of those instances, we will have to come back and revisit the drafting, and the industry will face an unstable regime that is not helpful to its planning. In one respect, the drafting is a bit too loose and in another respect it might be a little too tight.

[Sir Nick Harvey (North Devon) (LD)]

I strongly support the hon. Lady’s thesis that it is essential to get the wording right. At the moment, there seems to be a practice on the part of HMRC investigators to assume that any investment—certainly by private individuals taking advantage of this facility—is, by definition, improper. There is far too much of an assumption that people are on the fiddle. I share her view that it is an entirely valid form of tax allowance and that it is important to get the definitions absolutely bang on the nail.

[Helen Goodman]

I am grateful to the hon. Gentleman. It is slightly unfortunate that the Government have brought the new clause and new schedule to the House now, because this is the only opportunity we are going to get to scrutinise this.

The object is obviously to support the development of British theatre and, in particular, to support touring. We have some of the best theatre in the world; we all know that. It all began with having the best playwright in the world. We have built on that over time, and our theatre is one of the major attractions for inward visitors and a major export industry. I point out to the Minister that we can draw a distinction—it is a little crude—between two parts of the current theatre industry. The commercial part is a series of chains of theatres producing successful, profitable plays that are often sold to New York and have very long runs, particularly in the west end of London.

If the sole benefit of the tax relief was to make those companies more profitable, that would be very nice for them, but it would not achieve what the Minister is aiming for—namely, to support the development of the industry. We therefore need to look at whether the relief supports the part of the theatre that is not always profitable and is supported by the public purse. That is why the question that my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) asked about whether the allowance will be claimable by companies that are charities is very pertinent. Large parts of the subsidised theatre sector, the Minister hopes, will be getting a tax subsidy instead of a public spending subsidy; I appreciate that that is his aim. However, that will not happen if their legal structure is not in line with what the Bill provides for. It is rather disappointing that we are being asked to agree this primary legislation when the guidelines on the definitions have not yet been published and so it has not yet been possible for them to be scrutinised by people in the industry who understand this very well.

Trident Alternatives Review

Nick Harvey Excerpts

Wednesday 17th July 2013 Commons Chamber

[Mr Jones]

The hon. Gentleman makes a good point. No doubt at the general election he will remind his constituents and others of the Liberal Democrats’ position. We have some indication of what they think of people in Barrow and Furness because the hon. Member for North Devon (Sir Nick Harvey) suggested that they could move to the Bahamas to find work if we killed off the submarine-building industry there.

[Sir Nick Harvey (North Devon) (LD)]

indicated dissent.

--- Later in debate ---

[Sir Nick Harvey (North Devon) (LD)]

I commend my right hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) on bringing this piece of work to fruition, and I believe it has genuinely taken an open-minded look at the whole issue. The review did not set out at the beginning by offering preconceived conclusions to those carrying out the work, and I believe it has been a worthwhile exercise. I also note that the principal reason why alternative systems were found not to be viable was not—as some have suggested—because they were not technically viable. In contrast, it was because the length of time such alternatives would take, and the amount of money it would involve to equip a warhead to an alternative system, would make such alternatives prohibitive in the medium term. That is the expert view of those tasked with looking at the matter. If that is the conclusion to which they have come, I for one would not seek to question it and we must accept it.

The second part of the study, which looks at alternative postures, concerns the debate that this report can now seek to inform and trigger.

[Dr Julian Lewis]

Will the hon. Gentleman give way?

[Sir Nick Harvey]

Not at the moment.

Given that this report was commissioned by a Government who are a coalition of two parties with fundamentally different opinions on the issue, it was never going to come forward with proposals. It was about considering the alternatives and informing the debate that might follow.

I contend that nobody can rationally argue that the nature and scale of the nuclear threat that the United Kingdom faces in 2013 is the same as it was at the height of the cold war. Then we had a known nuclear adversary, the Soviet Union, that had British targets in its sights and we, similarly, had Soviet targets in our sights. We believed that it might strike at a moment’s notice and we therefore thought it was essential that we were ready at a moment’s notice to strike back. But 25 years after the Berlin wall came down, one cannot rationally argue that the threat we face today is the same as it was then. We can debate what threats we might face in the future, but we cannot argue that the threat we face today is the same as it was in 1980.

[Dr Fox]

rose—

[Sir Nick Harvey]

I give way to my good friend the former Defence Secretary.

[Dr Fox]

We are talking about building a system that will protect us against the potential risks in 20, 30 or 40 years. The year before the Berlin wall came down, no one could have predicted the world we would be in today. No one can predict what the world will look like in the future. The hon. Gentleman is asking us to take an irrational and dangerous risk.

[Sir Nick Harvey]

I agree entirely with my right hon. Friend that we must consider the threat we might face in 20, 30 or 40 years’ time, so we must therefore ensure that we have a nuclear deterrent in 20, 30 or 40 years’ time that is capable of deterring the threat that we might face at that point. My point is simply that the threat we face today is not the same as it was at the height of the cold war. It therefore cannot make sense to operate it on a 24/7 continuous basis facing a threat that simply does not exist at the moment.

I understand the view of those who say that we must retain enough capability to ensure that, in the future when we face threats we cannot anticipate today but know intuitively could come, there is enough of a deterrent to repel them. That is perfectly logical, but it does not make sense for the nuclear deterrent—uniquely among our military capability—to be on patrol the whole time when even our national security strategy has stressed that it is for a second-tier threat and when we do not use our military capability to deter the primary threats on that continuous patrolling basis.

To answer the points made by my right hon. Friend the former Defence Secretary, I am not saying that it might not be necessary in the future to crank up to a more rigorous posture—it might well be—but I do not see how anyone can rationally argue that we have to do that at the moment. The idea that the nuclear capability has a deterrent effect at all only by being patrolled 24/7 is clearly absurd. All the rest of our capability has a deterrent effect against a variety of aggressors in a variety of scenarios and we do not see the need to exercise any of it on a 24/7 basis.

[Dr Julian Lewis]

I could just about stay with the hon. Gentleman’s argument if he was saying that we ought to build four submarines but not send them all to sea until the situation became worse, but he is not saying that. He is saying that we should build only two or three such submarines, which would mean if the situation got worse, we would not be able to reinstate continuous-at-sea deterrence because we would not have the submarines. Without the submarines, we cannot have the posture, much as he might like to reinstate it when the situation gets worse.

[Sir Nick Harvey]

I can agree to the extent that we must ensure that we build enough capability that we can mount the deterrent we will need at the point that we need it. What that will comprise is a matter for further debate and further study and I note with interest that even those on the Labour Front Bench and the former Defence Secretary, the right hon. Member for Coventry North East (Mr Ainsworth), acknowledge that it remains to be seen whether we need four or three to do that.

[Mr Ainsworth]

Just let me see whether I understand the hon. Gentleman’s position: is he saying that we should build enough submarines to be able to go back to continuous-at-sea deterrence and to maintain it at any point at which the threat increases?

[Sir Nick Harvey]

I am certainly saying that I think we should have the ability to go back to continuous-at-sea deterrence when we think we need it. I do not know that I would go so far as to say we should be capable of sustaining it indefinitely—I think that is unnecessary in scale—but I do think we should be capable of sustaining it for periods of time when there are heightened tensions. The problem we face is that we run the risk of having a Rolls-Royce nuclear deterrent at the expense of having an Austin Mini as the remainder of our defence capability. During the very decade when expenditure on the Trident replacement will be at its height, there will be a long list of other high-profile, highly important defence projects competing for what we all know will be very limited defence resources.

There are some obvious examples. We are going to put the joint strike fighter on to our two aircraft carriers, and we do not have the slightest idea at this stage what the unit cost of them will be on a through-life basis. We are going to build the Type 26 frigate. We have got to do something about the Army’s equipment programme given that the future rapid effect system programme is now in tatters as a result of the last few rounds of cuts we have had to make. We are going to need another generation of remotely piloted aircraft. We are going to need more amphibious shipping when HMS Ocean goes out of service in 2018. We need more helicopters. We need more ISTAR assets, and we need to deal with the cyber-threat, which the national security strategy said was one of the primary threats and in which we are investing modestly but nowhere near enough.

If anybody thinks that the resources committed to defence, or that can be anticipated as being available to defence, are enough to pay for all of those on the scale everybody in Government, and probably in the Opposition as well, would want to see and think is necessary in terms of our own strategic defence and security review, something is going to have to give. We cannot afford to do all that and have a nuclear deterrent scaled to deal with the menace of the cold war 25 years after the Berlin wall has come down and 19 years after we and the Russians de-targeted each other.

It simply is not the case that in order to get a deterrent effect from our military capability we have to patrol it all the time. That is absolute nonsense. The British, the French and the Americans have a posture of continuous-at-sea deterrence; the Russians and Chinese do not. The Indians and the Pakistanis take each other’s nuclear weapons perfectly seriously, but that does not mean they patrol with them the whole time. It is complete nonsense to say we have to do it on that basis.

I hope the report published yesterday will inform a national debate about this before a decision is taken in 2016, and when that is done the next generation of the nuclear deterrent will have to compete for funds alongside all the other platforms I have described, which are far more relevant to the threats we actually face.

--- Later in debate ---

[Thomas Docherty]

If that were true, I would be absolutely astonished, but then nothing in this review and the work that was carried out by Liberal Democrat Ministers is credible.

The hon. Member for North Devon set out an argument that I have heard before that neither Russia nor China operates a CASD policy. I accept the premise of his argument, but he failed to mention—I am sure that it was inadvertent, not misleading—that both those countries have other platforms, so they maintain a continuous deterrent. We are the only one of the five that operates a single platform, so CASD is a continuous deterrent for us—there is no back-up plan.

I have a great deal of respect for the hon. Gentleman because after spending two and half years telling us why the Astute boat option would be sensible, he has at least had the courage to come to the Chamber and face up to the fact that he called that wrong. He argues that the problem was not a technical issue, but if his defence— pardon the pun—is that this is something that would cost billions and take decades to introduce, how is it not a technical problem?

[Sir Nick Harvey]

It was not a technical problem in the sense that technically it would work; it was a financial and a time issue. I accept, as the hon. Gentleman says, that the option is clearly not a runner, but not because it technically would not work.

[Thomas Docherty]

If the hon. Gentleman is not splitting hairs, he is splitting something or other, because if the option would cost billions of pounds and take decades to develop, the problem is technical. Any solution can be reaped with sufficient money and time.

The hon. Gentleman talked about how money could be circulated back into the MOD programme. We heard from the hon. Member for Moray (Angus Robertson) that the debate ends up being about things such as nurses and welfare, but the idea that the 4% lifetime cost savings as a result of having three boats would somehow be pumped back into the MOD’s conventional programme is not credible. The hon. Member for North Devon talked about how we could solve the challenges on the wider equipment programme, but we will have to do more with allies, whether on the joint strike fighter, interoperability or the remotely piloted air system. Work such as that started by the former Defence Secretary under the Lancaster House agreement is the way forward.

I noticed that the clock froze for two or three minutes while the hon. Member for Moray was speaking, but having listened to his speech, I felt that his argument had been frozen for 25 years. I was conscious that he did not want to use up his time by taking my intervention, so let me say that although he talked about the trade unions that could have been consulted, he could have spoken to the trade unions I met with my hon. Friend the Member for West Dunbartonshire (Gemma Doyle). If he spoke to trade union leaders at Faslane—the hon. Member for Argyll and Bute (Mr Reid) is in the Chamber but, surprisingly, he has not indicated that he wishes to speak—they would say that their future depends on this. I am sure that it was an oversight that the hon. Member for Moray did not suggest that those trade union leaders should have been consulted.

The hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile), who I notice has not shown the usual courtesy by staying to hear the following two speeches before leaving the Chamber, made the rather bizarre claim that CASD could be guaranteed only by having a Conservative Government. If he was here, I would remind him that it was his Conservative Government who signed up to this review in the first place. I think that they need to hang their heads in shame for wasting taxpayers’ money and civil servants’ time—they have not wasted Defence Ministers’ time, because apparently they were not asked for their views—and there is absolutely no guarantee that they would not have a fudge at the next general election. The only way to guarantee a future for Barrow and for the Clyde is to send a clear message at the next general election by voting for my hon. Friend the Member for Barrow and Furness and other hon. Friends.

Oral Answers to Questions

Nick Harvey Excerpts

Tuesday 6th November 2012 Commons Chamber

[Mr Gauke]

In the design of the scheme we will take steps to deal with tax avoidance opportunities to ensure that we do not create any loopholes, but this is a scheme that will encourage entrepreneurs and start-ups to provide businesses with an opportunity to expand rapidly, and it is exactly the sort of flexible approach that this country needs in the current economic climate.

[Sir Nick Harvey (North Devon) (LD)]

Will the Minister clarify the status of the idea of trading employee rights for share ownership? It has been described as a voluntary scheme, but does the Minister accept that it will swiftly become a de facto compulsory scheme? What level of employee shareholding is anticipated? The media have speculated that it could range from 2,000 from 50,000. It might be acceptable at 50,000, but it would be very different at 2,000.

[Mr Gauke]

There will be a range of options—the minimum is 2,000, and the maximum is 50,000—but this is not going to be a matter that is compulsory. It will not be the right answer for every business, but there are some businesses that need flexibility to find employee status somewhere between a full employee and someone who is self-employed such as a partner, as many hundreds of thousands of people are. I think that it is a sensible, pragmatic response.

Oral Answers to Questions

Nick Harvey Excerpts

Tuesday 11th September 2012 Commons Chamber

[Sajid Javid]

I thought that the hon. Lady might start by congratulating the Government on the fifth consecutive fall in unemployment. She will know that one of the key planks of the Government’s policy for dealing with youth employment is the provision of apprenticeships. She might also welcome the 68% increase in the number of apprenticeships in her constituency.

[Sir Nick Harvey (North Devon) (LD)]

What are the Government’s intentions regarding transition regions in the next round of EU funding? I am told that four Departments are slightly at odds over that. May I surprise my hon. Friends by saying that in the south-west those in the Treasury are seen as the good guys, in this context at least? Will they impress on their Government colleagues the fact that if these schemes are to help areas such as North Devon and Torbay, which have been shown to be at more risk of going into poverty than Cornwall, they will need to operate bottom-up and not top-down?

[Danny Alexander]

My hon. Friend is right to say that transition status has benefited regions such as his—and, indeed, mine in the highlands and islands—during the current multiannual financial framework period. Our principal objective in relation to the budget negotiations is to bring down the total EU budget in recognition of what is going on around Europe, but we will happily discuss further with him his concerns about the issues that he has raised to ensure that we secure a fair deal for impoverished regions of this country as well.