Tobacco Products (Description of Products) (Amendment) Order 2019

Peter Dowd Excerpts

Monday 17th June 2019 General Committees

[Peter Dowd (Bootle) (Lab)]

The Opposition will not oppose the order, but I have to reaffirm some of the points we made during the passage of the Finance Bill. This is, quite simply, the Government extending the tax regime to take these products on board. Questions about the health implications of these products are not proven one way or the other, and I do not particularly want to go into them today. However, it would be interesting to find out how much this change is projected to raise over the years. I do not think I saw those projections anywhere; it would be helpful to know what they are.

I also ask for the Minister’s view on the fact that tobacco revenue will start to go down, given the significant numbers of people engaged in smoking cessation campaigns. In fact, the last Labour Government put significant amounts into smoking cessation campaigns—I chaired a health trust at the time, and we put additional money into that—which brought down the number of people who smoke. In the light of that and of the general push—by all Governments, I have to say—to reduce smoking rates, the Government will have to start considering the implications of the reduction in revenue, relatively speaking, that will come from tobacco products as the years go by.

On a very minor point, my grandmother used snuff for God knows how many years—decades—but the order does not refer to snuff. Perhaps the Minister could put that right. That aside, there are two key points: the first is the revenue implications, and the second is the consideration of future revenue as a result of smoking cessation programmes.

[Robert Jenrick]

I am grateful to the hon. Gentleman for supporting this measure. As I said, it is a simple measure, which puts on the statute book the definition that is required under the Finance Act 2019.

The amount of revenue at stake is negligible—less than £5 million per year. That is partly because there is only one known product on the market at the moment. Of course, should this take off as a new form of smoking, there will more revenue at stake; at the moment, we think it will be only a small amount. Our primary motivation here is providing clarity to taxpayers, rather than raising significant amounts of money.

On the future revenue stream from tobacco, the hon. Gentleman is right to say that, should smoking continue to decline, which is a good thing, the revenue stream will start to decline. We monitor that closely, and the Exchequer always has new and novel ways of raising money to meet the shortfall in the future, should it have to.

In terms of snuff, I am looking to my officials—[Interruption.] That is disappointing. I was looking to my officials to see whether they knew the answer, but I will have to write to the hon. Gentleman.

[Peter Dowd]

Snuff is not a heated product—not, I suspect until it gets up your nose, but that is by the bye. I do not want any response, formally or informally, from the Minister on that.

[Robert Jenrick]

I am grateful for that. I commend the order to the Committee.

Question put and agreed to.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

Peter Dowd Excerpts

3rd reading: House of Commons & Programme motion: House of Commons & Report stage: House of Commons
Monday 10th June 2019 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 2—Report on the impact of Class 1A National Insurance Contributions on termination awards—

“(1) The Secretary of State must, within 12 months of section 1 of this Act (termination awards: Great Britain) coming into force, lay before Parliament a report on the expected impact of the new Class 1A liability on termination awards in excess of £30,000.

(2) That report must contain an assessment of the expected impact on—

(a) the total net value of termination payments received by individuals;

(b) the average net value of such payments; and

(c) the number of business start-ups using termination payments as funding in their first year in each region of the United Kingdom.”

New clause 3—Report on the impact of Class 1A National Insurance Contributions on sporting testimonials—

“(1) The Secretary of State must, within 12 months of section 3 of this Act (sporting testimonials: Great Britain) coming into force, lay before Parliament a report on the expected impact of the provisions of this Act on sporting testimonials.

(2) That report must contain an assessment of the expected impact on—

(a) the total amounts received by individuals from sporting testimonials; and

(b) donations made to charity from sporting testimonial proceeds.”

New clause 4—Report on Exchequer impact—

“The Secretary of State must, within three years of this Act receiving Royal Assent, lay before Parliament a report on its Exchequer impact.”

New clause 5—Effects of termination awards provisions—

“(1) The Treasury must publish reviews of whether the payment of Class 1A contributions on termination awards under sections 1 and 2 has had—

(a) any effect on the number of termination awards made above £30,000;

(b) any effect on the size of termination awards made above £30,000; or

(c) a disproportionate effect on—

(i) women,

(ii) pregnant women,

(iii) persons aged 50 or over, or

(iv) any other group of people with protected characteristics (within the meaning of the Equality Act 2010).

(2) The first review under subsection (1) shall be published no later than 24 months after this section comes into force.

(3) Subsequent reviews under subsection (1) shall be published no later than 24 months after publication of the previous review.”

This new clause would provide for a general review of the termination awards provisions of this Act within every period of 24 months.

Amendment 1, in clause 5, page 5, line 39, at end insert—

“(3A) No regulations may be made under subsection (3) to bring section 3 or 4 into force until the Secretary of State has made a Statement to the House of Commons on the expected effects of the provisions of this Act on donations to charities by the recipients of sporting testimonial payments.”

[Peter Dowd]

Although he is not here, may I welcome the new Financial Secretary to the Treasury to his post, and congratulate his predecessor, the new Leader of the House, on his elevation to the Cabinet? I understand that the elevation was short-lived, as he realised that he still had to sit across a table—a Cabinet table rather than a Treasury one—from the Chief Secretary. I expect that if some of his colleagues get their way on proroguing Parliament, he may well even be put on a zero-hours contract, because there would be little else to do.

I have previously stated, both on Second Reading and in Committee, when we had wide ranging discussions on the Bill, as we always do with financial Bills—we talk about a whole range of issues and get into all sorts of discussions about various things, even quoting Cicero and going into all sorts of Greek mythology; it is helpful to broaden our horizons when dealing with these Bills—that the Bill is a pale imitation of the great national insurance reforms that the Government promised to enact just a few years ago, in those halcyon days of the 2010 to 2015 Tory Government, who were going to conquer the world and who proposed massive changes to national insurance contributions. Of course, in effect, nothing came of that. The former Chancellor went west and the proposals lay around gathering a little bit of dust, then more dust and then even more dust on the shelves at the Treasury.

As we all know, national insurance is paid by employees, employers and the self-employed, and it is used to fund a variety of contributory benefits such as the state pension, contributory employment and support allowance, maternity allowance and other benefits. In 2018-19, national insurance contributions raised around £137 billion, which is more than was raised by VAT but less than was raised by income tax, at £132 billion and £192 billion respectively. National insurance contributions are clearly a substantial revenue raiser for the Exchequer.

Along with the Prime Minister, the Government’s credibility and all sense of reason in the Tory party, gone are the proposed abolition of class 2 national insurance contributions and the planned expansion of class 4 national insurance contributions, along with the Government’s parliamentary majority to boot. Those proposals have been replaced with these meagre clauses, which masquerade as a real Bill. They will introduce a limited class 1A employer charge on termination payments over £30,000 and on payments over £100,000 related to non-contractual sporting testimonials.

While we are on the subject of sport—loosely—I reaffirm my congratulations to Liverpool football club on their win, albeit as an Everton supporter. As I said in Committee, I can say that in the clear knowledge that it probably will not get much further than the people present, so I will not be criticised by my Everton-supporting friends and family. Saying it here tonight makes it more or less a secret, in essence.

Consideration of the Bill’s remaining stages has been brought forward to pack out an empty parliamentary timetable. The timing could not be more fortuitous, as we enter the first official week of the long-running Tory leadership campaign. It is a burden for everybody else to have to put up with it, and I am sure it is a burden for those on the Government Front Bench and Back Benches, too. I suspect that they will not say that, but I will say it for them.

There is a backdrop to this debate. We have already seen a sneak preview of the chaos and dysfunction that any of the hard Tory Brexiteers who are running for Prime Minister will soon unleash on the country. The right hon. Member for Tatton (Ms McVey) has suggested purging the Cabinet of remain-supporting MPs. The frontrunner, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), is flirting with the idea of the UK going AWOL with around £48 billion in October. That figure is almost as big as his ego. The Foreign Secretary, the right hon. Member for South West Surrey (Mr Hunt), has more positions on Brexit than the “Kama Sutra”.

Meanwhile, the right hon. Member for Esher and Walton (Dominic Raab) is threatening to put two fingers up to parliamentary sovereignty and prorogue the House, denying the elected representatives in this Chamber a say over the biggest issue facing this country since the second world war, and perhaps beyond that—I do thank you for your indulgence, Mr Deputy Speaker. So much for bringing back control. To what—an empty, locked Chamber? It is important, because had Parliament been prorogued, would we have been able to debate this Bill on national insurance contributions? No, we would not. Where would all the money go? We would not have it. We are here making the case for why Parliament should not be prorogued, but more importantly we are making the case because we have to get the cash in. All this is taking place while our European partners look on in polite bemusement, along with the rest of the country, as we are subjected to a month-long Conservative party psychodrama. That context is important to the matter at hand.

The Opposition continue to have concerns about how the new class 1A national insurance charge will impact on the level of termination awards that workers receive, particularly in respect of women, employees over 50 and pregnant women. Opposition new clauses 1 and 5 would require Ministers to adequately address our concerns. The tax and national insurance treatment of termination payments remains a sensitive topic to workers and employers alike. Employees facing redundancy often consider this final payment as an evaluation of the work that they have done for their employer, so it is psychologically important for them. As I have previously said, termination payments therefore have an emotional and a financial significance, and the amount awarded is often determined by painstaking and careful negotiations between managers and trade union representatives.

The Government’s rationale for the change apparently remains one of simplification: they cite many employers’ previous confusion as to what parts of a termination payment might qualify for exemption from tax and national insurance. However, Ministers have also cited the opportunity for well-advised employers to avoid paying the right amount of tax and national insurance on termination payments as justification for wider reform. It is important to repeat that that seems to have been given as justification for wider reform. We do not necessarily accept that justification. Neither the Office of Tax Simplification nor Treasury Ministers have been able to provide figures on the number of employers who have taken advantage of the existing loophole or on the amount that has been lost to the Exchequer as a result. That is important, because if a case is going to be made for something, the least we could be given is a little evidence—a few facts and statistics—to back up the assertion.

[Mr Jim Cunningham (Coventry South) (Lab)]

The best way to describe it is as a stealth tax on people who are going to be unemployed for quite a long period. Women are going to be under the cosh. We have to remind ourselves that women seem to be paying the price. We have only to consider the long, drawn-out saga of the Women Against State Pension Inequality, who cannot even get justice out of this Government.

[Peter Dowd]

My hon. Friend makes a valid point. Assessments of the impact of austerity have found that 86% of the burden has fallen on women. The figures indicate that women are the most badly affected by austerity, and all this Bill does is overlay that and up the ante even further. I thank my hon. Friend for making that point, because in effect it is a stealth tax. That is what it amounts to: a stealth tax with no evidence base whatever to support it, other than the Government just wanting somehow to get more and more cash in because of their failed economic policies.

[Grahame Morris (Easington) (Lab)]

I am grateful to my hon. Friend for giving way. The arguments that he is making are sound. There is a concern that this may well open the gates to further measures in the future. I fully understand that this is a charge that is being applied to employers, but it would be instructive if we used plain English and simple terminology. Why do we not use the term “redundancy” instead of “termination awards”, so that people will realise what is happening?

[Peter Dowd]

That is a very good point, because that is exactly what the Government do time after time. When they introduce these notions and concepts, they always try to put up a bit of a smokescreen. My hon. Friend is absolutely spot on. Let us call this essentially what it is, which is redundancy. Potentially, it is taking money from people at perhaps one of the most vulnerable times in their working life. Let me repeat: what we want is evidence. This an evidence-free zone—it is as simple as that. The other important point to make is that this is, in effect, a stealth tax. Worryingly, though, there is no coherence to this whatsoever. There is no coherence to this at all. Somebody comes up with an idea and the Government push it through because they want to push it through. There is no evidence for it whatsoever.

[James Cartlidge (South Suffolk) (Con)]

I have enjoyed discussing this Bill with the hon. Gentleman in Committee and on Second Reading. The definition of a stealth tax is surely a tax that is stealthy. In other words, it is not immediately visible, and has to be found in the small print of, for example, the Red Book. This is on the front of a Bill; this is the name of the Bill. I do not think that this can conceivably be described as a stealth tax. The Government have been very open about it, and it is on the front of the Bill.

[Peter Dowd]

I am very pleased that a Conservative Member of Parliament admits that he is putting taxes up. He has admitted that the Government are openly putting up taxes. Okay, even if I accept that it is not a stealth tax—

[James Cartlidge]

rose—

[Peter Dowd]

Just a moment. Even if I accept—[Interruption.] I am happy to give way. Even if I accept, which I do not, that it is not a stealth tax, it is, none the less, about a Tory Government putting taxes up. It is as simple as that. I will give way to the hon. Gentleman.

[James Cartlidge]

The point is not whether it is going up, but whether it is being done in a stealthy fashion. I accept that this is raising revenue. The Minister will not cut it, because that will take revenue from elsewhere. The question is whether it is stealthy. It is on the front of the Bill; it is the name of the Bill. It is not remotely stealthy. Stealth taxes are so named when we pull the wool over people’s eyes, but this is very open and transparent, and, yes, it will increase revenue for the Treasury.

[Peter Dowd]

The hon. Gentleman can point that out to me as much as he wants. I admitted, or acknowledged—call it what you will—that even if it is not a stealth tax, it is a Tory Government putting up taxes. [Interruption.] We agree on that. [Interruption.] I am happy to have that conversation with him outside the Chamber, if need be, so that I do not get into trouble with either you, Mr Deputy Speaker, or those Members on the packed Benches. The bottom line is that what we have here is quite clearly and unambiguously an admission from the Tories that they are putting taxes up. That is what it comes down to. [Interruption.] My hon. Friend the Member for Coventry South (Mr Cunningham) says from a sedentary position that they do so in a sneaky way.

Ministers have claimed many times that they have a desire to simplify tax. They talk all the time about simplification of tax. They have an Office for Tax Simplification. They institutionalised it. Has there been much simplification? Not as far as I am concerned. There certainly has not been any simplification of national insurance contributions. Therefore, despite the many claims from Ministers that they have a desire to simplify the tax and national insurance treatment of termination awards, the Chartered Institute of Taxation and other tax experts have raised concerns about the lack of information in the Bill as to how this new class 1A charge will be collected. In their rush to try to get more money into the Exchequer, they have not even decided or worked out how they are going to collect it.

[Mr Jim Cunningham]

I thank my hon. Friend for giving way. I made a remark about sneaky tax from a sedentary position. I have a good example of why we should not trust what those on the Government Front Bench say: in their manifesto, they pledged to retain the free television licence for old-age pensioners. What did they do? They passed it on to the BBC. We have all seen the announcement today. How can we trust anything they say?

[Peter Dowd]

That is another stealth tax—the television licence. The fundamental point is important. It goes to the heart of this debate. This is a rise in taxes. We are not quite sure how it is going to be collected, but it is going to be collected from some of the most vulnerable people. Currently, Ministers plan to leave it up to secondary legislation to determine how it is going to be collected. That is another important point. This has happened so many times with this Government—no amendments to the law in relation to the Finance Bill. Again, this goes to the heart of the matter. The Government bring forward legislation, proposals and policies to this Chamber. They try to push something through, but they do not tell us how and when they are going to do it. But they are going to do it. We have no opportunity to challenge them because they close down the debate. They have done so on the last four Finance Bills, I think—I stand to be corrected on that one.

Currently, Ministers plan to leave that up to secondary legislation, which is clearly a break from normal practice. Furthermore, rather than simplifying the national insurance treatment of termination awards, they look set to confuse employers even more. Therefore, a fundamental attempt apparently to simplify these proposals has actually not simplified them. If the raison d’être for this is simplification —that is what we have been told—the Government are that incompetent that they cannot even get that right, because it is not simplifying matters at all.

The measure will also add additional administrative burdens on HMRC at a time when it continues to be hamstrung by the Government’s disastrous reorganisation of its estate, the introduction of Making Tax Digital and the preparations for a no-deal Brexit. These specific proposals are being introduced when HMRC is in flux, but do the Government care? They do not care at all. So what is the so-called rationale for the introduction of this new national insurance contribution charge on termination awards, if not to make things more confusing for employers? Another factor has been thrown in: this is a tax avoidance measure, apparently. [Interruption.] The Minister says that he is not sure about that. Read some of the documentation.

[Matt Warman (Boston and Skegness) (Con)]

He didn’t say that.

--- Later in debate ---

[Peter Dowd]

I beg your pardon. So it is a tax avoidance measure, apparently, without any evidence, as far as we can gather, that there is any substantive tax avoidance going on with regard to this. I am all for tackling tax avoidance, as the Minister well knows. We support the tackling of tax avoidance, but we always want to do it when there is some evidence for it. We have lots of evidence of tax avoidance in other areas that the Government are not tackling, and in an area for which they do not have a particular amount of evidence, they are tackling it. It is a bit topsy-turvy—a bit round about. We find ourselves in a rather bizarre scenario.

I suggest that the Government’s rationale is wholly to do with the revenue that they expect to raise and that this is little more than an attempt to increase national insurance receipts for the Exchequer while shying away from any major tax or national policy change. The previous Chancellor got his fingers well and truly burned because he did not do it right. That is the issue here. We are having all this tinkering around, which is making matters more and more confused. That is certainly the opinion of the Office of Tax Simplification, as advocated in its 2014 report, which stated that a new national insurance contribution charge could raise revenue for the Exchequer and offset the costs of any tax treatment change affecting termination payments. The report went on to concede that the policy was likely to lead to increased NIC costs to the employer—not just more NICs, but increased costs to the employer—and to individual employees receiving reduced termination payments, as employers would be unlikely to increase their redundancy budgets.

The Government’s own impact assessment notes that this measure will present an “additional cost to employers”. Here we are yet again, with the party of business putting more and more costs on to employers through this national insurance contributions proposal, at a time when they are all under terrible stress for a whole range of reasons—not least because of the uncertainty of Brexit. The impact assessment also says that this will be

“reflected in lower wages and profit margins”.

Not only are the Government attacking businesses and bringing their profits down; they are also accepting that they are attacking workers’ wages. It is a double whammy, as the employer and the employee both get stung. What a state of affairs! Sadly, it is some of the most vulnerable people in the workforce who will pay the ultimate price. Whether it is a pregnant female employee voluntarily leaving the workforce or an older worker opting for early retirement, the new national insurance contributions charge will have a significant impact on the level of termination awards received.

To address the issue, the Opposition have tabled new clause 5, which would require the Government to undertake a review every two years looking at the impact of this measure on women, pregnant women, workers over the age of 50 and any other group of people with protected characteristics. New clause 5 would ensure that the impact of the new national insurance charge was carefully monitored; that is very important. It would also require Ministers to take personal responsibility for its outcome, with regular statements to the House. I know Ministers do not like doing that—Mr Speaker in effect acts as the person who gets them to come here to speak to us—but it is important that Ministers come to this Chamber to explain what they are doing. They are responsible to Parliament for their actions. The Executive are responsible to us and that is what we are demanding through new clause 5.

Similarly, new clause 1 would require Treasury Ministers to undertake a distributional analysis of class 1A national insurance contributions, looking specifically at the impact on the level of termination awards received by employees and, importantly, at the impact on employers. I am particularly thinking about small and medium-sized business owners, who are likely to see added costs as a result of the measure. We want to ensure that such employers are not going to be penalised because of the lack of evidence base for the Government’s proposals—other than, quite simply, that the measure will raise money. The Government should stop telling the House that this is about simplification, because it is not. We have to be honest about that. It is just about raising revenue. There is nothing wrong with doing that—it is crucial—but it is important that the Government are honest about what they are doing. They often get their figures wrong when they indicate how much they intend to raise. In fact, some of the figures identified in their proposals are almost a work of fiction.

The second and final measure covered by this very short Bill relates to a new class 1A charge for non-contractual sporting testimonials of more than £100,000. [Interruption.] I can hear the Government Front Benchers saying that I am making a long speech. Well, I know that Conservative Ministers do not like to be held to account at all; it is in their DNA. One of their colleagues, who is a contender for the leadership, even wants to prorogue Parliament—to close it down—so it is important that I make these points clear.

As my hon. Friend the Member for Oxford East (Anneliese Dodds) said in Committee, there remains a huge lack of clarity over how the charge will be applied, particularly when it comes to a payment that would be “customary”. She made a very important point and hit the nail on the head, and I am not quite sure that we are any further on at all from those discussions in Committee. There remain seriously unanswered questions as to how a national insurance contribution charge on sporting testimonial payments, which are in effect charitable donations from fans, would affect sporting charities and foundations set up by individual sportspeople. The Chartered Institute of Taxation has also pointed out the clear inconsistency that would arise between the national insurance treatment of sporting testimonial payments and the treatment of voluntary tips in the service industry. To answer these concerns, the Opposition have tabled amendment 1, which would require the Government to review the impact of this class 1A national insurance contributions charge on donations to charities.

--- Later in debate ---

[Dr David Drew (Stroud) (Lab/Co-op)]

I have listened very carefully to my hon. Friend and I totally agree with him. May I concentrate on the issue of testimonials? One of the great myths about professional sportspeople is that they are all terribly well paid, but county cricketers, people playing in the lower regions of football and rugby players playing outside the premier league are not well paid. Traditionally, long-term servants have had the opportunity of a testimonial and those testimonials are often organised by groups of volunteers. Are we seriously suggesting that people who organise a darts match, a pool tournament or a dinner are going to be brought into the regime, whereby they have to think about national insurance contributions, taxation and the rest? That is surely crazy.

[Peter Dowd]

My hon. Friend makes an important point. The Government would have us believe that there is an amount of money that people can raise or earn before the testimonial tax—that is what it is—comes in. I am sure that the Minister will be able to explain that to us, but we have had very little help by way of explanation from the Government on this whole area, and the measure is being introduced without significant or appropriate discussion.

Members will no doubt be pleased that I will only speak for another hour—I jest. This is yet another piecemeal reform designed to penalise employers and workers alike, while raising comparatively small sums for the Exchequer compared with the total amount of national insurance contributions that it receives each year, which I identified earlier as more than £130 billion. Of course, the Government remain wedded to cutting taxes for large corporations and the wealthy alike, leaving our public services and ordinary workers footing the bill. In fact—this is important—the right hon. Member for Uxbridge and South Ruislip has committed to £10 billion of tax cuts should he become Prime Minister, with the Institute for Fiscal Studies saying that the biggest beneficiaries would be wealthy pensioners and people living solely off investments, as neither pay national insurance contributions. Actually, all the Members of Parliament here would also be better off under the proposal by the former Foreign Secretary.

The Opposition will not countenance supporting a Bill that will indirectly lead to workers’ termination pay being reduced, especially when Tory hopefuls are throwing even more money at those who do not need it. Nor will we support a Bill that fails to offer any protection for women, older workers or pregnant women who could be financially worse off as a result of this change. If the front-runner for the Tory party leadership can give £10 billion to supporting wealthy investors, we can afford to support pregnant women who have been made redundant. For those reasons, we will oppose this Bill on Report and on Third Reading. I encourage colleagues from across the House to do exactly the same. Thank you very much for your indulgence, Mr Deputy Speaker.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to take part in a Report stage where the Government do not have amendments to their own Bill. That is quite unusual these days. Most of the Bills that we have seen recently have had Government amendments to them because there have been errors in the drafting, so I congratulate to the Minister for managing to bring in one that has not. Obviously, it would be great if he could see his way to accepting all the amendments tabled by the Opposition and by me, but he can save that up for his speech and let us know then whether he is willing to do so.

I will talk us through the amendments that we have tabled but also make it clear that we are willing to support the amendments tabled by the Opposition. Our new clause 2 is about the impact of the changes to class 1A national insurance contributions on termination awards. It asks for a number of different things, including

“an assessment of the expected impact on…the total net value of termination payments received by individuals…the average net value of such payments; and…the number of business start-ups that are funded by termination payments…in each region of the United Kingdom.”

We ask for this for a number of reasons, but mostly because I was a bit annoyed by what is in the Government’s explanatory notes, which basically said, “We expect there to be no impact on employees”, but actually meant, “We expect there to be no additional tax liability impact on employees.” But the reality is that there will be an impact on employees as employers will choose to give their employees less in termination awards because they will be liable for this class 1A contribution.

I specifically mentioned the number of business start-ups because I am acutely aware of the number of people, particularly where I am in Aberdeen, who struggled during the oil price fall that occurred in 2015-ish and were made redundant as a result of it. A number of them went on to start new businesses because of the termination payment that they received. I am concerned that reducing the amount of termination awards that people receive will mean that there will be fewer of those new business start-ups, and we may not see some of those businesses that go on to be phenomenally successful just for want of a few extra pounds in the termination award that is made.

Another thing that concerns me is that the Government’s projections show that wages for everybody will fall as a result of this additional charge on employers. The Government have admitted that; it is included within the calculation. Even people who are not receiving termination awards or are not, at any stage, likely to receive them—even those who are receiving only the Government’s national living wage, which is a pretendy living wage that people cannot live on, and those who are under 25 and therefore not eligible for it—will experience a reduction in wages as a result of the Government’s changes to employer class 1A liability in relation to termination awards. It is not fair that we are asking people who already do not have enough to live on to pay this additional contribution. That might seem to be an odd position to take in this Chamber when we have Conservative leadership candidates talking about lowering tax for the very richest, but I do not believe that wages should be lowered for those at the bottom of the pile, to increase what is in the Government’s coffers. If we are to do that, surely we should choose, as the Scottish Government have done, to levy that money through a more progressive taxation system.

The other issue with the termination awards aspect relates to the collection method that is described. Currently—this is from the Government’s website—employers pay class 1A and 1B national insurance on expenses and benefits they give to their employees. They have to fill in the forms only once a year and are given a deadline for doing so. The Government have not yet said how they intend these payments to be paid in real time, or how they intend that employers should ensure that they are recording them and paying them in real time. If the Government expect them to do this, they need to clarify that more quickly. I am particularly concerned about the employers who currently do not pay class 1A contributions in any way, shape or form because they do not allow employee benefits such as company cars or health insurance as part of their deal, yet are now being brought into class 1A contributions because, for some unknown reason, the Government have chosen to use class 1A contributions as the method of collection—the method of liability—rather than choosing a different method. Class 1A contributions are not levied on any cash just now; they are levied only on benefits in kind.

Therefore, a number of employers will need to have new computer systems to pay this money. Those who do already pay for benefits in kind will need to have a different computer system that allows them to pay in real time rather than at the end of the year. That will involve a lot of additional work for HMRC and for tax professionals who will have to advise employers on this method. That is an extra cost to employers—not just the actual additional money that they will have to pay but the additional administration cost that they will have to go through. It is incredibly important that if the Government intend to press ahead with this, they do everything they can to ensure that every employer who does not currently have any liability for class 1A contributions, in particular, is well aware of these changes and the new liability that will arise if they make any termination payments in excess of £30,000.

Let me move on to sporting testimonials. My concern is much the same as that raised by Opposition Front Benchers in relation to the donations to charities that are made as a result of sporting testimonials. There will be a new liability for people receiving money as part of sporting testimonials as long as they are not paid through an employee charitable donation-type method. It is a bit much to expect committees that are set up to have to register themselves in this way to pay the sporting testimonial beneficiary through payroll giving. That is a bit of an over-cumbersome situation. A lot of the people who receive money through sporting testimonials give a significant chunk of it to charities. I am therefore concerned about the reduction in charitable giving that there will be as a result of these changes.

The Government have pretty much said that this has a negligible Exchequer impact, but, once again, an additional administrative burden is being built up. This may stop some of these committees going forward with testimonials if they realise that they have to register for payroll giving and have to pay class 1A national insurance contributions as a result.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I am grateful for the opportunity to respond to the comments and questions posed by the hon. Members for Aberdeen North (Kirsty Blackman) and for Bootle (Peter Dowd). I shall not detain the House long, but I will try to respond to as many points as possible. I am surprised that the hon. Member for Bootle has raised those concerns and indicated that he intends to vote against this measure, given that he did not divide the House on Second Reading and did not divide the Committee on a single clause.

[Peter Dowd]

I indicated at the time that we would reserve our judgment and see whether the Government came up with sensible proposals. The fact of the matter is that, regrettably, they have yet again not come up with those suggestions, proposals, recommendations and explanations. That is why. Here we are giving the Government the benefit of the doubt, and we are being criticised for it.

[Robert Jenrick]

Let me respond to the amendments tabled by the hon. Gentleman and the hon. Member for Aberdeen North. It is a bit like groundhog day, because we have been through these arguments before. I will first address new clauses 1 and 2, which seek to amend the legislation that deals with termination awards, and then new clause 5.

New clauses 1 and 2 seek to commit the Government to report to Parliament on the impact of the changes to termination awards legislation within one year of implementation. They both seek further information on the impact of this measure on individuals whose contracts have ended and on employers. New clause 1 also asks specifically about distributional analysis, while new clause 2 asks the Government to consider the impact on businesses using termination payments to fund a start-up—a matter that we also discussed in Committee.

First, the Government consider that producing such reports is unnecessary, because we have already considered these issues in detail as part of the policy development and extensive consultation process. As we have discussed on a number of occasions, this Bill has been known about for some time. It was published for the first time in 2015. It has been restated in Budgets. It has been consulted on. This is not a new measure; it is well known to individuals and stakeholders who might be affected and to the tax and professional community who will be involved in advising businesses. There is little more to be said on that.

--- Later in debate ---

With the reassurances that I have been able to give and the further evidence provided throughout the course of the Bill, I hope that right hon. and hon. Members will consider not pressing their new clauses and the amendment.

[Peter Dowd]

We will push new clause 5, but I beg to ask leave to withdraw new clause 1.

Clause, by leave, withdrawn.

New Clause 5

Effects of termination awards provisions

“(1) The Treasury must publish reviews of whether the payment of Class 1A contributions on termination awards under sections 1 and 2 has had—

(a) any effect on the number of termination awards made above £30,000;

(b) any effect on the size of termination awards made above £30,000; or

(c) a disproportionate effect on—

(i) women,

(ii) pregnant women,

(iii) persons aged 50 or over, or

(iv) any other group of people with protected characteristics (within the meaning of the Equality Act 2010).

(2) The first review under subsection (1) shall be published no later than 24 months after this section comes into force.

(3) Subsequent reviews under subsection (1) shall be published no later than 24 months after publication of the previous review.”—(Peter Dowd.)

This new clause would provide for a general review of the termination awards provisions of this Act within every period of 24 months.

Bought up, and read the First time.

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

Mortgage Prisoners

Peter Dowd Excerpts

Thursday 6th June 2019 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

I thank the hon. Member for Dover (Charlie Elphicke) for securing this debate, and for his comments about his constituents, who he described as real people with real lives and terrible fears about already high interest rates increasing further. He spoke about the need to move from a computer-driven affordability test to a reality test, so that we can say yes to people and there will be better protections. He also said that capitalism must be tempered by responsibility and fairness, and that the interests of the consumer must be put before corporate interests. I agree with him.

My hon. Friend the Member for Blackpool South (Gordon Marsden) said that he was drawn in by the real-life experiences of his constituents, and that what the Government and the FCA have done so far is inadequate. He paid tribute to those journalists who exposed the role of lenders, and said there has been insufficient due diligence in the process. He said that we have a moral duty to act, and called for a formal inquiry.

The hon. Member for Camborne and Redruth (George Eustice) talked about the need for a statutory obligation to permit a switch to more affordable products if necessary, and a powerful presumption, if that is not allowed, for non-possession where the switch has been refused. I think that that is a perfectly reasonable position to take.

My hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) talked about the enormous hardship placed on customers, who are being punished because they have been caught up in the middle of regulatory change. She said that selling off to Cerberus was a major policy failure and that UK Assets Ltd was misled. She also said that the FCA has been complacent, and that Ministers should do something about that particular issue.

The hon. Member for Ayr, Carrick and Cumnock (Bill Grant) was surprised to see regulated mortgages sold off to unregulated companies. The impact on his constituents was to put them in terribly stressful situations and he said that that experience remains raw. As he said, “See it, say it, sorted.”

My hon. Friend the Member for East Lothian (Martin Whitfield) asked why, when we have a land of home ownership, we are allowing such a threat to that home ownership by the practices of unregulated lenders that can be accessed via an email. He said that there are 300 to 400 people affected in each constituency.

The hon. Member for Hazel Grove (Mr Wragg) talked about people trapped by large exit fees or the rigidity of new lending criteria, leading in some cases to the loss of homes and assets transferred to vulture funds. He reminded us that behind each broken product is a person and a home.

My hon. Friend the Member for Glasgow North East (Mr Sweeney) said that part of the legacy of the crash was banks seeking to benefit from the turmoil, with people trapped in purgatory. Let us hope it is purgatory, because you can get out of purgatory. It is very difficult to get out of hell.

The hon. Member for Sutton and Cheam (Paul Scully) gave an example of how his constituents, like so many people, were affected by the transfer to Cerberus and how they are locked in to a poor product, with the consequential impact on their lives and finances of having to pay three or maybe four times the usual interest rate.

The hon. Member for Strangford (Jim Shannon) called for an urgent inquiry into the issue. He wanted to add his support to addressing this particular subject. He referred to the grooming of customers in order to rip them off even more and how banks have little interest in customers whose mortgages they have sold on, and said that that is not acceptable.

The hon. and gallant Member for Beckenham (Bob Stewart) paid tribute to troops on D-day. I think we all support and give our full commitment to that. He then asked why this matter had not been sorted out. He did so in his usual wishy-washy way by skirting around the issue: he simply said that it is wrong for the people we represent and he is right.

The hon. Member for Thirsk and Malton (Kevin Hollinrake) gave an excellent speech. It was a very considered, thoughtful and forensic speech which asked the question: why on earth do we let them get away with it? Why did we let them get away with it before the crash? They created the conditions and the process, and then they went back to consumers and businesses and said that their businesses, houses or mortgages were no longer sustainable. The impact is on families. The bankers created the conditions for mortgage prisoners and it is really up to us to do something about it.

The hon. Member for Stirling (Stephen Kerr) talked about the damage to people’s life chances. The selling off to vulture funds has led to thousands of people being caught up in unregulated systems, with a lot of asset-stripping going on.

Finally, the hon. Member for Glasgow Central (Alison Thewliss) set out the cost of higher interest rates as a result of the lack of access to more competitive rates and the impact on businesses. She made the point that this is not just a legacy issue, but a threat to the future.

I understand that this is the seventh debate that we have held on banking in a year. I have to say that it is a sad state of affairs when we are having a debate on mortgage prisoners and vulture funds. There is something wrong with that and it speaks volumes. I was at a meeting today with about 25 people who are either affected by the issue or who are helping and supporting those who are affected. I suspect that many are in the Public Gallery today and I welcome them. Some are in despair and feel completely powerless against powerful bodies that simply ignore them, and they feel let down by us.

Lenders have an approach to their customers that is simply take it or leave it. Since the global financial crisis, we have heard many voices in this House speaking about the cost of that disastrous period, born out of rapacity, as the hon. Member for Thirsk and Malton said. In some quarters, that rapacity continues. I am sorry to say that UK Asset Resolution Limited, which is owned by the state, has not helped in the curtailment of that culture and has potentially encouraged it, even if by default. As many people have asked, why, for example, has it sold off mortgages to companies that are not regulated? In effect, they have been left at the mercy of those companies by the state and the Government. That is not acceptable. A Government company selling off assets to unregulated companies—it is difficult to believe.

My first question to the Minister is this: why has the Government allowed UK Asset Resolution Limited to do that? What is he going to do about that, and about the 200,000 people financially imprisoned by this scam? I do not accept in any way the Government’s argument that this is a question of being at arm’s length from these matters. How can the Government take such an approach when their citizens are being ripped off? They are in danger of aiding and abetting that ripping off. How can they continue to allow people who pay their mortgages and bills, and who carry on with their daily living against the odds, to be penalised? People are in a position where the inequality of bargaining is causing no end of hardship, worry, familial dislocation and, in some cases, attempts at suicide and perhaps loss of life. Millions of people have suffered from not just the recession caused by the rapacity of banks, but the cuts to social security and public spending that followed. I remind Members that in one fashion or another, the banking bail-out cost £1.5 trillion to put right, according to the Office for National Statistics.

We are hearing today about one group who have particularly suffered as a result of the financial meltdown and the decisions that have been taken since. For many Members of this House—and members of the public—who have mortgages, it seems unconscionable that we have not been able to refinance them at more competitive rates. The ability to do so is part of a healthy mortgage market that does not allow lenders to abuse their positions. The reality of those locked into interest rates that are sometimes three times the going rate can be horrendous, as we have heard time and again today from the 14 or 15 Members who spoke.

How can it be possible that people are ineligible for a mortgage when they will be paying less? That question has been asked so many times today. What a bizarre state of affairs. It will cost people less than their current mortgage so they cannot have it. Did we bail out the system only to allow the system to continue to penalise people who have not failed to keep up payments? These consumers, despite being up-to-date with their mortgage payments and seeking to move to a more affordable deal without borrowing more, are being held back by inactive lenders and entities not authorised for mortgage lending.

The practice of selling mortgages and unregulated commercial loans to unregulated funds has been creating mortgage prisoners, exposes businesses to asset stripping and threatens to continue to create further mortgage prisoners and risks to businesses, as laid out in the motion. Yet we seem to be seeing a curious case of blame-shifting. The chief executive of the Financial Conduct Authority referred in evidence to the Treasury Committee last year to a “peculiarity” of EU law. A peculiarity—is that it? Others seem to have suggested that the UK’s interpretation of the law is at fault. At any rate, the directive was brought into UK law in 2016, so the Government of the time and the Government of today have a responsibility to deal with the problem, wherever and whenever it originates. As I said earlier, its origins lie in the reckless behaviour of the those in the banking sector in the years running up to the crash. They were not reckless in lending to so many individuals, but they were reckless in their general approach to risk and exposure to little-understood derivatives. As a result of their behaviour, the aggressive downsizing of balance sheets meant that people with no history of default were put into high-risk groups and, ultimately, had their mortgages transferred to vulture funds, becoming de facto credit risks despite impeccable credit histories. Many of these funds are outside the purview of standard regulation, and the FCA may in some cases legitimately claim that as a result there is little it can do. However, it must come forward with proposals, rather than just sitting on the sidelines. That is its responsibility.

I pay tribute to all the campaigners who have brought this matter to the attention of the House, including the hon. Member for Thirsk and Malton and the all-party parliamentary group on fair business banking. They have been absolute stalwarts in pursuing the matter. I urge the Government to move as quickly as possible to establish whether the problem lies in EU regulation or in its interpretation, and to address it as swiftly as possible.

I am glad that the hon. Member for Hazel Grove referred to Cerberus, which features in Greek mythology. This particular three-headed dog, however, locked victims not just in hell but in negativity, repetition and hopelessness. This dog is symbolic of the inability of people to leave because they are trapped in an expensive mortgage hell. The Government must now put it on a leash, and sort out the rules.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Before I call the Minister, let me echo the words of the hon. Member for Bootle (Peter Dowd) in welcoming to the Public Gallery a great many people who are interested and involved in this subject, and who, I gather, have met Members this afternoon. I see Members assenting to that.

I draw attention to this because we so often hear criticism of what happens in the Chamber, and hear it described as a circus or a bear pit. It is delightful for once to be able to show the people who care about this subject that when matters are debated properly, thoughtfully, forensically and collaboratively here in the Chamber, it makes a difference.

--- Later in debate ---

[John Glen]

As I have tried to set out, I am not the arbiter of this specific issue, and it would be wrong for me to be drawn into the outcome before the consultation has concluded. That is imminent, however, as is the implementation of the solution.

[Peter Dowd]

I completely understand where the Minister is coming from, but it would be helpful if, at some point—not today; I accept that—he could set out the catalogue of metrics that will be used to ensure that these regulations, this interpretation, whatever it is, are operating practically within six, 12 or 18 months.

[John Glen]

That is a reasonable point to make. This intervention has to be meaningful and it has to deal with the problem of mortgage prisoners. I am very clear about that, and we in the Treasury will need to look carefully at how we evaluate this. As I was saying, I see plenty of innovation across the mortgage market and I look forward to seeing what affordable options lenders can offer to mortgage prisoners who are looking to switch.

Let me turn to the Government’s sales of mortgage books to purchasers that are not active lenders. Much of this afternoon’s debate has focused on the firms that purchase these mortgage books. It is regrettable that the Government have not received any reasonable bids from active lenders, with feedback suggesting that they have limited appetite for these loans. However, I would like to make it clear to the House that the administrators of these mortgage books must be FCA-regulated, regardless of whether they are active lenders. Any consumer whose mortgage is held by one of these firms has full recourse to FCA protections, including treatment in accordance with the FCA’s “treating customers fairly” principles, and the ability to complain to the Financial Ombudsman Service.

I have heard the comments about borrowers having their reversion rates drastically increased. To safeguard against this during asset sales, the Government have put in place contractual protections that have been enhanced to ensure that the terms and conditions of the original loans are honoured and, in the latest asset sale, to ensure that future rate rises are in line with the rates charged by the largest active lenders. This means that a customer will be treated broadly the same as if their mortgage was with an active lender, with payments in accordance with their original contract terms.

Oral Answers to Questions

Peter Dowd Excerpts

Tuesday 21st May 2019 Commons Chamber

[Mel Stride]

HMRC is not persecuting people, as my hon. Friend suggests. It is collecting the tax that is due. It is also not pursuing people for criminal activities, as he says. However, when it comes to criminality, I can tell the House that very recently, on 16 May, HMRC announced that six promoters of these schemes had been arrested on suspicion of loan charge tax fraud.

[Peter Dowd (Bootle) (Lab)]

Those of us on the Labour Benches have repeatedly asked the Government what they are doing to clamp down on the enablers of the loan charge and we have repeatedly received feeble answers showing inertia and inaction, and we have had more of that today. More broadly, why are the Government not doing more to crack down on lawyers, accountants and others aiding and abetting tax avoidance under the guise of legitimate tax planning?

[Mel Stride]

I think the hon. Gentleman probably composed his question before he heard my last answer, in which I made it clear that we have just recently had six arrests relating to the suspected fraudulent activity around the loan charge. We are also actively pursuing 100 promoters of tax avoidance schemes, including those relating to the loan charge, and have brought in up to £1 million fines for promoters engaged in this activity.

[Peter Dowd]

Six? There are thousands of these wheezes going on out there. Let me give the Minister another example. Under existing tax compliance and procurement rules, and public contracts regulations, there is provision for public contracts to be denied to individuals and organisations that do not comply with tax law, possibly including these promoters of loan schemes. Can the Financial Secretary admit that there is evidence of tax avoidance and enabling by organisations winning public contracts while not one single individual or organisation has been banned from securing those public contracts?

[Mel Stride]

Is not the difference between the Government and the Opposition on tax avoidance quite simply that this Government are serious about it, having brought in and protected £200 billion since 2010? The tax gap is at a near historic low. If it was as high as it was under the last Labour Government, we would be deprived of sufficient funds to employ every policeman and woman in England and Wales. This Government are serious about avoidance and evasion, and we have a record of which to be proud.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill (Second sitting)

Peter Dowd Excerpts

Tuesday 14th May 2019 Public Bill Committees

[Robert Jenrick]

Absolutely. The figures reported by the Office for National Statistics this morning are further evidence of the jobs miracle we have seen since we came to power in 2010. It is important to place these changes and the impact they will have on working people in the context of the fact that, as my hon. Friend said, most of us in this room have never known such a buoyant labour market in our lifetimes—and long may it continue.

On the particular point of the reports, the Government feel it is more appropriate to look at those issues in the round and to take a balanced decision based on all the relevant factors. Secondly, the Government have already consulted on this measure in detail. We have published both the draft policy proposals and the legislation for scrutiny. We explicitly considered the impact on employers and individuals as part of the policy and our development.

We decided on an approach that protected those losing their jobs by, for example, retaining the important £30,000 exemption that we have extensively discussed and not seeking to change the position with respect to employee national insurance contributions, but at the same time simplified and aligned the system, reducing the incentives for manipulating payments. We believe we have considered this issue carefully and reached a balanced way forward.

I will add at this point that the policy costing for this measure, as we have already heard in interventions from my hon. Friends, has been signed off and certified by the independent OBR, and the methodology for that assessment is described in the Budget policy costings document. That shows the Government’s commitment to transparency and sound public finances.

Finally, the Government have already committed to keeping this measure under review, as new information may become available. The publicly available tax information and impact note, TIIN, commits the Government to keeping the scheme under review through communication with taxpayer groups affected by the measure and through information collected from tax receipts.

As with all legislation, the Treasury is also required to carry out post-legislative scrutiny of Acts within three to five years of their implementation. As I outlined, I think in response to the question from the hon. Member for Oxford East this morning, the Treasury may well do that before that deadline; it would certainly be required to do so and to report to the Treasury Committee if it had not.

As part of the review process to meet those obligations, HMRC and HM Treasury will speak to stakeholders to gauge their views on how the policy is operating. There are well established lines of communication between HMRC and representative groups, as one would expect, that will provide the basis for a continuous review of the effect of this policy. I am sure that hon. Members will feed back to Ministers any concerns and thoughts regarding how the reforms are working in practice, and of course HM Treasury is always open to suggestions. I hope hon. Members will agree that those points make publishing a review on these matters unnecessary. However, it may also help if I respond specifically to the points raised about the impact of the new class 1A employers’ NICs liability.

I would like to make a number of important points in closing. First, no employee will receive a new tax charge as a result of the Bill. The Government have explicitly chosen not to charge employee NICs on the measure and to retain the £30,000 threshold.

Secondly, only about 20% of termination awards will be affected. As we heard this morning, the OBR expects that employers may react by lowering wages or accepting lower profits and has adjusted its forecast for salaries by 0.1% as a result. However, that is a negligible reduction and must be viewed in the context of record employment, record low levels of unemployment and record employment in all categories—disabled persons, women in the employment market, young people in the employment market and so on—a higher living wage, support to businesses through tax cuts such as corporation tax, and other important policy initiatives brought forward by this Government. Also, as the ONS pointed out this morning, wages are rising substantially above inflation.

Thirdly, as I noted in my letter to the Committee, and as I set out again in my answers to questions this morning, where employers face a new charge on termination awards, we expect this to be disproportionately on payments to higher-rate and additional-rate taxpayers, typically those who are in the top two or three income deciles.

Clause 1 will simplify the tax system, reduce the incentive to manipulate payment, and raise important revenue for our public services. As such, and with the reassurances that I hope that I have been able to give the Committee, I commend clauses 1 and 2.

[Peter Dowd (Bootle) (Lab)]

It is a delight to see you in the Chair, Sir Henry. I thank the people who gave evidence today to the Committee; it was very helpful. I had something like 50 questions to ask. I was unable to ask them all, but I will relieve Members by saying that I will not ask them all now—possibly 45, but not the 50 that I had planned to ask.

Contrary to what the Minister says, we do not, through new clause 1, want to “force” the Government to do this, that or the other; we do, however, want them to come to Parliament and accept parliamentary scrutiny. There have been no amendments to any of the Finance Bill Committees that I have sat on; I think it is four in total. In the mother of Parliaments, we were unable to scrutinise those Bills properly and appropriately—my colleagues will remember several of them—because the Government have tried, and continue to try, to close down any scrutiny. It is very important to get that on the record.

As for the implication that if we do not agree to the proposals, it will somehow have an impact on job creation—that old chestnut—as I said recently on the radio and in other media, the same was said about giving the minimum wage to miners in 1913, and to agricultural workers in 1924. It was said when people started to get holiday pay in 1938. People said that equal pay for women and members of ethnic minorities would cause the economy to crash, and the same things are being said about the minimum wage. It is the old claptrap—I should not say that, in case it is unparliamentary, but that is what it amounts to—about this impacting on jobs.

Yes, we have the highest number of jobs since 1975, or since records began, as the Government keep telling us, but the context is that this is the most precariously placed workforce in decades. Zero-hours contracts abound, and regional imbalances—[Interruption.] Government Members mutter, but facts are a stubborn thing; facts remain facts. [Interruption.] They are facts; the Minister mutters that they are not. The reality is that a huge number of people are on zero-hours contracts, and huge numbers of people are working two or three hours a week. That is classed as employment. I am sorry, but it is not “employment” to that person, who is not getting any money, or to their family, who perhaps have to send their children to school without breakfast or lunch. Let us get that into context.

The hon. Member for Dudley South effectively said that we will now tax redundancy payments above a certain level. Only the Tories could make a virtue of taxing the redundancy payments of people who have lost their job. The Minister mentioned that the £30,000 figure had been the same since 1998, and said that it was the most generous such amount in—I don’t know—the known world. We do not want to make simple comparisons with other countries, because other countries have far more generous reliefs in other areas, so making a direct comparison with other redundancy figures, out of the totality of employment reliefs, is not appropriate.

The hon. Member for Walsall North mentioned the affirmative procedure. If the Government want to reduce the £30,000 limit—as they no doubt will want to, given that that is far too generous for people who have been made redundant and have lost their job—we will be able to vote on that. Perhaps that would, at least, give us a proper opportunity to debate the issue on the Floor of the House, which we have not been able to do. I mentioned our inability to amend the law in the last four, or possibly even five, Finance Bills. That is unprecedented in parliamentary history.

[Mike Wood]

rose—

[Peter Dowd]

I am happy to give way to the hon. Gentleman, if he wishes to peddle some more Tory twaddle.

[Mike Wood]

I thank the shadow Minister for giving way. His point is entirely bogus, because as the Minister made clear, and as he knows, the Bill concerns purely employers’, and not employees’, contributions, so it does not tax anybody’s redundancy payment.

[Peter Dowd]

I will tell the hon. Gentleman what was admitted today: that still reduces people’s wages; that is what this comes down to. It could also give companies an incentive not to pay redundancy. I know that he wants to sweep those points aside as though they were irrelevant, but they are not irrelevant to a person who has worked for a company for 25 years and gets a redundancy payment that is taxed more greatly than they expected. That is the context in which I am raising these issues.

[Mike Wood]

Does the hon. Gentleman accept that the maximum statutory redundancy pay, even for an employee who has worked for 25 years, is barely half of the threshold amount in the Bill, so they would not be affected, even indirectly?

[Peter Dowd]

There we go again. It is the race to the bottom, isn’t it? We are always talking about a statutory minimum. That is what the Tories talk about all the time: the minimum. We do not want people living on the minimum; we want people to have a healthy, full-quality life. This is about the cumulative effect of the Government’s fiscal policies, not one isolated issue; it is about the totality. A person might have a job, but it might be a poor, insecure job. It is not just about having a job; it is about the quality and context of that job.

[Grahame Morris (Easington) (Lab)]

That is a valid point, and the expert witnesses supported that this morning. If an employer is designing and costing a redundancy package—I do not know why we use the term “termination” in the Bill; why not say “redundancy”? —surely the additional tax and national insurance must be a factor, and that may well have an impact on the final sum that the employee receives. Government Members say that we have record levels of employment, but there is a report today that 4 million people in employment are living in poverty. That is a feature that we have not seen before, along with declining and stagnating wage growth levels.

[Peter Dowd]

My hon. Friend makes an important point. The reality is that the only termination under the Tories is termination of the social and economic cohesion of this country. That is the termination that I am deeply worried about.

Another important point was raised. We always get the same old chestnut from the Conservatives. They say that their proposal will raise £200 million or £300 million —though they often do not raise what they say they will, because they are so incompetent at doing it—and that if we do not agree with it, we will have to find the money elsewhere. However, we have set out where we would find that money. It would not be from people getting redundancy payments; it would be people at the other end of the spectrum, who have significant amounts of money, or employers, who would have to cough up. We will get it from the people who are in the best position, psychologically and financially, to pay it.

[Eddie Hughes]

I think the hon. Gentleman was casting aspersions on this Government’s ability to collect taxes. My vague recollection is that our record is better than the Labour party’s. If that is so, what does he have to say about that?

[Peter Dowd]

I am pleased that the hon. Gentleman has raised that. Perhaps when we have a little chat in the Tea Room I will give him a copy of the letter from the shadow Leader of the House, my hon. Friend the Member for Walsall South (Valerie Vaz), to the Chancellor, setting out not our plans, but what Labour has done in the past on tax enforcement. [Interruption.] The Minister says from a sedentary position that they did not work. He should try telling that to taxpayers, who, as a result of Labour’s proposals over the best part of 15 years, raised billions upon billions of pounds, which went into public services. I will send a copy of the letter to the hon. Member for Walsall North, in case I do not bump into him in the Tea Room. I do not think the Chancellor replied; I cannot possibly think why.

Moving on to the substantive issue—[Interruption.] I do not mind a little bit of chuntering from Government Members, but if they made it at least marginally coherent, so that I could hear it, that would be really helpful. The Opposition’s new clause 4 would require the Government to review the impact of class 1A national insurance contributions on termination awards. The review would include:

“(a) an assessment of the impact the new Class 1A liability has on the level of termination payments workers receive;

(b) an assessment of the impact the new Class 1A liability has on employers;

(c) a distributional analysis of the new Class 1A liability; and

(d) anything else the Secretary of State considers appropriate.”

We are being very generous, and are giving the Secretary of State lots of room for manoeuvre in reporting to us on these matters.

As we stated on Second Reading, the condensed Bill before us is a shadow of its former self, standing at just five clauses. In fact, if it was a person, it would resemble a skeleton. The Government’s timetable for the Bill has been determined by the internal politics of the Conservative party—that is the reality; it is as simple as that—rather than an honest assessment of the time needed to scrutinise the measures properly.

The origins of the new class 1A contributions charge levied on termination awards can be traced, as Members know, to 2013, when the Office of Tax Simplification published its interim report, “Review of employee benefits and expenses”. Following the publication of the final report, the Government consulted on the proposed NIC changes and announced their intention to introduce the measure in the 2016 Budget. Two and a half years later, we are finally scrutinising the Government’s NIC reforms to termination awards.

The tax and national insurance treatment of termination payments remains a sensitive topic to workers and employers alike. As I said on Second Reading, employees facing redundancy often consider this final payment an evaluation of the work they have done for their employer. Termination or redundancy payments therefore have both an emotional and financial significance; the financial significance is sometimes slightly out of proportion, but there is nevertheless a relationship.

[James Cartlidge]

The hon. Gentleman is right about the psychological impact of redundancy payments. Does he therefore agree that we should celebrate from the rooftops that unemployment is at its lowest level since 1974?

[Peter Dowd]

I celebrate anybody getting a proper, secure, well-paid job. I am afraid that the hon. Gentleman should not expect me to celebrate somebody getting a job on two or three hours a week, and he should not expect me to celebrate the fact that £30 billion-worth of tax credits are going to subsidise people in poorly paid jobs, when only 20 years ago that was £1 billion. Do not ask me to celebrate that. Let us have the full picture. Yes, I always celebrate when somebody gets a decent well-paid, well-trained job with good terms of employment, but no, I do not welcome poorly paid, less well-trained jobs. I am sorry, but I cannot. But for the record, yes I welcome job creation—well-attuned job creation.

To get back to termination payments and their emotional significance, the amount awarded is often determined by painstaking and careful negotiations between managers and trade union representatives. A good employer might offer a generous termination payment to an employee as a sign that it is not a judgment on the intrinsic worth of the staff who are leaving, even though they have had to make them redundant. The job losses might be because of the Government’s economic policies.

The Government’s rationale for the introduction of a new class 1A employer NIC charge, which will be levied at 13.8% on termination awards above the £30,000 threshold, is to do with ease and simplification. In its “Review of employee benefits and expenses: final report” in 2014, the Office of Tax Simplification stated that

“many employers are unclear about which parts of a termination package qualify for the exemption”

from tax and national insurance. I stand to be corrected, but I am not sure whether we got a significant amount of clarity on that today.

Additionally, Ministers have cited the opportunity for well-advised employers to avoid paying the right amount of tax and national insurance on termination payments as justification for wider reform. However, neither the Office of Tax Simplification nor Treasury Ministers have been able to provide figures on the number of employers who have taken advantage of the existing loophole, or of the amount lost to the Exchequer as a result of that. That was probably confirmed today—we do not know.

Despite the many claims of Ministers about the desire to simplify the tax and national insurance treatment of termination awards, the Chartered Institute of Taxation and other tax experts have raised concerns around the lack of information in the Bill about how this new class 1A charge will be collected. We did not get a great deal of clarity on that today. Currently, Ministers plan to leave it up to secondary legislation, as alluded to earlier. That is not only a break from normal practice, but looks set only to confuse employers even more, rather than simplifying the national insurance treatment of termination awards. The people who came to speak to us today were probably a bit too polite to say that.

The provision will also add additional administrative burdens to HMRC at a time when it is hamstrung by what can only be described as the disastrous reorganisation of their estate by the Government—my hon. Friend the Member for Oxford East has been involved significantly with that—the introduction of Making Tax Digital, which has added to the problem, and of course the preparations for a no-deal Brexit, which have compounded it even further. Taken in the round, that is a challenge.

So what is the rationale for the introduction of this new NIC charge on termination awards, if not to make things less confusing for employers or to tackle tax avoidance, which is supposedly rife? I suggest that the Government’s rationale is wholly to do with the revenue they expect to raise, and is little more than an attempt to increase national insurance receipts for the Exchequer, while shying away from any major tax or national insurance policy change. I think that there was an acknowledgement of that today. This is just one element of what should have been a wider examination, as set out in the press release to which I referred, on 16 November 2016. This is certainly the opinion that the Office of Tax Simplification advocated in its 2014 report, in which it stated that a new NICs charge could raise revenue for the Exchequer and offset the costs of any tax treatment change affecting termination payments.

The report went on to concede that the policy was likely to lead to increased employer NIC costs and to individual employees receiving reduced termination payments, as employers would be unlikely to increase their redundancy budgets. Similarly, the Government’s own impact assessment notes that this measure will present an “additional cost to employers” that will be

“reflected in lower wages and profit margins with a reduction in total wages and salaries of 0.1%”

within the first year of its adoption. My hon. Friend the Member for Oxford East clarified that with the Minister in today’s evidence session.

To put it simply, this new NICs charge will lead to added costs to employers, some of whom will be small and medium-sized business owners, and less generous termination payments to employees as a result. At the same time, the Treasury has downgraded its forecast of the likely amounts this new charge will raise for the Exchequer from £485 million to £200 million a year. I am sure the Minister would like to provide clarity on that.

This issue goes to the heart of new clause 4, which seeks a review of the measure’s impact on the level of termination payments that employees receive and the cost to employers, and a distributional analysis of this new class 1A charge, which Treasury officials said had not been done. On the ground, it might have been too complicated and the cohort may not have been large enough under the circumstances. Given the likely cost to employers and of falling workers’ wages and termination payments, as well as the Government’s shrinking forecast of the amount of revenue the charge would raise, surely it makes sense to pause and gather further information before proceeding. After all, the Office of Tax Simplification noted in its original report that if Ministers were to follow its recommendations for a new NICs charge on termination awards, more data on the potential winners and losers would be needed. We were not able to establish who they were today. I specifically asked that question and could not get an answer. It was like an aggregate amorphous statement.

Sadly, Ministers have not provided that information, despite having years to do so. Treasury Ministers have refused to undertake a distributional analysis, citing the cost or that the cohort is not large enough as excuses, and they are still unable to provide credible figures on the number of workers who receive statutory redundancy payments versus those who receive non-statutory payments. Uncertainty also remains about whether the Government will seek to lower the £30,000 threshold at a later date through primary legislation or secondary regulations. The Minister said they have no plans to do this, but we already raised this issue during consideration of a previous Finance Bill—in fact, I think I raised it. The question was, “If you have no intention of doing it, why introduce legislation to do it and why introduce it through the process of secondary legislation?” If it were me doing that, I would not be banking a piece of legislation unless I intended to use it. That is the case here; the Government will use this. Otherwise, why take up parliamentary time to do so? If they are taking us on a run-around to fill time, that too is inappropriate.

New clause 4 seeks a review of the proposed class 1A charge, focusing on its impact on workers’ wages, on termination payments, added costs for employers and a distributional analysis of the measure. Without such a review, which will provide a wealth of information and further evidence of the likely effect on wages, termination payments and employers, the Opposition will not support this part of the Bill.

I will comment later on new clause 3, but at this particular point, that is all I want to say. I may ask questions of the Minister in due course.

[Kirsty Blackman (Aberdeen North) (SNP)]

I apologise—I expected to be called before the Opposition spokesperson on this section. I will do my best not to repeat things that he has said, but if I do, I shall try to do it in a different way at least.

It is good to be part of a Bill Committee that has taken evidence. We do not take evidence on Finance Bills and we are less knowledgeable and less good at scrutinising the information provided to us as a result. I hope the Minister agrees that the evidence sessions were incredibly useful this morning, even though he was in the hot seat and had questions asked of him. It meant that we will ask fewer stupid questions during this part of the scrutiny process, as well as being in a better position to drill down on some of the issues raised by different individuals.

--- Later in debate ---

The other issue for employers is that the Government have chosen to put termination awards as a class 1A liability and to do collection in real time, rather than at the end of the tax year. That is not the way that any other class 1A contributions are paid. It is, however, the way that other pay-as-you-earn contributions, for example, are paid. My understanding from the evidence given this morning is that the Government could have chosen to have termination awards as class 1 contributions, not class 1A contributions, with employee contributions exempted in the same way that those for pensioners are exempted. That would have been a much clearer situation for employers than deciding to do it as a class 1A liability. An awful lot of employers will have a liability as a result of these changes, whereas far fewer would have liability if it was a class 1 liability.

[Peter Dowd]

I did not want to stop the hon. Lady in her flow, but on her earlier point, I was at a meeting yesterday with many people from the defence industry and in particular the aircraft industry. One Member who does not sit on the Opposition Benches indicated that when a large aerospace manufacturer closed down in his constituency, thousands of small businesses—or at least one or two thousand small businesses—arose as a result of those people getting redundancy payments. That goes to the heart of the hon. Lady’s point about the potential impact of the reduction in the amount of money people will get from redundancy payments.

[Kirsty Blackman]

I absolutely agree. I was thinking specifically of the toastie shop in Aberdeen that does unbelievable toasted cheese sandwiches. Members should look at its Facebook page; it is called Melt and it is absolutely amazing. It sells toasted cheese sandwiches with all your calories for a week in one sandwich. That business was started by a woman who had been made redundant. A lot of people in Aberdeen and Aberdeenshire have been made redundant because of the recent crash in oil and gas prices, and they have been starting new businesses as a result.

I am particularly concerned that any change might stifle the growth of new businesses. I asked the Treasury this morning whether it has figures on the number of new businesses started with termination payments. It does not. It is very difficult for the Treasury to say that this will not have an effect—to be fair, it has not said that, but it cannot because it does not have the quantifiable numbers and cannot project them; it appears not to be keeping track of the information.

Lastly, on Opposition new clause 4, the shadow Minister has also asked for a distributional analysis of the new class 1A liability. Again, it is incredibly important for us to have that information.

The Minister suggested that the Treasury is trying to be as transparent as possible. To be fair, this is one of the more transparent Bills, with more consultation than some of the other Bills that we have seen. The issue is that the information that we are provided with, and that is in the public domain, is not good enough for us to be able to make reasonable judgments about the effect of the policy. It is all well and good for the Minister to say that it will generate £200 million and that we would have a £200 million hole in the Budget. The OBR has verified that figure, but the reality is that we do not have enough of the drill-down information on the people who will be affected.

All of us on this side of the Committee are concerned about the reduced amount that employees will receive. It would have been sensible for the Treasury to have come armed with some kind of projection around that. That would have stopped us from asking all these questions. We might have criticised the figure and said that the measure should not be taken forward, but we would not be having this debate if the Treasury had come forward with detailed figures.

The Minister has spoken in favour of clauses 1 and 2, but for a huge number of employers they do not represent a simplification when it comes to dealing with the tax system. This is a revenue-raising measure and it is about closing a loophole. I am not criticising the Treasury for either of those things, but it has badged the change as a simplification when the two principal things that it tries to do are not that, but revenue raising and closing a loophole; we would have had a very different discussion if the Treasury had made that clear rather than said that it was all about simplification.

I completely agree that the measure came from an Office of Tax Simplification report, but that did not say that class 1A contributions had to be used to achieve this end. That may not be the best possible way to progress. I have already spoken about class 1A. It could have been done in a class 1 way, which would have been clearer for employers to understand.

On collection methods, I have real concerns about this being a real-time collection measure. Less than a year out from implementation, employers may not be aware of the correct computer system or understand correctly how it will work. Obviously, if an employer is making future projections, it is going to be looking at what upgrades it will need for its IT system and be planning that as far in advance as possible. On top of all the uncertainty of Brexit, the Government are adding more complexity and future uncertainty: they are not able to say, “This is exactly how the real-time collection measure will work.” They are not able to provide that information to businesses far enough out.

Finally, on the “negligible” reduction, as the Minister described it, of 0.1% on wages, I should say that we are seeing incredibly high levels of in-work poverty. Not a surgery or a day goes by without working people getting in touch with me to say they cannot live on the amount of money they receive. I get such correspondence on a regular basis, as I imagine do all MPs across the House.

The Minister spoke about the national living wage, which is not a living wage and is not for those under 25. As the shadow Minister said, the Government do not want to allow under-25s a wage they could vaguely live on, just in case there are fewer of them employed. I do not think there is any evidence to show that is likely to be the case. It does not cost any less to live at 24 than at 26.

A 0.1% reduction in wages for people who are literally living on the breadline and having to choose between feeding their children and heating their homes cannot be swallowed up by some families. The Government say they are quite happy with a 0.1% reduction in wages as long as they get £200 million in the Treasury’s coffers. I do not think that is a sensible way to play these things off. I do not think the measure is worth the £200 million if it means more families in poverty and destitution as a result.

The 0.1% might sound very small but, for someone living on not very much money it can be the difference between being able to feed the kids and not being able to. There are a number of issues with this measure, both technically and with the stance that the Government have chosen to take on it.

--- Later in debate ---

[Kirsty Blackman]

I beg to move, That the clause be read a second time.

I put my hand up and say that I made an error in the drafting of the second part of this clause that probably confused everybody. Subsection (2) should not be there; only subsection (1) should be there. It is my error and I apologise. I will not therefore press the new clause to a vote, but I intend to speak on it.

The Minister will know from my questions this morning and our subsequent discussions of my concerns about the Treasury reporting back, and basically letting us know if a tax change has had the intended effect. I have raised this on a number of occasions, in several different forums, and now I have thought of tabling it as an amendment to the Bill, I may do it more often, particularly to Finance Bills—perhaps on each aspect.

I spoke to the previous Financial Secretary, and perhaps even the one before that, about this issue. When it comes to tax reliefs and such like, the Treasury says, “This is going to generate x amount of revenue for the Treasury.” We have no recourse to see whether that amount has been generated for the Exchequer. The Government say they constantly keep things under review. At one point, I asked the Library to provide me with a list of the reviews that it could find for the tax relief measures that had been put in place through Finance Acts to see whether they had generated the level of revenue that was expected. A number of them had not been reviewed.

We are not asking for much here. We are asking the Government to tell us whether the law that they have proposed and taken through Parliament—that they have stood up and told us will generate £200 million of revenue—has actually generated that revenue. We can make better law if we better understand the effects of the previous legislation that we have passed.

The new clause would require the Secretary of State, within three years of Royal Assent, to lay before Parliament a report on the Exchequer impact of the Bill. I appreciate the answers that were given by the Minister and HMRC this morning—within three to five years, a review is undertaken and the intention would be the same on this Bill, and that review would be sent to the Treasury Committee, which would examine it. I have a number of issues with that.

Perhaps no one from the original Bill Committee may be on the Treasury Committee, so we may not see the effect of what we have passed. It would be incredibly useful if the Minister would commit to ensuring that any reviews that happen—preferably all of them—are sent to members of the original Bill Committee, as well as the Treasury Committee. That would be very useful. I know we have a change of personnel sometimes, but that would be a good start.

I have previously criticised the lack of a link between the Treasury Committee and those who sit on Finance Bill Committees. The Treasury Committee does a lot of very good scrutiny, but those of us on Finance Bill Committees may not see or be part of that scrutiny, and therefore, unless we go and dig out the evidence, which we find out from a colleague was given six months ago, we do not necessarily know that it exists. I have criticised the lack of a link previously. It is important that any reporting that is done is not just to the Treasury Committee. I do not suggest for a moment that the Committee is not incredibly competent and very good at its job; I am just suggesting a lack of link-up and communication.

It would be much appreciated if the Minister could commit to taking this on board and to ensuring that there is wider transparency and communication about any review. If it were published in, say, a ministerial statement, and flagged to those of us on the original Bill Committee, that would give us the opportunity to follow up with written parliamentary questions, for example, even though we are not on the Treasury Committee and cannot ask questions in oral evidence sessions. We could do that much more easily if the Minister committed to providing us with that information.

[Peter Dowd]

We support the new clause, although we will not press it to a vote.

Given that there are not many people in the room and this probably will not be listened to very much, I can say that, as an Everton supporter, I none the less congratulate Liverpool on their 4-0 win. Not many people will hear that. I will deny I said it and will have it struck from Hansard. I also congratulate Man City on their win. I wish them the best of luck. At least there is a tenuous link with sporting testimonials.

[Robert Jenrick]

As a Wolves supporter, I am slightly bitter at the moment.

To answer the point made by the hon. Member for Aberdeen North, without repeating comments already made today, I appreciate her legitimate arguments. We feel that the measures in the Bill have been sufficiently consulted on. The long-standing tradition that a new piece of legislation will be reviewed within three to five years will apply. The review’s outcome will be in the public domain. It will be sent to the Treasury Committee. Ordinarily, it would be published on its website, and the hon. Lady or any other interested Members would be able to view it there. It will not be a private document only for the consumption of members of the Committee. I hope that will reassure her that we intend carry out a review in due course and that will be available for those who take an interest in it.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

Peter Dowd Excerpts

2nd reading: House of Commons & Ways and Means resolution: House of Commons
Tuesday 30th April 2019 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

The condensed national insurance Bill before us is a shadow of its former self. I would have liked to be able to say that I was bowled over or knocked for six by the Minister’s speech, but there were more own goals than anything else. It is far from the extensive Bill that was promised by the Chancellor’s predecessor at the 2016 Budget, which included the Conservatives’ 2015 manifesto pledge to abolish class 2 national insurance contributions. Instead, that manifesto pledge, like many of the Government’s promises, has quietly been sent to the landfill, barely even being recycled in this five-clause Bill. As for scrutiny, we have not even been able to amend the last three or four Finance Bills, but I am pleased that we will have an evidence session in Committee. I will be grateful for small mercies because we may be able to tease matters out a little more.

The cannibalisation of the national insurance Bill, which has been driven by the Chancellor’s volte-face on a tax cut for 3 million self-employed workers, reflects once again why the Conservative party has long ceased to be the party of the self-employed in particular and business in general. To many observers this will be viewed as another missed opportunity—one of the many opportunities that this Government have missed—to seriously address the relationship between the growing levels of self-employment in the UK and the levels of taxation and national insurance contributions that are paid.

The rushed timetable of this Bill has shown, once again, the Government’s complete lack of respect for parliamentary convention and the procedures of this House. The Opposition were notified only last Wednesday of the Government’s intention to timetable the Bill’s Second Reading, with an updated version of the Bill published last Thursday. The Government do not know one day from the next, although they do try to live from one day to the next. They gave parliamentary colleagues just one sitting day to examine the content of the Bill before today’s debate. The Government might not take their legislative responsibilities seriously, but the Opposition do.

Of course this is nothing new. Members have become accustomed to the Government’s handling, or mishandling, of legislation. The Government are engulfed in chaos and infighting on Brexit, and The Times reported yesterday that their rushed introduction of this hollow, some may say vacant, Bill is a further desperate attempt by the Prime Minister to keep this zombie Parliament in session.

Unwilling to face the electorate and unable to bring her dead-in-the-water Brexit deal back to Parliament for the fourth time, the Prime Minister is attempting to pack parliamentary business in the hope of avoiding an early Queen’s Speech that would no doubt be opposed by the Democratic Unionist Party and her own Back Benchers. This is a new embarrassing low for a Government who are all at sea. It is high time that the Prime Minister did the honourable thing and set a date for a general election and her departure. We have a kakistocracy dressed up as a Government.

The Bill is comprised of two key measures: the introduction of a new national insurance contributions charge for employers on the taxable element of termination payments above £30,000, as the Minister set out; and the introduction of a national insurance contributions charge on income from non-contractual sporting testimonials over £100,000.

The new class 1A employer NICs charge will be levied at 13.8%, if I understand it, and its introduction will align the NICs treatment of termination awards and income from non-contractual sporting testimonials. On the face of it, the Minister would have us believe that these changes are technical and benign. However, there is nothing technical about fundamental changes to the treatment of termination payments either for the employer paying them or for workers facing redundancy, who regard this final payment as an evaluation of the work they have done for their employer.

Termination payments, therefore, have both an emotional and a financial significance, and the amount awarded is often determined by painstaking and careful negotiations between managers and trade union representatives. A good employer might offer a generous termination payment to an employee as a sign that, even though they have had to make them redundant, it is not a judgment on the intrinsic worth of staff who are leaving.

However, a likely by-product of the Government’s proposed employer NICs charge is that it will incentivise employers to reduce the level of non-statutory termination payments to employees so that the overall level of non-statutory payments declines. This will diminish the level of termination payments available to workers who lose their job, while increasing the amount that the Government receive in NICs receipts.

The tax information and impact note for this measure goes to great lengths to clarify that this new charge will be limited to employers, and the Minister asserts that the Government have no plans to make further changes to the £30,000 statutory threshold, yet the Government’s own policy note states that this additional cost for employers will be reflected in lower wages.

The Office of Tax Simplification, which the Minister mentioned, noted in 2015 that imposing tax and national insurance contributions on all termination payments is

“likely to have a significant cost impact for some people, particularly those lower paid employees who may…often be the ones receiving smaller termination payments”.

Despite the clear impact that this measure will have on workers and employers alike, the original consultation noted that the Treasury had failed to undertake a distributional analysis of the impact of this new charge. With that in mind, will the Minister confirm whether, a few years on, that remains the case?

Similarly, the Chartered Institute of Taxation has raised concerns that the Bill does not set out how the new class 1A charge will be collected by HMRC, stating that it will instead be left to secondary legislation—more secondary legislation, the Government’s default position. The Treasury says it anticipates that the charges will arise and be paid in “real time,” rather than after the end of the tax year. However, tax experts note that this is a break from normal practice and will prove extremely cumbersome, requiring additional resources at a time when the Government are continuing their disastrous reorganisation of HMRC.

[James Cartlidge]

It is always a great pleasure and highlight to hear the hon. Gentleman talking about distributional analysis, but does he agree that, where we have what are effectively exceptional one-off payments that are hard to predict, it can be difficult to undertake such analysis? Sometimes we just have to be honest and accept that a measure is relatively minor. Although the money it raises is significant, we are unlikely to have the sort of data he is asking for.

[Peter Dowd]

It might be a minor measure, but the actual impact on individuals is potentially significant. I am interested in the impact it might have on individuals who lose their job, and not necessarily the capacity or otherwise of the Government to make an assessment of that. I focus my attention on those who may not get another job for a considerable period.

I now turn briefly to the second measure in the Bill, which seeks to introduce a similar NICs charge on non-contractual sporting testimonials for employed sportspersons. I look forward to leading the Government’s testimonial sooner rather than later.

Sporting testimonials have become a key part of our nation’s rich sporting history, presenting an opportunity for fans to pay tribute to sportspersons who are coming to the end of their playing career. I come from Liverpool, a city with a fantastic football team, Everton, and another football team, Tranmere Rovers. There is another team whose name I cannot remember; it has slipped my mind.

Under the Government’s proposal, the new class 1A employer NICs charge will apply after the first £100,000 and will make the controller of the sporting testimonial, usually an independent committee, liable to account for the charge where the employer is not organising the testimonial.

Although the Opposition recognise the logic of applying employer NICs to non-contractual sporting testimonials, where the money is going not directly to a sportsperson but, rather, to a testimonial committee, we are concerned that the majority of income from such testimonials comes from fans who make voluntary payments. If this measure is passed, there will be a clear inconsistency in the NICs treatment of voluntary donations or tips at sporting testimonials compared with the treatment of cash tips in the service sector, where the employer is not involved. That is something we will seek to address in Committee.

This condensed national insurance Bill is further evidence of the Government’s perpetual desire to shift the tax burden from the well-off to workers. Rather than tackling tax avoidance and raising taxes to ensure that the wealthy and large corporations pay their fair share, the Government are yet again introducing measures designed to raise additional revenue for the Exchequer from the termination payments of workers.

The introduction of a new employer NICs charge will inevitably lead to employers reducing non-statutory termination pay, leaving workers worse off when they have just faced the trauma of losing their job. To put it simply, this measure is unfair, cynical and disproportionate considering the scarring effect it will have on workers compared with the limited amount of revenue it will raise. We cannot support this, but we will look at it in more detail in Committee.

--- Later in debate ---

The point about sporting testimonials is timely. Cricket was mentioned, and I am sure you will be aware, as I am sure you will be there, Mr Deputy Speaker, that at 7 pm the England and Wales Cricket Board will be out in force on the Terrace to celebrate and mark the build-up to this year’s cricket world cup. I am sure you have had many invitations already. Others have declared an interest in that they are cricket supporters. I do not know whether that is an interest, but I am a supporter of Middlesex. I very much enjoy going to watch them and have done for many years, having been born in Edgware, in Middlesex. Those who spoken about this are absolutely right; testimonials are part of the fabric of cricket, football and so on. The key point to make, which has been mentioned but must be stressed, is that testimonials can be used to raise not just money for the Exchequer but considerable sums for charity. I believe Wayne Rooney’s testimonial raised £1.2 million, of which £1 million was donated to charity. In 2006, Alan Shearer raised £1.6 million in his testimonial, with most of it going to charity, as I understand it. Although there is a tax issue involved, we should recognise that these higher grossing testimonials, often involving fantastic sports stars and shown on television, are raising a lot for charity.

[Peter Dowd]

These testimonials are very important. A former Liverpool football player, Jamie Carragher, a Bootle lad, also had a testimonial and he put the best part of £1 million into his Jamie Carragher 23 Foundation. That is worth a mention.

[James Cartlidge]

I am grateful to the hon. Gentleman for mentioning the other Liverpool team, as it were. They seem to be doing quite well this season. It is a good and important point to make, because it sounds to me as though a relatively small number of sportspeople will have to pay a bit more tax in the coming years as a result of the Bill—there are a small number who do not have testimonials agreed contractually—but it is fair to have fairness.

Let me conclude on fairness. The hon. Member for Bootle and I have had one or two exchanges on Treasury matters over the years. He finished with quite a stirring wind-up, saying that with this Bill we were somehow supporting the rich—that classic old storyline that we were the party of failing to crack down on tax avoidance by the rich and were instead hitting the poorest. Well, what is the threshold in the Bill? It is £100,000.

[Peter Dowd]

What about redundancies?

[James Cartlidge]

The hon. Gentleman can correct me if I am wrong, but I believe the limit for testimonials is £100,000. [Interruption.] The hon. Gentleman mentions redundancy payments from a sedentary position; he can correct me if I am wrong again, but I do not think the Bill affects redundancy payments. It is about other, voluntary termination payments. On the subject of terminations, Mr Deputy Speaker, you will be delighted to hear that I shall now terminate my speech, but I will support this very good Bill.

Loan Charge

Peter Dowd Excerpts

Thursday 11th April 2019 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

I will not have time to take interventions, so the House will have to forgive me for that. I thank the hon. Member for Aberdeen South (Ross Thomson) for bringing this matter to the House’s attention. I will not reiterate the points made in the many contributions to the debate today, and I hope that last week’s thoughtful contributions have given the Financial Secretary to the Treasury pause for thought.

Labour believes that it is necessary to take action against all forms of tax avoidance and evasion. We stood on a manifesto that included a tax transparency and enforcement programme, and we continue to stand against schemes of this nature in their many forms. HMRC estimates that 50,000 individuals have not paid the proper taxation as a result of disguised remuneration schemes, of which there could be up to 250 variations. As of the start of this year, roughly half of those affected—27,000 people, as has been said—had registered with HMRC to correct their tax affairs. However, the Loan Charge Action Group estimates that up to 100,000 might be affected. Will the Minister clarify that?

What plans do the Government have to undertake a distributional analysis of the impact of the loan charge? Labour raised that matter through an amendment to the last Finance Bill, which was sadly rejected. It is vital to note that many of those concerned were encouraged by other parties to enter into a disguised remuneration scheme, sometimes even by their own employers, as has been made clear. We do not believe that the Government have done enough to pursue third parties who promoted such schemes. They must surely take a share of responsibility in many cases for what took place.

The report published by the Government suggested that only 10 organisations are facing legal action for promoting the use of such schemes. That seems a small number compared with the 50,000 individuals being chased. Why so few? I note also that only one and half pages of the 56-page report was dedicated to action against organisations promoting DR schemes, which is telling in itself. The Government have taken steps to allow those affected by the loan charge to repay their tax over a set period, with those earning £50,000 or less being granted up to five years to settle their affairs and those earning £30,000 or less getting up to seven years. What evidence was used to agree that period? If we knew more about the distributional impact of the loan charge, as Labour has repeatedly suggested we should, we would know whether that was manageable for individuals. Given the extreme stress that the loan charge is causing, have the Government nevertheless considered looking at extending that period to allow a more gradual payment? That would ensure that the full tax owed could be returned to HMRC in a manner that did not weigh too heavily on individuals. Has the Minister explored that option?

I would like to raise a point first made by Ray McCann of the Chartered Institute of Taxation to the Treasury Sub-Committee in December. He pointed out that the charge might be applied to those who had previously notified HMRC of their use of the scheme through the disclosure of tax avoidance schemes, but HMRC did not follow up on the disclosure—a point raised by many others. In the evidence session, Mr McCann suggested that that might leave the Government in murky legal territory when trying to apply the loan charge to individuals who had disclosed and included a DOTAS number on their tax returns. The review published last week seemed to suggest that a minority of cases were affected and rejected the assertion that legal issues may arise here. Can the Minister comment on that and say whether any action has been taken to rectify what seems to be a failure of HMRC to investigate DOTAS in some cases?

Will the Minister also comment on the impact of cuts to HMRC staffing and the loss of expertise on its ability to deal with such cases quickly in advance of the deadline? HMRC has lost 1,274 staff since March 2018 and 15,637 since 2010. This is a point that I have repeatedly asked about. Even the Government’s own review conceded that many individuals who have come forward to HMRC to have their cases settled have not been dealt with at all yet, or have waited a long time for a response. Does the Minister not accept that once again we are seeing the fault lines in the Government’s programme of HMRC retraction? This is clearly an issue of huge importance to those facing a significant increase to their tax bill, and the Government must act quickly, following recent events and their impact on people. I do not impugn the Financial Secretary to the Treasury in any way, but the Government could provide more comfort and certainty for those now facing significant additional financial pressures as a result of the charge.

It is important that the Government act to recoup tax owed, notwithstanding the many concerns raised by Members about constituents’ individual circumstances, but a blanket approach is not appropriate. We cannot have a tax system that, as one Member suggested, is based or run on instinct. I expect the Financial Secretary knows well that people are deeply concerned about this issue, and I am sure he will respond as constructively and positively as he can, given the many concerns raised by Members.

Oral Answers to Questions

Peter Dowd Excerpts

Tuesday 9th April 2019 Commons Chamber

[Robert Jenrick]

I can confirm that. The UK remains the European leader for foreign direct investment, venture capital investment and tech investment. Even in manufacturing, which is under a certain degree of strain, the UK remains the ninth largest manufacturing nation in the world.

[Peter Dowd (Bootle) (Lab)]

“Strain” is not the word. In the real world, production and manufacturing output remained 6.8% and 2.7% lower respectively in the three months to January 2019, compared with pre-downturn GDP in the first quarter of 2008. After nine years of policy failure, should the Chancellor and his team not stop throwing spanners in the manufacturing works and instead oil the machine?

[Robert Jenrick]

Not at all. Manufacturing exports are up 35% since 2010. We are investing in the manufacturing sector through our industrial strategy. We are creating a tax system that is pro-business. We are reducing corporate taxes to amongst the lowest in the developed world. The hon. Gentleman would do the opposite and reverse that. The very clear message that businesses give us, particularly international investors in this country, is that the threat of a hard left Labour Government dwarfs the risk of a Brexit outcome. We want to secure the future of the British economy in a resolutely pro-enterprise country.

[Peter Dowd]

What can I say? That old chestnut—and the Leader of the Opposition will be in No. 10 today as well. Anyway, I admire the Chancellor’s perseverance in trying to get the Prime Minister to grasp the concept of compromise—a challenging task, I have to say. Perhaps a less onerous task would be to sort out the problem with production. In the three months to January 2019, it fell by 1% compared with the same period last year, driven by a significant fall of 1.5% in manufacturing, which, of course, includes the beleaguered automotive sector. If the Government were a car, it would fail its MOT. The Chancellor has been putting manufacturing into reverse gear. Isn’t it time for a new car with a new driver?

[Robert Jenrick]

The British economy is remarkably robust in its present state. We are seeing continued economic growth, record levels of employment and record low levels of unemployment. Businesspeople, investors and entrepreneurs the length and breadth of the country know that the greatest threat to our prosperity is a hard left Labour Government.

Section 5 of the European Communities (Amendment) Act 1993

Peter Dowd Excerpts

Tuesday 26th March 2019 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

The Chief Secretary referred to the gnashing of teeth. The only gnashing of teeth going on in this country is by those people who cannot get access to a dentist because of her party’s health policy. She talked about the Tories being the party of business. She may well wish to have a word with the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), who used an Anglo-Saxon phrase in relation to business—the second word was “off”, basically.

If education is so wonderful and marvellous and schools are in such a good state, how come headteachers marched on Downing Street and presented the largest petition about the condition of schools and education? The answer from the right hon. Lady is always more deregulation.

[Elizabeth Truss]

indicated dissent.

[Peter Dowd]

That is what the right hon. Lady said in relation to planning law. It is deregulation—that is what it comes down to. However she wants to dress it up, it is deregulation. Deregulation has got this country into so much trouble in a whole range of areas, including banking and housing. Let us not hear any more about how deregulation is going to solve all the problems of the world. It will not.

After that, I would like to thank the Chief Secretary to the Treasury, and give credit where credit is due. In a speech given on 19 March, the Chief Secretary finally acknowledged that we will now

“throw off the constraints of the post-financial crash world”.

There it is: it is official. It was a financial crash world, not Labour’s crash. But better late than never—apology accepted.

We find ourselves in the absurd and surreal position of debating a motion to approve the Government’s programme of convergence with the EU at a time when the issue of Britain’s membership of the EU is about to bring down yet another Conservative Prime Minister, so the only convergence on the cards is the one between the Prime Minister and her P45. The theological obsession of the European Research Group, which is opposed to any convergence with reality in fact, has hamstrung the Brexit negotiations and left the majority over there—on the Government Benches—as spectators in an unfolding disaster of their own making.

Reflecting on the first time I spoke in the debate on the Government’s convergence programme with the EU, I recall it was just before the snap election in spring 2017. I am sure we all remember that. At the time, prominent newspapers ran headlines such as “Blue Murder” in the sure and certain belief that the Conservatives would wipe out the Labour party, or “Steel of the New Iron Lady”, comparing the Prime Minister to Margaret Thatcher.

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

We’re still in government.

[Peter Dowd]

The hon. Gentleman says that they are still in government, but that is a complete and utter fantasy, and even his honourable colleagues all smiled and smirked at that particular one.

Those supine, oleaginous headlines in the newspapers are gone, along with the words that dare not speak their name, “Strong and stable”. Whatever happened to that? Just two years later, those same newspapers now call for the Prime Minister to resign, stating, “Time’s up, Theresa”. This sea change among the Tories’ biggest supporters in the press sums up the failures of this Government.

While we are on the maritime theme, the Environment Secretary could not even use the limited imagination he has to think up another metaphor, and resorted to the hackneyed one:

“It’s not time to change the captain of the ship”.

What an imagination!

The Prime Minister’s red lines and her intransigence and insistence on a deal that has little or no support in the country or in this House have led us to this crisis. This weekend, we had the ludicrous spectacle—the ludicrous spectacle—of Cabinet Ministers jostling to brief the press about her imminent departure and her would-be likely successor, only to be followed by quick recants and unconvincing oaths of loyalty. It is almost Shakespearian.

The Government’s motion is based on the economic forecast provided by the Office for Budget Responsibility and the Chancellor’s spring statement—what there was of it. I am sure all Members would agree that the work of Robert Chote and his staff at the OBR is indispensable in informing debate and offering an independent forecast of UK economy. [Interruption.] If the hon. Member for Solihull (Julian Knight) wants to intervene, he should feel free to do so, but perhaps he could stop muttering across the Chamber inane comments that nobody can hear and nobody understands, and I suspect he himself does not even understand what he is actually saying.

However, it is worrying that the OBR’s recent forecast continues to be based on the UK securing a Brexit deal, which the Chief Secretary did not even mention, and a smooth transition, which she did not mention, particularly at a time when the Prime Minister continues to keep the option of no deal on the table. It is still there; it has not been taken off. This assumption means that if the UK does leave without a deal or leaves with a poor deal, the OBR’s forecasts will be in serious need of revision.

Similarly, at the spring statement the Chancellor spoke again of this mythical Brexit “deal dividend” that the economy will receive once parliamentarians sign up to the Prime Minister’s deal. According to the Chancellor’s imagination—which is significantly more febrile than the Environment Secretary’s—this “deal dividend” will lead to an increase in the public coffers. However, the Chancellor’s claims have already been debunked by the Treasury Committee, which described the dividend as “not credible” and “not fully consistent” with his own fiscal rules—yes, the rules that keep changing.

Rather than the fantastical picture that the Chief Secretary to the Treasury seeks to paint for our EU partners, I will take the opportunity to outline the real state of the UK economy and the Government’s woeful record. That is where we hear the gnashing of teeth—woeful record. Under the Conservatives, we have faced nine years of politically instituted austerity, which has weakened our economy and pushed our public services to breaking point. The Government’s austerity programme has suppressed incomes by more than £3,600 per household, costing the economy £100 billion; yet austerity is far from over. The departmental spending review that the Chief Secretary mentioned—likely to report in the autumn, as she said—will see real-terms cuts for most Departments. I will sit down if the right hon. Lady would like to give us some more information on that one.

[Elizabeth Truss]

I would be happy to. It is a 1.2% increase in real terms.

--- Later in debate ---

[Peter Dowd]

I do not think that is correct. I am afraid we will have to look at those figures. We will see them and we will hold the Chief Secretary to account when she is at this Dispatch Box and I am at the Dispatch Box where she is now.

[Matt Rodda]

My hon. Friend makes a good point about the complete failure of the Government’s austerity agenda. Earlier, the Chief Secretary mentioned nursery schools. Many school and nursery school heads are experiencing a continuing programme of austerity, which is actually due to get worse. She mentioned that she had a brief conversation with her colleague in the Education Department. [Interruption.] However long the conversation was, the message I have had from headteachers is quite to the contrary; actually, a very short stay of execution has been given, for just one year, when the headteachers I speak to in my Reading constituency need a long-term programme of sustainable investment in nursery schools, rather than warm words.

[Peter Dowd]

My hon. Friend is absolutely right. May I nip back to the point about the 1.2% increase, if I may beg your indulgence, Madam Deputy Speaker? The 1.2% is the overall increase. What will happen—[Interruption.] No; the reality is that some Departments will have major cuts in their budget.

[Rachel Maclean (Redditch) (Con)]

The hon. Gentleman is referring to a number of figures that he claims show a hit to every taxpayer; but 32 million taxpayers have had their taxes reduced under this Government, so they are keeping more of what they earn and they are better off. How many of those 32 million people would see their taxes put up under his proposals, and how many would be poorer under his proposals?

[Peter Dowd]

I will pick up some of those points later.

The reality is that meanwhile, the Government have presided over the slowest recovery since the 1920s—stubborn fact. The OBR has revised down GDP growth, and business investment is now falling. Those are not my figures; they are the OBR’s figures. What about wages? I will touch on the points that the hon. Member for Redditch (Rachel Maclean) raised. Real wages are still lower than they were a decade ago, and according to the OBR,

“average earnings growth remains below the rates typical before the financial crisis”.

These are real people’s real lives—real wages are not going up. For many workers who have seen their wages stagnate, borrowing and debt has plugged the gap. Household debt relative to income is forecast to increase over the next few years.

What about transparency in Government spending? Long gone are the days when Tory Ministers hailed their Government as the most transparent in history—replaced by a culture of secrecy and a disregard for parliamentary convention that saw the Government held in contempt of Parliament for the first time in history. It is not a proud record to have.

Even on transactional issues, such as the regular and timely release of figures for departmental spending of over £25,000, the Government seem to have quietly backslid, in some cases releasing data series late, incomplete, or not at all. The question is: what are they hiding? The Chief Secretary has made much of the Government’s record on the deficit, yet the reality is that on her watch, and that of her predecessor, they have simply passed deficits on to our schools, our hospitals and our local councils, with departmental spending cuts of over £40 billion since 2010.

[Mr Jim Cunningham]

When we talk about more money being put into Departments, whether for education or the health service, we have to remember that any additional money starts from a lower base. The Government are partially replacing what they took out in the first place. People do not seem to understand that major point. They said that austerity was over, but we still have it. Yes, people are in jobs, but they are very low-paid jobs. That is not taking people out of poverty; that is keeping people in poverty. What interests me the most, however, is that nothing has been said about further education, which has had major cuts. If the Government want to continue with austerity, they have to do something about further education.

[Peter Dowd]

My hon. Friend has obviously been reading Labour’s “Funding Britain’s Future” document, in which we picked up on that particular point. The hon. Member for Redditch mentioned tax cuts. Try telling that to people who have had 15% and 16% rises in their council tax, because the Government have shunted that on to the people. They are still taxpayers. Try mentioning to them that they have fantastic local services, when increases to their council tax do not even cover social care bills.

The Chief Secretary has bragged about the so-called Tory jobs miracle. However, she made no mention in the speech of the fact that it is built on insecure work, low pay and regional disparities. We have nearly 4 million people in insecure work and nearly 3 million people working under 15 hours a week across the UK. Workers in the north-east earn around £200 less than those in London, reifying the regional imbalance.

[Simon Hoare]

I hate to shoot the hon. Gentleman’s unicorn just as he has started to ride it, but 90% of new jobs created are full-time jobs. This is a total myth that his party keeps peddling. It belies the hard work, initiative and enterprise of the British people. Is it not time to stop misleading?

[Peter Dowd]

Try telling that to the 3 million people in insecure work. It is okay hon. Members jumping up and being outraged at the facts. The facts are stubborn, I completely grant them that. We are not living in the halcyon world that the hon. Member thinks we are living in. There are 3 million people living in insecure work. That is not acceptable in a modern society. The Chief Secretary has done nothing to help headteachers who having to close schools early or the 87 people a day dying while they are waiting for social care, or to assist the nurses, doctors, police officers, social workers, road sweepers, fire fighters, security services staff, civil servants or the back-office staff who keep all those services running day in, day out and night in, night out. Those are the so-called vested interests the Chief Secretary refers to in her regular speeches.

The Chief Secretary recently visited Felixstowe, Walsall and Tadcaster—commiserations to the people of Felixstowe, Walsall and Tadcaster. She said that people want

“the local roads fixed and not to have to sit in a traffic jam.”

Well, the Government are in a big jam at the moment. She went on:

“They want a less crowded commute into work. They want the basics sorted.”

This is after nine years of Tory Government! Where has she been? Did she really have to ask that question? A report today highlights that there are 2 million potholes out there with a £10 billion backlog of repairs under the Tories. No wonder people are sitting in traffic jams—they cannot get through the road for potholes. That is the reality under the Tories. Anyone with a scintilla of awareness already knows the answer to that. The good people of north Lincolnshire were certainly aware of it when I was in Crowle on Saturday, campaigning to rid them of their useless Tory council with the excellent Labour candidates. They want the Transport Secretary to do his job, and they want the Chief Secretary to do hers.

What about productivity—another abysmal failure of Tory economic policy? Productivity remains weaker than in most other advanced economies. The fact is that the Government have failed to prepare the UK economy for the future. Britain’s infrastructure ranks behind that of Germany, France, the USA and Japan in terms of quality, and its rate of public investment is among the lowest in the OECD.

[Elizabeth Truss]

Is it not the case that in 1997 the Labour Government cancelled the road building programme?

[Peter Dowd]

Yes—to invest in public transport. We now have the Chief Secretary to the Treasury resorting to decisions made by a Labour Government two decades ago. That is how grim it has got for the Conservatives’ arguments—they are talking about something that happened 20 years ago.

Despite that, the Government have cut planned public sector investment. Their failure to negotiate a credible Brexit deal has already led to huge uncertainty, stifling investment and putting jobs at risk. Manufacturing is in recession; numerous employers have announced job losses; and businesses that rely on the EU supply chain have been left in confusion and despair—like most Government Members, who are in confusion and despair at the actions of the Prime Minister.

The internecine warfare within the Conservative party has paralysed the Government yet again, while the economy and many people’s livelihoods hang in the balance. It is affecting people’s livelihoods, manufacturing and business—more vested interests to be ridiculed and ignored by the Chief Secretary to the Treasury. All that while the Government are reporting to our EU partners that everything in the garden is rosy—no pun intended, Madam Deputy Speaker. Surely it is time for the Chief Secretary to acknowledge that the only Brexit that will gain majority support is Labour’s alternative plan: a permanent customs union, a strong relationship with the single market and full guarantees of workers’ rights and environmental protections.

The Government’s assessment of the UK economy is not based in reality. It does not account for the Conservatives’ catastrophic record of austerity, which continues to destroy our public services and suffocate the economy. It pays no regard to the Tory failure on wages, which remain lower than they were a decade ago. In addition to radio silence on productivity, there is little mention of the lack of public investment in our infrastructure. In short, the Government’s assessment says far more about the ideological position of Tory Ministers and their insolvent ideas than it does about the actual economy. It says more about the hubris of a Government who have stayed in office well past their sell-by date and do not recognise the experiences of ordinary people.

In summary, economic growth stands at 1.2%; productivity is 35% below the Germans’; household debt as a proportion of income is set to rise from 139% to 143% by 2024; the national debt still stands at 82% of GDP—the Conservatives have doubled the national debt —and the deficit is £22.8 billion. That is the Conservative Government’s record after nine years of economic incompetence. That epitomises why the country needs a Labour Government that will put jobs and our economy first and invest to rebuild Britain for the many, not the few. I urge Members to reject the motion.

--- Later in debate ---

[Simon Hoare]

In an intervention on the shadow Chief Secretary, the hon. Gentleman referred to something that I am sure we have all heard from headteachers in our constituencies. Whether we are talking about national insurance, about pensions or about the demands of special educational needs, although increased DFE expenditure is going into most of our schools, it is nowhere near enough. We are asking schools to do more for more pupils with not quite as much money as they need. That is why I make the distinction. I welcome the increase, but new money is required, particularly as the range and the choice become wider and deeper.

I challenge anyone who represents a rural constituency, as I do, not to share my views on rural schools. I was delighted when the Chief Secretary took my point about the needs of maintenance. The costs of heating and running a whole estate of Victorian primary schools are greater than those in new build, perhaps in an urban setting, although that is not to say that there are no Victorian schools in urban settings. Such schools do not provide a good learning environment. Last month, I visited Motcombe primary school in my constituency. In a small classroom, one child is effectively being fried against a not particularly adequate heater, because the school does not have enough money to replace the heating system.

We must make a balanced judgment: we must aim to take those at the lowest end of the earning spectrum out of taxation, while also investing properly. We must strike that sensitive and sophisticated balance. My right hon. Friend was absolutely right: it is not just the big and sexy that we must consider, but schemes for local roads such as the C13 and the A350 in my constituency, and support for those who wish to remedy the rural broadband and mobile blackspots, which could become engines of economic growth and entrepreneurialism.

That takes me to my closing point, to which the hon. Member for Bootle alluded. Some of our recent debates appear to have pitted my party against the Government. I am sorry—I meant to say “against business”. [Laughter.] That was not a Freudian slip—or perhaps it was.

Business is the engine that generates the tax that delivers the services. We cannot have a hostile viewpoint; we cannot have a hostile environment for UK business to flourish. Without a flourishing business sector, without the freeing up of the entrepreneurial spirit that underpins the British character, the proceeds of growth—

[Peter Dowd]

rose—

[Simon Hoare]

I am drawing to a conclusion.

We all want to see the proceeds of growth and the investment in our public services that is required.

[Alison Thewliss (Glasgow Central) (SNP)]

I beg to move amendment (a), in line 1, leave out from “House” to end, and add

“declines to approve for the purposes of section 5 of the European Communities (Amendment) Act 1993 the Government’s assessment of the medium term economic and fiscal position as set out in the latest Budget document and the Office for Budget Responsibility’s most recent Economic and Fiscal outlook and Fiscal Sustainability Report, because it does not contain detailed analysis of the impact of the Withdrawal Agreement and the Framework for the Future Relationship with the EU on the UK’s economic and fiscal position; and calls on the Government to publish an assessment containing that analysis immediately.”.

I was curious to hear the Chief Secretary to the Treasury start by saying she is so glad that this is the last statement she will ever have to make to the EU. I cannot agree, and the Scottish National party cannot agree either. It is surreal to be standing here days from the original day of departure from the EU attempting to fulfil this legal obligation as though things were business as usual. These past few days prove beyond any doubt that we could not be any further from business as usual in this House; we are absolutely through the looking glass. Events are developing every day around what kind of country we are going to be left with; there are grave concerns about the future from every aspect of civic society. So I certainly do not share the Chief Secretary’s optimism that there is a bright future ahead.

The Chief Secretary talked about young people. Young people are the most pro-EU group in this country, and it is their future that this Government want to take away, so shame on her for not recognising the limitations that young people will face when they want to set up businesses, when they want to trade with the EU, when they want to travel and advance their education and opportunities in life.

I do not wish by way of proposing the amendment to diminish the work that the Office for Budget Responsibility does. My colleagues on these Benches and I will always welcome efforts to make public accounts more transparent and independent. The OBR has conducted this analysis rightfully and properly within its remit, but unfortunately this is precisely the reason why the SNP cannot support the approval of this statement tonight: because the OBR can only make forecasts on the basis of stated Government policy regardless of whether the policy is likely to be achieved or, as the hon. Member for North Dorset (Simon Hoare) said, whether it is his party against the Government, or whether in fact the right hon. Member for West Dorset (Sir Oliver Letwin) is now the Prime Minister, because who knows? It is a Dorset thing; Dorset is leading the rebellion against their own Government. That is very interesting—and I see how happy the hon. Member for North Dorset is to be doing so. It is an absolute shambles when a Member who ought to be supporting the Government ends up leading the charge against them—although that is not at all uncommon these days; it is part of the whole madness of this Government.

The latest OBR fiscal sustainability report was published on 17 July 2018. It does not reflect the reality of the Prime Minister’s proposed deal, which was published much later, on 25 November 2018. In the OBR’s outline of the assumptions made in its economic and fiscal outlook, it is clear that the terms of the UK’s departure from the EU are unclear and that there is “no meaningful basis” on which to predict the nature of the relationship between the UK and EU. That is the situation in which we have we remained.

I checked and I have £3.52 in my purse and I would be as well throwing it down the stank as putting it on any outcome of the UK leaving the EU, so it would be an understatement to say that I could find it risky to endorse a fiscal spending plan based on one assumption of our future relationship with Europe. It is ludicrous for MPs to be asked to approve this motion without having any sight of any analysis of the Prime Minister’s deal. It is our job in this place as MPs to scrutinise the UK Government, but we are not being given the opportunity to do so effectively.

The Prime Minister has said that such an analysis of her deal does exist. She confirmed it in a letter to my colleague, the right hon. Member for Ross, Skye and Lochaber (Ian Blackford), so why will the Prime Minister not share the details of that analysis with the House? Is it because she knows, as we all know, that the economists are right and her deal will be bad for GDP, public finances and the living standards of all our constituents?

GDP growth has gone from being the highest in the G7 before the EU referendum to the lowest today. Imports have been slower than for other G7 countries, despite an unprecedented drop in the value of sterling, and it is interesting that for some time now the exchange rate on the cash machines at Glasgow airport, which I see when I come down to London every week, has been taken off, because nobody would take any money out if they saw how dreadful it was.

Inward and outward foreign direct investment have dropped, with some analysis suggesting that the drop in inward FDI is as much as 19% compared with a no-Brexit scenario, and we are starting to see job losses on a regular basis across these islands. It is no coincidence that this is happening. The Brexit job loss index says that more than 200,000 jobs have been lost already, without the UK having even left. In a no-deal scenario, Scotland can expect to lose 100,000 jobs, according to research by the Fraser of Allander Institute, which is based in my constituency. Speaking of my constituency, I recall hearing from a significant business there on Friday afternoon. It says that it is going down from a five-day week to a four-day week, that it has laid off temporary staff and that it is losing orders because of the uncertainty of this Government. It is unacceptable that businesses the length and breadth of these islands are being put into this position because of an internal dispute within the Tory party.

The OBR has not explicitly modelled the effects of a no-deal Brexit on the economy, but the London School of Economics has suggested that if the UK Government were to stick to their frankly unreasonable targets for reducing net migration, it would not be unreasonable to expect a long-term decline in output and productivity. The UK Government’s shambolic Brexit deal would also be hugely damaging, because EU nationals contribute hugely to our society and our economy. The Government’s aim to reduce the number of EU nationals here by 80% would have a massive impact on the UK’s economy, on population growth and, quite frankly, on our ability to survive as a country. The Government do not want poor people to have children—they have brought in the two-child limit—and they do not want people to come to this country and build their lives here, but we have an ageing population. Where do they think we are going to get the people from? I have absolutely no idea, and neither do they.

On top of all this, income inequality has risen since the Brexit vote to the extent that on two occasions the OBR could not predict the levels of tax that the Treasury was going to receive from the 1% in society. The tax windfall that the Chancellor is celebrating is not a sign that the economy performing well; it is a sign of deep-seated inequality, which is worsening under the UK Tory Government.

[Peter Dowd]

I am sure the hon. Lady is aware that, according to the Institute for Fiscal Studies, an extra £5 billion will be required to maintain services in line with population growth, along with an appropriate number of people to support those services.

[Alison Thewliss]

The hon. Gentleman makes an excellent point, and he is absolutely correct. Without people, the economy will falter. That is the economic reality.

The Resolution Foundation has said that the income tax take is up 8% so far this year, but that that is coming from the very highest earners. The wages at the bottom continue to stagnate. If the OBR cannot openly predict the short-term economic performance, it is unreasonable to ask the House to sign off on its guidance. It is more difficult now for families to survive on the money they have. Since the vote, the cost of bread is up 11%, the cost of butter is up 23% and the cost of milk is up 11%—and we still have not left the EU. If people cannot afford to put bread and butter on the table, this economy is heading for the drain.

It is a well-established fact that Scotland did not vote for or particularly want to leave the EU. I checked just before I stood up to speak, and 13,920 of my constituents have now signed the petition to revoke article 50. The Prime Minister has consistently ignored attempts by the Scottish Parliament to find any kind of compromise solution, such as staying in the customs union and the single market, which would limit the damage of this hard Tory Brexit. If she wants to drag Scotland out of the EU against its will, she should have the bottle to come to this House and present the analysis that she says exists. She should have the courage to tell people that it will cost jobs and businesses and that she cannot make guarantees about the future.

If the Prime Minister does not believe that her Brexit deal can stand up to scrutiny in this House, the UK Government need to face up to reality and ditch Brexit altogether by revoking article 50. They are throwing good money after bad on no-deal planning, on fridges, on staged traffic jams and on botched ferry contracts, when they could be spending that money on lifting the awful austerity cuts that we have seen over the past nine years. The Chief Secretary to the Treasury talks about going round the country and listening to people’s public spending priorities, but I bet none of them talked about spending £33 million on Eurotunnel due to the shambles created by the Secretary of State for Transport, or about the £1 billion to bribe the Democratic Unionist party in an attempt to keep the Government in power.

Day after day in my constituency, I see the impact of this Government’s callous approach to cost-cutting. I see the benefits freeze, which is expected to cost families £800 a year, on top of the £900 a year that the Bank of England says Brexit is already costing every family. I see the two-child policy, which leaves families nearly £3,000 a year worse off if they have a third child and which makes a woman with three children on a 16-hour contract work the equivalent of 45 hours to make up the difference. I also see the thousands of pounds a year being lost by the WASPI women who are no longer entitled to their side of the pension bargain, having had their pensions cruelly stolen by previous Governments and by this one as well. How can any Minister look the population in the eye and say, “There is no money for you,” when the Government are asking us to sign a blank cheque for a hard Brexit?

I am a lifelong campaigner for Scottish independence and scarcely have I seen a clearer case for it than the shambles of the Conservatives and the incompetence of the Labour party in opposing them. The UK Government’s incompetence is changing hearts and minds all over Scotland on the merits of independence, and I hope that there will soon be an opportunity for the people of Scotland to take matters into their own hands.

Oral Answers to Questions

Peter Dowd Excerpts

Tuesday 5th March 2019 Commons Chamber

[Mr Hammond]

That is what we are doing. This will be the world’s first plastic tax and it is carefully designed to go with the grain of the market: to incentivise manufacturers to use more recycled plastic in their packaging. Because of that, it creates an effective market for packaging and, together with the producer responsibility note system, will transform the way in which plastic packaging enters the circular economy in this country.

[Peter Dowd (Bootle) (Lab)]

I am pleased that the Chancellor is, apparently, taking the issue of plastic waste seriously. The Government have committed £61.4 million to global research to help to prevent plastic waste from entering the oceans. Given the challenge, is that sufficient?

[Mr Hammond]

It is a good start. The idea is to identify ways in which we can work with countries around the world, including many of our overseas territories, which are particularly vulnerable to this issue, to ensure that we develop effective methods of avoiding plastic waste entering the ocean. Of course the best way to do that is by ensuring that plastics are not created in the first place, or that they are effectively recycled, but avoiding dumping at sea is our No. 1 priority.

[Peter Dowd]

Talking of preventing waste, what with the millions wasted on the ferries fiasco, the drone debacle, the Northern rail mess, the Carillion collapse, the electronic tagging turmoil, the £2 billion East Coast chaos and, finally, £72,000 spent on defending an illegal prisoner book ban, is it not time for the Chancellor, as the custodian of the public finances, to impose a ban on the failing Secretary of State for Transport wasting any more public dosh?

[Mr Hammond]

I am not going to take any lectures about waste from anybody on the Opposition Front Bench. This lot are world-champion wasters of public money. They have done it before and given half a chance they will do it again.