Draft Bank of England Levy (Amount of Levy Payable) Regulations 2024

Robert Syms Excerpts

Tuesday 20th February 2024 General Committees

[The Economic Secretary to the Treasury (Bim Afolami)]

I beg to move,

That the Committee has considered the draft Bank of England Levy (Amount of Levy Payable) Regulations 2024.

It is a pleasure to serve under your chairmanship, Ms Bardell. The Bank of England undertakes vital work in pursuit of its monetary policy and financial stability objectives, in line with primary legislation. To ensure that the Bank can recover fully and efficiently the costs of funding its important functions, it is necessary that the mechanism it employs to do so is reliable and stable.

The Bank’s current monetary policy and financial stability functions are funded by what is known as the cash ratio deposit scheme. Under the scheme, banks and building societies with eligible liabilities greater than £600 million are required to place a proportion of their deposit base with the Bank on a non-interest bearing basis. The Bank then invests those funds in gilts, and the income generated from such gilts is used to meet the cost of its monetary policy and financial stability functions. The scheme has resulted in significantly higher deposit sizes than were initially forecast and a lack of predictability for payers of a cash ratio deposit. Deposit sizes change in line with gilt yields, which have been lower than expected, meaning that the cash ratio deposit scheme has not been able to generate its target income from the investment of deposits and has therefore failed to fund fully the Bank’s policy functions. The shortfall to date has been funded from the Bank’s capital and reserves, meaning that it has not paid a dividend to the Treasury as Bank capital levels have fallen below target.

Following a review of the scheme in 2021, the Government set out their intent to replace the scheme with a Bank of England levy to provide greater certainty to firms on their contributions and to create a simpler and more transparent funding mechanism for the Bank. Sections 70 and 71 of the Financial Services and Markets Act 2023 made provision for that. The regulations before us make provision under the auspices of FSMA for the eligible institutions that do not have to pay a levy on how the cost is apportioned between eligible institutions that must pay a levy and how appropriate adjustments will be made for years in which a new levy is paid.

The Bank of England levy aims to create a simpler and more stable funding mechanism for the Bank’s policy functions. Under the new levy, for each year the Bank will estimate the amount that it needs to meet its policy costs; it will add any shortfall from the previous year and deduct any surplus. That is the anticipated levy requirement. The Bank will require institutions to submit data about their eligible liabilities and will usually take an average of the data provided between 1 October and 31 December in the previous year to calculate an institution’s eligible liabilities. The three-month reference period mirrors that used for the Prudential Regulation Authority levy, ensuring greater consistency across the levies and a simplification of the process for recovering the Bank’s costs. That is simpler for the institutions involved.

As under the cash ratio deposit scheme, if an institution has an average liability base up to and including £600 million, it will not pay any levy that year. If an institution’s average liability base exceeds £600 million, it will pay the levy. That ensures that the payment mechanism is fair, as only the largest institutions that benefit most significantly from the Bank’s monetary policy and financial stability functions will pay the levy. The cost paid by an institution under the levy will be apportioned according to the size of an institution’s eligible liabilities, meaning that larger institutions will pay a larger share of the costs. That is the same as under the cash ratio deposit scheme, so introducing the new levy does not mean that there will be relative winners or losers between the institutions that pay.

If an institution did not meet the threshold for paying the levy in the previous year, but it meets the threshold in a new year, the regulations deal with that as well. They stipulate that the firm would be treated as a new levy payer. This statutory instrument allows the Bank to treat new levy payers differently so that they contribute to the estimated policy costs for the specific year and do not have to contribute to any shortfall from the previous year or gain any benefit from surplus from the previous year. I hope the Committee will agree that that is a fair and proportionate approach.

The regulations will replace the cash ratio deposit scheme with a Bank of England levy—a simpler and more stable funding mechanism—while ensuring that no changes are made to the threshold at which firms will pay the levy or the broader important principle that larger firms will pay more.

[Sir Robert Syms (Poole) (Con)]

Presumably there could be an argument over whether someone has to pay the levy or what levy they have to pay. Is there an appeal process?

[Bim Afolami]

I thank my hon. Friend for that question. It is my understanding that there is not an appeal process, but the reason for that is that there is an agreed formula for when it occurs; the amount of levy that people will pay is not an art, but a science. As I say, it will depend on the size of the institution, just as the cash ratio deposit levy did, but this system is simpler and more stable. I hope colleagues will join me in supporting the regulations and I commend them to the Committee.

Draft Bank of England Levy (Amount of Levy) Regulations 2024

Robert Syms Excerpts

Tuesday 20th February 2024 General Committees

[The Economic Secretary to the Treasury (Bim Afolami)]

I beg to move,

That the Committee has considered the draft Bank of England Levy (Amount of Levy Payable) Regulations 2024.

It is a pleasure to serve under your chairmanship, Ms Bardell. The Bank of England undertakes vital work in pursuit of its monetary policy and financial stability objectives, in line with primary legislation. To ensure that the Bank can recover fully and efficiently the costs of funding its important functions, it is necessary that the mechanism it employs to do so is reliable and stable.

The Bank’s current monetary policy and financial stability functions are funded by what is known as the cash ratio deposit scheme. Under the scheme, banks and building societies with eligible liabilities greater than £600 million are required to place a proportion of their deposit base with the Bank on a non-interest bearing basis. The Bank then invests those funds in gilts, and the income generated from such gilts is used to meet the cost of its monetary policy and financial stability functions. The scheme has resulted in significantly higher deposit sizes than were initially forecast and a lack of predictability for payers of a cash ratio deposit. Deposit sizes change in line with gilt yields, which have been lower than expected, meaning that the cash ratio deposit scheme has not been able to generate its target income from the investment of deposits and has therefore failed to fund fully the Bank’s policy functions. The shortfall to date has been funded from the Bank’s capital and reserves, meaning that it has not paid a dividend to the Treasury as Bank capital levels have fallen below target.

Following a review of the scheme in 2021, the Government set out their intent to replace the scheme with a Bank of England levy to provide greater certainty to firms on their contributions and to create a simpler and more transparent funding mechanism for the Bank. Sections 70 and 71 of the Financial Services and Markets Act 2023 made provision for that. The regulations before us make provision under the auspices of FSMA for the eligible institutions that do not have to pay a levy on how the cost is apportioned between eligible institutions that must pay a levy and how appropriate adjustments will be made for years in which a new levy is paid.

The Bank of England levy aims to create a simpler and more stable funding mechanism for the Bank’s policy functions. Under the new levy, for each year the Bank will estimate the amount that it needs to meet its policy costs; it will add any shortfall from the previous year and deduct any surplus. That is the anticipated levy requirement. The Bank will require institutions to submit data about their eligible liabilities and will usually take an average of the data provided between 1 October and 31 December in the previous year to calculate an institution’s eligible liabilities. The three-month reference period mirrors that used for the Prudential Regulation Authority levy, ensuring greater consistency across the levies and a simplification of the process for recovering the Bank’s costs. That is simpler for the institutions involved.

As under the cash ratio deposit scheme, if an institution has an average liability base up to and including £600 million, it will not pay any levy that year. If an institution’s average liability base exceeds £600 million, it will pay the levy. That ensures that the payment mechanism is fair, as only the largest institutions that benefit most significantly from the Bank’s monetary policy and financial stability functions will pay the levy. The cost paid by an institution under the levy will be apportioned according to the size of an institution’s eligible liabilities, meaning that larger institutions will pay a larger share of the costs. That is the same as under the cash ratio deposit scheme, so introducing the new levy does not mean that there will be relative winners or losers between the institutions that pay.

If an institution did not meet the threshold for paying the levy in the previous year, but it meets the threshold in a new year, the regulations deal with that as well. They stipulate that the firm would be treated as a new levy payer. This statutory instrument allows the Bank to treat new levy payers differently so that they contribute to the estimated policy costs for the specific year and do not have to contribute to any shortfall from the previous year or gain any benefit from surplus from the previous year. I hope the Committee will agree that that is a fair and proportionate approach.

The regulations will replace the cash ratio deposit scheme with a Bank of England levy—a simpler and more stable funding mechanism—while ensuring that no changes are made to the threshold at which firms will pay the levy or the broader important principle that larger firms will pay more.

[Sir Robert Syms (Poole) (Con)]

Presumably there could be an argument over whether someone has to pay the levy or what levy they have to pay. Is there an appeal process?

[Bim Afolami]

I thank my hon. Friend for that question. It is my understanding that there is not an appeal process, but the reason for that is that there is an agreed formula for when it occurs; the amount of levy that people will pay is not an art, but a science. As I say, it will depend on the size of the institution, just as the cash ratio deposit levy did, but this system is simpler and more stable. I hope colleagues will join me in supporting the regulations and I commend them to the Committee.

Public Sector Pay 2024-25

Robert Syms Excerpts

Wednesday 17th January 2024 Westminster Hall

[Several hon. Members rose—]

[Sir Robert Syms (in the Chair)]

Order. I remind hon. Members that they should bob if they wish to be called in the debate. I think they are on about three minutes each.

--- Later in debate ---

[Beth Winter]

I thank everybody who has contributed to the debate, our trade unions and, most importantly, all public sector workers. They do amazing work under very difficult circumstances, and they deserve proper pay awards. I will table parliamentary questions, because I do not think the Minister has answered one of the seven questions I asked today. I will follow up with a letter to him, and hope that he will address those questions. Diolch yn fawr.

[Sir Robert Syms (in the Chair)]

I thank all Members for being brief and succinct so that everybody could get in.

Question put and agreed to.

Resolved,

That this House has considered the public sector pay round for financial year 2024-25.

Inheritance Tax

Robert Syms Excerpts

Wednesday 17th January 2024 Westminster Hall

[Peter Gibson]

I completely agree with my right hon. Friend. We know that when we reduce a tax, the effect has the potential to cascade throughout families—and throughout the country, because not all beneficiaries of estates necessarily live in the constituency where the house that is left behind is situated.

I will conclude on that point. Will the Minister respond specifically to my point about the equalisation of rates for all individuals?

[Sir Robert Syms (in the Chair)]

Thank you for the short speech. If we stick to about five minutes each, I think that we will get everybody in.

--- Later in debate ---

[Nigel Huddleston]

As I said, estates valued at over £1 million paid 81% of all inheritance tax.

I am aware of the time, and I need to leave a minute or two at the end for the wind-up, but I want to make a final point. We have had a very good discussion about inheritance tax, but we have had an inkling of the differences between the political parties. I am afraid that some Opposition Members started to delve into the politics of envy, which is a well-trodden path for the Labour party, by commenting on elitism, Oxford University and so on. Well, I can tell them that I went to Oxford, and that my Labour-voting trade unionist father, my mum, who worked on the tills at Asda, and the schoolteachers at my comprehensive, instead of being snide about the opportunities and aspiration that I had, actually applauded and supported social mobility. That is what we on the Conservative Benches do. It is disappointing to hear the tone of the Opposition.

The hon. Member for Ealing North, in another well-trodden argument, started trying to lecture us on responsible finances. We still have not had an answer to the question of where the £28 billion of spending promised by the Opposition would come from. We are more than happy to debate the issue, because we have a very clear plan for the economy: we had the very welcome and well-received national insurance cut at the autumn statement, which I do not believe the hon. Member opposed, and nor did he oppose the significant support that we gave during covid or the significant support that we have given households during the cost of living crisis. That all needs to be paid for, which is why we have higher taxes than we would like. But we are on a path to reducing them, because that is what Conservatives do. I thank hon. Members for their contributions; all their comments have been taken on board.

[Sir Robert Syms (in the Chair)]

I call Jon Trickett to make a brief winding-up speech.

Finance Bill

Robert Syms Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[James Murray]

The hon. Gentleman was desperate to make an intervention about fiscal responsibility, when just a year ago his party crashed the economy and sent interest rates soaring, and working families throughout the country are still paying the price. We on this side of the House take fiscal responsibility seriously. We want to have a fiscal lock in place, we want to get debt falling, and we want to get the economy growing. That is the difference between us and the Conservatives.

Clause 2 contains measures on research and development. In Committee we will probe the impact of those changes in greater detail, but it is clear straightaway that stability and certainty have been lacking here as well. We need only look at the changes in the current Parliament’s Finance Acts. The Finance Act 2020 raised the rate of the R&D expenditure credit from 12% to 13%. The Finance Act 2021 made changes to the amount of R&D tax credit that small and medium-sized enterprises could claim. The Finance Act 2023 again changed the rates of R&D tax reliefs, and that same year the Finance (No. 2) Act 2023 made yet further changes to how the relief operates. Now, of course, the Finance Bill before us introduces a whole new regime. Businesses making investment decisions yearn for stability and certainty, but after 13 years in office, the Government are proving themselves incapable of providing those crucial foundations for success.

We acknowledge, of course, that the tax legislation in Finance Acts needs to be kept updated, and that some change is not only inevitable but important in enabling legislation to function well. However, with this Government it is hard to avoid the sense that changes are being made without a long-term plan in mind. It looks very much as if there has been no long-term plan for capital allowances or research and development reliefs, and the same is true of tackling tax avoidance and evasion.

Although we welcome any measures to tackle tax avoidance and evasion, again there has been a busy history of legislation in this Parliament alone. The Finance Act 2020 made changes to the general anti-abuse rule, introduced to deter taxpayers from using tax avoidance schemes. That was followed by more changes to the rule in the Finance Act 2021, alongside other changes to the legislation covering avoidance. In the Finance Act 2022, a further round of changes were made to the legislation relating to avoidance, including on HMRC’s publication of information about avoidance schemes. Now, in 2023, we see the latest set of changes to the rules and penalties in respect of avoidance and evasion. While we will consider the detail of those changes in Committee, it is already clear that a long-term plan is very hard to see.

Stability and certainty are crucial foundations when businesses are making decisions about where to invest and where to create jobs. We in the Opposition hear that from business leaders day in, day out, across all sectors and in all parts of our economy. We know how much damage is done to economic growth and people’s standards of living when that stability and certainty are not there. We saw that at its most extreme last autumn, when the Conservatives crashed the economy and trashed their reputation in a matter of days, through a reckless disregard for our economic institutions and for working people’s security. But it is not just about last autumn; it is about 13 years of Conservative government. It is about the inability of the Conservatives to provide the stability, the certainty and the plan for the future that businesses and our economy need.

[Sir Robert Syms (Poole) (Con)]

If we have crashed the economy and we do not have a long-term plan, why are you voting with us today? [Interruption.]

[James Murray]

Yes, Madam Deputy Speaker, I took that question to be addressed to me rather than to you. We have made it clear that when it comes to the measures in the Bill for which we have been calling for some time, we welcome and will support them. We would not oppose measures that we have been calling for. However, given the Government’s chopping and changing year on year from one Finance Act to the next, it is desperately clear that there is no evidence of a long-term plan over the past 13 years, and no evidence of the plan that we need for the future. I hope that in a general election, when businesses and working people across the country look at the Conservative party and at the Labour party and ask themselves who has a plan to grow the economy and make working people better off, they will conclude that it is us.

--- Later in debate ---

[Sir Robert Syms (Poole) (Con)]

I agree with a lot of what my right hon. Friend the Member for Witham (Priti Patel) said. I was in this House for 13 years of Labour Government. Twice a year, we had the autumn statement and Budget, and all taxes were reviewed. In not one of those fiscal statements did they change the arrangement for non-doms. Why? Because it brings in more money. I am therefore shocked at the criticism from those on the Labour Front Bench of their Chancellors when in government. What we have with the Opposition is the politics of the magic money pot. The magic money pot is called non-doms, and the Opposition think that it will pay for everything. It will not; because such people are internationally mobile, they will move. The best things to tax are things that do not move, such as property. People can move, and we will not get sufficient money in as a result.

The Government have done a lot of good things. Putting up the triple lock is the right decision to look after pensioners, but those who pay tax might, because their pension will go up, pay more tax. Putting up the living wage is a good thing, because we want a higher-paid economy, but as lower-paid workers’ pay goes up, they pay more tax. It is one of the features of the modern world that those in the most successful and highest-paid economies tend to pay more tax. Although the overall tax burden, because of the freeze, has gone up, we need to reverse that, and we have started the process in the autumn statement.

The Government have set out a good long-term plan, which is essentially based on increasing the incentives for business to invest. We have a problem in Britain on productivity. One way of getting productivity up is to get pay up and investment in machinery and equipment up. If we can do that, we can pay for the public services that we all want, on both sides of the House, in terms of better education, a better health service and better outcomes. However, that requires getting productivity up. One of the problems since 2008 has been that Britain has struggled with productivity. Whatever we do, whether it involves incentives, higher pay, or credits for research and development, if it gets productivity up, that has to be a good thing.

I welcome an awful lot of what is in the autumn statement, but we should not look at it as one event; it is part of a series of events brought in by the Chancellor that mean that our national debt is falling over the plan. Our yearly deficit looks like it will be in the 3% range rather than the 4% range. Even the trade gap looks like it is improving. Our economic situation does not look too bad, and when we look over the channel to the EU and the eurozone, our problems seem rather less than theirs, with some of those countries going into recession.

I, too, saw today’s GDP figures. I would caution against any flash estimate of GDP. The monthly figures bounce around. I spent six weeks on a Finance Bill Committee during the days of the coalition when every day those on the Labour Front Bench talked about the double-dip recession, which was revised away six months later. The key point is to do the right things for the economy, get productivity up and get the economy growing, and the other things will come right. They will certainly come right when a lot of data is in. Even the three-monthly GDP data is based on something like a quarter of the stats. It is constantly updated over years and months. We should not be too fixated on short-term figures.

One reason I think the economy will grow over the next 12 months is that living standards have gone from falling to rising. That means that ultimately the British consumer ought to come to the rescue of the British economy and get it growing, if the Government can keep a stable economic situation, and pay continues to outstrip inflation, which I am very optimistic about. Brent crude has fallen under $75, which means that gas prices are now barely above where they were before the invasion of Ukraine. That has improved since the autumn statement. Petrol prices are falling again. This morning, the 10-year bonds interest rate was under 4%. That is a sign that the pressure now is to lower interest rates. The overall Government economic policy is not only to balance the books and reduce taxation in terms of national insurance, which will help 29 million people, but to get interest rates down so that, when people come to refix their mortgages, they can do so at a more reasonable rate. Good progress has been made, but we will not be free with one bound; it will take Budgets, statements and steady persistence. That means not giving in to every request for extra spending, however worthy they are individually. I commend those on the Treasury Bench and the Chancellor of the Exchequer. He has put together a good package, and I look forward to what will happen in March.

Before I sit down, I will pay tribute to a Labour Chancellor, Lord Alistair Darling of Roulanish, who was a very modest but very competent man. He faced what would be anybody’s nightmare in the Treasury, with banks collapsing. I think that history will treat him well for his management of the economy at that very difficult time. He is missed by this House and I am sure the other place will miss him too.

[Mr Deputy Speaker (Mr Nigel Evans)]

I echo that tribute to Alistair Darling. I was in the House with him for many years. He was a great politician and an excellent Chancellor of the Exchequer.

David Simmonds will make the last Back-Bench contribution. We will then move on to the wind-ups. I anticipate at least one Division.

Financial Markets and Monetary Policy

Robert Syms Excerpts

Wednesday 5th July 2023 Commons Chamber

[Sir Robert Syms (Poole) (Con)]

It is a pleasure to be here and to see the Treasury Minister on the Front Bench for the debate. I appreciate that many of these matters are dealt with by the Bank of England, but that is part of the reason why I will raise a number of points.

I voted against quite a lot of lockdown, with one of the strong reasons being that if 7 to 9 million people were sitting at home and, at the same time, the Bank of England was printing substantial sums of money, there might well be consequences. We can see in inflation, the strikes and a number of other things the pernicious effect of money printing and inflation in the British economy.

During lockdown, the Government took on a substantial amount of debt. Many people who were sitting at home were paid reduced salaries, but they could not spend the money, so they built up substantial savings. There are debates among economists about the amount of those savings. Some think it is 4% of GDP; others 8%. The Office for Budget Responsibility puts the figure at around £228 billion. That has been powering the economy over the past several months. The OBR initially predicted that we would have a recession, but the economy has shrugged that off. It is highly likely that this year we will not have a reversal. We may have a cost of living crisis in pay and inflation, but there is still a substantial amount of money flowing through the British economy.

The amount of money printed and the fact that people were not producing anything have created a problem. As we saw from headlines last week, one of the reasons that inflation is sticky is that money is still flowing through the economy. Headlines last week reported that package holidays were more expensive because they were not being discounted. Second-hand cars are going for quite a high rate. Although hospitality has had problems with high energy bills, it is difficult in many areas to book a restaurant or a hotel. The discounting that we would normally see at certain times of year is not happening, which is why inflation has not fallen as much as we expected. Nevertheless, supermarkets suggested today that food prices are starting to fall, and energy prices are falling. I think it highly likely that inflation will fall, although it will be a little delayed.

There is a lot of money swishing around in the British economy. The Bank has been pushed into raising interest rates. The thing about interest rates is that, unlike 20 years ago when most people had variable rates, a lot of people are now on fixed-rate mortgages, especially those with larger mortgages. Therefore, there will be a lag, as there always is when interest rates are put up, but this time it will be substantial. My concern is that most of the impact of raising interest rates on the economy has not yet been felt. Every now and again, the Bank will feel pressured to keep raising rates, particularly at a time when financial markets test the Bank and we have a 24-hour news cycle. That will be a problem for the British economy because raising rates will not make much difference to the next financial year, but will have a big effect in 2025.

A number of people have expressed concern that we may have overkill in raising rates. Andrew Haldane, the Bank of England’s chief economist a while back—a very good economist with a good finger on the pulse of the British economy—is worried that the Bank will overdo it. David Smith wrote a good article in The Times today, in which he said “a little patience” needs to be shown. We will have a testing time over the next 12 to 18 months, because raising rates will not show up much in reduced spending in the shops, and there will be various pressures on the Bank to act.

What we actually need is masterful inactivity and a lack of action, to let things continue. We will have a fall in inflation. We will probably go to real interest rates, which we do not have at the moment. The Bank needs to keep calm, have patience and allow inflation to fall, and that will do the job that needs to be done, but it will take a particular while. There is pressure in the markets. Today, two-year gilts were sold at 5.668%, which is the highest for 20 years. The markets will keep on testing the Bank.

That is my first concern. I know that the Chancellor of the Exchequer rightly has regular meetings with the Governor of the Bank, although I am not sure they have cocoa or a glass of claret. The message from the Treasury and from Parliament has been, “Be patient. Do not get yourself pushed into raising rates and causing a major reversal in 18 months or two years’ time.” In the short term, there will be an effect on the economy in terms of housebuilding and the construction industry, but I suspect it will not have much of an impact on budgets until that time passes.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for raising this complex matter. He is outlining the issues for the banks and talking about ensuring patience and balance. My constituents tell me that they are worried about mortgage increases, as I am sure are his constituents and everyone here tonight. They worry about all the things he refers to, as well as increasing prices. What would he say to those worried constituents who might not have such patience and do not know whether they will have possession of their house in a year’s time?

[Sir Robert Syms]

Interest rates are a very blunt instrument and I am sure many people are worried. I hope that if inflation picks up trajectory and goes down, we will start to see interest rates top off and that some with fixed mortgages—many have quite long fixed mortgages—will feel much more relaxed. To pay tribute to the Chancellor, he has, with the lenders and in a very competent way, produced a very good package of forbearance for those who may have problems with mortgages. The Government have, in many respects, set a very stable environment for the economy, but there are worries. My principal worry about the Bank, independent as it is, is that it may overdo interest rate rises.

My second point concerns quantitative easing and quantitative tightening. Clearly, we did more QE than was probably needed, but we are where we are and it needs to be reversed. If you are going to try to eat an elephant, you have to do it one bite at a time. It will take us 20 to 25 years to reduce the stock of bonds that the Bank of England holds, and what I do not understand is why the Government are not having a more active discussion with the Bank about when it will sell the bonds. We have a situation where the Bank has put up interest rates, that leads to a fall in bonds and at the same time the Bank sells bonds, creating a loss that it passes on to the Treasury. Whereas if it waits three or four months, inflation is likely to fall and some pressure may come off bonds, and that may mean that it is able to sell bonds for a slightly higher amount.

Now, whether there is a sort of hair-shirted virility symbol in doing that, I think selling bonds into a market where you will lose more than you would otherwise do is not really very good husbandry. Ultimately, although the Bank holds the debt, as the Government are the underwriter of the debt, it is a little bit like saying to your estate agent, “Go and sell the house, I don’t care what the price is.” The Government should have a view so that when we discuss things with the Bank, we ought to try to do our best to minimise the losses on quantitative easing as we reverse the process. Some projections say that over the next 20 years the loss could be £100 billion. Well, if we are very careful in how we get rid of the bonds and it is a £90 billion loss, then that is a win.

Mrs Thatcher always had a problem that when she was trying to control broad money there were no instruments apart from higher interest rates, but if we have this stock of bonds over the next 20 years, it might well be that it could form a part of policy that we either speed up or slow down to reduce broad money. It might be something that can be used in policy terms. My view is that the Debt Management Office—which has an interest because it has to sell Government debt, and the Bank of England selling it at the same time does not help—the Governor of the Bank of England and the Chancellor really ought to sit down a couple of times a year and agree a joint letter that sets out the parameters for how they will unscramble quantitative easing with a quantitative tightening programme, which I think the markets would understand. I do not think anybody would think we were infringing on the independence of the Bank of England if we were actually trying to ensure that the taxpayer gets best value.

On almost anything, any budget or taxation, the Treasury is very careful in approving things. This could be a big budget item each year for the next several years, so I do not know why we are taking a relatively benign attitude of saying to the Bank, “Just sell it and we’ll pay the bills.” I should say that I was a Lord Commissioner for a while and I signed some of the documents that indemnified the Bank. [Interruption.] There is probably another Lord Commissioner laughing, but we ought to pay quite careful attention to how we unscramble this. Those who read the column by my right hon. Friend the Member for Wokingham (John Redwood) will know that he has raised this matter a number of times. It is worth raising, because we are at the early point of unscrambling quantitative easing, and slightly more interaction between the Government and the Bank of England is necessary.

My final point is about money supply. During the pandemic, we were printing money at 20%. Then the money supply dropped a little, to about 15%, and now it has dropped very substantially. M2 is nearly into negative territory, and according to the last Bank of England estimate, M3X and M4X are growing by between 1% and 2%. Too much money in the economy is a bad thing because it creates inflation, but too little money in the economy is a bad thing because it can cause a credit crunch. In his book on the Wall Street crash, John Kenneth Galbraith pointed out that the principal reason for the major worldwide depression was the fact that money in the United States economy declined by a third. That is what pushed the economy over the edge, because the banking system essentially collapsed.

We have gone from an over-exuberant money supply situation to one in which money supply is barely growing. This is not unique to Britain; it is a feature in the eurozone and in the United States, and we know that the eurozone will have further problems. Those countries still have differentials in productivity and trade imbalances, and there is money swishing through their system as well. There was even some discussion about the Bundesbank having to be bailed out because of bonds it has bought—and, unlike the Bank of England, it cannot print money because it does not have a currency.

There is a worldwide problem. Money supply is falling in the United States, in Europe and in the United Kingdom. If we assume the normal 18 months to two years, that takes us into 2025. My principal point is that if we raise interest rates, which has an impact after a long lag that will hit at the end of 2024 and the beginning of 2025, and if we have a reduction in monetary growth and credit which has an impact at the end of 2024 and the beginning of 2025, there will be two interactions that could cause growth to hit a brick wall.

The economy has changed substantially over the years. We now have internet banking, money flows very freely, and we have digital currencies. I think we ought to be looking much more carefully at what is going on in the British economy, and, indeed, at how money supply affects real output. However, I think we also need a monetary policy; I do not think we should withdraw completely and allow the Bank of England to determine these matters, and that may require us to look at levers to ensure that credit and monetary growth go up.

What I really want to do this evening is to put it on the record for those at the Treasury that if they read Twitter, they will find that many monetarist economists are beginning to think that the decline in money will cause severe economic dislocation. The rule of thumb is that there should be a smooth transition of money, not sharp falls or sharp rises, and I fear that we are not getting a smooth transition of money. As I have said, that is a feature of all the various zones, and it is something that the Government need to pay attention to and not ignore.

The Government do not mention money supply very much. The Bank of England has started to talk about it again, but I suspect that we have to learn what Mrs Thatcher would have told us some years ago: that money is very important, and it is a very important part of economic policy. We cannot totally vacate it and leave it to central bankers. One reason I always opposed the euro was that I did not think the problems of the world could be solved by unelected central bankers, and I think some of that goes for our own unelected central bankers.

The next time the Minister sees the Chancellor, I hope he will ask him to read the report of this debate and reflect on the fact that there is a problem with money supply. We may be going into a new era, although I do not know whether the supply will continue to be negative or whether it will pick up, and the Chancellor needs to have discussions with other actors in this area. If we are not careful, the combination of the lag on interest rates and the current credit squeeze could give an incoming Conservative Government a real nightmare in due course, in terms of the way in which they manage the economy. So let us give these matters a little thought.

I look forward to the Minister’s reply. Probably, in accordance with the normal Treasury line at the moment, he will reply by not saying very much, but I am sure he has listened.

Oral Answers to Questions

Robert Syms Excerpts

Tuesday 20th June 2023 Commons Chamber

[John Glen]

The Government will be relentless in their pursuit of illicit assets. As I said, we have sanctioned 24 banks with global assets of over £940 billion and 120 elites with a combined worth of £140 billion. Working closely with our allies, we have incrementally and sequentially tightened that net and immobilised more than 60% of Putin’s war chest of foreign reserves worth £275 billion. We continue to work closely with our allies to intensify those measures as opportunities arise.

[Sir Robert Syms (Poole) (Con)]

I have one or two constituents in Poole who lost their jobs because they were in companies owned by Russians who were sanctioned, and they have found it difficult to have an orderly wind-up because banks run a mile from loaning those businesses a reasonable amount of money to sort them out. I know of one situation where people have not been able to get P60s as the business cannot get money from any of the banks—they do not want to be involved in anything to do with sanctions—so it cannot pay the accountants who would produce them. May I have a word with the Minister about that? In some cases, we are going over the top, and it is affecting our constituents.

[John Glen]

Those points demonstrate how serious and extensive the Government’s actions are, but I recognise that sometimes unfortunate situations arise and I am happy to look at that case and take it back to the Office of Financial Sanctions Implementation.

Cost of Living Increases

Robert Syms Excerpts

Tuesday 25th April 2023 Commons Chamber

[Sir Robert Syms (Poole) (Con)]

Nobody should be terribly surprised that we face difficult economic times if a Government lock an economy down for nearly two years; if they pay 7 million, 8 million or 9 million people to sit at home; if they provide grants to keep companies in business; and if they intervene on an unprecedented level. Indeed, the intervention to get us through the worst pandemic since 1918 was almost on the scale of a world war. The Government are to be commended for doing what they did to save lives.

Following that, we have had a major economic crisis and war in Ukraine. That has caused an almost unprecedented spike in energy prices. The last time they rose as much was in 1974. Both those factors have had a big effect on Governments, businesses and individuals. The Government have done an awful lot to try to safeguard people’s living standards. They have provided a cap on energy prices, they have provided a £400 grant, they have put the pension up by 10.1%, they have put benefits up and they are providing special payments. Billions have been spent on supporting people, and that is quite right in an extraordinary time.

Of course we can always have a political argument about whether we should do more or do less, but the most important point is to have an economic policy that gets us through the immediate crisis and into better times when the sun will shine. The good news is that in the course of this year, inflation is expected to fall substantially. We already see a fall in input price inflation figures, and a fall will come through in food prices and energy prices in the course of the year.

There is a debate about whether we will have 2% or 3% inflation, but given that it looks from the negotiations as though pay will go up a little bit, it is clear that inflation will fall below the level of pay increases sometime this summer. We will then have a situation where living standards start to recover. I do not pretend that people will immediately turn round and say, “This is great!”, because it takes several months for people to feel that that has happened, but we are heading towards a situation where the big reductions in living standards that have taken place over the last 12 months, and which have understandably made my party unpopular and made the public mood very scratchy, will start to reverse.

Through sound financial policies, the Government have done their best to keep a stable economy and set us on a path for growth. Looking at the public sector finance figures today, I hope that, when it is prudently responsible to do so, we will increase incentives by reducing tax. That in itself will help some of those who are struggling.

I think the Government are on the right track. I have no doubt that this is a difficult time for many of our constituents, but I do not think anybody can complain that we have not done what we can. I look forward, over the next three, six and 12 months, to a better economic situation. Ultimately, the argument that we are having on the Floor of the House is this: if people feel miserable and badly off, they will vote us out of office, and if they feel that things are going better, they may well vote us back in. I am optimistic.

Finance (No. 2) Bill

Robert Syms Excerpts

Committee of the whole House
Wednesday 19th April 2023 Commons Chamber

[James Murray]

No; I am going to make some progress. The hon. Gentleman has intervened quite a lot and I am looking forward to his speech, as I am sure everyone in the Committee is.

When the Economic Secretary responds, I would be grateful if he could address the points set out by new clause 4, in particular by giving some much-needed clarity on the scale of the impact the Government expect their changes to pension allowances to have. Can he tell us how many people are expected to stay in work or return to work as a result of these policies? What sectors do they work in? How many of them are NHS doctors? Those are important questions, yet it has been hard to get exact answers from Ministers. The Office of Budget Responsibility has said the changes to pension contribution allowances will increase employment by around 15,000, but Paul Johnson of the Institute for Fiscal Studies has said that figure is “optimistic”.

When the Financial Secretary to the Treasury was asked on Second Reading of this Bill how many doctors would stay in the NHS because of these measures, she confidently quoted Department of Health and Social Care statistics that around 22,000 senior NHS clinicians would have been expected to exceed the £40,000 annual allowance this year. However, she may not have known that, at the very same time, the permanent secretary who oversees Government spending was appearing before the Treasury Committee, where the hon. Member for South Cambridgeshire (Anthony Browne) was asking her questions. When asked about the evidence on how many of those 22,000 NHS clinicians would have been discouraged from working by the cap, she said the evidence was “mixed” and that they would need to do further evaluation.

It seems clear that the Government simply do not know how many people will be brought back into work as a result of their changes to pension tax-free allowances. They certainly do not know how many NHS doctors will come back into work, and they have clearly failed to do the thinking on how a bespoke approach for NHS doctors could operate.

That is why we oppose the Conservatives’ pension changes and why we will be voting for a fair fix for doctors’ pensions to get them back into work. We will be voting to spend public money wisely. We will be voting against a Government who choose to cut tax for the richest 1%, while pushing up stealth taxes and council tax on working people across the country.

[Sir Robert Syms (Poole) (Con)]

I declare an interest, as I am in the parliamentary pension scheme and I think I am one of the older people in the Chamber today. Indeed, I am old enough to remember when the shadow Health and Social Care Secretary, the hon. Member for Ilford North (Wes Streeting), was musing about getting rid of the lifetime allowance—a matter of a few weeks ago, before the Government did it.

Doctors in Poole have said to me clearly over a number of years that at a certain stage of their career they have all the skills, but when they work they get annual bills, and when they look at their lifetime allowance it makes sense for them to retire. The tax policy of the lifetime allowance and the annual allowance have been improving the golfing skills of GPs and hospital doctors, because they get to a point where, if they do the extra work, they are penalised by the tax system and they say, “Why should I do this?” Many still do it, but it is totally wrong that we have a tax policy that discriminates against people who want to work and want to use their skills.

One key thing that the Government have done is put billions into the national health service to catch up with the backlog. If we are putting billions in and want productivity in our hospitals to improve, it is totally inconsistent to have a tax system in which the key people leading teams and doing tests find that it is a disadvantage for them to work. We will never get the lists down if people feel that they are penalised for working hard, and many want to work hard. I have talked to doctors since the changes, and the evidence in my constituency is that some have decided to delay their retirements, which they had already put in for, while others who had retired are now coming back to work part-time. The main improvements will be higher productivity and more patients being seen. I do not know whether there will be a massive advantage for doctors, but there will be for patients, because at the end of the day, there are people waiting to have tests and operations, and this will make the national health service rather more productive that it would otherwise be.

Also, because many early-retirement doctors will now stay working, they will continue to receive salaries and pay tax at the normal rate. I am somewhat sceptical about the £1 billion cost because, if significant numbers of people stay in our hospitals, they will ultimately continue to pay taxes and many of them are higher-rate taxpayers. The key point is that we have to focus on the patients, not on the providers of services. If the providers of services can work and have incentives to work, we will get through more patients, which is what people in this House want.

It is difficult to focus on the national health service alone. There are the anomalies not only of general practitioners—I come across general practitioners well into their 50s and nearing retirement who work only three days a week because of the tax system, and this measure will help them—but of dentists. We all get people writing to us about a shortage of dentists—particularly NHS dentists—and unless we fix these problems, which are pushing experienced dentists into early retirement, our constituents will not get the services that they need.

As my hon. Friend the Member for South Cambridgeshire (Anthony Browne) pointed out, many other high-skilled, high-paid public sector jobs are impossible for managers to manage because the people undertaking those tasks are penalised either by a big tax bill each year, or by the difficulty of seeing their lifetime allowances used, so there is no great incentive for them to continue working. If we have a problem in this country, it is one of productivity. This tax change improves productivity. If we improve productivity in people-facing services, such as those provided by dentists and doctors, the people waiting for those services will clearly be more and better looked after by the system.

When the Conservative party came into office, the lifetime allowance was £1.8 million, which was a significant sum 14 years ago. The reason it was reduced was that there was a suspicion that City slickers were putting millions into pension funds and not paying any tax. In reality, it has come down too far and is hitting people who we need to provide the skills that they have trained for over years. Doctors spend years training and decades getting experience, but at the time when they are needed most—to deal with the waiting list—they find that the pension system is forcing them into retirement or to play golf. What the Government have done is sensible.

I do not accept the figures from the shadow Minister, the hon. Member for Ealing North (James Murray). The main benefit of the changes will be for those in the health service, but we cannot differentiate between one person providing one skill and somebody else providing some other skill. From that point of view, the tax system has to be neutral. If we get into a position in which the more worthy people pay less tax, we may as well be saying, “Why should anybody in the NHS pay tax? Why not just give them a free ride?” That is an argument without a great deal of thought behind it. We have to have a neutral tax system without the Government trying to second guess about the public or private sector, or whether doctors are more worthy than others.

I think that the Government have done quite a brave thing, and it was the right thing to do. Government is about taking the right decisions, even if they are not always the most popular. They are the right decisions to provide better medical care for our constituents and to get the NHS backlog down. Of course, one of the Prime Minister’s key pledges is to do just that. This is one measure that will enable that by letting people work longer, harder and more productively.

Finance Bill

Robert Syms Excerpts

Committee stage
Wednesday 30th November 2022 Commons Chamber

[The Financial Secretary to the Treasury (Victoria Atkins)]

It is a pleasure to represent the Government in this important Committee. At the autumn statement, my right hon. Friend the Chancellor set out the significant economic challenges that we face and our plan to ensure that we have economic stability, encourage growth and protect our public services. Securing fiscal sustainability in a responsible and balanced way inevitably requires some difficult decisions. We do not shy away from that, but we have sought to ensure that the heaviest burden falls on those with the broadest shoulders.

The Bill’s first three clauses relate to the energy profits levy. Clause 1 increases the rate of the levy and addresses consequential technical matters. It will ensure that oil and gas companies benefiting from extraordinary profits due to exceptionally high prices will continue to pay their fair share of tax. As hon. Members will know, the Government introduced the levy in May this year as a temporary surcharge on the extraordinary profits being made on the oil and gas sector, driven by global circumstances.

[Sir Robert Syms (Poole) (Con)]

Will the Minister define “extraordinary”—not necessarily now, but during the debate?

[Victoria Atkins]

I will happily do so. My hon. Friend will know the definition of “extraordinary” in relation to the electricity generators levy. We will come to the profits levy in due course.

The Government are raising the rate of the levy from 25% to 35% from 1 January next year, bringing the headline tax rate for the sector to 75%. That is because commodity prices—particularly gas—are expected to remain above their long-term average for the foreseeable future. However, the Government want the oil and gas sector to reinvest its profits to support the economy, jobs and the UK’s energy security, which is why the levy has an investment allowance that means that businesses overall get a 91p tax saving for every pound that they invest, providing them with an additional, immediate incentive to invest.

Clause 2 makes changes to the rate of the investment allowance within the levy to ensure that the total tax relief remains broadly the same following the increase in rate to 35%. Specifically, the clause reduces the rate of the investment allowance from 80% to 29%, effective, again, from 1 January next year. That will maintain the overall cumulative value of investment reliefs, which means that a company investing £100 will be able to claim £91.40 back in tax relief. To be clear, the investment allowance will remain at 80% for investment expenditure on upstream decarbonisation, so that we continue to support the transition to low-carbon electricity production. That will be legislated for in the spring Finance Bill, following further detailed technical work and consultation with interested parties.

[Victoria Atkins]

Certainly. I hope the hon. Lady will agree that we all want to see more decarbonisation, which is precisely why we have set the net zero landmark achievement for 2050, as she knows. In relation to energy security, we have to be realistic about where we are. Much as some campaigners would like it, we cannot stop using oil tomorrow. We have to find reasonable and methodical ways of decarbonising, which is precisely what the investment allowances aim to do, while encouraging different businesses, and indeed those businesses, to invest in carbon-free and low-carbon forms of energy production.

Clause 3 will extend the levy so that it ends on 31 March 2028 rather than in 2025. Although the levy remains a temporary measure, the change simply reflects the fact that global factors are now expected to keep commodity prices, particularly gas prices, elevated for longer than was first anticipated. At the same time, the Government recognise that certainty is key for oil and gas investments. There will therefore no longer be an early phase-out of the levy ahead of the new March 2028 end date, according to prices.

Together, the changes introduced in clauses 1 to 3 will raise approximately £20 billion over the next six years. The total revenue now expected from the levy is just over £40 billion over the same period.

Clause 4 relates to rates of research and development tax credits. The changes it makes will ensure that taxpayers’ money is spent as effectively as possible. Despite the UK spending the most in the OECD on R&D tax reliefs, the current system does not provide good enough value for taxpayers. The cash value of the scheme that looks after small and medium-sized enterprises is currently three times that of the research and development expenditure credit. The corporation rate change due from April next year will make the issue worse by incentivising less R&D per £1 of taxpayer support. Sadly, the SME scheme’s generosity has also made it a target for fraud.

The clause will therefore rebalance the generosity between RDEC and the SME scheme, specifically by increasing the RDEC rate from 13% to 20%, decreasing the SME enhanced deduction from 130% to 86%, and decreasing the SME credit rate from 14.5% to 10%. The changes that the clause will introduce are also a step towards a possible simplified single RDEC-like scheme for all.

Despite raising revenue, this reform is forecast to leave the level of R&D investment in the economy unchanged. More broadly, the Government have recommitted to increasing R&D spending to £20 billion by 2024-25. Ahead of the spring Budget, we will work with industry to understand whether further support is necessary for R&D-intensive SMEs. I know that is the point that most concerns several colleagues; I suspect that we will hear more about it in due course.

Clauses 5 and 6 relate to income tax thresholds. As the autumn statement sets out, the path to fiscal sustainability requires us to ask everyone to contribute a little more towards our public finances, but we are doing so in a fair way: those with more are being asked to contribute more.

Clause 5 will set the personal allowance at £12,570 and the basic rate limit at £37,700 for 2026-27 and 2027-28. Those thresholds, which have already been fixed at the current levels until April 2026, will be maintained for a further two years until April 2028. I hope hon. Members will note that the personal allowance is still the most generous tax-free personal allowance of any G7 country. Thanks to previous significant real-terms increases, it will still be more than £2,000 higher by April 2028 than if it had been uprated by inflation since 2010, with an estimated 1.6 million more people taken out of paying tax. Approximately 30% of people do not pay tax as a result of the personal allowance. I hope Government Members are proud that we have achieved that.

This Government also enacted the largest ever increase to a personal tax starting threshold in July this year by raising the national insurance starting threshold to £12,570, ensuring that some of the lowest earners do not pay any tax. That means that in 2028 someone on the average salary of £28,000 will still pay almost £900 less in tax than if tax thresholds had gone up with inflation since 2010. The income tax higher rate threshold is still high enough to protect the vast majority of people from paying the higher rate of income tax; approximately 80% of taxpayers pay tax at the basic rate.

Clause 6 will deal with those at the higher end of the income scale, to ensure that our return to sustainable public finances happens in a fair way. It will lower the additional rate threshold from £150,000 to £125,140 from April next year, meaning that income above that level will be taxed at 45%. Only the top 2% of taxpayers will be affected by this measure, which is expected to raise £800 million per year by 2024-25, with the vast majority of revenue—more than 80%—coming from those who earn more than £150,000.

[Sir Robert Syms]

My hon. Friend is no doubt aware that, because some higher rate taxpayers lose their personal allowance, the marginal rate between about £100,000 and £120,000 can be as high as 60%. Has any thought been given to whether we should smooth that out, particularly if we are lowering the rate when you hit 45p? I think it would make for a better tax system. The artificial level needs to be dealt with, perhaps by ensuring that the withdrawal of the personal allowance happens over a wider income band.

[Victoria Atkins]

A great deal of thought went into the matter at the Treasury ahead of the autumn statement. The reason for our approach is that there are significant difficulties with the alternatives. I do not think that anyone would want a cliff edge at £100,000 where someone who earned £1 over that amount would suddenly lose the entirety of their personal allowance. We have tried in the past to taper it, although I appreciate that that has led to the situation that my hon. Friend describes. We have brought the 45p rate down to £125,000 precisely because that is the end of the taper rate for the personal allowance. We have tried to make things a little simpler; I will happily admit that the tax system is very complicated, but we have tried to simplify that part of it. I do accept my hon. Friend’s point about the marginal tax relief rate, which we genuinely continue to consider because we want to be fair to those who, through hard work, contribute as much to the tax system as they do.

On clause 6, I was saying that the vast majority of revenue—more than 80%—will come from those who earn more than £150,000. We say that the UK remains an attractive place to work and do business. The threshold is still comparable to those of other countries with a similar top marginal rate of tax, but in the circumstances we are in, it is fair that those who earn more contribute more.

Clauses 7 to 9 deal with other allowances. Clause 7 will reduce the tax-free allowance for dividend income from £2,000 to £1,000 in April 2023, and to £500 from April 2024. That will raise more than £3 billion by April 2028 and will make the tax system fairer by bringing the treatment of investment income closer in line with that of earned income. Keeping the dividend allowance at £500 will still ensure that people are not taxed on low levels of dividend income, because the combination of the personal allowance and the dividend allowance will mean that approximately 25% of people with taxable dividend income will continue to pay no dividend tax, even once the measure has come into effect. People will still be able to receive tax-free dividend income from investments made through their individual savings accounts, in which taxpayers can invest £20,000 each year.

Clause 8 makes changes to the capital gains tax annual exempt amount, or AEA. The AEA is the total amount of capital gains that an individual may make free of capital gains tax each year, and is currently set at £12,300. For the tax year 2023-24, the rate will be £6,000 for individuals; it will then be reduced to £3,000 from 2024 onwards. The clause also abolishes the annual uprating of the AEA in line with the consumer prices index, and fixes the capital gains tax reporting proceeds limit at £50,000. Reforming the system to reduce the value of the capital gains tax-free allowance supports strong public finances, and makes the system fairer by bringing the treatment of capital gains closer into line with that of income while still ensuring that individuals are not taxed on low levels of capital gains.

--- Later in debate ---

I hope Members will join the Opposition in supporting fairer choices on the tax system in our country and in pressing the Government on the urgent need for growth in our economy.

[Sir Robert Syms]

I rise, as I did on the autumn statement resolutions, broadly to support what the Government are trying to do. I am pleased that the Minister is in listening mode, which is good because not everything is perfect in these debates. Even if things are not quite right in the autumn statement, there will be further Budgets in the years ahead. I am sure she will have a very successful career and will be in the Treasury for a while, and I therefore hope she will take our comments on board.

Clearly, at a time when money is short and the demands of struggling people are high, it is more difficult to redesign the tax system in an ideal way. I raised in my second intervention the difficulty in which those earning between £100,000 and £120,000 find themselves, and I hope their marginal rate of 60% will be reviewed at a future date.

I have some sympathy with the comments about research and development. The Treasury has a habit of introducing incentives and then worrying about losing too much tax. Actually, research and development should be a priority for this Government. A business investing in new technology wants to know what will happen three, five or seven years ahead. Sudden changes to the research and development rate may undermine the funding model of new businesses. I am sure there will not be a change this year, but I hope we will review this area very carefully, because it was one of our better measures in previous Budgets.

My main remarks are about the windfall tax. I do not like windfall taxes, but the way in which the Government have designed this windfall tax is good because of the investment allowance, which is the subject of a number of amendments. The objective has to be to keep companies investing. We are blessed as a nation, as we have oil all the way around our coastline. The only question is, at what oil and gas price is it worth recovering?

What has happened in the North sea in my lifetime is a tremendous British success story. Getting oil and gas from the great depths of the North sea made us, at one point, self-sufficient. We still have a lot of oilfields that we can develop, but eking out further discoveries needs incentives. I am a bit worried about the windfall tax, but I understand the current political need to have one. I am pleased with the investment allowance, because it will encourage companies to invest, and that investment should help us to produce more oil and gas and should help the British economy.

Something else that has occurred in my lifetime is that Aberdeen and many other areas of the United Kingdom that are near oilfields have created thousands of jobs. Those people may no longer be working in our oilfields, but they are working in oilfields abroad. This is an area that we need to develop.

My concern about extending the windfall tax to 2028—I raised the word “extraordinary” in my first intervention—is that there will come a point at which prices fall, perhaps because there is peace in Ukraine or because other forms of energy come on tap. If we maintain the windfall tax, we will then do great damage to the oil and gas industry. We need a way of assessing what the Government do and do not consider to be extraordinary.

Some years ago, the Wood review of the North sea looked at what could be done to extend the life of the North sea fields. It would be helpful if the Government reported on where they stand on the oil price and the windfall tax. It might be better if they employed an expert, independent of both the Government and the oil and gas industry, to look at what is being done to assess whether investment is being hurt and whether the rates are appropriate. We assume a rate of 35% all the way up to 2028; we are not assuming a reduction, even if oil prices reduce.

I see the autumn statement as a little like a business plan that we might show to our bank manager. It does not mean that everything will necessarily happen as set out until 2028. If we expect the industry to invest, it is important that it knows what will happen to the tax rate if oil and gas prices change. North sea oilfields and gas fields are five, 10, 15 or 20 years’ worth of investment, so they are long-term, not short-term, investments. We need to focus on the short-term need to raise money, which even the oil and gas industry probably understands. The investment allowance is good, and it will encourage short-term investment, but there will be long-term damage if we are not flexible enough either to reduce the rates or to abolish the windfall tax when we get back to more normal gas prices.

[Caroline Lucas]

I am grateful to the hon. Gentleman for giving way, because my anger is becoming so extreme that I might burst at any moment. Does he recognise that this country has the world’s most generous tax regime for oil and gas companies? Does he recollect that BP’s CEO said the company is raking in more money than it knows what to do with? He compared his company to a cash machine.

Does the hon. Gentleman not think his constituents in Poole might be rather more impressed if some of the money that has been forgone by the Treasury instead went into making sure we have enough teachers in our schools and enough health workers in our hospitals?

[Sir Robert Syms]

I am glad the hon. Lady is irritated by my comments, because I think I am right. We want a very successful oil and gas industry. My constituency is on top of the Wytch Farm oilfield, which has been going for 40 years. Most of my constituents do not know they are on top of an oilfield, so they keep writing to me about oil and gas. The reality is that we will need oil and gas over the next 30 or 40 years. Apart from power, many products derive from oil and gas.

Oil and gas is a very successful industry for the United Kingdom. The hon. Lady and I probably disagree on most things, but we need to ensure that we keep the industry growing, which will create lots of jobs. This very successful industry creates a lot of wealth, which does not undermine the fact that many oil companies are now investing heavily in renewables. The North sea investments of Shell and many other major companies are consistent with decarbonisation. What we can do in producing more North sea oil and gas and in decarbonising a lot of that production is very exciting.

That is my main concern for the Minister. This has been a difficult year for the Government, partly because of worldwide factors. I look around the world and see shipping costs falling and inflation starting to tail off. I hope there will be peace in Ukraine, and I hope the Ukrainians win, which may well improve the economic situation over the next two years. The Treasury needs to be flexible in how it looks at the situation. When I listen to Opposition Members, I feel they have a very inflexible view of the oil and gas industry that I think would do us great damage. I am glad the Government are in listening mode, and I hope they listen further to the comments of Back Benchers.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

I should have reminded colleagues that when we are in Committee I am to be referred to as “Chair” or “Dame Rosie”.

I call the SNP spokesperson.