Finance (No. 3) Bill

Robert Smith Excerpts

Monday 4th July 2011 Commons Chamber

[Steve Baker]

In that case, I am delighted that we are on opposite sides of the Chamber.

It is strange that capitalism has come to this: that, nowadays, the owners of capital need to be defended by the House from their own directors. If I have understood the amendment correctly, it would mean that the change in the main rate for 2011 would not come into force until legislation had provided arrangements for shareholders to approve their directors’ remuneration. It is almost incredible that such an arrangement does not already exist.

We must reunite ownership control and the risk taken with capital, and I believe that the amendment goes to the heart of one of the problems of our capitalist system. I am not sure that it would achieve the aim that the hon. Gentleman has set out because it might not affect the rate for 2011, and I therefore cannot support it. Nevertheless, I think it is an extremely good idea, and I urge the Government to consider it.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

I support amendment 51, tabled by my right hon. Friend the Member for Gordon (Malcolm Bruce). I remind the House of my entry in the Register of Members’ Financial Interests as a shareholder in Shell and a vice-chair of the British offshore oil and gas industry all-party parliamentary group.

The key aim of the amendment is to introduce damage limitation and to rebuild the confidence and trust among investors that the country needs if we are to maximise the benefits of our own oil and gas. The oil and gas under the ground does not provide us with any jobs, tax or security of supply. Those are produced only when it comes out of the ground, and, although it belongs to the nation, we can get it out of the ground only through the expertise and skill of people from my constituency and throughout the country. They apply their knowledge by way of the investment provided by risk capital, and the investors must know, as far as possible, in what climate they are operating and what returns they will obtain. The kind of risk that we rely on their taking is illustrated by a field in the North sea where the geology suggested that three platforms would be enough to sustain production and provide all the necessary equipment. Only when they started extracting the oil did they discover that there was much more sulphur in some parts of the field than in others and that they needed to build a fourth platform at a cost of £1 billion. Such extra risk taken by investors—not by the Government or the taxpayer—must be recognised as being of great importance to our country’s success in this regard.

Last week, we held a reception in Parliament for Subsea UK to highlight an industry that has developed into a jewel in the crown of this country, yielding £6 billion in production from under the sea through engineering skill, half of which is exported from this country. The United Kingdom is responsible for one third of the world’s subsea engineering; we therefore have something very important to nurture and build on.

The field allowance discussions are an important means of trying to unlock some of the fields that will be negatively affected by what has been proposed. The hon. Member for Aberdeen North (Mr Doran) and my right hon. Friend the Member for Gordon emphasised a longer term risk that needs to be addressed: the risk not to the projects that are unwinding now and in the next two years, which already had the momentum of contracts signed and delivered before the tax was changed, but to those that will be decided in the culture and investment climate prevailing in the aftermath of the tax. That is why these talks are so important in rebuilding trust and a constructive engagement.

I welcome the fact that industry and Government appear to be addressing the need for constructive engagement, and any updates from Ministers as to how we are progressing in rebuilding trust will be very important. We must remember that the reputations of the country managers—the people in this country who work for the multinational companies and the investors abroad—has been damaged by what happened. They have been encouraging their investors to invest in this country in one set of circumstances, only for the goalposts to be shifted. They need trust and confidence in them to be restored if they are going to persuade their investors abroad—in Calgary and elsewhere—to invest again in our country so we can build on the potential that exists.

[Stewart Hosie (Dundee East) (SNP)]

I agree with everything that has been said by the hon. Gentleman, his party colleague, the right hon. Member for Gordon (Malcolm Bruce) and the hon. Member for Aberdeen North (Mr Doran). We have heard about contracts and work that is in place already unwinding, with the likelihood of a gap after 2013 when one set of investment decisions has already been made but others have not yet been taken. I ask the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) to carry on the good work he is doing with his own Government on speeding up this review, so we can avoid that investment gap and the real dangers we will face in a couple of years’ time.

--- Later in debate ---

[Sir Robert Smith]

The purpose of the amendment is to keep the spotlight on this issue by ensuring we get updates from the Government, and that the Government can give a signal on the investment climate showing that they understand the concerns and are willing to take them on board so we can build a long-term future.

There is another gap apart from the time gap as these contracts unravel. We are a mature province so we must ensure that the infrastructure to get the next investments off the ground is still in place in years to come. That infrastructure must not be decommissioned prematurely, and so the investment must not be withdrawn. The owners of the infrastructure need to know that there is a long-term future for investment as more production will be brought in through those platforms. That is another reason why these constructive talks are so important.

I encourage the Government to do all they can to restore confidence and the positive investor climate that will unlock the full potential that exists in this country, build on the skills we already have, and maximise the benefit to the taxpayer in the long run and to our security of supply.

[Mr David Hanson (Delyn) (Lab)]

I am grateful to the hon. Member for Amber Valley (Nigel Mills) for kicking off this wide-ranging discussion on a number of important tax issues. He certainly enlightened me when he revealed that the Minister is tax personality of the year. I missed that; despite all my “Gauke” Google alerts, I missed the fact that he was tax personality of the year. May I offer the official Opposition’s wholehearted congratulations to him on that?

The hon. Member for Amber Valley gave a number of Ronald Reagan quotes and he said today was the 100th anniversary of Ronald Reagan’s birth. That was on 6 February, in fact, but this is the 100th year since Ronald Reagan’s birth. As you will know, Mr Deputy Speaker, today is the day on which we shrank the UK tax base by giving away America 200-odd years ago, and I hope that, as part of his plans for simplification, the hon. Gentleman will recall that.

New clauses 12 and 14 were proposed by the hon. Gentleman and he may be surprised to learn that I am not averse to his suggestion in new clause 14, because there are grounds for discussing the simplification of UK corporation tax returns for multinationals. It is worth while considering the review that he suggests, provided that it examines whether such a simplification will decrease, rather than increase, tax evasion—an increase is always the worry with such a simplification. New clause 14 potentially has merit and although I do not expect the hon. Gentleman to push it to a vote, I hope that the Minister will consider the issue.

New clause 12 proposes to review, or possibly even remove, capital allowances and asks the Office of Tax Simplification to report on replacing them with a different form of relief. The hon. Member for Amber Valley will know that Labour Members had substantial concerns about reducing capital allowances for firms, which explains why I cannot support the new clause. My hon. Friends and I tabled a number of amendments in Committee to oppose the reduction in the capital allowances. I realise that the reduction was tied up strongly with the decision to cut corporation tax to 24% by 2014-15—shortly thereafter it was decided to cut it to 23%— which was one of the flagship growth measures in the June Budget. However, that was paid for by slashing investment and capital allowances, which encourage businesses to take a long-term view by providing tax relief on the purchase of equipment and machinery. The view that I expressed in Committee has not changed, although I know that it will cause disagreement: companies that invest, particularly in manufacturing—car industries in my own area of north Wales, advanced manufacturing, wind turbine manufacturing, plane makers and so on—will benefit from capital allowances, whereas the tax cuts are, unfortunately, aimed at financial services.

At the time of the June 2010 Budget, manufacturers expressed concern at what this approach will mean for industry. More recently, the engineering manufacturers association warned that the Government risk moving to a tax system that contains “a bias” against big manufacturers. Members on both sides of the House are trying to encourage manufacturing growth, and I believe that the review that the hon. Gentleman seeks in the new clause could be damaging to the growth of capital investment and, therefore, to the growth of manufacturing industry.

Finance Bill

Robert Smith Excerpts

Tuesday 28th June 2011 Commons Chamber

[Mr Hanson]

If my hon. Friend looks at new clause 10, he will see that it calls for a general review of VAT and the impact on the economy. Out of that review could come, for example, a temporary reduction to 17.5%, as was called for by my right hon. Friend the Member for Morley and Outwood (Ed Balls), or there could be changes for certain sectors. The review could look at a range of issues to assess the impact of the increase on growth, jobs and living standards.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

Given the arguments that the right hon. Gentleman is making, how does he intend to vote on the new clause moved by the hon. Member for Caernarfon?

Scotland Bill

Robert Smith Excerpts

Tuesday 21st June 2011 Commons Chamber

[Pete Wishart]

I will not give way to the hon. Gentleman again.

We know what the Scottish people want when it comes to such matters. I was disappointed to hear what was almost a rant from the hon. Member for Glasgow North (Ann McKechin). Members’ personal attacks on the First Minister suggest that they have learnt absolutely nothing. Negativity does not win elections, but we hear continued, incessant negativity.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

Will the hon. Gentleman give way?

[Pete Wishart]

I do not have time to give way.

I can only ask Members to continue down that route so that we can continue to secure victories such as the one we secured only a few short weeks ago.

[Sir Robert Smith]

rose—

[Pete Wishart]

I have only 10 minutes left.

The Bill contains unpalatable measures that are totally unacceptable to the Scottish Government, and which were aired a moment ago, concerning the Supreme Court.

[Sir Robert Smith]

rose—

[Pete Wishart]

I will give way, for the very last time.

--- Later in debate ---

[Sir Robert Smith]

The hon. Gentleman spoke of a personal attack on his leader from the Opposition Front Bench. Does he not think that the head of a Government in a proper, modern, functioning democracy should show respect for the courts, which protect the individual citizen from abuse of power by the state?

[Pete Wishart]

I am almost grateful to the hon. Gentleman, because he has referred to a measure I want to deal with. The measure relating to the Supreme Court that was passed today is totally unacceptable to the Scottish Government, and will be unacceptable to the Scottish Parliament as well. When the last Scottish Parliament Bill Committee considered the Government’s proposals, even that Unionist-led Committee did not see fit to pass them. I do not think that a new Scottish Parliament Bill Committee will be any better disposed towards them.

Had I been given an opportunity to debate the issue, I would have suggested a sunset clause, so that nothing could be done until the expert group in the Scottish Parliament finishes its work under Lord McCluskey. That is the time for us to discuss how to resolve what is a real issue.

Finance (No. 3) Bill

Robert Smith Excerpts

Tuesday 3rd May 2011 Commons Chamber

[Stewart Hosie]

That is absolutely right. I said when I intervened on the right hon. Member for Gordon that of course taxation needs to be sensitive to profitability, but that Ministers also need to understand that investment decisions are sensitive to tax and other costs. Although the field is mature, some of it is unexplored. If the perception is that it is expensive and that there is tax instability—which has been said—we will lose the ability not only to continue work in some of the mature fields, but to explore as yet untapped reserves, albeit in a mature sector.

As I have said, this is the most damaging measure in the Budget for economic growth. Although I respect the attempts to amend it and the tabling of amendments for the Government to discuss, we think that it is so damaging that we hope Mr Hoyle will be able to call on hon. Members from across the Committee to resist clause 7 very vigorously indeed.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

I remind the Committee of my entry in the Register of Members’ Financial Interests as a shareholder in Shell, and of my wider interests in the oil and gas industry.

The oil and gas in the North sea belongs to the nation, but unless we have a regime that attracts experts with the finance and knowledge we need, we will not benefit from it. One of the amendments before us would restrict the tax raid to a year, to ensure that the Government and industry can engage in constructive dialogue that will encourage investment. It is important to restore confidence in the tax regime. Following previous supplemental changes, Governments had to work very hard to restore confidence and bring back investment, with field allowances and other incentives. They engaged with the industry and provided assurances that once the tax change had been made at the beginning of a Parliament, it would not be revisited until the next election. There is scope for restoring confidence, but some hard work will have to be done.

The Government need to address some of the arguments that are being made, particularly the one advanced by my right hon. Friend the Member for Gordon (Malcolm Bruce) about what individual investors are getting for their investment. It has been put to me that people made a decision to invest last June, but now the price of oil is $125 a barrel. If they decided to invest and then hedged for this year at $88, they are not getting $125, because the hedge fund is getting the profit. I do not see a tax being brought in on hedge funds; instead, it is being imposed on the people on the ground doing the hard work, on the skilled labour and on the knowledge and risk-taking.

When we talk about windfalls, we have to be slightly careful in the case of an industry with a fluctuating commodity price. When the price goes up it makes more profit and when the price goes down it makes less, but Governments tend not to say, “We’re a bit concerned that the price has fallen, so we’re going to cut the tax.” If there is a one-way ratchet, that causes uncertainty and concern in the minds of investors.

Amendment 13 suggests that if there is a desire to have a profit-related tax that varies with the price of oil, there should be some predictability to it. The hon. Member for Aberdeen South (Dame Anne Begg) said that it would cause complication, but that complication could be factored into new financial modelling. If there were a variable rate of profits tax, any company making an investment decision could factor that in and know where they stood in the fiscal regime.

It has been put to us that other countries, such as Norway, have different fiscal regimes for investment. However, Norway has had a stable long-term fiscal regime with very little change, and it has also had the attraction of less mature, bigger finds with more upside for investors. It is important to understand the confidence element.

The Energy and Climate Change Committee has seen evidence on the wider future of our electricity and gas network. This country wants to attract £200 billion of investment in its energy infrastructure, but if investors are being asked to build a massive offshore wind farm that will bring in more profits if the price of carbon goes the way they are betting, they will look across and see what has happened to the oil industry. They will not want the Treasury to come along and say, “Electricity bills are rising, so we’re going to put a windfall tax on the offshore wind farm,” which would undermine that investment decision. There is a read-across from gas and oil to wider investment in energy and big infrastructure projects in this country.

This is not just a constituency matter for my right hon. Friend the Member for Gordon and myself, who have many constituents who work in the industry, have jobs related to it or are economically affected by it. As has been said, it also affects East Anglia, Morecambe bay and other areas. The supply chain permeates the whole of the UK economy.

[Mr Kevan Jones]

I congratulate the hon. Gentleman on standing up for his constituents; he is doing the right thing. Does he not find it remarkable that there are no Conservative Members in the Chamber from Morecambe bay or other areas that rely on the oil and gas industry, to speak up for that industry tonight?

[Sir Robert Smith]

Those hon. Members may have chosen to speak in other ways; they can raise matters with Ministers directly or in correspondence. There are all sorts of ways of trying to influence Ministers. I am using probing amendments and this debate to try to do so. If I may say so, it is rather sad that the Committee has chosen to focus on such a major industry for the UK economy at 1.30 am, but—[Interruption.] Well, the House collectively chose that time.

I want to make two final points on the instability and uncertainty caused by such upheavals. Statoil is reviewing its investment. That does not mean that it will not go ahead at all or that some of the investment might be done differently, but in the reviewing time, Statoil’s supply chain will no longer have the ability to deliver. The supply chain does not have the cash flow to sit around waiting for Statoil’s review without affecting its employment, recruitment and subcontracting. The skills base that has built up has huge export potential and earns a lot of money for the country through exports to other oil and gas provinces, but the Government need to understand that that base needs a stable home environment to ensure that we anchor as much of those profits in the UK as possible.

Finally, I want to reinforce how crucial the mature fields are in unlocking future investment. Many of the investments being attracted today are much smaller than before, and they would not stand up if they did not tie back to one of the big platforms that still operate in the North sea. That is why I was somewhat concerned by some of the Treasury’s evidence to the Energy and Climate Change Committee. The Treasury said that petroleum revenue tax fields were now just cash-making fields, so they did not need any more investment—but the very age of those fields means that they do need investment. The Health and Safety Executive is very keen to keep a close eye on those fields: because of their age, the safety of their infrastructure is crucial. Moreover, investment could be vital in ensuring that that hub remains to unlock any smaller fields around the North sea.

Another uncertainty is introduced by clause 7 because of its relationship with the clause on decommissioning. In the Public Bill Committee the Government must address that new uncertainty, which builds on the uncertainty caused by clause 7.

I urge the Government to respond constructively and positively to the industry’s desire for an investment climate in which it can take all the risks on geology, weather, technology and the future of the commodity market, in the knowledge that a Government who see its long-term importance to the economy, and who therefore recognise the need to restore confidence in a stable fiscal regime, are behind it.

[Helen Goodman]

It is a great pleasure to take part in this debate and to follow the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), who made such a reasonable, well informed speech.

One question that has remained unanswered tonight is why the Government chose such a complex route rather than a much simpler windfall tax. Everyone understands that when the Government are looking for sources of funds, they will look at particularly profitable industries. However, the structure they have chosen means that investment in, and the future of, the industry have been brought into question. A far simpler structure would have raised the money without risking future work in the North sea oil and gas sector.

The Red Book is peculiarly unclear. The supplementary charge was raised from 20% to 32%, but the Red Book states:

“As part of the fair fuel stabiliser, if in future years the oil price falls below a set trigger price on a sustained basis, the Government commits to reduce the Supplementary Charge back towards 20 per cent on a staged and affordable basis while prices remain low.”

However, the meaning of a “sustained basis” for a fall in prices and of a “staged and affordable basis” is not set out in the Bill.

Amendment of the Law

Robert Smith Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Mr Jackson]

My hon. Friend makes an apposite point. I lobbied the Chancellor myself, I campaigned for the policy and I am glad that he has listened to the views of people, many of whom rely on the car to travel to work. It is a matter of public record that had Labour been re-elected in May last year, petrol prices would have been going up an extra 6p. That would be the price of Labour’s profligacy.

I am delighted that we are taking more poor working people out of tax, and that we are creating local enterprise zones to drive regeneration in some of the more difficult economic areas of Britain. I am delighted, too, that we are tackling corporation tax and creating conditions in which business wants to relocate to the UK and create jobs.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

But does the hon. Gentleman not realise the great damage the Budget has done by saying to investors, “You come to the United Kingdom, you invest in success, you employ 450,000 people, you make 20% of the Exchequer’s corporation tax, and then, once you have made all that investment, the Government move the goalposts and whack up a huge extra tax on your industry”?

[Mr Jackson]

I fully understand and respect the hon. Gentleman’s constituency interests. Were I in his position, I would make the same points. Clearly, when we are in a less than benign financial situation, clearing up the abysmal mess left by the Labour Government, we have to make difficult value judgments. To govern is to choose, and sometimes the choices made will not please everyone. I understand and respect the hon. Gentleman’s views, and I am sure the Chancellor and the Treasury Front-Bench team have heard his views.

Oral Answers to Questions

Robert Smith Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Mr Osborne]

The right hon. Gentleman really needs to brush up on his question practice, but let me say this to him: the idea that we were somehow left a fantastic economy by the Labour party is quite the most ludicrous claim in the country, and the only reason he makes it is because he was responsible for the economic mess that left this country on the brink of bankruptcy.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

One of this country’s great manufacturing success stories is world-leading subsea engineering that has grown up on the back of investment in the North sea oil and gas industry, based in my constituency but working throughout the United Kingdom. What reassurance can the Chancellor give my constituents that the Government will build on their constructive relationship to ensure a fiscal regime that maximises investment in North sea oil and gas production and exploration and that boosts the manufacturing that supports that?

[Mr Osborne]

Of course we want to ensure that we prolong the life of the North sea fields. One area on which we can work with the industry is ensuring greater certainty about decommissioning costs and about the tax regime that was operated under previous Governments and how that will apply over the next 10 years. I hope to work with the industry on that.

Equitable Life (Payments) Bill

Robert Smith Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

If I may continue a little more about the Bill, I will take more interventions shortly.

The Bill allows for payments made to policyholders to be disregarded for certain purposes, including making them tax-free in the hands of the recipients. The Government will also be able to consider what effect the payments might have on individuals’ eligibility for certain types of means-tested state funding support, particularly tax credits, and how that might be mitigated. A final decision has yet to be made on whether those powers will be used, but it is sensible to include them in the Bill so that any arguments can be taken into consideration. It is essential that we take every action to avoid the scheme becoming unnecessarily complex.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

I welcome the fact that the Bill places no restraint on the level of compensation. I wish to reinforce the point that, to restore confidence in the market, there has to be a fair resolution. Is the Financial Secretary still open to submissions on the level of compensation in the run-up to the comprehensive spending review, and is it still possible for people to make points that will influence that level?

[Mr Hoban]

Yes. Although we encouraged people to make representations by early September, I and my officials will still listen to any later representations. If anyone feels that they have not expressed their view, I will happily entertain their representations.

Equitable Life

Robert Smith Excerpts

Thursday 22nd July 2010 Commons Chamber

[Mr Hoban]

I accept my hon. Friend’s point about speed, but I also accept the point made by the hon. Member for Ynys Môn (Albert Owen) on the need for appeals mechanisms, because rough justice works both ways, and we need to ensure that people are treated fairly under the scheme.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

I welcome the fact that the Financial Secretary has recognised that the 25% cap will probably be the greatest concern of many of our constituents. He said that he will receive representations, but what is the deadline for those? People will want to influence him on that decision.

[Mr Hoban]

As I said, the process for deciding on the maximum compensation that is payable will conclude at the spending review, and we will publish the results on 20 October. I encourage the hon. Gentleman’s constituents to write sooner rather than later in that process. There are a range of views on that number and people will have their opinions on whether it is appropriate, but of course, we must set the overall position in the context of what the public purse can afford.

Budget Resolutions and Economic Situation

Robert Smith Excerpts

Tuesday 22nd June 2010 Commons Chamber

[Malcolm Bruce]

I am grateful, because I have not had time to look at the Red Book, only at one or two selected items. The health budget overall is protected. As the Chair of the Select Committee on International Development, I am delighted that the coalition is committed not only to protecting the aid and development budget but, over the coalition period, to delivering our promise of 0.7% of our gross domestic product in overseas aid spending.

Even in these difficult times, we can protect key areas, and the Chancellor demonstrated his recognition of the vulnerability of education and his desire to make sure that it received a degree of protection. I have been involved in working up a policy on the future of Royal Mail and the Post Office. I do not know how many times most hon. Members have debated the closure of post offices and problems in the Royal Mail. We all recognise that what we have at the moment is not fit for purpose, and has to be radically reformed and changed. I can honestly say that the Liberal Democrats have made a big contribution to producing a proposal that brings capital into Royal Mail, will help to support the post office network, and will enable Royal Mail employees to take a share in the business in which they are engaged in a way that makes it a much more co-operative venture. That is something that we have brought to the coalition, and I am delighted that it has been accepted.

A number of small details are worth acknowledging—for example, reversing the policy on furnished holiday lets, which affects some constituencies more than others, but is a serious cause of concern for people who have a single holiday cottage, and who would not have been able to maintain it. The policy would not have been good for tourism, and it was not a fair system, so I am glad that the Government have withdrawn it.

The commitment to deliver broadband support across the country is extremely important for rural areas, because if we want to encourage people to run businesses in such areas they need access to high-speed broadband. I am attracted to the proposal to provide finance for regional capital, although I want to hear the details of it. I can certainly think of projects in my constituency that I want to suggest to Ministers should bid for that fund. Indeed, I wrote to them in advance of the need, before I knew that there was a fund to tap into, but I think that it has real prospects. An important part of the Budget, which goes completely against the rant by the Leader of the Opposition, is the promotion of enterprise to create new jobs and businesses, whether through corporation tax reductions, decreases in national insurance costs for small businesses, or a regional premium for those areas where the public sector is disproportionately large.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

My right hon. Friend will know, as he represents a neighbouring constituency, how important the oil and gas industry is to our constituencies. It was refreshing not to have a tax bombshell dropped on that industry, as has happened in the past. The press notices for the Budget say that further improvements in the field allowance regime will be made to encourage exploration in the high-temperature, high-pressure world. That industry brings so much revenue into the Treasury that it must be treated in such a way as to make sure that the maximum investment is delivered.