(1 year, 9 months ago)
Commons ChamberIt is a pleasure to speak in this debate, and I think I agree with nearly everything in the two Front-Bench speeches. There is not a lot to add, except really to welcome the Bill and welcome the additional support that the Government have provided. I think it was absolutely the right thing to do, and it is essential for people with the least that they get these extra supports while energy bills and other inflationary costs remain as high as they are. I have a few observations to make on the Bill, but that should not really take away from the fact that the Government have actually come to the right conclusion. Making this support available is by far the most important decision, and everything else is probably nit-picking around the detail.
However, I would agree with some of the observations of the shadow Secretary of State, the right hon. Member for Leicester South (Jonathan Ashworth). Perhaps it would be helpful if the Minister, when she sums up, explained whether the Government did look at temporarily increasing universal credit, rather than rerunning the new benefit three times again this year. That would have allowed for a higher basic payment, which would then taper off for households on a higher income, so those with the very least would have got more than £900 and those with the most would have got a bit less than £900. That would probably have given more help to those households that are going to struggle most with the fact that they are going to get £300 less support this year—if we take into account the energy bills support and the reverse running of council tax we had last year—and be faced with, on average, £500 higher energy bills. It would be useful to know if that was considered, if it was not technically possible and the system could not cope with it, or if there were other good reasons why we preferred the three roughly £300 payments rather than having smoothed that over the year and used the tapering system.
Those of us who did—and do—support universal credit, did so on the basis that having a tapering benefit linked to income is the best way of doing it, because it avoids cliff edges. It stops people having unfortunate behavioural ideas, such as, “If I take the extra hours this month, I’ll lose my £300, so I’d best not do that; I might wait till next month,” or, “Ought I to drop out of a job, or try to somehow reduce my income to get that payment.” I accept that having three payments of £300 is better than a one-off payment of £900, but if we really believe in all the advances of universal credit being linked to income with tapering to avoid cliff edges, we should use it in a time of crisis as well as in a normal situation.
We know from the pandemic that we can very quickly flex the amount of UC, because we did it in about five weeks, so I cannot see a problem with that. That might not be so easy for tax credits and other benefits and we might have wanted one system that works for everything here. If the Minister says that is the reason, perhaps we can understand it, but now that we have had some time—we have had a year of this crisis—we might have produced a slightly more effective solution.
We also know that for the households with the least, getting lump-sum payments is not always best, because if they struggle with budgeting, they might not understand that they have £300 more this month that they will not have next month or for winter. Smoothing those payments through every month might help them ensure they have the money in place for when energy bills will be highest, which I suspect will not be when they get their April payment this year. I accept, however, that there is no perfect solution and that this solution is better than doing nothing.
I also want to reiterate a point made by the Chair of the Select Committee, the right hon. Member for East Ham (Sir Stephen Timms), and the shadow spokesman, the right hon. Member for Leicester South. They said—in the debate last year, I think—that needing to have received a UC sum in the assessment month before the payment prevented a large amount of people from getting a payment, not through any fault of their own or because they have got more money, but just because the way they receive their payments from their employer accidentally dropped them out.
A relatively simple solution would be to tweak two words in the Bill and say that if someone has received 1p in either of the two assessment periods before each staging point then they get the £300. That would add one word and one letter to the Bill and would fix the problem for the vast majority of cases. If someone happens to be paid four-weekly and they have two payments in one period, that would fix it; if they happened to have had a bonus once and it hit in one period, that would fix it because presumably they would not have had it for two successive months—and if they did have it for two successive months it is probably fair enough to assume they are now earning more than we thought they would be. That would be a simple change to consider in Committee, which I think will be on the Floor of the House so perhaps we can all get to vote on it—I suspect relatively shortly. I urge the Government to seriously think about making a simple change such as that, which would smooth out one of the rough edges quite easily.
The Secretary of State said that there will be a helpline, but this is primary legislation, and if someone has not received a penny in that month, there is no discretion for the Department to give them the £300, or the £301 or £299; it cannot do so because the Bill says it cannot—they have not received a penny, so they cannot have it. So there is no way of fixing that retrospectively; it needs to be fixed at this stage.
With those observations, I sincerely welcome the Bill, which will provide significant support for people in Amber Valley, who are struggling with high inflation and high energy bills. I repeat my request from the uprating debate, however: I urge the Government to keep the situation under review so that if it worsens and we need to help people more during the year we can come back and do that. It would not be too hard to add a fourth payment if we needed to.
I call the Scottish National party spokesperson.
(1 year, 10 months ago)
Commons ChamberIt is a pleasure to speak in this debate, and it is a bit of a pleasure that we are in a better position than we were a year ago, when we were looking at a welfare increase of 3% as we saw inflation forecast to hit 7% by April. We have—perhaps more by chance than judgment—a rise of 10% while inflation is actually 10%, so we at least have an uprating that looks to be the right number. However, the fact is that that is still a bit by chance, because we are still having to use information that will be six months out of date by the time we get there. It shows how strange the system we have is. When the Minister winds up, can they say whether any progress at all has been made in trying to get the systems in a position where we can use a more recent number, so that we do not end up with a repeat of last year, using an out-of-date number that is way below the level of inflation by the time we get into the year?
A 10% rise in benefits and the state pension is extremely welcome, and we should pay tribute to the Secretary of State and the ministerial team for getting that amount of money out of the Treasury, but I suspect that when the Chancellor sat down to do his emergency Budget, or several Budgets back in the autumn, he probably was not overly excited by having to find this amount of money. It was, however, clearly the right thing to do. The idea of putting up the incomes of people on fixed incomes or earning the lowest levels in the country by less than inflation would have been completely ridiculous. I think we have got to the right answer, and I welcome it. The timing of the changes has an unfortunate impact; by the time we get to April we will have had increases of just over 13% for the last two years, while inflation will have risen by about 17%, so people will still be 4% down on where they were before the crisis.
And it is worse than that. The basket of goods and services bought by most people on these benefits tends not to relate well to the consumer prices index. For example, food price inflation is much higher—more like 19%. There is no doubt that the Government have been extraordinarily generous with energy support, but if we factor in the changes to energy price support, what do we see for the coming year? The inflation figure that has been used is from September—before the move to the energy price cap, which started in October—and the price cap that drove that figure was an annual bill of £1,971. We are currently at £2,500, and the Government’s cap will mean that that number will rise to £3,000 from April, so the average household may well be £1,000 worse off on their energy bills. The rise in the state pension of about 10% is a little under that, so will only cover the rise in energy bills from the current financial year to the next.
The support will drop off quite considerably. If we add up the cost of living support, the £400 from the energy company and the £150 via council tax, the average household on the lowest incomes has had £1,200 of support this year. That will go down to £900, and the pensioner support will go down from £850 to £300. Although there will be a rise in the main benefits and pensions income, a cut to the other support and a rise in energy bills will mean that that is all gone, and most households will actually be worse off as we go into the next financial year. I am not sure that is what the Government intend.
The idea that we have to taper off the extra support for households that are earning money is right in principle, but the Government may need to keep a watching brief throughout the year on whether people living on a fixed income in retirement, on out-of-work benefits or on the very lowest incomes, can really absorb a change that could mean—by the time all the extra bills and the reduction in support have been factored in—that they are £1,000 worse off next year than they are this year. Is that what we really intend? Are we in danger of unravelling the incredibly generous support we have given in this financial year by taking it away next year, perhaps a bit too soon?
We all hope that inflation will fall considerably, and we see encouraging signs from the energy markets that prices are coming down. Perhaps by the time we get to April, the energy price forecasts for households for the next year will be a long way below the £3,000 or even below the current £2,500 cap, and this problem will go away. Perhaps the Government will be proven right in taking a more cautious approach to support for next year. Having gone to the effort to create a brand-new benefit for cost of living support, which I think is unprecedented, I hope the Minister can confirm that the Government will keep reviewing that rate to see whether we are giving households enough to get through the next financial year.
I wholeheartedly welcome today’s increases, which are clearly the right thing to do, but there are two things that the Government need to do on top of monitoring the situation. The first is to try to get this decision made on more recent, more relevant data. I accept that the systems are so old and steam-driven that we have to start doing the work in October based on the September number, and that if we do not start that early we cannot get the rises through, but it is a bit bizarre to bring to the House in February an order that we had to start programming the computer to do in November or October, and that we cannot change. If the House voted for something different tonight, it would be too late; this is plumbed into the system. We should either have this debate in November, when we can actually change it, or we should try to move the rise to a more relevant date. Given that we managed to get the £20 universal credit uplift through in a matter of weeks, I really cannot see why we could not be using more modern data. Now that we know that more of the legacy benefits will be continued on late into this decade, surely it is time to try to get a system that means we can do an uprating that reflects the real cost of living at the time that income comes in.
There is a second thing the Government should do, which the Select Committee recommended previously. We have had a slightly haphazard journey of welfare increases in the last 13 years, so it would be quite unlikely to have ended up in the right position, whereby the amount we are giving people in various household scenarios is equivalent to what they need in order to buy the goods and services that we think they ought to be able to buy. It is time to have a rebasing exercise: to go away and do the work, and work out whether we are giving the households of a single person, a couple, a couple with one child or two children, and so on, the amount of money we expect they need to live on—to be able to pay for all the essentials they ought to have. In some cases, perhaps we are. In some cases, we are probably not. But if we are, it is by fluke rather than any sort of planning, and if we are not, we are putting people in a really difficult position.
I hope Ministers can accept that there really needs to be a rebasing at the end of this crisis. If we have been through 17% or more inflation in the space of two years, that must suggest that the cost of living is in a very different position from where it was. Let us do the work. I will be very happy to find out that the benefits are in the right place and there is no need for any further increases. If they are too high—well, that is very generous, although I think it is very unlikely that they are too high. If they are too low, we need a plan to fix that. That would be the right thing to do. Let us do the work and find the evidence, and I hope we will then all be able to take an informed view when it comes to the uprating next year.
(2 years ago)
Commons ChamberIt is a pleasure to speak so early in the debate. It is also a great pleasure to have a Finance Bill that is so short. I must have spoken on a dozen of them in my time in Parliament and to have one that has only 12 clauses is some sort of miracle. During this week, we have probably about as much time as we normally have for one of several hundred pages, so we can really scrutinise the 11 substantive clauses. Perhaps that is progress, compared with what we normally expect.
I start by comparing this Finance Bill with ones we had at the start of the previous recession a decade and a half ago and ones we had at the start of previous measures to tackle a large budget deficit. If I recall rightly, the single biggest measure we had 14 years ago was a VAT reduction at the start of the recession, which cost something like £15 billion. I am not sure it had the effect we wanted. Interestingly, as we sadly slip into a recession, which we hope is shorter and shallower than that one, what we have not seen in this Finance Bill is any attempt to boost consumer confidence. We can argue that we tried that in September and it did not go so well, and probably the right thing here is to focus on how we reassure the markets that we can keep borrowing under control and therefore not risk a rise in interest rates.
However, if this recession looks like it might be any longer or deeper than the Government’s forecasts, I urge them to think carefully about how we get consumer confidence to turn around. I fear that what we will see in the new year is a big retrenchment in people’s personal spending. We will spend the money for Christmas because we have to, but people will then take a very cautious approach in the early part of next year, knowing that energy bills will go up in April and that tax changes are around the corner. We would not want them to go too far and retrench too fast. So I hope the Government will think about the role that tax can play in turning the economy around if we need that next year.
The other interesting comparison is with the approach George Osborne took in his Budgets in the first half of the last decade to introduce austerity to tackle the big public deficit we had. Let us look at what he prioritised. He had a VAT increase, which we are rightly not doing in this situation, but he increased the personal allowance and reduced corporation tax to try to put more money into people’s pockets from work and to encourage business investment in the UK. Interestingly, the Government are doing the complete opposite now. I am not sure whether we have worked out that that plan did not work, but there is evidence to suggest that the lower corporation tax rates we had for a decade did not achieve the additional investment that we wanted them to and we are probably better off sticking at about 25% than going lower.
I am slightly intrigued. The great claim we made was that we were taking people out of the scope of income tax. We are now at great risk of putting them all back into the scope of it again. I accept the Minister’s point that the personal allowance by the end of this five-year period will still be £2,000 higher than it would have been by inflation, but I think that is not enough of an increase. I hope that the Government regard these personal allowance freezes for another five years to be a kind of last resort and if we get any improvement in the economic outlook they can be reversed. Especially at the lower end of the level, keeping people out of tax, letting them keep more of the income and making sure that work pays are strong arguments. Frankly, I am not absolutely sure why we need to legislate for personal allowances in five years’ time. We will have another five Finance Bills before we get to those and we could have brought those into law at any point. I accept that we want to give the market a clear steer that we are serious about closing the budget deficit. If we need those measures, fine, they are probably less bad than a rate increase, but what is the point of legislating for them in this situation?
There is another contrast with what we have done on national insurance this year. We chose to—and I accepted the argument that we needed to—increase the headline rate of NI, but the compensation for that, when it became clear that that was a real problem at the start of the economic downturn, was to increase the personal allowance for NI—the starting point at which someone pays that tax. Yet now, rather than increasing the headline rate, we are effectively holding back the starting points of those taxes. So we have a tax on income and a tax on wages where we are taking one approach, and on the other tax we are doing something completely different.
As we go forward from what I accept are emergency measures that we need to use to fill a hole, the Government need to have a clear strategy for what our tax system should look like. They should consider the things we are trying to tax and the things we are trying to incentivise. They should try to give people some long-term stability so that they can plan and understand and we can get the behavioural changes and incentives that we want, rather than having a clear direction one way, and then doing a U-turn and wondering why people do not do the things that we would really like them to do. Now we are through the real firefighting, I hope the Government can produce a strategy and plan for where they think the tax system should go, so that people can understand it and respond accordingly. I think that that is what we had under the Gauke doctrine in 2010. We need to revisit that, now we seem to have changed our mind on so many of those things.
The bleakest bit of news in this Finance Bill was extending the windfall tax to 2028. I was hoping that the energy crisis might be over quite a bit before then and we would not need to have those measures in place. The fact we have done that suggests we are not expecting energy prices to come back down any time soon. Clearly, the windfall tax is the right thing to do. I have always taken the view that this is a level of profit that nobody could ever have thought they could get. These companies are earning it from extracting our natural resources; they are not their natural resources. We have given them permission to extract them, and they have rightly made some profit from doing so. However, we should limit that profit and accept that those are our resources and that we should take the right return from them, rather than the exploiter doing so, so I hugely welcome the introduction of the windfall tax.
I am quite intrigued by the research and development stuff. It is right, even at the most difficult time, to say that we want to make sure that we are incentivising R&D. That is a sensible, long-term measure that shows some long-term planning. I remember being at work as a young accountant when R&D tax credits were introduced—in 2000 for small companies and in 2002 for large companies. The journey they have been on, with rates going up and down and approaches changing—above the line, below the line, cash incentives and all those things—makes me wonder whether, 22 years on, we are really sure that R&D tax credits are delivering the outcome that we want. I suspect that the speeches in the Finance Bill debates in 2000 were that these measures would make us a science superpower in the next generation. I think that we are still giving those speeches, and we have not quite got the superpower bit. I wonder whether the Government should stop at some point and ask whether those are working. I know that there is an ongoing review on combining the reliefs, but are they triggering the right thing?
One piece of data that did worry me was that a disproportionate amount of those are claimed by companies in London and the south-east and they are not spread around the country in the way we would like. Is there a way we can use these tax measures to encourage that kind of investment and those kinds of skilled jobs in the regions of the UK, and not just focus them in the most prosperous parts?
I have expressed the view previously to many Treasury Ministers that, outside the EU, the one thing that we can do is take a regional approach to certain taxation to encourage activity in different parts of the country that we do not need to encourage in London and the south-east. I urge the Treasury to look seriously at whether we could take a regional approach to some taxes so that we can get those differentiating incentives to move wealth outside London and the south-east. That would fit entirely with our levelling-up agenda, but we have not chosen yet to be that creative with our tax system.
Given that we have plenty of time for detailed questions on clauses on Wednesday, I will just say that I accept the need for this Finance Bill. I will support all the measures in it and I will happily vote for it later. I will not be voting for the Opposition amendment, which I suspect will not come as a great shock. I think I support ending non-dom status, but we should have temporary residence relief. If somebody comes here on a secondment or for a short period, we should not try to force them to move all their tax affairs here. We should tax them on the income that they earn here. There would be a big disincentive and it would be out of step with other countries if we did not have a short period where somebody had that different situation to reflect the fact that they are not ordinarily resident here.
The fact is that a person’s non-dom status depends on where their father was born. In theory, they can become a non-dom even if they have lived here all their life and never been resident anywhere else in the world. That shows how ludicrous those rules are. I urge the Government to look at modernising all our residence tests, including that on non-dom status. They are all far too complicated. We could have a far more effective system that works better and would achieve the advantages of attracting investment here. There is a real problem with just scrapping non-dom status; it may drive some people we do want here to leave. On balance, a change is better and we should continue with the direction of travel that we had a decade ago of restricting the time period. I think that we could restrict it with a more modern relief that would achieve what we want without having the big downsides.
With that, I will happily support the Bill and oppose the amendment if there is a Division later.
(2 years, 5 months ago)
Commons ChamberIt is a pleasure to speak in this debate, Madam Deputy Speaker, and to follow the hon. Member for North Down (Stephen Farry); I agree with some of what he said, if not, perhaps, some of his conclusions. I think that, of all the contents of the Bill, the Government are on the strongest ground when it comes to the clauses we are now debating, and that the EU could have found a way of agreeing with the UK Government how to fix this problem. In the protocol, it was agreed that Northern Ireland was in the UK customs territory, and only goods that were at risk of going into the single market needed to be inspected as they crossed the Irish sea. We ended up with the EU seemingly interpreting everything as possibly being at risk of going into the single market, which produced a ridiculous level of tests that would never be acceptable to the Unionist community of Northern Ireland and are doing the economic damage and causing the tensions we have seen.
It should be obvious and acceptable to both sides that it has been agreed that Northern Ireland will have a foot in both camps: a foot in the EU single market and the EU customs zone, and a foot in the UK single market and the UK customs zone. The only way to make that work is to accept that there is a porous border, where there is no way of exercising the usual level of control that the EU would insist on at its other single market borders around Europe. The key questions for everyone to focus on are these: what goods are we really worried about? What goods have a real risk of crossing that border without being checked—without having the customs declarations and the duty paid, or the various other checks that are required? Finally, how do we put in place measures that can mitigate that risk, and make people on both sides of the border happy that nothing is crossing that border that poses a real threat to the integrity of either market?
To be fair, the UK Government have been extraordinarily generous, not just at the Irish border but at the Dover-Calais border, by not introducing the checks we could have introduced and which we would expect to see at a normal border, because we largely trust goods that are in free circulation in the EU, even if they are not absolutely consistent with UK regulations, either now or in future, or perhaps there is a theoretical customs issue, even though we have a zero-tariff, zero-quota deal, and there may be some duty payable because of rules of origin. We have been extraordinarily relaxed in accepting that those risks are much lower than the risks of trying to impose the burden of huge amounts of checks.
Until we get the EU into the mindset of accepting the same position in relation to goods circulating in Northern Ireland, there is no solution, because at some point there will have to be a border with checks and processes somewhere. We know it cannot be on the island of Ireland. We accepted that trying to make the EU put the border between the European mainland and the island of Ireland would be a horrible situation that the Republic of Ireland could never accept and effectively mean that it had left the single market by mistake, which the Irish Government would never entertain. It always looked to most people that there was the prospect of a compromise by doing something down the Irish sea, where goods spend several hours on a ship allowing for inspections and for declarations to be made, but that it had to be done sensitively and only on the things that were really at risk, otherwise we would end up with the problem we have now, where the Unionist community will not accept it and there is too big a dividing line between the UK mainland and Northern Ireland.
I support what the Government are trying to do and some kind of red and green channel is the right solution. I think the problem we have is that we have extraordinarily little detail about how it will work and how we satisfy the EU that the data we think we can collect and give it is sufficient to get it in a place where it will not have some horrible overreaction. We have not managed to reach an agreement. In fact, I understand it will not even look at our database and the data we could share to see if it is enough to get it there.
We have what looks like a theoretically attractive solution that is the right end position, but we have no idea how to make it work on the ground. We are going from a position where it looked like the EU was going to accept trusted trader exemptions, where everything must be checked and declared unless we have pre-agreed that certain traders are trusted and therefore we can exempt them from it, almost to a position where, if I read red and green right, everything is exempt unless either the trader self-declares that he will go into the single market, or we presumably do some risk-based inspection and spot something that should have been in the red channel in the green channel. It is a stretch to think we will get the EU happy with that without its having serious trust in our internal identification processes.
Then there is the difficult scenario of what happens when somebody changes their mind: goods go into Northern Ireland to be sold in a Northern Ireland store, and then they get low on stock in the Republic of Ireland and decide they want to move them into the Republic. The goods will not have been checked and they will not have done the customs declarations. What will the process be? Where do they go to get the goods checked so that they can legally move them across the border? Or do they just move them, nobody ever checks it, it is all fine and that is that? Again, I would be surprised if we get the EU happy about that. We are going from a position where goods are in free circulation on the island of Ireland, to a position where goods may not be in free circulation on the island of Ireland. How do we fix that?
I urge the Government, as the Bill progresses, to publish the processes for exactly how that will work, and how we can have an effective international border and make the red and green lanes work, so that we can show we are really trying to identify the goods most at risk of cheating or abusing the rules to try to get around them. If we can do that, there is scope to negotiate with the EU and get to the end point that we will inevitably have to get to. Unless the EU wants no border at all or a border on the island of Ireland, it will have to make the system work. That has been apparent for the couple of years since we knew this was coming, but we need to have in place trust between the EU and the UK Administrations, and we need to have the working arrangements and trust between the Irish and the UK authorities in Northern Ireland, so they can work together, trust each other to do joint inspections and share information on a real-time basis—all those common working practices that we have not managed to get to, due to the tensions on both sides, and where we need to get to.
The question we have to ask is: does proceeding with the Bill help us to get towards negotiating a compromised, pragmatic end position or does it make that harder? Fundamentally, I suppose the Government’s answer will be, “We have tried to get the EU somewhere sensible on this matter for the past year or more and we have not managed it. So we will put in place these arrangements and the EU will have a choice: either come and work with us and get to the stage where you are happy with the processes that we have in place and the data we can share with you, or it is just tough—accept what we will offer you.” I sincerely hope, before we do this on a unilateral basis, that at least in this area, where it looks like a compromise should be achieved, we manage to put in place something that both sides are happy with.
I call the shadow Secretary of State.
(2 years, 10 months ago)
Commons ChamberThe hon. Gentleman is absolutely right: we cannot expect somebody to move hundreds of miles in that situation. Equally, anybody who can work should work, and should be supported and given the training to do that when it is in their best interests. I do not meet many people who can work but do not want to; I think most people who can work with the right support are very keen to.
I will vote for the draft orders tonight. I think our choice is a 3% rise or nothing, so it seems slightly self-defeating to vote against them, but I ask the Government not to take the House’s approval as a sign that it agrees with the position we are in. The Government could use their discretion and make the increase higher than inflation if they wanted to, just as they have chosen many times to make it lower than inflation. We knew that this problem was coming; it has not turned up in the last fortnight and got us chasing around.
I am not even asking for something that would be a long-term cost. All we would be doing is bringing forward to this year the rise we would give people next year, so that they have it in time to pay their higher bills, rather than six months after getting them. That is the impact of the calculation that we do, and if we do not get it right, we will be putting people in an impossible situation.
The idea of having a welfare system that we can control so we can give people transparency and up-front certainty is that it is there to give them the support they need. We cannot keep filling holes with discretionary, complicated schemes that people may or may not find about, that are done differently by councils all around the country, and that may or may not exist in the long term. The whole idea of a universal credit system was that it would be a benefit that rolls everything into one and gives people the support they need. By doing all these occasional one-off top-up schemes, we are admitting that the main benefit is not in the right place.
I urge the Government to take a step back, to remember our core purpose of giving people enough to live on—not luxuriously or hugely generously, but with a decent standard of living—and to be absolutely sure that they have achieved that and are still achieving it. If they have any doubts, they must do the work to publish it and prove it, and if we need to fix it, let us get on with fixing it.
I call the Chair of the Select Committee on Work and Pensions.