Energy-intensive Industries
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The Exchequer Secretary to the Treasury (Priti Patel)
I welcome today’s debate and congratulate the hon. Members for Stockton North (Alex Cunningham) and for Redcar (Ian Swales) on securing it, not least because it puts me through my paces in understanding the remit, this whole field and carbon taxes. It has been an insightful debate. The Government’s position has been discussed by a number of hon. Members, but we are clear in recognising the significant role that energy-intensive industries play in the UK economy. As my right hon. Friend the Chancellor said back at Budget 2011, we are committed to ensuring that manufacturing is able to remain competitive during the shift to a low-carbon economy and have pledged to do everything we can to help manufacturers play a valuable role.
We also recognise the difficulties that EIIs have faced as a result of high energy costs, and various cases and accounts of challenges that companies have faced have been cited in today’s debate. That is why we introduced a package of reforms at Budget 2014 radically to reduce the costs of energy policy for business, particularly for manufacturing, while improving security of supply—all right hon. and hon. Members would emphasise that we must do that—and maintaining the Government’s ambition for renewable generation deployment. That package will benefit every household, business and region in the country, saving a total of up to £7 billion by 2018-19. Businesses alone will save a total of £6 billion and the package will particularly benefit the most energy-intensive manufacturers, about 80% of which are based in the north of England, Scotland and Wales, as we have heard. The package will improve incentives for companies to return their manufacturing to the UK and help existing firms to compete in the global race. I do not want us to underestimate that term: we are about competition, we are open for business, and the Chancellor has consistently made the case that this is about British jobs and keeping the United Kingdom a competitive place for manufacturing in EIIs.
Manufacturing fell from being 19% of the total economy in 1997 to 10% in 2010, as my hon. Friend the Member for Warrington South (David Mowat) mentioned, but it has grown strongly in the latest quarter, at 3.3% compared with a year ago. Currently, energy-intensive sectors are responsible for 35% of UK manufactured goods exports. Obviously, the Government want to make the recovery of manufacturing last for the long term and be sustainable, and to have growth that is balanced across the entire UK. I think we would all agree that lowering energy costs is therefore vital for the international competitiveness of UK manufacturing.
If we had not introduced any measures at Budget 2014, UK firms would have been paying just above the average price for electricity among the 29 members of the International Energy Agency, with the proportion of this price attributable to policy costs rising over time, reaching about one third by 2020. That is why the Government announced the series of measures at Budget 2014 radically to reduce the costs of energy policy for business, particularly in EIIs. The measures included capping the carbon price support rate at £18 per tonne of carbon from 2016 to the end of the decade; extending EIIs’ compensation for the cost of the carbon price floor and the emissions trading scheme until 2019-20—I will address the points raised about compensation shortly; introducing compensation for EIIs for the costs of the renewables obligation and feed-in tariffs from 2016 to 2020, which is worth almost £1 billion, in order to protect these energy-intensive manufacturers from the rising costs of the renewables obligation and the feed-in tariffs; introducing, from 2015, an exemption to the carbon price floor for fuels used to produce good-quality electricity by combined heat and power plants for on-site purposes; and introducing new measures to make energy markets more competitive for very small businesses and to help them use smart meters to cut their bills.
I met a range of small businesses this morning. Although we are talking about large EIIs in this debate, these things also have an impact on small businesses, and the Government are very committed to listening to their concerns and addressing the issues they face. I am pleased to say that all businesses will see their electricity bills reduce as a result of this package, provided it receives the necessary EU state aid approval, which was also a subject raised in today’s debate. There will be a total reduction for business of up to £6 billion by 2018-19. The companies that use electricity intensively will see radical cost savings, as, when previous announcements are taken into account, they are now compensated for all Government policy designed to support low carbon and renewable investment up until 2019-20.
A typical energy-intensive business receiving the compensation measures in the package will save about £19 million by 2018-19. Such businesses include Lotte Chemical UK Ltd in the constituency of the hon. Member for Redcar, and GrowHow in the constituency of the hon. Member for Stockton North. Other manufacturers will also see a reduction in their bills through the capping of the carbon price support, which it is estimated will save a typical heavy industrial firm about £800,000 and a typical mid-sized manufacturer £50,000 in 2018-19 alone. That will increase the competitiveness of the UK’s energy intensive industries, which is important as this is all about supporting those industries to be more competitive, particularly in the global race. All businesses have recognised that this is about international competition and our place in the world. The Confederation of British Industry stated that our 2014 Budget package will
“put the wind in the sails of business investments, especially for manufacturers.”
The chief executive of the Engineering Employers Federation said that the Government clearly recognise the need to make UK competitiveness a priority. It is fair to say that the Government are doing their utmost to ensure that the UK is a place in which to do business. We have always said that to achieve a resilient recovery, the UK must back manufacturing.
The chief executive of Tata Steel’s European operations, which has a plant in the constituency of the hon. Member for Redcar, said:
“The measures announced in the Budget are extremely welcome. The Government has listened to the concerns of the foundation industries by introducing a limit on the policy costs they face. These measures are a clear and meaningful contribution to forging a more competitive and sustainable future for UK steelmaking sites, which employ 18,000 people directly and several times that number indirectly.”
The package of measures proves that the Government are determined to see manufacturing remain at the heart of the UK economy and competitive on the international stage.
On carbon pricing, over the next decade we need to attract investment worth more than £100 billion to replace and upgrade our energy infrastructure and to diversify the energy mix. The investment will help to ensure that the UK meets our long-term legally binding greenhouse gas emissions reducing targets and, importantly, to safeguard the country’s long-term energy security, on which we have only just touched in this debate. Establishing a minimum carbon price sends a credible signal to help drive that level of long-term investment in low-carbon electricity generation—a point that was made by the hon. Member for Newcastle upon Tyne Central (Chi Onwurah). But diversification is not concerned with renewable energy alone. The Government are committed to developing a wide range of energy sources to ensure that energy prices remain competitive in the future, and of course nuclear energy and shale gas are central to that.
We welcome the announcement made by INEOS last month that it plans to enter the UK shale gas market, because we are convinced of the benefits that shale gas can bring to industrial production.
Alex Cunningham
The Minister mentioned shale gas and other issues, but in the north-east of England, coal gasification could be a huge saver both for our region and the country. I hope that she will encourage the development of that industry.
Priti Patel
The hon. Gentleman is right that this is not about one or the other or even a trade-off, but about all players in the energy mix. We are talking about long-term energy, security of supply and competitiveness in the long-term energy market, and that requires diversity.
We are also continuing to look into the issues faced by energy-intensive industries. Today, Members have touched on the issues of carbon-reducing options and the competitive impacts. My hon. Friend the Member for Rugby (Mark Pawsey), who talked about CEMEX and the cement plant, touched on the fact that there are a range of sectors that are not on the European Commission’s list when it comes to exemptions and approval of indirect costs. Let me reassure Members that this is about not just an occasional conversation with the European Commission but about being absolutely firm and clear with it and pressing it on this issue. The Government, too, will look at the competitive impacts of their carbon reduction options through a series of road maps. I am talking here about the involvement not just of the Treasury but of the Department of Energy and Climate Change and the Department for Business, Innovation and Skills. This will help focus policy making more on the opportunities and barriers that energy intensive industries face, and allow Government and industry to agree on actions to deliver cost-effective decarbonisation while safeguarding competitiveness.
Over in Brussels, we will press the European Commission to review the list of energy-intensive sectors that are eligible for compensation, with the aim of extending it, given the higher energy costs they receive as a result of the EU emissions trading scheme and carbon price floor. This is an ongoing matter. It is fair to say that we are well placed when it comes to pressing the European Commission and to making our case.
We will press the Commission to provide a more targeted list of sectors most at risk from carbon leakage as a result of the EU emissions trading scheme, for its next phase which begins in 2021, so that the free allowances that these sectors receive can be best focused on those energy-intensive industries that need them the most. The Government are well aware of the cost pressures on the EIIs, and we have developed a suite of measures to reduce those costs, as well as the measures announced in Budget 2014.
Let me address the points that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) made about compensation. In Budget 2011, we made it clear that £200 million was available, and much that has been spent thus far is within the eligibility of the constraints of the state aid clearance process, and that is all within the framework of the process that has been set out. The hon. Lady rightly said that the Commission published its guidance on eligibility schemes in April this year. That has not been lost on us. We are not thinking, “Well, that’s that. It’s been and gone.” We are absolutely on to this matter. I will if I may come back to the hon. Lady on this with some specifics. It is absolutely not the case that we are not looking at this any more. We want to do everything possible to ensure that that money is going where it is needed and supporting the EIIs that need that compensation. Of course, this comes back to the statement that was made by the Chancellor in 2011. We announced measures in the Budget this year, but we know that more needs to be done, so we will follow this matter through.
We are continuing work in this area securing investment in low carbon technologies; supporting the development of a wider range of alternative energy sources; and working with individual industries as they seek to improve their energy efficiency. It makes business sense for those industries to improve energy efficiency, and they are all going through that process. We welcome this opportunity to set out the wide range of work this Government are doing to support energy-intensive industries as the UK transitions to a low carbon economy.
National Insurance Contributions Bill
Priti Patel Excerpts(10 years, 10 months ago)
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The Exchequer Secretary to the Treasury (Priti Patel)
This has been an efficient debate—the Bill was discussed at great length in debates on the Finance Bill. On that basis, I will not recap the purpose of the Bill or the clauses, which have been effectively discussed. However, it is fair, right and proper that I address the points made by Labour Members. Clearly, there is consensus in a number of areas—work has taken place in debates on the Finance Bill and discussions have been had—but there are a number of areas that I should like to address.
The hon. Member for Birmingham, Ladywood (Shabana Mahmood) asked a number of questions. I will begin the debate on them now, and I have no doubt that they will be explored further in Committee. On the reform of maternity allowance for self-employed women, I challenge the assertion that the process is burdensome. As we have heard, the Bill is about simplification and introducing a degree of efficiency to NICs. Primary legislation and supporting regulations, and a revised claim process, will ensure that expectant mums are no worse off than they were under the previous class 2 arrangements. Right hon. and hon. Members will be pleased that HMRC and the DWP are working together to ensure that the process is straightforward and simple for them. As I have said, that will no doubt come up again in Committee.
The hon. Members for Birmingham, Ladywood and for Newcastle upon Tyne North (Catherine McKinnell) made a point on reform for the low paid and the impact of universal credit. It is fair to say that most self-employed people have the option to pay their class 2 NICs regularly using the budget payment option that is already available in self-assessment. Importantly, they are enabled to spread the cost of those payments. That is not legislated for in the Bill because the option to make the budget payments already exists within the current system of self-assessment. Once the Bill becomes law, the issue is how we raise awareness to ensure that people know about that. NICs are accounted for on an accruals basis, so the important fact is the time period within which the money is due rather than the date for payments. Of course, they will continue to be counted in the tax year, but as I have said, it is a question of spreading the costs.
The hon. Member for Birmingham, Ladywood rightly asked how HMRC will ensure that it applies the rules fairly for all taxpayers. It is fair to say that that argument was rehearsed in Finance Bill debates. The Government recognise that there are significant new powers. Obviously, the system must be administered fairly and consistently for all taxpayers. To that end, HMRC will establish clear governance for the key decisions on which cases can be designated as followers, which disclosure of tax avoidance schemes will be within scope and on the appointment of designated officers for the calculation notices. One important point is that clear separations will be established so that reviews of follower notices are carried out independently of the original issuing team. In addition, clear internal guidance and training will be provided for staff within HMRC on how they are to apply the rules. That goes with the clear external guidance, which has been published by HMRC so that taxpayers and advisers know how the rules impact on them. This is about not only fairness, but transparency, so that there is no confusion. On follower notices, those who know that they are deliberately avoiding tax will also know that they are being looked at, which is important. It is fair to say that our determination to lift every stone, and ensure that those who deliberately avoid tax are actively watched and pursued, is unequivocal.
The hon. Member for Newcastle upon Tyne North touched on wage growth for self-employed individuals. The self-employed community is growing, which is a good thing. This is about how we support them through the tax system, but there must be agreement that the only way to raise living standards is to tackle wider challenges and economic problems. We appreciate that times are tough, but this is about how we support hard-working people and the self-employed. We have increased the tax-free personal allowance to £10,500 from April next year, which will save the typical taxpayer £805 per year. We have also taken more than 3.2 million people out of tax altogether and cut income tax for someone on the minimum wage by nearly two thirds. There have been other effective measures such as the freeze in fuel duty and the freeze in council tax in every year of this Parliament.
There is no doubt that more discussion will follow in Committee, but given that there is a great deal of agreement on the Bill’s provisions, at this stage I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Oral Answers to Questions
Priti Patel Excerpts(10 years, 10 months ago)
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Robert Flello (Stoke-on-Trent South) (Lab)
3. What recent assessment he has made of the effect of his fiscal policies on the level of child poverty.
The Exchequer Secretary to the Treasury (Priti Patel)
The Government are protecting vulnerable groups while taking action to tackle the record deficit we inherited. Work remains the best route out of poverty and the Budget took action to support families and to make the tax and welfare system fairer, further increasing the income tax personal allowance to £10,500 in 2015-16, which will take 3.2 million people on low incomes out of tax altogether.
Robert Flello
I was amazed by the answer given by the Minister’s colleague to the previous question, so perhaps I will try her on the same point. Are she and her colleague in the least bit troubled by the fact that the IFS forecasts that child poverty will rise by 400,000 during this Parliament?
Priti Patel
The hon. Gentleman will know that the Government are committed to ending child poverty by 2020. Under this Government, as my right hon. Friend the Chancellor has already said, child poverty has fallen by more than 300,000 since 2010. The best route out of poverty is work and I am sure that the hon. Gentleman will support that route.
Charlie Elphicke (Dover) (Con)
I congratulate the Minister on her debut at the Dispatch Box. She has referred to child poverty falling under this Government. Will she confirm that it rose under the previous Labour Government in the previous Parliament?
Priti Patel
I thank my hon. Friend for his warm remarks. He is absolutely right. It is this Government who have gone out of their way to focus on a child poverty strategy, reducing the numbers, and that is something of which we are proud.
Helen Goodman (Bishop Auckland) (Lab)
16. The Government’s own figures show that the number of children in poverty in absolute terms after housing costs increased by half a million between 2010 and 2013. Why does the burden of fiscal adjustment fall on the most vulnerable?
Priti Patel
I think it is worth my reiterating that relative child poverty has fallen under this Government by 300,000 since 2010. It is quite clear what the IFS has said about the greatest and deepest recession we have had thus far and that work is the best route out of poverty. I have said it already and I will repeat it: work is the best route out of poverty. This Government are supporting hard-working families across the country and getting them out of poverty.
Sarah Champion (Rotherham) (Lab)
18. Unfortunately, the Minister’s comments bear no relationship to Rotherham, where almost a third of children are living in poverty. On a related topic, may I ask whether the Chancellor would listen to requests for additional funding for child protection in Rotherham and around the country?
Priti Patel
I thank the hon. Lady for her comments and we will look at all places and all situations. I reiterate that this Government are committed to helping all families that are having difficult times. Child poverty has come down and, of course, work is the best route to get families out of poverty. I am happy to discuss with her the specific issue of child poverty in her constituency
Mr Simon Burns (Chelmsford) (Con)
5. What assessment he has made of the effect of freezing fuel duty on the price of petrol.
The Exchequer Secretary to the Treasury (Priti Patel)
Autumn statement 2013 confirmed that fuel duty will be frozen for the remainder of this Parliament. As a result of this Government’s very clear actions, average pump prices are currently 16 pence per litre lower than they would have been if the Government had implemented the previous Government’s fuel duty escalator, and will be nearly 20 pence per litre lower by the end of this Parliament.
Mr Burns
May I congratulate my fellow Essex MP on her well-deserved promotion to the Treasury? Will she update the House on the use of the tax system to reduce the instability for motorists and outline the help that has been provided for them during what was the most horrendous recession caused by the Labour party?
Priti Patel
I thank my right hon. Friend for his warm and generous remarks. He knows that the Government are committed to supporting motorists. We are the Government who abolished the previous Government’s fuel duty escalator, cut fuel duty by 1 pence per litre and scrapped the four increases that had been planned over the Parliament. By the end of this Parliament, fuel duty will have been frozen for nearly four and a half years—the longest duty freeze in over 20 years—which I know that my right hon. Friend and, of course, the good people of Chelmsford will warmly welcome.
Mr David Hanson (Delyn) (Lab)
Could the Minister tell the House how much per litre VAT has added to the price of petrol?
Stuart Andrew (Pudsey) (Con)
6. What recent estimate he has made of the level of employment.
The Exchequer Secretary to the Treasury (Priti Patel)
We recognise that times have been tough for hard-working people. However, the Government have taken decisive action in getting more people into work than ever before—cutting taxes for hard-working families through increases in personal allowances, freezing council tax and fuel duty, cutting energy bills, and providing tax-free child care up to £2,000.
Chi Onwurah
In July the Chancellor came to Newcastle to announce that the economy was back on track. Office for National Statistics figures show that the real value of average wages in the north-east has fallen by £1,811 per year since this Government came into power. Is that what he means by “on track”—falling wages for working people and tax cuts for millionaires?
Priti Patel
The hon. Lady will know that our economy is recovering from the deepest debt-fuelled recession in living memory. The Institute for Fiscal Studies has made it clear that there have been very significant falls in real earnings as a direct but delayed response to the 2008 recession. In the light of this honest assessment, she will know that the only way to raise living standards in a sustainable way is to tackle the country’s economic problems head on.
Sir Tony Baldry (Banbury) (Con)
20. Does my hon. Friend agree that one of the best indications of the rate of growth is the increase in jobs, and that with over 1.8 million more jobs now in the economy than over the past four years, more women in work than ever before, and youth unemployment falling dramatically, that all indicates that our long-term economic plan is working and that as regards the economic policies of the Opposition, the wheel may be turning but the hamster is dead?
Priti Patel
My right hon. Friend is absolutely right. He has made the case very clearly that there are strong economic indicators out there that are testament to the Government’s long-term economic plan. Quite frankly, this country is going forwards, not backwards.
Kate Green (Stretford and Urmston) (Lab)
According to the most recent Office for National Statistics figures, child poverty in lone parent families where the parent is working full-time has risen from 17% to 22%. What are the Government doing to help those families to beat the rising cost of living?
Priti Patel
I re-emphasise the point that I made earlier: child poverty under this Government is down by 300,000. Inequality is being tackled very effectively by this Government through what we are doing to raise living standards and tackle the country’s economic problems head on.
Mr Philip Hollobone (Kettering) (Con)
Will my hon. Friend remind the House of the amount by which personal tax-free allowances have been increased since 2010 to help protect household budgets in an era of sluggish wage growth?
Priti Patel
As my hon. Friend will know, we have increased tax allowances by thousands of pounds to the new figure of £10,500, which will take an extra 3.2 million people out of tax.
Mr Robin Walker (Worcester) (Con)
17. What assessment he has made of the effect of freezing fuel duty on the price of petrol.
The Exchequer Secretary to the Treasury (Priti Patel)
I refer my hon. Friend to the response I gave earlier.
Mr Walker
I congratulate my hon. Friend on taking her well-earned place on the Front Bench. May I tell her that my constituents and, indeed, many businesses in Worcester have fed back how pleased they are that we have kept the fuel duty freeze in place and rejected calls from the Labour party to restore its fuel duty escalator? Will she remind the House what the cost would be to those people and businesses if we had gone along with the previous Government’s plans?
Priti Patel
I thank my hon. Friend for his warm welcome and kind remarks. This Government scrapped the previous Government’s fuel duty escalator, which would have increased fuel duty by 1p per litre above inflation from 2011 to 2014. Were it not for this Government’s very clear actions on fuel duty since 2011, current pump prices would be 16p per litre higher and would be nearly 20p per litre higher by the end of this Parliament. I know that my hon. Friend’s constituents and businesses in Worcester will support the clear action that this Government have taken.
Guy Opperman (Hexham) (Con)
T1. If he will make a statement on his departmental responsibilities.
Decommissioning Relief Deeds
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The Exchequer Secretary to the Treasury (Priti Patel)
At Budget 2013, the Government announced they would begin signing decommissioning relief deeds. These deeds represent a new contractual approach to provide oil and gas companies with certainty on the level of tax relief they will receive on future decommissioning costs.
Since October last year, the Government have entered into 61 decommissioning relief deeds (50 were signed in financial year 2013-14). Oil & Gas UK estimates that these deeds have so far unlocked at least £2.2 billion of capital, which can now be invested elsewhere.
The Government committed to report to Parliament every year on progress with the deeds. The report for financial year 2013-14 is provided below.
(a) The number of decommissioning relief agreements entered into—The Government entered into 50 decommissioning relief agreements in 2013-14.
(b) The total number of decommissioning relief agreements in force at the end of that year—Fifty decommissioning relief agreements were in force at the end of the year.
(c) The number of payments made under any decommissioning relief agreements during that year, and the amount of each payment—No payments were made under any decommissioning relief agreements in 2013-14.
(d) The total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments—No payments had been made under any decommissioning relief agreement as at the end of the 2013-14 financial year.
(e) An estimate of the maximum amount liable to be paid under any decommissioning relief agreements—The Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements.
Childcare Payments Bill
Priti Patel Excerpts(10 years, 11 months ago)
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Priti Patel (Witham) (Con)
May I say what a pleasure it is to speak in support of this Bill, which I welcome for many reasons, but predominantly for the long overdue support it provides to hard-working parents up and down the country. It shows parents that the Government are on their side as they return to work, fulfil their career aspirations, provide better futures for their families and their children and encounter new opportunities. It is incumbent on the Government to play a positive role in that regard.
I am a parent; my son is five years old. Like so many Members from all parts of the House, I understand the challenges of child care and work-life balance. I also understand that the costs of child care are far too high—to be fair, that was true under the previous Government as well. It is about time that we all faced up to that. Rather than throwing political brickbats across the House, we must start putting across a positive message about supporting hard-working parents and facilitating affordable child care so that everyone benefits, including children. Rather than being partisan and party political, we should realise that this is about children and ensuring that their futures are secure and that parents have access to good-quality, affordable child care. Parents need to feel comfortable that they are putting their children in the right environment—one in which their children will flourish, feel safe and be stimulated.
Mr Robert Buckland (South Swindon) (Con)
My hon. Friend is making a powerful point about the need for flexibility. Does she agree that for parents with disabled children, the need to extend that provision through to late teens is very important? The provision to extend the scheme up to 17 is particularly relevant for those families.
Priti Patel
I welcome my hon. Friend’s intervention. He makes a powerful point. When we consider child care and child care payments, it is important to understand that this one size does not fit all—we all have different child care needs. All our children are different; every family is different. The Bill moves us away from the notion that everybody’s situation is similar. We must support families through all sorts of personal circumstances, some of which are challenging and very difficult. We know that both as constituency MPs and as parents.
One of the biggest challenges and choices that parents face is how to raise their children, so the Bill is not only timely but politically significant—we have not had such a measure before. We live in a society in which the pressures on parents are absolutely enormous, whether because of employment, changing jobs, the labour market, social mobility or the fact that we live in an international and global world. Many companies have different expectations of their employees, but employees are parents, too.
Sarah Newton
Does my hon. Friend agree that caring for older relatives is another huge pressure on families? It is so important that the benefits of this Bill will be available to those on carer’s allowance. So many people fall out of work because it is too difficult to work while managing caring responsibilities.
Priti Patel
My hon. Friend makes a powerful point, which relates to my earlier comments on everybody’s circumstances being different and the flexibilities outlined in the Bill. The ability to reach out to those with different circumstances and backgrounds is paramount. The Bill demonstrates a depth of understanding of the challenges facing families and households. When both parents work, they find it difficult to decide between the costs of child care, which can be in excess of £10,000 a year, and spending time raising children themselves.
We should remember that child care costs vary across the country and that no generic or standardised level or rate exists. Costs are naturally high in London, the south-east and the east. Many working households spend a lot of their income on child care, partly because people do not necessarily live in the conventional family set-ups in which grandparents might be around the corner and able to offer support. I must be perfectly honest that I rely on such a situation. I tell everybody that I am blessed and that I can do this job only because I have outstanding family support to look after my son.
Child care decisions are often made on cost grounds and the Bill goes a long way to reflect that. Over the past decade, the average hourly cost of child care has increased by more than 67%, which is almost two and half times higher than the CPI rate over the same period. The pay of parents in England will vary depending on what they do. In London, pay levels are slightly higher than elsewhere, but many parents pay hundreds of pounds a week to some child care providers, which means that their families are under pressure and more often than not—we have not discussed this—that pressure ends up on working mothers. They are the ones who sacrifice their careers or put them on hold because child care costs can be so high that they have to decide whether going out to work or staying at home to look after their children is more financially expedient. I have much sympathy with those mothers. Many of my constituents with successful professional careers that they want to continue inform me of the pressures and challenges that they face, including the high costs of child care and commuting costs. Essex is not that far from central London, but most of my constituents and others across the county work in London. They are on a treadmill day in, day out. They face pressures and costs and feel as if they have no choice. If people feel that they have to stay at home, it becomes harder for them to re-enter the work force, which is another reason the Bill is so important. It helps mothers in particular to meet their aspirations, which we should all welcome and support.
The Government deserve credit for recognising the pressures, in addition to soaring child care costs, that families and mothers face and the impact of those pressures on families. As with so many other issues, the Labour party ignored that when it was in government. We have heard lots of rhetoric today, but the reality is that it is difficult, a challenge and a balance. It is easy for the Opposition to talk about the Government today, but we have to remember that the economic policies of the past—uncontrolled public spending—hampered the economy instead of helping families. When families needed help, they were hurt. We know about the negative impact that the downturn and its economic legacy has had on households, so now is the right time to focus on support for hard-working families. The Bill is about support for child care costs, but we want to put an end to the shameful past and what parents had to deal with, and to look forward.
As we heard from the Financial Secretary to the Treasury, the Government have gone a long way to bring in positive and proactive measures to help hard-working households: cutting income tax bills, abolishing Labour’s jobs tax; reducing fuel duty; and supporting private business. That applies particularly to my constituency, where SMEs employ 85% of my constituents. We need the private sector and SMEs to be successful to continue to create more jobs. A million new jobs have been created since 2010. The measures are positive and bring a new dynamic to the employment market. At the same time, low earners have been given support with child care costs, including free child care places for some 40% of two-year-olds. Those are the proactive measures that make a difference to middle and low-income families.
As a Conservative, I instinctively believe that the Government should not only support families, but also help parents to make choices about working arrangements, which is why the Bill is so positive and proactive. Families want to be empowered by Governments to make the right choices for themselves. The Bill helps families to make such choices by alleviating some of the financial pressures caused by child care costs. This package of support will help women who want to continue to work to do so. We are already seeing record numbers of women in work and the Bill will help those who have established a career—or those who are just starting out after having taken time off to bring up their children—to continue to develop and to advance in their profession.
The £2,000 a year of support for families is a substantial amount for the Chancellor to find and should be put in the right context. It has been made possible only because of the controls that have been placed on spending and the reductions in the deficit, which the Labour party has opposed. This Government is on the side of hard-working families. The Bill will benefit not only my constituents but working families across the country through sensible and practical measures. I welcome it as a positive way of supporting families and working women.
Finance (No.2) Bill
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Kelvin Hopkins
I am not an expert on tax codes, but taxation is too complex and could be made much simpler, although I think tax should remain progressive. The idea of a flat tax, which the UK Independence party is talking about, is complete nonsense. I fundamentally oppose UKIP not because of its views on the European Union, on which I might have some sympathy, but because of its views on everything else. UKIP is extremely right wing. It wants to get rid of rights at work, privatise the health service and introduce a flat tax. Frankly, UKIP is barking and I will oppose it at every turn.
My hon. Friend the Member for Birmingham, Ladywood talked about a review of the impact of tax changes, which is absolutely right and I support her.
Priti Patel (Witham) (Con)
I have thoroughly enjoyed the debate so far. I am astonished by the ground that we have covered, because we are solely here to address corporation tax, which has not been explored anywhere near enough in the light of the Labour party’s amendment.
As my hon. Friend the Member for Enfield North (Nick de Bois) said, the amendment would create uncertainty and put jobs and future investment at risk—there is no doubt about that. The Labour party wants to reverse the Government’s low business tax approach by putting up corporation tax, which would send out all the wrong messages to the business community. It is farcical that Labour Members are dressing up their so-called policy as a way to help small businesses with business rates. They are cynically trying to pitch big business against small business. The Government have clearly shown that we can help all businesses, both large and small, by cutting corporation tax and, importantly, easing the burden of business rates, which the Minister and the Chancellor of the Exchequer have done.
Angie Bray (Ealing Central and Acton) (Con)
Does my hon. Friend agree that it is often not an either/or situation? Small businesses often depend on larger businesses for work.
Priti Patel
My hon. Friend is absolutely right. She gets to the heart of the debate and shows why Labour has no credibility. Labour Members cannot claim to want to help small businesses when, as the Minister pointed out, at the last general election, when they were in government, they proposed to increase the small profits rate of corporation tax from 21% to 22%. We have also heard about the Labour party’s so-called interest in small business, but in government it presided over the closure of 6,000 small post offices. There is fuel duty and energy costs for small businesses, too. On many issues, Labour lacks credibility. We should put things into context and beyond doubt.
Priti Patel
No. We heard from the hon. Gentleman earlier.
The last Labour Government ignored the benefit of expanding trade. Exports came up in the discussion. This Government have gone out of their way to expand overseas trade. The Chancellor is in Brazil this week at the beginning of export week. We are doing everything right to sell Britain overseas, and to encourage overseas companies to come here and benefit from the low rate of corporation tax, which Labour wants to destroy.
Putting up corporation tax does nothing to help small business, contrary to what Labour says in its shallow and feeble amendment. That only goes to demonstrate that the Opposition have no plan to expand our economy or create more jobs, growth and prosperity—creating those things is exactly the right approach that the Government are taking.
Amendment 2, which I obviously do not support, is completely irrelevant to the wider national debate currently, which is about sustaining growth in our economy, and expanding our economy with jobs, growth, prosperity, inward investment and exports. On that point, I heard a terrible diatribe earlier—an hon. Member said we are not exporting enough. In my county of Essex, the Essex chamber of commerce has helped more than 1,000 local firms, including many small and medium-sized businesses, in processing export documents and giving practical assistance. The value of those exports is well over £300 million. That is the message we want to send out to business of all sizes in the UK. I have no intention of supporting the amendment and support what the Government are doing.
Mike Kane (Wythenshawe and Sale East) (Lab)
It is an honour to follow the hon. Member for Witham (Priti Patel). I concur that it is great news that the Chancellor is drumming up business for Britain in Brazil, but I wonder what first attracted him to the Copacabana beach.
I know debates in the House can sound like statistical conventions, but we have only to look at the statistics to realise that the debate is important. Some 99.9% of all private sector business in the UK is in SMEs, which also account for 59% of private sector employment and 48% of private sector turnover. As my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) said, SMEs account for 47% of all private sector employment. Labour Members will know that growing private sector trade unions such as the Union of Shop, Distributive and Allied Workers and Community the union are picking up on that growth.
I was intrigued by my hon. Friend’s story about starting out in a corner shop. I want to tell a story about a firm in my constituency. In 1985, a young woman—a housewife called Kamal Basran—was bringing up a young family and preparing food for them in her kitchen. She was fed up that she could not buy quality Indian cuisine from any of the major supermarkets. She took out a £5,000 bank loan and started supplying food to local restaurants and businesses. In the past nearly 30 years, she has grown that business and hopes to post a £50 million profit this year. It has grown year on year despite the recession. She now has 220 employees. As a new MP, I had the great honour of visiting that business in my constituency just a couple of weeks ago. The package I got as I left was superb. I do not declare an interest—I distributed the goods to parliamentary staff and constituents afterwards.
That success story is an example of why SMEs matter so much. In polling up to the last general election, people said that their work prospects were the most important things to them after health and crime—work prospects were always No. 3 or No. 4 on the list. That is why the debate is important.
Newspaper Supply Chain
Priti Patel Excerpts(11 years, 3 months ago)
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Priti Patel (Witham) (Con)
It is an honour to serve under your chairmanship, Mr Dobbin. I am grateful to Mr Speaker for granting this debate. I commend the Minister because this is her second debate in a row.
The issue of the newspaper supply chain and independent newsagents is covered by two Government Departments, so it is important that independent newsagents know which Minister and Department they can go to. I am delighted that my hon. Friend the Minister is responding this afternoon. I would be grateful if, in her response, she told us whether there are plans for one Minister to take the lead on this issue and oversee the policies that affect independent retailers.
Independent newspapers have been an integral part of many communities for decades. I am the daughter of former shopkeepers, and I spent more than 35 years living above a shop. My parents would go downstairs at the crack of dawn to open the shop, mark up newspapers and deal with the many challenges of the newspaper supply chain, so I have first-hand experience of the benefits to local communities of independent newsagents and the challenges of the newspaper supply chain.
Today is Budget day, so we should remember that our economy benefits from having prosperous, dynamic, independent newsagents; it is an important sector. Whether it is a friendly face at the counter who knows exactly what each customer comes in to buy, or a paper boy earning money for the first time and getting work experience—I have plenty of experience of delivering newspapers—independent newsagents offer high-quality, personalised services. As much as we welcome choice in where we shop, we all recognise that large supermarkets and online platforms do not do that.
Conservative Ministers deserve credit for taking action to support the sector. In particular, they have cut the small profits rate of corporation tax, increased the cap on business rates—that is an important step—cut fuel duty by more than Labour planned, reduced the burden on employers of national insurance contributions, and cut red tape, which has made a significant difference. The announcements in today’s Budget, apart from the usual increase in tobacco duty, with which we would not argue, also give independent newsagents a helping hand.
However, it is clear that over a number of years independent newsagents have faced difficult challenges that have forced many out of business. New tobacco controls have harmed responsible independent retailers. They have also driven many customers into the arms of illicit traders and smugglers, but that is a subject for another debate. The expansion of supermarkets brought more challenges. Changes to the newspaper and magazine market, including the expansion of existing newspapers’ online media platforms, new entrants to the market and the growth of free newspapers, have led to a decline in newspaper sales. The terms and conditions imposed on independent retailers by wholesalers are a part of the challenge they face.
I want to concentrate on the relationship between newspaper and magazine wholesalers and independent newspapers. The underlying trends and changes in how consumers digest newspapers and the news is highly relevant, because it has led to change in the marketplace.
Since the turn of the millennium, independent newsagents have suffered a fall in sales caused by the emergence of free newspapers—we all pick them up—that target the commuter market. The Metro and the Evening Standard, which are available in railway and underground stations, are two prominent examples. However, newsagents have also felt the impact of technological changes; more and more content is available online. All the main newspapers now invest heavily in their online platforms, which are updated minute by minute, particularly on Budget day. The growth in the use of smartphones and tablets has enabled news groups to provide news in a much more user-friendly way. Consumers are able to seek out and read news stories on other platforms, such as blogs. As a result, hard copy sales are falling. In the past two years alone—between March 2012 and February 2014—sales declined by 16% from 18.3 million to 15.4 million.
Despite the challenges that those changes pose to the traditional ways of selling newspapers, there are still some positive features for independent newsagents. Many people still go to their newsagent on the way to work and value the service they receive, and national news groups still see a role for print editions, which is important for independent newsagents. Few of us would find fault in news groups’ entrepreneurial and commercial decisions to use new technologies—we have all got to embrace new technology—or the cost-effective ways in which consumers digest news.
However, an issue that needs to be addressed, which places independent newsagents at a disadvantage and hampers their ability to compete and respond, is the wholesalers’ control of the newspaper supply chain and their vice-like grip on independent newsagents. The Minister is aware of the campaign that the National Federation of Retail Newsagents, the Association of Convenience Stores and many others in the sector ran to raise awareness about the lack of competition in the wholesale market. The are only two main wholesalers that operate in Great Britain: Smiths News and Menzies Distribution. They operate in what can be described only as a near monopoly, or near duopoly. National publishers of newspapers and magazines sign exclusive distribution rights deals with those wholesalers. Prices are set and there is no scope for independent newsagents to get involved in the negotiations, so their voices are not heard. A third wholesaler, Dawson Holdings, ended its magazine and newspaper distribution activities in 2009 after losing out on contracts with publishers.
Smaller independent wholesalers that traditionally operate at a local or regional level have been squeezed out as publishers have concentrated their contracts with Smiths and Menzies. As a result, if a newsagent wishes to trade in newspapers, they are effectively at the mercy of the wholesaler when it comes to terms and conditions, the quality of service—which many newsagents would question—and charges.
Jim Shannon (Strangford) (DUP)
I commend the hon. Lady for raising this issue. Like her, I have been contacted by constituents and small newsagents who are penalised by Menzies and other wholesalers, and have had their contract conditions changed without negotiation or consultation. Will the Minister respond to that issue? If an independent newsagent has a contract, how can they be charged extra money without consultation? There is no thought for the independent newsagent, who makes little money as it is.
Priti Patel
I completely agree. That is the reality of what we are dealing with. It is not a new problem; it has been going on for decades. There is a lack of negotiation, and newsagents are just a second thought. Any newsagent will be able to wax lyrical about the poor service they receive. From my experience in my parents’ shop, I have seen the supermarket down the road getting its newspapers first. When the newspapers are taken off the lorry, the independent newsagent is bypassed completely. That is simply not acceptable, but the wholesalers operate a virtual monopoly.
It is astounding that despite the monopoly conditions to which independent retailers are subjected, the Office of Fair Trading decided in 2009 and 2012 against referring the matter to the Competition Commission for further investigation. There is a strong case for opening up the sector and looking at the way those organisations are governed. That outcome is grossly unfair to the tens of thousands of independent newsagents who, as I know, are up at 4 am—before dawn—to serve the public. They work long hours to deliver a service for their customers, but they are forced to accept declining margins, higher charges and appalling service.
In my capacity as chair of the all-party small shops group, I am frequently contacted about this issue. I receive regular communications from newsagents across the country about the problems they encounter as a result of the lack of competition in the wholesale market. If a newsagent is dissatisfied with the products they sell and the terms and conditions they receive, they are hemmed in, because there are not many places for them to go. When it comes to general products, an independent newsagent can go to many cash and carries—of course they can, because there is competition in the marketplace—but they are limited as to where they can go for newspapers and magazines. There is simply no other avenue, which is why so many newsagents feel aggrieved. The market is stacked, rigged against them, and the Minister must review that.
The consequences of a lack of competition in the wholesale market and the dominance of the relationship between the publishers and wholesalers over independent retailers are profound. Notably, the margins that newsagents receive on newspapers are declining, and fast. Just as the cover prices of newspapers are set by the publishers, so too are the margins that retailers receive. When prices increase, the share that the retailer receives does not always follow. Some newspapers, such as The Telegraph and the Express, have accompanied their recent price increases with a pro rata rise in the amount received by the retailer, so that the margin remains the same. Many others, however, have not done so. The Mirror, for example, did not pass on a pro rata rate when prices increased from 70p to 80p in January, with the percentage received by retailers being slashed from 22% to 21%. In Scotland, the equivalent margin fell from 23% to 21%. Since January, it has been reported that one particular publisher has cut the margins received by retailers for 65 out of 138 titles.
It is understandable that publishers and wholesalers are looking for savings and efficiencies; I understand that the marketplace is changing. However, the arbitrary nature of decisions to cut retailers’ margins seems harsh—it is a blunt instrument—and the effect on profitability is pretty stark for independent retailers. I hope that the Minister will look into that aspect of the relationship between wholesalers and publishers.
On top of the fact that margins are being eroded, newsagents face higher costs from what are known as carriage charges, imposed by wholesalers. Originally introduced after the first world war to protect the universal availability of newspapers and their distribution to remote areas, carriage charges have soared over the past 20 to 25 years. I know that because my dad always used to complain about them. Despite the falling volume of newspapers and magazines being sold and distributed, carriage charges are rising and now represent the primary source of profit for wholesalers.
It says something about the effect of carriage charges in recent years when an increase of 2% announced by Smiths last summer was welcomed by some newsagents. That puts the figures into context. The fact that the steep rise in carriage charges has coincided with the signing of exclusive distribution deals between publishers and wholesalers, and with the collapse of competition among wholesalers, adds to the injustice that independent retailers feel—it is the icing on the cake—with a duopoly in place and the OFT failing to take action.
John McDonnell (Hayes and Harlington) (Lab)
I think the hon. Lady’s dad was right. We debated this issue in this Chamber 10 years ago, when there were more wholesale distributors. We are now down to two, but they have cut their nose off to spite their face; they have forced the costs on to retailers, and now corner shops are going out of business and circulation is declining. Short-term profit-making is significantly undermining the entire industry in the long term.
Priti Patel
I completely agree with the hon. Gentleman. The shops that we are talking about are the lifeblood of many communities. I have seen, over 35 years, a massive change; there is no doubt that we have seen many big changes. Increases in carriage charges are relevant not only to Great Britain but to Northern Ireland. Newsagents there have faced huge increases in the past 12 months alone. I would be interested to hear from the Minister about where there is scope to review the changes to carriage charges.
Jim Shannon
On that subject, the costs in Northern Ireland are exorbitant—I believe they are greater than here on the UK mainland. Independent newsagents have informed me and other elected representatives that it is getting to the point where they will have to decide whether to carry newspapers at all, because the margins are so tight. At the end of the day, it does not add up. Let us be honest: small shops are selling perhaps 100 newspapers, or 200 at the very most—there is no profit in that.
Priti Patel
The hon. Gentleman makes a really interesting point. I make it my business to visit many independent shops, particularly newsagents, and I always ask about the number of newspapers they are selling. The figures are staggering, because they are declining at such a rate. I remember, when I was a child, the bundles of our Sunday newspapers being enormous—we were dealing with hundreds and hundreds of newspapers on a weekend alone. That landscape really has changed completely.
Along with all the additional costs, independent retailers are frustrated by the appalling service that they receive from wholesalers. Of course, that has a knock-on effect on their business and the quality of service that they can offer to their customers. When their newspapers are delivered late, people stop going to those shops. I hear many reports from newsagents about late paper deliveries. Other newsagents find that the wholesaler has given them the wrong order or the wrong number of newspapers, or that the supplier has gone to the supermarket down the road, and not to their shop.
Although there is a process by which a newsagent can complain, it does not change a thing. It just adds to the stress and frustration of running a business. Newsagents feel increasingly powerless to get redress for their situation. With the latest promotion by one supermarket chain—it gives away free newspapers to customers spending more than £5—the squeeze is being felt even more. Will the Minister update us on what action the Government are taking to investigate possible abuses in the supply chain and to ensure that independent retailers are not unfairly disadvantaged?
In conclusion, independent newsagents, some of which are dependent for 75% of their business on newspaper sales, deserve to be treated with fairness—the debate is all about fairness in the supply chain. Unless changes are made to boost competition and give them a fair deal, including involvement in negotiations and decision making, more and more newsagents will struggle to compete. We will see more withdraw from the marketplace because they will not be able to survive, and our communities will be much poorer as a result. One newsagent put it clearly:
“the big point that needs to be made is that falling sales, shrinking margins and disproportionately high carriage charges will before long drive many smaller news retailers out of the market, to the detriment of consumers—notably the elderly who may not be tech-savvy and digitally aware of the alternatives to print editions.”
I hope that the Minister will give due consideration to the points I have made, and will help us to see what can be done to support the future of independent newsagents. These are small and micro-businesses, and the Government are doing great things for similarly sized companies. The issue should be reviewed by the Competition and Markets Authority, and the Government should work with newsagents to assess the reforms that are long overdue. I look forward to hearing what the Minister has to say.
Jim Dobbin (in the Chair)
I call the Minister to speak in her second debate this afternoon.
Oral Answers to Questions
Priti Patel Excerpts(11 years, 7 months ago)
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Danny Alexander
I do not recognise those figures. Back in the spending round in June, I set a cap on the costs of HS2 at £42.6 billion. We intend that it will be delivered substantially under that budget. The question for Labour Members is whether they support this project or not. Frankly, given the enormous benefits it will provide for cities across the north, Labour Members should support the scheme, not constantly undermine it.
Priti Patel (Witham) (Con)
I welcome the Chancellor’s decision to establish the great eastern main line taskforce, so can my right hon. Friend give an assurance that in this era of record capital spending on infrastructure he will look favourably on investing in measures that the taskforce proposes?
Danny Alexander
I certainly will. I know that my hon. Friend has campaigned assiduously for this, as has my hon. Friend the Member for Norwich South (Simon Wright) and many other Members in that part of the country, and the ambition that the taskforce has set out is a good one. It is very much in keeping with the direction of travel in our national infrastructure plan, so I look forward with interest to the proposals from the taskforce and to taking them forward in due course.
Oral Answers to Questions
Priti Patel Excerpts(12 years ago)
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Mr George Osborne
Figures from the Office for National Statistics show that the deficit fell from 7.8% to 7.7%, so it came down.
Priti Patel (Witham) (Con)
T7. In the light of the Chancellor’s assiduous commitment to deficit reduction, what assessment has my right hon. Friend made of the Opposition’s spending plans, which appear to consist of more borrowing, more debt and a return to Labour’s failed policy of boom and bust?
Oral Answers to Questions
Priti Patel Excerpts(12 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government are committed to simplifying the tax system. Since 2010, we have set up the Office of Tax Simplification and have acted on a range of its recommendations. The Government are improving tax administration for small businesses and, from April 2013, will introduce a new cash basis for calculating tax, benefiting up to 3 million small self-employed businesses.
Priti Patel
Does my hon. Friend agree that the most effective way to simplify the tax system and to maximise tax yield is to reduce the burden of taxes through lower taxes?
Mr Gauke
It would be right to say that the Government have taken 2.2 million people out of income tax—that is certainly a simplification for them. We have reduced the small profits rate of corporation tax and reduced the main rate of corporation tax. We have taken steps, wherever possible, to reduce taxes.