Economic Crime

Pat McFadden Excerpts

Thursday 2nd December 2021 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I am very grateful to the hon. Member for Thirsk and Malton (Kevin Hollinrake), my right hon. Friend the Member for Barking (Dame Margaret Hodge) and all the all-party parliamentary groups that are responsible for securing this debate today. What a great warrior my right hon. Friend has been on this issue over the years.

This issue matters particularly in the United Kingdom because we have one of the biggest financial sectors in the world. That is not only a great asset to the country in terms of wealth, employment, tax revenues and so on, but it gives us an opportunity and a responsibility. It is an opportunity, because how we regulate that can set an example around the world, but it is also a responsibility, because if our standards are too lax, and we allow the UK to be an easy home for illicit finance, that also sends a signal of a very different kind around the world.

As my right hon. Friend the Member for East Ham (Stephen Timms), the Chair of the Work and Pensions Committee, said, every day our constituents are assailed by fake texts, emails and scams trying to con them out of their own money. It is extremely difficult for our constituents to know what is genuine and what is not when receiving such communications. That is why it is essential that we act and use the opportunity of the online harms Bill to crack down properly on this kind of consumer fraud. At the moment, that is not the plan. There is a gaping hole in that Bill, and the first thing I want to put to the Minister is to accept the strength of feeling across the House that it has to be strengthened.

With the release of caches of documents, such as the Pandora papers and their predecessors, the UK and its overseas territories are far too often mentioned as a place where illicit funds can find a home.

We are about to go into a winter in which people will face not only rising prices but rising taxes, but time after time, we see reports that billions of pounds of illicit funding are washing through our country. The contrast between the obligations of those who struggle to make ends meet and those who see our property laws and institutions as vehicles for laundering money could not be more stark. It is an issue not just of financial probity and tax revenue—though it is certainly that—but of national security and should be treated as such.

If we are a welcome home for the proceeds of looting and kleptocracy, what does that say about the rule of law or our standing in the world? The Prime Minister’s recent performance on the issue of standards in this place suggests that he has scant regard for rules and responsibilities, but we already knew that. We know what he thought of the rules last Christmas when he told the rest of the country that they could not gather, as there are now reports of one Christmas party, maybe more, while the rest of the country was trying to obey the rules. The fight against money laundering and fraud is too important to be let down again by the belief that there is one rule for them and another for everyone else.

It is not an easy battle, because we are dealing with very rich people who will employ the most expensive lawyers in town to intimidate those who criticise them and try to silence them though financial exhaustion. We should pay tribute to the brave investigative journalists who have written about such things to expose what is happening, knowing that they will be aggressively pursued by legal actions designed, at best, to silence them and, at worst, to bankrupt them. But however rich the people involved are, we in this House can still act. We can decide not to sit back and let it happen. The measures advocated in this debate command strong cross-party support, so why are the Government not making more use of that support? Where is the urgency that hon. Members have called for?

Let us consider some of the individual measures that have been discussed. The Registration of Overseas Entities Bill has been on the stocks for years, but it sits in the sidings, not moving. We are approaching the fourth anniversary of when it was first promised, and it is more urgently needed now than then, yet when asked about the timescale, Ministers still wheel out the time-honoured bromide of “when parliamentary time allows”. They have had four years of parliamentary time, which is more or less a whole Parliament.

The legislation could play an important role in revealing the true nature of asset ownership, particularly the expensive London properties beloved of those who want to store their wealth here. Why will the Government not bring forward the Bill? Why does it keep being put on the back burner? Who in Government keeps saying no to it?

Shell companies are at the heart of mechanisms to hide the true nature of wealth—or perhaps more accurately, layer on layer of shell companies whose sole purpose is obfuscation. We have heard some figures about the registration of companies, including that there are 4,000 owners under two years old and that five beneficial owners control more than 6,000 companies. Companies House is a registrar that lacks the powers to do any serious policing or regulating of who registers companies. Plans for reform have been announced, which the Minister will no doubt go through in a few minutes, but they have not been implemented.

The aim should be clear: to ensure that Companies House is a guardian of propriety, rather than simply a library of data where there are no real checks on the quality of that data. No legitimate business owner has anything to fear from that kind of reform, but the people registering thousands of companies for the purpose of obscuring real ownership do. I urge the Minister not only to say what is planned for Companies House but to ensure that it is actually implemented. The sponsors of today’s debate rightly put Companies House reform at the heart of the fight against money laundering and fraud.

What of the Intelligence and Security Committee’s report on Russia? Where is the Government’s response to the measures advocated in that? Here there is not even a pretence of action. In fact, the report said, “If you’re determined to look in the opposite direction, then perhaps it’s not a surprise that you haven’t found anything.” The Government keep looking away in the hope that this issue will go away, but it will not.

Two weeks ago, the shadow Security Minister, my hon. Friend the Member for St Helens North (Conor McGinn), wrote to his opposite number asking what checks there had been on the almost £2 million of funds from Russian donors to the Conservative party. Does the Conservative party ask any questions at all when receiving this money? Why do Conservative Members think that their party has been such an attractive destination for this money, and what is it doing to Government policy? For example, who is there left in the Business Department who can still take a decision on the Aquind pipeline? How many Ministers have had to recuse themselves either because they have been funded or because they have already pronounced on the impending decision?

The third element called for today is greater corporate responsibility when it comes to money laundering and fraud. This already exists for tax evasion, for example. A company could not get away with saying, “Well, we were looking the other way—we didn’t know” when it comes to tax evasion. This was debated during the passage of the Financial Services Act 2021, which went through the House this time last year. Of course, any new corporate liability laws have to be carefully thought through, but the law should not act as an incentive for chief executives and senior executives in companies to claim ignorance about what is happening in their own organisations. We saw that time after time during the LIBOR scandal when these titans of the finance industry testified one by one that they had no idea what their traders were up to. The question facing the Government is: if corporate responsibility is right for tax, why should it not be right for fraud?

Underlying these specific points is a broader issue that should focus our attention. A number of times the Chancellor has said that he wants to put competitiveness at the heart of post-Brexit financial regulation. Having hung the financial sector out to dry when negotiating the Brexit deal, the Treasury now dangles the consolation prize of deregulation in front of it—the “Crackerjack” pencil for cutting off market access from the European Union—but at what price? Regulation was changed in the wake of the global financial crisis right across the world to protect the public in different countries, and the consequence of the Chancellor’s post-Brexit search for a consolation prize for deregulation should not be to put the public at greater risk. What kind of signal is it to send around the world to say, “Come to Britain because we want to make the referee weaker”? That is not even a signal the financial sector itself wants.

New fields are emerging. Cryptocurrencies have grown hugely in recent years. That has not been discussed much this afternoon, but it is hugely important. Their growth poses a genuine challenge to regulators and central banks right around the world. Where do the Government stand on the regulation of cryptocurrencies? Is it the case that crypto exchanges are being encouraged to base themselves outside the country so that we do not have to face up to these regulatory questions and responsibilities? Washing our hands of this issue is not good enough if the result is that those exchanges are based abroad and are beyond our reach in regulatory terms, without its making any difference to their ability to operate in the UK market. We have to be alive to the dangers of fraud and money laundering through new methods and innovations, and regulation has to keep pace with these market innovations. Can the Minister assure the House that the Government are telling the financial regulators that crypto exchanges that operate in the UK should be regulated in the UK? Is that the Government’s position?

This is an important debate, and it has shone a light on the inadequate efforts being made to protect the country from being seen as an easy place to store or to launder illicit finance. Despite the persistence of the problem and all the words said about how serious it is, the Government have dragged their feet on implementing measures that could command cross-party support. This is too serious an issue for that approach to continue because, as I have said, it is not just a matter of money; it is a matter of national security. It should be treated as such, and that is certainly the approach the Opposition take to the issue.

SMEs: Access to Finance

Pat McFadden Excerpts

Tuesday 9th November 2021 Westminster Hall

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Thank you for your chairmanship, Mr Pritchard. I am grateful to the hon. Member for Darlington (Peter Gibson) for proposing the debate and to the hon. Member for Thirsk and Malton (Kevin Hollinrake) and the APPG on fair business banking for their work on the issue.

As we have heard, small and medium-sized enterprises are at the heart of the economy. They employ millions of people and are responsible for much of the innovation and creativity that makes this country such a special place and such a dynamic economy. They have, of course, been through a tough time over the past 18 months or so. Many small businesses could not trade at all for much of the period, and others only in very restricted circumstances. In that context, programmes such as the bounce back loan scheme and the coronavirus business interruption loan scheme were important and welcome. As we now unwind from that level of Government support, it is important that the repayment mechanisms and the schedule are realistic. The SNP spokesperson referred to the burden of debt that has been left. It is also important that we have a proper assessment of the level of fraud and the use of public money in those schemes. A lot of money went out of the door and it is important that the taxpayer gets good value for money in support schemes of that nature.

As we recover from the pandemic, many SMEs are facing labour shortages, rising crises in materials and other effects, and our capacity to recover economically from the covid pandemic will depend to a large degree on how SMEs meet those challenges and manage to fare over the coming years. There are, as we have heard, particular traditions when it comes to access to finance for SMEs here in the UK. They include a dependence on loans from a relatively small number of traditional high street banks, a major focus from banks on mortgage and other property lending, a relatively new group of challenger banking entrants and less-developed non-bank sources of finance that are not always easily available to SMEs. The hon. Member for Darlington mentioned community development financial institutions in that regard and I believe they have an important role to play. I am familiar with the role of the Black Country Reinvestment Society, which operates in the area I represent. It has been able to step in at times and offer loans when the main high street banks have turned people down, and I believe it has helped around 1,500 businesses in the west midlands region over the years. I am sure it is a similar story in other parts of the country with other CDFIs.

The debate has also seen some discussion about the challenger banks and their potential to do more. The Minister heard the points made by the hon. Member for Darlington about MREL funding. That is important, because there is an active debate between the banking sector and the Bank of England about how that operates. The concept of bail-in debt was introduced after the financial crisis to avoid the situation where the taxpayer has to step in if a bank goes belly up—or, as it was termed, privatising the gains and nationalising the losses. With bail-in debt the bondholders are supposed to be on the hook, not the taxpayers. That is the right thing from the public interest point of view, but inevitably it entails a cost that will be applied to those who are lending to banks under those circumstances.

In this country, once a bank’s balance sheet increases above the range of £15 billion to £25 billion, the MREL bail-in rules kick in, although the Bank of England has indicated recently that the staircase for compliance will be shallower and over a longer period than was previously the case. The thresholds elsewhere are much higher. In the European Union, the threshold is €100 billion. In the United States, it is $250 billion. That means that bail-in in those jurisdictions is aimed at much bigger banks. There is another factor, which is related to the different ways that deposit insurance works in those jurisdictions, which has an impact on the risk appetite of regulators, but those are still much higher thresholds than in the UK and they allow medium-sized banks to grow before having to adapt to this new regime.

The challenger banks argue that if the threshold for requiring bail-in debt was higher, that would release more capital, which could be lent to the SMEs that are the subject of today’s debate. When the Minister winds up, I would be really interested in his reflections on the debate about challenger banks and the minimum requirement for own funds and eligible liabilities.

For the purposes of clarity, I should say that this is not a Brexit issue. The differential balance sheet limits for MREL predate Brexit, but challenger banks have all made the point that it places a ceiling on their capacity to grow.

[Kevin Hollinrake]

The changes that the Bank of England has made on MREL are very modest and will not help a bank such as OakNorth, which is a very successful challenger bank, in terms of its ability to lend more, which it could do if the limits were changed. Does the right hon. Gentleman agree that it seems perverse that bail-in requirements are there to try to protect the taxpayer and to take away the systemic risk, but the biggest systemic risk is having all the banking concentrated in a few big banks?

[Mr McFadden]

There is a potential tension here between competition and safety. The rules were brought in to insulate the taxpayer, but, at the same time, the Bank of England, the Treasury and the Government—everybody—subscribe to the idea of more competition in the UK banking sector, so I believe this discussion will continue.

More broadly, the issue of access to finance is also related to the question of economic growth. Economic growth has been sluggish in the UK for the past decade, averaging just 1.8%, which is significantly lower than pre-financial crisis rates of growth. Once we strip out the covid effects of huge plunging growth last year and a sharp bounce back this year and next, the recent report from the Office for Budget Responsibility, published at the same time as the Budget, predicts a return to those sluggish growth rates, averaging just 1.5% between 2024 and 2026.

Let us be clear: taxes are increasing because economic growth has been low. It has been low for more than a decade, and the Government cannot continue to blame that on the past. This low growth has left the country less wealthy than it would have been, and it has made it harder to fund public services adequately without upward pressure on taxes. Low growth is the foundation for the series of tax rises that the Chancellor has announced over the past year. That is a much bigger factor than the pandemic; the OBR report makes that clear. In fact, in that report it downgraded the long-term impact of the pandemic on GDP from 3% to 2%. Its estimate of the long-term impact of the Prime Minister’s Brexit deal was a hit to GDP twice as high as that from the pandemic.

We are talking about the financial services industry today. It was hung out to dry in the Prime Minister’s Brexit deal. It is not that the Government fought for market access and lost—the Government did not even try. This is 10% of the UK economy, hundreds of thousands of jobs around the country. It was simply left by the wayside when the Government negotiated the Brexit deal.

It is in everyone’s interests to address the issue of the UK’s sluggish economic growth. If the economy grows more, tax revenues will increase without tax rates having to rise. The country will become more prosperous and we will be able to pay our way. That is another reason why a healthy and properly financed SME sector is so important. Businesses need access to finance to be able to invest in expansion, to make the new idea happen, to be able to buy the new piece of equipment that might be able to do the job in a greener or more efficient way, to move into new premises, and to increase capacity to meet new orders. That is the foundation of economic growth, and right now we do not have enough economic growth. That of course is not the only thing that will impact growth.

If we talk to many businesses, they will tell us about business rates. In advance of the Budget, we called for an increase in the threshold for small business rate relief from £15,000 to £25,000. That could have lifted many small businesses out of paying business rates altogether, but that did not happen. Nor did the more fundamental reform needed to ensure that business property tax fits the economy of today and tomorrow, rather than the economy of yesterday. There will be other factors, too—not least our education system and whether we are equipping the workforce of tomorrow for the labour market of the future. Every time talent or potential goes unfulfilled, it is a drag anchor on economic growth, and that denial of opportunity is not just socially unjust, but economically destructive. We need to examine everything that can contribute to economic growth, and that means an SME sector firing on all cylinders.

This debate calling for more access to finance for SMEs is timely, but access to finance is not an end in itself. It is a contribution to the economic growth that the UK needs if it is to escape the high-tax, low-growth trap in which it finds itself, and for which households and businesses will have to pay the price in the tax rises recently announced, which will kick in over the next few years.

Income Tax (Charge)

Pat McFadden Excerpts

Thursday 28th October 2021 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

It is a pleasure to respond to today’s debate on behalf of the Opposition. Although the Secretary of State for Business, Energy and Industrial Strategy is not in his place, I begin by congratulating him on becoming a father for the first time. He would not tell us his age, but if he is an older dad, as I was, I suspect that he is learning the reason that people have children in their 20s and 30s. That is a lesson that we learn when we have them a little bit older in life, so I give him my full solidarity and best wishes on his new baby.

I thank all right hon. and hon. Members for their contributions to the debate, which were wide-ranging. Several hon. Members talked about the need for business rates reform in the longer term, which the Opposition very much support. Others raised continuing issues with universal credit and made the point that the changes made yesterday will benefit only a minority of those affected by the cut of £20 a week that was implemented a few weeks ago. There were also contributions on artificial intelligence, the return of inflation, bank closures and many other issues.

Several Welsh colleagues raised coal tip safety. My hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones) rightly reminded us that it has been just over 55 years since the tragedy in Aberfan. I remember visiting the graveyard in Aberfan as a young man with my friend Huw Lewis, the former Assembly Member for the constituency: I will never forget the pictures of children on the graves, lovingly cared for and frozen in time forever. Fifty-five years on, I hope that the UK Government and the Welsh Government manage to reach agreement on securing the safety of coal tips for the future. I thank hon. Friends for raising the matter.

The Budget, like all Budgets, covered many things, but the stand-out feature was the Chancellor’s admission that taxes are set to rise to their highest levels since the early 1950s—higher than under Norman Lamont, higher than under Ken Clarke, higher than under Denis Healey, higher than under any of the Chancellor’s predecessors. Corporation tax, personal allowance freezes, national insurance, council tax—there is one tax rise after another. A new analysis today shows that the combination of them is set to mean £3,000 more in taxes per household than when the Prime Minister came into office.

The reason for all the tax rises is simple: the Tories have become the party of high taxation because they are the party of low growth. In the 11 years in which they have been in office, economic growth has averaged just 1.8%. In the previous decade, it averaged 2.3%.

[Tom Hunt]

I find it somewhat unbelievable that the right hon. Member cannot see that perhaps the £407 billion that we spent fighting the pandemic might have something to do with what he has just identified.

[Mr McFadden]

If the hon. Member reads the OBR report, he will find that it says very clearly that the effect of the pandemic is smaller in the long run than the effect of the low growth over which his party has presided for more than a decade.

As I was saying, in the decade before the Conservatives came to office, growth averaged 2.3%. Let us look at what the difference between those rates means to people. The difference, added up over the years, is worth £9,000 a year to every household in the country, and from the Exchequer’s point of view, the difference would be £30 billion a year more to fund our public services. It is that more than anything—that appalling record on economic growth—which has forced the Chancellor to raise taxes. The British people are being forced to pay the price of the Government’s long-term economic failures.

The long-term effect of this lack of growth is far greater than the impact of the pandemic. When we look beyond the huge fall in GDP last year, due to the pandemic, and the bounce back from it this year and next, the growth picture does not change. The OBR is predicting economic growth averaging about 1.5% between 2024 and 2026. It is that low growth which creates the projections of real wages barely rising in the coming years. In his dreams, the Prime Minister is Winston Churchill; in his rhetoric, the Chancellor is Margaret Thatcher; but in its actions, this Government is Ted Heath.

The Chancellor and the Prime Minister have trapped the country in a vicious circle of low growth, rising inflation, stagnating incomes and rising taxes. The economic legacy of this Chancellor will be a country on the path of low growth and high taxation, but his political legacy will be as the man who buried forever the Tories’ reputation as a low-tax party.

[Barry Gardiner]

I entirely agree with all the points that my right hon. Friend is making. The Chancellor said yesterday that in three years’ time we would still have growth of 1.3%—negligible growth. If we look back to the years of the Labour Government, we see that even in 2010, after the global recession, we still had growth of 2.3%.

[Mr McFadden]

That is precisely the point I am making. The long-term growth trend makes a huge difference to the Government’s choices and their power to fund public services.

In the face of that, what was remarkable about yesterday’s Budget was the total absence of any plan for economic growth, and nowhere is that clearer than in education. The Chancellor expects us to applaud a lap of honour where in a couple of years’ time, funding per pupil only just gets back to its 2010 level. Let us think about that for a moment: almost 15 years with no real increase in investment in the workforce of the future. A generation of schoolchildren will have gone through their whole education with fewer resources than their predecessors.

How can the Government talk realistically about levelling up when their record is long-term neglect of educational opportunity? What an appalling dereliction of duty to young people in this country. There can be no more short-sighted decision than to stop talent flourishing—to take away the platform from which dreams can be fulfilled. For people born without money or without means, education is the only way in which that can happen. It is the means by which people can change the circumstances into which they were born. It is the platform to ensure that the course of life is not dictated by the hand that they were dealt at birth. Yet, for 11 years, this Government have neglected it. Then, when they were presented with a catch-up plan to help children to recover from the education lost during the pandemic, they shredded it. That is not only socially unjust; it is economically self-defeating, and that record on education is a major contributor to the weak, anaemic, stunted growth that has resulted in the tax levels we are seeing today.

This was not a Budget written in a few weeks in the Treasury. These high taxes and stagnating household incomes are not the product of the short-term crisis through which we have been living. This was a Budget written over 11 long years. Where was the plan for growth? Where was the plan to back the best of British creativity and enterprise? Where was the plan to ensure that we succeed in the technologies of the future? Where was the plan to ensure that, when it comes to levelling up, it is people and the talents that they hold, not just bricks and mortar, that are at the heart of it?

It is not just our view that the Budget did not measure up. The CBI has said that it will not

“do enough to transform the UK economy for a post-covid world”.

The Federation of Small Businesses asked:

“Is there enough here to deliver the Government’s vision for a low-tax, high-productivity economy? Unfortunately not.”

The Government ditched their industrial strategy out of ideological spite. The transition plan for net zero produced just last week was a damp squib. One of the biggest challenges that we face is how to transform the heating in our homes, yet their plan would partially cover just one in 250 of the replacement boilers needed. The long-term reform of business rates, which several Conservative Members said they supported, has been ditched once again. Time after time it is ditched. And the Government have only just discovered the importance of early years education, a decade after taking a wrecking ball to Sure Start and setting back a good start in life for millions of children around the country.

It is not just the fact that we have the highest taxes in living memory; it is that those taxes are not being used for any coherent long-term plan for the country. They are being used to firefight one issue after another as it momentarily occupies the mind of the Prime Minister. There is only one plan that the Chancellor has here, and it is as clear as day. It is to hold some money back in order to offer tax cuts before the next election. If that plan succeeded and the Tories won, what do we think would happen afterwards? We know what would happen. There would be a big speech about how taxes now had to go up because we had to pay our way and could not borrow what we could not afford. And the reason for that would still be the Tories’ lamentable failure on economic growth. That is not a moral mission. It is just a Tory election plan, and it is one that has been funded by hard-working taxpayers.

There is a better path. There is a better future and a different way, and that is to put our efforts into raising medium-term growth prospects and to get out of this bind of high inflation, high taxes and poor growth that 11 years of Conservative Government have left us in. That is the better path to prosperity and security. That is the path to ensuring that talent is used and to making the most of the UK’s potential. On the Labour Benches, we want to work with business, not treat it as a scapegoat for every problem that comes along. We want a fair deal for the workers in business, with good pay and decent conditions. We want to support wealth creation every bit as much as we support fair wealth distribution. We want to invest in the skills and talents of all our people, whatever their circumstances, from the youngest age possible, and we will have a net zero plan that meets the challenge of the moment and gets the best possible economic and employment benefits for the country. That is a better plan than the high-tax, high-inflation, low-growth model that the Conservative party has been pursuing, not for two years, not for one year but for 11 long years. It is that failure that gave rise to yesterday’s Budget and the tax burden being imposed on the country by this Chancellor and this Government.

Supporting Small Business

Pat McFadden Excerpts

Tuesday 19th October 2021 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

It is a pleasure to respond to this debate, and I thank all hon. and right hon. Members for the contributions they have made. I may not be able to mention them all.

My hon. Friend the Member for Sefton Central (Bill Esterson) talked about the challenges small businesses face. My hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy) talked with passion about her constituency and the importance of connectivity. She invited us all for a drink in Ye Olde White Harte, an offer I am very glad to take up.

From the Government Benches, the hon. Members for Bexhill and Battle (Huw Merriman) and for Thirsk and Malton (Kevin Hollinrake) took the St Augustine approach. They were all in favour of business rate reform, just not yet.

The hon. Member for Richmond Park (Sarah Olney) spoke of the plight of the travel industry. My hon. Friend the Member for Pontypridd (Alex Davies-Jones) spoke of the thousands of jobs lost in the music and creative industries, and of the help given to business by the Welsh Labour Government.

The hon. Member for Devizes (Danny Kruger) spoke thoughtfully about the importance of connectivity and the changing role of our high streets. The hon. Member for Stirling (Alyn Smith) spoke about how economic and consumer practices have changed through covid.

My hon. Friends the Members for Bradford West (Naz Shah) and for Vauxhall (Florence Eshalomi) spoke about the crucial importance of the wedding industry and the spin-off industries it gives rise to. My hon. Friend the Member for Islwyn (Chris Evans) spoke of his frustration, shared by many Members, of the baked-in variations in valuation, with no apparent process of redress or appeal. Every single Member who spoke in this debate spoke with passion about their high streets, their constituencies and the small businesses within them.

[Huw Merriman]

The point I would just gently make, on behalf of myself and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), is that we called for business rates to be reformed right now and indeed came up with a proposal that would cost it right now, too. I hope the right hon. Gentleman might reflect on that and come up with his own.

[Mr McFadden]

I am happy to talk about our proposals and the hint we got on what the eventual outcome might be.

We tabled this proposal because we want to support Britain’s businesses as they try to recover from the pandemic. Many physical retailers could not trade at all during the pandemic. Consumers changed their habits and went online. Our high streets were shuttered and closed. The problem of business rates is well known and has been for a long time: they are weighted against high streets; they are weighted on physical versus online businesses; and they create negative incentives for investment. If someone invests in their business, does the right thing and does their bit for the transition to a greener economy, their business rates actually go up. It is a 20th-century tax for a 21st-century economy.

Our calls for reform have met with widespread support from the business community. UKHospitality says that the biggest cost danger in sight for the hospitality sector is the reintroduction of business rates from 2022. The Federation of Small Businesses said that business rates

“hits firms before they’ve even made a pound in turnover.”

The CBI said that business rates are

“literally…a tax on investment”.

The British Retail Consortium found that without a reduction in rates next year, 83% of retailers said that it was “very likely” or “certain” that they might have to close stores. The Institute for Family Business has also backed this call.

In the short term, businesses need help. That is why our proposal, in the motion before the House, sets out positive steps that will help businesses right now: a freeze on business rates; an increase in the threshold for small business rate reliefs; and a proposal that is fully costed and fully funded.

The Government know that business rates need reform. That is why they launched a review 15 months ago, but where is it? Where are the conclusions? Where is the Chancellor’s plan on business rates? Has it not been published because he is fighting with No. 10 about it, as he is over climate change? Has he not published it because he is fighting with the Business Secretary, as he is on industrial support?

But we did get a clue as to what the preference of Government Members is, because many Members went for the Tory party’s three favourite initials: VAT. Time and again in Government, when they have needed to raise money, they have gone for VAT. We do not yet know what the conclusions of the business rate review will be, but the prospect of the VATman returning is certainly possible given the contributions that we have heard today.

[Kevin Hollinrake]

Will the right hon. Gentleman give way?

[Mr McFadden]

I cannot; I have to watch the clock. We put forward a plan both for the short term and the long term, but this is not just about business rates, is it? This is about the broader relationship between politics and business. The Opposition want a partnership with business to help the country to recover from the covid pandemic. We will not blame businesses for every shortage of workers or every shortage of goods. We will not use business as a weapon in ideological battles, as we saw throughout every day of the recent Conservative party conference. And we certainly will not go down the absurd road of trying to retrofit a justification for shortages and problems by claiming that they were part of some plan all along. When there is chaos at the pumps, blame business. When there is chaos at the ports, blame business. When there are shortages on the shelves, blame business. We have heard far too much of that from the Conservative party in recent weeks and, because of that, it has forfeited its right to be called the party of business.

[Kevin Hollinrake]

Will the right hon. Gentleman give way?

[Mr McFadden]

I will not. And the Conservative party willingly gave that up by putting ideology in its place. When the Prime Minister said “f*** business”, some of us thought it was a quip. We did not expect to see it followed through by briefings on and off the record that business is part of the problem and not part of the solution.

Any serious party of Government has to take wealth creation as seriously as it does wealth distribution. It has to celebrate entrepreneurs, not blame them. It has to champion creativity and innovation. It has to move its policies in line with economic change and the ceaseless process of technological change. That is what we on the Opposition side of the House are doing. Businesses will find, in today’s Labour party, a ready partner that wants to see them grow and see a fair deal for their employees; that wants to see both prosperity and security for the people who work in business; and that will work with business, not blame them for the failures and consequences of Government decisions. That is what this motion is about, that is what this argument is about, and that is the case we will continue to make.

Budget Resolutions

Pat McFadden Excerpts

Thursday 12th March 2020 Commons Chamber

[John McDonnell]

The hon. Gentleman makes exactly the right point. Not everybody supported the cut in interest rates, but the most important statement from the Bank of England was about the mechanisms with regard to the banks and lending, and about making sure that liquidity continues.

The point I am making is that, when we are dealing with what is in effect a global crisis, individual solutions in individual countries are not as effective as global co-ordination. I will give an example. Whatever criticisms people may have had of Gordon Brown’s individual policies during the banking crisis—I was here then, and actually I was giving a running commentary from the Back Benches, which perhaps at times was not welcome—no one can question the international leadership that he showed. There was a focus on and determination in bringing people together, and he brought to this crisis a mechanism by which, through the different international bodies, world leaders met and agreed a global strategy. Whatever people think of the outcome or about the merits or demerits of quantitative easing and so on, it did send out a message, and the markets eventually stabilised. I regret that we have not seen such a political and diplomatic leadership commitment or, indeed, such managerial ability from the Prime Minister or the Chancellor as yet.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Before my right hon. Friend moves on from his point about a co-ordinated international response, one of the things put in place at that time, about which there has been a lack of discussion this time, is what to do for those countries that have very basic healthcare systems. This virus respects no borders. Is there not a need for co-ordinated international action to get help to countries where testing and treatment may be much more rudimentary than they are here?

[John McDonnell]

To give the Government their due, the Chancellor did announce a £150 million contribution to the IMF, so there is an element of financial involvement and engagement. However, it requires the co-ordination of policy to ensure that those resources are directed effectively and successfully to tackle the very issue that my right hon. Friend raised. I hope that will be a model for the future when other global issues have to be confronted. As in the past—and this has happened under various Governments and political leaders—the UK should now be playing a critical role in mobilising the international bodies we have, in particular the UN, to agree a global response to deal not just with the current wave of this pandemic, but with the possibility of subsequent waves.

--- Later in debate ---

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

It is a pleasure to follow the hon. Member for West Worcestershire (Harriett Baldwin).

This Budget is the Government’s attempt to make a turn in the road. Gone are the logic, the rhetoric and the assumptions that have driven UK spending policy for the past decade. If nothing else, it is testament to the Conservative party’s capacity for reinvention and its hunger for power. For the avoidance of doubt, that is not an insult.

In truth, the Chancellor had little choice but to change course, because the backdrop to the Budget was a flat economy and an anaemic forecast for future growth—that is even before the impact of the coronavirus. Growth estimates are down this year to just a little over 1%, and to around 7% over the next five years. Growth that weak is not levelling up but levelling down. Such weak economic growth leaves the Government no alternative but to fund their spending plans largely by borrowing money in a way that the Conservative party has for years derided as irresponsible and reckless.

Add to that the impact of the Brexit path the Government have chosen, which is the defining decision that now dare not speak its name. If the line has gone out from No. 10 not to talk about it, the OBR did not get the memo because it is there in black and white. The OBR estimates a potential loss of 4% of GDP over the next 15 years—lost output, lost income and lost tax revenue.

The Secretary of State for Business, Energy and Industrial Strategy claims this is the most business-friendly Government ever. In truth, this is the first Government in living memory to relegate economic prosperity to behind issues of sovereignty. That is not a claim from me; it is a policy set out by the Prime Minister and his chief Brexit negotiator.

In more ways than one, this Budget is just starting to fill a hole the Government have dug for themselves. If low interest rates allow them to borrow for investment, it was also true some years ago when they derided such suggestions. Of course, new investment in infrastructure is welcome and long overdue, certainly in places like the Black Country. We have too many derelict factory buildings, too much unused development land and too much unremediated land, all of it standing as a physical reminder of the lack of investment over the Tory years, but simply calling themselves a new Government cannot disguise the fact that they are amending an investment shortage that they decided on in the first place. As I said, they are just starting to fill a hole they dug themselves.

Carbon capture and storage has been announced and abandoned almost as many times as the A303 project at Stonehenge, but neither has been announced quite so often as the potholes fund—the Albert Hall should have been well and truly filled by now with those announcements.

We have heard a lot of this before, and it could and should have started years ago, but it would be complacent of my party to rest on those criticisms alone because this is a shift in fiscal strategy—there is no doubt about that—and responding to it will require more than reaching for the same slogans as before. There has been much talk in recent months about what constitutes a good Opposition. The first step is to oppose the Government and Conservative party we actually have in front of us, rather than the ones we wish were in front of us. When our opponent has adapted, we have to adapt, too. That is something we must do.

Infrastructure investment is definitely needed, but addressing regional inequality is about people and their life chances. Where they were born, where they live and what kind of family they come from, those things should not limit people’s opportunities and chances to make the most of their life.

Alongside the bricks and mortar, we need: a deep-seated effort to tackle educational inequality; good quality, affordable childcare to make sure parents can take up jobs; an early-years effort to tackle the appalling development gap that afflicts some children, even by the time they start school; second-chance skill training to equip people for a new labour market and to give them the tools they need to reach their full potential; and the support for social mobility needed to break through the charmed circles that still characterise too many of the professions and too many of the best jobs in this country. If there really is to be levelling up, it is about a lot more than tarmac and concrete; it is about people’s lives and the chances they have.

We are still in the early stages of the coronavirus response, and no one can be sure about its health and economic impacts. There is broad cross-party support for the measures announced by the Chancellor yesterday, although we will continue to press for there being no penalty for those who choose to do the right thing, whether they are self-employed, on a non-permanent contract or anything else of that nature.

That takes us so far, but this is a global pandemic and is now being defined as such. Where is the global leadership in tackling this? Where is the co-ordinated economic response? Where is the concerted effort from world leaders to act together to face a virus that respects no borders? It is hard to escape the conclusion that, had this virus erupted a decade ago, there would have been a will to have a much more international response. With this generation of leaders, with nationalism on the rise and with international institutions and actions having been so disparaged and derided, that will has so far not been there.

It is not too late. We could lead in calling for that effort. If we do not, we will have to hope that the retreat into national responses does not cost us dearly.

[Several hon. Members rose—]

Oral Answers to Questions

Pat McFadden Excerpts

Tuesday 3rd March 2020 Commons Chamber

[Alok Sharma]

My hon. Friend makes an important point. Hydrogen can, of course, play a key role in net zero efforts, alongside electricity. My Department is investing in innovation, with up to £121 million supporting a range of projects to explore and develop the potential of low-carbon hydrogen.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

One of the UK’s great industrial success stories in recent decades has been the automotive industry. What discussions does the Secretary of State plan to have with the industry to help ensure that the UK is best placed to make the transition from internal combustion engines to electric vehicles?

[Alok Sharma]

Within days of taking office I spoke to our major automotive manufacturers, and I have had meetings with a number of them. However, the right hon. Gentleman is absolutely right. We want to encourage electric vehicles, and we are also committed to securing investment for a UK gigafactory. Last year we announced up to £1 billion of new money to support R&D and supply chains for electric vehicles.