Peter Grant debates involving HM Treasury during the 2019 Parliament

Wed 8th September 2021
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Health and Social Care Levy

(1st reading)
Peter Grant Excerpts
Wednesday 8th September 2021

(1 month, 1 week ago)

Commons Chamber

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HM Treasury
Mel Stride Portrait Mel Stride
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First, the hon. Gentleman’s knowledge of my constituency is obviously rather deficient, because I expect that mine shares many characteristics in common with his. I do not dispute the fact that any major fiscal move, such as putting up national insurance and bringing in this levy in this manner, will have associated complexities and difficulties. My pledge to the House is that the Treasury Committee will, I am sure, after private discussion, decide that we wish to look more closely at a number of the issues that are being raised in this debate, including the one that he mentioned.

Let us be honest about the options that were available to the Treasury. How could we have squared the circle and funded £10 billion-plus a year? The first thing that the Treasury could have done is to seek to cut expenditure in other areas, yet I have no doubt that if it came forward with any proposals of that nature, the Opposition would have fiercely resisted that as austerity all over again. We have to understand that on the current projections, there are many unfunded commitments, including, for example, keeping our railways going, going for net zero, additional funding that will be needed for school catch-up and so on.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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Given the right hon. Gentleman’s experience on the Treasury Committee, does he not agree that a tax hike of this scale could—if it was necessary—be much more fairly and equitably carried out if the tax burden was spread across a number of different taxes, rather than 100% of the burden being landed on one single, narrowly based tax?

Mel Stride Portrait Mel Stride
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I will come back to the hon. Gentleman’s point, but let me just stick with the options. The second option was to lean into growth, to assume that we could grow our way out of this problem. We have just had a huge contraction of the economy. We are not yet back up to the pre-pandemic level, although the Bank of England thinks that we may arrive at that point some time towards the end of the year, and we have many headwinds to growth ahead of us, not least the bottlenecks in supply chains, the labour shortages that we have witnessed in certain areas, and many other issues.

The third thing that the Treasury could have done is to borrow more money, and that is probably what the Opposition would have done in this situation. Despite the fact that the Bank of England now seems to feel that there is more money—I suspect that the Office for Budget Responsibility will confirm that around the time of the Budget— because the economy is doing a bit better than we expected, probably to the tune of about £25 billion, it would be a very brave Chancellor who started to borrow yet more and more, knowing that one day it is possible that the markets might turn around and look at the United Kingdom and decide that they no longer have confidence to lend to us. That would be a very dark day.

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Nigel Evans Portrait Mr Deputy Speaker (Mr Nigel Evans)
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Order. Peter Grant is next, and then the time limit will be reduced to four minutes.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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I am pleased to contribute to this debate. As I listened to the hon. Member for Wycombe (Mr Baker) just now, the words that kept going through my mind were “Union dividend, Union dividend”—we are tied to a nation whose public finances are in a mess, unsustainable and in a dreadful state.

Before I come on to the regressive nature of the Government’s proposal, I want to touch on just how far it falls short of the promises that the Prime Minister and others made in order to get elected. They have claimed that they have a plan to reform social care in England. It is obviously not for me to dictate what that plan should be, but if they have one, perhaps the Minister will tell us what changes, if any, there will be in the balance of resources between the NHS and social care. What changes, if any, will there be to the arrangements to manage each individual’s needs as they make the transition from health to social care? What changes, if any, will there be to the balance in the provision of care for the elderly between residential and non-residential? What changes, if any, are planned to the balance of responsibility between the state and the family?

There are no easy or right or wrong answers to any of those questions, but although I do not have the answers, I know that there are questions. The Prime Minister does not. I do not believe the Prime Minister even recognises that any one of those questions must be faced up to before he can claim to have a plan, or even the first hint of a plan, to deal with the position that we have, or some of us have, in social care.

The second major problem is that, even if the crisis in social care in England could be fixed with money alone, this proposal would not deliver anywhere near enough, and most of the “not enough” is not going to social care. A lot of it will go to benefit the families of some care recipients—some, but not all; and guess which some?—leaving precious little to actually improve the service. To claim that anyone voting against this tax hike today is voting against meaningful improvements to social care is simply untrue, and those who are preparing to make those claims on their Twitter accounts know that what they are about to tweet is not true.

I am in favour of increased funding for our health and social care services. If necessary, I will support fair and progressive tax increases to fund them, and I will pay my share of those taxes quite happily. However, I will not support this proposal, because it is not fair and it is not progressive. It discriminates against younger people with average incomes in favour of older people with much higher incomes. It discriminates against people who earn their money through their own hard work in favour of people who earn their money through the simple fact of having had plenty of it to begin with. It discriminates against my constituents in Glenrothes and Central Fife and in favour of those in places such as the Prime Minister's constituency, where, according to the Government’s own statistics, the average income per person is nearly £10,000 a year higher than what my constituents have to get by on.

The Government have claimed—we have heard this in a number of Conservative contributions—that they already know which of the UK’s nations will contribute most to this tax hike, and which will benefit most. They have claimed to have conducted an analysis which shows that it is not regressive in terms of different income groups. Although our SNP amendment was not selected, I expect to see the Government honour the spirit of that amendment, not by the end of the year but by the end of the week. I expect them to publish the analysis that we have asked for—or is this another case of their claiming to have all the information until they are asked for it, when we suddenly discover that it does not exist?

The final substantial objection to the Government's proposal is that it is designed to grab powers away from the democratically elected Governments of three of the partners in this Union, and place them in the hands of a Prime Minister who has no mandate to do this even in England. I have no issue with anyone allocating additional resources to Scotland, but I have a big issue with signing up to a regressive tax hike with no guarantee whatsoever that the Barnett consequentials will not be siphoned off as a result of some later Budget decision. Any guarantees that we get from the Government today will be as worthless as the promises that they made in their manifesto in 2019.

Let me be clear: the SNP will continue to honour its manifesto commitments. Any Barnett consequentials coming to Scotland as a result of increased spending on health or social care in England will be passed on in full to health and social care services in Scotland. But within that overarching guarantee, who do the Government think has the mandate to decide exactly how Scotland’s health and social care funding is allocated? I doubt that there is a single person, even on the Tory Benches, who honestly thinks it is right to assume that, because a particular way of allocating funding might be right in England, it is automatically right in the other three UK nations, where health and social care are organised in a completely different way. There is all the difference in the world between allocating funding to be used in a way that honours the Scottish Government’s manifesto promises, and decisions being foisted on us in a failed attempt to cover up the fact that the British Government do not keep their promises, to the electorate or to anyone else.

If one of the Prime Minister’s heroes had been here today, he might well have observed that never had so many promises been broken in such a short time to the detriment of so many and to the benefit of so few.

Laura Trott Portrait Laura Trott (Sevenoaks) (Con)
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This area of social care has not had a happy history in respect of political point scoring, and, unfortunately, we have seen plenty of that today on the Opposition Benches. However, it is unacceptable for us to play Russian roulette with people’s life savings when it comes to social care. One in seven people are going to be affected by this. Just because their loved one died of dementia rather than cancer, their life savings are being entirely wiped out. That is not right, but it is right that we are doing something about it, and I am glad that we are seeing some element of cross-party consensus on the model. It is the Dilnot model, and the Health and Social Committee, of which I am a member, put it forward as a proposal. It was supported by the Liberal Democrats when we were in government with them, and to a degree, I think, by the Labour party. So at least we are moving forward slightly in that regard. The real question now is how we pay for this. There has been a lot of confected indignation on the other side of the House to cover up a lack of a plan. National insurance is imperfect in many ways, but, as Tony Blair said:

“If we want sustained investment in the NHS over a period of time, we are going to have to pay for it.”

He suggested that national insurance was the fairest and best way to do it. I agree with him, even if members of his own party do not seem to. Paul Johnson from the Institute for Fiscal Studies says that

“overall much needed reforms to social care are being introduced and unavoidable pressures on the NHS are being funded through a broad based and broadly progressive tax increase. That is better than doing nothing.”

It is incumbent on Opposition Members to really look at themselves and to understand whether they think real change is needed. If it is, they need to come up with a better alternative. Otherwise, they need to walk through the Lobby with Members on this side of the House who are taking difficult decisions on behalf of our constituents. These are not easy decisions. They are not decisions that can be explained away by saying that we are not doing this in a broad-based way when we are, or by making things up about this not being progressive when it is. We are taking these difficult decisions because that is what the Conservatives do in a moment of crisis.

My colleague on the Select Committee, my hon. Friend the Member for Peterborough (Paul Bristow), was right to say that reform was needed. This is an awful lot of money that we are putting into a system that is very broken. A third of social care staff leave every year and there are 120,000 vacancies in the sector. We will need to up the quality of provision and to inspect it properly. We will need to ensure that the integrated care services that are being put in place are assessed by the Care Quality Commission. We will also need to ensure that local government is held to account on the standards of care that it provides. These are all important reforms. We need to ensure that social care is truly part of the NHS, so that a nurse can take a year to go and work in the care service and then come back into a hospital. These reforms will all be necessary to ensure that we deliver on our high ambitions for change. We are taking steps to make that change. We will ensure that the options available to families are of high quality and that they will not take away their life savings. We are taking difficult decisions, and the Opposition need to look at themselves and decide whether they are doing the same.

--- Later in debate ---
Steve Barclay Portrait Steve Barclay
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I have just given way and addressed my right hon. Friend’s points head on. Let me, in turn, address head on the points raised by the shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves).

In the shadow Chancellor’s speech, she said that she opposed the levy despite, as a number of Members pointed out, the previous Labour Government taking a similar approach in 2002-03, because she supports taxing wealth. The problem with that is that only a broad-based tax base, such as income tax, VAT or national insurance contributions, can raise the sums needed for such a significant investment. Again, that was a point made by critics of the Government, including my good friend, my hon. Friend the Member for Wycombe (Mr Baker). It could not be raised by taxes on wealth. Currently £6 billion is raised from inheritance tax, £8.7 billion from capital gains tax and £12.3 billion from property transaction tax. Indeed, that case was demolished by the Chair of the Treasury Committee, my right hon. Friend the Member for Central Devon (Mel Stride), as well as by my hon. Friends the Members for Dudley South (Mike Wood) and for Thirsk and Malton (Kevin Hollinrake), who highlighted that to raise the revenue required requires a broad-based approach.

Peter Grant Portrait Peter Grant
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On the subject of cases being demolished, one of the cases that the right hon. Gentleman’s colleagues have made great deal of play of today is that of the fictional Yusuf in the Government’s own document. According to the Government, Yusuf’s care home costs are £700 a week. They claim that under the current system they would have had to spend £293,000 before they reached the current cap. The Minister will be aware—I hope he can count—that in order to spend £293,000 at £700 a week—

Rosie Winterton Portrait Madam Deputy Speaker (Dame Rosie Winterton)
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I would like the hon. Gentleman to put his question.

Peter Grant Portrait Peter Grant
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What percentage of people going into a care home have any chance of still being alive in nine years’ time?

Steve Barclay Portrait Steve Barclay
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One of the features of the Dilnot proposals—Dilnot has been very frank about this—is that his costs ramp up over time. That is why the initial funding is £5.4 billion, but obviously, the social care element will increase. I will come to the case put forward by SNP Members, who seem bizarrely not to want the Union dividend that is offered and to not be seeking that additional funding. Let me finish on the Opposition amendment—

Covid-19: Government Support

Peter Grant Excerpts
Wednesday 7th July 2021

(3 months, 1 week ago)

Westminster Hall

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HM Treasury
David Mundell Portrait David Mundell (in the Chair)
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I call the SNP spokesman. Your time, Mr Grant, is trimmed to four minutes. We have been able to allow everyone to participate.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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Thank you, Mr Mundell. I am pleased to sum up for the Scottish National party this evening. I commend my hon. Friend the Member for Midlothian (Owen Thompson) for securing the debate, and, as others have mentioned, for his tenacity in refusing to let the excluded become the forgotten. I commend everyone else who has contributed.

I summed up in a Petitions Committee debate on the same subject in December 2020. Most of what has been said today was said in December 2020. It was ignored then. It cannot continue to be ignored. What did not happen in December 2020 did not happen today either. Nobody has made a fulsome defence of the Government’s action, or inaction. In 2020, eight Conservative MPs spoke. None of them defended the Government. In 2020, we got platitudes and fake sympathy from the Minister who responded. I hope that that is one thing that will not be repeated here tonight.

There is a saying much loved by a certain type of business analyst, which is, “If you fail to plan, you are planning to fail.” That is exactly what the Government did in the 10 years between knowing that a serious potentially lethal viral pandemic was coming and it actually appearing. They planned for the public health implications. There was no planning at all as to what they would do in the almost inevitable situation where significant sections of the economy would have to be shut down to protect public health from the ravages of the virus.

It is safe to say that when the Prime Minister made his famous, or infamous, “Don’t go to the pub” speech, neither he nor the rest of the Government had any idea what they were going to do to protect those in the hospitality sector from the immediate and inevitable collapse of their businesses, or indeed, to help anybody else in any other sector. An indication of how hasty and ill-thought-out the Government’s response was is that one of the mainstays of that support, announced on 11 March 2020 —the business interruption loan scheme—had to be completely rewritten 23 days later.

It would be tempting to assume that that same chaotic, shambolic approach is the reason that so many self-employed people and small business owners got overlooked, but that would be wrong because it was not a mistake. It was not an oversight. It was not an accident. It was absolutely deliberate.

The Chancellor told the House in his 11 March Budget statement last year:

“There are millions of people working hard who are self-employed or in the gig economy. They will need our help too.”—[Official Report, 11 March 2020; Vol. 673, c. 280.]

He knew—the Government knew—that those people did not fit into the packages of support that had already been identified, but he went on to announce that the help they were getting was being allowed to apply for universal credit—a benefit that has been deliberately designed to be not enough to live on for any sustained period.

Let us look at one group of excluded workers: people who were persuaded in the past, by previous Governments, to set up their self-employed business as a limited company with themselves as the only shareholder and themselves as the only director, or perhaps with a close family member as another director. When the Government claimed in May 2020 that they had not had time to work out proper eligibility criteria to apply to that massive group of workers, that was tenuous, two months into the pandemic. It is beyond ludicrous to continue—to keep saying that 16 months in—but that is exactly the excuse the Government are using. The other excuse is that it is too hard to tell the difference between a shareholder of a company who actively works in the company and a shareholder whose only involvement is to take the dividends at the end of the year.

This is not difficult; it is not rocket science. It is easy. If only Governments and Government agencies were as willing to use data-matching technology to help people through a crisis as they are, quite rightly, to use it to catch benefit fraudsters and other crooks fleecing the finances of the public sector. That is all it needs; it needs only the will. If the Minister, as I expect, is going to defend the Government’s inaction, all I ask of him is that he do the excluded the courtesy of admitting to them that the reason the Government are doing nothing is that the Government do not care.

David Mundell Portrait David Mundell (in the Chair)
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I call the shadow Minister. Again, if you could stick to four minutes, that would be extremely helpful.

Financial Conduct Authority and Blackmore Bond plc

Peter Grant Excerpts
Wednesday 30th June 2021

(3 months, 2 weeks ago)

Commons Chamber

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HM Treasury
Nigel Evans Portrait Mr Deputy Speaker (Mr Nigel Evans)
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This is when the Dispatch Box on the Government side will be sanitised. I ask the Minister not to touch it until it has been sanitised.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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Before we adjourn, I wish to draw the attention of the House to the collapse last year of Blackmore Bond plc and in particular to look at what the Financial Conduct Authority did, what it could have done, and what it failed to do to prevent this.

Blackmore Bond plc was incorporated in July 2016, went into administration in May 2020, and has since gone into liquidation. Between October 2016 and November 2018, it raised £46 million in loans, known as mini-bonds, almost all of it from small-scale individual investors. They were repeatedly told that their investment was guaranteed to be paid back on time with regular interest payments. By the time the joint administrators had disentangled the company’s financial affairs, it was obvious that none of that £46 million was left to repay the bond holders. Their “guaranteed” investment of £46 million had been reduced to nothing.

Obviously, primary responsibility for that must lie with the company’s directors, Phillip Nunn and Patrick McCreesh, who were also the joint owners not only of Blackmore Bond but of about two dozen related companies. I will disclose some information later that may help Members to understand just how culpable I believe those two are. However, whether their conduct is found, in due course, to be criminal, civilly unlawful or just downright despicable, the scandal yet again raises serious questions about the regulatory framework that allowed Nunn and McCreesh to persuade people to put money they could not afford to lose into high-risk investments where losing everything was always a possibility.

In fact, an experienced investment adviser, looking at the promotional material the company sent out, could only conclude that losing everything was not only a possibility but almost inevitable. That is probably why the directors of Blackmore Bond did not approach investment houses or experienced investors; they deliberately targeted people they thought would be an easy touch.

Kevin Hollinrake Portrait Kevin Hollinrake (Thirsk and Malton) (Con)
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The hon. Gentleman mentions the regulatory framework, and I am sure that he will go on to say whether he feels there were also shortcomings from the regulator itself in this case. The FCA’s attention was drawn to the boiler-room tactics of Blackmore Bond and the fact that it was pretty much a Ponzi scheme back in March 2017, yet three years later the company was still operating. It is simply unacceptable that the FCA should have taken that approach and not been more proactive.

Peter Grant Portrait Peter Grant
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For the second time in a few days, the hon. Gentleman has managed to read my notes a couple of paragraphs ahead of me. I am going to come on to that.

My concerns cover not just the Financial Conduct Authority but other regulators, such as Companies House, the Insolvency Service, the Financial Reporting Council and the professional bodies that regulate the audit of limited companies. Of those, only the FCA falls directly under the remit of the Treasury, so that is what I will focus on tonight, but I will continue to apply for debates so that the part played by other regulators can be examined.

Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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Will the hon. Gentleman give way?

Peter Grant Portrait Peter Grant
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I think the sky would fall down if I did not give way to the hon. Gentleman.

Jim Shannon Portrait Jim Shannon
- Hansard - - - Excerpts

I am sure the sky will not fall down, but I appreciate the hon. Gentleman’s giving way.

Does the hon. Gentleman agree that financial devastations such as the Blackmore Bond scandal have the potential to be avoided if there is proper scrutiny by regulatory authorities, which the hon. Member for Thirsk and Malton (Kevin Hollinrake) referred to? Does he also acknowledge that, often, that work starts with us in this House making legislative change?

Peter Grant Portrait Peter Grant
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The hon. Gentleman is absolutely correct. Ultimately, the regulator is us. If we highlight deficiencies in the system, we must try to get them put right. That is partly why I was so keen to secure this debate.

As the hon. Member for Thirsk and Malton (Kevin Hollinrake) mentioned, in March 2017, the Financial Conduct Authority received information from a very reliable, experienced financial services professional that a company called Amyma Ltd was using high-pressure sales techniques to target individuals to persuade them to invest in Blackmore Bond. The source, a Mr Paul Carlier, described in detail what he had seen and heard, and explained exactly why he was convinced that it was illegal. He made a point of sending his concerns directly to the then chief executive of the Financial Conduct Authority, among others. As a mark of gratitude, the FCA wrote back and said that it was aware of the situation and it was being passed on to the appropriate department.

It was the end of 2019 before there was any obvious sign that the FCA had done anything. To be fair to it, when it acted, it did not hold back. It banned outright the sale of mini-bonds to the kinds of investors whom Blackmore Bond had been deliberately targeting. If the FCA had done that earlier, it could have prevented up to £26 million of the losses eventually suffered by Blackmore’s victims.

The FCA has said that the sale of these kinds of investments was an unregulated activity, that Blackmore Bond plc was not registered or approved by the FCA for any regulated activity, and therefore that the whole thing was beyond its scope. That is just not good enough. What the FCA is effectively saying is that it had the legal power to ban the sale of these mini-bonds absolutely but could do nothing to stop one rogue company selling them to one particularly targeted group of vulnerable investors. I simply do not buy that.

While the sale of these high-risk bonds to investors who wanted low-risk investments was allowed to carry on in an unregulated free-for-all, the promotion of those same bonds is a regulated activity. The FCA’s website says that all adverts and promotions for financial services or products

“must be fair, clear and not misleading”.

Blackmore Bond’s promotional materials failed all those tests—something I will return to soon. Again, it took the FCA far too long to do anything, and when it did something, it did not do enough.

The FCA will claim that at some point during 2019, it was able to get Amyma’s website taken down. It seemed less keen to be reminded that in August 2019 Paul Carlier had to tell the FCA that the website was back up again. It may be just coincidental that a few weeks after Blackmore Bond went into administration, the director and sole shareholder of Amyma placed that company into voluntary liquidation, having first reduced the company’s assets from £316,000 to nil in the space of 18 months, meaning that the creditors of Amyma, including Her Majesty’s Revenue and Customs, would not see a penny of the £188,000 they were owed. It appears that Blackmore Bond really can pick its professional and business advisers very carefully.

Coming back to the promotional materials, though, under section 21 of the Financial Services and Markets Act 2000, any financial promotion must either be issued by an FCA-authorised company or have its contents approved by such a company. There are exemptions, but I have no indication whatever that any of those exemptions comes close to applying to Blackmore Bond. So if Blackmore Bond issued financial promotions that had not been approved by an FCA-registered firm, that was an offence under the Financial Services and Markets Act and the FCA should have been dealing with it.

The company issued its mini-bonds in six ways. For each one it issued an “information memorandum”, which appears, as far as I can tell, to have been approved by an FCA-registered firm. But that was not the only marketing it did. My constituent, who has probably lost £40,000, provided me with a copy of a separate document that he received. It is dated 3 October 2016—the same date as the information memorandum for the first series of mini-bonds. The FCA has confirmed to me that it meets its definition of a financial promotion. It was therefore an offence that it was circulated without being approved by an authorised firm, and there is nothing in this document to suggest that it was ever approved by an authorised firm. The FCA is not convinced about that. Its view is that it “cannot categorically say” whether the document was or was not lawful when it was circulated. But if that is the case, surely, knowing what it knows now about the operation of Blackmore Bond, if it “cannot categorically say” that it was not a criminal offence to send it out to potential investors, it should be investigating it.

Then we come on to the requirement for this and any other financial promotion to be fair, clear and not misleading. I am aware of the time, so I can only give a few examples of statements in the document that are either blatantly false or extremely misleading. On page 5 it tells bondholders that their money will be backed by “100% asset-backed security”. Not true; it was never the intention that the bondholders would even be guaranteed first call on all the assets, never mind that there was never a time, after the first series of bonds was issued, when Blackmore Bond plc ever held enough assets to repay the value of the bonds it had sold.

On page 4 it says:

“Blackmore Bond is part of The Blackmore Group”—

that bit is correct—

“a multi-channel investment group with a proven track record.”

The Blackmore Group was only incorporated in February 2016; it cannot possibly have had a proven track record by October 2016. It certainly could not have realised the £22 million in profits and property development that is claimed in the same document.

On page 4 we are told that

“The Blackmore Group”

has

“assets under management of £25 million”.

So how come The Blackmore Group’s accounts for 2016, signed by the directors, tell us that the total value of their assets was £390,000, and that after allowing for creditors and other liabilities, the total value of the Blackmore Group at 2016 was £2,281? How can that have created assets under management of £25 million?

Finally, on page 18, the directors promised:

“There are no fees or charges”—

completely untrue. Page 24 of the information memorandum devotes over half a page to explaining why the company will have to pay fees. They say that they will pay fees essentially for the marketing of bonds and for investor relations, and that those fees will not exceed 20% of total bond value. They then entered into an agreement with Surge Financial Services Ltd—a company well known to those who have an interest in financial misdealings—that they would pay it exactly 20% of the total bond value.

What the directors forgot to mention in any promotional literature was that they were also going to pay themselves a management fee. During 2017, the directors of Blackmore Bond plc chose to pay £1.4 million of management fees to the Blackmore Group Ltd, of which they again were the sole shareholders, the sole directors and the sole beneficiaries. Why did they choose to conceal that information from this document, and from the information memorandum that was sent out to persuade people to buy their bonds? Effectively, the directors were making sure that their cut was cleaned out of Blackmore Bond plc’s accounts as soon as—sometimes before—it hit the bank account, so that whatever happened to that company, their money would be saved and the poor investors would be left with nothing.

Blackmore Group does not of course have to publish a profit and loss account, and even the very sketchy financial statements it does publish are not audited, so it is anyone’s guess what Mr McCreesh and Mr Nunn did with that £1.4 million, and that, as I say, was only up to December 2017.

During my investigations into this affair, I received a copy of a chain of emails between one bondholder and Patrick McCreesh, who, as I say, with Phillip Nunn, owns and runs the entire operation. The bondholder is not a constituent of mine. He was happy for me to quote at length from his emails. He is happy for me to give his full name, but I have chosen not to identify him entirely, but his name is John—and it genuinely is John.

John’s investment was with another Blackmore company, Blackmore Estates Ltd. The bond was due to be repaid in January 2020, but by March 2019 John had got worried, because he had not heard anything from Blackmore Estates for a while, and he wanted to know what had happened to his money. Patrick McCreesh advised him that Blackmore Estates was now part of Blackmore Bond plc, and set out to persuade him not to claim back the investment he was legally entitled to in January 2020, but to reinvest it in Blackmore Bond plc.

There were numerous email exchanges, but by 16 August John was really getting worried because his online account with Blackmore did not seem to show anything. There was no indication whether he had any money left at all. He then wrote:

“Patrick, I have entrusted you with my military retirement fund, my only savings. Unlike others I cannot afford to live without this money. You have had my investment since 2015 and I am yet to receive a single penny back. If things are going downhill why would you call me personally and persuade me to re-invest only a few months ago?”

That referred to a telephone conversation they had in about April 2019.

Three times further to that between August 2019 and January 2020 John reminded Patrick McCreesh in the most poignant terms that this was all he had. It was a pension he had got by serving with distinction in Her Majesty’s forces. Patrick McCreesh knew that John could not afford to lose the money, yet he deliberately set out to entice him to leave the money with McCreesh, and not to take back the money he was entitled to, but to put it into a company that by the summer of 2019 Patrick McCreesh and Phillip Nunn knew had no future. They had not published audited accounts for some time, but they had prepared draft accounts that showed that, in the first two years of its existence, one third of the bondholders’ entire money had disappeared. By July 2019, Nunn and McCreesh knew the business was dying. McCreesh still went out and deliberately targeted this poor gentleman to fleece him of what McCreesh knew was all he had.

As I say, I have pages and pages from the email exchanges between John and Patrick McCreesh in relation to, as I said earlier, whether the conduct was criminal, civilly unlawful or simply despicable. I am happy to share the remnants of my speech with anyone who wants to look at it. It makes it perfectly clear of the behaviour certainly of one of those two directors that to describe it as despicable would be excessively charitable to Mr McCreesh, and I have no indication that Mr Nunn would have been any better.

John will not ever get his military pension back, and there are 3,000 other Johns out there. They were all taken in by two individuals with a track record of dodgy financial dealing, but who are still free to go and set themselves up as directors of a different company and start all over again. That will not be by selling or mis-selling mini-bonds to people like John, because that is now illegal, but they will find another way. Until the Financial Conduct Authority and other regulators scare them out of the way, there will be another generation of Johns, and in 50 years from now or 100 years from now, our successors will be in the successor to this Parliament bemoaning the fact that billions of pounds have been taken out of the pockets of hard-working people and used to fund a luxury lifestyle for charlatans, crooks and conmen.

The Financial Conduct Authority was not the most culpable party in this. Nunn and McCreesh were, and they have to be called to account somehow. The Financial Conduct Authority was not the only regulator that failed because it did not have the powers, failed because it did not use the powers or possibly failed because it did not have the resources to deal with the amount of financial misdealing that is going on just now. But one way or another, for the sake of the next generation of Johns, the Financial Conduct Authority and the other regulators have to get their act together, and they have to do it quickly.

John Glen Portrait The Economic Secretary to the Treasury (John Glen)
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I congratulate the hon. Member for Glenrothes (Peter Grant) on securing this debate. I also pay tribute to the hon. Member for Strangford (Jim Shannon) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for their contributions. I extend my sympathies to the Blackmore Bond investors. The hon. Member for Glenrothes set out the distress that has been caused to those many individuals, some of whom are his constituents. I am painfully aware of their very challenging situation through my own conversations and correspondence, and this evening we have heard more of those troubling accounts. Given these difficult circumstances, it is only right that I explain the reasoning behind the Government’s course of action and some of the decisions that we have made so far. I will also touch on the conduct of the FCA, the independent regulator.

Let me first remind the House of the background to this situation. As Members will be aware, Blackmore Bond was an unregulated firm established in 2016. Between 2016 and 2018, it issued non-transferable debt securities, otherwise known as mini-bonds, to retail investors. It raised £46 million, involving approximately 2,800 UK investors, to be used in property development projects. Blackmore stopped making coupon payments in 2019 and administrators were appointed on 22 April last year.

The orientation of most of the hon. Gentleman’s remarks was about the failures of the FCA, but I want to try to address some of his other specific points. He asked about the way that Blackmore hid behind other regulated firms such as Amyma. It is true that although several other firms were involved in the distribution of Blackmore bonds, some of which were authorised by the FCA, the Blackmore bond itself was not regulated. Amyma was not directly authorised by the FCA. It was an appointed representative of another authorised firm, Equity For Growth (Securities) Ltd, between July 2018 and September 2019, when its status was terminated. The FCA intervened to take down Amyma’s website following further investigation. Similarly, as a result of steps taken by the FCA, Northern Provident Investments, an FCA-authorised firm, withdrew its approval of Blackmore’s promotional materials, meaning that its bonds could no longer be marketed. This is clearly a very complex area, but ultimately the FCA cannot be said to have the same set of responsibilities towards unauthorised firms engaged in unregulated activities.

Peter Grant Portrait Peter Grant
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The Minister gave the same dates on Amyma as me—between 2018 and 2019. Did it not strike him, as it struck me, that Amyma was an appointed representative of another company, but the concerns about it arose in 2017, before it appeared to be an appointed representative of anybody? Does he not agree that there is something to be looked at there and that the Financial Conduct Authority should be asking questions about it?

John Glen Portrait John Glen
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I have set out the record as the FCA has presented it. I am sure that the hon. Gentleman will wish to continue correspondence with the FCA on some of those unresolved matters. However, I do make the distinction between the different responsibilities that the FCA has with regard to the different actors in this case.

It is only right that we do our utmost to minimise the chance of episodes like Blackmore Bond taking place in future, so I want to turn to the regulation of mini-bonds and the steps we are taking to safeguard consumers, which was a key focus of the hon. Gentleman’s remarks. I want to be clear to the House that the Government are committed to ensuring that the financial services sector is well regulated and consumers are adequately protected. That is why in April we launched a consultation that includes proposals to bring the issuance of mini-bonds into regulation. This follows the action taken by the FCA to ban the promotion of high-risk mini-bonds. This work is the culmination of a review into the regulation of mini-bonds that I announced in May 2019, and it delivers on one of the recommendations of Dame Elizabeth Gloster’s recent report. The consultation closes next month, in July, after which the Government hope to bring forward plans to legislate in the autumn.

The hon. Member for Glenrothes also referred to the financial promotions regime, and I think that underlying that was a concern about what the Government are doing to improve the efficacy of the regime. We continue to keep the legislative framework underpinning the regulation of financial promotions under review, including whether it is suitable for the digital age. The Government have set out our intention to bring forward legislation to create a regulatory gateway for authorised firms approving the promotion of unauthorised firms. That change is designed to strengthen the regime by ensuring that the firms able to approve financial promotions are limited to those with the relevant expertise to do so. The FCA will be able to better identify when a financial promotion has breached the restriction and take action accordingly.

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill (Second sitting)

Peter Grant Excerpts
Tuesday 15th June 2021

(4 months ago)

Public Bill Committees

Read Full debate Read Hansard Text
HM Treasury
Pat McFadden Portrait Mr McFadden
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My hon. Friend raises a very important point. There are many reasons why clarity about the limitations of Government responsibility and taxpayer responsibility, to put it another way, would be extremely helpful. The very fact of producing the Bill will mean that the Government have asked those questions anyway. As I said earlier, the cost in this case is expected to be about £120 million. The costs of clause 2, which we will come to later, are expected to be over £300 million. Over both clauses the cost will therefore be more than £400 million. That is a large sum of public money that will, in the case of clause 2, be recouped over a period of years from pension scheme members.

Of course, it is possible to have investment failings on an even greater scale. Is there any upper limit that the Treasury would see to such taxpayer exposure, or is it always to be on a case-by-case basis? In theory, investment failings could cost billions rather than hundreds of millions. Our amendment seeks to clarify the Government’s thinking on that, which would be beneficial to Parliament and the public.

Those are the reasons why we have tabled this amendment. We think that the compensation scheme and the whole story of the collapse of LCF demands such clarity and that reports such as the one we have called for would be beneficial.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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It is a pleasure to serve under your chairship, Ms Ghani.

I shall speak to amendment 7, in my name, and in support of the official Opposition’s amendment 1.

Both amendments call for the Secretary of State to report back to Parliament on issues that collectively raise many still unanswered questions about the Bill, about the compensation scheme, and about why the scandal of London Capital & Finance was allowed to happen.

By far the biggest criticism of the Bill, which we again heard from witnesses today, is that it has been deliberately framed so narrowly that those questions are in danger of being ignored. I know that the Government will argue that framing it narrowly increases its chances of getting on to the statute book—I accept that argument—but there is a downside to doing that.

The biggest question that is still unanswered is: why do we expect compensation for the victims of one investment mis-selling scandal when so many people have lost so much—possibly a total of more than £1 billion —in other company collapses that share most, and sometimes all, of the key features of London Capital & Finance?

I should make it clear that I am not asking for the setting up of other schemes. We are not asking for approval at this stage, or for other failures to be included in the LCF scheme. All we are asking for is some clear indication that the Government are taking action to look at the wider issues.

The Government’s answer is that London Capital & Finance was regulated by the Financial Conduct Authority and that companies such as Blackmore Bond were not. That smacks of looking for an explanation to justify a decision that has been taken for a completely different reason.

Companies such as Blackmore Bond set out to make prospective investors believe that the FCA had a role in protecting their money. Investors in LCF were misled into believing that its own registration with the FCA would cover their investments. The only difference with other company failures is that investors in those companies were misled into believing that someone else’s registration would cover them—a fine point lost on investors themselves.

The Government’s explanation appear to assume that the only problem, or even the biggest problem, with London Capital & Finance was that it was a regulated company selling unregulated investments. That was certainly part of the problem, but, as the written submissions from a number of investors and as evidence this morning made clear, there were other failings and possibly deliberate malpractice within the company and some of its advisers. Other failings of regulation went well beyond those laid at the feet of the Financial Conduct Authority in relation purely to LCF. If the Government constantly remind us that the sale of mini-bonds was not regulated by the Financial Conduct Authority, surely the elephant in the room is: why on earth not?

The Government will, I know, refer to the principle of caveat emptor. It is correct that anyone making an investment has a responsibility to ensure that the investment meets their needs, but there are hundreds—possibly thousands—of examples in UK regulation where we regulate the market but it is not realistic or fair to expect the emptor to caveat.

We do not expect people to do their own personal survey of a house to make sure it is safe before they buy it. We do not expect people to check the brakes on the bus before buying a ticket. We have regulation to protect public safety, on food standards, on product safety and on a number of financial transactions. It is perfectly possible for the Government to start to look at regulating these investments in future and compensating ordinary men, women and sometimes children who have lost sums that, individually, are not significant to the FCA but are massively significant to their plans for retirement, for paying to support their children at university or for ever.

We must make it clear that we are not asking the Government to approve compensation for every company failure. We are not asking them even to consider the implications of doing that. We are asking them to look specifically at cases where there is clear evidence of the mis-selling of investments, usually to people who the seller knew perfectly well were not suited to that investment. That has been a characteristic of all the cases we have looked at today.

Gareth Thomas Portrait Gareth Thomas
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I am particularly drawn to proposed subsection 5(b) of amendment 7. I wonder whether the hon. Gentleman shares my view that one measure the Government need to require of the FCA in the future, to prevent further such regulatory failures, is for it to take a more hands-on approach when customers get in contact to raise concerns about particular businesses; and to make it a point of principle that, when a significant number of customers raise concerns about the activities of a firm, the FCA might actually try to meet some of those customers, rather than, as appears to be the case at the moment, only bothering to meet representatives of the board and management of said firm.

Peter Grant Portrait Peter Grant
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The hon. Gentleman makes a valid point. A lot of the issues he raises are covered in Dame Elizabeth Gloster’s report and recommendations. She even pointed out today that possibly the single biggest failing—certainly one of the biggest failings—was that the Financial Conduct Authority had too restrictive a view of its purpose in regulating the market.

I have to say that it is not only the Financial Conduct Authority that has failed to regulate. What was the registrar of companies at Companies House doing when they got a copy of the audited accounts of Blackmore Bond—the only copy that was ever submitted by that entire group—in which it said, in so many words, that in order to pay the guaranteed interest on money it had already received from investors, it had to keep on getting more and more new investors? It was effectively a Ponzi scheme in all but name. The auditors made similar comments on the accounts but did not seem to be under any obligation or duty to do anything else. Nobody at Companies House, or the registrar of companies, appears to have been under any responsibility to look at the documents submitted to spot the danger signs; nobody anywhere seems to have been responsible for that. Although the Financial Conduct Authority has been rightly and severely criticised for its failure to regulate London Capital & Finance, we are talking about a much wider failure of the regulatory regime. Maybe one of the biggest difficulties is that there are so many people who might be involved and they are quite happy to point fingers at one another, saying that they should be responsible.

I realise I am in danger of wandering off the narrow scope of the Bill. We cannot amend the Bill to set up a more comprehensive compensation scheme just now because of the way it is framed; we cannot even amend it to set up a framework so that the Secretary of State, through statutory instrument, could extend it in the future. However, we can ask the Secretary of State to explain to Parliament not only what the Government are doing to help the victims of this one scandal but what lessons they have learned and what they are doing to make sure these scandals cannot be repeated. I hope the words of the witnesses from the Transparency Task Force this morning are ringing in all our ears. They believe they have evidence that there are other scandals like LCF happening right now and that it is just a matter of time before they collapse and leave yet more investors out of pocket.

Finally, why is it that the Government need to be called to account and asked to explain to Parliament why it is that, while they are supporting the victims of LCF, they are doing nothing to help the thousands of other victims of other scandals that have already come home to roost? For those victims, improvement in regulation alone is far too late.

Gareth Thomas Portrait Gareth Thomas
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I do not intend to detain the Committee long, because my right hon. Friend the Member for Wolverhampton South East made an excellent speech on this issue; I merely want to underline the point that I made in when intervening on him. There seems to be a degree of risk in the Government’s approach. Again, it would be good to hear from the Minister to better understand why the level of regulatory failure in this particular case should merit Government compensation, whereas if there were to be regulatory failure in, say, the case of the FCA’s handling of the demutualisation of Liverpool Victoria, that would not merit compensation for the 1 million-plus customers and owners of that financial services business.

I also underline the point that I made when intervening on the hon. Member for Glenrothes, who speaks for the Scottish National party, on the need of the FCA to perhaps rethink its approach to consumers more generally. At least one of the regulators in the financial services business case that I have particularly been following—that of Liverpool Victoria—has met representatives of that organisation some 35-plus times but has not met consumers at all. That seems to be an example of the FCA continuing not to have properly thought through where it might need to change its practices going forward. I know the Minister will be looking at this issue, and I gently encourage him to focus particularly on that aspect of the regulatory failure.

My right hon. Friend the Member for Wolverhampton South East underlined the point in Dame Elizabeth Gloster’s report that there have been 600 phone calls from customers about LCF’s poor performance, yet that still did not seem to spur on the FCA to take action quickly. There are almost 10 times as many consumers who are members of Liverpool Victoria as those who invested in LCF, which surely further underlines the need to get right how the FCA handles the consumer interests going forward. I look forward to the Minister’s answers.

John Glen Portrait John Glen
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It is a pleasure to serve under your chairmanship, Ms Ghani, and I thank all Committee members for their consideration of this important legislation.

As I set out on Second Reading, the Bill is a vital step in compensating LCF bondholders, and I will now turn directly to the consideration of amendments 1 and 7. As the right hon. Member for Wolverhampton South East set out, amendment 1 seeks to add a requirement for the Secretary of State to lay before Parliament a set of criteria for when the taxpayer should compensate investors for investment failures. In essence, it brings some clarity about when the mechanism that we are adopting, and hopefully funding, through the passage of the Bill would be used. Amendment 7 seeks to require the Secretary of State to lay before Parliament a report that assesses the impact of the Government’s compensating the customers of London Capital & Finance plc, as well as broader issues relevant to the mis-selling scandal.

I have listened very carefully to the speeches made during the passage of the Bill, on Second Reading and today, and to the evidence that we received this morning. I am particularly drawn to the remarks of my hon. Friend the Member for North East Bedfordshire, who acknowledged that a degree of risk is involved with any investment. With the right set of regulations and requirements, however, investors can be equipped with the right information to understand their risks and to make informed choices. The Government’s scheme appropriately balances the interests of both bondholders and the taxpayer, and it will ensure that all LCF bondholders receive a fair level of compensation for the financial loss they have suffered.

I turn now to compensation. I must reiterate that LCF’s failure was unique and exceptional. It is the only failed mini-bond issuer that was FCA-authorised and was selling bonds in order to on-lend to other companies. In conjunction with the FCA, the Treasury has looked at eight mini-bond firms that have failed in recent years, and LCF is unique in that respect. It is important to emphasise that the Government cannot and should not stand behind every investment loss. As I have probably said previously, LCF’s business model was highly unusual in both its scale and structure, and the extraordinary circumstances surrounding its collapse are unique.

Peter Grant Portrait Peter Grant
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Has the Economic Secretary or any of his advisers actually read the promotional material that companies such as Blackmore Bond were giving out, to assess the number of times that words such as “guarantee” and “secure” were included in those documents? Does he not accept that something needs to be looked at there—maybe not for compensation this time, but certainly for tighter regulation in the future?

John Glen Portrait John Glen
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I am grateful to the hon. Gentleman for his intervention because it takes me to the question of what the Government are doing to improve the efficacy of the financial promotions regime that he mentioned in respect of a different failure. We continue to keep the legislative framework underpinning the regulation of financial promotions under review, including whether it is suitable for the digital age. Many of the promotions are obviously online. We will publish a response in the early summer to the consultation on a regulatory gateway for authorised firms approving the promotion of unauthorised firms. It is not an issue that we take lightly. Change, once in place, is designed to strengthen the regime by ensuring that firms able to approve financial promotions are limited to those with the relevant expertise to do so. The FCA will be better able to identify when a financial promotion has breached the restrictions and take action accordingly, but that does not mean that the LCF failure is not unique and of a different scale and quality from some of the other failures.

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Pat McFadden Portrait Mr McFadden
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I am grateful for the Minister’s response.

I am not entirely convinced about the relationship between on-lending and the decision to compensate. I am sure that the Minister is correct in the literal sense that this was the only regulated firm that was selling unregulated mini-bonds. I am not saying that the Minister is wrong, but from reading the report I believe that Dame Elizabeth would have made the same findings. The mini-bonds were not doing what it said on the tin: they were not on-lending but pyramid selling.

The degree of failure, the degree of investment loss and the degree of regulatory failure are not directly related to the point about on-lending: it is more substantial than that. I am not convinced that all the elements of the Government’s case add up. It looks to me as though they have had to find a unique element to insulate themselves from court action or other claims.

Peter Grant Portrait Peter Grant
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As an indication of the Government having come to a decision and then looking for an explanation for it, I do not know whether the right hon. Gentleman picked up in the Minister’s comments how for the first time, in my knowledge, the concept of the scale of the failure—if I wrote down what the Minister said exactly right at the time—was that London Capital & Finance was unique and of a scale and nature that made it different from the rest. Does the right hon. Gentleman believe that the fact that the scale of the failure has now been quoted as a factor, when it was not before, is an indication that the Government have come to a decision and are now looking for reasons to justify it?

Pat McFadden Portrait Mr McFadden
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We are trying to put ourselves into discussions that we have not been party to so, to some extent, I am speculating on the way that the Government have built their argument.

I have made the point and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Pat McFadden Portrait Mr McFadden
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My hon. Friend makes a very strong point. The question of the perimeter is inescapable. One of Dame Elizabeth’s recommendations is that the Government consider the FCA’s remit, and the Government have said that they accept all her recommendations. The Minister said in his evidence to the Select Committee that this cannot be pinned on the perimeter, as it were, but as a conclusion of what has happened the perimeter must be considered. The Government have accepted that.

One way to deal with this is to say that regulated firms and regulated products must be brought together—I shall be grateful for the Minister’s response on that—but if that is not deemed to be the right response how will the question of the remit and the perimeter be responded to? At the heart of this failure is the halo effect of a regulated firm selling unregulated products.

Recommendation 13 is about ensuring that the legislative framework keeps pace with the sale of products through technology platforms. This field of activity is growing daily. It is driven by technological innovation—the movement of more and more activity online—and perhaps by the increased time people have had during the lockdowns to invest online. I do not want to try your patience, Ms Ghani, by delving too deeply into that today, but I think that this issue will occupy the House and this Minister in particular over the next couple of years. We will have to return to it again and again in the House, but recommendation 13 is precisely about legislation on selling things through technological platforms, and the Government and the FCA will have to adapt to it or they will fall behind the reality of the market and of financial crime.

Most of these issues have been put in the hands of the new chief executive, Nikhil Rathi, and the trans-formation programme to which the Minister referred on Second Reading. How are we to know that the 13 recommendations have been implemented? It is easy when a report is published to say, “We accept the findings.” The key is: are they followed through and properly implemented?

Dame Elizabeth’s report should be more than a series of individual recommendations. As she said this morning, it should result in a culture change. Much more communication needs to take place between different parts of the FCA while, crucially, not dropping the ball on regulated firms and unregulated products.

It is unfair of any of us, in government or in opposition, to load more responsibilities on to the FCA if it does not have the resources to fulfil them. We are clear in our amendment that the resources of the FCA have to be covered. Does the FCA have the resources to meet the ever-expanding list of responsibilities, including those on-shored as a result of our departure from the EU? It is funded through a levy on the sectors for which it is responsible. Is the levy giving it enough resources?

The failure of LCF exposed such a degree of dysfunctionality that it prompted the question: can the FCA really do its job? If not, the Government have to act because the public need the protection of a powerful regulator. The imbalance of information between the sellers of financial services products and the buyers absolutely demands that. This amendment is aimed at our receiving a report on the 13 recommendations and on their implementation by both the FCA and the Treasury. Its acceptance would provide Parliament and the public with a mechanism to ensure that statements saying that the recommendations had been accepted had actually been followed through and action taken.

Peter Grant Portrait Peter Grant
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I am pleased to speak in support of the amendment. There are two questions if the Government wish to reject it. Assuming that no one has any objection to the idea that somebody should keep an eye on what the Government are doing in response to the Gloster report—that would be a good idea—the questions are who should they report back to and when should they report back. Their response to those questions might provide the only grounds on which they could object to the amendment.

There can be no doubt that the Government must report back to the House of Commons and to Parliament. I know I might not look it—perhaps I do—but I am old enough to remember cases like Polly Peck, one of the great corporate scandals of earlier generations. In response to that, we had the Cadbury report that, in effect, invented the concept of corporate governance. It seems obvious now, but one of the key principles that came out of the report is that once the directors who are supposed to be in charge of a company have taken a decision for something to happen, they cannot just walk away. They have to put a process in place by which they, as the directors, individually and personally, can be satisfied that what they say should happen does happen.

The House of Commons in the UK Parliament is not a board of directors as such, but we still have to take responsibility—all 650 of us, individually and collectively—for making sure that, having had assurances from the Government that they will act either directly or indirectly through agencies such as the FCA, they will do things to sort out a £1 billion scandal. We are the ones who ultimately have to hold them to account for that.

I am not saying that a report or a statement to Parliament is the best possible way of holding the Government to account. Frankly, it is a joke of a holding to account, but it is the best that we are allowed in this place. That is why it is included in many of our amendments. Any argument from the Government that any way of reporting back on such vital recommendations that is anything less than regular statements to the full House of Commons and making themselves available to take questions from, if we are lucky, just 5% of all elected MPs, is just not acceptable.

Secondly, when should the Government report back? That is why I made a point of asking Dame Elizabeth whether six months from now—12 months from the original recommendations—is a reasonable time in which to expect significant progress. Dame Elizabeth made it clear that she cannot tell us about parliamentary procedure and all the rest of it, and I accept that. However, her view was clear that, in six months from now, it would be reasonable to expect there to be significant progress on a significant number of the recommendations. At that point, the House of Commons should get a report back from the Minister to explain what has happened and if it has not happened yet, when it will happen. Most importantly, he will explain why what has not happened has not happened. We have had far too many examples of Ministers giving assurances in good faith but of things not happening or, if they did happen, of their taking far longer than they should have done.

Time matters. None of us knows whether there is another London Capital & Finance already happening, and we heard from witnesses who are convinced that it is. There could be another Blackmore Bond, Basset & Gold or you name the corporate investment mis-selling scandal. It could be happening again right now. We do not know how many of them are on the go just now already swallowing up people’s pensions and savings. If the Minister is not prepared to commit to giving an update within six months, will he tell us what timescale he thinks is reasonable for us to expect real change? “In due course” is just not good enough for people who might be losing their investments now even while we dither and dally about what to do next.

Gareth Thomas Portrait Gareth Thomas
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I rise to support amendment 2, in the name of my right hon. Friend the Member for Wolverhampton South East. I share some of the frustration that the hon. Member for Glenrothes aired: this is the only route available to the Opposition to signal to the Government and the FCA the need to provide a continuing update on their progress in implementing the lessons that have been learned from the LCF scandal. My right hon. Friend the Member for Wolverhampton South East went through some of the many issues and recommendations that Dame Elizabeth Gloster’s report highlighted, but let me pick out five in particular.

First, the FCA failed to consider LCF holistically. Indeed, as my right hon. Friend pointed out, we got Dame Elizabeth to emphasise again in the evidence session today that the most significant issue was a very restricted approach to the regulatory perimeter. I will come back to that point.

Secondly, the FCA’s policy documents were unclear on the handling of key questions. Thirdly, its staff had not been trained sufficiently in various key and crucial matters. Fourthly, there was a series of gaps in the law that needed fixing in order to enable proper regulation. Fifthly, the issue that my right hon. Friend touched on last was the FCA’s scope and capacity to intervene effectively on consumers’ behalf—did it have sufficient powers?

Let me turn to the first of those concerns—the restricted approach to the regulatory perimeter and whether the FCA has learned to consider issues to do with consumers holistically. The example that I gave when I intervened on my right hon. Friend was that of a financial service business that has recommended to its customers something that the FCA has approved, only for it to come down the line, 12 months later, and suggest the reverse approach. That is effectively what is happening in the case of Liverpool Victoria. I do not want to test your patience too much, Ms Ghani, but let me clarify that example very briefly.

Liverpool Victoria converted to a company limited by guarantee from a friendly society two years ago. The FCA looked at it—

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Peter Grant Portrait Peter Grant
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The Minister referred to the fact that there are ongoing investigations in relation to LCF. Does he recognise that some of the individuals and intermediary businesses that are now under criminal investigation for their part in LCF also played a major part in other mini-bond scandals that I have written to him about separately? Although he made the point about the uniqueness of LCF, the aftershock of LCF is very definitely being felt in other mini-bond scandals that have happened since then.

John Glen Portrait John Glen
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Out of courtesy, I am very happy to respond to my colleagues. The right hon. Member for Wolverhampton South East asked why the 80% figure was not 100%. As I have tried to explain through the submissions that I have made, the Government have been trying throughout to balance the interests of bondholders and the taxpayer to ensure that we have a fair level of compensation in respect of the financial losses incurred. The scheme is based on the FSCS level of compensation but, as he knows, it is 80% up to that cap of £68,000 to reflect the unregulated nature of the LCF product.

I emphasise that it is imperative to avoid creating the misconception that Government will stand behind bad investments in future, even where the FSCS does not apply. That would create a moral hazard for investors and potentially lead individuals to choose unsuitable investments thinking that the Government will provide compensation when things go wrong. To avoid creating that misconception, and to take into account the wide range of factors that contributed to the losses that the Government would not ordinarily compensate for, the Government will establish the scheme at the level of 80% of LCF bondholders’ initial investment up to the maximum of £68,000. With any investment, there is clearly a risk that sometimes investors will lose money, and the Government and taxpayer cannot and should not be expected to step in and compensate for every failure and every loss. It would not be right or fair for investors in non-regulated products to receive fuller compensation than those who have invested in regulated products, for which the maximum amount is capped at £85,000 under the FSCS.

On the remarks of the hon. Member for Glenrothes about the individuals involved in an ongoing serious fraud inquiry, I am not familiar with the detail, but obviously I am happy to receive any representations. I hope that brings satisfaction to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Loans to the Board of the Pension Protection Fund

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Peter Grant Portrait Peter Grant
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The official Opposition’s spokesperson gave very clear reasons why there is benefit in our agreeing to the amendment. I would like to anticipate the reasons that the Government will give for rejecting it and explain briefly why those reasons are not valid—I nearly said mince, but I do not know if that would be understood.

I hope that the amendment will be regarded, not only today but in the future, in the same spirit as that with which it has been tabled. I can almost see someone at the Dispatch Box, thumping the table in response to a question, saying, “Of course, Mr Speaker, we all know that the official Opposition attempted to delay implementation of the scheme.” Amendment 3 could be misrepresented in that way, but that is clearly not what it seeks to do. It asks the Government to publish the results of something that any responsible Government would do before they created the terms of a loan. All it asks is that, having done an assessment—which surely they will—they tell us the results.

The impact on particular kinds of pension schemes is important, because it could be argued that the reason the clause is needed is that a previous Government did not properly assess the impact of the changes they made in 2015 on certain types of pension holders. That is where pension liberation and pension liberation scams came from. I hope that the Government have learned their lesson. If they do not assess in more detail the impact of major changes on particular types of investors and pension holders, they may be saving up problems for the future.

I will briefly mention the other two amendments. The Government should do what is proposed by amendment 5. Do they have any idea of the level of pension fraud in the United Kingdom right now? They should.

The Minister indicated this morning that the measure proposed by amendment 6 might already have been done by someone else. If that is the case, there is nothing to stop him taking that document and putting a written statement before the House, saying, “I have received the report of xyz this morning and I endorse its contents.” A report is given significantly more weight if it is put on the record in that way. Presenting an annual report also gives Ministers an opportunity to say, “I am unable to endorse its contents, for the following reasons,” but endorsing it gives it a gravity that it might not otherwise have had. The Minister may have noticed that I am no great fan of this Government or this place, but if a Minister of the Crown lays before Parliament a statement taking responsibility for and endorsing the report of a body that reports to their Department, that carries more weight than the report simply appearing somewhere in the pages of the media a day or two later.

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Guy Opperman Portrait The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
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I gather that we have a possible vote in the House, so I will attempt my entire response in 10 minutes. Before I do so, it is right that, on behalf of the entire Committee, I thank you for chairing the Committee, Ms Ghani. As the former ports and shipping Minister, and in a month when we celebrate the first female Royal Navy captain, some might argue that you are a well-qualified captain to keep what is—let us be honest—a motley crew in order. If you run for Speaker, Ms Ghani, I will definitely be supporting you.

Let me discuss what clause 2 does and does not do. It creates a power to make a loan to the board of the Pension Protection Fund, following the decision of 6 November 2020 in the case of the PPF v. Dalriada. It achieves that by inserting a new section into the Pensions Act 2004 to provide the Secretary of State with a power to loan money to the board of the PPF.

I think it is fair to point out to the Committee that the clause deals with matters that are predominantly––almost entirely––to do with 2010 to 2014. Many would wish to make this a case about pension freedoms, when in fact pension freedoms post-dated these matters. It is clearly a serious and important matter, and, following a court decision, the Government have accepted the entirety of that decision.

The practical reality is that the Fraud Compensation Fund has assets of £26.2 million, and the potential liability arising from the court judgment is £350 million. I accept that points have been made in respect of how the loan is to be repaid in the longer term and I will address that, but I shall now turn briefly to the amendments.

Amendment 3 seeks an impact assessment. With great respect to the Members who tabled that request, it is utterly unnecessary. It is, in fact, precluded by the decision of the House on section 22 of the Small Business, Enterprise and Employment Act 2015, of which I am sure Members are acutely aware. It states that impact assessments are not required in respect of levies or other such charges in these particular circumstances.

Secondly, the clause is implementing a court judgment.

Peter Grant Portrait Peter Grant
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Will the Minister clarify his last comment? Did he say that impact assessments are not required or that they are not permitted? Surely, if they are not required, we can still ask for one if we think it would be useful.

Guy Opperman Portrait Guy Opperman
- Hansard - - - Excerpts

That is a very fair question that I shall attempt to answer while I am on my feet, but I believe that it is not required. Section 22 of the 2015 Act excludes impact from the definition of regulatory provision, so I believe that it is an exclusion rather than a requirement. If I am wrong in any way, I shall write to the hon. Gentleman and correct myself. I may be corrected while I am on my feet, although in the brave new world of covid, that is quite difficult, as I am sure that he understands.

Clearly, if we were to do an impact assessment at this time, it would fundamentally delay the implementation of payment to members, and the blunt truth is that the PPF will run out of money by October if we do not progress this legislation. The levy increase will be consulted on post the passing of this Bill. It will need consultation, regulations and debate in the usual way.

Amendment 5 would also delay the progress of this matter. The Government will respond to the Work and Pensions Committee, to which I gave detailed evidence, before the end of the summer term. The full response of the Government in respect of all matters relating to such scams will be made before the end of term. We are already progressing Project Bloom and there is the work of the Money and Pensions Service that was introduced by my hon. Friend the Economic Secretary to the Treasury in the previous Act that we worked on. We have produced section 125 of the Pension Schemes Act 2021, which Her Majesty signed on the dotted line in early February, and the consequential transfer regulations that we have consulted on over the past month to ensure that pension scams are prevented on an ongoing basis.

I have been asked to address other matters. It is clear that Ministers are engaging with various organisations, including Google and Facebook. The two of us have made our views very clear to those organisations about how they should regulate themselves. I agree that Pension Wise should be used more but, with great respect, I disagree with the Chair of the Select Committee’s proposal for the many good reasons that I outlined in the debates on Report and Third Reading of the 2021 Act. Clearly the work that we are doing jointly with the Treasury and other organisations, including the FCA, on stronger nudges towards using Pension Wise and other things will make a massive difference.

On amendment 6, there is already an annual report. In true Chamberlain style, I have it here in my hand: the annual report of the Pension Protection Fund, which is published every July. I know, Ms Ghani, that you will have read the most recent version, and will be looking forward with bated breath to the July 2021 report, which will specifically address the issues whose importance today’s witness made very clear.

In those circumstances, I invite hon. Members not to press their amendments.

Business Rates Reduction Services

Peter Grant Excerpts
Wednesday 26th May 2021

(4 months, 3 weeks ago)

Westminster Hall

Read Full debate Read Hansard Text
HM Treasury
Jim Shannon Portrait Jim Shannon
- Hansard - - - Excerpts

I thank the hon. Gentleman for his intervention. His words resonate with my own. The family will be greatly encouraged by our comments.

It is a pleasure to follow the hon. Member for Walthamstow (Stella Creasy) and her reasoned and valuable contribution—a well-thought-out contribution, which we wholeheartedly support. She referred to cross-party support. I hope my comments today will add cross-party support to the two previous speakers.

I understand that the regulations for business rates relief are handled in a different way in Northern Ireland than here on the mainland, and in Scotland, but the issues are the same. The ten-minute rule Bill regarding business rates means that we perhaps can and should take a UK-wide, holistic view of this matter.

I read with great interest the comments that highlight the belief that business rates were designed for a bygone era, where business went hand-in-hand with high street premises. The way we shop is now changing forever and the coronavirus has exacerbated those changes. Online sales now account for 33% of all retail sales, compared with 20% only a year ago.

I have been very impressed with my local council in my constituency of Strangford, which is working with businesses on the high street to retain their presence while they enter online forums. I have seen businesses, many of which were only able to open last week in Northern Ireland, come to terms with the new click-and-collect era and other ways of doing business. As we have watched businesses roll with gut-wrenching punches, it has highlighted to me that perhaps we, too, in this place, must advocate for change that makes sense in the post-covid world, where we are today. I see the wisdom, as I have seen many times in the past, of the rationale of the hon. Member for Thirsk and Malton. I am interested to hear more and learn more of the outworking of the proposals that I have heard from my respected colleague and friend, as well as of those from the hon. Member for Walthamstow.

When I read the Library briefing for today’s debate, I was dismayed but not shocked at the companies seeking to take advantage of struggling businesses who are appealing the rates. The scams were wide-ranging and intricate, and it is clear that the current system leaves itself open for the kinds of abuses that both hon. Members refer to—yet another indicator that something needs to change, and change soon. The FSB contacted and asked me to put on record, as others have done, that they believe business rate companies should be licensed to access business rates records on behalf of businesses. There would be a low barrier to access, but a condition of the license would be to ban cowboy practices. The hon. Gentleman for Thirsk and Malton’s introduction used a lot of descriptive nouns for them without using any bad language, which I thought was quite good and I really relate to that. We could probably think of other things which would be unparliamentary and not appropriate. Nonetheless, it illustrates how we all feel.

While recent business rates reductions during the pandemic were welcome, too many businesses find themselves with an unexpected bill from these companies. Their predatory payment tactics mean that where Government policy reduced the bill to nil, these companies claim the reduction as part of their work, and charge year on year. Many businesses end up with a bill for £1,000 plus, when the only change has been as a result of Government policy. The Government does it, and they do it because that is their job. These guys come along and charge for it, when the Government does all the work. It reminds me of the cuckoo. We all know what the cuckoo does—he jumps into the nest of another bird, eats all the food that the parents give and has nothing to do with the parent birds. These are cuckoo companies and in my opinion deliver something that is totally wrong. Too often the conditions are hidden in the trading terms and conditions.

I welcome the schemes in England, such as extra targeted support packages for businesses and relief for retail, hospitality and leisure businesses, and the corresponding help in Northern Ireland. I put on record my thanks to the Minister and the Government—my Government—for all they have done to help businesses in the constituency of Strangford, and across the whole of the United Kingdom of Great Britain and Northern Ireland. They have kept those businesses afloat and we thank them for it. However, the fact of the matter is that businesses will need ongoing help. Rather than further complex and detailed schemes, now is the time to overview and change the entire system, as the hon. Gentleman for Thirsk and Malton referred to in his introduction. There must be a genuine review of how we can support businesses to survive, maintain a presence, and importantly continue with job creation. I believe we will get a bounce whenever we come out of lockdown, but we need to continue that bounce right through into the months and years ahead. When it comes to business, we have to play the long game, investing in small businesses, and knowing that in the end we will recoup every penny that has been outlaid when jobs continue and taxes are paid in manageable amounts to keep the business open and viable.

In conclusion, I believe the suggestions of the hon. Member for Thirsk and Malton are useful in moving forward, and I join him and the hon. Member for Walthamstow in asking the Government to put serious thought and manpower behind making this change for the good of business, our economy, and consequently, the quality of life throughout the whole of the United Kingdom of Great Britain and Northern Ireland.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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I am pleased to begin the summing up in this debate. Like others who have spoken, it is clear that if there had not been other major attractions on elsewhere in the House, there would have been far more people wanting to take part in this debate. I presume that is why the hon. Member for Thirsk and Malton (Kevin Hollinrake) applied for the 90-minute debate. In normal circumstances, I think the 90 minutes would have been heavily over-subscribed. The initial title of the debate that appeared in the business last week made us in the SNP wonder if it was relevant in Scotland at all, as business rates, and everything to do with them, are devolved. However, it is obvious that the concern is not so much about how the business rates system operates in the different UK nations: it is about the regulation of business practices in general.

The hon. Member for Thirsk and Malton spoke very eloquently, and clearly on the back of a significant amount of work to find out his facts, for which I commend him, but he spoke about a problem that is not specifically about the regulation of one particular service; it is about business practices that are dishonest, predatory, unacceptable in any circumstances, illegal in many circumstances and, as Members have suggested, probably illegal in the circumstances that we have heard about today.

I believe that such practices should be illegal, and enforceable not only in the civil courts. There should be circumstances where this behaviour crosses the line and is recognised as criminal activity, so that the directors of the companies concerned can find themselves personally facing financial sanctions or even imprisonment for the damage that they are doing to other people’s businesses and livelihoods.

My concern about the way the hon. Member introduced the debate is that if we close down the opportunity for the shysters, to use his term, to exploit businesses by setting up fake business rates reduction schemes, it will not take them a week to find a new way to scam other honest businesses, or even the same honest business again—for example, the provision of telephone services. A long-established and very well respected household-name business in my constituency was brought close to insolvency by a telecoms scam. A business offered it a better deal on its phone systems than the one it already had.

Many of the practices that the hon. Member mentioned happened to my constituent, and to many others as well—contracts being changed, documents being taken away and never returned, and customers not seeing the contract that was being used against them in a court action. All the practices that will happen with dishonest business rates advisers will happen with dishonest telephone system salespersons, and with dishonest businesses in almost any sector of the economy that we look at.

Although I recognise that there are specific issues about the way that business rates reliefs and reductions operate that can provide an opportunity for dishonest so-called advisory services, we need to look at it much more widely than simply that one service. There are certainly legitimate questions about whether property valuation is the best way to assess businesses’ financial contribution to the whole community. There are legitimate questions about whether property valuation is the best way to tax individuals for their contribution to local council services. There are certainly questions about whether it is sustainable that those are the only two taxes that most councils can vary to any extent in order to fund their services.

Those are discussions for a different day, possibly after the economy has recovered from the shocks of covid and the subsequent lockdown. The difficulty that we face is that a lot of individuals have been persuaded to incorporate their self-employed microbusiness as a limited company, and they did not realise when they did it that they lost almost all the consumer protections that they had as an individual. I put it to the Minister that we might need to look at amending consumer protection legislation so that very small businesses have a degree of consumer protection in the same way that we do as individuals.

Individuals get consumer protection because it is recognised that we are smaller than the people trying to sell us stuff. We often do not have the resources. We certainly cannot afford the lawyers that some of them can. That is why consumer protection legislation was introduced and has been amended. Is it time to apply the same principle to very small businesses? Even though they are businesses, and all businesses in some ways are equal in the eyes of the law, do we need to start introducing special consumer protection legislation that applies to small businesses, regardless of whether they are incorporated? I welcome the Minister’s thoughts on that point.

For the record, when I have done some checks I have found at least one person called Stephen Hughes who has run property-related companies in the Greater Manchester area. There are obviously a lot of companies with RVA or very similar sets of initials in their names. We have to make it clear that companies and individuals who, simply by coincidence, have similar names to those mentioned today are, as far as we can tell, completely innocent of wrongdoing. Nothing we are saying here should be taken to impugn the integrity of anyone other than the specific individual and business named today.

I will bring my remarks to a close with a firm message for the Government: people who set up a business with dishonourable or dishonest intentions, simply to prey on legitimate, honest and hard-working small businesses anywhere in these islands, should not be allowed to trade. If they are still allowed to carry out their nefarious practices, regulation of those businesses is not strong enough—it has to be tightened, and it has to be tightened soon, before we see more valuable small businesses going to the wall.

James Murray Portrait James Murray (Ealing North) (Lab/Co-op) [V]
- Hansard - - - Excerpts

Thank you, Mr Hollobone, for the chance to respond on behalf of the Opposition to this important debate. I applaud the hon. Member for Thirsk and Malton (Kevin Hollinrake) for having secured the debate on the need to regulate business rate relief services and for drawing our attention to the shocking and distressing detail of what happened to Miss Carter’s business in his constituency and of the wider appalling behaviour of RVA Surveyors.

I welcome the comments made by the hon. Member for Glenrothes (Peter Grant) on the wider need for action on predatory business practices, and those made by my hon. Friend the Member for Walthamstow (Stella Creasy), who added to the description of the shocking behaviour of RVA Surveyors, reminding us that she is a tireless campaigner for businesses in her constituency. I also recognise the comments of the hon. Member for Strangford (Jim Shannon), who mentioned the need for business rates to be looked at more widely to reflect the modern world and to support our high streets.

Our high streets are only just beginning to be able to get back on their feet after more than a year of covid restrictions in some form. Many of the problems they face, however, did not begin when covid hit; they have faced challenges in making ends meet since long before the pandemic started. In that context, it is shameful that con artists should prey on the financial insecurity of some small and medium-sized businesses at this of all times, and I am sure that all Members welcome the hon. Member for Thirsk and Malton bringing such concerning practice to our attention.

Let us be clear about how some providers of so-called business rate relief services operate. As we have heard, they claim that they will navigate through the local authority’s system on behalf of businesses and perhaps play hard ball with the Valuation Office Agency to negotiate business rate relief for companies. Their claims, however, could not be further from the truth. In fact, some of the businesses that need support most are lured—often on a no relief, no fee basis—into multi-year contracts that entitle the service providers to a huge percentage of any business rates savings made by the company. That results in astonishing and predatory commission fees for arranging benefits that are often applied freely and automatically by local authorities. Many businesses are entitled to small business rate relief, and others in the retail, leisure and hospitality sectors receive grants automatically or can apply through their local council website.

To spell out what that means in practice, let me set out an example, using conservative values nowhere near as bad as the worst cases that have been reported in the media. Take a new small business with a rateable value of about £13,500—a nursery, perhaps, or a small café. Its business rate prior to any relief would be in the region of £6,750. Were it unaware that it was entitled to small business rate relief, it might be tempted to contract with a business rate relief service, which would promise to negotiate a discounted rate for business in exchange for—again being conservative—say a 30% commission on any money saved. The service might stipulate—again, conservatively—a two-year contract, well below the five years or far longer that we have seen in the press or spoken about today.

In the 2019 financial year, that business would have been entitled to a 50% deduction through the small business rate relief. In the following year, covid measures increased that to 100%. Over those two years alone, with just a 30% commission, the provider of that so-called business rate relief service would take just shy of £3,000 off the new café or nursery. That is money that the new business was automatically entitled to and should have benefited from, yet the service provider took it off that business having added no meaningful value.

That is a deeply unethical business practice; it is exploitative, and targets those who need the relief the most. At present, these services are free to prey on vulnerable businesses, because there is no regulation in place and perhaps because too many businesses are unaware of the reliefs they are automatically entitled to. Although the hon. Member for Thirsk and Malton disagrees with me fairly often in the Chamber, I have no disagreement with him whatever in saying that there is no place for this kind of practice in the UK. I look forward to hearing from the Minister what the Government intend to do about this parasitic behaviour, which can do so much to harm small businesses.

I would also be grateful if, as the hon. Gentleman alluded to, the Minister would take the opportunity in his response to set out his position on some of the wider challenges posed by the business rates system to small and medium businesses, particularly those on the high street, which have faced difficulties for many years in making ends meet. I am of course aware that the Government have said that their final report on a fundamental review of business rates will be published in autumn 2021, so perhaps the Minister can start by confirming that this deadline will still be met. While recognising the promised publication date in the autumn, will the Minister none the less take this opportunity to update us on the Government’s thinking regarding any alternatives they are considering to the current system, as introduced in 1988? Can he guarantee that high street businesses will benefit from the reform and that online retailers will be asked to take on a fairer share? Finally, despite restrictions potentially—hopefully—being lifted on 21 June, we expect the impact of covid on businesses to continue beyond that date. Are there any circumstances in which the Minister would consider extending the 100% business rate relief for a further three months beyond the end of June, as called for by the Opposition ahead of the Budget?

As I have made clear, we agree with the concerns raised by the hon. Member for Thirsk and Malton. He is right to raise them, and I hope the Minister will be clear about what the Government will do to tackle the parasitic behaviour of so-called business rate relief services. As he will know, however, business rates are in need of a comprehensive review, so I would welcome his also updating us on the Government’s latest position on the wider points I have raised.

Finance (No.2) Bill (Third sitting)

Peter Grant Excerpts
Tuesday 27th April 2021

(5 months, 3 weeks ago)

Public Bill Committees

Read Full debate Read Hansard Text
HM Treasury
Abena Oppong-Asare Portrait Abena Oppong-Asare (Erith and Thamesmead) (Lab)
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It is a pleasure to serve under your chairship, Dame Angela. I thank the Minister for her explanation of clause 98, which restricts the entitlement to use red diesel and related biodiesel for most sectors from April 2022.

We support the Government’s intention behind the measure, which was first announced in the 2020 Budget. There is a clear need to ensure that fuel duty rebates are as limited as possible in order to meet our net-zero commitment. I note that several sectors retain their entitlement to use red diesel, including agriculture, rail transport and permanently moored houseboats. More recently, the Government have announced further exemptions, including generating power from non-commercial premises for amateur sports clubs and for travelling fairs and circuses.

I have a couple of questions for the Minister about the impact on individual sectors. I know that the waste sector made a representation to the Treasury arguing that removing its red diesel entitlements

“could increase the cost of recycling, which may result in waste being diverted to landfill instead and the cost of recycled goods increasing relative to virgin materials.”

Would the Exchequer Secretary assure us that that issue was looked at carefully and that the impact on recycling was considered? Would she also say a little about compliance in the industries where the entitlement is being removed? She mentioned that the Treasury had been working closely with the Department for Business, Energy and Industrial Strategy to ensure that compliance was followed, but what monitoring and enforcement will the Government use to ensure that red diesel is used only for approved purposes?

May I turn briefly to recreational boat owners in Northern Ireland? The Government have confirmed that private pleasure craft in Northern Ireland will have to use white diesel from June this year in order to implement a ruling of the European Court of Justice. The Royal Yachting Association, British Marine and the Cruising Association have raised concerns about the practical effects of the decision, including the limited supply of white diesel for private pleasure craft users in Northern Ireland. Would the Minister reassure us that HMRC and the Treasury will work closely with those organisations to minimise disruption? Would she give us more information on the steps that have been taken so far to ensure that? Finally, will the Government take any further action to encourage the growth of cleaner fuel alternatives in sectors such as the construction industry?

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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It is a pleasure to serve under your chairmanship, Dame Angela. I could repeat much of what I have to say about new clause 3 when we debate new clause 5, but in the interests of brevity I will not make the same comments again at that point.

We welcome the fact that the tax system is used to encourage individuals and businesses to operate in a more environmentally responsible and sustainable way, but it is important that when we make changes we are prepared to look at them afterwards to see whether they are having the expected impact. That can be quite difficult with Government changes to tax policy, because the policy aim is not always immediately obvious. How much of this change is an income-raising exercise for the Treasury, and how much is designed to reduce the use not only of severely environmentally damaging hydrocarbon fuels, but of other fuels which, although they may be less damaging, are damaging none the less?

Biofuels are not a guilt-free pass. Even though they may appear to be renewable, their use has an impact on the environment, for example where the resources of less well-off countries are used to grow biofuels for us to use instead of food to eat for the people who live there. We should not fool ourselves into thinking that simply by converting our excessive use of fuel to use of renewable fuels, we are somehow doing all we need to.

The second reason why regular reviews are needed is that as well as unintended consequences, there will be mistakes. One third of the Government amendments in Committee of the whole House were introduced to correct drafting mistakes, either in the Bill itself or in related legislation. People make mistakes—hon. Members may even have noticed the drafting mistake in the wording of our new clause 3, which the Exchequer Secretary so kindly pointed out. However, given that her objection to new clause 3 is that the timing does not work, I would appreciate a commitment from her that the Government will comply with the spirit of the new clause in a more appropriate timescale when the impact of the changes can be measured.

The Scottish National party supports the Government’s stated aim of encouraging a more environmentally sustainable and responsible approach to use of the earth’s resources; we just think that they should acknowledge that they might not always get it right the first time. They should build in a process by which we can review the policy after a reasonable time and make the changes that may be needed, sooner rather than later.

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - - - Excerpts

I will take hon. Members’ questions in turn, starting with the question on private pleasure craft in Northern Ireland.

From later this year, private pleasure-craft users in Northern Ireland will no longer be able to use red diesel for propelling their craft, as the hon. Member for Erith and Thamesmead mentioned. This will achieve consistency with the 2018 judgment by the Court of Justice of the European Union and ensure that the UK meets its international obligations under the Northern Ireland protocol. That is the primary reason for it, but it will also align with the way in which fuel used by private pleasure craft in the Republic of Ireland is treated, which should make it simpler for craft users to access the fuel that they need if they sail between Northern Ireland and Ireland. On the hon. Lady’s point about easy access to white diesel, I think that it will work in the same way as in the Republic of Ireland. The Government also intend to introduce a new relief scheme in Northern Ireland to ensure that the average private pleasure-craft user will not pay a higher rate of duty on non-propulsion use than they do now.

On new clause 3, we fully understand the point that the hon. Member for Glenrothes makes, but it takes time for us to be able to analyse what is happening with changes to tax. That is why we want to monitor fuel-duty receipts for red and white diesel, which will enable us to evaluate the extent to which the users of red diesel who have lost their entitlement are switching to greener alternatives. It is really important that we allow time for the policy to bed in before we carry out reviews, but the Treasury always keeps all tax policy under review. We want to ensure that we encourage the transition to net zero as well as maximising revenue for the Exchequer. We do not want to lose money, nor do we want emissions. I reassure him that we are all on common ground and will work together to achieve those stated goals.

On the sectors that continue to have the red diesel entitlement, I can tell the hon. Member for Erith and Thamesmead that we looked very hard at the sectors that could not easily switch to alternatives, and at those in which the impact on the consumer would be quite high, as opposed to those within the supply chain. That is how we came to specific sectors such as travelling circuses and amateur sports clubs, which we feel would benefit from continued red diesel entitlement.

On the question of biofuels, to respond to the hon. Member for Glenrothes, all users of biofuels will be taxed at the same rate as ordinary diesel, to reflect the fact that biodiesel releases just as much carbon dioxide when burned. The Government recognise that renewable biofuels deliver greenhouse gas savings, as they are sourced from feedstocks that extract CO2 from the atmosphere. To incentivise the use of these low-carbon fuels and reduce emissions from fuel supplied for use in transport, the Government introduced the renewable transport fuel obligation in 2008, whereby all road transport fossil-fuel suppliers in the UK are required to show that a percentage of the total road and non-road mobile machinery fuels they supply come from sustainable and renewable energy sources. Again, I remind him that the Government keep all of these rates under review.

Question put and agreed to.

Clause 98 accordingly ordered to stand part of the Bill.

Schedule 20 agreed to.

Clause 99

Rates of tobacco products duty

Question proposed, That the clause stand part of the Bill.

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Peter Grant Portrait Peter Grant
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The disadvantage of not speaking on every clause just for the sake of it is that sometimes people forget that someone is there.

I hear what the Minister says about new clause 4, but there is still a need for more reporting to Parliament. I appreciate that it is yet another one of those cases where the main responsibility lies with a different Government Department but the impact on the Treasury is substantial, which is why it is part of this Bill.

The Minister said that the increase is in line with inflation. Although that is technically correct, the headline rate of inflation is 3.1% and all of what are effectively income tax bands for the gambling sector are going up by 3.1%. Any increase in gross gaming yield is not caused by a price increase, as would apply anywhere else. If the gaming yield increases by 10%, that is because people are spending 10% more on gambling. The price of a bet on the grand national does not increase. What is happening is that either people are choosing to bet more than they were before, or more people are getting into heavier gambling than they were before.

Debt inflation is relevant to the income of low-paid workers, yet earlier when discussing clause 5, I think, there was a decision for them to get virtually no increase in their income tax bands for the next five years—0.5%, which is then frozen for four years. I would be interested to learn from the Minister’s response why the gambling industry needs to get its tax bands uprated for inflation every year, but hard-pressed workers who are only just making enough to get by are effectively seeing their tax bands increase by about a 10th of a percent compounded year on year.

Last year, the National Audit Office and the Public Accounts Committee reported on gambling regulation. Again, while the regulation is a matter for a different Department, we cannot ignore it here. Before the pandemic started, gambling was taking over the lives of 395,000 people in the UK. Of them, 55,000 are children under the age of 16. Another 1.8 million people were at risk of becoming problem gamblers, and it is likely that quite a few of those 1.8 million are now problem gamblers. No matter how locked down someone is, one thing they can do is gamble online, often with money they do not have, for 24 hours a day.

We do not know how much problem gambling costs public services. The lowest estimate is over a quarter of a billion pounds, and the highest puts it at well over £1 billion. The financial year on which those two reports are based, 2018-19, showed that the total gross gambling yield, so the money they take in minus the winnings they pay out—effectively the gambling industry’s gross profit—is £11.3 billion. There are indications that in the following year it was up to £14 billion. Gaming duties bring in about £3 billion to the Treasury, which is why we are discussing it today. The Gambling Commission, which is supposed to regulate all of that, has a separate levy by way of the application of licence fees paid by the industry and set by the Secretary of State for Digital, Culture, Media and Sport. That brings in the princely sum of £19 million—million with an “m”—to try and regulate an industry with gross profits of £11 billion, with a “b”. It is clear that it is not an equal contest.

As with so many of the clauses we are discussing, the impacts on thousands of our constituents and, in the case of problem gambling, the horrific and often tragic impacts on them, may not be in the scope of the Bill, but it would simply be unacceptable for us to ignore those impacts when we consider the relatively small part that the Treasury plays in the Government’s relationship with the gambling industry. It is not acceptable to look at clause 104 as just a revenue raising exercise for the Treasury, although sometimes it seems that that is all the interest the Treasury takes in it.

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Kemi Badenoch Portrait Kemi Badenoch
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Clauses 105 and 106 make changes to ensure that the climate change levy’s main and reduced rates are updated for years 2022-23 and 2023-24, to reflect the rates announced at Budget 2020. Clause 107 increases both the standard and the lower rates of landfill tax in line with inflation from 1 April 2021, as announced at Budget 2020. Clause 108 repeals the provisions in the Finance Acts 2019 and 2020 relating to carbon emissions tax, which were not commenced following the Government’s decision to implement a UK emissions trading scheme from 1 January 2021 instead.

The climate change levy came into effect in April 2001. It is a UK-wide tax on the non-domestic use of energy from gas, electricity, liquefied petroleum gas and solid fuels. It promotes the efficient use of energy to help meet the UK’s international and domestic targets for cutting greenhouse gas emissions. At Budget 2016, it was announced that electricity and gas climate change levy rates would be equalised by 2025, because electricity is becoming a much cleaner source of energy than gas as we reduce our reliance on coal and use more renewable sources instead.

Landfill tax has been immensely successful in reducing the amount of waste sent to landfill. That tax provides a disincentive to landfill and has contributed to a 70% decrease in waste sent to landfill since 2000. Reducing waste sent to landfill provides both economic and environmental benefits.

Peter Grant Portrait Peter Grant
- Hansard - -

How much of the reduction in waste going to landfill is due to a reduction in waste being produced, and how much of it is waste ending up in farmers’ fields and play parks and just being fly-tipped illegally, at further increased cost to the environment, and indeed to the public purse, for clearing it up?

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - - - Excerpts

I believe that a significant amount of it is due to the landfill tax. We have been looking at the rate in comparison year on year, and our analysis shows that the landfill tax is having a significant impact. There will always be fly-tipping, irrespective of what the tax rate on landfill is.

Clauses 105 and 106 make changes to the climate change levy rates for 2022-23 and 2023-24, to continue the rebalancing of electricity and gas rates announced in Budget 2016. The 2022-23 and 2023-24 rates were announced in Budget 2020 in order to give businesses plenty of notice to prepare for the changes. At Budget 2020, it was also announced that rates for liquified petroleum gas would be frozen to 31 March 2024.

To limit the economic impact of the tax rate changes on energy-intensive businesses, participants in the climate change agreement scheme will see their climate change levy liability increase by RPI inflation only. That protects the competitiveness of more than 9,000 facilities from energy-intensive industries across some 50 sectors.

When disposed of at a landfill site, each tonne of standard-rated material is currently taxed at £94.15, and lower-rate material draws a tax of £3.00 per tonne. These changes will see rates per tonne increase to £96.70 and £3.10 respectively from 1 April 2021. By increasing rates in line with RPI, we maintain the crucial incentive for the industry to use alternative waste treatment methods and continue the move towards a more circular economy. The changes made by clause 108 will repeal the provisions in the Finance Acts 2019 and 2020 relating to carbon emissions tax, which were not commenced.

New clause 5, tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon and for Midlothian, would require the Government to publish a report, within six months of the passing of the Act, on the effects of what would then be sections 105, 106 and 108 on progress towards the Government’s climate emissions targets. As clauses 105 and 106 make changes to ensure that the climate change levy’s main and reduced rates are updated for years 2022-23 and 2023-24, such a report would not be able meaningfully to assess the impact of these changes within six months of the passing of the Act. The Government currently assess and monitor environmental impacts across existing tax measures, and do that alongside other, complementary measures, such as regulation and spending, to understand the impact of policy making in the round. That alludes to the point made by the hon. Member for Glenrothes about landfill tax.

Clause 108 repeals the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax, which was not commenced because the Government decided that a UK emissions trading scheme administered by the Department for Business, Energy and Industrial Strategy would be the best replacement for the EU emissions trading system from 1 January 2021.

As it was not commenced, the carbon emissions tax’s role in meeting the Government’s climate emissions targets cannot be measured. However, Opposition Members should be reassured that the UK ETS, a market-based measure covering a third of UK emissions, will help to deliver a robust carbon price signal. The energy White Paper committed to exploring expanding the UK emissions trading scheme to other sectors and set out our aspirations to continue to lead the world on carbon pricing in the run-up to COP26. The Treasury will continue to work closely with BEIS on the introduction of the UK emissions trading scheme and will keep all environmental taxes under review to ensure that they continue to support the Government’s climate commitments.

In conclusion, the changes made by clauses 105 and 106 will update the climate change levy main and reduced rates for 2022-23 and 2023-24, as announced at Budget 2020 and to deliver on previous Budget announcements. Clause 107 will increase the two rates of landfill tax in line with inflation from 1 April 2021, as announced at Budget 2020. Clause 108 will ensure that the statute book is up to date by repealing the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax that were not commenced. I therefore commend the clauses to the Committee and ask that the Committee rejects new clause 5.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

If I may, I will address the clauses in reverse order. Clause 108 repeals the carbon emissions tax. As the Minister said, the Government introduced this legislation when deciding what to replace the EU emissions trading system with. We welcome the fact that the Government have decided to implement a UK emissions trading system, rather than a carbon emissions tax. The Minister and I recently debated regulations relating to the UK ETS, and I will not repeat the points I made then. However, I stress that our belief is that the UK ETS must be linked with the EU ETS in order to achieve a robust system of carbon pricing to meet our net zero target.

Clause 107 increases the landfill tax in line with inflation. We welcome this small, uncontroversial measure. We talked at considerable length about waste and recycling during our discussion of the plastic packaging tax. I repeat only the point that the Government should invest the revenue from these taxes into recycling facilities and technology. Finally, clauses 105 and 106 make a number of changes to the climate change levy over the coming years, including raising the gas levy and adjusting the climate change agreement rates. Could the Minister set out whether the Government intend to keep the climate change agreement scheme beyond its current period, and if not, what they will replace it with?

As we come to the end of the group of environmental clauses, I will make a few points about tax and our net zero commitment. In February, the National Audit Office published a report into environmental tax measures. The NAO criticised the Treasury and Her Majesty’s Revenue and Customs for failing to properly consider and evaluate the impact of these taxes on the Government’s environmental targets.

Does the Minister agree that we need information on the environmental impact of all taxes and reliefs? Will she commit to working with HMRC and other bodies to publish this information regularly? Currently, UK taxes with a positive environmental impact account for only 7% of tax revenue, and those with an explicit environmental purpose, such as the climate change levy or landfill tax, account for only 0.5%. So far, and particularly in the last Budget, we have seen a lack of vision from the Chancellor on the environment. We await the Treasury net zero review, but will the Minister set out what steps the Government will take in the short, medium and long term to ensure that our tax system plays a role in meeting our net zero commitment?

Peter Grant Portrait Peter Grant
- Hansard - -

The reason why a regular report to Parliament is needed on these taxes is that despite the optimistic assessment that the Exchequer Secretary set out, there are far too many taxes, including the landfill tax. With far too many of the officially designated environmental taxes, and an awful lot of taxes that are not officially environmental but that have an impact on the environment, the Government do not have a very clear handle on what is going on.

In February, the National Audit Office report “Environmental tax measures” stated:

“The exchequer departments do not specify how they will measure the impact of environmental tax measures.”

Before the tax has even been introduced, nobody is clear about what environmental impact they want it to have. The report also states:

“HMRC’s approach to evaluation provides it with limited insight into the environmental impact of taxes.”

Whether those taxes’ main intention is to influence behaviour rather than raise money, or whether they are introduced as a revenue-raising measure that we hope will also have beneficial environmental impacts, the Government’s track record has been that they do not really know what they intend the environmental impact to be before they start, and they usually do not collect information to give a reliable assessment of what the environmental impact has been once the tax is in place. In fact, the revenue consequences of the very small number of taxes that are officially environmental taxes are dwarfed by those of tax reliefs against other forms of taxation for reasons of environmental sustainability.

I will not press new clause 5 to a vote just now, and we will not oppose clauses 105 to 108, but I want to give a message to the Government about their forward setting of objectives and their monitoring of the environmental impact of taxes of all kinds: they really have to do better, and they have to start doing better very quickly.

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - - - Excerpts

On environmental impact, it is important for the hon. Gentleman to realise that where there are multivariable reasons why things occur, measurement will never be 100% accurate. We give the impact that we can measure; others may dispute it, but the Government have taken a view.

The hon. Gentleman mentioned the landfill tax in an intervention that I responded to in my speech, but it is a tax that is devolved in Scotland. He did not tell us what the Scottish Government are doing differently from the UK Government—while he was criticising the UK Government’s landfill tax policy, I think he probably forgot that it was a devolved matter.

Peter Grant Portrait Peter Grant
- Hansard - -

rose—

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - - - Excerpts

No, I will not give way.

The overall impact on the environment has been positive, with the landfill tax contributing to a reduction. The hon. Gentleman and the hon. Member for Erith and Thamesmead asked about recycling. The fact is that all these things are having an impact. We bring these taxes into play and they change behaviour; we cannot then say that it has nothing to do with the tax that the behaviour has changed. All these things are directly linked.

The hon. Member for Erith and Thamesmead asked a specific question about climate change agreements. For my part within the Treasury, that is being dealt with by the net zero review, but those agreements are a BEIS lead. She also asked about linking the UK emissions trading scheme to the EU emissions trading scheme. We are open to linking the UK ETS internationally in principle and we are considering a range of options, but no decisions on preferred linking partners have been made. We are looking to innovate and create a scheme suited to the UK and to our climate commitments.

We started—as the hon. Lady will know, given our debates on the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021—by reducing the cap on emissions by 5%, compared with what it would have been within the EU. We will set up further plans ahead of COP26, but we are going further and faster than EU representatives on this matter.

Question put and agreed to.

Clause 105 accordingly ordered to stand part of the Bill.

Clauses 106 to 108 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(David Rutley.)

10.36 am

Adjourned till this day at Two o’clock.

Finance (No.2) Bill (Fourth sitting)

Peter Grant Excerpts
Tuesday 27th April 2021

(5 months, 3 weeks ago)

Public Bill Committees

Read Full debate Read Hansard Text
HM Treasury
James Murray Portrait James Murray (Ealing North) (Lab/Co-op)
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It is a pleasure to serve on this Committee with you in the Chair, Dame Angela.

I am pleased to begin by discussing clause 112, which, as we heard, introduces two new schedules. The first, schedule 23, sets out a new points-based penalty system for the failure to make, or the late submission of, various returns. The second, schedule 24, makes minor changes to the penalty for deliberately withholding information from HMRC by failing to submit returns.

We welcome the stated aim of the Government: to encourage compliance without wanting to punish taxpayers who make occasional mistakes. It is right to give people in the regular course of events an opportunity to clear penalty points without incurring a penalty charge, while making sure a stronger deterrent is provided in cases where behaviour is shown to be deliberate. The explanatory notes for the clause point out that the regime has been developed through three separate consultations. However, as the Low Incomes Tax Reform Group—LITRG—makes clear, while HMRC has taken on board comments on the structure of a new penalty regime, it considers legislation in the Bill to be far more complex than originally envisaged.

LITRG points out that taxpayers come under Making Tax Digital for VAT for the first time in April 2022, and Making Tax Digital for income tax self-assessment for the first time in April 2023, so they face a complex and unfamiliar penalty regime at the same time as having to get to grips with their obligations under Making Tax Digital. For people with a single source of income, Making Tax Digital for income tax self-assessment appears to have six separate filing obligations over the course of a year, for which penalties could be incurred: four periodic updates, one end-of-period statement, and one final declaration.

I welcome the fact that the Minister set out his view of the suggestion by LITRG that the introduction of the new penalty regime should be delayed to allow those taxpayers time to familiarise themselves with the new obligations before they begin to accrue penalty points for non-compliance. I would also welcome the Minister’s thoughts on the suggestion by LITRG that the legislation should include an obligation on HMRC to keep taxpayers regularly informed of their penalty points total.

Clause 113 introduces schedule 25, which includes a new two-penalty model for businesses and individuals that fail to pay their tax liability on time. The first penalty is 2% of the amount of tax unpaid 15 days after the due date, plus 2% of the amount of tax unpaid 30 days after the due date. The second penalty is a penalty interest rate of 4% per annum that applies from the 31st day of the tax being unpaid. Again, the Low Incomes Tax Reform Group has expressed a number of concerns about the operation of this new regime, including concern about the interaction of time-to-pay arrangements with the new late-payment penalty regime. We would welcome the Minister’s views on that point.

Clause 114 introduces schedule 26, which, as we heard, is consequential to previous clauses and schedules that have been introduced. We tabled amendment 26, which suggests leaving out schedule 26, paragraph 36. We do not intend to press the amendment, but we welcome the Minister’s clarification on the point we sought to raise by tabling it. Our understanding was that schedule 26, paragraph 36 amended section 1303 of the Corporation Tax Act 2009. We were concerned that the amendment appeared to remove a prohibition on any surcharge in VAT, a penalty for missed payment, late payment or non-payment of VAT being written off as a loss in the company’s taxes. We therefore welcome the Minister’s clarification regarding the intention behind that amendment, particularly the message that it sends.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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It is a pleasure once again to serve with you in the Chair, Dame Angela. As the Minister pointed out, the intention behind amendment 24 is to reduce HMRC’s time limit to assess whether a penalty is due if someone is late in submitting their statutory return. Although the Minister is right that the two years have been there for a long time, that does not mean that two years is right. It seems unfair, considering how quickly potential taxpayers are expected to respond to queries from HMRC, which has been known to take two years to make an assessment for which it already has all the necessary information. The stated policy intention of the new regime is to be proportionate, penalising only the small minority who persistently miss their submission obligations, rather than those who make occasional mistakes. However, the Bill as drafted provides for penalties to be levied against people who have made occasional mistakes and allows HMRC up to two years—and an even longer period in some cases not covered by our amendment—to assess a penalty.

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Jesse Norman Portrait Jesse Norman
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I thank both colleagues for their contributions. I reassure the hon. Member for Glenrothes that the Government take seriously all such interventions and all our serious interactions with other political parties and hon. Members across the House.

The hon. Members for Ealing North and for Glenrothes both mentioned complexity. When introducing any new regime, let alone one in an area as complex as tax, there is inevitably an impression of complexity and a worry about the initial uptake. However, these concerns can be addressed and are being addressed in the legislation.

I remind the Committee that the reforms have been widely welcomed. The Chartered Institute of Taxation says that it

“welcomes the harmonisation of interest rules…and that HMRC will apply a light-touch…This will allow otherwise compliant taxpayers enough time to adjust to the new rules.”

The Low Incomes Tax Reform Group, which both hon. Members mentioned, says:

“HMRC have consulted on many aspects of the penalty regime in recent years, particularly with a view to ensuring that it is fit for purpose for Making Tax Digital. This is welcome, as is the fact that a number of LITRG concerns have been taken on board.”

It is good to see that; I am glad that the group recognises it, because this has been a carefully considered piece of legislation. An organisation called Buzzacott, which describes itself as a UK top 20 accountancy firm, says:

“This is a big change…but the system ought to be fairer because it takes account of the number of filings a business has to make, and it’s also less likely to excessively penalise a trader…The light touch in the first year is welcome”.

That ought to give colleagues a degree of comfort on the issue of complexity, but of course it is important to raise it, and Ministers and HMRC are aware of it.

The hon. Member for Glenrothes raised the two-year period; I think that he was trying to score a political point about HMRC staffing. I remind him that the SNP was expressing concerns about alleged staffing issues at HMRC before the extraordinary events of the past 12 months, in which HMRC has proven its outstanding ability to deal with the covid schemes and has been through everything that one could imagine in the pandemic.

I do not think there is any serious suggestion that the tax agenda, which antedates any concerns that the SNP has expressed with respect to the two-year period, is seriously being put at risk. The fact is that some people have very complex tax affairs and sometimes, in a small minority of cases, HMRC requires some time to reflect on them before it makes a judgment. As a matter of justice, as well as of combating tax avoidance, the two-year period should allow it a proper process of reflection.

The hon. Gentleman mentioned the idea of removing the first penalty, but as I pointed out the effect would be to remove a great deal of the early energy that incentivises people to comply with their tax obligations, and which is actually rather important. The SNP’s recommendation might have the effect of diminishing the number of people who comply with their tax obligations, because it would remove that initial first penalty, which is a little nudge.

Peter Grant Portrait Peter Grant
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I take the Financial Secretary’s point that what we suggest might make things better or worse than what the Government suggest. Leaving aside the possible practical issue with the timescales of some of the reports that we suggested, does he admit that it would be a good idea to bring back a report at an appropriate juncture to see whether the new regime encourages compliance in comparison with the current regime? Will he agree to table an amendment similar to our new clause 6, but with a different timescale, in due course?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

No. The hon. Gentleman has tabled a series of amendments and I have given clear reasons why the Committee should reject them. In one case, it would remove an incentive to comply early with the tax system—I will come to the light-touch issue in a second—and in the second case, it would make the system less able to deal with more complex cases with a potential issue about justice or, indeed, combating avoidance. So I do not accept the point that he makes.

I think the hon. Gentleman dragoons into the conversation a point about Scottish limited partnerships. Of course, those are handled not by the Treasury but by the Department for Business, Energy and Industrial Strategy, and he will know that that Department set out in December 2018 the Government’s plans for reforms of limited partnerships. It is a complex area. They include tightening registration requirements, greater transparency in relation to UK connections, and powers for the registrar to strike limited partnerships from the register in certain circumstances. They have to reflect on limited partnerships that are dissolved, that are no longer conducting business or where a court orders that their activity is not in the public interest. The reforms require primary legislation, and that is what the Government will be doing when parliamentary time allows.

The hon. Gentleman is, of course, right to raise the issue about communications. HMRC does communicate very regularly with taxpayers. It has made a commitment to informing taxpayers, at regular intervals, about points or penalties that they may have incurred. The legislation requires HMRC to notify the taxpayer when a point or penalty is levied; and of course, for the vast majority of taxpayers, that will be quickly and automatically, close to the date of any obligation. For those wishing to check their digital tax accounts, the points totals will be displayed there, but all taxpayers will also receive a written letter notifying them of their points total.

I should add, in conclusion, that although there is complexity, it is important to recognise that the two-stage payment approach is designed to give the proper and, indeed, fairer incentives to nudge people towards a final decision. HMRC has said that it will take a light-touch approach. It is also worth pointing out that the reforms will not take effect until 22 April for VAT businesses and until the 2023-24 tax year for income tax self-assessment taxpayers. There will therefore be plenty of time for those affected to adjust themselves to the new circumstances.

Question put and agreed to.

Clause 112 accordingly ordered to stand part of the Bill.

Schedules 23 and 24 agreed to.

Clause 113 ordered to stand part of the Bill.

Schedule 25 agreed to.

Clause 114 ordered to stand part of the Bill.

Schedule 26 agreed to.

Clause 116

Late payment interest and repayment interest: VAT

Question proposed, That the clause stand part of the Bill.

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James Murray Portrait James Murray
- Hansard - - - Excerpts

Clause 123 amends schedule 36 of the Finance Act 2008 to give HMRC a new power to issue an information notice for the purposes of collecting a tax debt. We would like to raise with the Minister a point articulated by the Chartered Institute of Taxation in connection with the amended schedule 36. It is concerned that the new notice for collection of tax debts can be used for the purposes of collecting a tax debt, whenever arising. That means that the use of these notices is not restricted to cases involving tax years after the measure becomes law, which raises a concern that this is a very wide-ranging power. What reassurance can the Minister offer that HMRC will use the new power granted by this clause proportionately and with appropriate oversight?

Peter Grant Portrait Peter Grant
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I do not have any issue with the changes proposed in clause 123 but, like the hon. Member for Ealing North, I think it is important to make clear that, in passing the legislation, Parliament has to give what may appear to be draconian powers to HMRC or other Government agencies to use when they have to. We then have to rely on Ministers to set policy, and sometimes on HMRC or Government Departments, in terms of their operational management decisions, not to use those draconian powers except when they absolutely must.

As we have begun to come out of the covid recession, a lot of individuals and businesses have found that their cash-flow position is as bad as it has ever been—and hopefully as bad as it ever will be. If HMRC manages itself only in terms of its own performance statistics on how quickly it can get the money in, there is a danger that it will do damage to the wider economy; in the longer term, it will do damage to the public finances. If a business is struggling to pay its tax, it is struggling to pay all its bills too. If we move in too quickly to get the tax out of that business, the chances are that it will go down and will no longer have any chance of paying its suppliers, so the suppliers go down as well. We will end up with a domino effect, with several businesses, and possibly three or four times as many jobs, being lost.

It is not a question of saying that there are circumstances where HMRC should say to somebody, “You don’t need to pay your debts,” but there will be times when it will be better for it to say, “We aren’t going to chase you for your debts now, but it’s up to you to get your circumstances sorted out, and then we will expect you to pay your dues.” I say that because I have known instances in constituency casework, as I suspect many Members have, where HMRC did not seem to take that approach. It appeared to have been chasing businesses to the point of liquidation, and individuals to the point of bankruptcy, for amounts of money that, in the grander scheme of things, were completely irrelevant to it, but highly relevant to those individuals and businesses.

I hope that we will get an assurance from the Financial Secretary today that the draconian powers in the Bill and in existing legislation will be used with an even softer touch over the next few years than they were supposed to be used with in the past. Otherwise, we will find that the difficulties that businesses are facing will get worse over the next few years, rather than better.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I thank both hon. Members for their questions. In a way, the clause is poorly named, because this is a change to allow information notices to be used to obtain documents; it is not, in and of itself, a measure that collects tax debt. The notice is an information power.

Tax authorities sometimes need to verify what they are told by taxpayers. A request that routinely arises is to look for details about transactions or movements of money in cases in which there is reason to believe that assets may have been concealed. A request may be an invitation to look for information to find out whether a bank account exists or has recently been closed. At its simplest, a request may be to find out the balance on an account.

It is important to say that the Government take very seriously all the input from our stakeholders, and the Chartered Institute of Taxation is an important stakeholder among many others. It has been striking how, over the past year or two, stakeholders have been very positive in flagging the degree of engagement that HMRC has had with them. There is a wide, close and professionally engaged relationship between the parties, and stakeholders’ concerns are carefully evaluated as part of the policy process.

It is also true that HMRC is bending over backwards to maintain its activities as a tax authority, while recognising—as the hon. Member for Glenrothes mentioned—the extremely difficult circumstances in which many companies have been placed by the pandemic and its effects. That is why there is a deferred payment scheme for VAT and Time To Pay arrangements that have been allowed to grow as they have done, and why in due course the Government are bringing in breathing space for people with debt.

A wide range of measures have been designed and put in place to protect people who may currently be vulnerable. In this case, the effect of expanding information notices is to implement a recommendation from the OECD’s global forum. Again, there was criticism from the forum that the UK was unable to use its information powers to enforce tax debts and unable to assist with information requests from other jurisdictions. Clause 123 will allow us to improve the already excellent levels of HMRC co-operation, which is only to the good in supporting international co-operation and exchange of information and the collection of tax debts that may be due.

Question put and agreed to.

Clause 123 accordingly ordered to stand part of the Bill.

Clause 124

Miscellaneous amendments of Schedule 36 to FA 2008

Question proposed, That the clause stand part of the Bill.

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Jesse Norman Portrait Jesse Norman
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Clauses 131 and 132 simply set out the Bill’s legal interpretation and short title in the usual manner for such legislation.

Question put and agreed to.

Clause 131 accordingly ordered to stand part of the Bill.

Clause 132 ordered to stand part of the Bill.

New Clause 1

Review of capital allowances and business reliefs

“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made by sections 15 to 20 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must compare estimated GDP in each of the next five years under the follow scenarios—

(a) these provisons are enacted,

(b) these provisions are not enacted, and

(c) the UK fiscal stimulus package, as a percentage of GDP, mirrors that of the united States.

(3) In this section— “parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland; and “regions of England” has the same meaning as that used by the Office for National Statistics.”.—(Peter Grant.)

This new clause would require a report on the impact of the capital allowance provisions on GDP, comparing them with the impact of copying the level of fiscal intervention in the US.

Brought up, and read the First time.

Peter Grant Portrait Peter Grant
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I beg to move, That the Clause be read a Second time.

I am pleased to finally move the new clause after four or five days of heavy debate in Committee and two days of debate on Second reading, which is an indication of the way things happen here. The wording of the new clause is quite deliberately designed to tightly fit within the scope of the Bill, although it will be no surprise to Members that I will highlight a number of wider issues.

The UK Parliament’s and UK Government’s existing way of putting forward and approving tax and public spending plans does not really allow them to be gone into in a great deal of detail, so we ask for some way to compare what would have happened if none of the changes enacted by clauses 15 to 20 had been made, how the economy looks when they have happened and how the economy would have looked if the Government had done something a bit more ambitious and radical.

The phrase “be bold like Biden” has become very popular since the American presidential election. We do not need a comparison with the exact measures taken there, but we are seeing an economy that is in some ways quite similar to the United Kingdom’s beginning to take tax break and tax incentive decisions very different from those the current UK Government have taken. It would be good if there was some way in which we could look at what impact those UK Government decisions have had.

There have been some indications from usually quite reliable commentators that—[Interruption.]

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Peter Grant Portrait Peter Grant
- Hansard - -

Thank you, Dame Angela. Members will be pleased to hear that I will not repeat everything I said before the Division. It has been quite authoritatively suggested that if the stimulus package put forward by the UK Government had been as bold and radical as that put forward by President Biden, the impact in Scotland alone would have been 134,000 additional jobs, and the impact on UK debt would have been unnoticeable—the figures were that the debt-to-GDP ratio at the end of quarter 2 next year would have been 118% rather than 119%, which is easily within the margin of forecasting errors. That is just one example of where a different approach—had there been a way of arriving at one in time—may have made a significant difference, and I do not imagine that that would have applied only in Scotland. If we took equivalent figures England, we would be looking at maybe 1 million or 1.5 million more jobs by this time next year.

With all of these proposals, we are saying that there is a better way for this Parliament and Government to arrive at the final decisions on their tax and spending plans. If we look at what happens in some of the devolved Parliaments, their Budgets are significantly smaller. Arguably, they are not nearly as complex, because those Parliaments have few or no direct powers on most taxes or welfare payments. The Scottish Parliament’s Budget is on the go for most of the year, and almost every Budget eventually gets passed. Bits have been put in at the request of most, and sometimes all, of the Opposition groups in the Scottish Parliament. Even during the short period when there was an overall majority SNP Government, almost every Budget that was passed had bits put in, after the draft Budget had been published, at the request of Opposition parties. Incidentally, some of the most effective ones were submitted by the Scottish Conservative and Unionist party and accepted by an SNP Government, because both parties were prepared to look at what was in the best interests of Scotland, rather than caring about the party political advantage to be gained.

The difficulty in the way that we do Budgets here is that, by the time anything in the Budget is public, battle lines are already drawn. It is confrontational, rather than co-operative. It is about putting forward suggested changes that one almost hopes the other side will not accept, so as to have a go at them at election time. That is great fun and electioneering, and the tabloid press loves it because it raises the temperature quickly. I sometimes wonder whether, by doing things that way, we might be missing a chance to finish with a better set of proposals, whether on the tax-raising or public-spending side. We could end up with a set of proposals that would come much closer to what we all thought we wanted to achieve when we first arrived here. That is clearly not something that I can put forward as a proposal for this Bill. The difficulty with the way we do things here is that there is never a chance to do that.

It is not possible to set tax policies and then wonder where to make the cuts or invest the money. It is not possible to set spending decisions and then wonder how to raise the money. It has to be an iterative process and has to be gone round three or four times a year. It is much better if that is done by discussion and then, if necessary, to have the set-piece debates, the disagreements and Divisions at the end of the process.

I will simply leave those thoughts with the Committee. I hope the Minister will feed them back to his colleagues in the Treasury. Colleagues in the SNP who have been part of the Treasury team much longer than I have been pushing such ideas for a number of years. There have been some changes to practice as a result. I am even more convinced, having had my first shot at a Finance Bill as part of the SNP Treasury team, that there are better ways to do things. Believe it or not, I actually want to make things better for this place, during the relatively short time that I hope to be here. Finally, if it helps the Committee, I will not say anything on new clause 7, because any arguments on that have already been had.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I thank the hon. Member for Glenrothes. I must say that the Scottish National party does not have an international reputation for the bipartisan way in which it treats partisan party politics. I am delighted to hear that the hon. Gentleman is offering the cross-party approach he advocated in his remarks.

The hon. Gentleman says that there is a better way. He should know that the Government are very much committed to improving the tax process wherever we can. We operate within a set of existing arrangements and political procedures that have proven their worth over many decades, but we are constantly seeking to improve. The classic example was our tax policies and consultation day, which we had in March this year. That was an attempt to create more transparency and to give more prominence to measures that might otherwise have been lost in the Budget process, in order to allow the widest possible public scrutiny and debate.

To pick up the point the hon. Gentleman made about international comparisons, I can understand why it appears interesting to him, but a few seconds of reflection would yield the thought that it really is not for the Government to be publishing analyses of other countries’ tax policies or fiscal arrangements. It really is not for us to be choosing one country, even if we were committed on that route, rather than another, because where would that end? Of course, there are many other institutions around the world that will provide precisely that kind of global comparison service. I am afraid that I do not share the hon. Gentleman’s view about the efficacy of that approach.

I am grateful that the hon. Gentleman is not pressing new clause 7, on the correct grounds that we have discussed much of it already, but, in general, the Government do publish an awful lot of detailed information on the Exchequer, macroeconomic business and equalities impacts of not only these clauses but all clauses that are debated in Finance Bills. Those assessments are comprehensive and wide-ranging, and therefore we do not think that a detailed review would be useful. With that, I am grateful to the hon. Gentleman for his contribution.

Peter Grant Portrait Peter Grant
- Hansard - -

I think it was obvious that I did not expect the Government to accept the new clause with joyful acclamation. I deliberately tried to pitch my remarks in a co-operative vein, and it is disappointing that the Minister could not resist a bit of completely unnecessary playground politics. If he wants to look at the respective international standings of the two Governments and the international standing of the two Heads of Government as things stand right now, and if he wants to look at the current standing, credibility and trustworthiness of the two Heads of Government among the ordinary people of England, never mind the ordinary people of Scotland, that is a debate I would be delighted to have with him on another day, but I would have to caution him that it is not a debate that his party wants to get into just now. For the people of Scotland, the outcome of that debate will be seen on Thursday next week. I look forward to that, but I suspect that the Minister’s party is not looking forward to it as enthusiastically as I am. I am sorry that I have had to adopt that tone at the very end of our deliberations.

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Peter Grant Portrait Peter Grant
- Hansard - -

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Question proposed, That the Chair do report the Bill, as amended, to the House.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

On a point of order, Dame Angela. I would like to thank you and Sir Gary, Hansard, the Whips, parliamentary private secretaries and officials. I am sure that I speak for those on both sides of the Committee when I thank those who have supported us through the Committee stage. I would particularly like to call out the names of Edwin Ferguson and Sarah Hunt and of our Bill team at the Treasury, Bill manager, Mikael Shirazi, Helena Forrest, Barney Gibb and Sam Shirley. I thank colleagues across this Committee for their commitment to scrutinising and debating the legislation. I am keenly aware, as they will be, that we do so under the picture of William Gladstone and his Cabinet at the time—a very forbidding chancellorial figure. With that in mind, I thank everyone for their contributions, and thank you, Dame Angela, for presiding so ably.

James Murray Portrait James Murray
- Hansard - - - Excerpts

Further to that point of order, Dame Angela. I would like to put on record my thanks to you for being a very patient Chair on my first time in a Public Bill Committee, following Sir Gary Streeter last week. I also thank the Clerks for helping us to draft amendments, and the wider House authorities for making it possible to hold a Public Bill Committee in these strange circumstances. I would also like to thank all members of the Committee. On behalf of my hon. Friend the Member for Erith and Thamesmead, I particularly thank our Whip—my hon. Friend the Member for Manchester, Withington—and my hon. Friends the Members for Vauxhall and for Luton North for giving up their time to sit on this Committee.

Peter Grant Portrait Peter Grant
- Hansard - -

Further to that point of order, Dame Angela. Although, there are obviously parts of the Bill that I do not agree with, I endorse the Minister’s comments on the work that has been done by his colleagues on the Treasury team and by Hansard and other parliamentary staff, without whom democracy in this place simply would not happen—we should never forget that.

I thank my hon. Friend the Member for Glasgow Central, who was unfortunately not able to be with us today, for her work as the senior SNP Treasury spokesperson. I also thank—this is a name that most Members will not recognise—Scott Taylor from the Scottish National party research team. When people ask me what Westminster researchers do, I say, “Their job is to make it look as if their MPs know what they are talking about.” We may all have different opinions on how effectively they do that, but Scott and his colleagues have certainly done a huge amount of work over the last months.

Finally, I thank the large number of external stakeholders who have engaged fully with us as a third party, and no doubt with other parties as well, in a constructive way. They understood when they put forward things that we simply did not feel we could support, but at the same time they gave us a lot of background information so that our understanding of the likely impact of the Bill was much greater than it would otherwise have been, whether we were able to take their requests on board or not. As I said, although I disagree with parts of the Bill, we should recognise that, overall, it is a better piece of legislation thanks to the contribution that those external bodies have made.

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Financial Services

(Consideration of Lords amendments)
Peter Grant Excerpts
Monday 26th April 2021

(5 months, 3 weeks ago)

Commons Chamber

Read Full debate Read Hansard Text Bill Main Page
HM Treasury
Pat McFadden Portrait Mr Pat McFadden (Wolverhampton South East) (Lab)
- Hansard - - - Excerpts

As we pass the midnight hour, we turn to the subject of money laundering. I am grateful to the Minister for his remarks and note that, alongside this statutory instrument, we had the statement earlier—I was going to say today, but it is now yesterday—by the Foreign Secretary, announcing sanctions against a number of named individuals. In that statement, the Foreign Secretary said that

“Our status as a global financial centre”

had made us both an attraction for investment and also a

“a honey pot—a lightning rod—for corrupt actors who seek to launder their…money through British banks or…businesses.”

It is precisely because we are a global financial centre that there is a special responsibility on the United Kingdom to ensure that each part of that sector always operates to the highest standards. We cannot build a future as a laundromat for dirty money, we cannot turn the other way when wrongdoing takes place and we cannot take part in the denigration of institutions. Of course, we also need the highest possible standards in our own public life if we are going to talk to other countries about corruption. That means allegations being properly investigated; it means a duty of propriety with public money; it means procurement based on open criteria, not on inside connections; and it means that those at the very top of our Government should tell the truth.

We support this instrument, which updates the list of third countries where extra due diligence is required in relation to money laundering and terrorist financing. We understand that these matters lie at the heart of national security and financial security, and we want systems as robust as possible in place to guard against money laundering and terrorist financing. Our defences against money laundering are not just a matter of law and regulation, vital though those things are; they are also a matter of enforcement, so I have a couple of questions for the Minister. Why does he think that in the recent FinCEN reports the UK was considered to be a higher-risk jurisdiction? Why does he think that so many shell companies are based in the UK? What are the authorities doing about that?

Both the Royal United Services Institute and Spotlight on Corruption have identified Companies House reform as an urgent issue in the tackling of corruption and money laundering. What are the Government doing to drive this? Where are we with the draft Register of Overseas Entities Bill? There was nothing about it in the most recent Queen’s Speech. Will there be anything about it in the next Queen’s Speech? A foreign property register was supposed to be established this year. Will the Government meet that deadline? Finally, where are the Government on implementing the findings of the Intelligence and Security Committee’s Russia report, which used the phrase “the London laundromat” in the first place?

Effective action against money laundering, terrorism and fraud is about a lot more than maintaining a list of countries; it requires action on all fronts if we are to fight these problems effectively. That is what we need to see.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP) [V]
- Hansard - -

I endorse a lot of the comments made by the Labour Front-Bench spokesperson, the right hon. Member for Wolverhampton South East (Mr McFadden); I found myself agreeing with a great deal of what he was saying.

The Scottish National party welcomes the measures in the regulations, but I certainly cannot share the Minister’s glowing endorsement of the Government’s record on money laundering or, indeed, the even more glowing self-praise that we heard from the Foreign Secretary earlier—or yesterday, as it is now. This is a Government who legislate against money laundering, or in favour of transparency in the world of big business only when the eruption of yet another scandal makes it politically too hot for them to continue to pretend that everything is fine. The Government are packed with hard-line Brexiteers—supporters of Brexit, the timing of which we now know was critical to those who had reason to want to keep British-regulated businesses clear of a tightening of European Union regulation.

The Government showed no hint of embarrassment when the first person to be hit with one of their much-trumpeted unexplained wealth orders turned out to be an east European multimillionaire whose immigration and UK citizenship applications had been fast-tracked purely because of the amount of money they owned—money the source of which was as unexplained and dodgy when they were allowed into the country as it was when the National Crime Agency finally caught up with them. Of course, even now the Government are mired in scandal over who really put up the cash for the spiffing up of the Prime Minister’s flat. Over the weekend, there were persistent claims, which went noticeably unanswered, that the money might originally have come from an unauthorised donor and that, in effect, the money might have been laundered.

There is no indication of what, if anything, the Government are doing to address the fact that seven of the 21 countries on the high-risk list are members of the Commonwealth, and another is trying to join. How can anyone have confidence in the super influence that global Britain is supposed to have if it cannot even fix corruption in its own Commonwealth? It gets worse, because another name on that list is that of the Cayman Islands, a British overseas territory. The Government have at their disposal the constitutional tools to put an end to the Cayman Islands’ grim reputation, but they choose not to use them. In fact, recent events have suggested that the Government would rather use their muscle to prevent the Scottish Government from giving children the full protection of a United Nations convention than use it to free one of their few remaining colonies from dodgy business practices that—who knows?—may well have been learned from former colonial masters in the first place.

There may well be legitimate and honourable reasons why a company that never does any business in the Cayman Islands would choose to have its brass nameplate on a door there, rather than in the United Kingdom, North America or wherever the business is genuinely based, but we are talking about 100,000 company registrations in a place the population of which is lower than that of my constituency. As well as answering the questions from the right hon. Member for Wolverhampton South East, will the Minister tell us what he thinks attracts so many British companies to create wholly artificial structures to link them to Cayman Islands? If it is not tax dodging or money laundering, or to evade legitimate laws on business ethics and transparency, what on earth does he think they do it for? If he cannot think of a reason, perhaps he should ask some of his colleagues why they choose to register companies there. If you have the Companies House register and the Register of Members’ Financial Interests open side by side on a computer screen, it does not take very many clicks of a mouse to find some very senior Tories who do exactly that.

As well as welcoming the regulations, the SNP will continue to keep up the pressure on the UK Government to bring in the further measures needed to clean up the entire financial services sector. The SNP can already claim a number of significant successes in forcing the Government to match their rhetoric with action and, for as long as there are MPs from Scotland in this place, we will continue to keep up that pressure.

John Glen Portrait John Glen
- Hansard - - - Excerpts

I thank the right hon. Member for Wolverhampton South East (Mr McFadden) and the hon. Member for Glenrothes (Peter Grant) for the points they raised. I shall try to address some of them. As I outlined earlier, the Money Laundering and Terrorist Financing (Amendment) (High-Risk Countries) Regulations introduce a new autonomous high-risk third countries list, which will ensure that UK legislation to protect the financial system from money laundering and terrorist financing remains up to date.

The right hon. Gentleman raised a number of points. He first mentioned the FinCEN files, which are largely historic, but I will write to him about anything further I can on that. I met Spotlight on Corruption recently to be challenged on a number of aspects. He mentioned Companies House reform, on which work is ongoing, and there will be further announcements in due course.

The regulations represent the UK’s new approach to high-risk third countries. It will allow the UK to take its own view on which countries are high risk without referencing EU legislation and to remain in line with international standards in the fight against money laundering and terrorist financing. The UK is internationally recognised as having some of the strongest controls worldwide for tackling money laundering and terrorist financing.

Finance (No. 2) Bill

(Committee of the Whole House (Day 2))
Peter Grant Excerpts
Tuesday 20th April 2021

(6 months ago)

Commons Chamber

Read Full debate Read Hansard Text Bill Main Page
HM Treasury
Margaret Hodge Portrait Dame Margaret Hodge (Barking) (Lab) [V]
- Hansard - - - Excerpts

It is a pleasure to follow the right hon. Member for Sutton Coldfield (Mr Mitchell), with whom I work very closely on this issue; it demonstrates the best of Parliament that we are able to do so across the House.

I rise to speak in support of amendment 77, which stands in my name and that of members of the all-party group on anti-corruption and responsible tax. Our proposals command support across the House, and I know the Minister will therefore address this issue thoroughly and seriously, not just in his response today but in the work that I know he is doing to bear down on those who enable and support tax avoidance and financial crime. I simply say this to the Minister: he may have reservations about the technicalities of our proposals, but he should at the very least accept the principle that underpins them and say so today.

Big corporations and high net-worth individuals who engage in tax avoidance schemes and financial crime do not dream up these schemes on their own; they are invented and developed by the huge army of tax professionals—accountants, lawyers, banks and advisers—who spend their working life trying to identify loopholes and wheezes. The schemes they devise do not just help but actively encourage people not to pay their rightful contribution through tax to the common purse for the common good.

At present, HMRC may slowly and belatedly catch up, and may deem such schemes unlawful. If it does so, the individuals have to pay up and sometimes face enormous tax demands, but the enablers of tax avoidance mostly get away scot-free; at worst they may lose the fees they earned from setting up the scheme for their clients. Our amendment would hold these enablers to proper account. If advisers and promoters involved in a scheme know that the scheme does not work, they are committing the criminal offence—mentioned by the Minister—of cheating the public revenue. They are breaking the law, so they should be pursued, charged and convicted with a criminal charge.

That does not happen now, and our amendment seeks to make it easier for the enforcement agencies to pursue criminal prosecutions. Not only would they hold the advisers to account, but I am completely convinced that the threat of a criminal prosecution would act as the most effective deterrent and bring to a halt many of the activities of these rogue advisers. It would be the most efficient way of tackling tax avoidance at source. It is a common-sense approach to the problem, and it would be welcomed by all taxpayers, who are so frustrated by paying their tax unquestioningly while seeing others avoid tax or break the law. It would restore confidence in the tax system. It is a good idea, and I hope that when the Minister responds he will say that he shares our view that we need to amend our legislation to make it easier to pursue and prosecute advisers who deliberately promote egregious schemes that are unlawful.

I know from my time chairing the Public Accounts Committee how embedded the culture of avoidance, evasion and financial crime has become in our financial services sector. We saw it plainly with the revelations from HSBC, with the Falciani leaks from its Swiss branch. It was there in the PricewaterhouseCoopers leaks keenly exposing that firm’s activities in Luxembourg. The Panama papers uncovered the shenanigans involving the law firm Mossack Fonseca, while the Paradise papers disclosed the nefarious activities of another law firm, Appleby. While it may no longer be seen as cool to be involved in tax avoidance, the latest leak of documents contained in the FinCEN papers spells out the complicity of major global banks in facilitating and enabling financial crime, from tax avoidance through to fraud and money laundering.

Normal working people, however, often suffer the most. The film tax relief that was exploited ruthlessly by the company Ingenious Media left many facing huge tax demands, though the chief executive, Patrick McKenna, is still lauded through public appointments in the creative sector. The loan charge scheme was promoted vigorously by enablers. They walked away scot-free, but left devastation in their wake. I understand from the all-party parliamentary loan charge group that seven suicides have been reported to the group—people driven to suicide because they were conned by enablers into participating in a scheme that later unravelled. That is truly shocking.

I welcome the consultation that the Government have launched on tackling the promoters of tax avoidance. The all-party parliamentary group will be preparing a response to that consultation. Most advisers, of course, work in an honest and straightforward way, and we do not want to pursue with criminal charges those who make an honest mistake, but there are still individuals, companies and organisations who deliberately and wilfully promote egregious schemes that they know do not work. Such enablers move quickly, they are well resourced and they are well capable of outmanoeuvring HMRC. As soon as one wheeze is uncovered, they move on to the next. Worst of all, they act with impunity, safe in the knowledge that they will escape any real punishment if they are ever caught.

Why do these rogue advisers not get prosecuted? The answer lies in what the Minister said: HMRC has to demonstrate dishonesty to proceed against them and it is virtually impossible to do so. The advisers can always claim that they honestly believed that the scheme would work. We therefore want a new test, which makes criminal prosecutions feasible and practical.

We suggest adopting the test that is in place for the work of the GAAR—the bar for prosecution for those ne’er-do-wells should be just as stringent. It would simply make it possible and practical to take action. HMRC would have to demonstrate not simply that the avoidance scheme was not reasonable; it would have to demonstrate that it was not reasonable for anybody to think that the avoidance was reasonable. Sorry for the complication, but that is a double reasonableness threshold. I assure the Minister that that double reasonableness test is in effect the same as the “beyond reasonable doubt” test that he mentioned in his opening remarks. Of course, it would be easy for enablers to avoid prosecution —they just need to stop promoting or recommending tax avoidance that is so aggressive that they know it will fail.

Our amendment tackles a gross injustice in the system. People are completely fed up with reading endless stories about scurrilous tax avoidance schemes promoted by those working in the financial services sector. The perceived difference in the way that hard-working taxpayers and rich individuals are treated breeds mistrust. We suggest a practical change in the law that would make it possible to pursue the enablers, not because we want to see the courts clogged up with prosecutions against bankers, accountants, lawyers and advisers, but because we think that that is the best way of making those advisers think twice before they promote unlawful schemes. It would deter most of them from trying to cheat the public revenue. I urge the Minister, please, to be bold on the issue, to state today that he will tighten up the law and to give us the assurance that, if he does not like our particular solution, he will come forward in a timely manner with his own proposal.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP) [V]
- Hansard - -

I am pleased to speak in this debate and to speak to the amendments and new clauses to which I have added my name and which were detailed earlier.

All the SNP amendments relate to schedule 6, under clause 30. Amendments 70 to 72 and 84 and 85 seek to amend subparagraph (3A) of paragraph 2. Taken together, the paragraph would read:

“Where the condition in subsection (1)(l) or (2) is not met in relation to a body or person at any time, but the body or person expects it to be met at any time, the body or person may allow for the condition to be treated as being met until the body or person is not expected to make expenditure on construction operations exceeding £3 million.”

On the face of it, it does not look like a major change, but the amended wording is more in keeping with the spirit of the existing construction industry scheme. It allows, for example, for a de minimis amount of minor works to be disregarded in the operation of the scheme.

Amendment 73 seeks to remove paragraph 3 from schedule 6. I know that the Minister has spoken against this amendment and amendment 74, but we have seen no convincing argument that this change is necessary just now, and we believe that it would be much better for industry to be allowed to continue with the existing scheme for the current year rather than asking it to change the way of doing things. Let us face it, with its being a major part of our recovery from the covid recession, industry has far more important things to concentrate on.

A similar reasoning applies to amendment 74, which seeks to leave out paragraph 4 from schedule 6. That paragraph relates to the way in which the costs of materials purchased for a construction contract are taken into account for tax purposes. The construction industry has had to meet a number of challenges this year. We do not see how changing the way in which it has to account for tax on purchases by a subcontractor for another subcontractor, for example, during this current year will help. We do not see why it needs to be done just now.

New clause 14 requires the Chancellor to report back to Parliament on the impact that the changes proposed in clause 30 and in schedule 6 have had on key economic indicators. One would think that it would be automatic that, when a Government make changes to the tax system, they would go back a wee while later to see whether the changes have had the desired effect. This Government are perennially hopeless at doing that. We seldom if ever see a published assessment of what impact the new legislation or changes to the tax system had. That makes it much more difficult for MPs and the public to hold the Government to account. Even more importantly, it means that, when mistakes are made—that is when, not if—there is no reliable process to identify that and to put things right.

For this Committee sitting alone the Government have had to table no fewer than 22 amendments in order to correct mistakes or to remove inconsistencies and ambiguity from their own Bill which they themselves commended to the House only last week. We can only hope that they have spotted all the mistakes by now, but surely with such an important piece of legislation it makes sense to ask the Chancellor to report back to us to tell us whether it is working, or whether there have been unintended consequences that need to be addressed sooner rather than later.

New clause 15 again requires the Chancellor to report back to Parliament, but this time on the effectiveness of various anti-tax avoidance measures in clauses 117 to 121, and the follower notice penalties in clause 115. I note that the Opposition have tabled something similar, although a bit more restricted in scope.

We welcome the further measures included in this Bill, but they still do not go nearly far enough. Time and again, it has been pressure from SNP MPs that has forced the Government to take any action at all on the scandalous levels of tax avoidance that they continue to tolerate. We still do not have an overarching and workable general anti-avoidance rule. We have an inadequate system of company registration and regulation that makes it far too easy for companies to hide the truth about who really benefits from the profits that they make on the hard work of citizens of these islands and who is really in control of the company. For example, the SNP has highlighted over and over again the need for legislation to combat the abuses of so-called Scottish Limited Partnerships by money launderers and organised crime. As things stand, almost anybody in the world can set up one or several Scottish Limited Partnerships and then use them to get round even the inadequate regulatory and transparency requirements that apply to other companies.

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Peter Grant Portrait Peter Grant [V]
- Hansard - -

I seek leave to speak to amendment 64 and new clause 16, which stand in my name and the names of my hon. Friends. We support the cut in VAT to 5% for the hospitality and tourism sectors; in fact, it was pressure from the Scottish National party that initially forced the Government to accept that measure. However, as with much of the Government’s support for businesses during the past 13 months, it is not enough.

Although there has been a welcome easing of restrictions in all four UK nations—in Scotland, we are particularly looking forward to next Monday, when the most significant easing of restrictions since December will come into effect—it is unlikely, indeed impossible, that the tourism and hospitality sectors will get back to anything like normal immediately. It is impossible that we will be back to normal by the end of September, and it is therefore completely irrational for the Government to arbitrarily decide that the 5% VAT rate should end on 30 September, but that is exactly what they have decided. The SNP did, in fact, table an amendment seeking to extend that date to 31 December, but that amendment was deemed to be outside the scope of this Bill. I accept that ruling, but I still urge the Government to get real, not only about the difficulties that the tourism and hospitality sectors are facing but about how long those difficulties are going to last.

In new clause 16, we are asking for the Chancellor to report back to Parliament on the impacts that the 5% VAT rate has had, and—very importantly—to compare that with what would have happened if it had been extended, as we have asked. We know what the 5% VAT rate is supposed to achieve, supporting businesses in those sectors, so the Government should have no qualms about assessing whether or not they have achieved that. Nor should they have any qualms about having their decision compared on an empirical basis with alternatives that have been put forward by other MPs.

The Minister claimed earlier that it is technically impossible to comply with that new clause because the data just does not exist. I find that frankly astonishing. If the political will is there, the data can surely be made available, and if Parliament decides that it is going to pass into law a requirement for that to happen, the job of the Government is to comply with the will of Parliament.

Amendment 64 asks for a minor, but important, change to the wording of clause 93, dealing with the temporary 12.5% VAT rate. Clearly, as I said earlier, we would have preferred that to remain at 5%, but the Government have rejected that proposal and gone for a 12.5% rate until 31 March 2022, presumably with the full 20% rate coming in after that date.

Clause 93, as currently worded, would allow the Treasury by regulation to bring that date forward, so that the tourism and hospitality sector would go back to paying the full 20% VAT rate sooner than the date that this House has agreed. That is not acceptable. Our amendment would allow the March 2022 deadline to be extended if we found—as we may well find—that the sector was taking longer than expected to recover. The only reason for bringing the date forward would be if, by some miracle, the tourism and hospitality sector recovered quicker than expected. I can see no circumstances in which those businesses will have recovered sufficiently for the increase to 20% to be brought forward earlier than March 2022.

In his summing up, may I invite the Minister to contradict me and to tell me that he thinks that that will be possible—that it will be appropriate to bring forward that date? If he cannot see any circumstances in which it will be right for him to use the power to bring that tax increase forward, he should not be asking us to give him the power in the first place.

One consequence of the quaint way that the British Parliament does its business is that, if we want to support businesses by reducing VAT on corporation tax liabilities, it goes in a Finance Bill, but if we want to reduce the liability of other taxes such as non-domestic rates, it does not. The non-domestic rate system is one of the very few parts of the business taxation system that is devolved to the Scottish Parliament. The Scottish Government have used that devolved power to ensure that businesses in retail, tourism, hospitality, aviation and newspapers, all of which have been severely hit by covid, will pay no business rates at all during 2021-22. The small business bonus scheme takes around 100,000 businesses out of non-domestic rates altogether and, if the current Scottish Government are re-elected, that will continue for the lifetime of the next Parliament.

In Scotland, we have the lowest business rate poundage in the United Kingdom, the most generous relief schemes and, of course, we have the most progressive income tax system in the whole of the United Kingdom. When we see the benefits that come to the vast majority of people in Scotland from the different approach that our Government have taken using the limited taxation powers at their disposal, I hope the Government will look positively on any request by the new Scottish Government, whoever that might be, to further extend those powers.

Sarah Olney Portrait Sarah Olney (Richmond Park) (LD) [V]
- Hansard - - - Excerpts

I wish to speak to clauses 92 to 95 relating to VAT. This last year has been exceptionally tough on our hospitality industries and I welcome all measures to support our valuable tourism and hospitality businesses as they tentatively begin to open up after the pandemic. Like many others, I was delighted to be able to visit pubs, restaurants and cafés in my constituency last week. I had a particularly enjoyable Friday night drink at the Black Horse on Kingston Hill and a fantastic Sunday lunch at the Glasshouse in New Malden. I am very much looking forward to getting round to all the other excellent venues in my constituency over the next few weeks and months.

However, it is important to remember that tourism and hospitality will not recover overnight. While there is undoubtedly a great deal of pent-up demand for eating out and visiting the wonderful sights and attractions of our great nation, it will not be possible for all businesses to open immediately and in full. And we do not know whether the Government’s road map will be able to progress as planned. Despite the wonderful success of the vaccine roll-out, we are still at risk from new variants and there may still be a need in future to restrict people’s ability to socialise indoors. So, although we welcome the cut to the VAT rate on hospitality and tourism sales to 5% until September 2021, the Liberal Democrats argue that the cut should be extended for the whole of the financial year, instead of moving to 12.5% from September to March.

Household incomes also need time to recover, and encouragement to spend on luxuries and leisure such as meals out should be continued for much, much longer. Indeed, the Government could and should have gone a great deal further to support these businesses and to safeguard the jobs that they create. Many businesses are able to partially reopen this month. There are estimates that up to 60% will not be able to reopen because they do not have outside space. But they will all be faced eventually with large VAT bills, deferred over the last 12 months.

A much better way to support businesses would have been to provide relief on the deferred VAT owed. That would have relieved businesses of an immediate cash burden and freed up that cash flow to invest in stock, staff and making their premises covid-safe. Instead, the Government propose to start imposing penalties from June this year on those businesses that have not yet started repaying this VAT. That will fall on businesses that have had extremely limited opportunities to earn any revenue in the last 12 months. The measures to allow businesses to pay this in 11 instalments is welcome, but will not help those businesses that cannot yet reopen and will not have any cash coming in to pay any of those instalments.

Businesses will also be carrying a great deal of debt and it is very disappointing to see a lack of measures in the Budget to address that. In particular, many businesses will be indebted to their landlords and it is disappointing that the Government have done nothing at all to help businesses with those costs. The Liberal Democrats would have introduced a revenue compensation scheme to help businesses with fixed costs such as rent. The burden of repaying those will fall very heavily on businesses that cannot yet reopen fully.

I am probably unique in the House in having direct experience of implementing Making Tax Digital for VAT reporting in my former role as an accountant for a large organisation. While the overall objectives of the programme are sound, I can tell the Minister from personal experience that they are not always straightforward to implement. I am puzzled as to why the Government think it should be a priority for struggling small businesses to deal with the additional administrative burden of implementing Making Tax Digital, at a time when they are having to deal with the huge burden of reopening in a highly uncertain time, and at the risk of further fines if they do not comply. Surely this could have waited another 12 months. The imperative to close the tax gap surely pales into insignificance when compared with the imperative to support precarious businesses at this time. How can additional red tape and administrative burden be the right response to the current crisis?

In short, this is not a Government who understand the needs or priorities of small businesses; it is a Government who choose to impose punitive costs and paperwork rather than provide effective support.

Finance (No. 2) Bill

(2nd reading)
Peter Grant Excerpts
Tuesday 13th April 2021

(6 months, 1 week ago)

Commons Chamber

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HM Treasury
Andrew Griffith Portrait Andrew Griffith (Arundel and South Downs) (Con) [V]
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It is kind of you, Madam Deputy Speaker, to call me in this important debate. I will try to reward that by sticking to the topic we are discussing. This is an excellent Finance Bill for a much-needed recovery. The UK is already a great place to start, grow and run a business, but to increase the rate of economic growth in the UK we need to restate and foster the pro-enterprise philosophy and measures that have served us so well in the past.

To govern is to choose and the Chancellor was absolutely right to choose fiscal discipline. The Bill begins to fix the public finances with a fair and honest plan about how to do so. Nothing is more devastating to enterprise and investment than high and volatile costs of borrowing, which wipes out small businesses like a pyroclastic flow clearing forested slopes. Thousands of otherwise successful businesses were crushed in the recession of the early ’90s caused by the error of the UK's membership of the exchange rate mechanism.

A centrepiece of the Bill is the super deduction. I have spoken to lots of businesses in my constituency, and it is already mobilising significant investment. The Bill also contains two excellent initiatives under the Help to Grow banner. I believe that the Government are really on to something here and that we could see the Department for Business, Energy and Industrial Strategy start to deliver a string of practical interventions to give small businesses a hand up. When the opportunity allows, I encourage them to go further. Only 10% of small and medium-sized British businesses currently export, leaving 90% of enterprises as potential exporters. That is a vast untapped opportunity to grow the scale and productivity of UK plc. Global Britain brings huge scope to increase the number of firms involved in international trade, but for many firms, where time is the scarcest resource, it is a big and uncertain step to take. Alongside the other elements of Help to Grow in this Bill, I suggest we make available grants to support exporting. It would be a natural extension of the support that the Government provide today under the useful, but relatively modest tradeshow access programme.

Like most, I welcome the extension of the lower rate of stamp duty in this Bill. On a future occasion, I encourage the Government to bring forward an exemption to stamp duty for downsizers. In many parts of the country, the real housing crisis is one of under-occupancy. With an ageing population, too many homeowners rattle around in accommodation that would be more suitable for growing families. Stamp duty is a real brake on downsizing. The Treasury will understandably be cautious about leakage, but it should be perfectly possible to define a downsizing transaction based upon the ratio of values and the limited time interval between the two housing transactions.

This is not an academic issue. Right now my constituents are blighted by development proposals on unsustainable greenfield sites in Ashington, Adversane, Buck Barn, Kirdford and Mayfield, all based on the fallacy that, despite the UK already having more than 600,000 empty homes and the highest rate of housebuilding since 2007, the only answer is to pile up even more supply.

For a similar reason, although I fully understand the context in which the decision was made, I regret the freeze on the lifetime allowance on pensions. The UK used to have one of the best systems of providing for retirement in the western world. Freezing the lifetime allowance is another Jenga brick whipped away from that once strong pillar. NHS consultants, headteachers and airline pilots are hardly plutocrats, but they now face a tax on thrift. Money that would have gone into well-regulated, well-diversified pension funds and been allocated to grow UK businesses has instead fuelled a boom in buy-to-let property, putting home ownership for millions further out of reach.

In the year in which the UK hosts the UN climate summit, let me conclude by welcoming two measures in the Bill that help us move towards a low carbon future. The first is part 2, which introduces a plastic packaging tax from next April. We should tax things we wish to have less of, and on that basis this is an excellent piece of legislation that will provide a clear economic incentive to use recycled material in the manufacture of plastic packaging. It is estimated that as a result, the use of recycled plastic could increase by around 40%, equal to carbon savings of nearly 200,000 tonnes a year and saving a lot of plastic from ending up in landfill and incineration. We only have one planet, so as soon as this useful measure is on the statute book, I encourage my Treasury colleagues to look at increasing the rate and lowering the exemption threshold.

Similarly, I welcome the removal of red diesel from many sectors, although I am glad there is a continued exemption for agriculture, which makes a significant contribution to the landscape in my constituency of Arundel and South Downs. Red diesel accounts for about 15% of diesel used in the UK and is responsible for the release of 14 million tonnes of carbon dioxide a year. This change will help the adoption of cleaner and greener alternatives, such as hydrotreated vegetable oil, and is yet another meaningful step by this Government, who are absolutely leading the world on climate action.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP) [V]
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I am pleased to be able to contribute to this debate and to expand on the reasons so passionately set out by my hon. Friend the Member for Glasgow Central (Alison Thewliss) as to why the SNP will vote against the Bill this evening. The purpose of the Bill is to give legislative effect to the Chancellor’s Budget. That Budget was a regressive Budget. It was an austerity Budget that turned its back on millions of those worst affected by the covid pandemic. It is a Budget that severely damages the interests of my constituents, so it is a Budget, and this is a Finance Bill, that I cannot and will not support.

Austerity is not an economy necessity. It is a political choice. It has been the first-choice response of almost every British Government of every complexion during my adult life, so it is maybe not surprising that so many people seem to have forgotten that there is a different way, a fairer way, and in fact a much more effective way to respond to an economic crisis. All we have to do is to care as much about the millions in these four nations who do not have enough to live on as we care about the lucky handful whose only problem is that they cannot count how many billions they have.

There is no disagreement about the fact that we need to start to repair the economic damage caused by the pandemic and by the measures that had to be taken in response. There are lessons to be learned, but perhaps the most vital lesson of all is that the inequalities that have been deliberately created and deliberately maintained in our society by successive Governments have also made our society as a whole much more vulnerable to the ravages of the disease. We know that the economic costs of covid have fallen much more heavily on the people who could least afford them. To give just one example, the British Retail Consortium did a survey that confirmed what we would probably have expected: during the pandemic, highly-paid people such as Members of Parliament have got better off and now have more savings than we had before, while most of our constituents on low incomes have been using up their savings just to survive, and many of them effectively have no savings left at all.

Presumably, the way we respond to that is to use the powers in the Finance Bill to redress that balance. Well, no—that is not the priority of this Government. In clause 5, we see a multi-year freezing of the income tax basic rate limit and, much more damaging, a freezing of the personal allowance at £12,570. It is not easy to find a way to change an income-based tax system so that we collect more tax but target the impact on people on lower incomes, but that is exactly what the Government propose to do. If it is accepted that the Treasury needs to collect more money in real terms from income tax, we should at the very least make sure that the impact in real terms is equally spread. In fact, the SNP would argue that whenever the time comes to increase taxes, those of us who are lucky enough to be on high incomes should be asked to bear a wee bit more of the pain.

I know that the Government will point to other provisions, such as clause 31 and the one-off uplift in working tax credit. In principle, that is something the SNP supports, but as my hon. Friend the Member for Glasgow Central mentioned, the way that it is implemented could harm some of the very people it is supposed to help. The eligibility criteria are crude, to say the least. It will not be at all easy for recipients to work out for themselves whether they qualify. What assessment have the Government made of the number of payments that they expect to be made in error, and are they seriously then going to chase down the recipients of those erroneous payments as if they had committed some kind of fraud, when in fact they have done absolutely nothing wrong?

I was interested to hear the comments of the Chair of the Treasury Committee, the right hon. Member for Central Devon (Mel Stride), on freeports. “Freeport” is obviously a buzzword that the focus groups have told the Tories goes down well with the party faithful, so they have decided to invent, or rather reinvent, something that looks like a rehash of 1980s-style enterprise zones but call it a freeport because that sounds like a better term. Leaving aside the terminology, how do the Government know that the provisions in clauses 109 to 111 will create new investment and new jobs, rather than just move investment and jobs that would have happened anyway, as the Committee Chair asked? How will they make sure that those who buy and sell land in a designated freeport area are investing the tax breaks they enjoy in creating jobs on the site, rather than just siphoning the money off into the profit and loss account of an offshore investment trust somewhere?

Almost a third of the Bill’s clauses relate to the plastic packaging tax, and no doubt the Bill Committee will want to spend a proportionate amount of time scrutinising the details, but for now, I draw the Minister’s attention to the National Audit Office report on 12 February this year. The report found that, although the Chancellor in his Budget speech last year was able to tell us how many tonnes of carbon the tax would save,

“the exchequer departments did not set these as measures of success in the Tax Information and Impact Note”.

A previous Tory Government brought in tax information and impact notes in a blaze of publicity, announcing that they would support better parliamentary scrutiny of tax policy, but how can Parliament scrutinise the success of this new tax if the key measure of success announced by the Chancellor does not even appear on the success radar of the Department that has to implement it?

My hon. Friend the Member for Glasgow Central raised the more general point about the woefully inadequate scrutiny that the often massive decisions in Finance Bills receive. I know that the Government will point to the number of minutes, hours, days or weeks that people have spent talking about it in Parliament, but talking about it and reading prepared speeches is not the same as proper scrutiny. For example, in this Bill we can accept, reject or amend clause 32 on the tax statement of payments under the self-employment income support scheme, which is fair enough for those who qualify, but we cannot redress the glaring injustice of the excluded millions who do not qualify at all. We can accept clause 31 or amend it to make it a lot better, to support working people whose income has been affected by covid, but we cannot vote to remove the 30 September cliff-edge when the furlough scheme is removed, because that would be an inadmissible amendment. Although the Bill can be improved in Committee and made slightly more fit for purpose, we are powerless to force the Government to undo some of the deliberately disastrous flaws and omissions in existing support schemes.

It is right that this Budget and this Finance Bill should start the process of rebuilding the economy after covid, but as the right hon. Member for Hayes and Harlington (John McDonnell) mentioned, the Government seem hellbent on taking us back to exactly the same unfair, unequal and divided society that we had before. In fact, they will probably succeed in making it even worse than before. Of course, the Tories do not want to talk about the fact that their own analysis shows that the long-term economic damage of the covid pandemic will be less than the damage of the self-inflicted and totally avoidable disaster that is Brexit.

It is an indication of how out of touch the Government are with my constituents, and with the people of Scotland generally, that the Tories, the official Opposition in Scotland, have already surrendered in the Scottish Parliament elections. They are not even pretending that they want to try and form an alternative Government after 6 May. They are delivering glossy six-page leaflets that literally have no policies on them. They are not even pretending that they have anything positive to say or to offer in Scotland—which, after all, is kind of what Scotland has been saying to them since 1955.

The Bill will get its Second Reading tonight, it will get through the Committee and it will become law. Its regressive provisions will be imposed in Scotland against the will of three-quarters of our people, no doubt to great cheers from the socially distanced Government Benches. But let me say this to them: enjoy imposing this Finance Bill on Scotland’s people, because in just over three weeks’ time, those same people will take a decisive step towards making sure that their time for imposing their policies on our country comes to an end.

Eleanor Laing Portrait Madam Deputy Speaker (Dame Eleanor Laing)
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I appreciate that this is a Finance Bill and technically it can go to any hour, so the House could be sitting until 11 o’clock or midnight, but I ought to say something to Members who are not in the Chamber but who I hope might be listening. It sometimes seems that Members who are at home and participating virtually do not pay attention to the rest of the debate. If they are listening, let me say to them that there is something a little bit distasteful about those who are sitting at home making very long speeches and keeping the entire operation of the House of Commons going till well into the evening. Everybody has the right to speak on the Finance Bill and it is very important that they do so, but it is generally recognised, and I particularly recognise it today, that that which can be said in 10 minutes can usually be said more effectively in five.

Income Tax

Peter Grant Excerpts
Monday 1st March 2021

(7 months, 2 weeks ago)

Commons Chamber

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HM Treasury
James Murray Portrait James Murray (Ealing North) (Lab/Co-op) [V]
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Thank you, Mr Deputy Speaker, for giving me the opportunity to speak on behalf of the Opposition on these regulations. As we have heard, this statutory instrument relates to the Euro 2020 football championships, which were delayed by covid-19 into 2021. Although I am speaking as a shadow Minister, this subject is literally close to home for people in my constituency; from many places near where I live, including the top of Horsenden Hill, people get a full view of Wembley’s arch, under which several of the games are set to be played, including the semi-finals and the final.

As we have heard from the Minister, the purpose of these regulations is to create an exemption from income tax for income earned in the UK by certain non-resident individuals in connection with football matches held in the UK as part of the tournament. The Opposition recognise that this income tax exemption was a condition of the bidding process for all countries wishing to host matches in the UEFA Euro 2020 finals tournament. We also recognise that the formal requirement to grant an income tax exemption in hosting the Euro 2020 finals is consistent with the approach taken in comparable events hosted in the UK in the past, such as the World Athletics championships 2017, the UEFA Champions League final 2017 and the London anniversary games in 2016. We will therefore not oppose this statutory instrument, and we look forward to enjoying the matches this summer.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP) [V]
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A belated happy St David’s Day to you, Mr Deputy Speaker, and to all hon. Members and staff of the House.

The Scottish National party will not oppose these regulations. Applying them to the delayed Euro 2020 finals is clearly an appropriate use of the power that has existed for a number of years to exempt from income tax liabilities anyone who works here for a relatively short time because they play for, coach or are otherwise involved with one of the national squads, or are UEFA-accredited staff and journalists. It is my understanding that this courtesy is often extended by other countries that host major sporting events; indeed, as we have heard, Governments of all the host countries had to sign up to this to take part in the bidding. I suppose we should welcome the fact that on this occasion the Government have actually honoured promises they made to our European neighbours; quite a few businesses in my constituency and elsewhere in Scotland wish that promises made to them were worth quite as much.

Clearly, because of covid, the tournament may not be the spectacle it might have been, but I hope that by the summer, the Governments of not only Scotland and the UK but all the qualifying countries have the pandemic sufficiently under control to allow the matches to be played—possibly not in front of full capacity crowds, but certainly with a big enough crowd at each game to give them the atmosphere that Europe’s top footballers clearly deserve. I can see that the hon. Member for Strangford (Jim Shannon) is waiting to speak, so let me say to him and his colleagues from Northern Ireland that I am sorry that Northern Ireland did not quite make it through a very difficult qualifying group to make it four UK nations out of four taking part.

Given that it is St David’s day, may I wish Wales the very best of luck with their start to the tournament? I also send my very genuine and sincere good wishes to England, as they strive to finish second to Scotland and qualify on our coattails in group D. Who knows? We might be able to give the world’s media not just an exemption from income tax while they are here, but a truly historic sporting occasion—and not just because Scotland’s men’s football team is at a major tournament, because I can remember when that was quite a common occurrence. We might show the media something that has only ever happened once in history; they might be able to report on Scotland beating England at Twickenham and at Wembley in the same year. Now, that is something that I think we all look forward to in June this year.

Nigel Evans Portrait Mr Deputy Speaker (Mr Nigel Evans)
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As a Welshman, I am not one to dwell on recent sporting victories that took place over the weekend.

Exiting the European Union (Value Added Tax)

Peter Grant Excerpts
Wednesday 3rd February 2021

(8 months, 2 weeks ago)

Commons Chamber

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HM Treasury
James Murray Portrait James Murray (Ealing North) (Lab/Co-op) [V]
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I am grateful for the opportunity to respond on behalf of the Opposition to these two statutory instruments. Our priority, as the Opposition, is to ensure that the UK economy functions as smoothly as possible and that the Northern Ireland protocol operates effectively following the end EU exit transition period. We will therefore not oppose the Government on these two statutory instruments.

As we have heard, the first of these sets of regulations includes changes to replicate in domestic law the measures that currently exist in EU law. They make provision in UK law for a VAT zero rate for the handling of qualifying aircraft at non-customs and excise airports, as businesses can no longer rely on EU law to provide that measure. Other measures in this set of regulations make more substantive changes. The introduction of a VAT zero rate for the handling of international trains is new, although in practice it is similar to the relief for aircraft. The removal of a VAT exemption for suppliers of pension fund management services for funds established in the EU is also substantive, although it was predicted when the VAT exemption for pension fund management services was introduced in UK law last year.

As those two points represent substantial changes, will the Minister say what assessment the Treasury has made of the impact on the tax base of these regulations? On the one hand, there will presumably be a loss of revenue as a result of the zero rating for handling of international trains, while on the other, the removal of the exemption for EU-established pension fund management services will presumably generate income for the Exchequer. Will he therefore set out what impact, separately and net, these changes are expected to have on the tax base?

The second set of regulations makes changes to the Value Added Tax Act 1994 needed following the end of the EU exit transition period in the context of the Northern Ireland protocol. As we have heard, the measures in this instrument will ensure that VAT can be recovered by DIY house builders in Northern Ireland on goods used in construction purchased in the EU. It will also remove VAT relief for goods moved from Northern Ireland to Great Britain for avoidance purposes and ensure that recovery is possible if VAT is incurred when a business moves its own goods from Great Britain to Northern Ireland.

As I made clear, the Opposition want to see the Northern Ireland protocol operating effectively and we want people in Northern Ireland to be protected from disruption to their lives and their businesses. While these changes are therefore welcome, it is vital that businesses are supported in understanding and being able to follow the new arrangements they face. The Minister will know that my Opposition colleagues have been calling on the Government to support a major and effective information campaign for British businesses about the new rules on trade with Northern Ireland and to increase capacity at the Trader Support Service to help businesses to complete new customs declarations. In the light of the disruption we have seen since the end of the transition period, will the Minister set out what extra support the Government have decided to put in place since the beginning of this year? Can he confirm specifically whether, since 1 January, there have been any substantive changes to the Government’s communication strategy for British businesses about the new rules on trade with Northern Ireland or increases in capacity at the Trader Support Service? These are important questions to ensure that the protocol operates effectively, and I would welcome the Minister’s addressing them directly.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP) [V]
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The SNP will not oppose these motions either, because, as with most statutory instruments, the choice is to approve or reject them in their entirety, and rejecting them in their entirety would mean failing to address some serious gaps in legislation left by the Government’s shambolic handling of Brexit.

Most of the first set of regulations, SI No. 1312, is non-contentious. In fact, if we are honest, most of it is necessary to put right yet another great British Brexit blunder. The now Foreign Secretary and former Brexit Secretary did not realise that we needed lots of boats at Dover to do cross-channel trade. Now we find that Treasury Ministers knew they had to legislate for goods crossing the channel on planes and boats but forgot that goods could also get across the channel in the channel tunnel on a train. Regulations 2 to 8—most of this SI —are almost entirely about correcting that blunder.

Regulation 10, which the Opposition spokesperson mentioned, concerns me. I hope that the Minister will be able to give some reassurances about who it will affect and how much it will affect them. The regulation removes the VAT exemption on fees charged for the management of qualifying pension funds established in an EU member state. The explanatory notes say that the change is necessary as a consequence of withdrawal from the European Union. Will the Minister expand on exactly why it is a necessary consequence? Surely the exemption could have been retained as part of the trade deal the Government are so proud of. Did the Government actively seek to end the exemption, did they try to retain it but have to negotiate it away during the negotiations, or did they just completely forget about it, as they seem to have completely forgotten about so much else? Is it necessary because the Government want to do it or because they have sleepwalked into a situation where they are, in effect, forced to do it? What assessment have they made of the impact of the removal of this exemption? Do they know how many people in the UK have their pensions managed by EU-based funds, possibly without the pension holder even realising it? What is the total value of such funds? How much additional tax does the Treasury expect will become due as a result of this proposal?

Pension holders affected by this change went into a long-term relationship with their pension fund based on the VAT rules that applied at the time. They had a reasonable expectation that the rules would not be significantly changed during the term of their pension, but they are now being told that the rules have been changed and it is up to their pension fund to cough up the tax that becomes due. It may not technically fit the definition of “retrospective legislation”, but that is what it will feel like to those people.

As well as the impact on UK residents whose pensions are managed by EU-based funds, what happens in the converse situation? Presumably, it will also be necessary for every EU member state to now start charging VAT on the management fees for every pension fund that an EU resident holds with a UK pension manager. I imagine that this will be a bigger issue. So what assessment have the Government made of the value to the UK economy of the big financial centres, such as Edinburgh and London, selling their pension management expertise to the European Union? What assessment have the Government made of the impact on the competitiveness of that part of our financial services industry if its customers are to start paying VAT and its competitors do not?

I turn to the second of the statutory instruments, the Value Added Tax (Miscellaneous Amendments to the Value Added Tax Act 1994 and Revocation) (EU Exit) Regulations 2020. All the amendments to legislation proposed here appear reasonable and necessary for the smooth operation of the Northern Ireland protocol. In that regard, may I urge those calling for the protocol to be completely scrapped to ask themselves: whose interests would be served by the British Government welching on such an important international agreement almost before the ink has even dried on it? The protocol is flawed, for two reasons: it attempts to resolve an almost insoluble contradiction, which the Government have continuously refused to acknowledge; and, like almost everything else of critical importance to Northern Ireland during the Brexit process, it was thrown together at the last minute.

This statutory instrument is needed because we saw exactly the same kind of last-minute rush job just before Christmas with the Taxation (Post-transition Period) Act 2020. That Act passed its entire proceedings in this House in about four and a half hours. Under the rules of the House at that time, virtual participation in debate was not allowed, so inevitably the number of Members who could take part was reduced and the degree of scrutiny afforded to the Bill was affected. The scrutiny was so affected that the day after that Act had received Royal Assent the Government had already had to table this statutory instrument to correct mistakes in their own legislation. Provisions that were essential to allow the economy in Northern Ireland to continue to operate were thrown together at the last minute. We should never forget that the unique concessions the Government have made to Northern Ireland in the Brexit process were not made out of any respect for the will of the people there; they were made because the Government’s original intended solution of acting unlawfully and tearing up international treaties eventually became a step too far even for some of their own most loyal supporters. Although we welcome the fact that the Government have been forced to give some recognition to the will of the people of Northern Ireland, who never voted for this Brexit chaos, surely they deserve better than to be continually treated as an afterthought.

These two sets of regulations are necessary to make up for the incompetence of the Government of a wannabe global power, who did not realise that boats were a useful way for people on an island to trade across its sea borders. This Government also then forgot there was a tunnel so that people could also cross a sea border on a train, and they still continually forget that 1.8 million of their own citizens do not need to cross the sea to get to the EU; they have only to cross the road. My final question to the Minister is: how many more pieces of additional legislation are we going to have to approve in order to clear up after this Government’s incompetence?

John Redwood Portrait John Redwood (Wokingham) (Con) [V]
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I have declared my business interests in the Register of Members’ Financial Interests.

As the Minister has told us, these are two important statutory instruments for the facilitation of trade generally and for the facilitation of trade within Northern Ireland and between GB and Northern Ireland, and to the extent that they make things easier and allow zero rating of important services and goods, I welcome them wholeheartedly. But, of course, as others have said in this debate, we meet today against the background of clear difficulties and problems in the implementation of the Northern Ireland protocol, where it appears that a number of important impediments to GB-Northern Ireland trade have been inserted, and it is crucial that the talks go well and we get rid of them as quickly as possible.

So when we look at the administration of VAT, which is an important part of the trade process, I would like an assurance from the Minister that these regulations, and all the other VAT and excise rules applying in Northern Ireland and throughout the United Kingdom, will be solely administered and enforced by United Kingdom authorities, because I have much more confidence in them. Will he also assure me that the aim of these statutory instruments, and the wider VAT legislation that they add to and amend, is to ensure that the movement of goods from Great Britain to Northern Ireland, or the other way, will be as smooth and easy as the movement from London to Surrey or from Manchester to north Wales, because that is what I thought we had agreed and signed up to—that Northern Ireland was a fully integrated part of the United Kingdom single market, under our single market and taxation rules? I would like the reassurance through these statutory instruments that we are intending for that to be true.

Will the Minister also confirm that there has for many years during our period in the European Union been an important VAT border between the United Kingdom and the Republic of Ireland, but that it has always worked very smoothly and was not enforced at the physical border, in accordance with the spirit of agreements and not wanting barriers at the land border? It was an electronic border and adjustments were made by computer or by correspondence so that these things could be sorted out in a sensible and decent manner without having to have people queuing at borders to make complex calculations and submissions. If that is the case, does the Minister agree that it is in that spirit that we need to find the answer to the current impositions and difficulties affecting our trade across those borders? It seems very odd that we cannot replicate that success of our past trading, where electronic manifests, trusted trader schemes and so forth, and proper electronic VAT registration worked very well. Surely the UK authorities, if we are the proper and sole enforcement authority in Northern Ireland, can work with trusted traders, VAT-registered hauliers and ferry companies and so forth, and we can accept their certification or word that the goods on their load are entirely GB-Northern Ireland or Northern Ireland-GB. We can then accept, therefore, that there are no other considerations and the loads can then move as smoothly as from London to Guildford or Manchester to north Wales. It would be very helpful to hear the Minister’s views on how that can be achieved and how quickly we can get to that point.

It is absolutely crucial to the people of Northern Ireland, as we have heard from their representatives, that they can trade smoothly with the rest of the United Kingdom. That was fundamental to the spirit of the agreements that the United Kingdom entered into with the European Union over the issue of trade with and between Great Britain, Northern Ireland and the Republic of Ireland. I hope the Minister will have good news for us and that these things can be sorted out quickly.

Covid-19 Support Schemes: Ineligible People

Peter Grant Excerpts
Wednesday 9th December 2020

(10 months, 1 week ago)

Westminster Hall

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HM Treasury
Christina Rees Portrait Christina Rees (in the Chair)
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I thank hon. Members for adhering to the time limit; it is much appreciated.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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I am pleased to be able to sum up in this debate for the Scottish National party. I commend the hon. Member for Twickenham (Munira Wilson) on securing the debate, and everyone who has contributed. As others have said, we could have filled this Chamber four or five times over with hon. Members who would have liked to take part, but realised there would not be space. I cannot be the only person who has noticed that today, again, nobody has defended the Government’s failure to support these 3 million people.

I also commend the campaign groups that are helping to make sure that this scandal will not go away—not this year, not next year, not any year—until it is addressed. I am sorry there is not time to mention by name all my constituents who have contacted me and asked for their plight to be publicised, let alone the people from outside my constituency who have been in touch over the past few days specifically because I was going to speak in this debate.

The first and most important point that must be made—it is one that the Government sometimes try to fudge—is that this is a deliberate policy decision. It is not that the Government could not have helped these people by now, had they wanted to; it is that, frankly, they do not seem to care enough to try. It has to be the UK Government who address the problem. None of the devolved Administrations has borrowing powers that would come anything close to the amount the UK Government are borrowing to fund their covid support package. By 2025, UK Government debt will be somewhere in the region of £2 trillion to £2.5 trillion. The devolved Administrations are not allowed to borrow money to this extent; if they were, I am sure that at least one, and possibly all three, would.

To the many harrowing stories we have heard today and in other debates, I can add that of my constituent Gemma, who moved from being employed to being self-employed early in 2019. For 2018-19, her PAYE income was higher than her self-employment income, and she did not qualify for support. She has now submitted her tax return for 2019-20, the period ending shortly before lockdown was imposed. Deliberate policy from the Government is that they ignore her accurate tax return for 2019-20 as evidence of what she was earning—what she would have earned this year. However, HMRC is happy to use the same tax return as evidence that she now owes them £9,000.

There was good reason why 2018-19 tax returns were used as a basis for the first scheme when it was announced last year, but now that the Government again have a scheme open for self-employed support applications, there is no excuse whatsoever to continue to exclude people simply because their 2018-19 tax return significantly understated their self-employment earnings.

There are some cases, such as that of Joanna in my constituency, where alleged employed earnings were significantly overstated. Joanna still runs a small business. Her family ran another business that failed because a serious accident befell a close family member who was involved in the business. To cope with that, they cashed in their pensions at exactly the wrong time in 2018-19. This meant that their pensions were counted towards her earned income. Had it been a few months earlier or later, it would not have counted, and Joanna would qualify for covid self-employment support. Now, they get nothing. Just like Gemma, Joanna’s tax return for 2019-20 will give a much more accurate picture of her earnings but it will be ignored by the Government. Again, of course, HMRC will quite happily use it as a basis for the tax she is due to pay them.

It would be easy just to say that this is happening because the Government do not care, but even if it was true that they genuinely could not care less about the plight of these 3 million people and their families, surely they care about the damage to the economy if these people disappear from wealth creating in the future. Let us not forget that this time last year all those people were working in their businesses, creating wealth and providing valued services to the local communities and beyond. Some were giving jobs to other people in the community. All were paying taxes into Government coffers. That is what they were doing this time last year. This time next year, or maybe even earlier, every one of them wants to be doing exactly the same—to be part of a post-covid shared economic recovery. To do that, they need support this time, this year.

I say to the Minister, even if the Government’s approach to these people is as callous as it sometimes appears, surely it is in our shared interest to help all those who want to be in business after covid to get into business or to stay in business. It is not about charity; it is simply about parity.

Bridget Phillipson Portrait Bridget Phillipson (Houghton and Sunderland South) (Lab)
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It is a pleasure to see you in the chair, Ms Rees. I appreciate that we are slightly pushed for time. I am grateful to the hon. Member for Twickenham (Munira Wilson) for securing such an important debate on a timely issue. For nine long months now, many workers have had no support whatsoever from the Government due to glaring gaps in the Government’s various schemes and wider provisions—inadequacies that the Opposition have highlighted time and again. Many of these problems could be fixed with political will, but the Government so far have chosen to do nothing. Those problems have festered and worsened, and today they are endangering our economic recovery.

I pay tribute to the Members we have heard from, whose contributions showed the impact that being shut out of support has had on many of their constituents right across the United Kingdom, particularly my hon. Friends the Members for South Shields (Mrs Lewell-Buck), for Batley and Spen (Tracy Brabin), for Portsmouth South (Stephen Morgan) and for Manchester, Withington (Jeff Smith), who made such passionate cases on their constituents’ behalf. Like many Members, I have also heard from constituents who find themselves in this position. One constituent, newly self-employed after starting his own business, told me:

“I am from a working class background. I’ve worked and paid taxes since leaving school, funded my own retraining. I’ve not claimed any benefits at all during this time. I’ve worked hard to earn everything that I have achieved. I admit to feeling disappointed and let down, that due to a quirk of timing and dates, I won’t be afforded the same level of Government support.”

I have also heard from many of the unions representing working people in this country: Community, Equity, the Musicians’ Union, the Writers’ Guild, Prospect and the GMB about how many of their members are in similar situations. I have also heard from the Federation of Small Businesses. Across professions, the same issues come up time and again: the exclusion of the newly self-employed, the 50% threshold, and people who are not eligible for universal credit despite a huge drop in income. We also know that, despite some recent welcome changes, there is ongoing discrimination against women who have taken maternity leave.

I have said before, and will say again, that the Opposition accept that it was difficult to get everything right when the Government set up these income support schemes back in March—but we are months into this pandemic now. We know where the gaps are. We have pointed them out repeatedly and Members have made the case here today. I ask the Minister, again, what is being done to sort out these issues? No doubt he will list the schemes the Government have already made available, but surely he must understand that this will be cold comfort for those still unable to access support. Does he have anything new to say today?

The Government’s failure to address these issues is also storing up problems down the line. There are many self-employed people who have put money aside into savings accounts to pay for end-of-year tax bills. In many cases, these savings trigger an end to their universal credit eligibility or they can only claim at a reduced rate. This means that not only are they going without support for longer, but that they will face even greater financial difficulties when required to pay their end-of-year tax bill. As we have heard today, Government inaction risks the very economic recovery we all desperately need and want.

Entrepreneurship is the backbone of our economy. A dynamic economy needs people who are willing to take risks, become self-employed and start their own businesses. After all, after the 2008 financial crash, it was SMEs that spearheaded economic recovery and gave people hope and work. Now, however, when so many self-employed people are in need, the Government are not there to help.

Self-employed people have seen how the Government have treated them, and I worry that they will be wary of taking steps that could help to drive our recovery. As we have heard today, many people who are already self-employed are considering giving up on their careers and their businesses. That is of particular concern among women, those from low-income backgrounds, and black, Asian and minority ethnic communities.

We should do everything we can to ensure that an economic recovery benefits everyone in our country, and we should give the self-employed the confidence to keep going, not leave them to sink or swim. If we do not, we will face a much slower and less inclusive recovery. That is in the Minister’s hands. It is not too late to listen; it is not too late to act.

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John Glen Portrait The Economic Secretary to the Treasury (John Glen)
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It is a pleasure to serve under your chairmanship, Ms Rees. I congratulate the hon. Member for Twickenham (Munira Wilson) on securing the debate, and I thank the 14 Back-Bench Members for their contributions—I listened very carefully to each—which spoke powerfully to the many cases of hardship that I recognise exist throughout the country.

I acknowledge the article written by the hon. Member for Twickenham for The House magazine today, and the briefing by ExcludedUK, which was made available yesterday for the debate. I have looked at that carefully and shall take back the three-stage approach, and we will continue to see if we can move forward. I recognise that there is a sensitivity about Ministers standing up and listing all the measures that have been put in place so far, so I will go through some of that only briefly, but I will then move on to the context and rationale behind some of our decisions, and address some of the points that have been raised.

Clearly, the pandemic has profoundly affected the lives of countless people. As a Government, we have a moral obligation to protect jobs, livelihoods and our country’s economic capacity, a point that has been made and acknowledged by many Members during the debate. We have spent £280 billion on what has been one of the most comprehensive responses, including the job retention scheme, which protected 9.6 million jobs; the self-employment income support scheme, which provided grants to 2.7 million people; affordable loans for businesses, which we have adapted over time; extra help through the welfare system; bespoke interventions for different industries, such as the £1.57 billion for the creative industries; as well as other support, such as income tax time-to-pay arrangements, payments to those asked to self-isolate and grants for businesses required to close.

We have striven, as a Government, to provide support for as many individuals and businesses as we can, as rapidly as possible. That has meant taking some difficult decisions, however. I will set out the rationale for some of those decisions, particularly in relation to the self-employed, before moving on to how we have adapted our support schemes so far.

To give some context, when we designed those schemes, we had to keep some guiding principles in mind. First, the help must be targeted at those most in need. To achieve that, we obviously had to set clear rules. That is why we have said that those eligible to claim from the self-employment income support scheme must have made profits of no more than £50,000 from self-employed activity. I recognise that for those on the upper side of the £50,000 cut-off, that must feel unfair, but we did have to draw a line somewhere, and wherever we had drawn it, we would have had the same challenge.

According to HMRC data, those in that category had an average income of between £100,000 and £200,000. We have also said that support from that scheme must go to people whose main income is from their self-employed trade. That is why we also said that to claim, workers should make at least half of their income from self-employed activity. HMRC analysis shows that typically for those who make less than 50% of their income from self-employed sources, their profits are on average between £1,800 and £3,500 per year. That strongly suggests that self-employment is not their primary income source.

I now come to the second principle that we have used, which is the need to balance the Government’s duty to support individuals with our responsibility to protect taxpayers. Colleagues will be aware of the wide concern about fraud that continues to be, rightly, something that is raised in Select Committees and by those commentating on what we have done. To verify claims through the self-employment income support scheme, we needed to use data from an individual’s tax returns, and that means using returns from the year 2018-19. That has meant that people who became self-employed in 2019-20 have been unable to access the scheme, because HMRC does not yet hold complete tax return data to check their details.

We are listening closely to individuals who pay themselves through dividends, but that presents another challenge, which is that there is no practicable way of distinguishing between dividends derived from an individual’s own company and those from other sources.

I know that the past months have been very difficult for many people in the groups that I have mentioned, but I want to stress that we have not taken a dogmatic opposition position to any particular group and we continue—

Peter Grant Portrait Peter Grant
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Will the Minister give way?

John Glen Portrait John Glen
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I will be very happy to take just one intervention.

Peter Grant Portrait Peter Grant
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I am grateful to the Minister for letting me intervene. It is patent nonsense to suggest that we cannot tell the difference between shareholders who are directors of a small company and shareholders who are anonymous investors in a big company that they know nothing about. Companies House holds all those records. Why, nine months later, have HMRC and the Treasury made no attempt to do a data-matching exercise between what HMRC holds and what Companies House holds?

John Glen Portrait John Glen
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I thank the hon. Gentleman for his intervention. Of course, one of the challenges that we had to come to terms with was the need to deliver a scheme as quickly as possible, and to as many people as possible, within the context of a finite number of individuals who could verify that data. Short of introducing a scheme whereby people would need to manually go through and verify those different data sources—

Peter Grant Portrait Peter Grant
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indicated dissent.

John Glen Portrait John Glen
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The hon. Gentleman shakes his head, but that, practically, was the challenge that we, working with officials, had to overcome. We had to make a judgment as to how to reconcile those two realities.

I want to reiterate that we are not adopting dogmatic opposition to any particular group, or contribution or idea that could move this forward. We need to protect the taxpayer, but that has not overridden our determination to provide support and we will continue to think about how we can improve the way the schemes that I have mentioned are targeted.

We have adapted already. We extended the cut-off point by which workers needed to be on their company’s payroll to be eligible to be furloughed, allowing more workers to receive those payments, and that potentially includes freelancers paid through PAYE. Some workers may be able to benefit from the recent changes that allow employers to re-furlough workers who left their jobs between 23 September and 30 October. And since July, employers have been able to bring back previously furloughed workers while still claiming from the Government for any hours not worked. We have adapted the self-employment income support scheme to help new parents who have taken time out of work, along with self-employed armed forces reservists, who were previously not covered.

I would like to add that people who are ineligible for one scheme may still be able to get support from one of the many other sources that I mentioned earlier, and that was not an exhaustive list.

I recognise that many people in the groups that we have talked about today fully intend to continue in their current jobs. However, we are investing to help those who decide to seek new opportunities. My right hon. Friend the Chancellor of the Exchequer recently announced a £2.9 billion restart programme, which will provide intensive and tailored support to help people to find work.

I listened to the range of contributions from constituents across the country. It is very, very challenging for us to provide support for every single group that is struggling at this time, but I reiterate our willingness to continue to work with groups, including IPSE, the relevant APPG, the FSB and others, that bring forward proposals. My right hon. Friend the Financial Secretary to the Treasury is engaged in many of those conversations. As we move through into the new year, we will continue to look at the new schemes.

Our overriding goal has been to provide as much support as we can to people and businesses, and as rapidly as possible. We acknowledge that we have not been able to help everyone in the way that we would ideally want to, but that has not been a wilful disregard for their situation; it is based on the challenges of verifying. It is not attributing any blame to them either. We have succeeded in supporting millions of people and businesses through this intensely difficult time, and we will continue to do our very best until we have beaten coronavirus.

Lockdown: Economic Support

Peter Grant Excerpts
Tuesday 3rd November 2020

(11 months, 2 weeks ago)

Commons Chamber

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HM Treasury
Steve Barclay Portrait Steve Barclay
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3 Nov 2020, 1:43 p.m.

First, I refer to the answer I gave earlier about the universal nature of the package. Another such area that my hon. Friend did not mention is the fishing sector, which was particularly impacted not only through its supply of the restaurant trade but through its exports, which were also hit. We have listened to concerns there and put in some additional support. But the best way we will support businesses, whether in the wedding sector or elsewhere, is by getting the virus down. That is why we have taken the comprehensive measures that we have for the next four weeks. That is the best way to be able to open up these sectors and get the people who have been furloughed or supported through the self-employed scheme on to the job support scheme, where they will then qualify for the furlough bonus, which will be further support that is available.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP) [V]
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For all the Minister’s sweet talking, the simple fact is that nearly eight months after the first lockdown was imposed, millions of self-employed people and small businesses are still being excluded from Government support. He has spoken approvingly today of comments from a recent Public Accounts Committee report, so may I draw his attention to the Committee’s 20th report of this Session, unanimously agreed by a Committee with a Conservative majority?

The report says:

“The Committee is disappointed that, so long after the beginning of the pandemic, HMRC has still not made sufficient use of its data to identify small businesses which have been left out of previous support packages, and therefore maximise taxpayer eligibility for grant support.”

Can the Minister not accept that the Committee’s disappointment reflects a view widely held among all parties in the House and that it is time for the excluded 3 million to be supported by actions, not just words?

Steve Barclay Portrait Steve Barclay
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I am somewhat surprised that the hon. Gentleman talks of actions when, as a result of our ability to operate UK-wide, we have been able to support nearly 1 million jobs in Scotland. Some 65,000 businesses in Scotland have benefited from the UK Government loan schemes and, as of 31 August, 242,600 employments were furloughed, at a take-up rate of 10%. Significant support has been offered to businesses in Scotland, as indeed it has been to businesses throughout the UK. It is odd that the hon. Gentleman talks about actions and ignores the nearly 1 million jobs that have been supported as a result of the actions that the UK Government have taken.

Budget Resolutions

Peter Grant Excerpts
Monday 16th March 2020

(1 year, 7 months ago)

Commons Chamber

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HM Treasury
Chris Stephens Portrait Chris Stephens (Glasgow South West) (SNP)
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16 Mar 2020, 8:27 p.m.

I thank the hon. Member for Cleethorpes (Martin Vickers) for his generosity in giving me those 33 seconds.

It is becoming clear that this will be the first Budget of this financial year. I do not mean that as any criticism of those on the Treasury Bench, but it is clear that events are moving fast. The Government will want to introduce emergency legislation and may seek emergency powers, and it is clear that even the Budget announced last week has already been overtaken by events. However, let me make couple of remarks about it.

First, we will have a wider debate about the loan charge on Thursday, but I was disappointed that there were no more concessions for those caught up in that scandal. It amazes me that people who were caught up in it, rather than those directly responsible for it, are being chased for money. I hope the Government will also be a bit more specific about the measures they want to introduce to tackle the promotion of tax avoidance. I am not the only Member who is concerned about the reduction in staff at Her Majesty’s Revenue and Customs over the past 10 years.

Secondly, the Government committed during the election campaign to maintaining the free TV licence. Given that we are in a period where the main source of information for many people, particularly the elderly and those who live on their own, is television, the Government need to move quickly to take back control of that power from the BBC and give it back to the Department for Work and Pensions and maintain the free TV licence. Over the next few weeks and months, elderly people will need that box in the corner of their living room to get vital information on tackling coronavirus.

Peter Grant Portrait Peter Grant
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16 Mar 2020, 8:29 p.m.

The Conservatives have already changed their promise on that. In the 2017 manifesto, they promised to keep the free TV licence. Now they are promising to keep it as long as everybody else pays for it. Surely that is a bit like saying the Government will provide free bus fares for everybody, as long as the bus companies pay for them?

Chris Stephens Portrait Chris Stephens
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16 Mar 2020, 8:29 p.m.

Yes, I agree. My hon. Friend’s point is well made.

There are a number of challenges that the Government now face. I am not the only Member over the past few days who has had constituents contact them to say they have already seen their hours reduced and shifts cancelled. They are being advised by employers that there will be no work for them, as people are being discouraged from going into nightclubs, bars and restaurants. The work in this sector is traditionally low paid and precarious. I hope the Government will now look at the models introduced by Denmark and Norway to address those issues, and sit down with trade unions and business to come up with a financial model that ensures wages are maintained for those who are low paid and in precarious work, including those on zero-hour contracts. In particular, I hope the Government are considering, as Norway has done, issues relating to the self-employed and carers.

On statutory sick pay, I have been contacted by constituents who are alarmed that some employers, including some large multinational employers, do not pay company sick pay from day one. Some pay it on day four and some pay it on day seven, leaving the state to pick up the tab. Because of the different schemes by different employers, some individuals will find themselves receiving only statutory sick pay from day one, which is not topped up by employers and their particular sick schemes. That will lead to a situation where some people—I am sure I am not the only Member to hear this—feel they will have to make a choice between public health and poverty, and their wages. We really need to look at the rate of statutory sick pay. If there was a European league table, the UK would be either in the relegation zone or not too far away from it. The statutory sick pay of other European countries far outstrips what is on offer in the United Kingdom.

On universal credit, we need to move away from an arrears-based system. The five-week wait, which other hon. Members have mentioned, needs to go now. The first payment should be the first payment. The DWP receives £50 million a month in advances returned from claimants. How much does that cost the Department to administrate and how much time are DWP staff taking on that when they could be processing online journals and other claims? I agree with hon. Members that there should be no evictions for rent arrears during this period and that there should be no sanctions.

I want to end by saying that the Treasury will now need to consider, over the next few days and weeks, whether there should be a people’s bailout. The amount of money the state had to spend on the bankers’ bailout will probably be similar to what it may have to spend to alleviate poverty and to get through the current crisis in the weeks ahead.

Tax Avoidance and Evasion

Peter Grant Excerpts
Tuesday 25th February 2020

(1 year, 7 months ago)

Commons Chamber

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HM Treasury
Steve Barclay Portrait Steve Barclay
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25 Feb 2020, 1:13 p.m.

As a point of principle, HMRC always seeks to collect the tax that it is due. One of the areas of innovation—I will come on to such areas as Making Tax Digital—is about making that easier for HMRC, but I appreciate that the right hon. Gentleman is making a point more about fraud than error. The underlying principle is that HMRC always looks to collect the tax that it is due, but if he has a specific point on a constituency basis, I know that my right hon. Friend the Financial Secretary to the Treasury will always be keen to discuss it with him, because he has a zeal for cracking down on any such practice.

The Government have done much to squeeze the tax gap: by ensuring that companies increasingly pay their way; by cracking down on offshore avoidance and evasion; by tackling tax avoidance schemes; by helping people to get their taxes right first time; and by investing in HMRC’s toolbox. If one looks at the actions being taken in terms of large businesses, they will see that there is an exceptional level of scrutiny. At any one time, HMRC is engaged with half the UK’s largest businesses and we have introduced specific measures to shape behaviours. For example, the diverted profits tax was introduced in 2015 to ensure that multinational companies pay UK tax in line with their UK activities. Under our rules, those companies either declare the correct amount of profits in the UK and pay the full amount of corporation tax on them, or they risk being charged a higher amount of diverted profits tax at a rate of 25%. It raises tax directly through encouraging changes in groups’ behaviour that, in turn, leads to increased tax receipts.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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25 Feb 2020, 1:15 p.m.

The Chief Secretary quoted a figure of 25% as a potential penalty. Will he tell us how much has been raised from those penalties so far? Has anyone been penalised as a result of failing to fall into line with this new incentive?

Steve Barclay Portrait Steve Barclay
- Hansard - - - Excerpts

It is always good, 10 days into the job, to get specific challenging questions on the detail, but to answer that question—and I do not want to tempt hon. Members who usually come with in detailed questions such as that—the tax has raised £5 billion in additional revenue. On this occasion, I can satisfy the House, but I do not want to tempt fate with too many colleagues on this outing.

It is interesting that attitudes in large companies are changing. I am sure that there will be Members who will want them to change further, but since 2013 the proportion of large businesses agreeing that tax avoidance is acceptable has more than halved, moving from 45% to 21%. There is clearly more to do, but that shows a change in attitude within many large companies.

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Margaret Hodge Portrait Dame Margaret Hodge (Barking) (Lab)
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25 Feb 2020, 1:56 p.m.

I welcome the debate this afternoon so early in the new Parliament, but the importance of tackling aggressive tax avoidance, tax evasion, economic crime and money laundering cannot be overstated, and this debate will not go away until the Government are seen to have taken far more action, not just uttering warm words of support in principle but demonstrating firm action in practice.

There is a lot of money at stake, and that is not just reflected in the tax gap, as others have suggested. The tax gap does not measure the money that we should be collecting in tax from, for example, the profits from the activities that big digital companies undertake here. Looking simply at the tax gap, as currently defined by HMRC, is not enough if we are serious about tackling tax avoidance, tax evasion and economic crime.

As I said, a lot of money is at stake, which is important when we have a new Government who have pledged to restore some of the cuts that they have implemented over the past decade and to invest in services and who want to level up living standards across the country. Fairness is at the heart of this debate, as has already been said. It is not about castigating the rich or anything like that; it is about ensuring that everybody pays their fair share of tax. Everybody should contribute to the common pot for the common good from the wealth they own or the income they receive. It is about ensuring that everybody is treated equally before the law. Until everybody in the nation, particularly the 85% who pay their tax automatically through the PAYE system, can be sure that there is fairness in who pays tax and how much they pay, we will not be able to raise the necessary revenue to fund the services that this country so desperately demands.

I urge the Government and the Chief Secretary to the Treasury to listen carefully to what is being said in today’s debate. There is a cross-party consensus on many of the issues, and the Government need to heed that. They will be unable to ignore the voice of Parliament, despite their increased majority, because to do so would be morally wrong and totally unprincipled.

Let me give a figure that has not been mentioned so far. The National Crime Agency estimates—the figure has not changed and, if anything, has gone up—that about £100 billion of illicit money flows through Britain each year. We have become the jurisdiction of choice for too many kleptocrats, too many criminals and too many people who want to launder their money. We will never build a global Britain on the back of dirty money. Post-Brexit Britain will not prosper by, at best, ignoring the extent of the problems of avoidance and economic crime or, at worst, facilitating it.

I ask the Government to respond to four current concerns. In 2018, the right hon. Member for Sutton Coldfield (Mr Mitchell), who is in America talking to elected representatives about how to tackle evasion and avoidance, and I led a successful cross-party campaign to place on the statute book an obligation on overseas territories to provide public registers of beneficial ownership. In 2019, the Crown dependencies, recognising that the will of Parliament was to include them in the legislation, voluntarily agreed to come along with that. We accepted a concession that registers should be implemented by 2023—too late, but it was better to have the scheme accepted by all parties. I remind Members of why the change is so important. We have already heard today that half the entities named in the Panama papers were registered in just one of our overseas territories: the British Virgin Islands. Secrecy enables wrongdoing, and we must understand that.

Our Crown dependencies are as complicit as the overseas territories, and I have two examples: Silvio Berlusconi was accused of bribing two judges, and the payments were allegedly made through a secret offshore branch of the Berlusconi empire, with funds sent to the judges’ bank accounts in Switzerland through a Jersey-based company; and Bono used a company in Guernsey to hide the profits he made in Lithuania.

We need public registers of beneficial ownership in both the Crown dependencies and the overseas territories. Transparency is a key tool in tackling evasion and economic crime. Global Witness has shown a thirst for open access to company data. Since 2015, when the paywall came down on UK company data searches, there have been, on average, 2 billion searches a year, compared with just 6 million a year before the pay wall came down. It has been used by individuals, investigative journalists, campaigning organisations and the voluntary sector, and it has been used by businesses to try to ensure other businesses are treated fairly.

What support have the Government now put in place to help the overseas territories and Crown dependencies implement public registers? Will the Minister confirm the 2023 date this afternoon? Has he taken any steps to bring that date forward? That would be perfectly possible.

Research from Tax Watch shows that, between them, the big five global digital companies—Google, Cisco, Facebook, Microsoft and Apple—paid £240 million in corporation tax in 2018. They should have paid £1.3 billion according to Tax Watch’s calculation of the activity they undertook here, the profits they made here and, therefore, the corporation tax bill that was liable here.

The Government’s proposed digital services tax is the beginning of an answer, but, by 2023, it will raise only around £400 million, which is a tiny start to ensuring that these large global corporations pay a proper amount of tax on digital services. It makes me so angry, because these companies are as dependent as anybody else on the services our tax provides. They need a well-educated workforce, which is provided from taxpayers’ money; they need a healthy workforce, which is provided from taxpayers’ money; and they need infrastructure—whether roads, the internet or whatever else—which is often also provided from taxpayers’ money.

Peter Grant Portrait Peter Grant
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25 Feb 2020, 2:03 p.m.

I am sorry to interrupt the right hon. Lady because she is making a valid point that those who are the most enthusiastic in giving advice about how to dodge taxes are often people who, in a previous life, benefited from other people’s taxes. Does she believe there is a bit of inconsistency in that some Members of Parliament who get significant support from tax advisers who promote themselves on giving advice about how to legally avoid taxes are themselves paid very handsomely indeed from other people’s taxes?

Margaret Hodge Portrait Dame Margaret Hodge
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25 Feb 2020, 2:06 p.m.

I am unaware of that specific allegation, but I will come on to facilitators, advisers and enablers who get away with far too much.

The only way we will start ensuring that digital companies pay the right amount of tax is by implementing country-by-country reporting. I asked the Chief Secretary and he did not reply, so I hope the Financial Secretary will reply to the question in his winding-up speech. When will this Government implement the country-by-country reporting that will allow us to see what activity takes place here, what profits are made here and, therefore, what fair tax should be paid here?

I reiterate to the Financial Secretary an issue that I raised with him in an Adjournment debate a couple of weeks ago, and to which he failed to reply at the time. Netflix has so far avoided public scrutiny, but it exports its profits by ensuring that subscribers pay into a server located in Holland. We reckon Netflix earned about £1 billion last year and paid no corporation tax, but in over two years it has benefited to the tune of £1 million from the high-end television tax relief. Not only was Netflix not paying tax, but it was benefiting from what is, in effect, a grant to encourage the production of content here in the UK.

I welcome such reliefs, but it seems utterly unacceptable that companies should benefit from grants offered through tax reliefs here in the UK yet behave in such an appalling way and refuse to pay their tax here. Now that we are Brexiting from Europe, surely it is not beyond the realms of possibility to introduce legislation so that companies will be eligible for such tax reliefs only if they show responsibility in how they behave and in paying their fair share of tax.

The other thing that really gets me with many of these American-headquartered companies is that the Americans, under Donald Trump, extract tax from profits earned through activity undertaken here in the UK. They extract tax at a lower rate but, nevertheless, they are getting more tax than we are, which is unacceptable. Americans are profiting from tax on profits and intellectual property created here in the UK.

I again ask the Minister what I asked him in the Adjournment debate and to which he refused to respond: will he extend the digital services tax to include streaming services? Will he stop those who deliberately avoid tax having access to grants and tax reliefs?

The hon. Member for Glasgow Central (Alison Thewliss) talked about creating a register of beneficial ownership of property, which David Cameron first promised us five years ago. Why is it important? The last figures I could get show that getting on towards 90,000 properties across the UK are owned by companies incorporated in tax havens.

The purchase and ownership of properties has become a key way in which money is laundered into the UK. Transparency International has established that one in 10 properties in just one London borough—Westminster —is owned by a company registered in an offshore secrecy jurisdiction. Private Eye claims that one in six properties sold in Kensington and Chelsea was bought by a company located in an offshore tax haven. This is a key way in which people launder money here.

The electoral register of Kensington and Chelsea is interesting. There has been a 10% decline in the register over the past decade or so, whereas registers have increased everywhere else in London. Why? Because people buy the properties and leave them empty. They simply use the purchase as a way of laundering money, and we know lots of that money comes out of Russia—about £70 billion has flowed out of Russia into the UK in the past 10 years.

When are we going to see that legislation? When will it be put before the House? When will we see the promise made a long time ago by a Conservative Prime Minister fulfilled by this Conservative Government?

Finally, the hon. Member for Glenrothes (Peter Grant) mentioned the role of advisers. It is the advisers who create these schemes. Whether they are banks, accountants, lawyers or just advisers on their own, they found schemes that are later deemed to be unlawful. Film tax credit and, most recently, the loan charge are good examples of schemes that have caused terrible hardship to people. I feel ambivalent about it because, of course, there is never something for nothing, and people should have been much more careful before they entered into such schemes. Nevertheless, they have led to suicides—they have been terrible schemes. Advisers always get away scot-free, whoever they are, and none of them is held properly to account. The law in this policy area is just too weak. In criminal law, we have to prove dishonesty to pursue a criminal prosecution, which is very difficult. In civil law, the penalties are ridiculously low and are limited to the amount of fee that the adviser would have gained. There is also what is known as a double reasonableness test: it cannot be regarded just as an unreasonable course of action; it also has to be demonstrated that it was unreasonable to think it was reasonable—I hope that makes sense to Members.

The calling to account of advisers, enablers and promoters would be a powerful tool. At a stroke we would kill off many of the schemes that are currently exploited, which lead to such tax loss in this country. I urge the Minister to bring forward legislation to toughen up the regime and to make it easier to hold the advisers, enablers and promoters to account.

In conclusion, it is vital to battle against tax evasion—it is vital to demonstrate fairness in our system, to ensure the proper funding of our public services, and to the building of a global Britain that is respected around the world for its values and integrity and that is seen as a good place to do business. The Government will pay a heavy price if they fail to respond properly to the issues that have been raised in this debate. They must not just give us warm words; they have to give us tough action. I hope that in my short contribution I have given the Minister some good ideas that he could easily implement and that would make the world of difference. I urge him to have regard to them.

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Kevin Hollinrake Portrait Kevin Hollinrake (Thirsk and Malton) (Con)
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25 Feb 2020, 12:33 p.m.

It is a pleasure to follow the hon. Member for Coventry South (Zarah Sultana). I share some of her concerns about ensuring that those with the broadest shoulders pay the most, following the lead of the shadow Chancellor, but it is useful to look at the facts. An interesting survey was carried out by PricewaterhouseCoopers and the BBC on the nations that have the highest proportion of tax on high earners, looking at people earning a quarter of a million pounds a year. The UK is the third highest taxing country in the world—only Italy and India are higher. The hon. Member for Stalybridge and Hyde (Jonathan Reynolds) shakes his head, but he can google that. We should clamp down on tax avoidance and tax evasion, but we cannot raise the taxes we want without the negative consequences of people shifting that wealth and income elsewhere.

Peter Grant Portrait Peter Grant
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The shadow Chancellor said at the beginning of the debate that tax is about a lot more than just income tax. Can the hon. Gentleman confirm whether the statistic he just cited relates to all taxes paid by wealthy individuals or only income tax? Does he agree that, if he is only talking about income tax, that statistic is highly misleading?

Kevin Hollinrake Portrait Kevin Hollinrake
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25 Feb 2020, 2:54 p.m.

It related to income tax. [Interruption.] The point I was making was about income tax. The shadow Chancellor talked about raising taxes from the people who earn the most, and I was simply responding to that point. I have said in the Chamber many times that we should clamp down on tax avoidance and tax evasion.

The shadow Chancellor strikes me as the failed football manager turned TV pundit—having lost all his games by a wide margin, he suddenly complains when the incumbent manager is only winning his games 1-0. This Government have done far more to collect avoided and evaded taxes than the previous Administration—that is a fact. We can choose our opinions, but we cannot choose our facts. We need to go further. This is not just about the money; it is about creating a fair and level playing field and building confidence in the system, so that SMEs, which are the lifeblood of our economy and business, feel that they are not playing in a rigged game. It cannot be like that.

It is utterly wrong that we should countenance tax avoidance, because it undermines the level playing field for SMEs, and that has a tangible effect. For example, the Johnston Press, which owns The Yorkshire Post and many other titles around the country, was turning over £177 million in advertising revenue in 2008, and today, that figure is £22 million. There has been a transfer of revenue from areas such as regional press to online advertising, and particularly Google. Johnston Press will have paid its fair share of taxes, as most companies of that size do. Internationally, Google turns over about £100 billion. We know that around 10% of its turnover is in the UK—that is a stated fact—which is £10 billion. Its international profit margin is 22%, which means that it makes £2.2 billion. It should be paying £418 million in corporation tax at 19%, but it pays £67 million. That is simply iniquitous. It cannot be right, and it cannot be sustainable.

I am delighted that the Economic Secretary to the Treasury is on the Front Bench, because I want to give another example of where we are not maintaining a fair and level playing field. It relates to some of our banks and Cerberus. UK lenders who pay UK tax have sold their loan books to inactive lenders who work offshore and do not pay corporation tax or operate on the same regulatory playing field. Cerberus, which has bought loan books off Northern Rock and UK Asset Resolution, plays by a completely different set of rules. Its costs are therefore lower, which means that it can afford to pay more for those loan books. It does not properly look after its customers, nor does it have the responsibility to look after them and treat them fairly. We have to make an extra effort to ensure that everybody operates on a fair and level playing field. Cerberus paid £15,000 in corporation tax on six subsidiaries in 2015, despite working on a 20% profit margin.

In terms of my own business experience, our business grew to a point where we were making a reasonable profit. Our adviser—a normal accountant, not one of the big four—said, “How about trying this scheme to avoid tax?” It was perfectly legal, but we refused to take that option, because we did not think that it was right. We need to work harder with advisers and promoters to ensure that everybody pays their fair share of tax. The Government use the big four in many ways and take their advice, and it seems wrong that those very companies then go to large multinational companies and others and show them how to avoid tax.

One of the solutions is country-by-country reporting. We have a precedent for that, with the bookmakers’ point of consumption tax. The Labour party came up with a ruse that involved charging businesses in terms of where their economic activity, people and premises are, and there is very much a basis for that. We need to ensure that what the Government have done through the digital services tax and diverted profits tax narrows the gap for companies such as Google and Facebook.

We need to implement some other key measures, including on transparency about overseas entities and ownership of property, which is a way to avoid tax and move money around the world illegally and unfairly. We need to see measures on beneficial ownership in overseas territories brought forward to 2023. Finally, a corporate offence of failure to prevent economic crime and money laundering would reduce the amount of money that is illegally shifted out of the UK into foreign jurisdictions and increase the amount of tax that is paid.

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Rob Roberts Portrait Rob Roberts (Delyn) (Con)
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25 Feb 2020, 3:04 p.m.

Thank you, Madam Deputy Speaker, for calling me in this Opposition day debate, which, judging by the Benches opposite, Opposition Members did not know about at all.

There has been a lot of discussion, Madam Deputy Speaker, about large corporate entities and taxation so I will talk a little bit about taxation from a personal point of view, because it is often the case that lots of smaller transactions from a large number of individuals can also make a significant difference. In my previous life as a financial planner, I very much did things along the lines of capital belonging in the hands of the people to give them the power to shape and determine their own futures. Our taxation system is something of a Frankenstein’s monster. The hon. Member for Glasgow Central (Alison Thewliss) was right earlier when she said that we tinker around the edges. I agree that we tinker around the edges in many ways. The wholesale, scrapping and rewriting of the entire system would be absolutely preferable, but it is a massive undertaking that no Government would ever do, so unfortunately we will always be restricted to tinkering around the edges.

That tinkering inevitably leads to the wonderful law of unintended consequences, loopholes and other things that appear, but despite all that, as a financial planner I always used to say to people that paying tax was a privilege. In many countries around the world there are people who would be delighted to be able to have their own businesses and to thrive, grow and pay tax, as we do. So it is a privilege, but everyone should pay their fair share, and that word “fair” is thrown around very easily these days. It is a very esoteric concept. It is a little bit in the mind of the beholder.

There has to be a point—a sweet spot—where there is no incentive to avoid taxation, and we saw it perfectly when we reduced the highest rate of tax from 50% down to 45%. The amount of revenue generated actually increased and there has to be a point where the incentive is gone. Fairness is not a concept that is available only to the Opposition Benches. What about the concept of fairness to the individual who went to university, stayed on for a master’s degree, started off at the bottom of an organisation, works 80 to 100 hours a week, sacrificing time with their families and lots of other social benefits so as to carve out a successful career, climbed the ladder and got to high levels of income and found that the taxation system was punitive and a punishment on success? It is not hard to see why the highest earners take steps to mitigate their tax levels.

As a financial planner, I always ensured that all the legitimate tax breaks were used—the simple things such as the ISA allowance, pensions allowances or capital gains tax allowances. Then, for people who have particular approaches to risk, there are vehicles such as enterprise investment schemes and venture capital trusts. That word “allowance” crops up all over the place in our tax code. There are legitimate ways to mitigate tax. We encourage it. Governments of all colours and descriptions have encouraged legitimate tax mitigation for decades, and it is important that we realise that the vast majority of the public engage in legitimate tax avoidance every day through pensions and ISA investments. We need to change the language we use a little bit to ensure that avoidance and evasion are treated and understood very, very differently.

Let us be clear that every £1 of evaded tax is £1 less for our vital public services. Everybody across this House and, more important, in the country, recognises that clearly. This Government are tackling the issues, and for Opposition parties to decry those efforts is just disingenuous. During the shadow Chancellor’s opening remarks, Opposition Members yelled, “Ten years, 10 years”, when we talked about our measures to fix the economy. Damn right it took 10 years. How long was it supposed to take? What would be reasonable from where we were in 2010? The tax gap was 7.3% previously, now it is 5.6%. There was an annual deficit of £153 billion; it is now an absolute shadow of that.

The Labour party complaining about 10 years is like people going around setting fires and then complaining that the fire service do not put them out quickly enough. It is nonsense, especially when, in the past two years, Labour Members have voted against various measures that would have helped tackle tax avoidance, evasion and non-compliance. If you will pardon the pun, Madam Deputy Speaker, the hypocrisy is a bit rich.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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25 Feb 2020, 3:10 p.m.

I am pleased to be able to take part in this debate and it strikes me that there is a fair amount of agreement, but somehow we seem to be managing to create disagreement instead of agreement, which I have to say is one of the hallmarks of this Parliament in comparison to other Parliaments around the world.

It does seem to me that when we have a discussion about tax, too often on the Government Benches there seems to be an underlying assumption that somehow tax, and income tax especially, is bad. Even though they cannot actively and publicly promote irresponsible tax avoidance, it almost seems as if in their heart of hearts they do not quite see what the problem is. For example, the oft-repeated and completely fallacious claim that Scotland is the highest taxed part of the United Kingdom is completely false. Why is it automatically a bad thing, even if it is true? If for somebody on my salary Scotland is the highest taxed part of the United Kingdom, that is good. If, for somebody struggling to get by on a low-paid, part-time job, Scotland is the lowest taxed part of the United Kingdom, surely that is also good. I sometimes wonder how many Government Members, in their deepest instincts, genuinely believe the conciliatory comments that we have heard from some of their colleagues today that tax is a good thing and that we should all be happy to pay our taxes. When we look at the Register of Members’ Financial Interests and at some of the companies that are bankrolling Conservative MPs, we have to wonder whether they are bankrolling them in the expectation of getting absolutely nothing back in return.

The hon. Member for Delyn (Rob Roberts) spoke about legitimate forms of tax avoidance, and I do not have a problem with that; I do not have a problem with the tax system giving incentives to people to encourage them to do things that provide a wider public benefit, such as giving money to genuine charitable organisations; investing in genuine businesses that need an injection of capital to grow and to create employment; and investing to make sure that their own and their family’s future is financially secure when they are no longer able to work. All those things provide a wider public benefit and it is right that the tax system should encourage them. What public benefit is provided when a company electronically transfers billions of pounds of profits into a non-existent letterbox in the Cayman Islands? That generates no public benefit to anybody, so why do we have a tax system that, either deliberately or unintentionally, encourages exactly that kind of behaviour?

Although some progress has been made, with a more aggressive approach to dealing with legalised tax avoidance than there was in the past, it still does not go anything like far enough. My hon. Friend the Member for Glasgow Central (Alison Thewliss) commented on how easy and cheap it is to set up a company structure for no reason other than to avoid taxes. Many of my constituents, and many in all of our constituencies, would find it easier to set up a company to dodge taxes than people are finding it to prove to the Home Office settled status scheme that they have the right to live and work here and pay their taxes. What kind of regime is it that makes it harder for people to live here and pay their taxes than it is for people to dodge their taxes?

A lot has already been said about the concept of the Scottish limited partnership. I recall that as a young student accountant many years ago I memorised the Partnership Act 1890 by heart. It is a short and fairly simple piece of legislation. I recall that at the time there was a reason why section 4(2) was a good idea—why it was a good idea that in Scotland a partnership had a legal entity of its own. I cannot remember what the benefit was, but I am pretty sure that our predecessors in 1890 did not put those 17 words into that Act just to allow the good reputation of Scotland’s financial services sector to be abused by international criminal gangs in order to launder billions of pounds of criminal funds through the wonderfully respected financial services centre that is the city of Edinburgh and indeed through other cities in Scotland.

My hon. Friend commented on the number of companies advertising their ability to set up tax-dodging companies for people and how easily we can find them on the internet. Such a partnership has been described as

“an ideal solution for those who prefer to operate…in the EU”—

this is perhaps a wee bit out of date—

“and to have a totally tax-free facility”.

That quote came from TBA & Associates Tax Business Advisors Ltd, whose registered office is not a million miles away from here.

In finishing, I wish to read out a quote from Shepherd and Wedderburn LLP, one of Scotland’s best known and most respected firms of commercial lawyers. It said:

“Scotland’s global reputation in the funds and financial services sector, as a respected and safe jurisdiction in which to undertake business, can be exploited by the Scottish LP in an effort to add credence to an otherwise fraudulent scheme.”

If even the businesses that are advising their big commercial clients on how to reduce their tax liability are flagging up the fact that the existence of that loophole in Scottish partnership legislation is a bad thing for the Scottish economy, how can the Government not understand that? If they are not prepared to act on it, they should give the Scottish Parliament the right to regulate that aspect of Scottish business. Believe me, the Scottish Parliament will deal with it very, very quickly.

Let me make one final comment. A lot has been said about the loan charge, both in this debate and in previous debates. I have seen worrying reports recently suggesting that HMRC is offering an easy ride to the companies that have made billions out of advising their clients to go into these schemes in return for co-operation—basically, this is about shopping their own clients to HMRC. Again, the little guy gets done and the big guy—the big business—gets off scot-free. I hope that the Minister will give a categorical assurance that no such offers have been made and no such offers ever will be made to the big companies who are the genuine villains of the loan charge scandal.

Duncan Baker Portrait Duncan Baker (North Norfolk) (Con)
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25 Feb 2020, 3:19 p.m.

Clearly, there is a lot of cross-party support on this topic. Benjamin Franklin once said:

“in this world nothing can be said to be certain, except death and taxes.”

In this country, there is no doubt about it; we have one of the best tax collection systems in the world. It has been said a lot already, but the tax gap is now less than 6%. What we have not said enough is that it is falling every time it is measured. Our manifesto promised a strengthened anti-tax-evasion unit in HMRC, and that is welcomed. I guarantee that every time we knock on a constituent’s door and talk to them about paying their fair share of tax, that is what they want to see. We will continue to clamp down on fraud. Through digital measures that have come in over the past few years, we continue to do that. I just wish to mention two schemes that I came across when I was in business. Over the past few years, HMRC has brought in real-time information and Making Tax Digital, both new, electronic ways and means of submitting one’s information to ensure that there is less data manipulation and so the right amount of tax is paid on time by companies and employees. Far from doing nothing about tax avoidance and evasion, this Government are doing quite the opposite.

Before I became an MP, I was in the real world. I was in a business in Norfolk. I recall once opening the post and to my horror seeing that I had a VAT and PAYE inspection all in the space of the same month or so. When my jaw hit the ground, the first thing I thought was, “What have I done wrong to deserve this?” Out came two tax inspectors. They had 50 years of experience in HMRC. They were fantastic people who spent the next week or so giving me a thoroughly good going over; they checked everything from maternity pay calculations to VAT rates on hedgehog food, grass seed and olive trees. I became an expert on zero-rated products—for those who are not aware, I should say that grass seed and hedgehog food are zero-rated. I am still none the wiser about olive trees being standard rated. The real excitement during that process came with the added knowledge that gingerbread men are biscuits and are zero rated. If we dab a bit of chocolate on their eyes, they remain zero-rated, but do not give them any more chocolate buttons, as they then become standard rated. I joke, and people may wonder why I am talking about this, but I do so because it highlights the real facts. This is a real situation going on up and down the country every day, where businesses and individuals are checked to ensure that they are paying their fair rate of tax—and it works. The staff are diligent and hard-working. This was a normal business, with a turnover of roughly £25 million, and over the four years HMRC went back we had to pay around about £800 of additional tax that was required. So if the Chancellor is listening, I can tell him he got his fair share. The point is that people have said today, “Well, it’s only the big businesses. It doesn’t go across the board”, but that is not true. It is black and white: you pay your fair share. The research from the Institute for Fiscal Studies shows that the highest 1% of income tax payers account for 27% of all income tax. We can hardly sit here and say that the wealthiest are not paying their tax, can we? When those in the public eye commit wrongdoing or try to dodge their tax, there can be few news stories that attract more disdain and are more frowned upon. We have massively cracked down on tax avoidance and evasion in the past few years, and the new evasion law will go even further to clamp down on the worst fraud offenders by doubling the maximum prison term to 14 years. We have already secured over £200 billion in additional tax revenues since 2010, and at the 2018 Budget we announced an ambitious package of 21 measures that it is estimated will raise a further £2.1 billion.

I agree with what has been said all around the House about how global companies that do not pay their fair share of tax in this country absolutely should do so. The digital services tax that we will see coming in will start to put some of those things right. As my hon. Friend the Member for Delyn (Rob Roberts) said, there are differences between tax evasion and tax avoidance. Companies are not evading tax; they are avoiding it. That is where the legislation needs to be corrected, which is what this Government are doing.

The last point I want to make—I have stressed it before when I have stood up here—is that we have to have a balance: yes, clamp down on tax evaders, but we should not be persecuting the wealth generators in this country, the entrepreneurs and those who create jobs up and down this country.

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Jesse Norman Portrait The Financial Secretary to the Treasury (Jesse Norman)
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25 Feb 2020, 3:50 p.m.

I am delighted to wind up the debate for the Government. It has been a fascinating debate. There has, of course, been extensive discussion of the issues of tax avoidance and evasion, but we have also heard about lemon meringue pie and West Bromwich Albion, and we have heard two sparkling maiden speeches, for which I thank my new hon. Friends. It has been a cornucopia of joy for everyone interested in these issues.

Before I deal with the debate itself, may I dwell for a second on the Tax Justice Network report, which is central to the motion? We are repeatedly enjoined to trust it as an authoritative assessment of the UK’s position, but I suggest that nothing could be further from the truth. Those who look closely at the report will see that it generates absurd outcomes. In its list of 133 jurisdictions, we supposedly come 12th in terms of offensiveness, yet near the bottom we see Brunei, Vanuatu and Liberia. Is anyone seriously suggesting that this country is a less robust and effectively transparent tax jurisdiction than those?

The reason for that mistake is the fact that the findings are based on an entirely flawed methodology which accepts the proposition that the UK is one of the least secret jurisdictions in the world. I believe it is the eighth least secret, according to the report. Because its authors have some fudge factor, or financial multiplier, they have somehow able to deduce this extraordinary further conclusion. In fact, it is bogus. As was pointed out by a partner at Clifford Chance, the excellent Mr Dan Neidle— [Hon. Members: “That is not an answer.”] He is a tax partner at Clifford Chance who was offering his view, but that was a nice try from the Opposition Front Bench. He is quoted as saying that

“Britain still scored badly despite making significant strides ahead of its global peers on fostering greater”

—tax—

“transparency.

This, he said, was because the report calculates its final secrecy score based on the volume of financial activity conducted by non-residents.”

That is, of course, further to the issue of the core secrecy of the regime, and, as I have said, ours is one of the most transparent.

The report is bogus. It is based on a flawed methodology, and one that is itself secret to the point of being hard to scrutinise. However, I will say one more thing about it: although bogus in many respects, it does accurately place much of the blame for the current situation on the very soft-touch regulatory regime initiated under the Labour Government of 1997. That much, at least, is accurate.

Let me now deal with the main topic of the debate. Of course it is right to focus on the size of the tax gap —the gap between tax owed and tax paid—and I am delighted that it has fallen to a near record low of 5.6%. In his excellent speech, my hon. Friend the Member for Amber Valley (Nigel Mills) asked whether we could introduce a target. It is, of course a retrospective measure. HMRC’s attempt to get close to this point involves the concept of compliance yield, amounting to £34.5 billion this year, which is itself a stretching target. However, the good news is that the 5.6% target is some 0.7% below the average of the last five years of the Labour Administration. That is about £4 billion of tax which we, I am pleased to say, are collecting, and which, had they stayed in office, they would not have collected. It has also rightly been pointed out that at the last Budget the Government announced 21 new measures to tackle avoidance, but of course they were voted down by the Opposition. Last year, these compliance activities brought in some additional £34 billion, and since 2010 compliance activities have secured and protected more than £200 billion of tax revenue. That is a record of which we can all be proud.

It is an interesting fact that, when he came to consider the loan charge, Sir Amyas Morse focused on the earliest date on which he believed the charge could be properly validated in law. That date was December 2010. In other words, we supposedly had 10 years of loan charge non-compliance under the Labour party, which received no legal justification or support. I do not actually believe that that is true. HMRC was correct in chasing those people as it did, and that will be proved, but the fact is that Sir Amyas himself has pointed to the slapdash manner in which the last Government addressed this whole issue.

Let me pick on some of the important comments that have been made in the debate. My right hon. Friend the Member for East Hampshire (Damian Hinds) was absolutely right to highlight the importance of the quality of data in our system. He was also right to focus on the diverted profits tax and the digital services tax as examples of activities that we are undertaking in order to improve compliance. The right hon. Member for Barking (Dame Margaret Hodge) raised a series of important points, and I want to spend time on those. We have discussed them in an Adjournment debate, and it is interesting that she has come back to them today. She is absolutely right to say that the centrality of the tax system should be one of fairness. It should not be one of penalising any particular section of the public—rich or poor, wherever they live, whatever they might be doing.

The right hon. Lady asked about public registers of beneficial ownership. It is important for me to say that the law enforcement agencies need to have access to the information they need to tackle money laundering. That is what really matters at the core of this. The Government have ensured that the recently established register of trusts is specifically designed to capture overseas trusts for that reason. She is right to focus, as did the hon. Member for Oxford East (Anneliese Dodds), on the progress that has been made on public registers of beneficial information. The right hon. Member for Barking raised the question of beneficial owners of overseas entities. She will know that that register will be the first of its type in the world, and we will go further to increase transparency in the UK property market. The Department for Business, Energy and Industrial Strategy is the lead Department on this, and it has published a draft Bill that has undergone pre-legislative scrutiny.

The right hon. Lady also raised the question of creative sector tax relief. She will understand that in order to qualify for film and high-end tax reliefs, businesses have to incur a proportion of their production costs in the UK and pass a test for cultural content administered by the British Film Institute. I cannot comment on the specific circumstances of individual companies, but she ought to be aware that HMRC carries out a detailed check of each claim for creative sector tax relief, and that large businesses are subjected to an exceptional level of scrutiny. The point is that large businesses, like all other taxpayers, should pay the taxes due under UK law and implement compliance checks where necessary.

The right hon. Lady talked about country-by-country registration. Private country-by-country registration is of course in place. The problem lies in securing the international agreement required to roll out the public registration. It demands a measure of international agreement, and that is something that we continue to focus on. That is a Conservative act of leadership that we are still in the process of taking forward. She is right to pick on some other areas. I would just point out that the disclosure of tax avoidance schemes, the promoters of tax avoidance scheme rules—which can lead to significant penalties—and the enabler penalties that we put in place are all important, and I anticipate that will be strengthening them further over time. Let me pick up a couple of other quick points—

Peter Grant Portrait Peter Grant
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25 Feb 2020, 3:58 p.m.

Will the Minister give way?

Jesse Norman Portrait Jesse Norman
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25 Feb 2020, 3:58 p.m.

I am afraid that there is no time at all to do that, but I will pick up a couple of further points. Colleagues quite rightly had concerns about HMRC resourcing, and they are welcome to write to me if they want to discuss specific topics.

I mentioned the important point made by my hon. Friend the Member for Amber Valley, and I am pleased that he offered his qualified support for IR35. He is right that it is an important measure, and it will collect something like £1 billion of tax a year by the end of the period. As he will be aware, the Government are preparing to legislate to clarify the status of employment from a business standpoint, which is proper and correct.

I am surprised that the right hon. Member for North Durham (Mr Jones) was told that he could not be told anything. Of course, HMRC cannot discuss specific issues, but I hope that he will have a more interesting conversation than that.

I thanked my hon. Friend the Member for Delyn (Rob Roberts) for his constructive attitude, and he was right to focus on the privilege of paying tax. There is an element of truth in that, and we should properly defend it. With that in mind, let me sit down.

Question put.

Oral Answers to Questions

Peter Grant Excerpts
Tuesday 11th February 2020

(1 year, 8 months ago)

Commons Chamber

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HM Treasury
Simon Clarke Portrait Mr Simon Clarke
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11 Feb 2020, 12:30 p.m.

I had a good meeting yesterday with my hon. Friend and fellow Stoke and north Staffordshire MPs. The Government are supporting small firms across England through the network of 38 growth hubs, one of which is based on Stoke-on-Trent. In our manifesto, we announced our intention to create a national skills fund, which will help to transform the lives of people who have not got on the work ladder and lack qualifications, as well as people looking to return to work or to upskill.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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11 Feb 2020, 12:31 p.m.

Every year Scotland exports a quarter of a billion pounds worth of salmon to the European Union. This week, the Scottish Salmon Producers’ Organisation expressed serious concern about the continuing uncertainty of Brexit. What assessment has the Chancellor of the Exchequer made of the impact on this vital industry of the Chancellor of the Duchy Lancaster’s announcement that “as friction-free as possible” trade with the EU means “not friction-free at all”?

Sajid Javid Portrait Sajid Javid
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I assure the hon. Gentleman that we are working closely with the fishing industry, including salmon producers, to make sure that as we put in place our new free trade agreement, it will continue to thrive.

Migration and Scotland

Peter Grant Excerpts
Tuesday 11th February 2020

(1 year, 8 months ago)

Commons Chamber

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HM Treasury
Douglas Ross Portrait Douglas Ross
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11 Feb 2020, 4:29 p.m.

It is rather rich for the hon. Gentleman to criticise me for quoting from the MAC report and then to quote from the MAC report himself. If it is good enough for him to quote from that report, it is good enough for me to quote from it.

I have a final quote from the MAC report, which said:

“We also don’t want to institutionalise some parts of the UK as ‘lower wage’; regional inequalities should be addressed through equalising wages.”

The Government share that view and are committed to the levelling-up agenda, and I would like to believe that that view is shared in all parts of the House.

I wish to say something on the role of the Scottish Government, who commissioned the report we are discussing.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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11 Feb 2020, 4:31 p.m.

May I take the Minister back to his enthusiasm for the work of the Migration Advisory Committee? According to the committee’s own website, its six good citizens consist of two from the London School of Economics, one from the University of York, one from the University of Warwick in Coventry, one from the University of Oxford and one from the University of Southampton. According to the biographical information on the MAC website, none of them have declared any previous experience working in Scotland or, as far as I know, in Wales or Northern Ireland, either. Although I welcome the Government’s new-found enthusiasm for the virtues of elite academic experts, as these people no doubt are, if the Minister wants an immigration system that works for the whole UK, surely that system should be looked at and analysed by people with experience of working in all parts of the UK. [Interruption.]

Douglas Ross Portrait Douglas Ross
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11 Feb 2020, 4:29 p.m.

I am extremely sorry to hear that an experienced SNP Member, backed up from a sedentary position by the Chair of the Scottish Affairs Committee, the hon. Member for Perth and North Perthshire (Pete Wishart)—[Interruption.] Will he allow me to continue? The hon. Member for Glenrothes (Peter Grant) does not think that the MAC reports are in any way relevant to Scotland because there is no one Scottish on the committee. The MAC consults widely with Scotland. That report is clearly worthy of quoting, as it has been quoted twice now by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East. The MAC’s membership is made up of experts who consult and engage with Scotland before they commission any report. We should thank them for their efforts rather than criticising them for not being Scottish enough. It is a particularly separatist argument that we get from the SNP time and again.

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Mark Harper Portrait Mr Harper
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11 Feb 2020, 4:51 p.m.

No, I do not. The Migration Advisory Committee—the clue is in the name—provides advice to the Government. I am very pleased that we live in a country where decisions are taken by Ministers who are accountable to this House. I look forward to my right hon. Friend the Home Secretary setting out the Government’s plans once they have been approved by the Cabinet.

I have never quite understood one point. It was touched on by the hon. Member for Streatham, who speaks for the Opposition. It is the issue about pay and skills shortages. I suppose it is because people on the left broadly do not believe in a market economy, but my view is that, if there are sectors of the economy where employers are having trouble recruiting people, that rather suggests that they should increase the pay in those sectors, or improve the training that they provide for people—the economic value to those constituents. We should not simply acquiesce in allowing businesses to import an unlimited number of people to keep down the wages of the people working in the sector. Sometimes, as a Conservative, that is an uncomfortable message to deliver, because we are the party of business and economic growth: that is certainly the view of business. Sometimes we should say to business, “You should not be able to employ an unlimited number of people from overseas and keep wages down; you should actually increase the salaries you pay to your staff or increase the training opportunities to improve their productivity.” The Government having that level of creative tension with business would be more healthy than simply allowing it to import cheap labour.

Peter Grant Portrait Peter Grant
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If the response to staffing shortages and skills shortages is to pay people more, can the right hon. Gentleman explain why it is that when the health service was experiencing desperate shortages of staff right across the board, his Government imposed year after year of public sector pay cuts in real terms?

Mark Harper Portrait Mr Harper
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11 Feb 2020, 3:39 p.m.

Opposition Members always find this tiresome—although it tends to be ones from the official Opposition—but the hon. Gentleman will know that when the Conservative Government came into office in 2010, we faced a significant deficit in the public finances—[Interruption.] SNP Members immediately start jeering, but it is true. That needed dealing with, and Government Members had to take some very difficult decisions to get the public finances in order; I commend Liberal Democrat Members, who took part in the coalition Government. I am surprised that Scottish nationalist Members of Parliament do not understand big deficits in the public finances, because Scotland has in its public finances a significant deficit of around 7%, which is significantly higher than the rest of the United Kingdom.

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Wendy Chamberlain Portrait Wendy Chamberlain (North East Fife) (LD)
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11 Feb 2020, 6:08 p.m.

From the midst of the choppy waters, I have some life rafts. When the “Migration: Helping Scotland Prosper” report was published by the Scottish Government, my hon. Friend the Member for Edinburgh West (Christine Jardine) stated that, as a result of the work of the Scottish Affairs Committee, it was clear that the immigration needs of Scotland would be best met on a sectoral, rather than geographical, basis. The Scottish Affairs Committee was told that the UK can vary visas for different areas and sectors under existing laws. I therefore urge the Government to use these powers in consultation with the Scottish Government.

Agriculture is a key sector in my constituency of North East Fife that relies on a migrant workforce throughout the year, particularly at peak harvest times. The National Farmers Union estimates that 80,000 people are required to harvest crops across the UK each year, and a good proportion of this workforce is mobile, moving from location to location throughout the season. Borders within the UK can create barriers to work for such individuals. Our departure from the EU is already impacting on farmers’ ability to recruit staff, so we should be doing all we can to mitigate these difficulties rather than potentially exacerbating them. The need for visas for non-EEA nationals to crew fishing boats is acute in Cornwall, as it is in East Neuk and elsewhere in Scotland.

The Scottish Government’s migration report states:

“The current UK immigration system is complex and consists of a number of different routes and visas for work and study in an unclear system of tiers alongside a restrictive approach to family migration.”

I agree. That is why we proposed an amendment to the motion that focuses on the failings of the current system and the creation of the hostile environment that impacts on people across the UK, and the need to develop a system that treats everyone with dignity and respect.

Yesterday, I was approached by one of my constituents who had previously sought the support of my predecessor, Stephen Gethins. I thank Stephen for the support he gave to the family concerned. Valentyna Yakoleva is Ukrainian national who lives in my constituency with her son-in-law Andriya, her daughter, and their two children. She moved to the UK in 2010 at the age of 60 and has lived with her family in my constituency since then. After her travel visa expired, she should have been eligible for a family reunification visa, for she had no surviving spouse. She applied for the visa through a law firm based in Dundee, with the family making the assumption that it would be granted. She has spent this last decade raising her two granddaughters. Andriya, her son-in-law, told me that he would not have been able to work if his mother-in-law had not been looking after their daughters. Andriya sadly lost his job in 2015 but is now close to qualifying as a student teacher, thanks to Valentyna’s help.

But following errors in her initial application, and a failed appeal, Valentyna faces deportation back to Ukraine. She was held in the detention centre at Dungavel in South Lanarkshire following her arrest by the police in Fife, and was then held, away from her family, for two weeks before being released on bail following a judicial review. She has been given two options: to leave the UK now, voluntarily, with the prospect of returning for visits only after a period of a year; or to be forcibly evicted from the UK and unable to return for five years.

I find this utterly appalling. Valentyna is nearly 70—the same age as my own mother, who likewise supported me with care for my children in their early years, and indeed still does. Valentyna has lived in this country for a decade. She has helped to raise her grandchildren, allowing her son-in-law to contribute to society and the economy, and to pay taxes. She now faces being sent to a country where she has no family, no property, and no prospect of employment. In addition, she has a number of health issues that she needs support with. Her son-in-law has said that Ukraine

“is no place to be sending her back to. She has no family there and her pension was frozen around seven years ago with no prospect of her ever having access to it. Valentyna is our family, she has brought up our children and has been part of this community for almost a decade. Sending her back will be an absolute breach of her human rights and devastating for all of us.”

I agree. This is a total breach of Valentyna’s human rights, causing untold anxiety and distress.

Cases like these are a black mark against our society. I ask the Minister to intervene in this case. Clearly, it is totally unacceptable to deport Valentyna, sending her somewhere where she has no family, has not lived for a decade, has no prospect of finding a job, and has her health put at risk. We should aim to be judged on how we treat the most vulnerable people in our society. We are failing Valentyna and many others like her.

As a newly elected MP, it is incredibly worrying to see the clockwork regularity of constituents contacting my office because they or their family face deportation because their visas have not been processed or their settled status has not been granted. Other Members have referred to that today. You do not have to be a Member of Parliament for long for it to be clear, if it was not already, that our immigration system is not working. It is not fair—

Peter Grant Portrait Peter Grant
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11 Feb 2020, 6:14 p.m.

I agree with pretty much everything that the hon. Member is saying. If we were to devise an immigration system that we thought would work for our respective communities, they would not be that different. But will she explain why she wants us to support the Lib Dem amendment and to wipe out the whole of the motion that the SNP has put forward? She is asking us to wipe out condemnation of the Government’s response to the Scottish Government White Paper. She is asking us to delete the bit that says that we welcome the support that we have had from across civic Scotland. She is even asking us to delete the part that says that the Home Secretary should

“engage positively with the Scottish Government…before introducing the Immigration Bill”.

If she wants the House to support the Lib Dem amendment, could she explain why she wants to delete all those parts from our motion instead of adding them to what she has put forward herself?

Scotch whisky: US tariffs

Peter Grant Excerpts
Thursday 30th January 2020

(1 year, 8 months ago)

Westminster Hall

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HM Treasury
David Mundell Portrait David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)
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30 Jan 2020, midnight

I beg to move,

That this House has considered the effect of US tariffs on the Scotch whisky industry.

It is a pleasure to serve under your chairmanship, Ms Buck. I am delighted that the Minister, my hon. Friend the Member for Moray (Douglas Ross), is responding to the debate, because he is the Member of Parliament with the most whisky distilleries in his constituency. He has been a powerful advocate for the industry since he was first elected.

For some years, the Scotch whisky industry has enjoyed a renaissance. There is a romance about Scotch, a heritage that is unmatched, and a global reach that is unrivalled. As an economic reality, Scotch whisky provides jobs and investment in rural communities, underpins a supply chain that extends across the UK, and has become central to Scotland’s tourism offer, attracting visitors to our shores from all over the world. As Secretary of State for Scotland, I spoke often of the whisky industry’s stand-out success. By the end of my tenure, I could recite the numbers in my sleep: £4.7 billion in exports to 180 countries globally, 40,000 jobs supported across the UK, 20% of UK food and drink exports, 41 bottles exported every second.

Global Britain, which is being debated in the main Chamber right now, is surely about reinvesting in the UK on the world stage; championing rules-based trade; and demonstrating that the UK is open for business, outward-looking and confident in its trading prospects. The Scotch whisky industry has led the way on that in its 150 years of exporting. Distillers large and small bestride the world and the brands have become some of the most recognised globally, as I saw for myself when promoting the industry in countries as diverse as Argentina, Mozambique and Japan, always with positive support from the Scotch Whisky Association and its members.

This great Scottish and British export has been put under considerable pressure since the imposition by the United States last October of a 25% tariff on the import of all single malt Scotch whisky and Scotch whisky liqueurs. I asked an urgent question in Parliament ahead of the tariff’s imposition and during the debate that followed, along with other Scottish Members, I set out the industry’s concerns about its potential impact. The Prime Minister spoke to President Trump, as I requested in those exchanges, and many MPs lobbied US Ambassador Woody Johnson.

Regrettably, the tariff imposition went ahead. I should be clear, however, that the US is legally entitled to impose the tariff because of the World Trade Organisation’s ruling on the long-running dispute between the EU and the US about aircraft manufacture. To cut a long story short, the WTO found that both Europe and America had given illegal subsidies to Airbus and Boeing. The WTO said that until the subsidies were repaid and their impact eliminated, each side was entitled to impose retaliatory tariffs on the other’s exports to encourage compliance. That may be legal, but it is a bitter blow to the Scotch whisky industry.

The US is Scotch whisky’s most valuable global market; more than £1 billion of Scotch whisky was exported there in 2018. The disconnect between the source of the dispute and the UK products affected by the tariffs is particularly galling. The US chose not to impose tariffs on imports from UK aircraft manufacturers, so Scotch whisky is bearing almost two thirds of the total tariff liabilities imposed on UK exports to the United States.

Our cashmere and shortbread industries are feeling the pain every bit as much. As the Minister and my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont) have highlighted, those industries have also been targeted and their imports to the US subject to a 25% tariff. Given the importance of cashmere to the Borders, my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk raised his concerns directly with the EU Trade Commissioner. Depressingly, they have not even replied, which suggests that the EU does not recognise the economic impact of those taxes on businesses in rural Scotland.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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30 Jan 2020, 1:35 p.m.

I commend the right hon. Gentleman for his tenacity in pursuing this matter, which concerns us all. He has highlighted the vastly disproportionate effect that the tariffs will have on the Scotch whisky industry. He has also referred to other important Scottish exports that are affected. Has he seen any analysis of the proportionate effect on Scotland’s economy, compared with the economy of other parts of the UK, of the imposition of those tariffs? If that has not been produced, does he agree that it would be a good idea for the Government to produce it?

David Mundell Portrait David Mundell
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30 Jan 2020, 1:36 p.m.

I thank the hon. Gentleman for his helpful intervention. I will come on to the initial feedback in relation to the impact of the tariffs. If we cannot resolve the issue in the short term, however, his suggestion has much to commend it.

As the hon. Gentleman alluded to, it is the small businesses, the new distilleries, that will be worst-hit as a consequence of a dispute in an industry with which they have no connection. Large spirits companies have portfolios of products that make them less vulnerable to market changes, but as Diageo chief executive Ivan Menezes recognised today, it is “devastating” for the industry as a whole. He said:

“It’s not a big impact on Diageo on the single malts into the US, however for the industry in Scotland, it’s devastating. It impacts small distillers, farmers and employees there. Thousands of jobs. That’s our focus. We hope sense will prevail between the US and the UK and the EU to get these tariffs down.”

It could get worse. Following a WTO ruling last December that the UK, among other European countries, was still in breach of WTO rules in its support for Airbus, the US Government proposed to increase existing tariffs and expand the coverage to include more products. As early as next week, we will know whether the tariffs on Scotch malt whisky or other Scottish products will rise or widen in their scope. Most troublingly, they could include blended Scotch whisky.

Meanwhile, since June 2018, the EU has imposed a 25% tariff on US whiskies in response to US tariffs on steel and aluminium. That is another long-standing dispute and another unrelated sector bearing the painful consequences of Governments’ failure to resolve disputes. It is a far cry from the mid-1990s, when the US and the EU, together with Canada and Japan, agreed to remove all tariffs on imported brown spirits. That unleashed an increase of 270% in total Scotch exports to the US. That is impressive, but it is put in the shade by the 400% increase in US whisky exports to the UK over the same 25-year period. Friendly competition has been good for both industries, for tax revenues and for consumers.

It could not be clearer that the UK Government need to resolve the outstanding issues on UK subsidies to Airbus to ensure that the UK is fully compliant with international law in the WTO’s view. That is evidently key to ensuring the return to tariff-free trade in whisky across the Atlantic.

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Wendy Chamberlain Portrait Wendy Chamberlain (North East Fife) (LD)
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30 Jan 2020, 2:09 p.m.

It is a pleasure to serve under your chairmanship, Ms Buck, and to make my second speech in a parliamentary debate. I want to illustrate the impact on the US tariffs on whisky in my constituency. North East Fife is not only the home of golf but the spiritual home of whisky. The earliest written reference to Scotch whisky appears in the exchequer roll in 1494, which says that Brother John Cor, a Lindores monk, was commissioned by King James IV to turn eight bolls of malt into aqua vitae. Today, North East Fife is the proud home of four distilleries: Daftmill, Eden Mill, Kingsbarns and the recently revived Lindores.

Lindores is a fantastic example of the variety of positive benefits that the industry can bring. In addition to its distilling—its first single malt is currently in the vaults—it is a hospitality venue, playing host to weddings, other private events and visitor tours. Eden Mill and Kingsbarns have visitor centres, and as I said in my maiden speech, produce gins, further adding to the diversity of drinks production. Daftmill is a small distiller, located on a working farm, where production is dictated by the seasons. Its output may be small, but it is in high demand. The annual Fife whisky festival, centred in Cupar, is now a well-established event, attracting distillers large and small from across Scotland and beyond to North East Fife. This debate is not just about distillers; the supply chain is affected too. Take Crafty Maltsters—farmers based in Auchtermuchty, who have diversified into malting their own barley. Scotch whisky production in North East Fife brings many economic benefits in many ways.

In North East Fife, we feel the impact of larger whisky operations in neighbouring constituencies. I should declare an interest: prior to my election to Parliament, I worked at Diageo for four years. It has a large packaging plant in Leven, in the constituency of the hon. Member for Glenrothes (Peter Grant), and some of my constituents are among its employees. During my time there, I saw how larger businesses in industry can, through corporate social responsibility programmes, deliver real benefits. Diageo’s “Learning for Life” programme supports unemployed people into careers in hospitality through four weeks of training and a work placement with a local employer, with courses running throughout the UK. One of the most satisfying aspects of my time with Diageo was volunteering for that programme and seeing the difference in attendees over the six-week period.

Producers across Scotland work hard to support the communities in which they operate, so I am grateful to the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) for securing this debate. US tariffs on whisky have had and threaten to have a very damaging effect on the industry and the wider supply chain. As hon. Members have already heard, the US is the largest market for single malt, so it seems unfair that that success story should be put at risk because of a dispute that was not of the industry’s making.

As we move further into the 21st century, Britain should be at the forefront of taking down artificial barriers, whether economic, social or geographic. I worry on behalf of my constituents that we are seeing the opposite: the US President Donald Trump’s cavalier approach to trade, the barriers that the UK will impose on itself tomorrow night when we leave the EU, or the potential border that the SNP want in Britain with Scotland leaving the UK. As the Government seek a trade deal with the US, they must do all that they can to help the whisky industry by making removing tariffs an immediate priority and, in the meantime, by alleviating financial burdens on distilleries in the Budget. As other hon. Members have said, the Government must make sure that this Scottish success story continues to mature.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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30 Jan 2020, 2:11 p.m.

I am very pleased to be speaking a lot sooner than expected, Ms Buck.

Karen Buck Portrait Ms Karen Buck (in the Chair)
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30 Jan 2020, 2:11 p.m.

Members have been admirably restrained.

Peter Grant Portrait Peter Grant
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30 Jan 2020, 2:11 p.m.

It is the first time that I have seen so many Members fail to reach the indicative time limit. I will try to reciprocate because the Minister will undoubtedly have a lot to say. I commend the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) on securing the debate and on the very detailed and thoughtful way in which he set out not only the value of the whisky industry to Scotland, but the very serious harm that the tariffs can and have caused.

Very few of us in the Chamber represent constituencies that would make someone think immediately of whisky, yet everybody who has taken part in the debate—and the Minister perhaps more so—has in their constituencies significant numbers of businesses that rely on the wealth of the Scotch whisky industry. Unfortunately, the debate has clashed with another major parliamentary highlight, the maiden speech of my hon. Friend the Member for Aberdeen South (Stephen Flynn). I have no doubt that, had he not been in the main Chamber, where he is supported by a number of hon. Members, he would have been here to speak.

Very few manufactured products anywhere in the world are as iconic as Scotch whisky—we are one of the few countries in the world to have a diminutive adjective for nationality that people immediately identify with our best-known export. As has been mentioned, the industry is critical to the economies of Scotland and the whole of the UK. It supports around 42,000 jobs and contributes £5.5 billion to the UK economy in gross value added. That is important to an economy the size of the United Kingdom, so how important must it be to one the size of Scotland?

What surprises a lot of people, no matter how often I remind them—I will continue to remind people and am grateful to the hon. Member for North East Fife (Wendy Chamberlain) for doing so, too—is that my constituency in central Fife is one of the cornerstones of that industry and of the wider distilled spirits industry. Diageo’s Cameron Brig distillery in Windygates produces 480 million bottles of spirits annually. The nearby bottling and packaging plant at Banbeath in Leven, which the hon. Member for North East Fife mentioned, packs 39 million cases of spirits every year. At the recently opened Cluny Bond warehouse at Begg, 1.1 million casks of the golden nectar are sleeping as they wait for the angels to come and work their magic. Those facilities represent Diageo’s recent investment of almost half a billion pounds in my constituency, providing jobs for a workforce that fluctuates between 1,000 and 1,500 people.

The statistics published last week in the most recent Scottish index of multiple deprivation confirmed that parts of Levenmouth, and Buckhaven in particular, are among the most deprived areas in Scotland. Cameron Brig is barely a mile from those communities, and the massive vote of confidence and real commitment to corporate responsibility—rather than just words in the annual report—are welcome signs that things may be starting to improve for thousands of my constituents. They see one of the world’s biggest brand names investing in them and their neighbours time and again.

Anything that jeopardises the long-term sustainability of the Scotch whisky industry, or fundamentally undermines the market forecasts on which Diageo have invested heavily in my constituency and others elsewhere in Scotland, is of concern to us all. It concerns me as the SNP Treasury spokesperson but also as a constituency MP that, although Diageo do not yet expect tariffs to cause any problems to the Fife operations, that will change if they are continued or extended to cover blended whiskies and other sprits.

We can already see the impact of the tariffs: during their first full month, there was a 33% fall in malt whisky exports to the USA, as hon. Members have mentioned. If that continues, it will equate to a £100 million drop in annual sales, which could reach £200 million or £300 million if the tariff is also applied to blended whiskies. Although we should not forget the damage that has been done to other exporting businesses, as the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale alluded to, it cannot be right that 62% of the entire UK tariff is hitting one industry that had absolutely nothing whatever to do with the escalating dispute. Will the Minister consider producing an analysis of the proportional impact of the tariffs in the different nations and regions of the United Kingdom? I will bet that it bears no relation whatever to the proportional analysis of the nations and regions that benefit from the Airbus operation.

It remains to be seen how effective the UK Government will be at persuading the American Government to think again, as it is very difficult to persuade an irrational President to do anything rational. The UK Government have the chance to use the Budget to help Scotland’s world-leading drinks industry to get through what is literally an existential threat to many businesses. The Scotch Whisky Association is asking for a 2% cut in spirits duty, and I hope the Government will give that careful consideration, although in reality, such a cut would return only a small proportion of lost sales revenue.

A more fundamental problem is the continued and inequitable way in which different kinds of alcohol are taxed in the UK. It is not fair, rational or defensible for different kinds of alcohol to be taxed according to how they are made rather than by their alcohol content. If someone at the pub buys a glass of whisky and a glass of wine that contain exactly the same amount of alcohol, they pay 16% more duty on the whisky than on the wine. The only justification for that is it has aye been, and that is no justification at all.

If the Prime Minister is to keep his promise to scrap the import duty on American bourbon, he should make it clear that he expects complete reciprocity from the President of the United States and the complete abolition of import tariffs on Scotch whisky. A number of hon. Members present were there earlier in the week when we met not only senior representatives of the Scotch Whisky Association, but the President and CEO of the Distilled Spirits Council of the United States. They are determined to see the import tariffs on Scotch whisky and the export tariffs on their product abolished. They do not want a protectionist Government to protect them artificially; they want to be able to compete on fair terms with top-quality spirits, not only from Scotland, but from elsewhere. That is one of the few cases that I have seen in which an industry that would expect to benefit from the imposition of import tariffs is among the first to shout out that they want them abolished.

This sorry affair is yet another indication, for those prepared to look with open eyes, that Britain’s place on the world stage—it is currently being debated in the main Chamber—is nowhere near as influential as some people like to think, and that getting any kind of rational trade deal from a wholly irrational President will be neither quick nor easy. I hope that this debate and other exchanges will make it clear to the bully boys in No. 10 and the White House that we will not allow either of them to treat the economy of our nation as a pawn to be sacrificed in the way that our fishing industry was sacrificed.

Daniel Zeichner Portrait Daniel Zeichner (Cambridge) (Lab)
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30 Jan 2020, 2:19 p.m.

It is a pleasure to serve with you in the Chair, Ms Buck.

I congratulate all Members on such sensible and thoughtful contributions. In particular, I thank the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) for securing the debate and for his broad-ranging and sensible introduction to it. I also congratulate the hon. Member for North East Fife (Wendy Chamberlain) on what might have been her first contribution in Westminster Hall, which is a less aggressive place than our other Chamber. I was struck by her comments about Diageo and the European Union. I also thank some of my colleagues in the shadow International Trade team for helping me to prepare for this debate, which is just as much about trade as it is about food and drink.

The Scotch whisky industry is thriving and, as we have heard, incredibly important to the United Kingdom as our ninth most valuable export, contributing £5.5 billion to the UK economy last year and supporting 42,000 jobs across the nation. It is particularly important for Scotland’s economy, accounting for the vast majority of Scotland’s exports of food and drink, and providing 10,500 jobs, in particular in rural communities involved in the distillation, production and maturation processes.

Having the Scottish whisky industry embroiled in the increasingly tit-for-tat trade disputes that have been festering between the US and the EU over the past 15 years is a cause for profound regret. We can all agree that something is wrong when a trade dispute that originated in alleged subsidies for aircraft has escalated primarily to affect a whisky industry that has been doing nothing but mind its own business and thrive, without tariffs, for decades. With the 25% tariffs that have been slapped on American imports of single malt Scotch whiskies and Scotch whisky liqueurs from the UK, Scotch whisky now pays for more than 60% of the UK’s tariff bill arising from the Airbus case. That absolutely cannot be right. As hon. Members have outlined, we are now seeing real impacts of the row on people.

The EU as a bloc remains our largest export market for Scotch whisky, but as an individual country the US is our largest market, and clearly our largest export market for single malt Scotch whisky. The tariffs imposed on those products in October have therefore had considerable impact already, as we have heard, with the value of Scotch whisky exports to the US down 33% in November 2019 compared with November 2018.

Those hit hardest by the tariffs, as we have heard, are disproportionately the small and medium-sized distilleries across Scotland, which only produce single malt and have the US as a key market. The Scotch Whisky Association estimates that the industry could lose as much as 20% of its sales to the US over the next year if the tariffs remain. That would be worth £1 billion. As we are all aware, a decline in the value of our exports to the US of such magnitude will inevitably have knock-on effects on investment, productivity and jobs.

Scotch whisky has not been alone in being hit by the American tariffs, and it is worth repeating that the 25% tariffs also hit a range of our agricultural exports, including pork and cheese. The British Meat Processors Association tells us that they face some real difficulties, and we have already seen the value of UK pork exports to the US fall by 42% between November 2018 and November 2019.

The main subject today, however, is the impact on Scotch whisky. Following the US Trade Representative’s announcement of a further review of its tariffs in December, we now face the real possibility of the tariffs on single malt whisky being increased, or their coverage expanded to include the blended Scotch that is currently excluded. That would make an already challenging situation much more difficult.

Such bullying tactics by President Trump are sadly reflective of an approach to international trade that I fear we will only see more of as we leave the European Union. President Trump has made his desire to put America first explicit, and is playing fast and loose with the global rules-based system governing international trade. So far, he has unfairly attacked foreign industries with tariffs, blocked the appointment of judges to the World Trade Organisation’s appellate body and, recently, threatened to pull the US out of the World Trade Organisation altogether. We urgently need an end to that tit for tat, and the removal of tariffs on both sides, on both Scotch and American whiskies. The Scotch whisky and American whiskey industries are in clear agreement on that.

The Prime Minister’s promise to remove EU tariffs on American whiskey as soon as we leave the EU is welcome, and it is clear that he believes this will go some way to encouraging President Trump to remove tariffs on our Scotch whisky. What is less welcome, and remarkably counter-intuitive, are recent reports that the Prime Minister is threatening both the US and the EU with high tariffs in some bid to speed up post-Brexit trade deals. We are familiar with the Prime Minister preparing completely different positions to cover all eventualities, but will the Minister make it crystal clear that tariffs on American whiskey will be excluded from this threat? If he will not, how can the Government possibly guarantee that pursuing such an aggressive trade stance will not embroil the Scotch whisky industry yet further in a burgeoning trade war?

In the meantime, the Scotch Whisky Association has been waiting nearly three months for a response from the Government on their plans for short-term support for the industry while it is subject to the tariffs. I hope that the Government will confirm today what their intentions are in that regard.

The sad reality is that this entire episode demonstrates just how difficult our upcoming trade negotiations will be once we leave the EU. One of the main economic advantages of being in the EU was the fact that in trade negotiations the UK was part of a trading bloc of 28 countries. Now we are on our own. In a future trade deal with the US, therefore, we will have to face up to the full force of its demands to export to us hormone- treated beef and chlorine-washed chicken. We will also have to ensure that the geographical indicators for our produce—such as Scotch whisky and Cornish pasties—are not lost once we leave the EU’s protective framework. The signs to date of the Government’s commitment to protecting the good name and value of our regional goods are, frankly, not promising.

Our highly prized Scotch whisky industry is a high-profile casualty in this grim world of retaliatory trade wars between men with big egos, little sense of the damage they cause and even less regard for the wider consequences. We urgently need a return to a rules-based order to give stability and security. The jobs and livelihoods of people not just in the UK but in nations across the world depend upon it.

Growth Strategy

Peter Grant Excerpts
Tuesday 21st January 2020

(1 year, 9 months ago)

Westminster Hall

Read Full debate Read Hansard Text
HM Treasury
John Redwood Portrait John Redwood
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Yes, I am happy for there to be attractive reasons why people should go to the parts of the economy that have been less heavily invested in and that are less pressurised. However, with cars the issue is demand; there is not enough demand for the very good cars that the industry currently makes. The Government want to change the kind of cars that people buy, but it will take time for Britain, or anywhere else for that matter, to be able to produce the millions of electric cars that the Government want us to buy, at a price and to a specification that people like.

So, this is a top-down revolution and the public are not yet fully engaged in it in the way that the Government would like them to be. When polled, the public say that electric cars are a very good idea. However, when they are then asked, “Well, when are you buying your electric car?”, the answer is, “Well, not yet. Not me. I want a better subsidy on the car, I want a lower price, I want a higher range”—whatever it is.

There are still issues about engaging the public, which is why we are getting this industrial dislocation. China has experienced exactly the same thing and one would have thought that China would have continuous growth in cars, because it is coming from a much lower level of car ownership and individual income. However, even in China car volume is down, because of the regulatory changes and the dislocation involved in going from traditional product to electric product.

In addition, the Minister and his colleagues should look at the issue of property. Property is a very important part of the UK economy. It is often an asset base for people to borrow against in order to develop their business, and it is often the main way in which individuals hold their personal wealth. By buying a house on a mortgage and gradually paying the mortgage off, property often becomes people’s principal asset, which gives them some wealth and financial stability.

However, we have a property market in the UK that has been damaged by the very high stamp duties that were introduced under the previous Government, and the Government should look at that issue very carefully. I do not think that the Government are even maximising the revenues from stamp duties, and it might not be a bad idea for them to ask, “What are the rates that would maximise the revenues?” At the higher price levels in property, transactions have been very badly affected; indeed, they have been massively reduced by the very high rates at the top end of the market. So, the Treasury constantly has to revise down its forecasts of how much revenue it collects from stamp duty.

A more free-flowing property market would be a very good thing, because it would create all sorts of other work for people who are in the refurbishment and removals business, and above all it would allow people to fit their property needs more closely to the property that they have. A lot of potential switching in the market is being frustrated: some people have houses too big for them but they do not fancy paying the stamp duty on the trade-down property, and other people would like a bigger property, but the stamp duty would be just such a big addition to the higher price that they would have to pay for that property.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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21 Jan 2020, 9:46 a.m.

I congratulate the right hon. Gentleman on securing the first Westminster Hall debate of the new Session. Does he agree that there has been a major problem in the United Kingdom for many decades, which is that people—for one reason or another—have been encouraged to treat the house that they live in not as a place to live but as a speculative investment, on which they expect to make money? Also, does he accept that many people have been severely stung, because they thought that they would be able to stretch for a mortgage that they could not afford, in order to sell the house for more money in 10 years’ time? If the value of the house does not increase in 10 years’ time, they have a problem. That situation caused the crash in 2007-08 and it has caused a number of minor crashes since then. Does he also agree that more needs to be done to make sure that people who only have the money that they are investing in their house are protected against the possibility of losing their house and everything else when the market crashes?

John Redwood Portrait John Redwood
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21 Jan 2020, 9:47 a.m.

Most people buy a house because they want somewhere to live that is theirs, and that they can then do up and change in the way they see fit, subject to planning. But yes, of course, it is also a way of holding wealth, and I repeat what I said: for many people it becomes their largest single asset. I do not think that is a bad thing. I do not think that people are treating their main property as a trading counter; it is where they wish to live, and they will only move when they want a different house, mainly for living purposes. People would only be able to buy property speculatively if the property was their second or third house, and not many people are in the fortunate position of having such wealth.

There is no absolute protection against house prices going down; they do from time to time, as the hon. Member for Glenrothes (Peter Grant) pointed out. However, if someone’s aim is to live in a house long term, and if they have taken out an affordable mortgage, temporary fluctuations in house prices are not life-threatening or wealth-threatening to any worrying extent, and they will just live through the period when house prices dip because there has been a recession, or whatever.

Fortunately, we do not seem to be looking at such a situation in the immediate future, and it is very important that we have a growth strategy, so that the slowdown in the economy that we have experienced in recent months is turned around quickly and does not become something worse, which could have negative consequences in the way that the hon. Gentleman talked about.

So my No.1 message to the Government is not to underestimate the damage that clumsy taxes can do, and they may even end up costing the Treasury, as stamp duty has done, because it is not collecting as much as it should. That is probably the case with vehicle excise duty as well, because of the volume impact on new cars, which relates to a whole series of factors; it does not just relate to the vehicle excise duty, but that was another complication in the situation.

As the Minister has this particular responsibility, I urge him to look again at IR35. We want a very flexible economy in which people can choose flexible employment, rather than have it forced on them. We have had a relatively flexible small business sector, but it is being damaged by the top-down imposition of the IR35 rules. I hear all sorts of stories from across the country of people having to stop their contracting business or losing contracts because the big companies that might employ them are worried they might get dragged into a retrospective tax increase in employer and employee national insurance. That is damaging the small contracting sector, and I urge the Government not to carry on doing that when we want to encourage more self-employment and allow self-employed people to go on to build bigger businesses.

One of the Office for National Statistics figures I saw recently, which I found fascinating, was that in London there are more than 1,500 businesses per 10,000 people, whereas in the lower income parts of the country there are half that number. There is a huge gap between the volume of enterprise in London, which is the richest part of the country in terms of average incomes, and much of the rest of the country, where incomes could be higher. It is not easy to break into why there are so many more businesses in London. In part, it is because people are better off and have more spending money—demand is important in setting up a business—but it is also to do with the general business environment and the concentration of people, talent, enterprise and spending power that we see in the capital. We need to do something similar in other parts of the country. Building more businesses is crucial, and IR35 is getting in the way of doing that.

Some 4.5 million people in the country who work for themselves do not have any employees, and they are afraid of taking on an extra employee because of the implications, whether for regulation, tax or otherwise, or because they think it will be too difficult to manage. We need to look at that step up in building a business, when someone goes from just working for themselves to having an employee or two. It is important that we make that step as easy as possible, because if another million self-employed people decided that they wanted a single employee, that would be transformational. That would obviously create a lot of extra demand in the labour market.

We need to look at taxes on employment and the complications of employment. Anything that the Government can do to reduce the tax on employment is a very good idea. We cannot collect tax revenue just by taxing things we do not like, but where we have a choice, it is better to tax things we do not like rather than things we do like. All parties in the House like the ideas of well-paid jobs and of more work, so we need to work away in Government to see how we can reduce the burden of taxes on work such as the apprentice levy, the national insurance levy on both the employee and the employer and other concealed taxes on work.

We also need to look at taxes on entrepreneurship. A larger population of people who have great ideas, who can change markets and who can persuade others that they have something people might want to buy is vital to the process of creating a more prosperous United Kingdom. We need to ensure that the offer on capital gains tax in particular is a fair one. People who have built a business over the years should not feel that they will be taxed again on it all, because they have been taxed on the activity in the business. Capital gains has to be a fair regime, and I urge the Government to keep the enterprise allowance arrangements so that entrepreneurs can keep a lot of the benefits from building their business.

It is said that our productivity performance in recent years has been disappointing and that that is a puzzle. I do not quite understand why it is a puzzle; it is exactly what we would expect. We have had a major reduction in North sea oil output. The way the figures are calculated means that it is one of the most productive sectors, because labour productivity is based on the amount of revenue or value-added generated by an individual, and an individual in the oil industry produces a huge amount of revenue due to the windfall element in the oil price. We had a very big squeeze on many of the activities in the City that were apparently profitable before 2008. Those activities flattered the productivity figures, but some of the profits turned out not to be genuine, and a lot of them have been squeezed out. Again, a high-earning, apparently highly productive part of the economy has gone through a big change, and we have lost that.

We have been a successful economy—this is a strength—in creating lots of new jobs, but a lot of them are relatively low paid so they do not score very well under productivity scoring. If we compare our productivity with that for continental countries with unemployment rates two or three times as high as ours, their productivity is higher, because people we are employing on low pay here would be unemployed there, and the unemployed do not count in the productivity figures—they are just ignored as if they do not exist.

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Kevin Hollinrake Portrait Kevin Hollinrake (Thirsk and Malton) (Con)
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21 Jan 2020, 10:17 a.m.

It is a pleasure to speak in the debate; I congratulate my right hon. Friend the Member for Wokingham (John Redwood) on introducing it.

I will start with a modern-day parable from a book called “The 7 Habits of Highly Effective People”. A man is walking through a wood and comes across a lumberjack who is trying to saw down a tree and not getting very far. He walks up to the lumberjack, taps him on the shoulder and says, “Excuse me. Your saw is blunt. You’d be better off stopping and sharpening it.” The lumberjack says, “No, no—don’t bother me. I’m sawing down the tree.” He tries again: “Excuse me. Just sharpen your saw and you’ll cut that tree down much more quickly.” The lumberjack says, “I haven’t got time to sharpen the saw.”

That parable has stood me in good stead in my business. I draw the House’s attention to my entry in the Register of Members’ Financial Interests, as I am still in business today. The most expensive and the most vital resource of any business is the people who work in it. It is important always to ensure that they are not working with worn-out tools, and that they are effective and as productive as possible.

The key to the UK growth strategy has to be productivity. I do not disagree with my right hon. Friend: it is a simple issue to solve. However, it will require significant investment, both from the public sector and, crucially, from the private sector. Public sector investment alone will simply not do it.

The reality is that across the north and the midlands we have been working with worn-out tools for too long. According to Andy Haldane, the chief economist at the Bank of England, of the six factors that drive prosperity and productivity the No. 1 factor is connectivity. Large swathes of the country, particularly the north and the midlands, but virtually all regions outside London and the south-east, are very poorly connected. That is because we have underspent in those areas for too long. I know that our excellent Minister will say that the Government are now investing equal amounts in the north as in other parts of the country. That is true to some extent, in terms of central investment. However, other regions, particularly London and the south-east, are very good at aggregating different forms of investment, including private sector and local authority spending. If we add all that up, for every £1 that is spent on infrastructure per capita in the north, about £3 is spent in London and the south-east. That is why those regions are phenomenally productive and therefore phenomenally prosperous. When I talk about more public sector investment, it is not about a grievance that we in the north or the midlands have not had our fair share; it is about sound economics.

I will quote a few leading economists, beginning with Lord O’Neill, a former cities Minister who was also the chief economist at Goldman Sachs at one point. He was an ardent remainer, but said that being in or out of the EU was

“not the most important thing”;

the most important thing was

“our productivity performance and our geographic inequality”.

Andy Haldane highlighted in a recent speech exactly the same figures as my hon. Friend the Member for Derby North (Amanda Solloway): the gap in average incomes between the richest and poorest regions is now larger than it has been at any time since the early 20th century. Amazingly, as my hon. Friend said, the prosperity gap in average incomes between the richest and poorest regions is about 2.5 times, and that figure is almost identical to the gross value added per person, which is the productivity measure. If we drive productivity, we drive prosperity around the country. That would not only help UK plc’s tax receipts, which pay for all our public services, but would level up throughout the UK. I love the phrase “level up”; it is what we should have been doing for decades. The fact that we have not been investing right across the country is not a failure of this Government, but a failure of Governments of all persuasions over decades.

However, the economist David Smith recently made a very interesting point in The Sunday Times regarding the Government’s grand plans to invest more across the country. In his words,

“public investment works only when it operates in harmony with private investment.”

That mirrors an article written by Mark Littlewood of the Institute of Economic Affairs. Members will be aware of some of his articles; he is not really a big spender, and when he was discussing the Government’s planned investment in infrastructure around the UK, he was quite scathing. He asked why, if this is such a wonderful idea and it is going to produce such a good return, MPs do not invest their pensions in it. One of the examples he gives of why this might not be the right thing to do, which I disagree with, is Doncaster. He writes that Doncaster is one of the best connected towns in the country, yet it is not very prosperous, so connectivity alone will not do the job. Public sector investment alone will not do the job.

However, I totally support what I think the Government are planning, which is to invest about £100 billion to £120 billion in the economy over the next few decades. I very much hope that they will support Transport for the North’s £120 billion 30-year plan to deliver projects such as Northern Powerhouse Rail, all the way from the east coast to the west coast, as well as lots of smaller projects such as the dualling of the A64 in my constituency, which are equally vital.

We need to incentivise private sector investment; this cannot just be about taxpayers’ money. If we look at what was done in eastern Germany during the reunification of that country, a huge amount of public sector money was put into East Germany, but the German Government also created incentives for businesses to relocate or start up in eastern Germany. It was a very simple measure, but over time, it was phenomenally successful. I absolutely agree with my hon. Friend the Member for Derby North about free ports and enterprise zones, and tax incentives for businesses to move to those regions.

My right hon. Friend the Member for Wokingham said rightly that the number of businesses set up per capita in London is way higher than in the north. I would like to see a SME revolution across the north; many more small businesses need to be set up, and the No. 1 factor in businesses setting up is access to finance. A troubling story in The Times today stated that the reduction in lending to SMEs in the north is five times greater than in London. That trend is going the wrong way at the moment, and we need to make sure that SMEs right across the country have access to finance.

As many hon. Members know, I am very concerned about the concentration of business lending among four big banks in the UK. That is completely the opposite of what has happened in places such as Germany, where there are 1,500 mutual banks across the SME sector. We should certainly consider encouraging regional mutual banks, in order to make sure that SMEs have access to capital, and should also consider whether public sector procurement should favour more local SMEs. Preston City Council has done an excellent exercise, spending more money with SMEs and less with some larger companies, because that council knows that SMEs spend much more of their money in the local community. It is a virtuous circle.

We should also decentralise agencies’ jobs and spread some of those public sector jobs around the country. I do not know whether the House of Lords will come to York—I think probably not—but decentralising jobs away from our wonderful capital and right across the country has to be the right thing to do. Finally, we should devolve powers and money so that we can get excellent local mayors, such as Ben Houchen in the Tees Valley. We want more people like him, including a York city region mayor and a Leeds city region mayor, so that we can devolve powers and money back to people who really understand the local communities and are willing to undertake a revolution in how we structure our economy, making sure that we get not only more public sector investment, but more private sector investment.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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21 Jan 2020, 10:27 a.m.

I am pleased to begin the summing up in this debate, Mr Hollobone. I do not think my voice will last longer than 10 minutes, so there should be no concerns on that account.

I congratulate the right hon. Member for Wokingham (John Redwood) on having secured this debate, and the three Members who have already spoken—the hon. Members for Strangford (Jim Shannon), for Derby North (Amanda Solloway), and for Thirsk and Malton (Kevin Hollinrake). Maybe unsurprisingly, given the constituencies those Members represent, a lot of the focus in this debate has been on the serious imbalance in the economy of the United Kingdom, and indeed the economy of England, between London and the rest. I am interested to hear what the Minister has to say about finally addressing that issue, because if we look at England in isolation—I am sorry to say that isolation is where England is headed right now—the disconnect between the biggest city and the tens of millions who live in other parts of the country is quite stark. It is something that we do not see in successful economies across the rest of Europe, and it will hold back the wider economic potential of this nation.

I particularly congratulate the hon. Member for Derby North on her return to the House of Commons. I always thought ping-pong was what happened between the House of Lords and the House of Commons, but apparently Derby North has a game of ping-pong between the Conservative party and the Labour party. I do not know how long she will be able to stay this time, but I know that she will relish the challenge of staying a bit longer. I cannot, in all honesty, say that I wish her well in that, but I hope she will not take that too personally.

Interestingly, although we have heard a lot of ideas about how to improve economic growth, we have not stopped to think about what economic growth is, what it is for, and particularly who it is for. One of the reasons why I do not get too obsessed with fractions of a percentage up or down in economic growth is that it can mean a lot of different things depending on how we measure it, and it is quite possible to look as if we have strong economic growth when an awful lot of people are being left behind. Some 20 million or 30 million people in the United States of America live in poverty, so looking at the apparent success of the American economy tells us that growth in itself is not enough. If people get left behind—if we do not have inclusive growth—then our economic growth is not really delivering.

I am very pleased that, with the limited powers they have just now, the Scottish Government have prioritised inclusive growth in a lot of ways that do not immediately look as if they are about economic growth. An example is their success in getting more young people from deprived areas into university. Some 16.5% of first-time entrants into universities in Scotland come from the 20% most-deprived areas, which means that we are close to a position where young people growing up in those areas have just as much chance of going to a top-class university as people from other parts of Scotland. That is massive, especially as education is one of the best ways to improve a person’s life chances.

More importantly, even though university might not be the best thing for a lot of young people, they are the first people in their families to believe that university is for them. The attitude, “A university education isn’t for the likes of me because I’m from the wrong background”, is beginning to be dismantled. It is impossible to estimate the difference that that could make through time.

The First Minister has also supported improving the educational achievement, and therefore the life chances, of young people who have been in the care of local authorities at some point or who have come from families with severe problems. When I was a council leader, I looked at the stark difference in the educational attainment of those young people compared with others of a similar age. Their life chances were being affected almost before their lives had started.

Nicola Sturgeon’s commitment means that those young people now believe that they have every bit as much right to get into university, get a good job, start their own business and prosper in the world as anybody else. That is a major contributor to economic growth. Even if it does not add any percentage points to GDP growth, surely it is right to make sure that if we live in a prosperous society, and we want to call that society civilised, we measure its success not by how many millionaires there are but by how well the people at the lower end of the income scale are faring. There is a marked divergence in that area between the priorities of the Government in this Parliament and those of my Government in my national Parliament in Scotland.

I mentioned a number of features of inclusive economic growth in my contribution to the Queen’s Speech debate last night, which I will not repeat. In particular, I spoke about the marked contrast between the Scottish Government’s investment into my part of Fife to regenerate the local economy, and the UK Government’s lack of attention. For as long as we remain part of the United Kingdom, I will continue to call on the UK Government to step up to the plate and honour their responsibility in that regard.

We talk a lot about the exceptional economic strength of London and the south-east of England, although, as I have said, the imbalance between that and the other English regions will become a major problem, if it is not already. In terms of fundamental economic performance, however, if Scotland were a region of England, it would be the second or third best performing region of England on every economic indicator. Whether in the growth of inward investment, the growth of our exports or the growth of our economy generally, Scotland has a fundamentally strong economy. There is absolutely no doubt about that.

The single biggest threat to our economy is Brexit. Every analysis shows that, after Brexit, our economy will grow less than if we had stayed in the European Union. The Government’s response to the fact that all their analyses showed that Brexit was an economically bad idea was not to stop Brexit but to stop publishing the results of the economic analyses, because they were too embarrassing.

Today’s debate has been very interesting, but the definition of economic success that I have heard, and the direction that the proposals from down here for economic success would take people in, are not what people from my country want to take, so that will result in a significant divergence. I say to hon. Members who represent constituencies in what they call the north of England—although I am not sure Derby and Yorkshire are particularly far north—that one of the best things that could happen for the economy there would be to have our very own northern powerhouse in Scotland. I can see that coming in the not-too-distant future.

Anneliese Dodds Portrait Anneliese Dodds (Oxford East) (Lab/Co-op)
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21 Jan 2020, 10:34 a.m.

It has been a pleasure to listen to this interesting debate. I was encouraged by some of the comments of the right hon. Member for Wokingham (John Redwood), whose position is perhaps more similar to that of the Labour party than he might be delighted to hear, but I disagreed with his conclusions in some areas.

When preparing for the debate, I anticipated that the right hon. Member’s take would follow his comments before Christmas, when he welcomed what he described as the “turning around” of the mood in relation to the economy by the Prime Minister, which will

“take some cash…and now is the time to spend a bit of that…That will show that the country has made wise decisions up to this point, and that Brexit will not be damaging to our economy”.—[Official Report, 19 December 2019; Vol. 669, c. 65.]

Of course, that is a bit of a change from some of the advice that we have heard he gave to investors not to continue to invest in the UK.

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Jesse Norman Portrait The Financial Secretary to the Treasury (Jesse Norman)
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21 Jan 2020, 10:48 a.m.

It is a delight to be able to speak for the Government in this first Westminster Hall debate of the new decade, as well as of the new parliamentary term. I congratulate my right hon. Friend the Member for Wokingham (John Redwood) for initiating this debate and for his very wide-ranging and thoughtful speech. I am sure he will be as pleased as I am and as I know Members across the House will be that today’s economic news reinforces a picture of an economy that is growing. The International Monetary Fund predicts that the UK is about to grow faster over the next few years than its major rivals in the eurozone and many of the G7—Germany, France, Italy and also Japan. PwC’s chief executive survey now rates UK attractiveness highly once again—I think we are the fourth most attractive global destination for location for businesses. That is very far from the narrative of isolation that we are hearing from the SNP and indicates the continuing international connectivity and scope for investment in our economy.

As my hon. Friend the Member for Derby North (Amanda Solloway) pointed out—I rejoice to see her back in this House—we are in the extraordinary position of having had 10 years of continuous annual economic growth. That is a remarkable achievement, and I am sure she will be as pleased as I am to see that the latest information is that the jobs market is strengthening, even from its already very strong current position. That economic growth is an amazing fact. If someone had said in the lee of the 2008 financial crisis that, beginning with the Conservative Government of 2010, there would be a full decade of uninterrupted annual economic growth, I do not think there is a person in this country, let alone this Chamber, who would not have bitten their arm off. That is something that we should all delight in, but that we should acknowledge has limitations that we need to try to overcome.

One of the things that was most interesting about my right hon. Friend’s speech was the way in which he highlighted the change in economic policy. He focused on the fiscal change and on the transition from the Budget restraint of the last two Governments to the more expansionary fiscal policy that this Government have indicated in the spending round and that we may see in the Budget. I would suggest there is something slightly deeper going on. There is a change in the Government’s conception of economic policy. We are not thinking of economic policy in what might be called a more purely general equilibrium way, by which investment flows automatically to investable propositions and finds returns. We are determined as a Government to build more energy into that and to adopt a focus that is more specifically targeted on regional needs and identities, and it is that sense of economic policy that marks a distinct intellectual step forward. If anyone is interested, I tried to explain this in a piece in the Financial Times yesterday that highlights this transition.

I will say a bit about the interesting speeches that were made by my right hon. Friend and other Members. He is right to say that lower taxes can be part of a fiscally expansionary policy. He possibly ignores some of the differences between ourselves and the USA. Obviously, the US had a massive fiscal boost, which is something it could do partly because of the dollar’s extreme strength as the global reserve currency. Of course, that was accompanied by a significant—in this country, it would be politically contentious—deregulation in energy. There are important differences between the US economy and our own.

My right hon. Friend mentioned the constraints under which the motor industry operates, but he did not mention dieselgate, which was an absolutely disastrous blow to the credibility of the global diesel manufacturers. Nor did he mention the fact that current diesels are still very heavy emitters—even Euro 6, compared with current environmental standards. The Government have frozen fuel duty and grown VED only in real terms. It is about trying to strike a balance between a shift towards a greener economy, particularly a green transport economy—at a time when we have not quite got to the point in the S-curve where the supply of electric vehicles is coming through at enough scale to warrant people using them—while moderating and mitigating the impact on households.

My right hon. Friend and the hon. Member for Oxford East (Anneliese Dodds) touched on what he described as the top-down imposition of IR35 rules. As he knows, IR35 rules have not changed. All that has changed is the way IR35 is being assessed, and we have called for a review in order to ensure that its implementation can be as smooth as possible. He touched on the issue of public sector productivity—again, rightly—and there might well be scope for using things such as telemedicine to improve the productivity of the public sector, but an intrinsic difficulty is one of the economic laws that we bump up against: Baumol’s cost disease. The cost of services relative to manufacturing continues to escalate, and it is not possible in the public sector to have industrial-type improvements in productivity. We do not want teachers to have too many pupils in the class, and we do not want nurses to have too many people to examine and support, so productivity is intrinsically more limited. The Government must therefore be cleverer about how we use technology, which is the purpose of the new GovTech fund that we have announced.

I will pick up on some of the other themes of the debate before turning to another point. I agree with the comments made by the hon. Member for East Londonderry (Mr Campbell) about the importance of spreading wage growth across the UK, which was a point also made by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) in his very thoughtful speech. I also share the view of the hon. Member for Glenrothes (Peter Grant) that it is a mistake to see property as a speculative asset, and there is no doubt that the crash of 2008 was caused by a massive over-leveraging in the banking sector. As he will recall—Labour does not like it when I point this out—UK bank borrowing across the sector as a whole was 20 times equity for 40 years, encompassing 1960, 1970, 1980 and 1990. In 2000 it started to go up, and by 2017 it was 50 times equity. That was what fuelled the enormous speculative boom.

Peter Grant Portrait Peter Grant
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21 Jan 2020, 10:54 a.m.

Will the Minister give way?

Jesse Norman Portrait Jesse Norman
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I will not, because I am very short of time.

I share the concern expressed by the hon. Member for Strangford (Jim Shannon) about the toxic atmosphere in SW1.

I will mention another issue that is more specific and personal to me, and I hope colleagues will indulge me. In my constituency in Herefordshire, we have been trying to create a new model of higher education through what we call a new model institute in technology and engineering. It has attracted a great deal of attention across Government because it creates the possibility of significant regional economic growth that is closely tied to the creation of university campuses in cathedral cities such as Canterbury, York and Lincoln. I flag it now because, from a national perspective, it represents a portable model by which higher education of the most value-added kind, and that therefore has benefits for entrepreneurship and business formation, can be moved to all parts of the country, having been tested and developed in Herefordshire. One would think that this was something that Government at all levels would support. Her Majesty’s Government, in the form of the Department for Education, the Department for Business, Energy and Industrial Strategy, and the Ministry for Housing, Communities and Local Government, have been extremely supportive of it.

One might also think that the local enterprise partnership, the Marches LEP, would support it. I am sorry to tell colleagues that the Marches LEP—I say this having had at least a year of wrestling with it on this topic—has been absolutely diabolical in the way it has treated this very innovative project. It has received £23 million from Government and all the support one could imagine. It has received private sector investment, and investment from matched funds. The LEP, which by charter is supposed to support economic growth in the Marches, has done nothing but prevaricate and delay. Even now, it is seeking to impose a £5 million indemnity on Government investment, although the Government made it clear in letters from the Secretary of State and from senior civil servants as early as January 2019 that no such indemnity was required. The specific people involved—the then chairman of the LEP, Graham Wynn, and the chief executive, Gill Hamer—should be subjected to significant criticism in the House. I put it on record that this important opportunity for a portable model of regional growth in higher education, which was developed through a pioneering model of tech and engineering at university and which offers possibilities and creativity, has been ignored and is being actively undermined.

Having said that, let me congratulate my right hon. Friend the Member for Wokingham again on introducing this very wide-ranging and important debate, which has examined not merely specific policy change but the very basis of economics itself. I thank him for securing the debate.

Economy and Jobs

Peter Grant Excerpts
Monday 20th January 2020

(1 year, 9 months ago)

Commons Chamber

Read Full debate Read Hansard Text
HM Treasury
Sajid Javid Portrait Sajid Javid
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20 Jan 2020, 4:53 p.m.

I agree absolutely with my hon. Friend and will come to that topic in just a moment.

The foundation of our new economic plan is fiscal responsibility. It has taken a decade of hard work by the British people to turn our public finances around. The deficit has fallen from 10% of GDP in 2010 to just 1.8% today. We are not going to throw that away. We were elected on a platform to manage the public finances responsibly, so it is a matter of trust, as well as economic credibility, that we deliver on that promise to the British people. We will be bound by a credible new fiscal framework that will keep our borrowing and debt under control while allowing for new investment in levelling up and spreading opportunity throughout the country. At the Budget, I will publish a new charter for budget responsibility that will give effect to those rules, and the Office for Budget Responsibility will scrutinise our performance against them.

Thanks to the hard work of the British people, we have got that deficit down, and debt is under control. We can now afford to invest more in levelling up and spreading opportunity right across our country. The first step will be our national infrastructure strategy. Better infrastructure can boost people’s earning power by making it easier to find work. It can help businesses access new markets. It can help us thrive and grow. It can boost communities and places and improve standards of living. It is simply not good enough that we have fallen behind so many other countries on infrastructure, and the Government are going to fix that.

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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The Chancellor may be aware that a very welcome infrastructure announcement was made just before Christmas, when the Scottish Government gave the long-awaited confirmation that the Levenmouth rail link will be reinstated. Exactly how much money do the United Kingdom Government intend to put into that vital project?

Sajid Javid Portrait Sajid Javid
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I am afraid I did not catch the name of the project the hon. Gentleman mentioned. If he wants to stand up again and mention it, I will reply.

Peter Grant Portrait Peter Grant
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The Levenmouth rail link—I can give the Chancellor a map if he wants to know where it is.

Sajid Javid Portrait Sajid Javid
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The good news for our citizens, whether in Scotland, England, Northern Ireland or Wales, is that our infrastructure revolution and the funds we intend to use to build new infrastructure will benefit every part of the United Kingdom. When we set out our plans and provide more detail in the forthcoming Budget, there will no doubt be a lot more investment in Scotland.

--- Later in debate ---
Eleanor Laing Portrait Madam Deputy Speaker (Dame Eleanor Laing)
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Before I call the next speaker, I am going to do something very unusual. Many colleagues today have been incredibly brief in their speeches. Our problem from the Chair is usually that people take much longer than they are meant to—a wonderful bunch of speakers this afternoon have taken a considerably shorter time than they were entitled to. I am therefore going to increase the time limit to nine minutes.