Finance (No. 3) Bill (First sitting)

Peter Dowd Excerpts

Tuesday 27th November 2018 Public Bill Committees

[Kirsty Blackman]

Absolutely. It is odd that the House of Lords is more democratic than this place in relation to the Bill.

The Finance Bill Committee should take evidence. I know that it is a long-standing convention that it does not, but having served on the Public Bill Committee on the Taxation (Cross-border Trade) Act 2018 and heard the evidence taken, I know how useful it was for Committee members and how many of them referred to it in subsequent debate. It was an incredibly useful exercise and the legislation that came forward was better as a result.

As I flagged up in last year’s Finance Bill debates, it is very good that external organisations have submitted written evidence, but I guarantee that the majority of hon. Members in this Committee have not read it all because of how little time we have had. Allowing us to question witnesses on the evidence that they provide on the Finance Bill Committee would be incredibly useful. The Government might not accept that this year, but can we consider taking evidence in future years? I am not the only one calling for this. The “Better Budgets” report produced by the Chartered Institute of Taxation and various other organisations called for the Finance Bill Committee to take evidence two and a half years ago, so external organisations have requested it, not just the SNP.

[Peter Dowd (Bootle) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Dorries. I hear what the hon. Lady says. Some of us have not been in the House for a great deal of time. I sat on the Housing and Planning Bill Committee, which lasted for 20 sittings, with a marathon sitting just before Christmas three years ago. We heard a great deal of evidence that significantly informed the debates. Some members of this Committee might have been on that one. Interestingly, some of the evidence we took proved to be absolutely spot on, because the Government subsequently ended up changing some of their housing policies. The Government made the same argument at the time: “No, we have thought this through. We have consulted”, but the ability to hear from experts who live and breathe these issues was beneficial.

It was the same on the Criminal Finances Bill, which covered a pretty niche area. The job of Parliament is to scrutinise legislation, so we need the tools to do that. Whichever party is in control, it has the full back-up of the civil service, who are themselves experts and, to their credit, know their work, but it is important that the Opposition are able to get independent assessment and adjudication of what the Government tell us. That does not mean I do not believe a word that Ministers say—I believe everything they say. It is just that we do not necessarily get the full facts. I have found it very useful in the past to have evidence sessions, and the Government should give serious consideration to that.

I think this is the fourth Finance Bill I have sat on in the past two years, although my recollection is not what it used to be. We have also had the customs Bill, which is also a finance Bill, so we have had effectively five finance Bills in a short period of time and in a time of incredible turbulence and change. There might not be a convention or a tradition to take evidence in Finance Bills, but there comes a time when we think, “This is as good a time as any to take evidence because the circumstances have changed substantially.”

We have also had what amounts to movement on the convention in relation to the amendment of the law. As everybody knows, it has been used only about half a dozen times since 1929 when Winston Churchill introduced it. It has been used six or seven times, including three times by the Government in less than that period in years. That is a substantive and significant change. The Minister kindly responded to my letter about that and indicated that it was not necessarily a significant change, but it is. If we as a Committee—as a House—have done something only six or seven times in the best part of 90 years, changing that convention is significant. For that reason as well, we need to take a step back and decide that perhaps we need evidence sessions to tease out some of those important things.

It would also give assurance to the House, to Back-Bench Members and to the public in general that we take those matters seriously and that it is not business as usual—that just because we have done something for years or decades, we do not carry on doing it regardless. It would send a message that, in these turbulent times, the House takes the country’s finances seriously.

Therefore, we should seriously consider taking evidence. After all, we are all open to public scrutiny in one fashion or another—in fact, there is no doubt that we welcome it, and I do not suggest that the Government do not welcome it too. If we do not object to that scrutiny, why do we not institutionalise it, do what other Committees have done in the past and take evidence? Let experts in their field challenge us, and let us challenge them.

[Kirsty Blackman]

One of the Government’s arguments against taking evidence is the fact that the Bill is split between the Committee of the whole House and the Bill Committee, but does the hon. Gentleman agree that we in the Bill Committee tend to consider the more technical amendments on which we most need evidence to make good legislation?

[Peter Dowd]

That is a perfectly fair point. Inevitably, when we get into Committee, the clauses that we discuss are very technical and it is those technical clauses for which we need some evidence.

At the end of the day, we have had written evidence from the Chartered Institute of Taxation on clauses 7, 11, 81 and several others, which I read with great interest. Some of the comments were very pertinent. It would have been a good opportunity to tease out some of the issues in those clauses in more detail. As I said, none of us are concerned about challenge—that is why we came into Parliament. We are here to be challenged, and that is the nature of our democracy.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

My hon. Friend has hit the centrality of the issue. The failure to move the amendment of the law resolution means that this Bill Committee becomes much less of a political conversation and more of a technical one. We can see on the programme motion the amendments that have been ruled out of order—reasonably, by applying the rules that the Government have put on the Committee. It has not been permitted for us to have a political conversation about different approaches to income tax, and if the Committee cannot have the political analysis, we should surely have the technical one, which has to involve experts.

[Peter Dowd]

My hon. Friend has a laser-like focus. In that regard, the Government cannot have it both ways. They cannot tell us that, on the one hand, we are dealing with all these technical issues and we should not be dealing with those wider issues, hence the amendment of the law, but in the same breath tell us that we cannot have any face-to-face consultation or oral evidence.

I give credit to the Government in so far as they have consulted pretty widely on these matters, but I have been involved in lots of consultations that have been paper exercises. I do not mean that lightly—they have been genuine attempts at consultation where people have written in to express this or that view—but during the process, I have certainly been in situations where we have decided, in the light of the evidence that we have and of the information provided to us through that consultation process, that we were going to say, in an open and transparent fashion, “Okay, let’s stop. We have all this consultation. We’ve read it. We’ve listened to it. Why don’t we just tease it out a bit more with some of the people who have taken the time to write back to us?” Organisations have indicated to us that they would welcome evidence sessions. The hon. Member for Aberdeen North has indicated some people we could see, but there are lots more. Frankly, we could have three days of evidence sessions, which would not be a bad thing per se. The idea that we focus it down to one day, with the organisations that hon. Lady has identified, is not, in the grand scheme of things, a difficult process, issue or onus. I exhort the Government to listen carefully to what we have said in the genuine spirit of trying to make this a better Bill. There may be agreement and we may have a better Bill where there is no agreement. I exhort the Government to listen carefully and accede or acquiesce—not capitulate—to our request.

[Sir Robert Syms (Poole) (Con)]

I have just a few points about where we are going. There are a number of events in Parliament that get quite a lot of public interest; the Queen’s Speech is normally one and the Budget is another. People make representations to the Treasury in advance of the Budget, but afterwards the Financial Times and almost every insurance company, bank and accountancy firm produce reams of information on what changes have occurred. The one sure thing about the Budget is that a number of trees will be cut down, to supply information to the great British public on what changes have already occurred. Actually, I do not think that this is one of those Committees that needs to take lots of information, because most of us will have lots of information already.

One could substitute vested interests for the point about experts, because there are an awful lot of vested interests in this country. As a large Committee of the House of Commons, we sometimes have to navigate our way through that, so we could sit for months listening to vested interests on a whole range of subjects and not actually make any decisions. The purpose of this Committee is to look at what the Government have done, maybe make some decisions and then report back to the House.

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[Kirsty Blackman]

The Minister makes a slightly circular argument. He suggests that questioning him would help us to improve the legislation and that questioning external experts who have to apply tax changes would be less useful.

[Peter Dowd]

Does the hon. Lady agree that there is an issue? The Labour party tabled a number of amendments, 10 or 11 of which were ruled out of scope. I do not criticise that at all. There is no criticism—

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[Mel Stride]

I thank the hon. Lady for her question, which we touched on in the Committee of the whole House. She will be aware that clause 3 is subject to the English votes for English laws process because non-savings earnings are devolved to Scotland, so that clause only applies to Northern Ireland, Wales and England, while clause 4 on the savings and dividend rates applies UK-wide. I understand her point and we will be happy to look at that in the future. As things stand, we support where we are at the moment in the division of those particular clauses.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Corporation tax charge for financial year 2020

[Peter Dowd]

I beg to move amendment 8, in clause 2, page 1, line 7, leave out from “tax” to end and insert

“may be charged for the financial year 2020 if the condition in subsection (2) is met.

(2) The condition in this subsection is, prior to 6 April 2019, the Chancellor of the Exchequer has laid before the House of Commons a review of the corporation tax receipts of multinational companies with UK-domiciled subsidiaries in relation to their publicly available UK-based revenue.”.

This amendment requires a review of the effects of corporation tax receipts of multinational companies compare with their UK-based revenue.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 9, in clause 2, page 1, line 7, leave out from “tax” to end and insert

“may be charged for the financial year 2020 if the condition in subsection (2) is met.

(2) The condition in this subsection is, prior to 6 April 2019, the Chancellor of the Exchequer has laid before the House of Commons a review of the corporation tax receipts of technology companies with UK-domiciled subsidiaries in relation to their publicly available UK-based revenue.”.

This amendment requires a review of the effects of corporation tax receipts of technology companies compare with their UK-based revenue.

Amendment 10, in clause 2, page 1, line 7, leave out from “tax” to end and insert

“may be charged for the financial year 2020 if the condition in subsection (2) is met.

(2) The condition in this subsection is, prior to 6 April 2019, the Chancellor of the Exchequer has laid before the House of Commons a review of the Commissioners’ effectiveness at applying General Anti-Avoidance Principles with reference to corporation tax collection.”.

This amendment requires a review of the effects of HMRC’s effectiveness in applying General Anti-Avoidance Principles with reference to corporation tax collection.

Amendment 11, in clause 2, page 1, line 7, leave out from “tax” to end and insert

“may be charged for the financial year 2020 if the condition in subsection (2) is met.

(2) The condition in this subsection is, prior to 6 April 2019, the Chancellor of the Exchequer has laid before the House of Commons a review of the current UK tax gap in respect of corporation tax applying globally agreed avoidance measures to multinationals with UK-domiciled subsidiaries.”.

This amendment requires a review of the effects of the current UK tax gap in respect of corporation tax applying globally agreed avoidance measures to multinationals with UK-domiciled subsidiaries.

Clause stand part.

[Peter Dowd]

In speaking to amendment 8, I will also speak to amendments 9, 10 and 11, each of which we will press to a vote.

Clause 2 enacts the continued charging of corporation tax. As the explanatory note says, the clause

“charges corporation tax for the financial year beginning 1 April 2020 ...Parliament charges CT for each financial year. This clause charges CT for the financial year beginning 1 April 2020. The rate of CT for the financial year 2020 was set at 17% in Finance Act 2016 Part 2 section 46.”

As I indicated earlier, it is vital to hold the Government to account on the matter of their treatment of corporation tax. The Government have offered huge tax breaks to big business even during their continued programme of austerity, which only two weeks ago the special rapporteur described as causing “misery”. It is important to set that context in relation to our amendments. The Government have slashed—that is the word—the amount of corporation tax paid, with a commitment to continue to cut big company taxes further. By 2020, 11% will have been cut from the main rate.

The main rate of corporation tax applies to companies with profits over £300,000—these are not small family businesses, but big corporations of the sort that we have all come to know, because they play a significant part in our economy. There is no criticism of that, but there is a balance to be drawn.

The main rate started at 28% in April 2010. It was reduced by the former Chancellor to 26% in April 2011 and then was reduced again to 24% in 2012 and 23% in 2013, before reaching 20% in 2015. It was cut further, to 19%, in 2017 with a view to reaching 17% by 2020. As of last year, the Institute for Fiscal Studies found that, compared with 2010, those cuts were denying the country £16.5 billion a year in tax revenue. That will increase if the Government stay in power long enough to push the rate down to 17% by 2020.

The Government have already been criticised by tax experts about the matter, which to some extent takes us back to our debate about the ability to tease out the issues. For example, Bill Dodwell, the former head of tax policy at Deloitte—not a company considered to be particularly socialist—said:

“Nobody seems to welcome the cut to 17 per cent.”

The British Chambers of Commerce has called for a pause to the corporation tax giveaways. When corporations’ own trade associations are making that point, it indicates that something might not be quite right. If it is important that we are all in this together, we must all be in it together on this matter too, and corporations should not be outside that.

We seek to take stock of the Government’s policy, which many people describe as corporate welfare, in the context of eight painful years of austerity for some of the poorest in our society and following numerous criticisms of the corporation tax policy by those who will benefit from it. Will the Minister help us to understand the Government’s position by addressing those criticisms in turn? Perhaps the Government might wish to introduce a review of corporation tax changes since 2010, so that we can get to the bottom of this important matter. After all, in eight years under the Government, corporation tax giveaways are likely to amount to hundreds of billions of pounds, while the number of people in poverty has risen to 14 million. A review of the matter would also help us to compare the Government’s actions with Labour party policy, which is to reverse the cuts and invest the money elsewhere.

Let us have a review to tease out the issues, because £16.5 billion works out at more than £25.5 million per constituency in the UK. The combined total cut from the constituencies of Conservative members of this Committee amounts to £228 million; it is important that the figures are put in context, because that translates to a lot of schools and hospitals that they are prepared to sacrifice.

Along with the important matter of what has happened to corporation tax since 2010, we must also draw a link between the Government’s cuts to corporation tax and their wider programme. In our view, there has been economic mismanagement, but we are not necessarily here today to talk about that.

[Bim Afolami (Hitchin and Harpenden) (Con)]

The hon. Gentleman asserts figures such as £16.5 billion, but does he accept that the tax rate has a dynamic effect on the amount generated for the Exchequer? It is all very well to cite a number as a static figure and say, “Actually, Labour party policy will double the amount we get,” but does he accept that there is a relationship between the rate and the amount that the Exchequer generates because of increased economic growth?

[Peter Dowd]

The hon. Gentleman makes a fair point, which I will address later in my remarks, and which we can tease out across the Committee if we want.

For Members who do not know, labour productivity is calculated by dividing output by labour input. Output refers to gross value added, which is an estimate of the volume of goods and services by an industry, and in aggregate for the UK as a whole. Labour inputs are measured in terms of workers, jobs—“productivity jobs”—and hours worked, or “productivity hours”.

The cuts to corporation tax have done nothing to improve our productivity. The hon. Member for Hitchin and Harpenden may wish to listen to that point, so I will repeat it: the cuts to corporation tax have done nothing to improve our productivity. That strikes at the heart of the Government’s failure on the issue. In fact, the economic statistics centre of excellence and the centre for macroeconomics at the National Institute of Economic and Social Research published a study this year of Britain’s very poor productivity. That brings us to the point that the hon. Gentleman raised, because one would assume that as a result of the tax cuts, more would be invested and productivity would rise—but that has not happened. The Government have argued that those corporations now receiving significant sums in tax cuts would invest in our economy and drive their business models forward, thus increasing UK productivity. Unfortunately, the 2018 paper shows that the billions of pounds of giveaways have not had a positive productivity effect. To deal with the point raised by the hon. Member for Hitchin and Harpenden, that paper says:

“Average annual…productivity growth was 2.5 percentage points lower during the period 2011-2015 than in the decade before the financial crisis…in 2007. We find that several years on from the financial crisis stagnation remains widespread across detailed industry divisions, pointing to economy-wide explanations for the puzzle. With some exceptions, labour productivity…lost…momentum in those industries that experienced strong growth before the crisis. Three fifths of the gap is accounted for by a few industries that together account for less than one fifth of market sector value added. In terms of why we observe continued stagnation, we find that capital shallowing has become increasingly important in explaining the labour productivity growth gap in service sectors, as the buoyancy of the UK labour market has not been sufficiently matched by investment…The collapse in labour productivity growth has been more pronounced in the UK than elsewhere”

notwithstanding those major cuts in corporation tax.

[Anneliese Dodds]

Does my hon. Friend agree that there is a contradiction in Government policy? They appear to believe that cutting corporation tax rates will lead to a higher activity rate and a higher investment rate—as he said, that has not been the outcome—but when it comes to social security, the assumption appears to be that cutting the rate of income that people can take home by having a high taper rate, for example, will necessarily lead to a higher work rate. Actually, the evidence shows that the vast majority of people on social security want to work and there is no evidence that they do not want to. The psychological approach to corporations—that if they give them more corporate welfare, they will work harder, although the evidence does not indicate that that is the case—seems to be very different from the approach to social security recipients, where the view is that if they reduce their income they will work harder, when actually most people want to work.

[Peter Dowd]

I do not want to introduce Gilbert and Sullivan, but the point is that it is a topsy-turvy world where cash for corporations equals productivity, when it does not, and cuts to welfare equal productivity, when they do not. It is not as simple as that and I am afraid that the Government’s rather one-dimensional approach does not work. That report shows that the billions handed to those big companies by the Government have not had the required effect on business investment to drive up productivity. The facts are there for everybody to see. No doubt, if we had had some experts here, we could have teased that out a bit more.

[Bim Afolami]

The hon. Gentleman has focused on domestic business investment, but would he not accept that having an attractive corporation tax regime and providing a business-friendly climate also helps with foreign direct investment? Britain is still a world leader in that.

[Peter Dowd]

Yes, but there is not necessarily a causal link there. The reality is—[Interruption.] Let me tease that out. The evidence does not suggest that, as I have tried to point out. The German economy is 35% more productive, because investment in it is significantly better than investment in this country’s economy. We are having a debate at the moment about the question of uncertainty in relation to Brexit, which is probably having a more significant effect than the hon. Gentleman suggests.

The bottom line is that the idea that cutting corporation tax per se will lead to growth in the economy has not proven to be the case. The economy is still flatlining, despite those cuts to corporation tax. The best part of half a billion pounds is still sitting in corporate bank accounts not being invested, despite corporate tax cuts.

[Jonathan Reynolds]

This is exactly the sort of conversation that we should have, and exactly what the Finance Bill should talk about. International competitiveness is not only an issue of tax rates; I think we all agree on that. We absolutely recognise that the tax rates on corporate taxation are part of that, but there is at the minute a very poor argument for the UK’s being such an outlier among developed nations and continually cutting its rate of corporation tax for diminishing returns, as my hon. Friend has said, when our public services are in dire need, our infrastructure needs are huge and our skills base is being eroded. All of those impact on competiveness as well. It is the balance that we have to get right.

[Peter Dowd]

My hon. Friend makes an important point: we have to have a balance. The massive cuts in corporation tax—sequentially, over several years—have not had the required effect. If they did, there is an argument to be had, but they have not. There does not appear to be any evidence that that is the case, so it begs the question why. If the Government are trying to make a rational case for it, they have singularly failed and it is time to have another look.

The Government once had a plan to tackle, for example, productivity in 2016 when they tried to maintain that there was an agenda beyond austerity, but that has not been the case. Sadly, the plan was not to reverse the corporation tax cuts and invest in the economy, but simply to push on. As a result, the plan was roundly criticised. The Business, Innovation and Skills Committee said

“we question whether the document has sufficient focus and clear, measurable objectives to be called a ‘plan’. This broad and expansive document represents more of an assortment of largely existing policies collected together in one place than a new plan for ambitious productivity growth.”

That plan was the best attempt so far and it has singularly failed. That is why we will continue to press the Government on the true cost of corporate giveaways both in terms of the tax forgone and their effectiveness.

Amendment 8 requires a review of the effects of corporation tax receipts of multinational companies compared with their UK-based revenue. That is a perfectly reasonable approach in the round—it is not just one-dimensional. The Financial Times reported last year that multinational companies avoided paying as much as £5.8 billion tax in 2016 by booking profits in overseas entities. It reported that that represented almost a quarter of the tax underpaid by large corporations last year. In addition to an apparent avoidance of tax, they also get a tax reduction. It is a great life if you can get it: do not pay tax and get rewarded with another tax cut. If only we could all do that, although I suspect none of us would want to.

Sadly, the situation does not seem to have improved under the Government’s plans, despite the warning signs. The Times reported two weeks ago that HMRC is now chasing £28 billion in unpaid taxes from multinationals. The Government’s response was to give them some more. It is a bizarre approach when they owe £28 billion, or when HMRC is chasing £28 billion. I assume colleagues in HMRC do not simply go around chasing £28 billion for the fun of it, and instead do it because there is a requirement and we need the tax, and importantly because companies should pay their fair share. That represents a 50% increase in avoidance over four years. While the Government give corporations tax cuts, the corporations appear to say, “Thank you very much; we will carry on doing what we usually do and avoid our taxes.”

The problem stems from transfer pricing, which refers to the charges made between different parts of a multinational business for goods, services or intangible assets, including intellectual property, for example. Tax rules provide that transactions between connected parties should be taxed as if they were on arm’s length terms. In recent years, multinationals have been accused of arranging their transfer pricing to minimise their tax liabilities in jurisdictions such as the United Kingdom, which accounts for billions of missing tax in the UK.

The Conservative party not only wants to give the wealthiest a tax break but it does not seem too bothered if they give it to others such as corporations that do not necessarily need it. Of course, as my hon. Friend the Member for Oxford East said, that rule applies only to powerful interests and not to the working single mother who pays in full every single month.

[Bim Afolami]

The hon. Gentleman uses the word “corporations” pejoratively and then mentions the hard-working single mother. Does he accept that the hard-working single mother might also run a small business? Why did the Labour manifesto commit to increasing corporation tax on small businesses as well as on multinationals?

[Peter Dowd]

I started my comments by welcoming the role that corporations play in our economy. My use of the word “corporations” was not in any sense pejorative. I have said nothing “pejorative” about corporations. I may have talked pejoratively about those corporations that avoid their tax and I think most other people would, too. Those corporations have a responsibility, and not just legally, to pay tax. I am not suggesting they are evading tax in that sense, but morally they are part of our community. They are part of one of the most stable countries in the world, with a rule of law next—[Interruption.] I am absolutely shocked that the hon. Gentleman is laughing at my assertion that we have one of the best processes for the rule of law in this country. I am sure he did not mean to laugh when I was praising the British constitution—I accept that he did not really mean it.

At the end of the day, the bottom line is that I have not at any time been pejorative, and nor would I wish to be pejorative, about corporations that play their part in society, that pay their taxes, that treat their workers properly and that treat their customers as their first port of call. I would not be pejorative about those corporations, but I will not stop criticising corporations that do not pay their fair share of tax.

To get back to the point, that is why the Government appear to be winding down the diverted profits tax rather than ramping up the pressure on companies that do not pay their way. The review demanded by amendment 8 would strike at the heart of the problem. For too long, the Government have sat idly by and watched the UK being fleeced by many big companies and the public are saying that enough is enough.

On amendment 9, the Government’s blind spot in respect of companies paying their share extends in particular to technology companies. It was reported in The Guardian this year that Amazon had halved its corporation tax despite posting record profits. The article speaks directly to the amendment by saying:

“The company, which has been locked in a race with Apple and Alphabet to be the world’s first trillion-dollar business, revealed that pre-tax profits at its UK business tripled from £24m in 2016 to £72m last year.

The figures were reported by Amazon UK Services, the company’s warehouse and logistics operation that employs more than two-thirds of its 27,000-plus UK workforce, in its annual financial filing to Companies House.

The company almost halved its declared UK corporation tax bill from £7.4m in 2016 to £4.5m last year. It received a tax credit of £1.3m from the UK authorities in 2016, and last year paid £1.7m tax on its profits.”

I do not have the evidence to hand, because time does not permit me to go into all the details, but it would be interesting to know how many of those 27,000 people are on tax credits themselves because the pay they get from that company is pretty low. There is an unacceptable triple-whammy for taxpayers. No. 1 is that some of those companies’ employees get tax credits because they do not get paid enough; No. 2 is that the companies are getting a corporation tax cut; and No. 3 is that they avoid paying their taxes where they can.

Will the Minister guarantee that Amazon will pay a full and reasonable share of tax on its operations next year? I suspect that he is not likely to commit to that suggestion even if he wanted to. What about other companies? Google paid only £50 million last year, despite total sales of £5.7 billion, which is worth repeating. Meanwhile, Facebook paid only £15.8 million in corporation tax, despite collecting a record £1.3 billion in sales. Its accounts show that while it increased its UK income by more than 50% in 2017, its pre-tax profits increased by only 6% to £62.7 million. The Silicon valley-based company’s UK taxable profits were reduced by a £444 million charge for unexplained “administrative expenses”, which is scandalous.

The Chancellor said that he would introduce a digital services tax in response to that flagrant attempt to undermine our tax base. Oddly, though, the tax seemed to bring in only £5 million in the first year and £275 million in the second. Perhaps the Financial Secretary could tell us where the rest is. That seems a pretty pathetic attempt to restore a level playing field in our tax system—the digital services tax is a drop in the ocean. What estimate has the Minister made of the total corporation tax lost to HMRC through avoidance by technology companies? What steps has he taken to work with other nations to deliver a comprehensive response? How many meetings has he had with the European Union since the Budget?

As the Minister knows, the European Union’s approach is much more comprehensive. A Commission press release set out its approach to digital taxation—it is therefore directly relevant to amendment 9. It demonstrates that the EU’s plans are far more developed than the UK’s. It is therefore important that we listen to them. The press release states:

“The Commission has proposed new rules to ensure that digital business activities are taxed in a fair and growth-friendly way in the EU. The measures would make the EU a global leader in designing tax laws fit for the modern economy and the digital age”,

which is what amendment 9 seeks to do. It continues:

“The recent boom in digital businesses, such as social media companies, collaborative platforms and online content providers, has made a great contribution to economic growth in the EU. But current tax rules were not designed to cater for those companies that are global, virtual or have little or no physical presence. The change has been dramatic: 9 of the world’s top 20 companies by market capitalisation are now digital, compared to 1 in 20 ten years ago. The challenge is to make the most of this trend, while ensuring that digital companies also contribute their fair share of tax. If not, there is a real risk to Member State public revenues: digital companies currently have an average effective tax rate half that of the traditional economy in the EU…Today’s proposals come as Member States seek permanent and lasting solutions to ensure a fair share of tax revenues from online activities”

as urgently as possible. Like the European Union, we are seeking to create an initiative

“to reform corporate tax rules so that profits are registered and taxed where businesses have significant interaction with users through digital channels. This forms the Commission’s preferred long-term solution.”

I would like the Government to consider a number of European Union proposals as part of the review, including an interim tax on certain revenue from digital tax activities. The Government could take that issue into account as part of the review, too. I hope they will look at it as well.

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[Clive Lewis (Norwich South) (Lab)]

Thank you for that.

[Peter Dowd]

People will thank me for it—I am sure that is the case—but I exhort people to read that detail, which will give them an insight into a way forward.

The question that a review would fundamentally seek to ask is whether the section of the GAAR that I referred to but will not quote from is strong enough in providing HMRC tax officials with the basis for pursuing corporation tax avoidance. The review would also look at its relationship to the other sections of the guidance in meeting that aim.

A related matter is whether the hollowing out of HMRC has had an impact on its effectiveness in preventing avoidance and evasion, and we cannot ignore that. My constituency, as you are well aware, Ms Dorries, is home to a significant number of HMRC staff, and they have been impacted, as everywhere has, by the Government’s hollowing out of HMRC. This matter should be considered as part of the review proposed by our amendment. The effective resourcing of HMRC needs to be reviewed as well.

[Bambos Charalambous]

Does my hon. Friend agree that we need more senior HMRC inspectors to go after the corporations that are avoiding tax and that without investment in HMRC we will not be able to recoup the taxes that are necessary to fund this country’s economy?

[Peter Dowd]

My hon. Friend makes a fair point. This is not about the production of civil servants for the sake of it, just having them in a job where they do very little and are not particularly productive. Those civil servants are incredibly productive. There are various figures on the amount spent on chasing tax avoidance: if we put in £1, we might get £9 or £10 back—more according to certain studies. We need investment in the system, so my hon. Friend’s assertion is absolutely spot on. Resourcing should be considered as part of the review of corporation tax proposed in the amendment.

For too long, the Government have asked HMRC to pay the cost of a financial crisis that it had no part in, by implementing cuts in the very Department we need to support if we are to put an end to some of these avoidance gains. The impact of the Government’s austerity agenda was recognised by the National Audit Office, which published a report suggesting that the quality of services provided by HMRC to personal taxpayers collapsed in 2014-15 and in the first seven months of 2015-16. Between 2010 and 2014-15, HMRC cut personal tax staff from 28,000 to 15,000, which has almost certainly had an impact on the functioning of HMRC. The NAO analysis indicates that the quality of services deteriorated, which I do not think is a surprise to anyone. That gives a sense of the impossible pressure that HMRC is being put under and the difficulty of delivering on tax avoidance under the Government’s agenda.

Finally, amendment 11 requires

“a review of the effects of the current UK tax gap in respect of corporation tax applying globally agreed avoidance measures to multinationals with UK-domiciled subsidiaries.”

In respect of corporation tax, there has been some debate about what the tax gap in question is. I start by referring Members to HMRC’s own analysis of the tax gap, published this year. That analysis says:

“The estimated total tax gap for Corporation Tax was £3.5 billion in 2016-17 (£3.4 billion in 2015-16). This equates to 10.6% of the overall tax gap in 2016-17…The Corporation Tax gap for large businesses in 2016-17 is estimated at £1.1 billion. This represents 5.3% of total theoretical liabilities, the same as in 2015-16. There has been an upward revision to the 2015-16 estimate since the 2017 edition of ‘Measuring tax gaps’ by around £0.1 billion due to more recent data becoming available”.

There are around 170,000 mid-sized businesses in the UK, defined as the smallest businesses previously managed by the Large Business Service and the largest small and medium-sized enterprises that were reorganised into the mid-sized business directorate. Corporation tax on mid-sized businesses is about £0.1 billion higher than in 2015-16, and the corporation tax gap for small businesses is estimated at £1.6 billion for 2016-17, which is equivalent to 8.8% of total theoretical corporation tax liabilities. Those figures demonstrate the Government’s failure to apply proper enforcement measures against corporation tax avoidance: even on their own Department’s analysis, billions are slipping through the net every year. A review would be a first step towards ensuring that we applied the proper rules against multinationals with UK-domiciled subsidiaries, for example, and that those multinationals were paying their fair share.

A recent survey by ActionAid showed that eight out of 10 of British citizens want the Government to get on and deal with this issue. The Government are, in effect, upsetting 80% of the country with their inaction on this matter. Quite a significant number of people believe action has to be taken. I therefore call on the Minister to get on with it, accept our amendments and follow our proposal in dealing with tax dodgers at the corporate level once and for all.

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[Peter Dowd]

There is always a danger in these situations of comparing apples and pears. This is to compare the largest economy in the world—the United States—which has 50 states and different levels of tax, with this country. On the other hand, the comparison is with the Republic of Ireland, with a population of about 4 million and a gross domestic product significantly below ours. We need reasonable comparators. I am sure the Minister will agree that those are likely to be our European neighbours.

Would the Minister agree that he is missing the point? We have a contention, which I laid out and will not repeat. The issue is to address the amendments. Our argument is that the amendment requires a review of the effects of corporation tax receipts on multinational companies compared with their UK-based revenue. We make our assertions on the basis of independent evidence and say we should let the Government do that, through institutional mechanisms. Does the Minister not agree that that would be a sensible way forward and we can then have these debates again?

[Mel Stride]

I shall come to the issue of the amendments momentarily. I would just say in conclusion to this debate on tax that it is a dangerous position for the Opposition to adopt. They are telling large businesses and entrepreneurs and the 5 million small businesses up and down the country that a significant tax hike is in theirs and the economy’s best interest when it clearly is not. The clause introduces the ability further to relieve that element of taxation.

The hon. Members for Bootle and for Oxford East spoke at some length about avoidance. The Government have an exemplary record on clamping down on avoidance, evasion and non-compliance. There have been 100-plus measures since 2010, bringing in and protecting some £200 billion in revenue, a vital amount of money for our public services.

As the Committee will be aware, we have one of the lowest tax gaps in the world at 6% for 2015-16, the last year for which figures are available. That compares very favourably with the record of the last Labour Government—in 2005-06, the figure was well above 7%. The difference would fund every policeman and woman in England and Wales. We recognise that bringing in tax receipts is extremely important.

On HMRC staffing, 28,000 full-time equivalents in HMRC are engaged in tax inspection. We have invested an additional £2 billion in HMRC since 2010 for that purpose. The fruits are already being seen in near record lows in the tax gap.

The hon. Member for Bootle urged us to work closely with the EU on tax avoidance. The Committee of the whole House debated clauses 20, 23 and 19 on control of foreign companies, exit taxation rules and certain anti-hybrid rules, all of which emanate from the EU anti-tax avoidance directive. We have been in the vanguard of the base erosion and profit shifting project, as the Committee will know, to clamp down on avoidance.

The hon. Members for Bootle and for Aberdeen North mentioned digital businesses. We need to understand the important point that, when we look at profits generated by companies through digital platforms and the interaction of UK consumers with them, we are not referring specifically to avoidance—the hon Member for Bootle may have suggested that. We are looking at the current international tax regime and whether it is fit for purpose in taxing that form of profit generation. The current regime basically assigns taxation rights to the jurisdiction when there is economic activity in that jurisdiction, as defined by the buildings, where the intellectual property rests, whether people are employed, where the risks are taken, where the management is domiciled and so on. We want to move to a situation where we are able to tax those businesses because of the profit generation—the value generation—that they are creating, as I have described.

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[Mel Stride]

The hon. Lady makes an entirely reasonable request for that information. As I indicated, I am happy to provide it to her. In fact, divine inspiration has just arrived—I have an answer; I knew it was lost somewhere in my mind. There have, in fact, been 12 opinions, all of which have been supportive of HMRC. If she would care for any further information, I am happy to provide it outside the Committee.[Official Report, 3 December 2018, Vol. 650, c. 5MC.]

Amendment 11 would make the clause contingent on a review of how the application of globally agreed measures to combat avoidance by multinationals would impact the tax gap. HMRC publishes annual updates on its tax gap analysis. The corporation tax gap is estimated to have declined from 12.4% of total theoretical liabilities in 2005-6, under the previous Government, to 7.4% in 2016-17.

[Peter Dowd]

I have a quick question. There is a cumulative effect of the Minister saying to us that there have been reviews on this and reviews on that. The phrase used is, “We keep these things under review.” I completely accept that the Government do that, but —I think I have asked about this before—it would be helpful to find out what the process is for keeping such things under review, other than a Sir Humphrey-type approach, which is to just say, “We keep these things under review,” so we all sit down and think, “That was a good answer,” and forget to ask the next question.

[Mel Stride]

I think the hon. Gentleman has described the process beautifully. I would add to his observation that we do have more formal methods of engagement than that which he describes. We publish tax information impact notes for every single tax measure and there is the process that we debated earlier for how taxes and the measures in a Finance Act are scrutinised over time, and so on.

To conclude this fairly lengthy debate, I urge the Committee to reject the amendments and I commend the clause to the Committee.

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[Peter Dowd]

I thank the Minister for his response and those hon. Members who intervened to try to tease the matter out. He has not told me, or anybody on this side of the Committee, anything that suggests that the Government take the matter of corporation tax and the need for reviews as seriously as we do, or that gives reassurance to the public out there. While everybody else is receiving a pay rise—just about—after 10 years, potentially on a sustained level, the Government have said that, eventually, they will invest in the NHS, but as those things begin to come through, people are still not convinced that corporations, which many of them work for, are playing by the rules.

The Minister has not said anything that convinces us to the contrary; hence our amendments. If he is convinced of his argument—I have no reason to believe otherwise—he needs to convince not just Government Members, but Opposition Members and the great British public. Some 80% of people do not believe that large corporations are playing fair by the system. Either they are wrong, in which case the Government should tell them so, or they want an eye kept on this issue, which our amendment would do.

I have no doubt that we will come back to this matter in the next Finance Bill, when the Minister and I might or might not be here in Committee. No matter what the Government think, it is not going away—it will come back to haunt the Finance Committee year in, year out. I exhort the Minister to listen to that.

[Mel Stride]

If it is in order, Ms Dorries, I will give the hon. Member for Oxford East an additional piece of information on the issue of referrals to the panel. There were nine cases rather than 12; there were 12 opinions on those nine cases, all of which supported HMRC. That might explain how I had a figure of nine while the hon. Lady was focused on 12.[Official Report, 3 December 2018, Vol. 650, c. 5MC.]

Finance (No. 3) Bill

Peter Dowd Excerpts

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

[Julian Knight]

My hon. Friend answered the hon. Lady’s intervention better than I did, so I do welcome what he said.

Let me sum up. In its treatment of tax thresholds and stamp duty, the Bill lays out a fairer tax system. It is a tax system predicated on a better society, and it is a system where people who can pay have to pay their fair share, but where that is achieved without being punitive and without, frankly, trying to put dogma over the reality of the situation.

[Peter Dowd (Bootle) (Lab)]

I am glad to have this opportunity to debate the issues surrounding new clauses 1, 2 and 3 in my name and the names of others in the Committee of the whole House, and to discuss them in the context of the Government’s attempts to distract attention from their woes. We have just had a lesson in voodoo economics from the hon. Member for Solihull (Julian Knight).

Members need to pay attention to Labour’s proposals in relation to new clauses 1, 2 and 3, but I must first point out that, in response to the Government’s authoritarian restrictions on amending this Bill, we had asked whether the entire legislation could be debated on the Floor of this House. That would at least have ensured a scintilla of constructive discussion among Members on the whole Bill. Alas, our request was denied by the Government, and we are left yet again asking for reviews and assessments as set out in our new clauses. It is important none the less to get these issues about child poverty out into the open. The Government increasingly seek to implement their austerity agenda—for that is what it is—behind closed doors. They will no doubt see our new clauses as an irritant that would highlight the differences between a slash-and-burn approach to public services by the Government juxtaposed with a policy of investment, renewal and rebuilding from this party based on a fair taxation system, as identified in our new clauses.

The Government have practised their manoeuvres in Committees that they have stitched up to give themselves the majority, which they do not deserve, and they do not have the guts to allow proper amendments to their Bill. No Minister has had the decency to defend that position and it is pretty pathetic. The electorate did not give them that mandate, but they arrogantly take it in any event, so it is important that we debate and tease out the issues that we have set out in new clauses 1, 2 and 3.

[Leo Docherty]

The hon. Gentleman mentions tax cuts. Will he describe whether the Opposition support the tax cuts laid out in the Bill?

[Peter Dowd]

The hon. Gentleman was that busy talking about sizzling sausages and Marxism last week that he did not hear what I had to say. Now, it is not for me to constantly repeat myself—although I know the Tories do it all the time—so I suggest he reads last week’s debate in Hansard.

Luckily, I am pleased to see that even these mendacious measures are not enough to prevent this Government from a slow-motion collapse. The twists and turns continue. If the weekend reports in the media—specifically The Sunday Times—are anything to believe, if this House votes against the deal, No. 10 has a

“dark strategy to twist arms.”

So what is the cunning plan? Well, No. 10 seeks to

“encourage a crash in financial markets after losing a first vote in the hope this stampedes MPs into voting for it a second time”.

This is ordinarily known as extra-parliamentary activity. The fact that the media are actually putting that scuttlebutt into print, however bizarre, simply shows the desperation in No. 10, so it is important that we do tease out the issues, as we will with new clauses 1, 2 and 3, but this situation bears witness to the siege mentality now at pathological—some might even say clinically obsessive—levels in Downing Street.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

I am sure that my hon. Friend, like me, was glued to the television at 10 o’clock last night, watching a documentary “A Northern Soul”, about a man called Steve living in poverty in Hull and his inspiring work to help the children living in that city. I therefore give my hon. Friend my wholehearted support in particular for new clause 2, which would provide for a tax impact assessment to look at how we can genuinely help people like Steve who have suffered so badly under this Government.

[Peter Dowd]

My hon. Friend is right. I am afraid that the Government are in denial over the question of child poverty; I will come back to that point shortly.

Quite simply, the Prime Minister and those around her have lost the plot; and there have been plenty of plots recently. This Government would not know progress if it stared them in the face, which is why we need new clauses 1, 2 and 3. It is little wonder that the Government have presided over eight years of economic ineptitude that have seen our tax system and society becoming increasingly unequal.

As I said on Second Reading, Labour will not stand in the way of any change that would put additional income into the pockets of low and middle earners. Maybe that answers the question of the hon. Member for Aldershot (Leo Docherty), so he might not have to look at Hansard. Low and middle earners have borne the brunt of the economic failure of this Government and we will not take that cash out of their pockets. However, we believe that the richest in our society and those with the broadest shoulders should pay more tax to help support our public services and finally end austerity. This is not a controversial view, at least among the morally orthodox.

[Leo Docherty]

The hon. Gentleman mentions tax increase. If Labour were to put in its plans for a wholesale renationalisation of major parts of our economy, how much extra tax would the average British taxpayer be paying?

[Peter Dowd]

Dear, dear—none. The hon. Gentleman really has to take his nose out of the Tory voodoo economics book, widen his horizons and look at Labour’s “Funding Britain’s Future”.

One only needs to look at our European neighbours to see that the rate of tax on higher earners in this country is relatively low compared with Germany, France, Sweden and even Ireland. To set the ball rolling, Labour’s new clause 1 would require the Chancellor to lay before the House a distributional analysis of the effect of reducing the tax threshold for the additional rate to £80,000 and introducing a 50% supplementary rate for those earning more than £125,000 a year.

These are Labour’s policies, committed to in Labour’s very, very popular manifesto of 2017. They will put—[Interruption.] I know that Government Members do not like to hear this, but these policies will put the country on a much fairer fiscal footing, ensuring that the wealthy pay their fair share for the restoration of our social fabric, which is crumbling after eight years of gruelling Tory austerity.

The fact is that since the financial crash a decade ago, the very rich have only become richer. The Institute for Fiscal Studies identified that the top 1% have received an increase in share of total income from 5.7% in 1990 to 7.8% in 2016. In response to the hon. Member for Aldershot, it is no wonder they are paying more taxes—they have had the biggest share of total income.

[Rachel Maclean (Redditch) (Con)]

Does the hon. Gentleman not accept that this Government are determined to tackle these important issues of income inequality, to the point where income inequality and inequality of disposable income are now at their lowest level since before the financial crisis, when his party were managing the economy?

[Peter Dowd]

Well, they are not making a very good job of it—there are 4 million people in poverty. That is the fact. Conservative Members can deny that until they are blue in the face, but that is the reality.

Let us move on to the issue of infant mortality. Infant mortality has risen for the first time since the 1990s, when the Tories were last in government, and, as I indicated, there are 4.5 million people living in poverty. That is a fact, and they should not pretend otherwise. They should at least have the guts to admit that their policies have got us into this situation.

This stark contrast in living standards has been driven by the Government’s remorseless austerity agenda, which has chopped away at our fiscal checks and balances. By narrowing the tax base while continuing austerity, they have entrenched poverty and inequality across the nations and regions, leaving vulnerable groups—particularly women—worse off.

[Louise Haigh (Sheffield, Heeley) (Lab)]

My hon. Friend is making a really important point, and it is reflected in the changes to life expectancy that we have seen over the last eight years. Life expectancy for the poorest women in Sheffield has fallen by four years since the Conservatives came to power in 2010. Is that not a further reflection of the devastating impact of austerity on inequality in this country?

[Peter Dowd]

Quite simply, it is shameful—it is as simple as that.

New clause 2 would require the Treasury to undertake an equalities impact assessment of the changes to the personal allowance and its impact particularly on child poverty. This assessment will include households at different income levels, groups protected by the public sector equality duty and the regions and nations—this is the Labour party speaking for the whole of the United Kingdom.

Such an assessment is needed now more than ever. The Social Metrics Commission recently found, as I indicated before, that 4.5 million children are living in poverty in the United Kingdom. That is shameful. The Government claim that none of this matters as long as parents are finding work, which ignores the fact that work is no longer a sustainable route out of poverty. Indeed, the Joseph Rowntree Foundation found that more than two thirds of children in poverty live in a working family.

We know that the assessment set out in new clause 2 will further justify the United Nations special rapporteur’s investigation into this Government’s policy of austerity last week. The poverty envoy found that the policies of austerity had inflicted “great misery” on our citizens, and he went as far as to say that the “fabric of British society” is falling apart as a result. That is absolutely damning.

[Alex Chalk]

The hon. Gentleman is talking a lot about the politics of austerity. The United Kingdom last lived within its means in 2001. Under a Labour Government, when would the United Kingdom next live within its means?

[Peter Dowd]

I do not accept the premise of these trumped-up ideas from voodoo economics presented by the Tory party. The reality is that the report was absolutely damning. It was absolutely devastating, and Government Members should be ashamed that somebody from the United Nations should come to this country and objectively lay out the facts as they are.

Sadly, in true Trumpian style, the Government chose to ignore the UN special rapporteur. Live on “Channel 4 News”, the Financial Secretary to the Treasury buried his head in the sand, saying

“there is a…strong push to reduce poverty”.

Well, it is not getting pushed hard enough. The Financial Secretary refused to acknowledge that there are 1.5 million people living in destitution, despite repeated questioning. A cursory look at this Government’s policies demonstrates that, for eight years, they have felt it was reasonable to punish the poorest to let the bankers off the hook. How can this Government be so out of touch?

I now turn to new clause 3. According to HMRC’s own statistics, over £400 billion a year is spent in tax reliefs. Entrepreneurs’ relief costs £2.7 billion a year alone, and benefits only 52,000 people.

[Alex Chalk]

The hon. Gentleman is very generous in giving way a second time. If Labour Members were to get back into power, would they change the tax system so that people had to pay tax from £6,750, as in 2010? Does he agree that that would cost working people an additional £1,000-plus a year?

[Peter Dowd]

I suggest that the hon. Gentleman reads the shadow City Minister’s article on LabourList, which sets that out very clearly.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I’ll send you a copy.

[Peter Dowd]

My hon. Friend will send the hon. Gentleman a copy and he will sign it—and Conservative Members might actually learn something. I know it is difficult for my hon. Friends to grasp the concept that Conservative Members might learn something, but they actually might.

Entrepreneurs’ relief costs £2.7 billion a year alone, and benefits only 52,000 people. This bloated relief—and it is bloated—is overwhelmingly spent on a small number of wealthy individuals, with 6,000 claimants receiving relief on gains of over £1 million. I will repeat that: 6,000 claimants receive relief on gains of £1 million. It is no wonder then that the IFS and the Resolution Foundation have called for it to be scrapped. Clause 38 and schedule 15 represent yet another Conservative half-measure.

[Rachel Maclean]

As a former entrepreneur, as in my entry in the Register of Members’ Financial Interests, I did not benefit from this particular relief, but many in that community do benefit from it. Does the hon. Gentleman believe that this should be scrapped, which would penalise people who start businesses in this country and go on to employ people who then pay taxes and put food on the table for their families? Is the position of the Labour party to be completely anti-entrepreneurs?

[Peter Dowd]

The Treasury has not reviewed the relief and does not know whether it is working, but it has chucked £2.7 billion—I repeat, £2.7 billion—at a relief that affects only 52,000 people. There is something not quite right with that. I get that and my hon. Friends get that, but Conservative Members are in denial about it, as they are about child poverty.

[Leo Docherty]

Given that the hon. Gentleman is against relief for entrepreneurs, will he tell the Committee whether he is also against small businesses being relieved of their rates, with business rates being slashed by one third? [Interruption.]

[Peter Dowd]

Out of courtesy I will respond to the hon. Gentleman. What we want is a fair taxation system, which is completely and utterly alien to the Government. It is as simple as that.

[Stephanie Peacock]

My hon. Friend pointed out that the Government are in denial on child poverty. That is absolutely clear in my constituency in Barnsley, where 6,000 children live in poverty. Does he agree that poverty is a political choice caused by the Conservative party?

[Peter Dowd]

My hon. Friend is right, and for the Tories that choice comes first, second and third, and it always will.

On one hand the Government are lengthening the qualifying time for investors from one year to two, but on the other hand they are ensuring that shareholders will be protected from falling below the 5% threshold needed to claim the relief when a company is sold. It is hard to see how this confused measure will tackle the growing cost of the relief.

Naturally, the Opposition, the Resolution Foundation and the IFS are not the only ones who have found this measure perplexing to say the least. The Chartered Institute of Taxation has raised deep concerns about its retroactive nature, its lack of clarity and the likelihood that the reforms will hit small businesses the hardest—the businesses that the hon. Member for Redditch (Rachel Maclean) no doubt had in mind in her intervention. Far from making the relief more equitable, this measure will instead insulate wealthier claimants who can rely on expensive tax advisers to navigate red tape, ensuring that the cost of the relief will continue to bloom.

The cost of corporate welfare has risen steadily under this Conservative Government. In fact, I would go so far as to say that it is the one form of welfare that Government Members support. In contrast, the Labour party is committed to undertaking a full and comprehensive review of corporate tax reliefs when—not if—we reach government. That is why we have tabled new clause 3, which would require the Government to undertake a full review of entrepreneurs’ relief. The review would consider the overall number of entrepreneurs in the United Kingdom, the annual cost of the relief, the cost per claim and the impact of the relief on productivity in the UK—productivity that is 15% below our comparators in the G7 and 35% below the Germans. The Government should be getting to grips with that fact, not fiddling around with entrepreneurs’ relief.

Government Members should ask themselves how they can justify the amount of money going to 52,000 people while our public services are falling into disrepair. This relief is clearly in need of urgent review to ensure that the taxpayer is not being ripped off. They should be clear that if they choose to vote against new clause 3, they are voting against the interests of taxpayers across the country. Again, this is £2.7 billion for 52,000 people.

I hope that Government Members will support our new clauses 1, 2 and 3, for the reasons that I have outlined. This authoritarian Government of the rich, by the rich, for the rich have lost all credibility to manage the affairs of this country. They no longer know what they stand for, nor do they have the courage to find out. This Bill of broken promises takes us no further forward in meeting this country’s mounting challenges, so I call on Members throughout the House to support Labour’s proposals to create a fairer society and a fairer tax system. If we are unable to change the Government’s course, we will challenge the Bill at every step of the way, notwithstanding the authoritarian shackles put on us by this authoritarian Government, and we will use it to put an end to this aimless and divided Government.

[Richard Graham]

It is a pleasure to follow the hon. Member for Bootle (Peter Dowd), although there were moments during his speech when I found myself wondering whether history was being rewritten in a remarkably creative way.

The changes that the Government have proposed come against a background of remarkable achievement in cutting the deficit by four fifths, reducing the unemployment rate to its lowest since the 1970s, giving 32 million people tax cuts and taking 1.7 million out of income tax altogether. Some of those things were denied by the hon. Gentleman, who claimed at one point that the rich were only getting richer. I think it therefore falls to me to offer a few statistics to put his comments into context.

The first comes from the Institute for Fiscal Studies analysis of what went on under the previous Labour Government. The hon. Gentleman, who is chuntering with his colleague the shadow Chancellor, should focus on that IFS analysis. The independent analysis from the IFS shows very clearly that on most measures income inequality during the 13 years of the previous Labour Government went up. Part of the reason for that was explained, helpfully, by the hon. Member for Norwich South (Clive Lewis) in an interesting interview with The Guardian the other day. He pointed out that the attitude of the previous Labour Government was, to quote the former deputy Prime Minister, Lord Mandelson, “intensely relaxed” about the filthy rich. The hon. Member for Norwich South rightly went on to say that during the 13 years of the Labour Government:

“The huge fortunes of those at the very top…were left almost untouched.”

That is why the work done by this Government, which for example includes scrapping child benefit in 2013 for those earning over £50,000, has led to the lowest tax gap for a very long time. The percentage of income tax paid by the top 1% has doubled under the Conservative Government. The hon. Member for Bootle therefore needs to think hard about that IFS analysis. Income inequality went up under the 13 years of the Labour Government and it has gone down in eight years under the Conservatives.

There are other points worth highlighting. For example, people on lower and middle incomes actually have more money in their pockets now than at the start of the financial crisis under the previous Labour Government. The gap, as I pointed out, between those on the lowest and highest incomes is lower than it was when the Labour Government left power in 2010. In fact, income inequality is now close to its lowest point since 1986. That is a remarkable achievement. Over the past 30 years, which include 13 of a Labour Government, income inequality narrowed sharply under this Conservative Government.

Labour Members have made a lot of points about employment, so it is worth highlighting that the growth in employment benefits most the poorest 20% of households. The employment rate is now up by more than seven percentage points on where it was before the financial crisis under Labour in 2007. Thanks to the national living wage, the income of the lowest earners has actually grown by almost 5% since 2015, higher than at any other point across the earnings distribution. The actual situation today in our economy for those working is therefore very different from that painted by those on the Opposition Benches and by the hon. Gentleman.

A crucial and major difference between the Labour party and the Government is on taxing business. The uncomfortable truth for Opposition Members who would like to tax business more is that since the Government cut corporation tax in 2010 receipts have gone up by 50%, generating an extra £20 billion in 2016 over what was generated in 2010. The extra £20 billion we found for the NHS above inflation for this five-year period does not come from nowhere; it comes from increased receipts and growth in the economy. That extra £20 billion raised from corporation tax, as a result of cutting corporation tax, is one of the critical economic differences between those on the Government side of the House and those on the Opposition side. The Opposition still believe that if they tax businesses more they will get more tax. The truth, however, is that if we tax businesses less we incentivise business and entrepreneurs, generating more tax receipts to put into our vital public services.

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[Peter Dowd]

If the hon. Gentleman is so sure of his position, what is wrong with providing for a review of the effectiveness of entrepreneurs’ relief, as new clause 3 would do?

[Richard Graham]

The hon. Gentleman is kind to mention that, but the fact is that we on the Government side of the House believe strongly in incentivising the entrepreneurs. They are the ones producing the technologies of the future—Fintech, Edtech, every sort of tech—and the reason why this country has seen more investment in technology in London alone in the last year than Germany, Spain, Ireland, the Netherlands and France put together. These incentives to businesses are what generate the additional tax revenue I highlighted earlier.

The changes to gambling tax are among the most significant measures proposed. These are fundamentally about what is morally right, and I am delighted that the Government have found a way to do the right thing, not just by reducing the maximum stake for fixed odds betting terminals from £100 to £2, but by introducing it rapidly and by raising the remote gambling duty from 15% to 21%. If I could make one request of the excellent Minister, it would be that he consider other ways to reduce the amount of online gambling advertising and to raise more tax revenue from it.

This is an important discussion. Some of the facts offered earlier by the Opposition were completely astray from reality, and I strongly support what the Government are doing to incentive business, encourage more people into work and, above all, benefit the lowest earners. It is worth finishing with one last statistic from the OECD: the proportion of jobs that are low-paid is at its lowest level in this country for at least 20 years. That is a significant achievement on which we can hope to build yet further in the future.

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[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Before I speak to my new clause 18, I want to gently chastise the hon. Member for Gloucester (Richard Graham). He is not in his place at the moment, but I am sure that someone will respond to this for him. He very inappropriately raised quite selective data on inequalities, a subject that I spent nearly 20 years working on before I came to this place. He should know that we are the seventh most unequal country of the 30 developed countries in relation to income inequality. By some measures, we do worse than others, but overall, economic equality is not just about income; it is also about pay and wealth. We need to be mindful of this fact, and selectively reporting data is not a practice that we should be indulging in.

I should like to declare an interest as the chair of the all-party parliamentary group for health in all policies and as a fellow of the Faculty of Public Health, following more than 20 years of national and international work in this field prior to becoming an MP. It is lovely to see you in the Chair, Madam Deputy Speaker. New clause 18 would require the Government to commit to undertaking an assessment of the effects of the personal taxation measures in the Budget—including changes in the personal allowance and the higher rate threshold—on poverty, on the public’s health, including their life expectancy and healthy life expectancy, and in turn on public services.

The reason I have tabled this new clause is that, over the past eight years or so, I have seen the gains made under the previous Labour Government being totally reversed by this Government. Those gains included the reduction in the number of children and older people living in poverty and the improvements in health including an increase in our life expectancy and reductions in health inequalities. As the UN’s special rapporteur on extreme poverty and human rights, Philip Alston, said on Friday, the cuts and reforms introduced in the past few years have brought misery and torn at our social fabric. He went on:

“British compassion for those who are suffering has been replaced by a punitive, mean-spirited and callous approach”.

As I mentioned in my point of order earlier, I am afraid the Under-Secretary of State for Exiting the European Union, the hon. Member for Spelthorne (Kwasi Kwarteng) demonstrated this exact point in his comments on the “The Andrew Marr Show” yesterday. The lack of humanity he showed in his response to the plight of Emily Lydon, who is being forced to sell her home because of issues with transitioning on to universal credit, shamed not only himself and the Government of which he is a Minister, but this whole House.

[Peter Dowd]

Does my hon. Friend agree that the massive cuts in the public health budgets that are now controlled by local authorities have simply made matters considerably worse in the public health field?

[Debbie Abrahams]

My hon. Friend is totally right. Those budgets were ring-fenced to start with, but they are now absolutely emaciated. This is stopping us doing the prevention work that we should be doing. We made massive investments in public health, and they were having a real impact in terms of health gain. I am afraid that that is now going by the bye.

We know that there are 14 million people living in poverty in the United Kingdom, 8 million of whom are working—the highest level ever. It is fine for Conservative Members to speak on a positive note about employment rates, but they should be asking themselves why we have such high levels of in-work poverty. That, too, brings shame on us. Two thirds of the 4 million children living in poverty are from working households. How on earth are young people expected to learn and to excel at school if they are constantly hungry?

--- Later in debate ---

[Jack Brereton]

I agree with my hon. Friend’s comments, which show the responsible approach we on this side of the House have taken to the economy, compared with the approach the previous Labour Government took.

[Peter Dowd]

rose—

[Jack Brereton]

And now the hon. Gentleman is going to tell us about Labour’s future approach if they ever get back into office.

[Peter Dowd]

As the hon. Gentleman is talking about borrowing, does he agree that the Tory party in the last eight years has borrowed more money than all Labour Governments put together?

[Jack Brereton]

The hon. Gentleman will have seen the figures that show that debt is now coming down to lower levels than ever before, and we have seen the deficit back under control after the failings of the previous Labour Government who got us into an horrendous mess that working families in this country ended up paying for.

We are now seeing the numbers of low-paid workers at a record low, and we are seeing low taxpayers now paying record low levels of tax. The astonishing turnaround achieved in making work pay, not least through tax measures like those before us today, means that the Office for Budget Responsibility has now revised up its assumptions for the trend labour market participation rates and revised down its estimate of the equilibrium rate of employment. As the Treasury rightly highlights in the Red Book paragraph 1.15, both of these revisions raise the level of potential output, which is good news for the sustainability of the labour market boom which has undoubtedly been the greatest achievement of the policies pursued by this Conservative Government.

--- Later in debate ---

[Jack Brereton]

That is absolutely right. We should be looking at those figures, not some of the figures being used by Opposition Members, who want to keep people on a level of pay that is lower than it would ever be, because they want to keep people out of work and keep people in the workless society we saw under the previous Labour Government.

We on this side of the House have made work pay, and the long-term benefits of doing so are clear in the expansion of our non-inflationary production potential. The last time unemployment was so low, 40 or more years ago, there were massive peaks in inflation. The contrast with today is stark and we should be proud of our work as a country in digging ourselves out of the mess left by the Labour party.

For people in Stoke-on-Trent making work pay has added to the renaissance of our fine, proud city and its industries, and the situation is the same in once-forgotten manufacturing towns across the country, which are seeing a revival in real jobs for real levels of take home pay. Indeed the ONS estimates that real household disposable income per head was 4% higher in quarter 2 of 2018 than at the start of 2010, and the OBR expects it will increase by a further 3.2% by the end of 2023. At the same time, income inequality is down, and is lower than it was in 2010. To refute a number of the claims made from the Opposition Front Bench, the number of children in absolute low-income poverty has fallen since 2010.

[Peter Dowd]

I hear what the hon. Gentleman says, but if he is so convinced of his policies in relation to the issues he is talking about, why will he not support the provision in section 5 of the Act of an impact assessment on child poverty and equality? What has he got to fear?

[Jack Brereton]

The reason is that the facts show that the number of children living in absolute poverty has fallen since 2010 and will continue to fall, because of the policies of this Conservative Government.

--- Later in debate ---

[Jack Brereton]

Thank you, Dame Eleanor. The statistics I have used show that income inequality is lower than it was before the crash, and this is all alongside our continuing to reduce the deficit and debt, and meeting our targets three years early, while continuing to invest more in our vital public services. This responsible approach to public finances has seen our economy and the number of jobs boom, compared with the spiralling-out-of-control economy under Labour.

I was pleased that the Minister with responsibility for high streets—the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry)—visited my constituency on Friday and talked about some of the measures we are taking in this Budget to support towns like Longton and Fenton in my constituency, helping to address some of the issues on the high street. I hope we can get some of the £650 million pot announced in the Budget to convert many of their empty premises back into use and help with business rates to ensure that retailers with a rateable value of under £51,000 will receive relief, as that will be hugely welcome by the smallest retailers in our towns.

I also want to comment on some of the views expressed by Opposition Members about entrepreneurs’ relief. I was shocked that some of the views were so anti-business and anti-enterprise. We must condemn those views, which are damaging businesses in constituencies up and down the country.

[Peter Dowd]

rose—

[Jack Brereton]

Can the hon. Gentleman answer that one?

[Peter Dowd]

The hon. Gentleman must not misquote. We are looking for an assessment of entrepreneurs’ relief, and if he believes that what he suggests is good value for money for taxpayers he would support a review of that relief. What is wrong with that?

[Jack Brereton]

I just wanted to talk about the relief in Stoke-on-Trent as well. Entrepreneurs’ relief in my constituency will help many businesses that are starting up. We have some fantastic retention rates in Stoke-on-Trent; we have some of the highest new business start-up retention rates in the country, and that relief is critical in helping those businesses.

The measures introduced in the Budget to increase the time period from 12 to 24 months will help to ensure that it is businesses that are genuinely contributing to our economy that will receive the relief, making a huge contribution to the development of new technologies and innovation that we so much support in our economies throughout the country.

The proposed reductions in corporation tax in the Budget and the relief on capital allowances, which my hon. Friend the Member for Gloucester (Richard Graham) spoke about, will also be a huge support for many of the businesses in my constituency, particularly manufacturers. Around 15% of the economy in Stoke-on-Trent is made up of manufacturing businesses. Those measures will be a huge support for those businesses, increasing the amount of machinery and equipment that they can buy. Increasing relief on capital allowances and the investment allowance up to £1 million will help more of those businesses to buy new equipment and invest in the plant in their factories. I welcome that measure, which will help not just those manufacturing businesses, but the huge number of businesses up and down the country that produce that machinery and the workforces in those industries, which are so valued up and down the country.

--- Later in debate ---

For that reason, I fully support the measures in clause 5, which provide an opportunity to take yet more people out of income tax, building on the work done by the coalition Government. To return to a point made earlier by my hon. Friend the Member for Solihull (Julian Knight), it is very easy to create fiscal drag by having people pay higher taxes. Reducing those taxes reduces the drag and increases the amount of money in the economy. More people spend more money, which helps businesses to employ more people and creates a virtuous cycle from which we all benefit.

[Peter Dowd]

The hon. Gentleman refers to things being virtuous. I am sure that he believes that new clause 1 is virtuous, in that it sets out an assessment of the effect of reducing the threshold for the additional rate to £80,000, which is the Labour party’s policy. If he wants the facts and the evidence, why does he not support new clause 1, which will enable us to get all the facts and the evidence? Then we can have another debate, in which we can talk about Plutarch and Cicero until the cows come home.

--- Later in debate ---

[Peter Dowd]

The actual author of that article called the Prime Minister a word that would be unparliamentary if that is what he said. He called her that particular word. If the author is calling the Prime Minister a particular word, should the hon. Lady not accept the fact that the author did not say that?

[The First Deputy Chairman of Ways and Means (Dame Eleanor Laing)]

Order. The hon. Gentleman is rightly respecting parliamentary language. Rather than refer to language that is unparliamentary, if he simply wants to say that the alleged author of those alleged words denies them, he is at liberty to do so.

[Peter Dowd]

Thank you very much, Dame Eleanor. That is precisely what I wanted to say.

[Rachel Maclean]

I thank the hon. Gentleman for his intervention, but I fear that we are getting bogged down and dragged into areas that I do not wish to go into, given that I do not have very much time. I merely wish to make the point that Labour’s record demonstrates its disregard for managing public finances responsibly. What it also does, as we have heard from Members, particularly from those on the shadow Front Bench, is help us to see their approach to entrepreneurs—those people who sacrifice and work, sometimes for decades, to start businesses. They seek to attack and punish those people who often put their lives on the line and who often take considerable sacrifices to start businesses. Those entrepreneurs up and down the country may not be paying themselves for many, many years because they have to meet the payroll of their workers. We see the approach from the Opposition to those people. We are talking about entrepreneurs’ relief that will come to fruition only when that entrepreneur wishes to sell or dispose of part of a business that may have lasted over a lifetime during which they have paid tax, contributed to our economy and created jobs.

[Peter Dowd]

rose—

[Rachel Maclean]

I am sorry, but as much as I enjoy debating with the hon. Gentleman, I will not take any more interventions because I do not have much time and I have taken one already.

We have heard a lot of philosophy tonight. I will not quote Cicero again, but I will draw the House’s attention to the Jewish philosopher Maimonides who said more than 2,000 years ago that the greatest form of social justice and charity is to start a business and to create jobs. Therefore, I reject the Opposition’s amendment on the entrepreneurs’ relief. However, we should definitely keep it under review, and I am absolutely sure that the Treasury will do so because we on the Government Benches want to ensure value for taxpayers’ money in all the things that we do. We recognise that we are spending not the Government’s money, but our constituents’ money, and we need to do that carefully.

I now wish to address the movement on the tax thresholds, because this relates to a fundamental Conservative value.

Finance (No. 3) Bill

Peter Dowd Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give the Finance (No. 3) Bill a Second Reading because it derives from the 2018 Budget which confirmed the continuation of austerity and tax cuts for the wealthiest, failed to introduce a fair taxation system which protects middle and low earners but requires a greater contribution from the top 5 per cent of highest income earners, implied real terms per capita cuts for unprotected departments between 2019-20 and 2023-24, failed to halt roll-out of Universal Credit with planned social security cuts still to come, failed to raise the funding needed for mental health services, failed to provide the long-term funding needed for long-term adult social care, failed to provide adequate school funding, failed to address the funding gap that local councils face, failed to end the funding crisis facing public services, with police, teachers, nurses and doctors having no reassurances that the public sector pay squeeze will end in 2019, failed to tackle child poverty and growing inequality across our country, failed to tackle the fact that 87 per cent of the impact of the Government’s tax and benefit changes since 2010 has fallen on the shoulders of women, failed adequately to address climate change and delayed the much-needed reduction in the maximum stake for fixed-odds betting terminals until October 2019, and because the Bill is not based on an amendment of the law resolution, thus restricting the House’s ability to properly scrutinise and improve the Bill.

I have to give credit to the Financial Secretary to the Treasury: he managed to keep his face straight throughout his delivery. We had lots of flowery words from him, and I am surprised that we did not have phrases in his cliché-ridden speech such as “sunny uplands”, “green shoots of recovery” and “the end of the rainbow”. Why were those clichés not in his speech as well?

We have been asked to scrutinise a Finance Bill under the most difficult circumstances the Government could create, short of barring the Opposition from actually attending the House. The timetable set for the Bill meant we were expected to table amendments on Second Reading before the Bill had even been published—an abuse of power. To add insult to injury, printed copies of the explanatory notes to the Bill only arrived in the Vote Office earlier today. How busy Members are expected to provide proper scrutiny under these conditions is beyond me. It is an abuse of power. Worse still, the Government’s refusal to table an amendment to the law for the third Finance Bill in a row means that we will be unable to meaningfully amend this proposed legislation following Second Reading. As I said in my speech on the Budget resolutions, that is unprecedented. It is another abuse of power.

Last week, the President of the United States fired his Attorney General to undermine an investigation against him. Mr Trump also barred a journalist asking legitimate questions from the White House. Perhaps he gave the Prime Minister the odd tip on how to side-step conventions and constitutional process. Stitching up Committees with a false majority, obstructing scrutiny of the Finance Bill and giving a £1 billion bung to a minority party to keep the Prime Minister’s Government alive are further abuses of power. In any other country, we would use a word for this behaviour: malfeasance, plain and simple.

This is a desperate state of affairs, especially given how much the Bill is in need of change. The Government’s policies announced in the Budget fail to tackle a single one of the great challenges now facing this country after eight years of austerity. Most notably, this Bill of broken promises fails to end austerity, as the Prime Minister said it would during her conference speech—once she had finished gyrating. As our reasoned amendment points out, this promise has been broken: £4 billion of Tory social security cuts are still on their way. Only half the money cut from universal credit work allowances was returned to the programme. There was nothing on the social security freeze or the two-child limit.

[Kevin Hollinrake]

The hon. Gentleman mentions the reasoned amendment, which refers to the long-term funding of adult social care. Two Select Committees, the Health and Social Care Committee and the Housing, Communities and Local Government Committee, recommended a social insurance system in their inquiry’s report. Is he willing to support that cross-party recommendation as a solution to the future funding of adult social care?

[Peter Dowd]

The hon. Gentleman needs to speak to his own Government about cross-party support. My party cannot discuss these issues in this Chamber, let alone outside it. He would be better off engaging with his own Government on these matters.

What we have in the Budget is more spent on potholes than on our schools, not a penny more for everyday policing or fire services and nothing to begin to unravel the 40% budget cuts that have taken place across local authorities.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) asked a very straightforward question, and I am going to give the hon. Gentleman another chance to answer it. Will he, as suggested by my hon. Friend, engage in cross-party support—yes or no?

[Peter Dowd]

It is not in the Finance Bill. Frankly, the hon. Gentleman should worry more about the 8% cut to per pupil school funding in his constituency than trying to get me to answer questions that the Government should be answering.

[Vicky Ford]

On police funding, when the Government proposed hundreds of millions of pounds of additional funding for the police by raising the police precept, why did the Labour party vote against it? [Interruption.]

[Peter Dowd]

From a sedentary position my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) says that one in four policemen have gone from his constituency. That is similar to what has happened in my constituency and, I suspect, in the hon. Lady’s constituency. There is not one penny more of day-to-day spending in the Budget. She should be asking her Government why the police are still being underfunded.

[Ruth George]

Does my hon. Friend agree that the huge rise in council tax for council tax payers on every level of income is a highly regressive form of tax? In my Derbyshire constituency, people are having to pay more council tax for fewer police.

[Peter Dowd]

“Regressive” and “Conservative Government” go in the same sentence pretty easily.

The Budget does not move us towards parity for mental health services. It does nothing to end the crisis in social care, to which the hon. Member for Thirsk and Malton (Kevin Hollinrake) referred, or in children’s services. It gets worse as the days go on. The Budget was a continuation of austerity under anyone’s definition, and the Bill is a written testament to that broken promise.

[Charlie Elphicke]

As ever, the hon. Gentleman is very passionate. May I just take him back to the question put by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake)? Will he support that generous and very sensible proposal? Does he think that that is the right way to go about things?

[Peter Dowd]

Look, we are always prepared to look at any idea, but we are trying to deal with the problem today. We are trying to deal now with the hundreds of thousands of elderly people who are not getting the service they are entitled to.

[Alex Chalk]

Back in 2010, at the height of the crisis the hon. Gentleman’s party left us with, it was a Labour Chancellor, Alistair Darling, who said that Labour would close the deficit by 2020. That will not now happen until 2025. How can the hon. Gentleman credibly suggest that this is an austerity Budget?

[Peter Dowd]

That is remarkable coming from an hon. Member who is a member of the party that promised us all that the deficit would be gone by 2015.

[Mr Jim Cunningham]

The Government have apparently suggested that we should have a cross-party talk to resolve the issue of social care. They were offered that chance by the Labour Government before the 2010 election and they turned that opportunity down. Let us set the record straight. Tory Members talk about Labour Governments leaving office with high unemployment, but the Major Government left 3 million people unemployed. We introduced the minimum wage, and they said it would lead to 3 million people unemployed.

[Peter Dowd]

National living wage—the clue is in the title—but what the Government have proposed is not a living wage.

The Chancellor did not use the phrase “climate change” once during his hour-long speech—it felt longer than an hour, I’ll grant you that—despite the recent Intergovernmental Panel on Climate Change report, which warned that we only have 12 years to avert climate catastrophe. The Government cling to their woeful plastic straws initiative, but the only measure in the Bill addressed to the 100 corporations that produce 71% of our global emissions was yet another tax break. That is the sort of stuff that the Government should be tackling. This is for the oil industry. The Government have really got to get to grips with its approach to climate change. This oversight is catastrophic. History will remember the Government’s failure to tackle the greatest threat to humanity—that does not overstate it.

Meanwhile, the vulnerable suffer. The Government reneged on their promise to tackle the social devastation wreaked on our communities by fixed odds betting terminals, causing the resignation of yet another Minister. It has since become apparent that they reneged after lobbying by the gambling industry, in spite of the known link between these machines and people taking their own life. Here we have it: the Chancellor of big business pays little regard to the tragedy of lives lost to this awful addiction, as long as the gambling industry can keep making a return and continue its donations to the Conservative party—a fact.

So what remains in the Bill when all these pressing issues have been left out? There has been much discussion about the Government’s change to tax thresholds in clause 5. Let me make our argument clearly: after eight years of austerity, we will not stand in the way of any change that will put additional income into the pockets of low and middle earners, regardless of how that is brought about—[Interruption.] We have said that time after time. However, Labour’s policy remains that we believe we should be taxing the wealthiest more to deliver the end of the austerity that the Tories have failed to provide. We will therefore table an amendment to clause 5 setting out our tax proposals. These proposals would protect everyone earning below £80,000 a year— 95% of the population—from any further tax increases, while ensuring that the top 5% of our society pay their fair share. We call on the House to support our amendment in the Committee of the whole House.

[Colin Clark (Gordon) (Con)]

Will the hon. Gentleman concede that 1 million people will be lifted out of the higher rate of taxation and that many of them are consultants working in hospitals, GPs, senior police officers and senior council officers? Does he not recognise that that is a good thing?

[Peter Dowd]

The hon. Gentleman really must listen more—[Interruption.] I will send him a signed copy of my speech; he might learn a thing or two.

We believe in building a coalition of the many—a broad, democratic movement of 95% of the public—to spread prosperity across the furthest reaches of our country. We cannot in good faith increase taxes on those who have struggled for eight long years while the richest continue to accrue even more wealth.

[Vicky Ford]

I thank the hon. Gentleman for giving way—I was listening. What does he intend to do to individuals earning over £80,000 a year?

[Peter Dowd]

Actually, we set out our tax policies in “Funding Britain’s Future”, and I will send a signed copy to the hon. Lady for her to have a look at. Perhaps Government Members can have a tutorial with Sir Roger Scruton and tease out some of the issues.

On Brexit, yet again, we have seen the Government using our exit to hand themselves broad powers, indefinitely. This is a continuation of the theme that I described—of a Government’s demand for power, even though they are clueless about how to exercise it.

[Charlie Elphicke]

The whole House understands that the hon. Gentleman is very enthusiastic about raising the rates of taxes for richer people, but does he not remember that the experience of reducing the top rate of tax from 80% to 60%, and then from 60% to 40%, was that more money was brought into the Treasury on each occasion? Labour’s plans to increase taxes will mean less money for the Treasury and less money for the NHS.

[Peter Dowd]

International evidence does not show that, but let me give the hon. Gentleman a figure. The top 1% have received an increase in share of total income—from 5.7% in 1990 to 7.8% in 2016-17. That was identified by the Institute for Fiscal Studies.

[Nigel Huddleston (Mid Worcestershire) (Con)]

What I do not understand—if the hon. Gentleman really believes this—is why, for 99.3% of the time that the last Labour Government were in power, the top rate of income tax was 40%, whereas for the duration of this Government, it has been either 45% or 50%. Does Labour say one thing in power and a completely different thing in opposition for purely opportunistic, party political and vote-winning purposes?

[Peter Dowd]

A Conservative Member of Parliament talking about opportunism! It is not quite as bad as the Liberal Democrats talking about opportunism, I grant you, but there we are—[Interruption.] I think the hon. Gentleman should worry about working people in his constituency who, overall, are £800 a year worse off after the longest fall in wages since the Napoleonic era—I suspect that one or two Government Members were here at the time. The Prime Minister has stood staring at the Brexit menu for two years while her Cabinet devours itself in the queue behind her.

[Kevin Hollinrake]

According to the economist David Smith, if Labour policies at the last election had been implemented, people who were earning between £100,000 and £120,000 a year would have been paying, on that element of their earnings, a marginal rate of taxation of 72%. Does the hon. Gentleman feel that that is a fair burden of taxation on earners at that level?

--- Later in debate ---

[Peter Dowd]

In the context of a fair taxation system, as set out in “Funding Britain’s Future”—which, again, I exhort the hon. Gentleman to look at—we look at everything, and we will look at everything, unlike the Government.

The indecisiveness that I referred to means that the Government have to try to amass as much power as possible so that, if the Prime Minister cannot make her mind up, our hands are tied in a constitutional sense. It seems that, when Tory Brexit theocrats talked about wanting to take back control, they wanted us to give it to them. We cannot allow such a vast power grab to take place from a Government who have shown such disregard for our constitution already.

Turning to another issue, I draw the House’s attention to the measures that are supposed to address tax avoidance—hope springs eternal. Once again, these are simply inadequate. They are a series of half-measures that leave so much room to wriggle, they must have been written by the Prime Minister. The Government promised us a full public register of beneficial owners. Where is it? I have looked through the Bill numerous times—I have to admit, it was painful—and I can see no reference to it. It is yet another broken promise.

We have been waiting for two years for the Government to act to tackle burning injustices, yet they seem more focused on fanning the flames. Again, we find ourselves being forced to debate a Bill that is heavy on rhetoric, as evidenced in the speech from the Minister, and light on content. No wonder the Government will not let us amend it. They are scared that we would put something useful in it and add some policy to the lacuna that is there now.

[Siobhain McDonagh]

Does my hon. Friend agree that a response to the Taylor review would be the start of something real and possible and the abolition of payment between assignment contracts?

[Peter Dowd]

I refer my hon. Friend to the response given by the Minister earlier. We are prepared to look at all proposals.

[Vicky Ford]

The shadow Minister just said that the Bill is light on content, but it is 315 pages long. I have just read his Labour party document “Funding Britain’s Future”, which is eight pages long, three of which are footnotes. What am I missing, sir?

[Peter Dowd]

What is the hon. Lady missing? A great deal, I would contend.

[Rachel Maclean]

The hon. Gentleman talks about the policy on tax collection, so surely he will welcome the Government’s innovative approach to unexplained wealth orders. These measures have already been implemented. They are an innovative approach to capturing people who seek to avoid our tax system, and they are bringing wealth into the Treasury. Surely he can find something to welcome in that.

[Peter Dowd]

They have been so successful that the Government have only used them once.

[Mr Jim Cunningham]

The Bill might be thick, but it is low on content when it comes to public sector funding for public sector pay—we notice that that is for the spending review—and it is very light on content in relation to the Taylor review and people on zero-hours contracts.

[Peter Dowd]

My hon. Friend, who is a great advocate for his constituency, is spot on. Some 4.5 million children—7,000 per constituency—are living in poverty in the UK. Conservative Members should concentrate on sorting out that kind of problem. That is what the Government should be focusing on.

[Rebecca Pow]

The hon. Gentleman just talked about spurious rhetoric, but I want to take him back to what he said about climate change, because he completely misses the point. The Government are doing more on climate change than any before them. A great deal of it is being done by the Department for Business, Energy and Industrial Strategy, the Department for Environment, Food and Rural Affairs and the Foreign and Commonwealth Office—it is about joined-up thinking. We have the 25-year plan, the Agriculture Bill, the green growth strategy and the electric car strategy, and measures in the Budget draw this together. The plastics tax is one very good example of how seriously we take the issue.

[Peter Dowd]

Investment in renewables is down. The idea that the Government are green is itself green—it is a pathetic claim.

The Government promised us a public register of beneficial ownership. I have asked before: where is it? It is another broken promise. I call on the House to support the amendment to give the people of the United Kingdom action on the great challenges facing our nation, which the Government appear incapable of addressing and which have been ignored for too long.

I end on the note I started on: the abuse of power. It was once said that:

“Worse than a corrupt government is an incompetent one, not least because having the second characteristic does not exclude the first”.

Given the way the Government have behaved over the ability of Parliament to do its job, that notion is becoming closer and closer as the days progress. It should be deeply worrying to any democrat.

Financial Statement

Peter Dowd Excerpts

Monday 29th October 2018 Commons Chamber

[The Chancellor of the Exchequer (Mr Philip Hammond)]

Today, I present to the House a Budget for Britain’s future: a Budget that shows the perseverance of the British people finally paying off; a Budget for hard-working families who live their lives far from this place and care little for the twists and turns of Westminster politics. People who get up early every morning, who open up factories, shops, and building sites, drop their kids off at school, check on elderly relatives and neighbours—the strivers, the grafters and the carers who are the backbone of our communities and our economy. People who ask only of Government that we protect the jobs that put food on their table; that we deliver the public services their families rely on; and that we do it efficiently, minimising the amount of tax we need to take from their hard-earned wages. People who Conservative Members are proud to represent. So I say to them today: this Budget is unashamedly for you.

The British people put their faith in us to do the job, and today we repay that trust with a Budget that paves the way for a brighter future. Let me be clear why. The tough decisions of the past eight years were not driven by ideology—[Interruption.] They were not driven by ideology—they were driven by necessity and by Labour’s failure in government which led to our deficit soaring to a post-war record and our economy suffering the deepest recession since the second world war. That was our inheritance and, as ever, we did what needed to be done.

Now we have reached a defining moment on this long, hard journey, opening a new chapter in our country’s economic history where we can look confidently to the future and set our course for where this remarkable country will go next. Because today, I can report to the British people that their hard work is paying off, and the era of austerity is finally coming to an end.

I am sure that like me, many Members of the House keenly remember the last Budget delivered on a Monday. It was 1962: I was six years old. Tensions between Russia and the United States were rising, and a former Foreign Secretary turned Chancellor delivered a Budget amid Cabinet revolt. I am acutely aware of the phenomenon of false memory, but I could swear that I remember my parents turning to me and saying, “Philip, one day that could be you.”

The media have been full of speculation about the timing of today’s Budget. Some were hoping for a December Budget. I am sure the headline writers were ready with something like “Spreadsheet Phil turns Santa Claus”. Others were desperate for it to be on Wednesday—“Hammo House of Horrors” perhaps. But the truth is that by choosing today rather than Wednesday, I have not avoided the blood-curdling threats, the anguished wailing and the strange banging of furniture that is usually associated with Wednesday; I have been kindly invited to a special meeting of the 1922 committee this evening.

Our economy continues to confound those who talk it down, and we continue to focus resolutely on the challenges and opportunities that lie ahead as we build a new relationship with our European neighbours and a new future outside the European Union. But as we do so, let us not forget the remarkable achievements of the British people in clearing up the aftermath of Labour’s great recession. Because for all Labour’s carping and relentless negativity, talking Britain down at every opportunity, we the British people have a record to be proud of: eight straight years of economic growth; over 3.3 million more people in jobs; higher employment and lower unemployment in every region and every nation of the United Kingdom; wages growing at their fastest pace in almost a decade; income inequality lower now than at any time under the last Labour Government; an economy back on its feet again; an economy working not for the few, and not even for the many—an economy working for everyone.

We are at a pivotal moment in our EU negotiations, and the stakes could not be higher. Get it right, and we will not only protect Britain’s jobs, businesses and prosperity, but harvest a double “deal dividend”: a boost from the end of uncertainty, and a boost from releasing some of the fiscal headroom that I am holding in reserve at the moment. We are confident that we will secure a deal which delivers that dividend—confident, but not complacent. So we will continue to plan for all eventualities, and I will do so at this Budget with a three-pronged approach.

First, I have already allocated £2.2 billion to Departments for Brexit preparations, and in the autumn Budget last year I set aside a further £1.5 billion to be allocated for 2019-20. Today I am increasing that sum to £2 billion, and in the coming weeks the Chief Secretary will announce allocations to individual Departments.

Secondly, I shall today maintain the headroom to my fiscal rules broadly as set out in the spring statement, retaining firepower to intervene if the economy needs more support in the coming months. Thirdly, as I have been clear since moving to an autumn Budget, if the economic or fiscal outlook changes materially in-year, I will take whatever action is appropriate, if necessary upgrading the spring statement to a full fiscal event. The House can be confident that we are working for the best outcome for Britain and preparing for every eventuality.

I shall first report to the House on the economic forecasts of the independent Office for Budget Responsibility, and I thank Robert Chote and his team, once again, for their excellent work. The OBR expects growth to be resilient across the forecast period, improving next year from the 1.3% forecast at the spring statement to 1.6%; then 1.4% in 2020 and 2021; 1.5% in 2022; and 1.6% in 2023.

This Government have prioritised getting people into work because the best way to help people is to provide them with the stability of a pay packet every month. Since 2010, over 3.3 million more people are in work, and today the OBR confirms Britain’s “jobs miracle” is set to continue—revising up participation in the labour market, revising down the country’s equilibrium unemployment rate and predicting 800,000 more jobs by 2023. By my calculation, that is over 4.2 million net new jobs since 2010, making the shadow Chancellor’s prediction of 1.2 million jobs lost out by just the tiniest margin of 5.4 million people—roughly the population of Scotland.

But now we need to focus on pay, and with the proportion of low-paid jobs at its lowest since 1997, with regular pay growth at 3.1%—its strongest in almost a decade—and inflation forecast to average 2% next year, the OBR is forecasting sustained real wage growth in each of the next five years, which is a far cry from the dismal picture that the Leader of the Opposition is so desperate to paint every Wednesday.

I turn now to the fiscal forecast. We inherited the highest budget deficit in our peacetime history, but after eight years the hard work of the British people is paying off, and we will not squander their efforts. Today’s forecast, taking into account all announcements made since the spring statement, including measures I shall announce today, shows the deficit down from almost 10% under Labour to less than 1.4% next year under this Conservative Government, and falling to just 0.8% by 2023-24. Borrowing this year will be £11.6 billion lower than forecast at the spring statement—just 1.2% of GDP —and is then set to fall from £31.8 billion in 2019-20 to £26.7 billion in 2020-21, £23.8 billion in 2021-22, £20.8 billion in 2022-23 and £19.8 billion in 2023-24, its lowest level in over 20 years.

So we meet our structural borrowing target three years early and deliver borrowing of just 1.3% of GDP in 2020-21, maintaining £15.4 billion headroom against our 2% fiscal rules target. We are no longer borrowing at all to finance current spending, and today the OBR confirms that our national debt peaked in 2016-17 at 85.2% of GDP, and then falls in every year of the forecast from 83.7% this year to 74.1% in 2023-24. That is lower in every year than forecast at the spring statement, and it means that we meet our target to get debt falling three years early: a turning point in our nation’s recovery from Labour’s great recession—both our fiscal rules met, both of them three years early—so Fiscal Phil says, “Fiscal Rules OK”.

While we are working to get Britain’s debt down, to end the nightmare of wasting over £50 billion a year on interest, the party opposite would do the opposite. Labour’s plans would increase tax and borrowing by £1,000 billion, taking our debt to GDP ratio soaring to well over 100% of GDP—a reckless and irresponsible policy from a reckless and irresponsible party.

I have always been clear: sound public finances are essential, but they are not an end in themselves. So since I have been Chancellor I have taken a balanced approach, putting an additional £60 billion into our public services and investment in our future, cutting tax for 31 million people, and all the while reducing borrowing and getting our national debt falling. Now, we must do more, and thanks to the hard work of the British people, in this Budget we can do more.

I said at the spring statement that our careful management of the public finances was beginning to pay off, and that if the improvement we saw then continued, I would be able to provide more support to our public services on a sustainable basis. Today, the OBR confirms a significant improvement in our public finances—an upgrade that underscores the hard work of the British people and this Government’s stewardship of the economy since 2010, and means that I can deliver on the promise I made in the spring, setting out a new path for public spending and a clear view for the British people of the fruits of their hard work.

Next year, we will conduct a full spending review, setting our priorities for public spending within a sustainable funding envelope, deciding on the right balance between investing in Britain’s future and current consumption of public services. Today, I have set out an indicative five-year path for departmental resource spending—RDEL, as it is known to aficionados of public finance. To give context, in spending review 2010, average annual real growth was minus 3%; in spending review 2015, it was minus 1.3%; from next year, average annual real growth will be plus 1.2%—but that is not the limit of my ambition. When our EU negotiations deliver a deal, as I am confident they will, I expect that the deal dividend will allow us to provide further funding for the spending review. The hard work of the British people is paying off; austerity is coming to an end.

Mr Deputy Speaker, you will know better than most that every Chancellor likes to have a rabbit or two in his hat as he approaches a Budget, but this year, some of my star bunnies appear to have escaped just a little bit early. In June, my right hon. Friend the Prime Minister announced the single largest cash commitment to our public services ever made by a peacetime Government—an £8.4 billion five-year deal for our precious NHS, half as much again as the increase Labour offered the NHS at the last election. Let me be clear: we are delivering this historic £20.5 billion real-terms increase for the NHS in full over the next five years. So in a very important sense, we made our big choice for this Budget four months before it was delivered.

This was the right decision. Our NHS is the No. 1 priority of the British people, and as we approached the 70th anniversary of its foundation, they had a right to know the scale of our commitment to it. But the British people also care that money invested in the NHS goes to the frontline and to improvements in services, so we did not just hand over money; we agreed that the NHS would produce a 10-year plan, setting out how the service will reform, how waste will be reduced, and exactly what the British people can expect to get for their money.

That plan will be published shortly, but I shall give the House a sneak preview today. [Hon. Members: “Ooh!”] I, too, can poach a rabbit every now and then.

There are many pressing demands on additional NHS funding, but few more pressing than the needs of those who suffer from mental illness. Today, I can announce that the NHS 10-year plan will include: a new mental health crisis service with comprehensive mental health support available in every major A&E; children and young peoples’ crisis teams in every part of the country; more mental health ambulances; more “safe havens” in the community; and a 24-hour mental health crisis hotline. These new services will ensure that people suffering from a crisis, young or old, can get the help they need, ending the stigma that has forced too many to suffer in silence and ending the tragedy of too many lives lost to suicide. We are proud to have made this extraordinary commitment to funding our NHS, a precious institution that has been nurtured for most of its life by Conservative Governments.

Departmental spending allocations with be settled at the spending review next year. However, there are a small number of areas where I will provide further support now in order to deliver necessary certainty for forward planning. Local government has made a significant contribution to repairing the public finances and this Budget ensures local councils have more resources to deliver high-quality public services. We are giving councils greater control over the money they raise: through the adult social care precept; through our plans for increased business rate retention from 2020; and by removing the housing revenue account cap, so that councils can help to build the homes this country needs.

We will shortly publish our Green Paper on the future of social care, setting out the choices, some of them difficult, for making our social care system sustainable into the future. But I recognise the immediate pressures local authorities face in respect of social care. So today, building on the £240 million for social care winter pressures announced earlier this month, I will make available a further £650 million of grant funding for English authorities for 2019-20, and an additional £45 million for the disabled facilities grant in England in 2018-19. We will invest a further £84 million over the next five years to expand our successful children’s social care programmes to 20 further councils with high or rising numbers of children in care, allowing councils to improve services for older people, for people with disabilities and for children in care now, while longer-term funding decisions will be made at the spending review.

The UK spends more on defence than any NATO member except the US, but over the past year we have had stark reminders of the scale, scope and complexity of the threats we face. My right hon. Friend the Defence Secretary is working with the Cabinet Office and the Treasury to conduct a review into the modernisation of our armed forces in response to the evolving threat, which will form the basis for a comprehensive consideration of defence spending next year. As a former Defence Secretary myself, I understand the immediate pressures our armed forces are facing, so I will today provide an additional £1 billion to the Ministry of Defence to cover the remainder of this year and next to boost our cyber capabilities and our anti-submarine warfare capacity, and to maintain the pace of the Dreadnought programme to ensure continuous at-sea deterrence, a deterrent that allows us to sleep easy in our beds, but one that the Leader of the Opposition and the shadow Chancellor have spent their political lifetimes campaigning to abolish. Nobody should be in any doubt that those of us on the Government Benches are proud of our armed forces and we will always back them with the investment they need to keep this country safe.

It is not only our armed forces who keep us safe. Our counter-terrorism police play a vital role in defending Britain against the evolving threats we face. We committed in 2015 to spend 30% more on counter-terrorism capabilities over the current spending review period. And today I commit an additional £160 million of CT police funding for 2019-20 to protect CT police numbers in 2019-20 and to allow future CT police funding to be considered in the round at the spending review.

I recognise that policing more generally is under pressure from the changing nature of crime. I also recognise the representations made on this by many colleagues, such as my hon. Friend the Member for South West Bedfordshire (Andrew Selous), and I can tell the House today that my right hon. Friend the Home Secretary will review police spending power and further options for reform when he presents the provisional police funding settlement in December.

As I have already set out, due to the hard work of the British people, public borrowing this year is coming in substantially below forecast. This allows us to provide additional support for public services in the spending review and contributes to the significant reduction in forecast debt this year. But I also want to use this good news to give a little bit back, where it can be put to good use, in this financial year.

This year marks a century since the end of the first world war. And as we remember our fallen servicemen and women whose sacrifice ensured the freedom we enjoy today, many projects are raising money for veterans’ charities from sales of commemorative items on which VAT is charged. We cannot waive the VAT due on these sales, but we can make a donation with the VAT we will receive, and I commit today that the Treasury will mark the centenary of the armistice by making a donation of £10 million to the Armed Forces Covenant Fund Trust to support veterans with mental health needs.

Many of our nation’s village halls were built to commemorate the sacrifice of world war one, and many of them are being refurbished to commemorate the centenary. So I will also provide funding for grants equivalent to the VAT chargeable on such refurbishment projects. And as our focus moves from the anniversaries of the first world war to the second, I will also provide £1.7 million for educational programmes in schools to mark the 75th anniversary of the liberation of the Bergen-Belsen concentration camps, ensuring that the next generation hears the stories of those who survived the holocaust and of the British soldiers who liberated them, because as the terrible events in Pittsburgh this weekend remind us, the battle against antisemitism did not end with the defeat of Nazi Germany.

Across the length and breadth of England, our air ambulance services work tirelessly to get those with life-threatening illnesses and injuries quickly to the expert medical care they need. Funded entirely by philanthropy, they do a fantastic job, and today I am making £10 million of funding available to help them to go on doing so.

We are investing record amounts in our schools and that investment is paying off, with 86% of schools now rated good or outstanding, compared with 68% in 2010. But I recognise that school budgets often do not stretch to that extra bit of kit that would make such a difference. So today I am announcing a £400 million in-year bonus to help our schools buy the little extras they need—a one-off capital payment directly to schools, averaging £10,000 per primary school and £50,000 per secondary school.

I have one final in-year measure to announce: every Member of Parliament will testify that potholes are high on the public’s list of concerns. So as autumn takes hold, I am making an additional £420 million available immediately to local highway authorities to tackle potholes, bridge repairs and other minor works in this financial year.

But if we want sustainable world-class public services and rising living standards, we must make the serious long-term reforms our economy needs to tackle the productivity challenge, to prepare our nation for the technological change ahead and to show the next generation that our market economy can evolve once again to meet the needs of the new age. That is because, for us on the Government Benches, ending austerity is not just about funding public services; it is about real wage growth and leaving more of people’s hard-earned money in their pockets. This is the nation of the industrial revolution, of Stephenson, Whittle, Lovelace and Faraday—people whose ideas shaped the world around them—and today Britain once again can lead the world as we exploit a new wave of scientific and technological discovery pouring out of our universities and research institutes. We can solve the productivity challenge if we are willing to embrace the future, to make the choice to invest in infrastructure, research, skills and our regions, to manage change, not hide from it.

I believe passionately in this agenda, but even I would admit that at the last two Budgets I might have given the House just a little more detailed information on productivity and technological innovation than it strictly needed, so this time I will leave it to the Budget Red Book to set out more detail of the many measures we will take today. [Hon. Members: “More!”] Sensing the disappointment of my colleagues, I will just mention that the list in the Budget Red Book includes our commitment to technology, with £1.6 billion of new investments to support our modern industrial strategy, ranging from nuclear fusion to quantum computing; £150 million for fellowships to attract the brightest talent to these shores from around the world so that our scientific research can continue to lead the world; and our commitment to infrastructure, including our expanding of the national productivity investment fund once again to over £38 billion by 2023-24, so that over the next five years total public investment will grow by 30% to its highest sustained level in 40 years and will on average be an astonishing £460 million a week higher, in real terms, than under the last Labour Government. This is a Conservative Government investing in the roads, the railways, the research and the digital infrastructure that will power this country in the 21st century.

Half of the UK’s £600 billion infrastructure pipeline will be built and financed by the private sector. In financing public infrastructure, I remain committed to the use of public-private partnership where it delivers value for the taxpayer and genuinely transfers risk to the private sector, but there is compelling evidence that the private finance initiative does neither. The shadow Chancellor, of course, rages against PFI at every opportunity yet curiously forgets to mention that nearly 90% of those contracts were agreed by the last Labour Government. That has left the nation with a bill of more than £200 billion to pay off and would be the most potent symbol of the economic mismanagement of the last Labour Government, if only Gordon Brown hadn’t sold the gold.

Labour’s policy is to terminate all these contracts, triggering the ruinous penalty clauses that the Labour Government themselves agreed to in the first place and adding tens of billions more to an already enormous bill. It is a classic Labour solution: pouring good money after bad. I will not do that—we will honour existing contracts—but the days of the public sector being a pushover must end. We will establish a centre of excellence to actively manage these contracts in the taxpayers’ interest, starting in the health sector, but we will go further. I have never signed off a PFI contract as Chancellor, and I can confirm today that I never will. I can announce that the Government will abolish the use of PFI and PF2 for future projects, putting another legacy of Labour behind us.

We are investing in our nation’s infrastructure and backing the technologies of the future, but we know that the real engine of growth is enterprise. The right hon. Member for Hayes and Harlington (John McDonnell) lists

“fermenting the overthrow of capitalism”

as his pastime.

Mine is “reinvigorating capitalism for the digital age”, because I want Britain to be one of the great winners of the technological revolution. On this side of the House, we will always back enterprise and the market economy that underpins it, because we know that it is the only way to deliver the high-wage, high-skill economy of the future.

As we finalise our departure from the EU and deliver a deal that secures Britain’s future trade, we must unleash the investment that will drive our future prosperity. So today I can announce a package of measures to stimulate business investment and send a message loud and clear to the rest of the world: Britain is open for business. I am increasing the annual investment allowance from £200,000 to £1 million for two years, delivering on a long-standing ask of the British Chambers of Commerce; I am providing a targeted relief for the cost of acquiring intellectual property-rich businesses; and I am introducing a permanent tax relief for new non-residential structures and buildings, partly funded by an adjustment in the special writing-down rate for long-life assets from 8% to 6% to better align the tax and accounting treatment of these assets.

To support British exports, we will increase UK Export Finance’s direct lending facility by up to £2 billion. We will open the use of e-passport gates at Heathrow and other airports, currently only available to European economic area nationals, to include visitors from the United States, Canada, New Zealand, Australia and Japan. We will provide an additional £200 million of funding for the British Business Bank to replace access to the European investment fund, if needed. We will back another 10,000 entrepreneurs by extending start-up loans funding to 2021. Following representations from the Federation of Small Businesses, I am extending the new enterprise allowance, providing mentoring and support for benefit claimants to get their business ideas off the ground.

With thanks to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), we are working with the Financial Conduct Authority on expanding access to the Financial Ombudsman Service for larger small and medium-sized enterprises. As well as backing businesses to invest and grow, we will make sure that British workers are equipped with the skills that they need to thrive and prosper. We have introduced a new system of T-level vocational training, we have put the first £100 million into the new national retraining scheme, and, through the apprenticeship levy, we are delivering 3 million high-quality apprenticeships in this Parliament. But that system is paid for by employers, and it has to work for employers. So today, in addition to the flexibilities that I announced earlier this month, I can announce that for smaller firms taking on apprentices we will halve the amount that they must contribute from 10% to 5%. In total, this is a £695 million package to support apprenticeships.

As our economy evolves in the digital age, so too must our tax system, to ensure that it remains fair and robust against abuse, and raises the revenues that we need to fund our public services. The employment allowance was introduced to incentivise businesses to take on employees, but at a flat rate of £3,000 per employer, it does not provide any real incentive for larger employers. So from April 2020, we will target it at small and medium businesses with an employer’s national insurance bill of less than £100,000 a year. We will also bring the treatment of capital losses for the largest companies into line with that of income losses.

We recommit ourselves today to keeping family homes out of capital gains tax, but some aspects of private residence relief extend it beyond that objective, and provide relief for people who are not using the home as their main residence. So from April 2020, we will limit lettings relief to properties where the owner is in shared occupancy with the tenant, and reduce the final period exemption from 18 months to nine months.

I have received representations that I should abolish entrepreneur’s relief and put the savings towards funding our NHS commitments, but I do not believe we can have sustainable public services unless we have a dynamic economy, and encouraging entrepreneurs must be at the heart of any strategy for a dynamic economy, so I will retain entrepreneur’s relief, but to ensure it is going to genuine entrepreneurs, I will extend the minimum qualifying period from 12 months to two years.

In the period since the last Budget, we have explored all avenues to address the cliff-edge effect of VAT registration, but our options are restricted by EU law. We will continue to work on this issue as our future VAT regime becomes clear over the years ahead, and in the meantime, to give small businesses certainty and in response to representations from my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), the Federation of Small Businesses and others, I will leave the threshold unchanged for a further two years.

The off-payroll working rules, known as IR35, are designed to ensure fairness so that individuals working side by side in a similar role for the same employer pay the same employment taxes. Last year, we changed the way these rules are enforced in the public sector, but widespread non-compliance also exists in the private sector, so following our consultation, we will now apply the same changes to private sector organisations as well. But after listening carefully to representations made—including many from right hon. and hon. Friends—during the consultation, we will delay these changes until April 2020, and we will only apply them to large and medium-sized businesses.

There is one standout example of where the rules of the game must evolve now if they are to keep up with the emerging digital economy. Digital platforms delivering search engines, social media and online marketplaces have changed our lives, our society and our economy, mostly for the better, but they also pose a real challenge for the sustainability and fairness of our tax system. The rules have simply not kept pace with changing business models, and it is clearly not sustainable or fair that digital platform businesses can generate substantial value in the UK without paying tax here in respect of that business. The UK has been leading attempts to deliver international corporate tax reform for the digital age. A new global agreement is the best long-term solution, but progress is painfully slow. We cannot simply talk forever, so we will now introduce—[Interruption.] We will now introduce a UK digital services tax. This will be a narrowly targeted tax on the UK-generated revenues of specific digital platform business models. It will be carefully designed to ensure it is established tech giants, rather than our tech start-ups, that shoulder the burden of this new tax.

It is important that I emphasise that this is not an online sales tax on goods ordered over the internet; such a tax would fall on consumers of those goods, and that is not our intention. The digital services tax will only be paid by companies that are profitable and that generate at least £500 million a year in global revenues in the business lines in scope. We will consult on the detail to make sure we get it right and to ensure that the UK continues to be the best place in the world to start and scale-up a tech business. The tax will come into effect in April 2020 and is expected to raise over £400 million a year.

In the meantime, we will continue to work at the OECD and G20 to seek a globally agreed solution, and if one emerges, we will consider adopting it in place of the UK digital services tax, but this step shows that we are serious about this reform, because it is only right that these global giants with profitable businesses in the UK pay their fair share towards supporting our public services. I am already looking forward to my call from the former leader of the Liberal Democrats.

We are updating the rules of the game, but we must also make sure people play by the rules. And today we continue the work of the past eight years, where we have secured £185 billion since 2010 that would otherwise have gone unpaid, with a package of measures today to further clamp down on tax avoidance, evasion and unfair outcomes, raising another £2 billion over the next five years. We will make HMRC a preferred creditor in business insolvencies, to ensure that tax that has been collected on behalf of HMRC is actually paid to HMRC. We will end the practice of purchasing services through overseas branches to avoid UK VAT, and we will crack down on insurance companies routing services through offshore territories. And we will stop our generous R&D tax credits system being abused by reintroducing a PAYE restriction for the small and medium-sized companies scheme. Labour talk tough on tax avoidance and evasion. We take action.

Investing in our infrastructure, backing the technologies of the future, supporting British businesses, and updating our tax system for the digital age—that is how we will deliver the high-wage, high-skill economy of the future. But we must also recognise that technological change will bring challenges as well as opportunities, and there is one part of our economy that is currently confronting that challenge in spades: our high streets. Embedded in the fabric of our great cities, towns and villages, the high street lies at the heart of many communities, and it is under pressure as never before as Britain adopts online shopping with greater alacrity than any other large economy. So if Britain’s high streets are to remain at the centre of our community life, they will need to adapt. Today, we support them to do so, responding to calls from across this House, especially from my right hon. Friend the Member for Putney (Justine Greening) and my hon. Friends the Members for Southport (Damien Moore) and for Croydon South (Chris Philp).

We will provide £675 million of co-funding to create a future high streets fund to support councils to draw up formal plans for the transformation of their high streets, to invest in the improvements they need and to facilitate redevelopment of under-used retail and commercial areas into residential, at one and the same time helping with the housing challenge and delivering much-needed footfall to high street businesses. We will consult on how modernisation of the use classes order and compulsory purchase order regime can help to facilitate the transformation of the high street.

The change our high streets face is irreversible and it will take them time to adapt to it, but I know that many small retail businesses are struggling to cope with the high fixed costs of business rates. Since 2016, we have introduced business rates relief measures worth £12 billion, and many of these reliefs will have benefited high street businesses, but today I can go further. At the next revaluation, in 2021, rateable values will adjust to reflect changes in rental values, but I want to help retail businesses now. So for the next two years, up to that revaluation, for all retailers in England with a rateable value of £51,000 or less, I will cut their business rates bill by a third. That is an annual saving of up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafés. I will also extend the £1,500 local newspaper discount for a further year. Whatever the national press says, I have been assured of a warm welcome for my Budget from the Royston Crow and The Keswick Reminder.

Local authorities have long been able to provide discretionary business rates relief to other bodies, but not to themselves. And so following representations from my hon. Friends the Members for North Cornwall (Scott Mann) and for St Austell and Newquay (Steve Double), I am pleased to announce a new mandatory business rates relief for public lavatories, so that local authorities can, at last, relieve themselves. For the convenience of the House, Mr Deputy Speaker, and without wishing to get unduly bogged down in the subject, this relief—

[Peter Dowd (Bootle) (Lab)]

Toilet humour.

[Mr Hammond]

Well, at least I am demonstrating that we are all British. This relief will extend to any such facilities made available for public use, whether publicly or privately owned. I can honestly say that that is virtually the only announcement in this Budget that has not leaked. [Hon. Members: “More!”]

We cannot resolve the productivity challenge or deliver the high standards of living that the British people deserve without fixing our housing market. In last year’s Budget, I launched a five-year, £44 billion housing programme to deliver the biggest increase in housing supply since 1970, and I abolished stamp duty for first-time buyers on properties up to £300,000. Some 121,500 first-time buyers have already benefited from our new relief, and the number of first-time buyers is at an 11-year high. Today, I am extending that relief to all first-time buyers of shared ownership properties valued up to £500,000, and I will make the relief retrospective so that any first-time buyer who has made such a purchase since the previous Budget will benefit.

But we have more to do, so I can announce today a further £500 million for the housing infrastructure fund to unlock a further 650,000 homes, the next wave of strategic partnerships with nine housing associations, which will deliver 13,000 homes across England, and up to £1 billion of British Business Bank guarantees to support the revival of SME housebuilders. We are consulting on simplification of the process for conversion of commercial property into new homes, and because we want to see parishes and neighbourhoods enabling more homes for sale to local people to buy at prices they can afford, we are providing funding to empower up to 500 neighbourhoods to allocate or permission land for housing through the neighbourhood planning system for sale at a discount to local people in perpetuity.

I am also grateful to my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) for his review of build-out rates, published today. He concludes that the large housebuilders are not engaged in systematic speculative land banking—[Interruption.] Perhaps Opposition Members would like to read the report. My right hon. Friend makes several recommendations for reform of the planning system in respect of large strategic housing sites, and we will respond to his report in full in the new year.

Meeting the productivity challenge means tapping the potential of every region and nation. Our devolution agenda is giving power back to the people, and today we go further to fire up the northern powerhouse, fuel the midlands engine and back our regions across the UK. We are increasing the transforming cities fund to £2.4 billion and providing an additional £90 million to trial new models of smart transport, including on-demand buses—I think, Mr Deputy Speaker, that is what we used to call taxis in our day. We are launching a competition for proposals for business-led development corporations. We are funding 10 university enterprise zones. There is £115 million for digital catapults in the north-east, Northern Ireland and the south-east and for the medicines discovery catapult in Alderley, £70 million to develop the Defence and National Rehabilitation Centre near Loughborough, £37 million of additional development funding for northern powerhouse rail, and £10 million for a new pilot in Manchester to support the self-employed to acquire new skills. We are backing a new special economic area in south Tees, and we are providing £20 million to further develop the plan for the critical central section of east-west rail between Oxford and Cambridge. And here, in our capital, we support the delivery of a further 19,000 homes by improving the docklands light railway with housing infrastructure fund money.

The decisions announced in this Budget mean, in 2020-21, an additional £950 million for the Scottish Government, £550 million for the Welsh Government and £320 million for a Northern Ireland Executive. Obviously, there are much larger sums to come, as we move ahead over the spending review period with our NHS funding change.

I can also announce funding for further city and growth deals, including £150 million for Tay Cities, £350 million for Belfast and £120 million for North Wales, while negotiations progress with Ayrshire, Mid Wales and Borderlands, and will begin with Moray, Derry/Londonderry and Strabane as well.

I was pleased to be able to respond to a joint request from the right hon. Member for Belfast North (Nigel Dodds) and the hon. Members for Belfast East (Gavin Robinson) and for Belfast South (Emma Little Pengelly) to provide the city with £2 million of help towards the recovery of the city centre following the fire at the iconic Bank Buildings, and we are also moving forward with schools projects in Northern Ireland worth £300 million to increase the provision of shared and integrated cross-community education. And we have agreed to the establishment of a working group to progress plans for short-haul air passenger duty devolution.

To continue to support Scotland’s oil and gas industry, we will maintain headline tax rates at their current level and launch a call for evidence on our plan to make Scotland a global hub for decommissioning. Finally, to support our vital fishing industry as we leave the EU, we will invest £12 million over the next three years in cutting-edge fisheries technology and safety measures.

A Conservative Government delivering for all our proud nations and for all our English regions, driving growth and prosperity across our United Kingdom.

We are driven by a determination to ensure that the next generation will be more prosperous than ours, but we cannot secure our children’s future unless we secure our planet’s future. So at this Budget I take further action with a package of measures, set out in the Red Book, to ensure that we leave our environment in a better state than we inherited it.

There is one particular measure I want to mention. The shadow Chancellor’s recent accident has reminded us all of how dangerous abandoned waste can be, so I will provide £10 million to deal with abandoned waste sites, although I cannot guarantee to the House that £10 million is going to be enough to stop him falling flat on his face in the future.

I also said at the spring statement that we must become a world leader in tackling the scourge of plastic littering our planet and our oceans. Billions of disposable plastic drinks cups, cartons, bags and other items are used every year in Britain—convenient for consumers, but deadly for our wildlife and our oceans. Where we cannot achieve reuse, we are determined to increase recycling, so we will introduce a new tax on the manufacture and import of plastic packaging which contains less than 30% recycled plastic, transforming the economics of sustainable packaging. We will consult on the detail and implementation timetable.

I have also looked carefully at the case for introducing a levy on the production of disposable plastic cups—not just for coffee, but for all types of beverage—and I have concluded that a tax in isolation would not, at this point, deliver a decisive shift from disposable to reusable cups across all beverage types. I will monitor carefully the effectiveness of the action which the takeaway drinks industry is already taking to reduce single-use plastics, and I will return to this issue if sufficient progress is not made. In parallel, my right hon. Friend the Environment Secretary will look to address this issue through the reform of the packaging producer responsibility scheme. Working across government, this ambitious package reflects our determination to lead the world in the crusade to rid the oceans and the environment of plastic waste.

It is only by dealing with our debts and tackling the long-term challenges our country faces that we can sustainably raise wages and living standards. But I recognise that many people are feeling pressure on their household budgets now, and because the hard work of the British people is paying off, I am pleased to be able to announce today a series of measures to help families across Britain with the cost of living.

Turning first to duties, as my right hon. Friend the Prime Minister has already announced, we will freeze fuel duties for the ninth successive year, bringing the total saving to the average car driver to over £1,000 and to the average van driver to over £2,500. The tobacco duty escalator will continue to rise at inflation plus 2%. I have received numerous representations from my right hon. and hon. Friends on one particular subject, and in response I will be freezing beer and cider duty for the next year, keeping the cost of beer down for patrons of the great British pub. And in response to the concerted lobbying of my Scottish Conservative colleagues, I will also freeze duty on spirits, so that we can all afford to raise a wee dram to Ruth Davidson on the arrival of baby Finn, saving 2p on a pint of beer, 1p on a pint of cider and 30p on a bottle of Scotch or gin compared with the inflation assumption in the OBR forecast, while proceeding with the usual RPI increases on wine.

As promised at the autumn Budget 2017, so-called “white ciders” will be taxed at a new higher rate. From October next year, I can confirm that we will increase remote gaming duty on online games of chance to 21%, in order to fund the loss of revenue as we reduce FOBT—fixed odds betting terminals—stakes to £2.

From April 2020, APD—air passenger duty—will be indexed in line with inflation, but there will be no change in the duty rate for short-haul flights. The new 26-30 railcard, which I announced at Budget last year, will be available across the network by the end of the year, saving up to 4.4 million young people one third off their fares, and we launch a package of measures on affordable credit and support for credit unions, which is set out in detail in the Red Book.

The switch to universal credit is a long overdue and necessary reform. It replaces the broken system left by the last Labour Government, a system that trapped millions on out-of-work benefits for nearly a decade. This is not just a welfare measure; it is a major structural reform to our economy that will help to drive growth and employment in the years ahead, and I pay tribute to my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith), without whose tenacity universal credit would never have seen the light. However, I recognise the genuine concerns among many right hon. and hon. Friends about two issues, the first of which is the implementation of this programme. It is an enormous undertaking and we have always been clear we want the migration process to be as smooth as possible. I have already delivered nearly £3.5 billion to help with the transition, including a £1.5 billion package of support at last year’s Budget. Today I can go further, with a package of measures worth £1 billion over five years—[Interruption.] What a surprise. What a surprising response from the Opposition Front-Bench team. It is a package of measures to aid the transition worth £1 billion over five years, enabling my right hon. Friend the Secretary of State for Work and Pensions to introduce additional protections as existing welfare claimants move on to UC. She will announce details when she introduces the managed migration regulations later this year.

Secondly, I have heard the concerns about the rates and allowances within the design of the system. In my first autumn statement, I reduced the UC taper rate from 65% to 63%. Today, I can tell the House that I am increasing work allowances in universal credit by £1,000 per annum, at a cost of £1.7 billion annually once roll-out is complete. That will benefit 2.4 million working families with children and people with disabilities by £630 per year. Universal credit is here to stay, and we are putting in the funding it needs to make it a success because, on this side of the House, we believe that work should always pay.

Delivering higher wages for those in work is core to my mission as Chancellor. Under this Conservative Government, the poorest 20% have seen their real incomes grow faster than the richest 20%, and the proportion of jobs that are low paid is at its lowest level for 20 years, thanks to the national living wage introduced by a Conservative Government in 2016. From April, it will rise again, by 4.9%, from £7.83 to £8.21, handing a full-time worker a further £690 annual pay increase and taking his or her total pay rise since the introduction of the national living wage to more than £2,750 a year.

We accept the Low Pay Commission’s recommendations on national minimum wage rates and will support young people and apprentices with further above-inflation increases. The Low Pay Commission’s current remit is for the national living wage to reach 60% of median earnings by 2020, subject to sustained economic growth. Next year, we will give the Low Pay Commission a new remit, beyond 2020. We will want to be ambitious, with the ultimate objective of ending low pay in the UK. We will also want to be careful, protecting employment for lower-paid workers, so we will engage responsibly with employers, the TUC and the Low Pay Commission itself over the coming months, gathering evidence and listening to views to ensure that we get it right. I will confirm the final remit at the Budget next year.

EU Customs Union and Draft Withdrawal Agreement: Cost

Peter Dowd Excerpts

Monday 22nd October 2018 Commons Chamber

[John Glen]

I am grateful to my right hon. Friend for a number of Budget representations on that point. What I can confirm is that, when the sum of £35 billion to £39 billion was agreed, it was agreed on three principles: the UK would not make its payments sooner than it would otherwise have done; it would be based on the actual rather than the forecast; and it would mean that we would include all benefits as a member state. I recognise the wide range of concerns in the House, including those raised by my right hon. Friend, but we are at a delicate stage of the negotiations and the Prime Minister will be speaking to the House shortly.

[Peter Dowd (Bootle) (Lab)]

The right hon. Member for Wokingham (John Redwood) has some brass neck. He spent eight years being a cheerleader for austerity and he comes to the House today and says that; it is unbelievable. Amid the Tory quarrelling, the Prime Minister’s negotiations appear to succumb to a new failure every day. She has stood staring at the menu for two years while the Cabinet devours itself. It now seems that it may take a bit longer for her to make up her mind, demanding that the EU give further time in relation to the transition period. What we cannot fathom is how the Government are unable to negotiate our exit within the agreed period, begging instead to make it longer.

Humiliatingly, I have to say, we hear that 95% of the agreement is done, as though that is supposed to reassure us. Perhaps I may remind the Government that 95% of the Titanic’s journey was completed successfully. Meanwhile, the Government have gone from discussing a backstop to discussing a backstop to a backstop, to requesting an extension to the transition. These do not signal a Government who are about to emerge victoriously.

Let me ask a couple of questions, if this 95% deal is done. First, on the EU’s trade policy, during the transition, the common external tariff and customs regime will continue to apply to the UK, but third countries will have no legal obligation to continue to treat the UK as if it were a member state. Therefore, what trilateral discussions have the Government had with both the EU and third country partners, such as Mexico, South Korea, Switzerland and all the other countries with which the EU has preferential trading agreements in place, to ensure that the UK will continue to benefit from these arrangements during the transition period? Secondly, what progress have the Government made towards acceding to agreements facilitating trade, such as the pan-Euro Mediterranean convention that facilitates diagonal cumulation of origin, during the transition period and in any deal thereafter?

These matters, along with the question of the wider trade in goods, are easily resolvable with the transition period that has already been agreed. If the Government had got their act together, there would not be talk of additional time. The only thing that is costing the Government is this useless Government.

[John Glen]

It is difficult to discern the precise questions there, but I thank the hon. Gentleman for his comments. The Government are in a negotiation and there are a number of issues that are not yet resolved. With respect to the final state around our future freedom to trade, those are matters that will be reported on to this House before there is a meaningful vote. So he needs to be patient a little longer as we move through that last 5% and deal with those matters.

Oral Answers to Questions

Peter Dowd Excerpts

Tuesday 11th September 2018 Commons Chamber

[Elizabeth Truss]

I am sure my hon. Friend will recognise that we are not going to announce the contents of the Budget at today’s Treasury questions, but I point out that we are a Government who believe in low taxes: we have reduced taxes on basic rate taxpayers by £1,000. Of course, as well as putting that extra money into the NHS, my job as Chief Secretary is to make sure we get value for money from every penny we spend, and that is why we are developing a 10-year plan. We are improving the use of technology and we are getting better value for money from the drugs budget as well.

[Peter Dowd (Bootle) (Lab)]

Is the Chief Secretary aware in the discussions the Health Secretary may have had on NHS funding whether he mentioned his unilateral plan to ditch the 2013 pensions deal agreed with representative bodies, which was supposed to last for 25 years, and which may affect 1 million NHS staff?

[Elizabeth Truss]

What I am aware of is the deal that has been done with NHS workers to give them a 6.5% pay rise in exchange for reform over the next three years. We know that on average public sector workers get approximately 10% more in terms of pensions than their private sector counterparts, but we are also making sure that we have the right wages to recruit and retain people in the NHS.

[Peter Dowd]

Clearly, the Chief Secretary to the Treasury does not even know what she has put out in her name. The pension changes snuck out on Thursday evening could negatively affect the pensions of a further 4 million public sector workers—[Interruption.] No, that is not the case. So I ask on behalf of those dedicated public sector workers—nurses, doctors, social workers, teachers, support staff and refuse collectors—will the Chancellor withdraw these snidey proposals and honour his predecessor’s deal? Is that too much to ask? Or will millions of staff in the public sector be let down and betrayed yet again by this Government?

[Elizabeth Truss]

I think the Labour party has misunderstood the announcement we made last week, which will actually ensure that more money goes into public sector pensions, in line with the deal that we did with the unions previously.

Public Sector Pay

Peter Dowd Excerpts

Tuesday 24th July 2018 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

(Urgent Question): To ask the Chief Secretary to the Treasury if she will make a statement on the public sector pay announcement.

[The Chief Secretary to the Treasury (Elizabeth Truss)]

I am delighted to have this opportunity to discuss today’s announcements of public sector pay rises.

Last September, I informed the House that we would scrap the cap, and now we are delivering on that commitment. What we are announcing today amounts to the biggest pay rise in almost 10 years for about 1 million public workers across Britain, including teachers, armed forces personnel, prison officers, police, doctors and dentists. This comes on top of the positive news we were able to announce in March that 1 million nurses, midwives, porters and other NHS staff would receive a 6.5% pay rise over three years. That deal was a benchmark example of where high pay awards are agreed in return for modernisation of terms and conditions.

We were able to announce these pay rises thanks only to the hard work of the British people, which has brought down the deficit by over three quarters and allowed us to reach the point where the debt will begin to fall this year. We did not listen to the siren calls from the Opposition for damaging splurges, and that is why today we are able to scrap the cap and increase public sector pay. These new pay deals represent what this Government are about. They are affordable and responsible, while making sure that we continue to provide the public with world-class public services. They also reward our hard-working public servants.

It is great, on the final day of this Session of Parliament, that we are able to give every person who works in the public sector positive news on which to enjoy their summer.

[Peter Dowd]

These uninhabited proposals will do nothing to repair the damage done to our brilliant public sector workers by this Government’s slash-and-burn policy in relation to public sector pay. Over the past seven years, our teachers have lost £2,500, our firefighters £3,000, our prison officers £4,000 and our paramedics £4,000 in real-terms pay cuts. Even the armed forces have been affected by this stingy Government.

Yet the Government think it is enough to announce to the press—to the press, Mr Speaker, yet again—an uncosted proposal that will, at best, leave workers just about breaking even on their austerity-slashed pay, while civil servants and others continue to see their pay cut. This is a mendacious PR exercise. Based on today’s announcement, after eight years of real-terms pay cuts for employees in the public sector, our police officers, junior doctors, some specialist doctors, GPs and dentists are all being offered a further real-terms pay cut.

Will the Minister now confirm what the additional cost of each announcement is to Departments? Will she also confirm that this cost is being siphoned from existing departmental spend, with no new money made available? This will have a disastrous effect on Departments already close to ruin from austerity; they will be forced to cut staffing levels and services to cope. Can she guarantee that there will be no reductions in staffing levels across the public sector because of this unfunded increase in pay? Can she guarantee that public services will not be adversely affected by her failure to provide proper funding? Will she explain why civil servants continue to see real-terms pay cuts? They are always at the back of the queue when it comes to pay. How much additional social security expenditure has resulted from seven years of cuts to public sector workers’ pay? Does she agree that it has been this Conservative Government’s policy for the past seven years to force thousands of public servants on to social security by cutting their income?

The Conservative party should be ashamed. The Government’s announcements today leave public sector workers treading water. These proposals will force threadbare Departments to make further cuts to vital services and to reduce staffing levels, and what for? All so that the Prime Minister can get a cheap PR hit to try to cling on to power. We do not buy it. Labour demands that public sector workers get the pay that they deserve.

[Elizabeth Truss]

Yet again, we hear from a Labour Front Bencher not a positive welcome of the news today, which will mean hundreds of pounds more in the pay packets of public sector workers, but yet more complaints and no solutions.

We have scrapped the cap, and we are making sure that public sector workers get a decent pay rise. Let me tell the House what that will mean for workers in the public sector. For teachers earning under £35,000, it will mean a 3.5% pay rise, earning them an extra £800 a year. Police will see a 2% rise, with the average police constable on a £38,000 salary seeing a £760 pay rise. Prison officers will see a 2% rise and a 0.75% bonus, with extra for those who are new recruits. Junior doctors will get at least a 2% pay rise, and the hard-working people in our armed forces will receive a 2% pay rise and an additional 0.9% bonus, to reflect the brilliant work they do for our country.

The hon. Gentleman asks me how these pay rises are funded. Unlike the profligate Labour party, we have worked to support every Department to ensure that these pay rises are affordable within their budgets. In the case of the Department for Education—[Interruption.] The hon. Gentleman asked me the question. Does he want to hear the answer or not? [Interruption.] He obviously does not.

Taxation (Cross-border Trade) Bill

Peter Dowd Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 16th July 2018 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

Given that there may not be a Third Reading, I will start very briefly with some thank yous. I would like to thank Scott Taylor, one of our researchers. I would also like to thank the work of the Public Bill Office, particularly that of Colin Lee and Gail Poulton, who have been absolutely excellent in their support to all of us who have been here throughout the passage of the Bill.

I want to talk about the history of the Bill and how we got to this point. We had the Committee stage earlier this year. On the Saturday morning after it finished, and almost out of the blue, the UK Government announced that they would not be entering into a customs union. They clearly did not think it through, bringing out the announcement at the most stupid time: after all the debates in Committee. It was totally ill-thought-out.

We then had the Chequers agreement on 6 July. The White Paper was published on 12 July, which Members will note was the day after the amendments were tabled to this Report stage of the Bill—we all had to table our amendments before we had actually seen the White Paper. I thank the Minister for coming to Westminster Hall to give us some level of reassurance, but pretty much all the reassurance he could give was, “Please look at the White Paper that’s coming out on Thursday.” It has, therefore, been really difficult to prepare for the Bill. It has been really difficult to write this speech, trying to game exactly what is going to happen tonight. I am still not clear.

There are too many factions in this House. We have the UK Government, the Conservative remainers, the European Research Group, the Democratic Unionist party, the Labour leavers, the Labour remainers and the Labour Front Bench. The UK Government will not support things put forward by anybody who supports remain. The Labour Front Bench will not support anything put forward by the Conservative remainers. The members of the ERG will not support anything put forward by anybody except themselves. The Democratic Unionist party will support whatever the UK Government tell it to, on the basis that it is being paid to do so. It is a complete shambles. Trying to do anything sensible in this House is incredibly difficult, especially given that we know there is a majority for a customs union among the Members of this House. Despite that, we are going to end up in a situation where members of the ERG, who believe in the polar opposite of a customs union, are having their amendments accepted. When the rest of us put forward anything vaguely sensible, our amendments are not accepted.

This is certainly not about sovereignty for the people or sovereignty for Parliament; it is about sovereignty for a very small group of elite Tories who want to have their say. The Government are letting them have their say. I could not be more angry about the fact that the ERG’s amendments are apparently going to be accepted. I do not want to direct all my ire at those on the Government Front Bench. Those on the Labour Front Bench need to be absolutely clear on their position. They need to be clear that they will support the softest possible Brexit. If they are talking about a jobs-first Brexit, they need to recognise the benefits of the customs union and the single market. They have the opportunity to do that tonight by supporting some of the amendments that have been tabled by those who support a soft Brexit.

The Scottish National party does not support fully a number of amendments that we plan to vote for tonight. Our position is that Scotland voted to remain in the EU, so we would like to remain in the EU. Scotland supports remaining in the single market and the customs union, so the SNP will support anything that keeps us in the single market and the customs union. In the absence of those options being on the table, we will do what we can to protect the economic and cultural interests of the whole United Kingdom. Even though some of the amendments are not brilliant, we will vote for anything that makes Brexit slightly softer than the Brexit that is being proposed. I needed to make it clear that just because we support an amendment here does not mean that it is a preferred option. It means that it is not quite as bad as some of the other options.

I make it clear that I will press new clause 16, in my name and the names of my colleagues, and I would also like to speak in favour of our other amendments. The SNP position is crystal clear, as I said. The UK Government position is not. I welcome some clarity that is given in the White Paper that was published after Chequers, but I have major concerns about some of it. It mentions specifically a trusted trader scheme. On the trusted trader scheme that we have—the authorised economic operator scheme—I have raised concern after concern about it, and I am not the only one; organisations such as the British Chambers of Commerce have, too. If there is to be an expanded trusted trader scheme, it needs to actually work. It needs to be applicable to small businesses and businesses need to be able to access that scheme. We are now at the stage that businesses should know what those schemes are. If the Government are going to bring them forward, they need to do so as quickly as they possibly can so that businesses can be clear on what basis they will be trading in future. That is really important.

I am pleased to see that diagonal accumulation has been recognised in the Chequers agreement. I have been talking about it for some time, and I am really glad that it has been recognised and that we will have a situation where we will possibly still be able to export cars to South Korea, because that is really important for our car industry. I am pleased that the Government have now made it clear that they are pursuing that.

Protective geographical indicators are also mentioned in the Chequers White Paper. I am slightly concerned about the way the Government are going on this. It would be very good to have more information around that. A PGI scheme that applies only to the UK and does not recognise EU PGIs is a bit of a problem, so we need more clarity from the UK Government on how they intend the PGI scheme to work. I know that there is a negotiation, but if we could have their point of view first, that would be very useful.

I want to briefly mention some of the other meat in the Bill and something that the British Retail Consortium brought to us. It encapsulated some of the issues with the Bill very neatly. It said that there are not yet agreements on security, transit, haulage, VAT and people and that we need mutual recognition on veterinary, health and other checks with the EU. It seems that the Government are pursuing some of this, so that is good news. We need investment in IT systems to deliver the customs declaration system. Again, I am still not convinced that this will come through in time, so if the Minister could give reassurance that it will, I would very much appreciate it. We need co-ordination between agencies at ports and borders, as well as investment and capacity and staff at ports. The Government have not done enough on both those things. They have not put the extra resource into ports. They have not told ports how they will be administering these things in the future. If ports are going to have to massively increase their staff numbers, they need to know now how they will do that.

On queuing, a two-minute delay at Dover will create a 17-mile queue, so it is not as though Operation Stack will just happen as normal. This will not be Operation Stack. It will be an incredibly large version of it, and Operation Stack was bad enough. The BRC also mentioned AEOs, particularly in relation to small and medium-sized enterprises. All those things are still concerns about the Bill and I will raise them on Third Reading, if we have a Third Reading debate, because I do not believe that the Bill is fit for purpose as it is.

I specifically want to talk about the new clauses from the ERG. If the UK Government are bound to accept them, we have a very, very severe problem. I have major issues with new clauses 36 and 37 and amendments 72 and 73. New clause 36 relates to reciprocity. Page 13 of the Chequers agreement says:

“At the core of the UK’s proposal is the establishment by the UK and the EU of a free trade area for goods.”

It then goes on to make clear on page 17 that

“the UK is not proposing that the EU applies the UK’s tariffs and trade policy at its border for goods intended for the UK.”

This new clause directly contradicts that.

What is the point in having a White Paper released on a Thursday if the Government are going to ignore it on Monday? I do not understand how we can be in that position. How can businesses know where we are going if the Government do not even know where they are going? For the Government to be accepting amendments by a group of around 14—who knows how many of them there are?—ERG members to get a hard Brexit is absolutely ridiculous. If there is going to be a Brexit, we need a Brexit that does what the Labour party suggests it should do: protects jobs. We need the Labour party to support a Brexit that protects jobs as well, not just us.

The Bill is a mess. It does not do what it set out to do, which is replicate the union customs code, and it does not now do what the Chequers agreement said it would on Friday. We need everybody in the House, from all the various factions I mentioned earlier, to get behind proposals that protect jobs and the sovereignty of the people, not just the sovereignty of an elite few.

[Peter Dowd (Bootle) (Lab)]

I read the White Paper on the train home on Thursday, if only out of a sense of morbid curiosity, but following the Prime Minister’s capitulation to the Brexiteers today, that curiosity has turned to a sense of the macabre. To begin with, we had the woman in the bunker with the blacked-out windows saying we were outward facing. Are we? This from the Prime Minister who invented a hostile environment for the Windrush generation and for disabled people claiming their rightful benefits and whose Government have been on the wrong side of the law more times than Arthur Daley.

The Prime Minister went on to state that we had a dynamic and innovative economy. Do we? Our economy is 35% less productive than Germany’s; we invest less and we have the most regionally imbalanced economy in Europe. Growth is sluggish and inflation stubborn. And on it goes—it gets more surreal. She says we live by common values of openness and tolerance for others and the rule of law. Really? The only thing the Conservative party is open to and tolerant of is big fat donations from Russian oligarchs. But here is where it gets really interesting. When she speaks about sticking to our principles, one has to wonder which principles she is referring to—the ones she referred to yesterday and which are enshrined in the White Paper or those she holds this afternoon, which tear the White Paper to shreds. Perhaps the Minister can enlighten us.

The Prime Minister wanted to deliver an ambition to “once and for all” strengthen our communities, our Union, our democracy and our place in the world. I will take those claims one by one: our communities have been ripped apart by austerity; our Union is in danger from Ministers out of touch with the needs of any nation and afraid to move away from their desks in case someone else takes it; our democracy is threatened by swathes of Henry VIII powers; and our place in the world is a laughing stock due to the Prime Minister’s supine sycophancy to Donald Trump, who humiliated her.

The White Paper—what is left of it—came from the pen of a Prime Minister obsessed with silly soundbites. She used to talk about “Labour’s magic money tree” until she wanted a magic money tree of her own with which to bribe the Democratic Unionist party, when that phrase was quickly ditched. What about the infamous “strong and stable” mantra? It turned out to be more like a strong and stable smell of panic during the election and was ditched as well. Finally, it seems that this White Paper has also been ditched.

As for Northern Ireland, I present, the buffer zone—a 10-mile-wide area along the entire boundary between Northern Ireland and the Republic. Under the EU’s trading rules, to be operational this buffer would have to be policed on both sides of the 10-mile divide. Did we really spend decades trying to get rid of divides in Northern Ireland only to resurrect them? I think not. As for the facilitated customs arrangement, we are not clear what about it constitutes a partnership, as it would effectively leave UK customs officials working to maintain a customs union that we are no longer a part of.

Regardless of who is responsible for managing the duties, it remains unclear how the FCA would be frictionless. Presumably, the final destination of goods would have to be queried as they enter the UK. This would slow down the passage of goods across our borders and prevent intricate supply chains from functioning properly. It would lead to waste, uncertainty and expense for business, to higher prices for consumers and to job losses and production moving abroad, as the right hon. Member for Broxtowe (Anna Soubry) pointed out. In that regard, the comments from the hon. Member for Gainsborough (Sir Edward Leigh) were unconscionable.

What about the UK border? Does the Minister expect checks to be in place to ensure that goods that claim the UK as their final destination are not diverted into the EU once they arrive? Presumably, we would need customs checks and controls between the EU and the UK to reconcile goods to documents when, for example, UK anti-dumping duties exceed those applicable on import. Can the Minister clarify? Can he tell us how many trusted traders—the Tories using the word “trusted”; that’s a laugh, isn’t it?—are currently registered with the Government’s scheme and how many they believe will be registered by the end of the transition period?

Of course, all this can be avoided if the House chooses to support Labour’s clear and pragmatic solution to the issues of frictionless trade within the EU and preventing a hard border in Northern Ireland. New clause 11 presents Labour’s practical solution to the problems that have confounded the Conservatives. In our new clause, we call on the Government to negotiate a new customs union with the European Union, to be in place when we leave the current customs union at the end of the transition period. That is the only way to ensure that we can have frictionless trade with our largest trading partner and help to prevent a hard border between Northern Ireland and the Republic. It is what business needs and producers want, and it is what would most benefit the public.

Banking Sector Failures

Peter Dowd Excerpts

Thursday 12th July 2018 Westminster Hall

[Peter Dowd (Bootle) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bone. I thank my hon. Friend the Member for East Lothian (Martin Whitfield) and the hon. Member for Stirling (Stephen Kerr) for bringing this important matter for us to debate, discuss and tease out. I thank the hon. Member for Beckenham (Bob Stewart) and the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) for their comments. I thank, of course, the hon. Member for Thirsk and Malton (Kevin Hollinrake), whose report set a good scene for us.

I want to briefly quote from that report. I know we do not have as much time as we would have if the hon. Member for Inverness, Nairn, Badenoch and Strathspey had not taken up so much time, but I am not criticising that.

[Mr Peter Bone (in the Chair)]

Order. That is not quite right. I think we have until 4.30 pm, so do not cut your remarks short because of that.

[Peter Dowd]

Okay. Thank you, Mr Bone. The report states:

“In the wake of the financial crisis, the banking sector’s reputation has suffered from a number of disturbing scandals, many of which have had a catastrophic effect on thousands of individual lives and livelihoods. They have also damaged confidence, resulting in reduced demand for business borrowing and, consequently, a slowing of economic growth.”

That encapsulates not just the context of those affected, but the broader sense of the economy.

This is not about bashing bankers. Other hon. Members have noted that many thousands of people work in the banking sector whose hands are clean regarding this. Let us not—we have not—go down the path of blaming everybody in the banking sector. My constituency has a large banking sector. Santander has a centre there with about 2,000 people. We all appreciate that it is not everybody in the banking sector.

[Bob Stewart]

It is about the morale of people who work for companies such as RBS. How could all those decent people, who are working really hard, want to be associated with these bloody criminals? They do not! It is really bad for their morale.

[Peter Dowd]

I think the hon. Gentleman should tell it as it is and stop holding back on these matters. Clearly, there is something rotten in the state of Denmark. The banking system appears, at times, to have fallen under the worst instincts of greed, instinct and, in some cases, a predatory capitalism, which others have alluded to.

This year marks the 10th anniversary of the Government bailing out the banks at the height of the financial crisis. In October 2008, the then Chancellor, Alistair Darling, announced £17 billion and, subsequently, £20 billion-worth of recapitalisation funds for Lloyds and RBS respectively. At the height of the crisis, taxpayers—everybody here and people in the Public Gallery—paid out of their own pockets, in one fashion or another, to the tune of £1.5 trillion. That is an awful lot of cash to come out of people’s pockets.

It is worth remembering that it was the ineptitude, at least, of certain bankers and the greed of others—not, I must say, a Labour Government—that trashed the global economy, leading to the UK financial sector receiving the largest taxpayer-funded bailout in history. That narrative has given many people a “Get out of jail” card. Blaming the last Labour Government is not helpful, because it takes attention away from the real culprits.

The taxpayers who funded the bailout of RBS and Lloyds have since found themselves rewarded by the Government, with the deepest cuts to public services. That has to be said, because it is a consequence of the banking crisis, too. There are consequences for individual businesses, for small and medium enterprises, but there are also consequences of that greed that we all—in one fashion or another, whether it is our brothers, sisters or parents—suffered. Let us not forget that, nor self-flagellate on this matter.

I have to tell the Minister, it is an inconvenient truth that the Chancellor has sold off taxpayers’ shares in Lloyds and part of our shares in RBS. According to the National Audit Office, the Government sold shares in Lloyds at a loss of £5.9 billion. The recent sale of 925 million shares in RBS left taxpayers with a £2.1 billion loss. That is a total of £8 billion taken out of the pockets of taxpayers and of small and medium enterprises. That money could have been used for compensation and redress. That is the fact of the matter. We should not be selling these things off when people are already queuing up to get back some of the money that was inappropriately taken from them; that is the context.

I turn now to the failures of the banking sector since the financial crisis. Several Members used their speeches to express concerns, for example about the number of banks closing in the high street, and those closures are happening despite the Government introducing the access to banking protocol to prevent closures. This issue about trust and confidence continues; we must have trust and confidence in our banks.

In 2015, the four big banks made £11 billion in profits from high street banking. It is clear that they are in a position to provide these vital services and curtail closures, which are contributing further to the decline of our high streets and leaving communities all over the country financially excluded. We were there for the banks when they messed up and they must be here for us in our communities now. We helped them and they have got to help us and our communities.

The next Labour Government are committed to ensuring that banks provide the financial infrastructure that businesses and communities need, and we will replace the access to banking protocol with alternative legal requirements. My hon. Friend the Member for East Lothian referred to those alternative legal requirements and he also raised the issue, as did others, of the Global Restructuring Group. It is worth my making a comment on that issue, too.

Apparently—indeed, evidently—the GRG was originally set up to support businesses that were in trouble and bring them back to financial health; apparently that was its original raison d’être. And where that was not possible, the GRG would manage the cessation of a business to protect the bank’s interests. There is nothing wrong with protecting the interests of a bank, if it is done reasonably, fairly and through the proper channels, and not with a predatory approach. However, thousands of small and medium businesses, many of which had been viable in the medium or long term, were put into the GRG and little attempt was made to help them. That has become apparent and these banks have got to recognise that that was the case.

I think the Tomlinson report has been referred to already today. It examined numerous cases of businesses consigned to the GRG and found very few examples of a business entering the GRG and then moving back out and into local management. It was a one-way street; it was a cul-de-sac for those businesses.

The Tomlinson report recorded strong evidence of RBS extracting

“maximum revenue from the business, beyond what can be considered reasonable and to such an extent that it is the key contributing factor to the business’ financial deterioration.”

So, the people who it was thought would help a business did not just fail to help it; they actually gave it a good kicking. That is the fact of the matter for many, many businesses. As I said, the very people who were expected to help save businesses did the opposite.

Of course, in their speeches today Members have cited a number of specific cases of businesses in their constituencies that were victims of this scheme, and “victims” is not too strong a word to use, because they were victims. There are heart-rending, heartbreaking stories of people that Members have brought to us today, and in our constituencies we have all encountered such cases, so these incidents are not isolated incidents.

All of that has meant that in certain situations the GRG effectively intervened in the valuation of assets, as has been indicated already today, triggered default and then took advantage of the consequences. Some businesses saw as much as a two-thirds reduction in their valuation in just two months. I repeat that—some businesses saw as much as a two-thirds reduction in their valuation in just two months.

I am aware that a complaints process is still ongoing between the RBS and its former business customers, and the victims of the GRG, as well as discussions about compensation. As I have said, many of us have been involved, to some degree or other, in this process. So I echo the calls made by hon. Members today and by my hon. Friends the Members for Norwich South (Clive Lewis), for Sefton Central (Bill Esterson) and for Stalybridge and Hyde (Jonathan Reynolds) in previous debates that this issue demands a full and independent public inquiry. Given the revelations in the Financial Conduct Authority’s section 166 report, there must be a comprehensive examination of all matters that could have led to practices that, at the very least, bordered on being illegal or were illegal. I know that the hon. Member for Thirsk and Malton was more robust in his approach to this issue than I have been, but I understand his sentiments.

The reality is that the Government’s response to what amounts to a scandal has been woeful at best, particularly when we consider the seriousness of the reports on this issue. Over the past decade, the relationships between banks and their customers have been damaged by a series of high-profile incidents. Business banking scandals, record fines and the closure of high street banks across the country have placed an insurmountable amount of pressure on this relationship.

The hon. Member for Thirsk and Malton says that one bank in particular is getting a bit tired of these indications. The suggestion that, in effect, we really ought not to be pushing this inquiry and that as a result their own good will is going, is frankly outrageous. It really is outrageous. Taxpayers were forced or required—whatever word people want to use—to bail out the banks 10 years ago, and quite rightly they feel aggrieved by the continuing culture in some situations in the banking system, which too often treats customers as a commodity and not as customers, which is really not good for the health of the economy. The question is this: what is the purpose of finance? We have got to get a grip and realise that the purpose of finance is to benefit the nation and not just a few.

Things are in pretty dire need of change, which is why Labour are committed to creating a more diverse banking system, backed up by legislation. A Labour Government would create a national investment bank, similar to the ones already operating in Germany and the Nordic countries, which will bring in private capital finance to deliver lending power. The national investment bank would also support a network of regional development banks that would be dedicated to promoting growth in their communities. The banks will deliver the finance that our small businesses, co-operatives and innovative projects desperately need, and in a trusting environment.

We need action now. We have had passion and anger, and quite rightly so, but what we need now is action. We need to put matters right as soon as we can. We do not need any more talk; we need action now. So, in that regard, I turn finally to the legislative process. As you know, Mr Hanson, a good deal of parliamentary time has been spent in talk and debate on these matters, and in talk and debate on other matters, which may be relevant for some people but are not relevant to the health of our economy, our banking sector and our businesses, including our SMEs.

So I make an offer to the Minister today, to help restore trust in the banking system. Yes, let us have a tribunal system; let us have a dispute resolution system; and let us have access to all those things. However, let us also have a tribunal system that we can all trust and believe in.

I give a commitment from the Labour party that if the Government want to set aside legislative time to put that tribunal into the system, they will have our full backing to do that, because we must take action now—not tomorrow, next week or next year. We must take action now.

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[John Glen]

I thank the hon. Gentleman for that intervention, but I will take the opportunity to correct him. The Government do not have a 70% shareholding. We have a 62.4% shareholding. We do not have control of the day-to-day running of the bank, in the same way as the Scottish Government do not have control of Prestwick Glasgow Airport, yet they have a complete shareholding in it. We need to be real. There is a difference between ownership and day-to-day control. I want to address the practical issues because our constituents want to know what is being done to deal with these challenges. Before I go into that, I want to acknowledge that in previous debates I was challenged by Members from constituencies in Scotland. I will visit Scotland for four or five days at the end of August during the recess to address specifically the issues around rural banking. I went to look at the mobile banking units of one of the banks in Derbyshire in the previous recess, and I take very seriously the concerns about how effectively they function in terms of support for disabled people.

[Peter Dowd]

What sort of message does it send to banks when all these closures are happening and in 2016 the Government decide to cut, for example, the banking levy from £3 billion to £1.3 billion, sequentially, year on year? The Minister can try to duck the issue, but he gives a bung to the banks while they close their branches, and that is not acceptable.

[John Glen]

I want to try to address our constituents’ concerns about bank closures and what the Government are doing to see that their services are provided. The Post Office and the banking industry have a commercial agreement that enables 99% of the UK’s personal and 95% of the UK’s business customers to carry out their day-to-day banking. I am concerned about the effectiveness of that arrangement, so I am determined that public awareness of those services should be greater. I am pleased that UK Finance and the Post Office have responded to my call for further action, particularly when the last bank in town closes, to make sure that the transfer of responsibility—

--- Later in debate ---

[John Glen]

I am happy to look carefully at the issues and the respective responsibilities and interaction between them that the hon. Gentleman raises. I fully accept the sensible point he makes.

I want to return to the case raised by my hon. Friend the Member for Stirling. Several specific cases were raised and my hon. Friend spoke passionately about his constituent’s case, which is illustrative of many of the experiences that sadly occur. Following my meeting, I received a letter from Ross McEwan in May that said that his complaints handling team would be happy to discuss constituency cases with Members. I encourage all Members to do so. I want to put this on the record. I particularly encourage my hon. Friend the Member for Stirling to raise his constituency case with the team. I am keen to understand what sort of response he gets and how satisfactory the process is.

As to the comments of the hon. Member for Bootle (Peter Dowd) about the sale of RBS shares, I am not one to enter into unnecessary partisanship in such discussions, because the issues are important, and I generally welcome the tone of the debate, but he must acknowledge that when the shares were purchased by the Government for £5.02 in 2008 it was not a rational economic choice. It was necessary for the Brown Government to secure the banking system. Therefore, to point out the difference in price, after the Government had taken advice from those who are stewards of the Government’s interest, based on value for money, is not really rational. Most consumers would not have purchased shares at the time in question; it was for the good of the nation.

[Peter Dowd]

Okay, so if we push the bank aside and forget that, how does the Minister explain the loss to the taxpayer in the sale of the Post Office, which was another billion or two pounds—or is that irrelevant as well? How does he explain the reduction of 26% in corporation tax for banks and other corporations, to 19%, when people in the Gallery cannot get a penny out of the Government?

[John Glen]

I am glad that the hon. Gentleman has conceded the point on RBS. I want to focus on banks, and I was responding specifically on the matter of RBS.

I want to set out what the Government have done to address the issues that came to the fore during the financial crisis, because the regulatory framework and what has evolved over the past 10 years is a foundation for some of the outstanding challenges that we need to resolve. Since the crisis, the Government have reformed the UK system of financial regulation for the benefit of the industry and the people who rely on it. We have bolstered standards across the sector and taken strides to restore public trust in financial services. I acknowledge that there is more work to be done, and I shall come specifically to the issues raised in the report of the all-party group, and in other work. We have regulators armed with comprehensive powers and responsibilities co-operating to identify and address risks across the financial sector. The Financial Stability Board has praised the UK for its successful transition to a new regulatory regime, and the International Monetary Fund has applauded the UK’s more resilient system. We have implemented reforms to improve individual accountability in the financial services sector, and that includes the introduction of the senior managers and certification regime, which promotes individual responsibility.

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) set out a list of individuals about whom he has outstanding concerns; and it must be right to hold people to account. Where evidence exists for individuals having behaved criminally or in a way that needs further analysis, it must be brought forward. I understand that the shadow cast over the issue by outstanding cases needs to be resolved by the regulator. However, the SMCR promotes individual responsibility, holding senior managers to account for misconduct that occurs on their watch. It ensures that individuals at all levels can be held to appropriate standards of conduct. Both those things were key recommendations of the post-crisis Parliamentary Commission on Banking Standards. The SMCR was implemented for all banks, building societies, credit unions and Prudential Regulation Authority-designated investment firms in 2016. The regime will be extended to cover insurance firms from December 2018, and all other Financial Conduct Authority-regulated firms in December 2019.

I want now to talk about the core issue of SME lending. Despite significant improvements to the system at large, I am acutely aware that concerns remain about misconduct within the sector.

Treasury Spending: Grants to Devolved Institutions

Peter Dowd Excerpts

Tuesday 3rd July 2018 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

I am not quite sure whether I need a wee dram after that speech by the hon. Member for Glasgow North (Patrick Grady). We have moved from the turgid to the ranting in one fell swoop, and it got the point where I was looking forward to the Chief Secretary’s speech, which takes something.

I will not regurgitate what has been said, because I could not make head nor tail of it, quite frankly, and I do not suspect the Members who made those speeches could, either. These debates come on the eighth anniversary of the Conservatives’ first austerity Budget, and we are still seeing the effects of that pernicious and ill-informed policy in these estimates.

Back in 2010, the then Chancellor outlined a package of cuts worth £81 billion, to be rolled out gradually, with many still to take effect during this Parliament. There has been an absolute decimation of the public realm, and the vast contraction in spending has had devastating social consequences. A cash-starved NHS is at crisis point; social care has been forgotten and ignored; there has been the longest fall in living standards since records began; and the Office for Budget Responsibility is saying that wages will stagnate for another two decades. Meanwhile, swingeing cuts to the regions have left the UK more unequal.

Today, the Local Government Association published a report showing that local authorities will have had £16 billion cut from their core funding by the end of the decade, leading to a £7.8 billion funding gap by 2025. When Conservative Members call for special consideration, I remind them that they all supported those decisions, with no dissent, year in, year out. With no codicils and no caveats, they supported every one of those spending cuts. They are now complaining and saying that they need their communities back up and running. Quite simply, they voted for these cuts in their own areas, and they should have the guts and the backbone to admit it.

Those cuts helped to create a sense of hopelessness and destitution in many places across the UK, one which no doubt contributed to the Brexit vote a few years after Mr Osborne’s slash-and-burn Budget. It is very strange that, after pursuing this unpopular and ineffective programme, cutting Department after Department, the Prime Minister managed to find enough cash to buy the support of the Democratic Unionist party. It is regrettable that DUP Members are not here today, but the fact is that the DUP should not have had to ask in the first place.

Yes, ironically, the Prime Minister sprouted the magic money tree in the rose garden of No. 10 on the very spot where the giggling David and Nick shook hands on the austerity deal. Indeed, £410 million of that deal is included in these estimates, with some £590 million left to be allocated. Perhaps the Chief Secretary could tell the House when the remaining millions promised to the DUP will be put before Parliament.

We have no issue with the funding of Northern Ireland. After all, following eight years of austerity, 370,000 people there are now living in poverty. What we object to is the Government telling the public during an election campaign that there is no fiscal headroom for investment, before immediately finding a £1 billion windfall to keep themselves in power. Unfortunately, the other devolved nations have not been privy to similar arrangements, as they could not afford to offer the Prime Minister continued tenure in office in return.

Looking north of the English border, the Scotland Office sees a significant reduction in its departmental budget. I also note that some spending has been allocated for city deals in Edinburgh, Inverness and Aberdeen. Alongside that funding, perhaps the Chief Secretary can tell us how much money the UK Government will invest in the new or recently signed city deals in Scotland, such as the Stirling and Clackmannanshire deal. Will she give us more details on the Glasgow and Clyde Valley city deal by updating us, for example, on whether there will be any additional Government funding for that deal, particularly for infrastructure projects?

Turning to Wales, the cash grant proposed for the devolved Welsh Government is 2% lower than the amount they received last year and comes at a time of unprecedented austerity for Wales. The Welsh Labour Government’s budget will be 7% lower in real terms by the end of the decade than it was in 2010-11 as a result of the UK Government’s cuts. That means there is £1.2 billion less to spend on public services. As with Scotland, this is the first financial year the Welsh Government have been given greater control over taxation. The Wales Act 2017 and the Welsh fiscal framework devolved stamp duty and landfill tax to the Welsh Government. Responding to that, the Government have reduced the block grant by £269 million to reflect changes to the amount of tax revenue the Welsh Government now collect directly.

Although the devolution of Welsh taxes is welcome, Labour is the real party of devolution and wants to ensure that the Welsh Government have a greater level of fiscal autonomy and financial self-determination. However, this also puts Wales in a vulnerable position. Welsh taxes will need to grow as fast as those in the rest of England to keep up with cuts to the block-grant. In the case of stamp duty, which has been replaced by a land transaction tax, Wales has received no agreement from the Government to protect any fall in revenue. That is particularly concerning given the deep-rooted differences in UK property market conditions, especially after Brexit, which risk leaving the Welsh Government exposed to risks that are outside their control. In addition, Wales’s slower population growth may lead to slower revenue growth than in the other nations of the UK.

The Opposition are also concerned by the method that has been agreed upon to determine how the Welsh block grant is cut. The comparable model means that Wales will lose out even if revenues per head grow at the same rate as everywhere else in the UK. When offered the same method, the Scottish Government rejected it outright, and the Welsh Government agreed to it only after the Treasury agreed to a Welsh needs-based factor being included in the Barnett formula.

So although the Government’s recognition of the Welsh population’s higher needs is a welcome step, the uprating of Barnett consequentials to reflect the high need must also be closely monitored. The transitional uprating of 5% and the agreed funding floor of 15% should not be considered a fait accompli by the Treasury. Instead, both rates should be regularly reviewed by this House and the Welsh Assembly, and, where necessary, uprated.

The day-to-day spending budget for the Welsh Government is yet another casualty in the Government’s continued austerity programme. The Welsh Government this year will see a 3.3% reduction in both their capital and resource budget compared with last year’s final budget. The reality is that the Treasury is pulling the rug from under the Welsh Government by demanding that they do more with less. It is the same old story that we have seen played out time and again, for example, in relation to local government in the UK. Ministers have cynically devolved taxation as a means to also devolve their austerity agenda. That is another case of the Tories not having the courage of their convictions; it is all a charade and an illusion. Financial settlements are dressed up, but in the end Scotland, Northern Ireland and Wales will inevitably find that they have less. Those nations deserve better from the Government; they deserve a better deal, one that is fair. With these estimates, they are not getting that deal and, to use the words of the Chief Secretary, “That’s a disgrace”.

--- Later in debate ---

[Elizabeth Truss]

I have already had some discussions about the Tay cities deal with the Secretary of State for Scotland, and we will look at the details. We constantly have to make sure that every piece of Government spending has the best possible value for money. It was significant that in the speeches from SNP Members we heard nothing about value for money or the fact that taxpayers pay for spending.

[Peter Dowd]

Will the Chief Secretary join me in congratulating the hon. Member for Stirling (Stephen Kerr) on actually getting an answer out of this Government?

[Elizabeth Truss]

My hon. Friend the Member for Stirling is an extremely effective Member of Parliament from whom Members from all parties could learn.