Draft Taxation of Regulatory Capital Securities (Amendment) regulations 2015

Rob Marris Excerpts

Monday 14th December 2015 General Committees

[Rob Marris (Wolverhampton South West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr McCabe, as a fellow MP for the west midlands, which is becoming the powerhouse of the country.

I do not fully understand the detail of the regulations, although I think that I understand the overarching architecture and the need for financial stability. The regulations were foreshadowed in what are now section 31 of, and schedule 7 to, the Finance (No. 2) Act 2015. I have been somewhat hampered in my investigations, as has my admirable researcher, Imogen Watson, because the tax information and impact note was not available today. I trust that one has been published, but I could not get a copy of it. However, I did manage to get a copy of the 2013 version, which I think mirrors this, because similar regulations were introduced in 2013 to deal with RCSs for banks and building societies, as the Minister has said, and now they cover insurers.

We are again, as we were in the Finance Bill, in the territory of the loan relationships regime—that somewhat awkward wording is the technical term—with these regulations, which follow the European Union’s solvency II directive, which will take effect on 1 January. Because that directive is being transposed via the Finance (No. 2) Act 2015 and these regulations, a new type of regulatory capital for insurers will be introduced for the purposes of complying with the equivalent of the Basel III requirements: 6% for tier 1 and 2% for tier 2.

As I understand it, these regulatory capital securities are hybrids; they have features of debt and equity. However, under the regulations the Government propose to tax them as debt and not as capital, despite their name. The 2013 tax information and impact note for the banks version of the regulations suggested that, were an entity to get into financial difficulty, the potential tax burdens would be lower. Although the regulations are welcome in terms of financial stability, my colleagues and I would like reassurance that they are not feather-bedding the insurance industry by allowing it to get away with paying lower tax than it should be paying by issuing capital instruments that are taxed as debt and not as capital.

[Mr Gauke]

As I set out in my opening remarks, the regulations provide necessary amendments to the existing Taxation of Regulatory Capital Securities Regulations 2013. They are required to clarify the tax treatment of securities issued by insurers to meet new regulatory requirements designed to improve financial stability. The taxation of regulatory capital instruments should be absolutely clear and support regulatory principles of financial stability, but the existing regulations, which provide clarity to the banks, are silent on the tax treatment of similar securities for insurers.

The securities included in these regulations are akin to loans made to the business rather than capital investment. They are therefore more like debt than equity and the tax treatment should reflect that.

[Rob Marris]

I have two points. First, clarity is always welcome in tax legislation, even though one may be clarifying a policy with which one does not agree, hence our discussion. Secondly, I remain bemused, because the Minister said that regulatory capital securities are akin to loans and more like debt, but they seem to me to be the cost of doing business. Many businesses require capital to do business, and those in the insurance and banking sectors, in particular, and for obvious reasons, have greater capital requirements, which are statutory. Why are they being treated that way?

[Mr Gauke]

The hon. Gentleman is aware that there are capital requirements on financial institutions because they need instruments that will absorb losses in the event of financial stress. The position for insurers is decided at EU level, as I said in my earlier remarks. In circumstances of financial stress, the debt can convert to equity. It is not simply a matter of it being a cost of doing business that many businesses would experience; it is part of a regulatory regime to ensure that insurers are well funded in circumstances of financial stress so that that does not cause wider difficulties in the financial system.

The hon. Gentleman expressed a concern—I do not know whether it was probing or likely to drive him to oppose the motion—that the regulations could be seen as being soft on insurance companies. I reassure him that they are about providing clarity on the tax treatment of securities that have debt-like qualities and are required to be held for the stability of insurers. The original regulations approved by the House in 2013 are designed to support the EU regulatory frameworks for financial institutions by taxing returns as interest and ensuring that a tax charge is not triggered in the event that coupon payments are altered or suspended as a result of the issuer falling into financial stress.

I hope that those points are helpful and that the regulations will be supported by all members of the Committee.

Question put and agreed to.

Oral Answers to Questions

Rob Marris Excerpts

Tuesday 1st December 2015 Commons Chamber

[Mr Osborne]

I am glad that my hon. Friend has read the document. Part of what we are doing is making sure that mortgage fees are more transparent. Alongside that, we are ensuring that utility bills are more competitive for families and cutting the electricity tariffs that we talked about earlier. We are also making sure that people can get a better deal from their water company. This is all part of driving down costs for families and helping the working people of Britain.

[Rob Marris (Wolverhampton South West) (Lab)]

What will really support people with home ownership is massively increasing the supply of new homes—not, as the autumn statement does, simply subsidising people to bid up the prices of existing homes. After five and a half years in office, it is time that the Chancellor took some responsibility. He has a woeful record on house building, exacerbating the market failure that has led to restricted supply and consequently high prices. When will the Government increase supply very markedly by starting a real programme of mass house building—of homes for rent as well as to buy?

[Mr Osborne]

Over the course of this decade we will have built more social homes than in the entire period when the Labour party was in office. Affordable housing should also be housing that people can afford to buy, as well as rent, and we are doubling the housing budget and undertaking the biggest house building programme since the 1970s. It is a shame that the hon. Gentleman was not with me in Wolverhampton yesterday seeing the new jobs being created at the Jaguar Land Rover engine plant as we make sure that we build homes for the people working at that plant.

Draft Double Taxation Relief and International Tax Enforcement (Guernsey) Order 2015 Draft Double Taxation Relief and International Tax Enforcement (Jersey) Order 2015 Draft Double Taxation Relief and International Tax Enforcement (Canada) Order 2015 Draft Double Taxation Relief and International Tax Enforcement (Kosovo) Order 2015

Rob Marris Excerpts

Thursday 26th November 2015 General Committees

[Rob Marris (Wolverhampton South West) (Lab)]

It is a great pleasure to serve with you as the Chair, Mr Davies. I hope this is the first such occasion of many. For the purpose of this Committee, perhaps we might call the Opposition side of the room the Wolverhampton side, as my hon. Friend the Member for Wolverhampton North East is here, as well as my hon. Friend the Member for Middlesbrough.

Will the Minister say a little more about the continental shelf with regard to Jersey and Guernsey, which he mentioned in his remarks? The definition of the United Kingdom of Great Britain and Northern Ireland in both statutory instruments is updated from, I suppose, the 1952 agreement. He referred to an example of an oil and gas company operating in the North sea that, for tax purposes, might be resident in Guernsey or Jersey. Will he talk the Committee through that a little more? I had thought—it appears wrongly—that the updating was to do with the territorial waters around Jersey and Guernsey or around the UK.

As for Canada, I do not need to declare an interest, although some members of the Committee will know that I was a resident of Canada for tax purposes for many years. I note from paragraph 10.3 of the explanatory memorandum—we have a memorandum to the Canadian agreement rather than explanatory notes, because it is essentially a diplomatic exchange of letters incorporated into a statutory instrument—that:

“An Impact Assessment has not been prepared for this instrument as it gives effect to a previously announced policy to enact a double taxation convention.”

That wording is also used in the explanatory memorandum to the Kosovo order. I hope the Minister will explain that a little further, because, on the face of it, it appears to be a body swerve around providing an impact assessment, with Her Majesty’s Government simply saying, “Oh, we announced this policy before, so we don’t have to do an impact assessment now.” it is quite possible that I have misunderstood that, but it does seem somewhat strange, so I would be grateful for his elucidation.

Will the Minister explain why paragraph 14 of the schedule to the Canadian agreement provides for what in Canada is called pendulum arbitration? Although those exact words are not used, for Members who do not know, in pendulum arbitration the mediator or arbitrator decides in favour of one submission or the other. There is therefore no meeting in the middle or compromise: it is all or nothing.

The Minister is expert in many things, so I stand to be corrected by him, but as far as I can tell the dispute settlement provisions in chapter 33 of the comprehensive economic and trade agreement between the European Union and Canada, which was unveiled in September 2014 but has not yet been signed, and to which the UK would, through the EU, be a party—for hon. Members who do not know, this is the Canadian-EU equivalent of the Transatlantic Trade and Investment Partnership between the United States and the European Union—provide for an arbitration panel that does not use pendulum arbitration. I appreciate that CETA is a trade agreement and the orders before us today relate to double taxation relief agreements, but the trade agreement has the mediation procedure, the arbitration panel and so on. Can the Minister explain the thinking of Her Majesty’s Government on the difference between the two? It could of course be that the European Union, which is party to CETA, simply chooses a different route that the Government are not so keen on.

I have already asked why there was no impact assessment in relation to Kosovo, and I hope the Minister can explain that. On article 29 and the agreement with Kosovo, as I understand it either party can terminate the agreement with six months’ notice, but only after five years. It is like a five-year lease where thereafter either party can break the lease with six months’ notice. Will the Minister say whether five years is common in these sorts of agreements? From previous debates on statutory instruments with this very helpful Minister, I believe that the Kosovo agreement is broadly similar to the OECD model. It may be that a five-year period is common in the OECD model, or it may be that it is common for the Government to fill in the blank in the OECD model by having five years if the other contracting state agrees.

[Mr Gauke]

I thank the hon. Member for Wolverhampton South West for his questions. First, he asked whether I could say a little more about the definitions for Guernsey and Jersey. As with all tax treaties, the DTAs with Guernsey and Jersey provide that the UK can tax an enterprise resident in the other territory only if it is operating in the UK through a permanent establishment. The DTAs with Guernsey and Jersey did not include the continental shelf within the definition of the UK. That means that, under the terms of the DTA, the UK currently has no taxing rights over Guernsey and Jersey enterprises operating on the UK continental shelf, whether they have a permanent establishment there or not. The changes made by these orders ensure that companies cannot exploit that feature of the treaties to circumvent the effects of the bareboat chartering rules introduced in the Finance Act 2014. That was an attempt to deal with a particular area of the tax system that was being exploited. The orders are an attempt to be consistent with those rules and to avoid any loophole being exploited.

On the issue of the impact assessment, let me make this point. DTAs remove barriers to cross-border trade and investment, so the effects of a specific agreement will depend on the extent to which activities change as a result. Concluding a DTA is therefore not a zero-sum game—I have made that point before, and the hon. Gentleman accepts it—because possible negative short-term revenue effects are offset in the longer term by increased activity. Given the long timescales, complex and shifting interactions with domestic law, large and unpredictable behavioural effects and the lack of a sensible comparator, it is not possible to produce meaningful estimates of the revenue effects of double taxation agreements, and successive Governments have never attempted it.

I hope there remains a consensus in the House that trade is a good thing. We wish to remove trade barriers and to encourage trade between countries, as that is a source of wealth creation that benefits all participants. DTAs help to remove a potential barrier to trade, which is the risk of double taxation. That is why successive Governments have been supportive of steps, such as those we are taking today, that ensure a large DTA network.

The hon. Gentleman mentioned pendulum arbitration, which is sometimes called “final offer” arbitration or baseball arbitration, particularly in the US, where it is used for setting players’ salaries in cases of dispute. This method or arbitration involves a panel having to choose the position taken by one of the tax authorities. The alternative is a reasoned decision, by which the panel can come up with its own preferred solution. The UK has traditionally followed the latter method—reasoned decisions—as set out by the OECD, but “final offer” arbitration, which Canada favours, has several attractions. Not only is it likely to be quicker, simpler and cheaper than reasoned decision arbitration, but it encourages the two sides to take reasonable positions in their discussions, which decreases the likelihood that arbitration will be required. There is no particular significance in one trade agreement taking one approach and a different agreement taking another. These are matters for negotiation and a case can be made for either approach when arbitration is undertaken.

[Rob Marris]

Let me put this to the Minister on a pendulum arbitration basis: will he say which he thinks is preferable? All or nothing—give me a reasoned answer.

[Mr Gauke]

I think probably the best answer is that it depends. It would be fair to say that I am unsure whether it is possible to split the difference between the two, so one either has to use pendulum arbitration or a reasoned decision. That is the default option, but some of our treaties do have “final offer” arbitration and we are prepared to consider it.

As for the five-year provision on termination, a five-year minimum life for a tax treaty given by the termination clause is a provision common to most of our treaties. It ensures that the products of often complex and lengthy negotiations can stand for a minimum period of time. Those who have served in these Committees before will be aware that we often replace very old treaties. These are not things that can be knocked out in a fortnight, so some kind of minimum period of time is helpful.

I hope that those comments and clarification are helpful and that the Committee will support the orders before us.

Question put and agreed to.

Draft Double Taxation RElief and international Tax Enforcement (Jersey) Order 2015

Resolved,

That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Jersey) Order 2015.— (Mr Gauke.)

Draft Double Taxation RElief and international Tax Enforcement (CAnada) Order 2015

Resolved,

That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Canada) Order 2015.—(Mr Gauke.)

Draft Double Taxation RElief and international Tax Enforcement (Kosovo) Order 2015

Resolved,

That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Kosovo) Order 2015.—(Mr Gauke.)

HMRC Office Closures

Rob Marris Excerpts

Tuesday 24th November 2015 Commons Chamber

[Rob Marris (Wolverhampton South West) (Lab)]

I salute the Minister’s efforts to make a good fist of things, and the efforts of this Government, and the previous coalition Government, to clamp down on tax avoidance. More should be done, but they took good steps. We need a well-functioning HMRC because we need taxes to pay for the goodies that we and our constituents want. We need a well-functioning HMRC to assist business and to maintain the confidence of taxpayers. We need a well-functioning HMRC for effective anti-money laundering steps, to clamp down on tax evasion, and to protect revenue.

It is desirable for HMRC to act efficiently, and technology is changing what it and other large organisations do. For example, 80% of self-assessment returns are now done online, and that availability of information from HMRC—including specialist knowledge—is greatly aided by the internet. There is a difficult balancing act for HMRC between providing information and guidance to businesses and individual taxpayers, and not providing tax advice, and sometimes that is difficult for staff. Like other Members, I pay tribute to the overwhelmingly hard-working and skilful staff at HMRC around the United Kingdom. It is no criticism of them that we still have a considerable tax gap. Having more staff is likely to help close that gap.

The National Audit Office estimates an 18:1 return on employing extra staff—that means that £1 more in salary means £18 more in revenue. There is, of course, a law of diminishing returns in that scenario. HMRC itself, through its chief executive, estimates a return of 11:1.

[Mark Tami (Alyn and Deeside) (Lab)]

My hon. Friend mentions valued staff. Does he agree that, as the Minister said, thousands of valued and very experienced staff will not be able to relocate and will therefore be lost to the Revenue?

[Rob Marris]

I agree, and I will come on to that in a moment. We have to look at the debate, and at what is happening with HMRC, in the context of the economy overall and the Government’s finances. In the past five years, national debt has gone up 55%. Instead of it taking five years to sort out the deficit, the Government’s own estimates say it will take 10 years. GDP per capita has stalled. The balance of payments deficit is at the highest it has been in peacetime, at 5% of GDP. Productivity has stalled. Home ownership is markedly down. It is now said that we have the fourth lowest rate of home ownership of any European Union member state. Correspondingly, net household debt is rising alarmingly. That is the economic context; we need to protect revenue.

There are problems, of course: the tax gap, to which I referred; an insufficient number of collectors; and an insufficient number of staff dealing with evasion and artificial avoidance measures. There is the difficulty—created, I have to say, by the previous Labour Government —of the disastrous contract with Mapeley, which is based, I think, in the Bahamas. The ownership of the leases of HMRC offices was transferred to Mapeley in 2001. As far as I am aware, the proposals we heard on 12 November do not address that issue in any way, except to say that we are dumping all the offices. Nothing has been said about what will happen to the leases and so on. Perhaps the Minister, in closing, could tell us a bit more about the intersection between the plans and the wretched leases with the wretched Mapeley.

Staff numbers are markedly down in recent years. According to the Office for National Statistics, between 2007 and 2010, under the previous Labour Government, the number of HMRC staff went down 9%. Under the five years of the coalition Government it went down a further 24.4%—a cumulative drop of 31.4%.

[Alison Thewliss (Glasgow Central) (SNP)]

The hon. Gentleman may have been contacted by local trade union representatives in his area. The Public and Commercial Services Union came to see me. It understands that HMRC is currently spending in the region of £70 million on overtime. Does he agree that that indicates that HMRC needs more, and not fewer, staff?

[Rob Marris]

I agree. There are problems with the workforce, to which several hon. Members have referred. The chief executive of HMRC wrote to me on 12 November, saying:

“We expect that 90% of our current workforce will be able to either work in a regional centre or see out their career in an HMRC office.”

That says to me that the chief executive of HMRC reckons 10% will either not transfer or will be made redundant. That is worrying.

Reference has been made this afternoon to response times. In the first two quarters of 2015, 12 million calls went unanswered—half of all calls to HMRC. Only 39% of calls were answered within five minutes. In the third quarter of this year, after an infusion of staff, the rate of answered calls went up to 76%. That is a great improvement—except that the target is 80%, and in 2014-15 the answer rate was 72.5%. I have to say to the Government, and particularly to the Chancellor of the Exchequer, who has a family business, that this is the worst of statism. If HMRC were a business, it would have gone bust with that appalling customer service, but because none of us has any choice but to pay taxes, it remains in business. It should not do so. It certainly needs transforming, but cutting the number of staff does not seem to me, or my party, the way to do it.

On anti-money laundering, London is thankfully a major world financial centre, but we have a huge problem with the regime set up to deal with money laundering and to counteract it. The average HMRC fine in 2014-15 for money laundering was £1,134, according to Transparency International, which I thank. That seems a remarkably low figure, although it is not helped by the fact that 14 different regulators are involved in accountancy. If that is not sorted out, HMRC staff cannot do their job properly in relation to anti-money laundering, let alone tax evasion.

As has been said, since June 2014, HMRC has not had any face-to-face walk-in centres. There are a few teams of mobile advisers—a man in a white van dashing around Northern Ireland or northern Scotland, up to Caithness or wherever—for those who desperately need a face-to-face interview, but that is a very unsatisfactory state of affairs, and not one that encourages the taxpayer to feel confident that they are getting the service they should from HMRC. It is extremely worrying that the number of offices is being reduced from 170 to 13.

[Paul Blomfield (Sheffield Central) (Lab)]

My hon. Friend will recognise that this is a massive programme involving 56,000 staff, the closure of 140 offices and relocation to 20 sites that have yet to be acquired, all within five years. In the 2015 civil service staff survey, almost 80% of HMRC staff thought their management were unable to manage change effectively. Does he agree that there are huge risks in the programme, and that it is potentially a disaster waiting to happen?

[Rob Marris]

There are huge risks, partly to do with insufficient funding, insufficient staffing and an insufficient number of offices. I regret to say that in my constituency, Crown house—the second and final HMRC office in my constituency—will close. The only silver lining for people in my region is that the specialist office in Telford, Shropshire, down the road, will continue to be HMRC’s IT headquarters.

As a result of these relocations and closures, it is likely that HMRC will haemorrhage staff. It employs a lot of specialist staff. Unlike in many other Departments, an awful lot of staff in the Treasury are very mobile, as there is a ready outlet to the private sector, which often pays more.

[Chris Stephens]

Does the hon. Gentleman agree that HMRC will have to publish an impact assessment in respect of the social and economic changes and staff with a disability or caring responsibilities?

[Rob Marris]

I do agree, but I will say more on that in a couple of minutes. Views vary on whether the closure programme is wise. Last week, the Financial Secretary to the Treasury and I again met Stephen Herring from the Institute of Directors, who broadly—this is paraphrasing his position—welcomes this kind of move because he thinks that technology has transformed, and should further transform, how HMRC operates, and that it should be driven by business efficiencies and so on. The Association of Chartered Certified Accountants is broadly in favour of this sort of change, too. Its head of taxation said it was

“reasonable to restructure the offices and we support there being higher skills”.

Correspondingly, the Public and Commercial Services Union, which does a great job representing its members in HMRC and across Government, has grave misgivings —to say the least—about the programme, as does the Association of Revenue and Customs, which is part of the FDA union and represents senior people in HMRC.

[Judith Cummins (Bradford South) (Lab)]

Does my hon. Friend feel that adequate and meaningful consultation, with full regard to the facts, was undertaken on this decision?

[Rob Marris]

I do not, but again, I will say more in a couple of minutes.

At one end of the spectrum, the IOD says it broadly supports this type of change, and at the other end, the unions say they have grave misgivings. The president of the Chartered Institute of Taxation—hardly known as a supporter of the Labour party, the SNP or any political party—has said:

“Taxpayers and tax professionals alike will be anxious that a public body that is struggling to meet its public-facing service targets has announced that it is about to lose many staff and close its local offices.”

The Institute of Chartered Accountants in England and Wales—I do not know what the position is in Scotland—says that the timing of the changes

“could stretch HMRC to breaking point”,

and that the restructuring of HMRC could be disruptive and could distract its leadership.

[Susan Elan Jones (Clwyd South) (Lab)]

Does my hon. Friend agree that the distribution of well-qualified civil servants around the country will alter fundamentally, and that it is simply not on to say to well-qualified civil servants in north Wales that they have to go to Liverpool, no tax offices being left in north Wales at all?

[Rob Marris]

I tend to agree with my hon. Friend. I cannot make any commitment from the Front Bench that a Labour Government would keep every tax office open, but to keep this issue in proportion, in 2010 we had about 393 tax offices collecting an average of well over £1 billion each. Any business that was bringing in that amount of money would be kept open.

[David Mowat]

I am listening carefully to the hon. Gentleman’s argument. Perhaps he could tell us, on behalf of the Opposition, how many tax offices he thinks we should have. Do we go back to 310, or whatever the number was, or is 170 about right, or should it be even lower? What is the hon. Gentleman’s number?

[Rob Marris]

This is a classic case of this Government putting the cart before the horse. They announce the closure programme before they have got adequate information. We need a public consultation on this kind of change; we need a business consultation; and we need parliamentary scrutiny, by the Public Accounts Committee and the Treasury Select Committee, for example. Only when that process has been gone through, could I—or, I would venture, other hon. Members—form a view about how many HMRC offices should be distributed around the United Kingdom, given the changes brought about by technology and the desire for efficiency, and, balanced against that, the desire for a customer-facing service.

[Imran Hussain (Bradford East) (Lab)]

My hon. Friend is generous in giving way. I accept that there has not been meaningful consultation and not enough scrutiny of the financial case. Does he agree with me, following what was said by the hon. Member for Shipley (Philip Davies), that where an alternative financial, economic and social case can be put, it should be reconsidered?

[Rob Marris]

rose—

[Mr Speaker]

Order. Before the hon. Gentleman, who is an experienced and versatile Member, replies, I remind colleagues that the convention—a fairly long-standing one—is that the Opposition Front-Bench spokesperson for the party whose Opposition day it is not would ordinarily make a Front-Bench speech of about 10 minutes. The hon. Gentleman is a little over that. I am conscious that 18 Members wish to speak, and this is not a conventional Opposition day but the SNP’s Opposition day, so a brief contribution from the Labour spokesman is absolutely right and proper, but we need to get on to Back-Bench debate pretty sharpish.

[Rob Marris]

I am grateful, Mr Speaker. In fact, I had finished my speech but for the intervention. I shall respond to it briefly now. I absolutely agree with my hon. Friend the Member for Bradford East (Imran Hussain), and I think the Minister was very open in responding to the hon. Member for Shipley (Philip Davies). That is precisely the sort of investigation we needed before these sweeping changes were announced. There should be consultation, investigation and much more publicly available evidence.

[Mr Speaker]

The hon. Gentleman confirms his reputation as a gentleman. It is very much appreciated that he took what I said literally. We shall have to start with a five-minute limit. I call Mr Philip Davies.

Draft Small and Medium Sized Business (Credit Information) Regulations 2015 Draft Small and Medium Sized Business (Finance Platforms) Regulations 2015

Rob Marris Excerpts

Thursday 5th November 2015 General Committees

[Rob Marris (Wolverhampton South West) (Lab)]

It is a pleasure to serve under your chairmanship for the first time, Mr Nuttall. I thank the Minister for his usual lucid explanation. I shall, as I often do, depart from convention and ask him some questions first, so that he has time to ponder the answers, before I make some general remarks about the two sets of regulations.

The Breedon taskforce of 2012 stated that the Government have a role to play in encouraging lending

“through the disclosure of data that sits within public bodies.”

First, I wonder what the Government have done in the intervening three years to play their role. Secondly, the taskforce also recommended that the British Bankers Association, with which I met recently, should

“explore greater credit data sharing”.

Will the Minister give some indication of what greater data sharing banks have done with non-bank providers? I appreciate that he is not answerable for the banks. They are independent institutions—apart from two of them, to which we will return—but he may have some information that would assist the Committee.

Thirdly, what have the Government done to encourage RBS and Lloyds bank, which are basically owned by taxpayers, although in declining proportions, to lend, particularly to SMEs?

Fourthly, the explanatory notes to the credit information regulations indicate:

“The provision of credit data on companies is not a regulated activity”.

If that continues to be the case after these technical regulations are passed—I think it will, although I appreciate there will be designation—will the Minister explain why?

Fifthly, it is up to CRAs, as I understand it, to apply to be designated under the credit information regulations. Will the Minister explain to the Committee the Government’s thinking on why that will not be compulsory? There may be a good reason, but it is not clear to me.

Sixthly, the explanatory notes to the credit information regulations state at paragraph 10.3, under the details about the impact of the regulations:

“The Bank of England will benefit from receiving an increased depth of credit information as a result of the regulations.”

Some of us feel that we suffer from information overload, particularly when we look at our emails, so will the Minister tell us why the Bank of England needs that even greater depth of credit information?

My seventh question—I assure you, Mr Nuttall, that I have only nine, or perhaps 10—is about paragraph 7.1 of the explanatory notes to the finance platforms regulations, which states:

“A proportion of the SMEs that are rejected by the largest UK lenders are viable businesses, and are rejected simply because they do not meet the risk profiles of the largest banks.”

Will the Minister give some indication of what proportion of SMEs are rejected? Those explanatory notes also say, in paragraph 9.2, that an implementation guide will produced. Will he indicate the date by which that guide will be produced and published, as it will help lenders?

I have two more questions. I note—the Minister may correct me on this—that Handelsbanken is not on the list of designated banks that he read out. If he is at liberty to do so—I appreciate that he may not be—will he indicate why that sound, upcoming bank, which does a lot of lending to SMEs, is not designated? Of course, perhaps I misheard the list.

My final question is somewhat rhetorical. Regulation 2 of the draft finance platform regulations is about interpretation. I may have missed this, but as far as I can see the regulations do not define what a finance platform is. Will the Minister tell us where that definition is? It seems to me an awkward phrase. It is one that seems to be generally accepted, as it is being used in the draft regulations but is not defined in them, but for those of us who are not finance anoraks it is a new expression.

The Opposition are likely to support the draft regulations. I hope we will get some information from the Minister pursuant to my questions, but the regulations are helpful and, as he adverted to in his remarks, have multiple safeguards. Labour supports business, and SMEs in particular. They are the drivers of growth, especially, very often, in employment. For that reason, for example, I met the Institute of Directors this week to get its take on various things, not specifically on these regulations.

Both sets of regulations will help SMEs access borrowing so that they can invest and expand, which we all want. According to the helpful table produced by the Library, however, in recent months the problem has not been lending to SMEs, which has grown in the past three months, but a shrink in lending to large businesses—for these purposes, SMEs are businesses with a turnover of less than £25 million a year and large businesses those with a yearly turnover of more than that. Large business lending is suffering, whereas SME lending is growing. It is not growing as fast as many of us would wish, and we hope the regulations will encourage more growth, but that is the recent trend.

In its response to the consultation on the SIs, Experian supported them—unsurprisingly, given its commercial imperative—and said they would be a “market-changing enhancement” and would result in “significant improvements in finance providers’ ability to assess risk, consider affordability and lend responsibly.” Experian also said that the assistance the regulations would give to SMEs would

“support market growth and stability”.

Will the Minister explain the apparently hands-off approach to Lloyds bank and RBS? The Government have had significant leverage over those banks through United Kingdom Financial Investments, but have not used it on lending to SMEs or certain of the unusual practices of those banks, so will he say why? Had that leverage been used in the past five and a half years, it would have helped the SME sector, which we are keen to support, as are the Government. Indeed, that leverage could have been used more than it was under Mr Brown and the last Labour Government.

As I have said, the Opposition are likely to support the regulations, but a little more clarity from the Minister would help to inform the debate.

--- Later in debate ---

[Mr Gauke]

I thank the right hon. Member for Enfield North and the hon. Member for Wolverhampton South West not only for their questions but for their support for the draft regulations. We have had a productive discussion, and I hope to respond to their questions. Before I do, let me reiterate that, together, the draft regulations will generate a significant change in competition in the market for SME finance ,which could improve not only the amount of finance available to SMEs but the cost and quality of services offered to small firms.

As I set out in my opening remarks, there is a large body of evidence that there are market failures in the SME lending market. The draft regulations will help to remove the barriers to entry identified in that evidence; increase competition in a highly concentrated market that is dominated by the four largest banks; and remove information market failures that prevent SMEs from seeking finance and prevent alternative finance providers and challenger banks from knowing of each other’s existence.

I stress, particularly in the context of the first point raised by the right hon. Member for Enfield North, that the regulations are about providing opportunities to businesses seeking finance, so that they do not just go to one place, get rejected and give up, but choose to go to other providers. That is an important option available to businesses. Of course, it is ultimately for businesses to determine how much they wish to borrow, but the way of protecting businesses from over-borrowing is not to have a position whereby they cannot access finance at all. That is an important point.

The shake-up of the lending market for SMEs will improve the ability of our small and medium-sized businesses, which are so vital to UK growth, jobs and opportunity, to access the finance they need to grow, expand and continue to have a significant positive impact on the UK and its economy.

In light of some of the questions that have been asked, it might be helpful if I provide a little more information. The hon. Member for Wolverhampton South West raised a point about overall credit conditions. On an annual basis, the growth rate of net lending to SMEs continues to ease. It was 0.6% in June 2015, up from minus 2.8% in June 2014. Across all SMEs, 67% of applications in the 18 months to quarter 1 of 2015 were successful. That is up from 59% in the same period to quarter 1 of 2014. For small businesses, successful credit applications fell slightly in quarter 2, but the trend over the past few years has been improving.

It also might be helpful for the Committee to have a bit of information about SME finance application rejection rates. The rate for new money is 35%. For new money for first-time borrowers, it is 45%. For renewals it is 2%, with an overall rejection rate of 24%. To break it down in another way, loans are at 33% and overdrafts are at 18%. It would be difficult to provide information on rejections on the basis of the loan application not meeting the bank’s risk criteria. I can understand why the hon. Member for Wolverhampton South West asked that question—I am not sure I can provide that information, but I hope what I have said is helpful to him.

On the provision of data through public bodies, I would argue that the UK is a best practice example throughout Europe of data sharing by CRAs. A register remains an option that can be considered if the current system and the regulations are not effective, but our proposals are part of our desire to ensure that data are properly shared.

A question was asked about the purpose of the Bank of England accessing the data, and whether that would constitute overload. That access should give the Bank of England a much fuller understanding of the regional and sectoral allocation of credit, of the type of small and medium-sized businesses that are getting credit and of the risk profiles of different small and medium-sized businesses. We believe that that access will be helpful to the Bank of England.

On encouraging RBS and Lloyds bank to lend to SMEs, the regulations do just that. They apply to both RBS and Lloyds, which will share the data through the CRAs. That is how the UK system works.

[Rob Marris]

Will the Minister say what the Government and their predecessors have been doing for the past five and a half years, before these regulations to get RBS and Lloyds to lend to SMEs?

[Mr Gauke]

The best way of ensuring that our banking sector, including RBS and Lloyds, is in a position to lend to SMEs has been to look at the overall situation of the economy and to ensure, for example, that we have had lower interest rates than we might otherwise have had, and that we have not had to increase interest rates prematurely. That has been part of ensuring that we have good lending conditions. We have had policies such as funding for lending, which was designed to help banks across the piece. We must remember that although RBS and Lloyds are publicly owned, operational decisions are not made by Ministers. That has never been the Government’s approach.

The challenge for banks in recent years has been that we needed them to ensure that their balance sheets were restored and that, to some extent, they moved on from a period of risky lending to ensure that they were more secure, while at the same time ensuring that a flow of finance was available to SMEs in particular. The Government have sought to maintain that balance throughout the past five and a half years but, in truth, there was never an option of simply telling RBS and Lloyds to lend merrily without due regard to the risks. I am not saying that the hon. Member for Wolverhampton South West is suggesting that.

[Rob Marris]

The Minister is right, that is not what I am suggesting. He mentions interest rates, which the Bank of England sets. It sets the tone for the whole market and does so independently. We have had low interest rates since before the coalition Government came in, and the Bank of England’s interest rate has not changed.

On operational stuff, the Minister must distinguish between strategy and tactics. It is right for a major shareholder, such as the Government in those banks, to set the tone not of individual lending decisions—yea or nay—to an SME, but of the risk matrix used by the institution. On a strategic level, the Government could influence that as a shareholder, but they have apparently abdicated responsibility and failed so to do, thereby hurting SMEs.

Common System of VAT (Vouchers)

Rob Marris Excerpts

Monday 2nd November 2015 General Committees

[The Chair]

With the Minister having explained the matter so clearly, we have an hour for questions. I remind Members that they should be brief and, crucially, include a question. At my discretion, they can ask supplementaries, if they wish.

[Rob Marris (Wolverhampton South West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Gray. In past years, you and I have spent many years working constructively, I think, together in this room.

The area is particularly complex. I hope the Minister will confirm whether I have understood the proposal correctly—it is quite possible that I have not—but when we boil it down, it is that single-purpose vouchers would be subject to VAT when they are issued and multi-purpose vouchers would be subject to VAT when they are redeemed. That is what I pick up from the papers. Incidentally, the papers are one of the few places outside church where one hears the word “redeemer” used.

[Mr Gauke]

Yes. The hon. Gentleman has essentially summarised the matter very effectively, so I am happy to confirm that.

[Rob Marris]

I understand that the Commission considered four options. One, perhaps unusually for the Commission, was to do nothing. One was what it is pleased to call—I confess that this is a new one on me—the “soft law” approach, which most people would call guidelines. Another was to legislate, and the fourth option was a ban. Which of those four—to do nothing, the guidelines, to legislate or a ban—was the preferred option of Her Majesty’s Government?

[Mr Gauke]

The first of the UK Government’s objectives was to address a level of inconsistency and confusion that exists under the status quo, so we were not in favour of the do-nothing approach. Equally, we see vouchers as having a role to play. Within the UK, we have one of the bigger markets, as one might expect—although it is perhaps bigger than one would expect based on the proportion of our economy. We would not therefore favour banning vouchers; that would be a very draconian approach.

To get the type of clarity that we think we need, we concluded that guidelines would not be sufficiently strong. Therefore, of the four options, we favour legislating and hope that we can reach agreement among all member states so that the Commission’s proposals can go forward in a legislative form, although, as I said, we have highlighted a couple of areas where we think they can be improved on.

--- Later in debate ---

[The Chair]

Mr Marris, do you have a further question?

[Rob Marris]

I have two further questions, if I may. As the Minister is aware, article 30a—I think it is a draft—defines “voucher”. It defines “single-purpose vouchers”, “multi-purpose vouchers” and “discount vouchers”. Are Her Majesty’s Government satisfied with those definitions?

[Mr Gauke]

In essence, we are satisfied with the definitions set out in article 30a. Ultimately, this is not about discount vouchers such as money-off coupons, so I hope that those are not at the heart of the proposals before us. We are satisfied with the definitions.

[Rob Marris]

As the Minister said, this is a matter of considerable complexity. Were the proposals to go ahead—with, as the Minister mentioned, some fine tuning—would complexity for business increase or decrease? Which is the likely assessment?

[Mr Gauke]

It would be fair to say that there is some complexity in the current system because of inconsistency. The hon. Gentleman asks whether the draft directive will disrupt businesses because they will have to deal with a new regime. I would argue that it will not cause major disruption to businesses here. The most likely to be affected would be large, high street chains. High street shops that issue vouchers through distributors to other businesses would be most affected. Those that issue vouchers direct to their customers would be least affected.

Whether a business will be affected significantly will depend on the balance between the two types of operation within the same business. Some high street retailers issue both types of voucher. Some distributors might want to change their business model from buying or selling vouchers to arranging the sale of vouchers. That is quite possible.

Officials have had wide-ranging discussions with UK businesses on the changes. Although there may be some changes and disruption, the general feedback that officials have received from businesses is that they would welcome certainty on the matter in the future. Again, I make the point that, for the first time, VAT law would have a specific provision for VAT treatment of vouchers, which would mean that EU member states would have the same rules, making cross-border trading using vouchers far easier. Businesses would no longer have to set up different systems for different countries.

To give a topical example, the provisions would also make the collection of VAT on mobile phone roaming charges far simpler. The new rules would allow the UK to make changes to our law to make it easier to collect the right amount of tax on what the customer pays when using a voucher. Yes, there will be some disruption to and impact on high street retailers but, on balance, if an agreement can be reached, this is a favourable change.

Tax Credits

Rob Marris Excerpts

Thursday 29th October 2015 Commons Chamber

[Scott Mann]

Absolutely correct. It is ultimately our responsibility to look at all the financial provision that we make as a Government and ensure that that money is distributed to people who are trying to do the right thing.

[Rob Marris (Wolverhampton South West) (Lab)]

Will the hon. Gentleman give way?

[Scott Mann]

One more time.

[Rob Marris]

I am grateful. Let us be clear. The hon. Gentleman attacks Labour for having a policy that we do not have. That is unacceptable. Our policy is not to continue with £30 billion of tax credits for ever more. As my hon. Friend the Member for Lewisham, Deptford (Vicky Foxcroft) said, we want to change that. It is a question of phasing and whether we cut incomes from tax credits before wages go up. That is the Government’s policy and that is what we oppose.

[Scott Mann]

Forgive me—I thought the two Opposition-day debates were aimed at abolishing the proposal completely.

This Government know they need to make tough decisions, but they need to make them with fairness and compassion. The measures that we are putting in place to manage the transition are to be welcomed, and the national living wage, the free child care arrangements, and the social rent reductions of 1% a year that are being implemented for those who live in social rented homes will help some people to manage the transition. However, it is evident that some people will fall between the cracks. People with older children aged between eight and 14, for example, who do not necessarily have child care provision that they can allocate, single parents who currently earn more than the living wage, and those in private accommodation who do not benefit from the rent reductions will be affected.

There are many better economists in the House than I. It is not a subject that I profess to be particularly good at, but I would like to offer some financial solutions. How about going after VW, which seems to owe a huge amount of money to our Government from the vehicle excise duty that it has not paid? We should use some of that money. How about abolishing national insurance for anyone who is under the income tax threshold? We could also give tax breaks to grandparents or provide a transferable allowance for that 30 hours of free childcare. Many working families use grandparents to provide care. I see no reason why we could not change the childcare arrangements to take account of that. We could consolidate tax credits for new claimants, which would reduce the welfare bill.

I welcome the opportunity to get on the record in this debate, and I welcome this moment of pause that has been presented to us by the other place. I am here today to stand up for the thousands of working people in North Cornwall and I urge the Chancellor to assist them in their efforts to work and to earn.

National Insurance Contributions (Rate Ceilings) Bill (Second sitting)

Rob Marris Excerpts

Tuesday 27th October 2015 Public Bill Committees

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a very great pleasure to serve under your chairmanship, Mr Bailey. I welcome all hon. Members to their places. Progress was brisk and efficient at our evidence session this morning and if it were up to me, that momentum would continue, but of course it is not up to me.

Clause 1 specifies that the class 1 contributions payable by employees at the main primary percentage shall not exceed 12%. Class 1 contributions are payable at 12% on earnings between £155 and £815 a week. For earnings above £815 a week, the additional primary percentage shall not exceed 2%. The provisions in clause 1 will apply to any tax year that begins after the day on which the Bill comes into force before the next election.

[Rob Marris (Wolverhampton South West) (Lab)]

It is a pleasure to serve under your chairmanship again, Mr Bailey. You commented on the weather. Of course, you and I know that that the weather in West Bromwich and in Wolverhampton is always lovely, especially at this time of year.

Through clause 1 the Government are limiting their room for manoeuvre. I am aware, as are all hon. Members, that there was a commitment by the Conservative party in the general election not to freeze but to put a cap on national insurance contributions at both rates. That was also the policy of my party, so I think that we will have a fairly brisk afternoon.

However, the Bill, as primary legislation, puts restrictions on Government, which, as I suggested to the Minister in the evidence session this morning, creates a measure of uncertainty. When some things are restricted, like this and other tax measures, such as the 1,300 tax reliefs, of which the Audit Commission says that only about 200 are tracked properly, it can create uncertainly by a kind of ripple effect—if one is being certain in one sphere but saying nothing about this other sphere, whatever it may be in terms of the tax regime, perhaps one has plans to change that.

Do the Government currently have any plans to change, in any way, the regime for national insurance contributions, whether in terms of the upper earnings limit or the percentage rates at which it is levied? There are different rates, of course, depending on the different classes, including class 3A, which runs out at the end of next March. Are there any proposed changes to the regime?

[Mr Gauke]

I am grateful for the hon. Gentleman’s comments and I am encouraged, as I am sure you are, Mr Bailey, by the consensus, at least on being brisk this afternoon.

As for future plans for national insurance contributions, of course, all taxes—and for these purposes, we count national insurance contributions as a tax—are kept under review. Any announcements are made by the Chancellor in Budgets and autumn statements. I have nothing to add to what has previously been said in Budgets and autumn statements. As was touched upon in our evidence session this morning, the Office of Tax Simplification is looking at national insurance contributions and their alignment with income tax. It has examined that in the past, and it and the Government believe that it would be helpful to draw out some of the related issues in quite a complex matter.

[Rob Marris]

I appreciate that consultation is ongoing and evidence is still being gathered, but is the Government’s preferred option at this point to have such an alignment?

[Mr Gauke]

The Government’s position is very much an open one. There is no preferred position as such. Clearly, the matter has been raised on numerous occasions over many years. I suspect that all parties have looked at this issue to a greater or lesser extent. The Office of Tax Simplification has made recommendations in the past on this matter, and we think that it would be beneficial for it to continue to look at the subject with a view to developing potential ideas and then, after that further investigation, for us to have an informed debate on whether to take the proposals forward. The Government do not have a predetermined position, but we think that it would be beneficial to the general debate for the OTS, which is a respected organisation that has already done good work in this area, to take the matter forward.

In short, we do not have further proposals other than those that we previously set out—not least, of course, the cap. The hon. Gentleman is right to say that the Bill provides for a cap, not a freeze.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Secondary percentage

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

Oral Answers to Questions

Rob Marris Excerpts

Tuesday 27th October 2015 Commons Chamber

[Mr Osborne]

My hon. Friend is absolutely right. As a result of the combination of him being a very effective local MP and the fact that we have a Conservative Prime Minister and a Conservative Government, we are delivering more jobs into my hon. Friend’s part of Lancashire. Indeed, I remember on visits with him seeing the work being done on the link road to the port, which for decades—including when there were Labour MPs representing the constituency—was campaigned for, but never delivered. Now it is actually being built and delivered as a result of my hon. Friend’s local efforts.

[Rob Marris (Wolverhampton South West) (Lab)]

Contrary to what the Chancellor believes, my party does want to deal with the deficit; we just think he is going about it the wrong way. We are worried about certain employment trends. The Solar Trade Association, for example, has warned that up to 27,000 jobs could be at risk due the Government’s announcement of the withdrawal of support for solar energy schemes. What steps do the Government propose to take to avoid large-scale redundancies and this employment trend in the solar industry and what support will the Government offer to the industry?

[Mr Osborne]

Of course we are in a constant dialogue with the solar industry, and solar energy use has dramatically increased over the last five years, but so have the costs of that technology. Quite reasonably, then, we have reduced the subsidy going to solar. There has to be consistency in what Labour Members argue for. On the one hand, they say, quite reasonably, “Please deal with the energy prices that are affecting the steel industry”, but then their spokesman gets up and says, “Please add more cost on to energy bills in order to subsidise renewables.” The trouble is we cannot have both.

Finance Bill

Rob Marris Excerpts

Monday 26th October 2015 Commons Chamber

Brought up, and read the First time.

[Rob Marris (Wolverhampton South West) (Lab)]

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

[Madam Deputy Speaker (Mrs Eleanor Laing)]

With this it will be convenient to discuss the following:

Amendment 89, page 4, line 20, leave out clause 9.

New clause 1—VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service—

‘(1) The Treasury shall, within six months of the passing of this Act, publish and lay before the House of Commons a report on the VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service.

(2) The report must include (but need not be limited to) an analysis of the impact on the financial position of Police Scotland and by the Scottish Fire and Rescue Service arising from their VAT treatment and an estimate of the change to their financial position were they eligible for a refund of VAT under section 33 of the VAT Act 1994.’

New clause 2—VAT on sanitary protection products—

‘(1) The Treasury must, within 12 months of the passing of this Act, lay before the House of Commons a report setting out the impact of exempting women’s sanitary protection products from value added tax.

(2) The report must include (but need not be limited to)—

(a) an estimate of the impact on VAT revenue of exempting women’s sanitary protection products; and

(b) an assessment of the impact on the purchase of women’s sanitary protection products of exempting them from VAT, with particular reference to purchasing by women aged under 25.’

New clause 7—VAT on sanitary protection products (No. 2)—

‘(1) Within three months of the passing of this Act, the Chancellor of the Exchequer shall lay before both Houses of Parliament a statement on his strategy to negotiate with the European Union institutions an exemption from value added tax for women’s sanitary protection products.

(2) A Minister of the Crown must lay before Parliament a report on progress at achieving an exemption from value added tax for women’s sanitary protection products within European Union law by 1 April 2016.’

New clause 10—Enforcement by deduction from accounts: review—

‘(1) The Chancellor of the Exchequer must, within two years of the passing of this Act, undertake a review of the impact of Section 47 of, and Schedule 8 to, this Act.

(2) The review must address, but need not be confined to:

(a) the number of cases in which the Direct Recovery of Debts has been used;

(b) the effectiveness of the safeguards; and

(c) the total amount recovered.

(3) The review must include a benefit-cost analysis, including speed of recovery.

(4) The Chancellor of the Exchequer must as soon as practicable lay a report of the review before both Houses of Parliament.’

New clause 11—Impact of removal of CCL exemption for electricity from renewable sources—

‘(1) The Chancellor of the Exchequer shall within six months of the passing of this Act undertake a review of the impact of the removal of the CCL exemption for electricity from renewable sources and lay the report of the review before both Houses of Parliament.

(2) The review must address, but need not be confined to:

(a) the impact on consumers and on fuel poverty;

(b) the impact on energy-intensive industries and on employment in those industries;

(c) the level of carbon leakage in the energy-intensive industry;

(d) the effect on investment in new renewable power generation and on investment in new nuclear power generation;

(e) any effective subsidy provided to, or additional profits accruing to, operators of existing and new nuclear power stations;

(f) what additional measures will be enacted to mitigate the impact on energy-intensive industries of the removal of the section; and

(g) the impact on business investment.’

Amendment 90, page 62, line 2, leave out clause 45.

[Rob Marris]

It is pleasure, almost 15 years after I was first elected to this place, finally to make it to the Dispatch Box—albeit, for the moment, the Opposition Dispatch Box, but never fear, comrades, we are working on it!

New clause 9 and amendment 89 deal with inheritance tax. They are twins, and I shall address my remarks to those two provisions before going on to address the many somewhat disparate amendments and new clauses in this large group.

New clause 9 is designed to make the Chancellor of the Exchequer undertake, within one year of achieving a Budget surplus, a comprehensive review of the inheritance tax regime. I have to say that it is a somewhat optimistic new clause, given that five years ago, the same Chancellor of the Exchequer was forecasting a surplus any day now. We have now arrived at any day now, and he is forecasting a surplus for the financial year 2019-20. We will see whether that happens. If the Government accept the spirit of the new clause, as I hope they will, they could have a review of the inheritance tax regime now, rather than wait at least five years until the Chancellor achieves a surplus—if he ever does.

Amendment 89 would remove the inheritance tax provisions in the Bill. Inheritance tax is a somewhat unusual tax. It is the least painful tax any of us will ever face, “because you only pay it when you’re dead.” We need to bear that in mind when we talk about this tax. Most estates on which inheritance tax is levied cross the threshold, whatever it might be, either because people have inherited wealth themselves or because they have had a windfall gain from the increase in the price of the house in which they live. There are, of course, those who start out in disadvantaged backgrounds and make a lot of money in their lifetimes; inheritance tax would then be payable on their estates. But one can say with confidence that that does not apply to a great number. At the moment, very few estates pay inheritance tax.

[Mrs Anne Main (St Albans) (Con)]

I am sure the hon. Gentleman will want to qualify what he said by region. In some areas, such as my St Albans constituency, a large number of people pay inheritance tax. In fact, London is particularly disproportionately affected. He needs to qualify his remarks in that respect.

[Rob Marris]

The hon. Lady is right, of course, that it varies around the country and that there is a much greater tendency to pay it in London and the south-east—the area she represents—but I stand by my remarks that for many of those people, the liability of their estate to inheritance tax is occasioned by a windfall increase in the value of the home in which they live. Some people improve the houses in which they live, but in the last 20 or 30 years, the great driver for estates falling into inheritance tax liability has been a secular rise in house prices. That is not as a result of people doing up their houses, although of course that happens. And good luck to them. Many hon. Members, including myself—and my wife—own the house in which they live. I, along with others, will have a windfall—and it is a windfall—from the secular increase in house prices.

[Alex Cunningham (Stockton North) (Lab)]

I congratulate my hon. Friend on his promotion to the Front Bench. Does he agree that these Tory proposals amount to a north-south divide policy? While hundreds of thousands of people in the south benefit from the increase in property values, carry this great wealth and want to leave it to their families, families in the north do not have the same advantage—or very few of them do. Is it not another north-south divide policy?

[Rob Marris]

I certainly agree with my hon. Friend. We already have enough geographic and regional divisions in this country, and I do not want their number to increase. Of course, when we legislate we must be aware of the different impacts that the measures that we introduce may have in the country of the United Kingdom, both its regions and its nations. However, there are many places in the United Kingdom where few people will pay inheritance tax, and in the country as a whole, without the changes that would be brought about by the Bill—if the House were to pass them, which I hope it will not—it is forecast that 63,000 estates would have a tax liability by 2020-21. According to the House of Commons, the proposed changes would reduce that to about 37,000, the same level as now.

In absolute terms, 37,000 represents quite a lot of estates, but in proportionate terms it is a very small amount—well below 10%—and in the case of many of those estates, the tax is payable because of a windfall. For many people—again, not all of them—that windfall was brought about when they bought their houses with mortgage interest relief at source: MIRAS. Those people acquired an asset which upon their death, after a secular rise in house prices, led to inheritance tax being a liability, and they acquired that asset with the help of the state; in other words, the help of the taxpayer. Now some of them cavil at inheritance tax, which I think is very unfortunate.

The effects of the proposed inheritance tax changes could be wider than the Government may have thought. When we stop and think about it, we must conclude that it is not surprising that many of those who would benefit because their parents have an estate worth more than £650,000 are themselves well-to-do. There is nothing wrong with being well-to-do; all Members of Parliament are well-to-do, and I have been in the fortunate position of being well-to-do for most of my life. However, when a Government propose a tax regime in which they will favour those who are already favoured, we really have to question their priorities.

The Government’s proposals will make inheritance tax more complicated, and it is already fairly complicated. Successive Governments—the Labour Government under whom I was a Back-Bench MP, the Conservative party which was then in opposition, the coalition Government whom we have just seen and, I venture, the current Government, and certainly the current Opposition—have wanted a simpler tax regime, but that is extremely difficult. We have a Finance Bill, the second of this year, which is about a centimetre thick and runs to more than 200 pages. I am not a tax expert or an accountant, but as far as I can tell, it is owing to the cunning of professional accountants who, quite legitimately, provide tax avoidance advice that we have to keep introducing loophole-closing measures that complicate the tax system. The Government are making the inheritance tax regime more complex in a way that is unfair because it favours those who are already well-to-do. The combination of forgone tax revenue and additional complexities does not amount to a desirable policy.

--- Later in debate ---

[Alex Cunningham]

Does my hon. Friend agree that the policy will further escalate the inequality between the people in our communities and throughout the nation? There are people who may work very hard but must depend on the likes of tax credits in order to exist, and have no opportunity to build any wealth whatsoever; and there are people who can inherit a property that may be worth £2 million, and then simply exploit that wealth in order to become even wealthier, to the detriment of everyone else in the country.

[Rob Marris]

My hon. Friend is right. In the constituency that I have the honour to represent, and in which I have lived for almost all my life, I could find no house worth more than £2 million when I looked in April this year. Indeed, none of them was near that value. There is barely a house that is worth over £1 million in the whole constituency, and of the three Wolverhampton constituencies, the one that I represent is undoubtedly the most affluent. The same will apply across swathes of constituencies: there will no houses worth that amount. The idea that an affordable house, as has now been defined by the Prime Minister, is £450,000 in London or £250,000 outside London is frankly a joke in constituencies like mine. For £250,000 it is possible to get a fantastic house in Wolverhampton. We welcome people in Wolverhampton—come to Wolverhampton: decent schools, good cheap housing, no traffic jams to speak of; fantastic, so come—but £450,000 will buy almost any house in Wolverhampton South West.

[Christian Matheson (City of Chester) (Lab)]

Does my hon. Friend share my concern that the Government have been unable to drive forward the economy on any basis of productivity and are therefore relying on property price speculation, and that this would be a way to drive up property prices to cover up their failings in other parts of the economy?

[Rob Marris]

I agree with my hon. Friend, and if I can catch the Speaker’s eye on Third Reading I will be making points along those lines. The true state of our economy, driven by a housing bubble and household debt, is actually quite frightening. In terms of inheritance tax, new clause 9 simply asks the Government, after the Budget is in surplus, to look at the inheritance tax regime. Of course the Government could do it now, and I would welcome a commitment from the Minister, if he is able to make one, that the Government will do so, because the tax breaks in this Finance Bill will be about £940 million a year by 2020-21. That does not seem a wise use of revenue when it is coming in from some of the most well-to-do families—a small number of estates, as I said. It is not a good idea to be in one sense spending money in that way. I appreciate that it is not actually spending money because, technically, it is a case of simply not collecting it in taxes, but in everyday terms it is spending money, because so much of what we do in this House is to do with priorities, and so much of the prioritisation we decide on is predicated on how much money there is with which to do those things.

[Christian Matheson]

Does my hon. Friend agree that we cannot afford this measure in this Parliament, not least because it will cost, as the Budget Red Book tells us, about £2.5 billion in this Parliament?

[Rob Marris]

It is difficult to tell what we can afford as the Conservative party, in government since 2010, has consistently failed to meet financial targets for dealing with the deficit. The Opposition agree with the Government that the deficit needs to be tackled, but we disagree on the way in which it should be done. Forgoing £2.5 billion —if that is the exact figure, and I think my hon. Friend is probably right that it is of that order of magnitude—in a very regressive way is something that Labour Members would not countenance, but we need to look at the whole regime, hence the wording of new clause 9.

There will also be complications with the wording of the inheritance tax provisions. There is a feeling of unfairness among some as to the definitions—which I will not go through tonight—of a linear descendent. Many, if not all, Members will know from our own lives, advice surgeries and places we live that the definition of a family and those who are regarded by someone as being a member of their family are somewhat fluid in our society, and have become much more fluid in the last 50 years in terms of social recognition. For example, the Labour Government introduced civil partnership legislation, which I welcome—it is possible this Parliament will extend that to opposite-sex couples—and, commendably, in the last Parliament gay marriage was put on to the statute book. Those are concrete examples, dealt with by this House, of the fluidity and changing nature of family structures, but the provisions in this Bill rather lock in whether somebody is, or is not, regarded as a member of a family. Inheritance tax in this Bill is a bit of a problem, therefore, and I urge the Government to accept new clause 9 and amendment 89, which in a sense is a stand part motion.

I will now turn to value added tax, enforcement by deduction from accounts and the climate change levy—unless any Member wishes a quick run-around again on inheritance tax, but I suspect not.

[Alex Cunningham]

On the question of equality in our nation, we have seen the Government deliver huge tax cuts for their friends in the City and the hedge fund managers. We would rather that money went to the needy in our society, so that they do not have to rely on loans from the loan sharks that our friends on the Government Benches make some money from as well. Does my hon. Friend agree that the Government’s proposals will do us out of the chance of recovering some of this wealth when these people die?

[Rob Marris]

I agree that it sometimes seems that the policies of this Government are not only to shrink the state, but to give to those who already have and take away from those who have not, for example in terms of tax credits. I will not be drawn by my hon. Friend on the subject of tax credits, but it does seem a rum state of affairs. It is the sort of thing that drew people like me to join the Labour party, to fight for that kind of equality and to fight against regressive taxation.

[Jonathan Edwards]

The hon. Gentleman has been inviting interventions on this issue. On new clause 9, why has he tied in the holy grail of a Budget surplus with asking for a review? As he has said, the Government proposals in the Finance Bill will make it more difficult to reach a Budget surplus.

[Rob Marris]

That is in the interests of having some clarity as to when this should kick-in. The Government could do it now if they chose. They do not need primary legislation to do it, but the proposal for a review of inheritance tax is in the context of the Government now being five years behind the original projections made by the current Chancellor as to when we will be in surplus. We are giving the Chancellor a lot of latitude now. We hoped that there would not be draconian cuts, which are now being planned by the Government, to public spending and that we could, through adopting a growth strategy, get to a Budget surplus with no deficit earlier than 2019-20, but I fear we will not do so. So a review now is fine, but Labour Members are reasonable people and we are giving the Government lots of latitude. They ought to think again on this regressive tax, as on others.

[Mark Durkan (Foyle) (SDLP)]

On the issue of inheritance tax, does my hon. Friend recognise that it is odd that the Government in this Budget and in the language of the legislation have moved to do away with any concept of child poverty? They are moving on work and family tax credits with very little discussion on their part about the impact on children. When they talk about inheritance tax changes, they use the word “children” a lot, but of course the children they are talking about there are people who are well-off.

[Rob Marris]

My hon. Friend is quite right. If I may be so bold, in this context, the word “child” means people of around my age and that of my hon. Friend rather than minors. I wish the Government had paid a little more attention to minors and to child poverty. One of the achievements of the Labour Government was that child poverty fell significantly while we were in office. I regret, however, that that Labour Government, under Gordon Brown, cut inheritance tax by introducing the doubler—the Minister referred to this in Committee—whereby the £325,000 personal allowance could be utilised by the surviving spouse if the first spouse to die had not used that allowance. I expressed my regret about that at the time. At that point, when the threshold was around £300,000, only 6% of estates in England paid inheritance tax. Then the threshold was raised to £325,000, and then the doubling up came in. That was regressive and regrettable, but so be it: that is the regime that the coalition Government inherited.

[Sammy Wilson]

I accept the point that the hon. Gentleman is making, but will he explain why he believes that we are more likely to have a successful review of inheritance tax when we move into a surplus, when the pressure on public finance is less, than when we are in deficit? Does he not think that the best time for a review of inheritance tax—that is, the giving up of tax revenue—is when we have a deficit problem?

[Rob Marris]

No; I disagree with the hon. Gentleman. We want to achieve economic stability—something that has been sadly lacking over the past seven years and that will probably continue to elude us for the rest of this Parliament—at which point we can pause for breath. This is part of the Labour Opposition’s overall approach: we believe that our Government finances need something called zero-based budgeting. This will be a major undertaking, in which we start by looking at what society needs rather than looking at what it has been spending its money on and simply topping that up, salami-slicing it away or whatever. We need to step back from that, but we can do so only at a time when we have a budget surplus and are not running a current—I stress the word “current”—deficit. That is the right time to look at this question.

I want briefly to talk about new clause 1, which has been tabled by Scottish National party Members, and to which I imagine they will speak later. It seems slightly odd that they wish to evade the consequences of devolution. As I understand it, a decision was taken in Scotland to amalgamate eight police forces and, I think, a similar number of fire and rescue services to create a single police force and a single fire and rescue service. My understanding is that, because they were new organisations, they became liable to VAT, which their predecessor organisations had not been. I quite understand the sentiment behind new clause 1, but it seems a little strange that, having used the powers of devolution which were quite properly passed by this House, the people of Scotland—refracted through their Parliament—should wish to change the rules on VAT. That said, we are heading towards a position of full fiscal devolution—[Hon. Members: “Are we?”] Well, I am not saying that we have got there yet, but we are heading towards it. That is the trajectory, and we would therefore not oppose new clause 1.

[George Kerevan]

I congratulate the hon. Gentleman on reaching the Front Bench after far too long a wait. I can tell him that we would be more than happy to take over the setting of VAT in Scotland. That could remove the anomaly.

[Rob Marris]

I thank the hon. Gentleman for that. We shall shortly be having a discussion about the mechanics of setting VAT in the United Kingdom.

New clause 7 has been tabled by my hon. Friend the Member for Dewsbury (Paula Sherriff). New clause 2, tabled by the Scottish National party, is similar but not as good. It was also tabled in Committee. The greater virtue of my hon. Friend’s new clause—in contradistinction to new clause 2—is that she has carefully listened to what the Government said in Committee about the road map, as we say these days, to achieving this worthy goal. She has worded her new clause in the light of the remarks made by the Minister in Committee, and I commend her for that. Her proposal has gained considerable momentum on both sides of the House, for obvious reasons. Of course, those of us on the Labour Front Bench will support it and I urge hon. Members on both sides of the House to do the same. I will not say a great deal more about the new clause—

[Sir William Cash (Stone) (Con)]

Some of us do have a certain amount to say about it. These are weasel words. The Opposition know perfectly well that they are not going for a full relief, or any relief, and are instead going for a pathetic little report, because of sections 2 and 3 of the European Communities Act 1972. The hon. Gentleman knows it, and we know it. These are weasel words, and the proposal would make no real change.

[Rob Marris]

I wish no disrespect to the hon. Gentleman, but I am not going to get into a big debate about this subject. It is not a great idea for a man to stand at the Dispatch Box and get into such a debate. On the broader issue of the European Union, it might surprise him to learn that more than half the population of the EU is female. It might also surprise him to contemplate the fact that this measure could be on the shopping list that our Prime Minister takes to Brussels, and that it could gain considerable support—from the Chancellor of Germany, Mrs Merkel, for example.

[Wes Streeting (Ilford North) (Lab)]

If the new clause were passed this evening, as it should be, it would be interesting if it became the only demand that we were aware of in the negotiations. Would not that be a welcome development? The Prime Minister and the Chancellor have not said anything about their negotiating position yet.

[Rob Marris]

It would be a welcome development. As I have indicated—

[Sir William Cash]

Will the hon. Gentleman give way?

[Rob Marris]

No, I will not give way—

[Sir William Cash]

Why not?

[Rob Marris]

I will not give way for two reasons. First, the hon. Gentleman can seek to catch the Deputy Speaker’s eye later. Secondly, as I have said, I do not propose to get drawn into a debate on this issue. I support my sisters in the Labour party and around the House, and they are more capable than I am of putting forward the reasons behind the measure being proposed by my hon. Friend the Member for Dewsbury. They are more than capable. They do not need me to do it, and I shall say no more than I have already done.

New clause 10 seeks to place a statutory requirement on the Government to produce a report, within two years of the passing of the legislation, on the effects of clause 47 and schedule 8. In lay terms, clause 47 and schedule 8 will—with safeguards—allow HMRC to nick money out of our bank accounts without a court order.

Of course, under these provisions HMRC would not, in any legal sense, be stealing money from a bank account. Were it to do so, that would be covered by section 1 of the Theft Act 1968—I am not a criminal lawyer, but that is my recollection of it. What HMRC would be doing is something that other people cannot do: it would, with safeguards, be removing money from a debtor’s bank account without a court order and without the agreement of that debtor. That is a very big step forward for our society to agree to, refracted through clause 47. In Committee, the Labour Members tried to persuade the Government not to press ahead with the clause, as did other organisations, but we failed on that. We are not trying that again tonight directly, but we are saying that we take cognisance of the safeguards the Government have introduced and beefed up as a result of representations, and that a report should be produced within two years to see how they are working.

Before I deal with the safeguards, I wish to remind the House of why clause 47, allowing HMRC to go into people’s bank accounts without a court order, has been introduced. One major driver is HMRC’s fears about revenue loss through non-compliance. In an earlier Budget speech, the Chancellor said:

“I am increasing the budget of Her Majesty’s Revenue and Customs to tackle non-compliance.”—[Official Report, 19 March 2014; Vol. 577, c. 785.]

That was welcome: there is too much non-compliance going on, some of it blatant, some of it immoral avoidance but not illegal evasion, such as large corporations squirreling away money in tax havens and in places such as Luxembourg; and there are people who owe money to HMRC but fail to pay, and so HMRC has to take steps to recover that money.

Another major reason given by HMRC, which might trouble the hon. Member for Stone (Sir William Cash), was as follows:

“The current processes for recovering debts…can be costly”.

That was said on page 2 of the consultation document, which contains an introduction by the Financial Secretary to the Treasury—the words I read out were not his but they were contained in a document whose preface he wrote. Paragraph 2.31 on page 9 goes on to say that

“a county court judgment…can be a slow and expensive process.”

In clause 47, the Government are therefore saying, “We find the court system a bit slow and a bit costly, so we are going to have our own system to take money out of people’s bank accounts, with safeguards.” That is echoed in clause 48.

Where someone wins at court, there is a calculation to be made as to how much they are owed on a debt. I believe the basis for calculating what is known as the judgment debt rate goes back to about 1837, but the Government are not having that either in clause 48. Under the interest rate provision in clause 48, and in clause 47 on HMRC taking money out of bank accounts without a court order, we have one rule for them and one rule for the rest of us. We have to ask ourselves: are they right about the court system? Is it a slow and expensive process? I have not practised law for almost 15 years, but I try to keep up with it and I think the process is getting slower and more “costly”. That is because it has been starved of money by this Government and their predecessor Conservative-led Government.

--- Later in debate ---

[Alex Cunningham]

I hope my hon. Friend will indulge me further on the question of equality. Not everybody can go into court or argue with HMRC, as they do not have the skills and understanding always to take on all these intricacies of debts, claims and this, that and the other. Where people do get to court, they find protection there for them, because they can argue their case in front of a judge and make various points, and the judge can actually aid them. These people cannot afford to have legal representation, because there is no legal aid any more, and so they are in a better position because the judge can actually help them a little.

[Rob Marris]

I agree with my hon. Friend on that. It is no coincidence that my hon. Friend the Member for Walthamstow (Stella Creasy) is in her place tonight, as she has done sterling work on trying to stand up for the financially disadvantaged. I thank her for her work on so-called “payday lenders”, because when I tried as a Back Bencher under the last Labour Government to amend a Finance Bill to give the Government the power—just the power—to cap payday loan rates, I could not get a Labour Government to go even that far. She has done magnificent work because, as my hon. Friend the Member for Stockton North (Alex Cunningham) said, this is to do with protecting the financially vulnerable. That is why it is a big step forward. I congratulate the Government on introducing the safeguard that an assessment must be made of the vulnerability or otherwise of the alleged debtor and that that assessment must be recorded in writing.

[Mr Steve Baker (Wycombe) (Con)]

I can scarcely believe my ears. I think that the hon. Gentleman is congratulating the hon. Member for Walthamstow (Stella Creasy) on helping a Conservative-led Government do more to protect the poorest in our society than a Labour Government would do. Have I heard him correctly?

[Rob Marris]

In that particular respect, the hon. Gentleman has heard me correctly. However, if he had heard my earlier remarks, he would also be aware of my great unease at many other policies put forward by the current Government as well as by the previous Conservative-led Government. But in the narrow respect to which he refers, he did understand me correctly.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

Does my hon. Friend agree that a Government who voted three times against a cap on the cost of credit should not be lecturing the Opposition on how to protect the vulnerable? Perhaps if they had listened earlier to the concerns expressed from the Labour Benches about people who are vulnerable and who have personal debt in this current economic climate, this country would have made much more progress.

[Rob Marris]

I agree that progress can be pitifully slow under Conservative-led Governments, and that sometimes those Governments are very slow learners. With regard to the work that my hon. Friend has done, which has an echo in the safeguards under clause 47, she has persuaded the Government to be less hard-nosed and to be more “listening” about financial vulnerability than they had previously been and much credit for that success must go to her for her work with charities and others.

New clause 10 seeks in a very reasonable and moderate way to have a review of the effects of clause 47. The review would cover the total amount recovered, and whether it was as expected. It would cover the number of cases dealt with: would it be 11,000, because at one point the Government thought that it might be 19,000? It might also provide some measure of the effectiveness of the new procedure. I say to the Minister that we on the Labour Benches do not like the procedure, because it smacks of hypocrisy—of the Government, not of him personally. It is a case of, “It’s one rule for them and another for us. The court system is not working, so we will do a workaround on that.”

I now wish to turn to new clause 11 on the climate change levy, and to amendment 90, which would delete clause 45 on the CCL. In a sense, the proposal is a double negative. If clause 45 were deleted, the exemption would be restored. Again, I urge the Government to look at both these measures, which retain, certainly for the moment, the exemption on the climate change levy and, as stated in new clause 11, look at the effect of the abolition of that exemption. As I understand it, there was no consultation to speak of before the measure was announced. In contradistinction, when a fundamental change to the tax regime of combined heat and power units was introduced, that industry got two years’ notice of exemptions. In this case, this year, there was 28 days’ notice, which is next to no notice at all, because these things have long lead times.

I accept the Government’s figure that a third of this exemption is claimed by overseas producers—if only that were not the case. When many, if not all, western countries address the issue of greenhouse gas emissions, which is the nub of what we are talking about, they tend to offshore the problem. Carbon dioxide intensive manufacturing, using lots of non-renewable fossil fuels, gets relocated by capitalists to places such as China and India, making it look as if the CO₂ emissions per capita in the United Kingdom are falling quite dramatically, but if the CO₂ emissions in the United Kingdom were to include those for which UK residents and consumers are responsible, we would see a rather different picture. Of course Labour Members are not happy about a third of this exemption money going overseas, but in one sense that is all part of offshoring. As far as one can see, successive Governments have been turning a blind eye to the offshoring of greenhouse gas emissions to China and India and so on, but when we are talking about measures to lessen that, no offshoring is to be allowed under this Government. They should think again.

I am not intimate with the industry—this is after all a finance debate and not an energy debate—but I accept that the cost of the CCL exemption in the five years of this Parliament could be in the order of £4 billion. We are talking about a lot of money. It is symptomatic of this Government being penny wise and pound foolish—if one can be penny wise with £4 billion—because they are cutting the exemption too soon, before the industry reaches self-sufficiency. If the industry were treated like the nuclear industry, we would have 100 years of subsidy before deciding whether the technology worked and it was self-sufficient. I am not suggesting that, but what we have is an industry in which the UK has been pretty successful. Indeed, it is a desirable industry. It is a renewables industry which, on all the evidence of which I am aware, is likely to grow in future years around the world, not shrink. We had some technological lead and a skilled UK workforce, but then the Government take us a step back with what they do at 28 days’ notice to the CCL exemption. I understand that prospective onshore wind projects are, almost as we speak, being abandoned, which is regrettable. That is not to say that every one of those projects should proceed, but it is regrettable if the whole industry is shrinking.

As I understand it, the impact assessment for the changes to the CCL exemption and the feed-in tariff is that there will be 1 million more tonnes of CO₂ produced in the UK each year, which seems to be going in the wrong direction. What other financial incentives are there to encourage UK non-domestic users—I am talking about business and the public sector, not households—to use renewables? Secondly, in what ways are the renewables obligation and contracts for difference more efficient and more effective?

[Alex Cunningham]

This whole issue cannot be divorced from carbon capture and storage and the need for the Government to confirm their support for the two projects in the competition—I think we are due a decision on that in the new year. After that, we need to encourage industry with industrial CCS, especially on Teesside where my constituency sits and where, nearby, we have just lost a large section of the British steel industry.

[Rob Marris]

It is a tragedy what is happening to steel production around the country, and energy prices are part of the mixture behind it. They are as high as they are partly because we have not got to grips with technology like carbon capture and storage, and that is shackling companies in our country.

[Sammy Wilson]

Does the hon. Gentleman not see the contradiction in saying that the Government should be looking for ways to encourage high-intensity energy users to use more renewables, which are three times more expensive than producing electricity from gas, while lamenting the decline in energy-intensive industries in the UK?

[Rob Marris]

I disagree with the hon. Gentleman. The difficulty is that we have high energy prices because we have not invested in new technology to bring them down. For example, if we had cracked the holy grail of carbon capture and storage on a commercial basis—it is already cracked on a scientific basis—this country would be quids in, because of all the coal we have.

[Sir William Cash]

The short response to what the hon. Gentleman is saying is that massive subsidies deployed in other countries are being authorised by the European Commission, but we do not get them. As the hon. Member for East Antrim (Sammy Wilson) said just now, there is an increasing failure in renewable energy because it is too expensive and the subsidies are a complete disaster zone.

[Rob Marris]

The hon. Gentleman is right that the European energy market and the production of energy within the European Union are a bit of a mess. The United Kingdom is part of that mess because we are in the European Union, but it is a mess here anyway because we have not tackled energy security. Again, the problem started under the previous Labour Government and I berated them for it at the time. I was berating a Labour Government on energy security before I lost my seat in 2010, and on returning to this House five years later, so far as I can tell almost nothing has been done on that front apart from the poisonous deal—in many senses of the word—backed by China and EDF for new nuclear power stations in this country.

One can see a bit of a pattern with what is happening with the removal at 28 days’ notice of the climate change levy exemption for electricity from renewable sources used by non-domestics—non-doms, as it were. The Liberal Democrat policy was for the percentage of taxation to come from environmental taxes to keep rising year on year, and when the Liberal Democrats first came up with that crazy idea in about 2007 I pointed out that it was a bit self-defeating. That has been formally abandoned by this Government, which is not necessarily a mistake, but in the context the issue is what has or has not replaced that policy. Support for large onshore wind is being cut, and support for photovoltaics is being ended one year early. The Government’s policy is to lessen air passenger duty, and they aim to abolish it and to expand airports. That is not good news for the environment. The policy on zero-carbon homes for 2016 is being scrapped, not just diluted. There is a massive nuclear subsidy, which we heard about last week with the visit from China. What will our nuclear industry be built on? State support from China and from France.

[Alex Cunningham]

I should have declared that I was chair of the all-party group on carbon capture and storage, and I am also chair of the all-party group on energy intensive industries. My grandfather was a miner, so I am pleased to hear the word “coal” mentioned in the Chamber. We have huge resources, particularly under the North sea close to Teesside. Does my hon. Friend agree that we need to see investment now in coal gasification if we are going to provide the natural gas needed by companies such as GrowHow, the UK’s only remaining fertiliser producer?

[Rob Marris]

I did not know that my hon. Friend had gathered so many accolades, but I thank him for the work he has done on these energy matters, which is particularly important for his constituency interests and for our country. As I said, if we could get the holy grail of carbon capture and storage, our country would be quids in because of the amount of coal we have. I am sadly old enough to remember what was called town gas; I do not know whether my hon. Friend remembers it. Town gas was made from coal, produced and piped, before we discovered abundant natural gas in commercial quantities under the North sea. Yes, we could go back to that, but we need the technology.

Instead, we have a massive subsidy for nuclear energy. Leaving aside the safety issues for the moment, that subsidy is just twice the price per kilowatt hour guaranteed with indexation. Who is proposing it? A combination of France and China—China with, as I understand it, a reactor that has not yet been built anywhere in the world, and France, through EDF, with the wonderful record we see at Flamanville in Normandy, where the reactor is now three times behind schedule at twice the predicted cost and still has not opened. There is a similar story with a similar reactor, also being helped by France, in Finland.

The Government are contemplating huge subsidies in a panic over energy security, which of course will not guarantee energy security as it will take so long to build a new fleet, as they are pleased to call it, of nuclear power stations. Meanwhile, as my hon. Friend the Member for Stockton North points out, we have the craziness of all this abundant coal yet quite insufficient Government-funded CCS research and development through which we could proceed to the gasification of coal as North sea gas is running out.

[Alex Cunningham]

My hon. Friend may be surprised to learn that I spent 17 years of my career in the gas industry, so I know very well what town gas is. I was pleased to play a part in seeing natural gas come to large parts of the country. It does not matter whether subsidies are for wind, for panels on people’s roofs or whatever else; this is also about the creation of jobs. If we get carbon capture and storage right, a place like Teesside could start to replace the highly skilled jobs we have seen going down the pan over the past few weeks.

[Rob Marris]

I quite agree with my hon. Friend. We want those highly skilled jobs and we want the cheaper energy that one hopes we can get from that technology. We need the Government to kick-start research and development investment to develop that technology. However, I must caution my hon. Friend. There is only so far I can go in agreeing with him. Yes, we want those jobs, and quite a lot of them will be highly skilled, but it is a dead end for us as a country always to have subsidised jobs. That is the obvious thing to say, but it is a dead end. We need a plan to get from where we are, without energy security and without technological development, to the sunlit uplands where we have that technology and development, and where they are self-sufficient and commercially viable. That will need some support from Government, and the removal under clause 45 of the CCL exemption for electricity from renewable resources used by non-doms is a step in the wrong direction.

The Department of Energy and Climate Change Minister Lord Bourne of Aberystwyth wrote to me on 26 August saying that the Government had committed to delivering on the national infrastructure plan published in December 2014, which contained a number of priority investments. He went on to list some of them. One is rail electrification, and we know what has happened to that—it is on pause. Another is low-carbon energy such as nuclear; we know the cost of that, which is enormous. A third is low-carbon energy such as renewables, but clause 45 is going in the wrong direction on that. Lord Bourne also cites energy efficiency measures such as smart meters, but the evidence on them is mixed, to say the least. Before Conservative Members jump up, I know that it was a Labour Government who started down that route and it struck me as a very odd thing to do at the time.

The final point that Lord Bourne mentions, which will please my hon. Friend the Member for Stockton North, is carbon capture and storage. We need to go down that route, but as I say, we need a bit more help from Government, and the measure in clause 45 goes in the wrong direction—at least, we are uncertain what direction it is going in as there has not been a whole bunch of consultation on it as far as I can tell and I am not aware of an impact assessment.

On 8 July—Budget day, I believe—HMRC put out a consultation document on the subject, which said that one of the factors being examined was the “operational impact” in pounds. It stated:

“Changes in HMRC costs are estimated to be negligible and would fall as part of the existing operational cost of administering CCL. The government will consult Ofgem and NIAUR”—

that is, the utility regulator—

“over summer/autumn 2015 to establish the costs and other impacts on the regulators of removing the exemption.”

That is a consultation, as I understand it, only on the impacts on the regulators, but that might shed some light on the impact on the industry and on employment. I hope that when he responds to the debate, the Minister can address that point.

[Sir William Cash]

I do not think new clause 7 is strong enough. It just asks for progress. We are not doing enough. Let me explain why.

The hon. Member for Wolverhampton South West (Rob Marris), who presumably helped to draft this proposal, knows perfectly well that he is trying to find a way of satisfying those who would like to see a serious attempt made to reduce the VAT on these products. They are clearly necessary and the tax on them should be reduced in the way that has been proposed. Unfortunately, however, he also knows that because of sections 2 and 3 of the European Communities Act, it is impossible to do that without getting the agreement of all the other member states. There is a variation as between other member states and ourselves to the advantage of those states, the net result of which is that supporters of new clause 7 are not going to get that agreement and they know it.

I am completely on the side of those who want to see a total elimination of VAT on these products.

--- Later in debate ---

[Mr Gauke]

It is a pleasure to respond to the debate. Let me begin by congratulating the hon. Member for Wolverhampton South West (Rob Marris) on his debut at the Opposition Dispatch Box—and what a debut it was, consisting of a speech lasting more than an hour. In the time that is available to me, I shall attempt to respond to his speech and, indeed, the many other speeches that we have heard this evening, but let me first deal with the measures that we are discussing.

New clause 9 would require the Chancellor of the Exchequer to undertake a comprehensive review of the inheritance tax regime within one year of a current budget surplus. Amendment 89 would remove clause 9 from the Bill, as a result of which the additional transferable nil-rate band for all individuals who leave their home to direct descendants would not be introduced. Clause 9 represents a commitment that was made in the Conservative party manifesto—a promise made to the British people—and recognises that more hard-working families face an inheritance tax bill than has been the case at any time since the introduction of the system nearly 30 years ago.

Last year, 35,000 estates had an inheritance tax liability. It has been forecast that that figure will nearly double, rising to 63,000, in 2020-21. Thousands more worry about leaving their families with inheritance tax bills when they die. The additional transferable nil-rate band will simply return the number of estates with an inheritance tax liability to 37,000 in 2020-21, broadly the same level as in 2014-15. I remind the Opposition that that level is still higher than the level in any year between 1997 and 2010. Furthermore, we have ensured that the wealthiest will make a fair contribution to the public finances through inheritance tax. It will not be possible for the largest estates to benefit from the new allowance. It will be gradually withdrawn by £1 for every £2 that the estate is worth over £2 million.

Those who support amendment 89 demonstrate that they do not understand those who wish to save, pay their taxes, work hard to own their own homes, and pass them on to their children and grandchildren without facing a hefty tax bill. We believe that it is right for people to be able to pass on their homes to their descendants rather than the taxman.

The hon. Member for Wolverhampton South West expressed what sounded like concern about the fact that no properties in his constituency—or very few—would be affected. He also said that he opposed measures taken by the last Labour Government to introduce the transferable nil-rate band. I remind him that in the year in which those measures were introduced, 4.3% of estates paid inheritance tax. If we do not act, some 11% will pay it by 2019-20.

Given the comments that we have heard from the Opposition Front Bench, suggesting that they wish to raise more revenue from inheritance tax, I rather suspect that their desire for a review is connected with their perception of it as a potential cash cow. If I have misunderstood, I am happy to withdraw what I have said, but that seems to me to be the direction in which Opposition Members want to go.

[Rob Marris]

It is not a question of inheritance tax being a “cash cow”; it is a question of whether we maintain the regime that we have now, and the revenue that it brings in, or move to the much more generous regime that the Government wish to introduce.

[Mr Gauke]

The regime as it stands will affect more properties than it did under any of the Labour years. The reality is that if we do not take action, inheritance tax will hit more and more estates. It will be a tax that will be much more widespread than was previously the case. If that is the position the Labour party holds, that is the position, but I think we should be aware of what it is.

--- Later in debate ---

[Mr Gauke]

Yes, I will make those representations to the European Commission to allow member states to have the flexibility to do that, which I think is the key issue here.

On the climate change levy, let me briefly explain the policy rationale, as we have debated this on a number of occasions. The climate change levy renewables exemption was misaligned with today’s energy policy, providing indirect support to renewable generators when the Government are now investing in more effective policies that target them directly. Together, policies such as the renewables obligation and the feed-in tariff will provide more than £5 billion-worth of support to renewable electricity generation in 2015-16 alone. I do not believe the report on this clause is necessary. The Chancellor has already written to the Chairman of the Treasury Committee in August setting out the environmental analysis of the summer Budget in 2015.

On enforcement by deduction from accounts, we believe that we are introducing a necessary measure and that we have struck the balance correctly. I am grateful for the remarks made by the hon. Member for Wolverhampton South West in pointing out that the safeguards are strong. I know he still has concerns about the measure, but the safeguards are strong and we believe we are striking the right balance.

To conclude, I urge the House to reject new clauses 1, 2, 7—if it is pressed to a vote, and I hope it will not be—10 and 11, and amendment 90.

[Rob Marris]

On inheritance tax, the Government have not gone far enough. It is not a problem to us that 11% of estates might face it, as that is still a tiny minority, and if the Government were worried about preserving assets, they would have done a lot more about social care for the elderly and what that takes out of their houses. On new clause 1 and VAT on the Scottish police, that was indeed a decision of the Parliament in Scotland, but simply saying, “They were warned” is not good enough. I understand and support the SNP on new clause 1. On new clause 7, I salute the Minister for coming a very long way, but he has not come far enough. The same applies on new clause 11.

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

--- Later in debate ---

[Rob Marris]

This is a mixed Finance Bill. It contains some measures with which the Opposition agree: the changes to personal allowances; the welcome increase in the annual investment allowance; the surcharge on banks; the provisions to encourage more to be spent on research and development; the provisions on carried interest—though they do not go far enough; and the anti-avoidance provisions for enterprise investment schemes, venture capital trusts and controlled foreign companies.

But the Bill also discloses some wrong priorities, which I shall list in no particular order. The changes to inheritance tax—it will not surprise Members to hear me mention this, in the light of our debate earlier—are a giveaway to the most well off in our society. The cut to corporation tax is a beggar-my-neighbour, downward, low-tax regime competition measure aimed at covering up the failures on productivity. We disagree with lowering the bank levy rate. The provisions on vehicle excise duty take us backwards by favouring gas guzzlers and penalising drivers of less dirty vehicles. Some 16 or 17 years ago, journalists would have called the marked increase to insurance premium tax a stealth tax.

The changes to the climate change levy are a step backwards that indicates the Government have lessened their commitment to the environment and can no longer make the laughable claim to be the greenest Government ever—it is one of a host of changes indicating that they are not serious about our environment. We disagree with the provisions on the direct recovery of debt that allow HMRC to take money out of someone’s bank account without a court order. They are doing this because they find, as so many people do, that the court system is costly and slow, but rather than change the court system, for which they are responsible, they are simply introducing a different rule for themselves. They have done the same in clause 48 with interest on judgment debts. It is one rule for them and another rule for the rest of us.

I warn the Government: they are straining our constitution. Late last week, they tabled about 75 amendments for Report stretching to 40 pages and dealing with highly technical matters, which suggests that they are not entirely sure what they are doing. Last week, we also saw the longest Standing Order in living memory detailing the changes to English votes. This is not a great way to treat our constitution.

Then we see the potential constitutional tussle with the House of Lords over tax credits, brought about by this Government’s decision to proceed with a fundamental change to tax credits, which will cost working families thousands of pounds, by using a statutory instrument rather than putting the provisions in this Finance Bill. Clearly, this Finance Bill, like all Finance Bills, would never have gone near the House of Lords. This Government tried to box clever by putting the tax credit changes in a statutory instrument and they have been caught swimming without trunks when the tide went out. It is a constitutional tussle that we did not need and it would not have happened if they had put those provisions in the Finance Bill.

We need to see this Finance Bill in the context of the economy. It is great news that employment is up, albeit that too many of the jobs are low paid and insecure. It is great that, at last, we have some economic growth that extends outside London and the south-east. Before Conservative Members start cheering too much, there are ill winds blowing domestically. The deficit on the balance of payments, at 6.5% of gross domestic product, is the highest in peacetime. Inflation targets have been missed, and productivity stalled, which the Government try to mask with a change in the corporation tax rate. GDP per capita, after six years of the Conservatives leading a Government in this country, is still in recovery. Living standards are, at last, starting to rise, which is welcome, but this is happening in the private sector, not in the public sector, where the Government continue their wage freezes. Living standards have stalled for five years because of the—

[Philip Davies (Shipley) (Con)]

On a point of order, Mr Speaker. The hon. Member for Wolverhampton South West (Rob Marris) is droning on about all sorts of stuff. My understanding is that Third Readings are supposed to be about what is in the Bill, not just a general drone about the economy. Will you rule on that, Mr Speaker? [Interruption.]

[Mr Speaker]

Order. I was listening closely, and allowing the hon. Member for Wolverhampton South West (Rob Marris) some latitude, but the thrust of the point of order is correct. I should emphasise that this is not a portmanteau debate for the airing of a miscellany of grievances. This is a relatively narrow Third Reading about what is in the Bill, upon which I know the hon. Gentleman will now dilate for the remaining two and a half minutes.

[Rob Marris]

I thank you for that guidance, Mr Speaker. I prefaced my remarks by saying that I was putting the Finance Bill in the context of the economy in which it takes place. That is what I said, as Hansard will show. I think that the context of the Finance Bill is important, Mr Speaker, because otherwise one cannot judge whether the provisions are adequate for the country in which we live.

[Mr Speaker]

I entirely understand the point, but there are two minutes left, so the context has to be very pithily stated before the hon. Gentleman gets on to the substance.

[Rob Marris]

It will be, Mr Speaker. I was on to my peroration before the hon. Member for Shipley (Philip Davies) raised his point of order.

The national debt is up by 60% at the end of the tax year, so what is all this about protecting the next generation? The Government have missed their targets for five years, and they have been privatising debt for the next generation when it comes to student loans and costs for home buyers. We have a household debt bubble growing. This Government have slashed public investment and are substituting it with the private finance initiative. The measures in this Bill will not be sufficient to address the problems our nation is facing. What we need is public investment—and we need it in housing, in energy and in skills. This Government have mishandled the economy, and trouble will be brewing unless they change course. They should invest in infrastructure and skills.