Draft Mortgage Credit (Amendment) (EU Exit) Regulations 2019
Draft Financial Services (Distance Marketing) (Amendment and Savings Provisions) (EU Exit) Regulations 2019
Seema Malhotra Excerpts(5 years, 8 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
My hon. Friend is making an important speech. Am I correct that he just wants clarity about whether there will be any effective reduction in the amount of consumer protection that will apply to UK consumers as a result of the regulations?
Jonathan Reynolds
I am extremely grateful to my hon. Friend for that question. That is exactly the type of concern that we on the Front Bench have sought to outline. As she knows, we need not only to onshore some regulations, but to prepare for the legislation that will be passed in the European context between exit day and the end of any transition. We are all particularly interested in the impact on consumer protection, the overall regulatory burden and the function of the regime, and the Minister has sought to provide clarity on those issues.
Those two specific points are all I wished to say about the second set of regulations.
European Union (Withdrawal) Act
Seema Malhotra Excerpts(5 years, 11 months ago)
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John McDonnell
What has happened is clear: the deal has not convinced the Government side and certainly has not convinced the people. It has not convinced a majority in the House so far.
The Government analysis estimated that the impact of trade barriers alone could mean an average drop in wages of 3%—£800 a year, in today’s terms. The regional growth impact is worst in our exporting regions such as the north-east and the west midlands. Other organisations have come to similar conclusions. The Bank of England said that GDP would be almost 4% lower by the end of 2023. The National Institute of Economic and Social Research put the damage at £100 billion in real terms.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Does my right hon. Friend agree that the uncertainty about EU free trade agreements, which currently cover our trade relations with more than 70 countries, is set to be hugely damaging to businesses up and down the country? They are currently worth more than £150 billion.
Draft Short Selling (Amendment) (EU Exit) Regulations 2018
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Short Selling (Amendment) (EU Exit) Regulations 2018.
May I say what a pleasure it is to serve under your chairmanship, Mr Robertson? It is a pleasure to be here again to introduce a statutory instrument. I thoroughly enjoyed the preparation for this debate.
In the context of the UK’s withdrawal from the EU, the Treasury has been preparing extensively for a range of potential outcomes, including a no-deal scenario. This statutory instrument forms part of the work that is necessary to ensure that there continues to be a functional regulatory and legislative regime for financial services if the UK leaves the EU with no deal and no implementation period. As colleagues are aware, we have had a number of debates in the House as part of that process. The statutory instrument is another part of that programme of legislation.
Short selling is the practice of someone selling a security that they borrowed, with the aim of buying it back at a lower price than they sold it for. Following the financial crisis, a number of countries, including the UK, acted to suspend or ban short selling due to the risks it posed to the stability of the global financial system. In response, the EU introduced the short selling regulation—the SSR—which introduced a harmonised regulatory framework for short selling and certain aspects of credit default swaps. That regulation relates to financial instruments that are admitted to trading or traded on a European economic area trading venue.
Given that the UK would be outside the EEA and the EU’s legal, supervisory and regulatory framework in a no-deal scenario, the existing legislation needs to be updated to reflect that and amended to ensure that its provisions work properly in such a scenario. The statutory instrument will therefore make a number of amendments to the SSR and related legislation, including certain parts of the Financial Services and Markets Act 2000, to ensure that they continue to operate effectively in the UK once the UK has left the EU.
First, the statutory instrument amends the scope of the regulation so that it relates only to instruments admitted to trading on UK venues and UK sovereign debt. Financial instruments admitted to trading only on EU venues will no longer be in the scope of UK regulation. Additionally, the statutory instrument amends the UK’s powers to address threats to financial stability or market confidence in the context of the SSR. Under the current regulation, the UK can take action on instruments for which it is the most liquid market in Europe or that were first admitted to trading in the UK. If the UK wishes to take action on an instrument that has its most liquid market elsewhere in the European Union or was first admitted to trading on an EU venue, it is required to seek consent from the relevant EU regulator. The statutory instrument deletes that provision so that those instruments will be treated in line with other third-country instruments. That means the UK will be able to take action against any instrument traded on a UK venue and, before using those powers, will consider threats solely to UK market confidence and financial stability.
Secondly, the statutory instrument transfers to the appropriate UK bodies functions that are currently carried out by EU authorities. For example, there will be a transfer of powers, such as the power to specify when a sovereign credit default swap transaction is regarded as hedging against a default risk, from the European Commission to the Treasury. Powers will also be transferred to the Financial Conduct Authority from EU supervisory bodies. Those include powers that will enable the FCA to make technical standards and take action on all instruments admitted to trading on a UK venue. The FCA is the appropriate regulator to which to transfer those functions because it has the necessary technical expertise to make technical standards, due to its existing supervisory responsibilities in relation to short selling.
Thirdly, the statutory instrument deletes provisions that facilitate co-operation and co-ordination across the European Union. Currently, regulators in member states must notify their counterparts in other member states before taking action to restrict short selling, with other regulators subsequently determining whether to apply similar restrictions. This instrument removes those provisions, along with the powers of the European Securities and Markets Authority to intervene in exceptional circumstances.
The statutory instrument makes technical amendments to existing UK legislation, particularly part 8A of the Financial Services and Markets Act 2000, to ensure that the UK can continue to respond to overseas regulators’ requests for information. It is the intention of the UK to preserve as far as possible a mutually beneficial working relationship with the EU, in the same way as we currently co-operate with non-EU regulators under existing provisions in the 2000 Act.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
What assessment has the Treasury made of the likely increase in the volume of activity at the Financial Conduct Authority and whether the resources are sufficient to deal with that?
John Glen
I can confirm that the Treasury worked very closely with the FCA before publication of this SI on 9 August. Over the two months before the regulations were laid on 9 October, we took feedback from industry and the regulator, and we are confident that they are in a very strong position to deal with the requirements that they would be given in the context of a no-deal outcome subsequent to the SI.
Let me make some progress—I am nearly there. The instrument maintains a number of existing exemptions. The current regulation provides exemptions from certain reporting requirements, restrictions on uncovered short selling for shares that are traded primarily in a third country, and the buy-in regime. Those will be maintained, and the FCA will now take on responsibility for publishing a list of relevant third country shares that are subject to the exemption—a responsibility that currently rests with the European Securities and Markets Authority. To ensure continuity at the point of exit, the FCA will recognise the ESMA list for two years following exit day, so that there will be no change to the exemptions.
Additionally, the SI maintains the exemption for market makers and authorised primary dealers under SSR. This exemption enables firms to carry out certain primary market operations and market-making activities without the requirement to disclose their net short position. Moreover, provided that they meet certain thresholds, those operators are not required to comply with relevant restrictions on uncovered short selling. Market makers will be required to join a UK trading venue and notify the FCA at least 30 days before exit should they wish to benefit from the exemption. However, the operators that have already done that will not experience a change.
The instrument deletes the conditions in the current regulation that must be met to be able to correlate sovereign issuer positions to sovereign debt. To determine sovereign debt correlation under SSR that can be used to offset the positions of sovereign issuers, those conditions are currently used. The deletion reflects the fact that the UK will be the sole sovereign issuer in question post-exit. The instrument will also provide the Treasury with the power after exit to set the relevant thresholds.
The instrument makes amendments that will enable UK credit default swaps to be used by market participants to hedge correlated assets and liabilities anywhere in the world, rather than solely in the EU. That will ensure that UK firms can continue to use UK sovereign credit default swaps to hedge correlated liabilities or assets issued by issuers in the EEA and, in future, across the rest of the world, too.
In summary, the Government believe that this SI is necessary to ensure that the regulatory regime relating to short selling and certain aspects of credit default swaps works effectively if the UK leaves the EU without a deal or an implementation period. I sincerely hope that colleagues will join me in supporting the regulations; I commend them to the Committee.
Alison Thewliss (Glasgow Central) (SNP)
It is not just the enthusiasm from the Finance Bill but from the Scotland win last night, that has brought me here this morning. I am delighted to be here, and to report that news to the Committee, if Members have not already heard.
I have many of the same concerns about this instrument as the hon. Member for Stalybridge and Hyde. I continue to be concerned that we are putting an additional burden on the FCA and the Treasury, and I am yet to be convinced that we have not just the expertise, but the numbers of staff and the capacity, to take this on in addition to all the other SIs that have already been laid before the House, or will be in the weeks and months ahead. I would like some more information from the Minister about the detail of that.
Secondly, with all these powers going to the FCA and the Treasury, what will be the role of this House in scrutinising the measures as we go forward? Obviously, these are very important regulations, given the issues that arose in the 2008 crash, which might not have happened if we had had greater scrutiny at the time. After 10 years of progress on developing regulations, we do not want to slip back again once we fall out of the European Union mechanism for co-operation. I want safeguards to be put in place to make sure, should we move away from the current co-operation mechanism, that we do not end up in the same circumstances as we were in during the financial crash.
I was concerned to hear the Minister discuss the deleting of co-operation provisions. Clearly, that is a result of coming out of the EU, but I want to know a bit more about what might replace those provisions in future, or what mechanisms will be set up for European co-operation in this area. It is in all of our interests to have those mechanisms—to have some means of working together—and just saying, “We will find a way of doing that in future” does not really cut it when we are talking about something that, if it is not done absolutely correctly, could bring down the entire economy.
Seema Malhotra
Further to my intervention on the Minister, and regarding the point that the hon. Lady has eloquently made, there appears to be an assumption that the volume of activity that this instrument may lead to will just be absorbed by the existing resources. Combined with the fact that it is not going to be business as usual post-Brexit, or indeed in the run-up to Brexit, does the hon. Lady agree that the issue of resources needs to be looked at more seriously as a result of this and other measures?
Alison Thewliss
I absolutely share the hon. Lady’s concerns. As I said, we already have many SIs, and lots more are coming down the line. I am sure that many more exciting Committee sittings will take place to examine the details of those SIs. I would like a bit more clarity about the numbers of people who will be required to implement this regime, monitor it, and make sure that it works in future.
I would also like to know a bit more about the implications of this SI. The explanatory memorandum states:
“Wherever practicable, the proposed approach is that the same laws and rules that are currently in place in the UK would continue to apply at the point of exit”,
and it goes on to talk about continuity, certainty and all of those things. It would be useful to know how tightly we need to remain aligned to existing measures, now that we no longer follow those rules or have any influence in making them. I would question the whole point of leaving the EU in the first place if we have to stay that closely aligned—what is the point in leaving and having an inferior deal? Of course that is not what Scotland voted for, and that remains the case. Those are my questions. Other points were raised by other hon. Members, so I am happy to sit down and let the Minister reply.
Oral Answers to Questions
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Robert Jenrick
The hon. Gentleman and I have discussed this matter. I have met stakeholders from the region on a number of occasions, including Councillor Judith Blake from Leeds. We have said that to progress this matter we want to see the Sheffield city region become fully functioning and the Mayor, who is now elected, able to conduct his duties. We think that is a reasonable way forward, so that local people in that area are not let down.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
The Chief Secretary to the Treasury (Elizabeth Truss)
Due to the Government’s support, we have already seen the cost of renewables fall significantly. Offshore wind has halved in price since 2015 and the costs of other technologies are also falling.
Seema Malhotra
It is very surprising that the Chancellor’s Budget did not make any new commitments on renewable energy. Even worse is the fact that that comes with slashed grants for electric vehicles and plans to remove support for small-scale renewables. This was described by RenewableUK as a major blow to the sector. It also comes with the pursuit of fracking at any cost. On one of the greatest challenges we face today—clean, low carbon sustainable energy sources—why are the Government rolling back the clock?
Elizabeth Truss
Since 2010, we have reduced carbon dioxide emissions across the economy by 26% and across electricity generation by 47%. We are making sure that those technologies are competitive, so that they work well in the market, and so that we deliver lower prices to customers and lower levels of carbon dioxide in our atmosphere.
Customs and Borders
Seema Malhotra Excerpts(6 years, 7 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I am glad to be able to speak in this debate, which was secured by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the right hon. Member for Loughborough (Nicky Morgan) and other Chairs of Select Committees.
A number of issues have been raised. In the interests of time, I do not propose to go over them, but they include the issue of no new barriers, the wider issues of regulatory convergence, the need to continue the ease of our trade and the dream of independent free trade agreements closing the gap created by what we will lose as a result of leaving the European Union, the single market and the customs union.
I want to raise a few of the wider economic issues that have not so far been addressed in this debate. The predecessor to the EU customs union first came into being about 65 years ago with a treaty establishing the European Steel and Coal Community. Some people seem to think that that makes it an anachronism. There is also an argument that the UK is now mainly a services economy, so an agreement that eases trade in goods is no longer as relevant as one that eases trade in services.
Putting aside the fact that goods remain around half of UK exports and so are still important and essential in their own right, the argument fails to grapple with the complexity of the modern economy that any stark dividing line between goods and services is false. Being in the customs union has relevance for services as well as for goods.
The UK economy is bound up in a complex network of EU supply chains for producing intricate products such as cars and pharmaceuticals. A substantial share of the value of these goods, ranging from 20% to 40% across most regions, according to estimates from the UK Trade Policy Observatory, is the services that go into them. Therefore, when a car rolls off the production line in Sunderland, Ellesmere Port or Luton, the value of that car includes the cost of accountants, administrators and auditors who the car company employs in making it. These services are then exported indirectly when we sell these cars abroad. Therefore, it is not only the goods but indirect services exports that rely on a near seamless passage that the customs union provides.
Robert Neill
The hon. Lady makes a very important point about the linkage between goods and services. A customs union does not deal with the issue of services, but does she agree that services do benefit indirectly, because many goods are exported with a financial service product attached—an insurance policy attached to a car and other forms of warranty, for example? The two are inter-linked.
Seema Malhotra
The hon. Gentleman makes an extremely important point and, indeed, takes my argument further. I thank him for his contribution.
The risk to these exports, both of goods and services, is not distributed evenly across the UK. The implications for regions in the UK, particularly the most affected regions, are stark. In Wales, the north-east and Yorkshire and the Humber—areas that can least afford an economic shock to their manufacturing bases—an estimated 55% to 60% of their indirect service exports goes to the EU, and they are therefore reliant on the customs union for efficiency and speed.
It would be a dereliction of our duty if we exposed regions, families and businesses to greater risk in a world that is already rife with uncertainty without a proper debate on the implications for their prosperity, especially as the most affected regions are also those least well positioned to respond to any shocks arising from leaving the customs union. As the City Region Economic and Development Institute at the University of Birmingham found, Brexit will aggravate, not reduce, inter-regional imbalances. Its research also found that the regions most exposed to Brexit are not remain-voting London and Scotland. For this risk of further damage, what do we have to look forward to in order to mitigate those effects? By the Government’s own analysis, whatever model for leaving the European Union that we take, there will be, at best, between 2% and 5% less growth over the next 15 years. That means lower wages than would otherwise have been the case, and lower tax receipts and therefore less in our public purse to redistribute resources to the very areas that expressed discontent in the referendum and, indeed, to go into our public services.
This issue is not just about economic divides. Perhaps I can come to my closing remarks with a few comments about Northern Ireland. It is clear to most—and I suspect even to the Government now—that there is no technological solution to achieving no hard border without infrastructure. The “Smart Border 2.0” report, which is often cited as an option, has rightly been acknowledged as insufficient by the Government. Perhaps I could quote from the report from the Exiting the European Union Committee. It says that
“we remain of the view that we cannot see how it will be possible to maintain an open border with no checks and no infrastructure if the UK leaves the Customs Union and the Single Market.”
I support the motion before the House today, because the customs union is vital to ensure that the complex supply chains within our economy continue to function effectively. This is also an argument based not just on politics and ideology, but on academic research and evidence. Anyone with a genuine interest in greater equity in the distribution of economic gains in our country cannot take these warnings lightly. For Ireland, supporting membership of the customs union is also about accepting the reality that, without it, a border in Northern Ireland is eventually inevitable. I cannot vote in any way in this House other than the one that makes a border in Northern Ireland less likely to happen.
Spring Statement
Seema Malhotra Excerpts(6 years, 8 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Is it not true that young people in our communities are paying the biggest price for this Government’s choices and failures? Local government faces a funding gap of £5.8 billion by 2020. The income of my local council, Hounslow, has been cut by 40% since 2010, with more to come. There are 400,000 more children in poverty than five years ago, and in some wards in my constituency the proportion is now hitting 40%. The Chancellor asked to be judged on his record. Is that a record of which he is proud?
Mr Hammond
Yes, it is, because the figures given by the hon. Lady are not quite right. There are 200,000 fewer children in absolute poverty than in 2010. [Interruption.] Absolute poverty is the relevant measure. The crucial point that she simply skirts around is that, after the financial crash during the last Labour Government, we could have gone down a route that many of our continental neighbours went down, which would have seen hundreds of thousands, if not millions, of young people cast on to the scrapheap of unemployment and left there potentially for decades. We did not go down that route, and we have seen youth unemployment in this country relatively low and falling, and that is a huge benefit to the next generation, who will be able to benefit from their engagement in the workforce and, as they go forward, from rising living standards.
Budget Resolutions
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John McDonnell
That is a process of bringing MPs together as individuals, not as party representatives—let us be absolutely clear about that. We look forward to any proposals that come forward for consideration from any source. If we can find a practical way forward, we certainly will.
The most important thing is that we have an emergency at the moment. We need £2 billion now, not over three years, because people are suffering now. Families are imploding. I felt a sense of relief when it was trailed that we were going to get £2 billion. I then felt extreme disappointment when we were then told it would be £2 billion over three years. That was never mentioned in the press releases before the announcement.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Does my right hon. Gentleman agree that the January figures for those waiting more than four hours for accident and emergency, which at 86% are the worst on record, are another example of how our health and social care systems are at crisis point?
John McDonnell
As always, my hon. Friend has pre-empted my remarks. Not only did the Government fail to address social care yesterday, but they failed to address in any way the crisis in our NHS. It was completely ignored.
Ahead of the autumn statement, Labour and others were warning that the NHS was in crisis. It was in crisis before the winter, but the Chancellor could not find a single penny for the NHS in the autumn statement. The Royal College of Nursing now says that the NHS is in its worst crisis ever. Ahead of the Budget, the British Medical Association called for another £10 billion for the NHS. As my hon. Friend has just said, A&E waiting times have today got worse again—more people are waiting longer. It is astonishing that there was a complete failure on the part of the Chancellor in the Budget to recognise the scale of the crisis that our hospitals and doctors face. It is a crisis that the Government created by cuts.
Instead, we have a £100 million fund to enable GPs to triage in accident and emergency. The capital spend will build rooms for GPs in hospitals with no GPs to staff them, because no revenue funding is associated with the proposal.
Sajid Javid
We have heard no apology from the hon. Lady for the fact that during the 13 years in which Labour was in power, there was an almost threefold increase in the national debt and the country was left with a larger budget deficit than any other major advanced economy.
Seema Malhotra
Can the Secretary of State name a promise that the Government have actually kept in relation to the economy?
Sajid Javid
One kept promise on which the hon. Lady could have focused is the creation of 2.7 million jobs in our economy since 2010. They call themselves the Labour party, Madam Deputy Speaker, but they could not care less.
Sajid Javid
The right hon. Gentleman makes a good point about the importance of public health, and he is absolutely right to pay tribute to the former Health Minister, who is now the Financial Secretary to the Treasury, for the work she did. I hope he will agree with me that the work that my hon. Friend and others did shows that they have taken this issue seriously. Some of the measures that the Chancellor talked about in his Budget statement—the so-called sugar tax, for example—will help in the long term with prevention, especially in the case of diabetes.
Health and social care are not the only public services that we are investing in. The Budget funds a further 110 new free schools. It funds free school transport to include all children on free school meals who attend a selective school. It also provides an additional £216 million of investment in existing schools.
When I was a teenager, my comprehensive school refused to let me study the A-levels of my choice; the people there said that it would be a waste of time and that I should leave school and just go and get a job instead. What I did was get on the bus and go to the other side of Bristol to sign up at Filton Technical College. I am proud to call myself a graduate of FTC. The education I received there was second to none. Without Filton, I certainly would not be standing here today—so you can blame them if you wish I wasn’t.
Many opportunities were opened up by my time at Filton, but for years afterwards I would still see eyebrows raised and sneers barely supressed when I said that I had been to a technical college. For too long in this country there has simply not been parity of esteem between valuable technical education and more academic study. As Business Secretary, I began the process of changing that, including by creating the Institute of Apprenticeships. I am very pleased that the introduction of T-levels announced yesterday will continue that process.
We are following the work carried out by Lord Sainsbury, Baroness Wolf and other experts in this field to radically improve technical education, and in doing so we are investing an additional £500 million a year in our 16 to 19-year-olds. We will also be offering maintenance loans for those undertaking higher level technical qualifications at the new institutes of technology and national colleges.
Seema Malhotra
Notwithstanding the challenges Labour has posed on the Budget, I welcome the T-levels and the emphasis on technical education. I think the Secretary of State will acknowledge that Labour Members have also argued for an increase in vocational education. This sends a very important message to the young people in my constituency who I talked to yesterday that there is great value in having this alternative. The challenge will be to integrate it well enough in the workplace so that it leads to real, skilled jobs in the future.
Sajid Javid
The hon. Lady rightly points to the challenge of ensuring that employers recognise the changes. Initiatives such as the new Institute of Apprenticeships, which is employer-led, will help to set the standards for the technical training. That will make a difference in ensuring that employers welcome the new qualifications.
The measures I have talked about so far will improve lives right across the country, but we recognise that local areas across Britain want greater control of their own services and infrastructure. The Government, the Greater London Authority and London Councils have reached an agreement on further devolution for our great capital city. This includes exploring a pilot for a development rights auction model and joint work to identify what elements of the criminal justice services can be delivered locally. We will also be agreeing a second health and social care memorandum of understanding to support work on prevention, integration and estates reform.
However, there is more to this country than its capital city. I should know: I was born in the north, raised in the south-west and elected in the midlands. Today, the Chancellor is in Dudley, launching our midlands engine strategy. This follows the northern powerhouse strategy published after the autumn statement.
Rishi Sunak
I am not sure that I recognise the right hon. Gentleman’s figure. The schools budget has been protected, and the Government are rightly consulting on the iniquity in the current funding system which means that constituents in my rural area are worse off to the tune of hundreds of pounds per pupil compared with very similar pupils in other parts of the country. I am delighted that the Government are addressing those iniquities in their consultation.
Rishi Sunak
If the hon. Lady does not mind, I will make some progress and come back to her.
I begin with small businesses. My predecessor, Lord Hague, has a well-documented enthusiasm for beer, so it will come as no surprise to Members that pubs are a cornerstone of my rural constituency’s economy. Following in his footsteps is difficult enough, but it is impossible for me to visit a pub in my constituency without seeing a picture on the wall of William pulling a pint with the landlord. Not only is my constituency home to more than 200 pubs, but I am proud to say that it hosts the Campaign for Real Ale’s 2017 pub of the year: the community-owned George & Dragon in Hudswell. I was delighted to be in Hudswell just last Friday when the landlord Stu Miller, his family and team received their award in the loud company of everybody from the village.
In recent months I, like many other hon. Members, raised concerns that the revaluation of business rates risks penalising such small, enterprising businesses. I am delighted to say that this was the Budget of a Chancellor who, like any good barman, listens to our concerns. For the landlords who run them, the jobs that depend on them and the communities that enjoy them, this Budget’s £1,000 business rate discount will make a real difference to many pubs at a time when money is still tight.
But pubs are not the only rural businesses that the Budget will help. Auction marts and livery yards across North Yorkshire have seen particularly steep rises in their business rates because the idiosyncrasies of such companies are not well understood by officials and because the last revaluation coincided with the disastrous foot and mouth epidemic. Such idiosyncrasies are more than even the most ingenious civil servant could be expected to foresee. Auction marts, livery yards and riding schools are particularly important to the fabric of our rural community, so I thank the Chancellor for the extremely welcome creation of the new £300 million discretionary business rates fund, which will put decision making back in the hands of communities and allow businesses in constituencies such as mine to benefit from the local knowledge of councils in ensuring a smooth transition to the new schedule.
Rishi Sunak
What I say to customers and to the hon. Gentleman is that I am sure that the Minister doing the wind-up will be able to say how much better off customers are from having benefited from several years of freezes in beer duty that would otherwise have been put in place. I am sure they would also like to hear that this Government will be consulting on new duty rates for white cider and still wine to see what more could be done to help customers who drink those alcoholic beverages. Lastly, let me say that I would welcome him back to my constituency any time and will be happy to share a pint with him next time he is there.
Seema Malhotra
I have not yet been to a pub in the hon. Gentleman’s constituency, but I recognise the benefits for pubs in my constituency. May I extend the question about customers in pubs, many of whom may be self-employed? Have they reflected with him on their concerns about the proposed rise in national insurance?
Rishi Sunak
I thank the hon. Lady for raising that issue. If she will allow me, I will deal with that exact point later in my speech.
The last measure in support of local businesses that I wish to highlight is the £690 million fund available for local authorities to address urban congestion. Congestion is not something one would ordinarily associate with the rural idyll of North Yorkshire’s villages and market towns, but the residents and community of Northallerton are relentlessly frustrated by the level crossing near our vibrant and diverse high street, as its impact on local business is substantial. I have convened meetings of local authorities and Network Rail to discuss plans to alleviate the congestion, and I very much hope the Chancellor’s new fund can help us.
As the Chancellor so rightly pointed out in his Budget speech, supporting our businesses is a means to an end, not an end in itself. If our children are to benefit from the more than 2 million new jobs created since 2010, they will need the right skills. The 2.4 million apprenticeships created in the last Parliament are a momentous achievement, but we must also recognise that although most of us think of apprentices as young people, 16 to 19-year-olds—school leavers—account for less than 10% of the increase in new apprentices. That means that too many school leavers are still sticking with an inappropriate classroom education rather than a first-class technical one. The Chancellor’s announcement of new T-levels is a crucial step in redressing the balance and closing for good the gap between the classroom and the factory floor, for which our economy has paid a high price for too long. I therefore welcome the new half a billion pound investment in increasing training hours, the streamlining of technical qualifications, the provision of high-quality work placements and the introduction of maintenance loans. Taken together, that is a powerful package to help to ensure parity of esteem between technical and academic education.
Yet I also urge Ministers to continue to look carefully at my campaign, supported in the recent industrial strategy, to create a UCAS-style system for apprenticeships. This branded, one-stop-shop portal would not only end the classroom divide between those applying to university and those applying for apprenticeships, but, by bringing everything together in one place, help businesses to connect more easily with young apprentices in schools.
Turning to national insurance, I, like many Conservative Members, have always believed in low taxes as a spur to economic growth, but when a Government inherit a deficit of £100 billion the greatest priority must be returning to sound finances and doing so in a way that is fair. I believe it is right that those who benefit from public services make an appropriate contribution to paying for them, and that is what this Budget’s changes to national insurance will ensure. Sixty per cent. of self-employed workers—those earning less than £16,000—will see a decrease in their national insurance contributions as a result of the removal of the regressive class 2 band. Workers earning up to almost £33,000 will be no worse off when these changes are taken together with the increases to the personal allowance, and for those earning more the average increase in contributions will be a few hundred pounds. It is right to ask: is this fair? I believe that it is.
Historically, different rates of national insurance for the self-employed and the employed reflected significantly different benefits and access to public benefits, but that difference is no longer there. Indeed, changes to the state pension, which is partly funded by national insurance, mean that self-employed workers now benefit from an extra £1,800 annually in pension—this is something they would need to save up to £50,000 for to receive in the private sector. Similarly, self-employed couples starting a family can now benefit from almost £5,000 in tax-free childcare support.
In this House, I always hear calls for investment in public services, such as this Budget has provided for in social care, but those investments need to be paid for. Her Majesty’s Revenue and Customs has estimated that it is losing about £5 billion a year from the increasing trend of self-employment, so it is right that we make small changes to ensure that everybody contributes to the public services and benefits we value. It is important to recognise that even after these changes the tax system will still recognise the particular issues faced by self-employed workers and will favour them in its tax rates and treatment. They will benefit from a lower rate of national insurance than employees; they will still not bear the cost of employers’ national insurance, which is levied at a substantial 13.8%; they will still have the ability to offset losses and gains over years; and they will still benefit from a more generous treatment of tax-deductable expenses. I am also encouraged that in the longer term the Government are committed to looking at the whole issue of the increasing trend towards self-employment, and to ensuring that we reflect those changes in the economy in our tax system and ensure that everybody is treated fairly. This small change is thus necessary to protect the things we value, and it is fair and proportionate.
In conclusion, we have all learned to be a little cautious of economic forecasts, but if the Office for Budget Responsibility is right, the first students to sit their T-levels will do so in a country with 1 million new jobs, double today’s productivity growth and, for the first time in two decades, national debt falling as a percentage of GDP. This Budget, like the ones that came before it, is building a country where our businesses will not have to pay for the profligacy of the past and our children can look forward to a bright future. Nothing could be more important than that, so I commend this Budget to the House.
Ms Eagle
Exactly. My hon. Friend will agree that, with their cynical use of short-term advantage and the way they have electioneered on it, their pledges and the way they have campaigned, the Conservatives have actually made it much harder for us to make the reforms that we as a society need to make to our tax and benefit system and our social care system. That is the ultimate in irresponsibility.
Yesterday, the Chancellor tore up the tax lock. He can dance on the head of a pin and claim that the lock did not apply to class 4 national insurance contributions all he likes, but that was not on the side of the bus and no one will believe a Tory election promise ever again. The Chancellor has learned a tough lesson: if he wants to be for the just about managing, he needs all the tools of government available to him. He cannot tax-lock himself out of all his options and end up having to plug the gap in social care by taxing the self-employed. The Government have been hoist by their own cynical petard.
We are willing to work with the Government on both the challenges that I have mentioned—social care and how to arrest the alarming rise in self-employment, which brings precariousness for far too many people. Self-employment is often just apparent self-employment, and it is quite often very low paid and precarious. We need to ensure that the self-employed are properly protected and have proper access to the protections that employees take for granted.
Seema Malhotra
As usual, my hon. Friend is holding us spellbound with an excellent speech. The former Secretary of State for Work and Pensions, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), in a sense blamed the Tory manifesto for being wrong more than he blamed the policy that the Government introduced yesterday and the way that they did so. Does she agree that those are both problems that the Government clearly need to learn from?
Ms Eagle
I agree. We saw a cynical dash from the Conservatives to make short-term promises to get elected, and we saw them campaign even more cynically on those promises in the hope that when they had to be broken nobody would notice. But the Government’s actions are making it much harder for us to have cross-party support on anything, and they have also made it very difficult for anyone to believe any single one of their manifesto pledges again. The Government have increased distrust of politics. That is the legacy of their behaviour on social reform and tax reform, which are vital if we are to prosper in the future.
Mr Raab
It is good to at least start on a point of consensus.
When I hear the leader of the Labour party or the shadow Chancellor talking about the economy, I sometimes feel that there is a parallel universe. I listened carefully to the right hon. Member for Hayes and Harlington (John McDonnell) on “The Andrew Marr Show”. He explained that the economy was not growing fast enough. In fact, the British economy was the second fastest growing in the G7 last year, as it is this year, despite all the doom and gloom around Brexit. He needs to look at the economic facts.
The right hon. Gentleman went on to say that real wages are falling, which hon. Members have returned to on several occasions. I will talk about cost of living pressures, but the official figures are crystal clear. Real wages have been rising since September 2014 and, according to official data, are set to continue rising. [Interruption.] If the hon. Member for Heywood and Middleton (Liz McInnes) wants to intervene, I would welcome that, but otherwise she should go and check the facts. The raw truth is that employment is at a record level, real wages have been rising since 2014, income inequality—I know that she, like me, cares about that—is at its lowest in 30 years, the FTSE is at a record level, and there has been a fresh wave of investment since the referendum, including, most recently, the commitment by James Dyson.
Seema Malhotra
Does the hon. Gentleman agree that although he may be able selectively to cite headline statistics, there is a reality in our constituencies that comes through in our casework? Schools and parents tell me about people not being able to afford school uniforms, and people are relying on food banks. Does he acknowledge that we need to face that reality and that our economy and economic policy should deal with those things?
Mr Raab
I welcome the acceptance of the official figures at least, which was implicit in what the hon. Lady said. I accept that there are cost of living pressures, not least given that inflation is creeping up, but let us face it: inflation is still well below the Bank of England’s headline 2% target. I will address cost of living challenges and what we should do about them, but we live in the real world and we should not chase the Labour party leadership’s socialist pipe dreams, because they will do nothing to deal with cost of living pressures other than precipitate a lack of confidence and investment in the economy and falling living standards as a result of increasing unemployment.
I thought that the hon. Lady was going to intervene to welcome Dyson’s investment in a new 517-acre research facility in Wiltshire. Jaguar Land Rover is investing in creating the new Velar model, which will be exclusively manufactured in Solihull. The wave of investment is coming right across the country. There is a resilience and strength in the British economy, and fresh investment and enthusiasm about the opportunities that lie ahead. Having said that, I want to be careful not to allow any sense of complacency to creep in.
This Budget is all about the whole package. In what I like to think is my still relatively limited time in this place, I have never known a Budget that has not involved compromise. Trying to put together a package is the serious business of government. Hon. Members of all parties can be quite quick to allow the positive stuff that we like, whether that is taxation cuts or extra investment—I have been guilty of that in the past—but we also have to ’fess up and face up to the difficult decisions that have to be made. That is the serious business not just of politics, but of government. Look at what the leader of the Labour party said yesterday; he and his party are so unfit to govern because they are not willing to face up to those difficult decisions.
Kerry McCarthy
As I said, we have to acknowledge that the self-employed are in a very different situation from people who have an employer who takes care of all their needs. The Chancellor has singularly failed to recognise that. He seems to be blaming the self-employed for not reading the non-existent small print in the Conservative manifesto. He cannot get away with saying that this is not a broken promise, given what the Conservatives said in 2015.
Seema Malhotra
My hon. Friend makes a point about her family. My father was self-employed when I grew up, also in a family of eight. I was in a similar situation. We never had a holiday when we grew up. Our summer holiday was a daytrip to the seaside with food that we took for ourselves. That is the reality of the struggle it can be to make ends meet when people take that risk. Does she agree that this added pressure, when there are already pressures on family budgets, could be what turns those who are just about managing into those who are no longer managing?
Kerry McCarthy
I very much agree with my hon. Friend and recognise the points she makes about the family she grew up in.
Surely we want to encourage more people to become entrepreneurs—to strike out on their own and create the thriving businesses of the future. Some of our most successful entrepreneurs started out as self-employed, then set up small and medium-sized enterprises, and went on from there. I think that this short-sighted tax grab by the Chancellor will deter people from doing that.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Thank you for giving me the opportunity to contribute to today’s Budget debate, Madam Deputy Speaker.
It is fair to say that today’s headlines are not what the Chancellor might have planned: “Spite Van Man”, “Tories break tax vow”, “Phil Picks a Pocket or Two”, “Rob the Builder! White Van Man gets battered by Budget”, and that is just to name a few. It is a good example of how, when one does things in a hurry, one gets things wrong. The Chancellor got it wrong yesterday. If he takes anything away from the last 24 hours, it will be that he made the wrong choice at the wrong time and in the wrong way. That is why Labour, along with many Government Members, will oppose the increase in national insurance for the self-employed. It is a broken promise and the Chancellor is rightly in for a rocky ride.
The Chancellor has used his first Budget to continue with tax giveaways to those at the top, while hitting self-employed low and middle earners for £2 billion to fill his own black hole. The Association of Independent Professionals and the Self-Employed describes this tax hike as an additional burden upon individuals who are already subjected to costly excessive bureaucracy. Anyone who is self-employed and earns more than £16,250 a year will have to pay more tax. Under the proposals, a self-employed person earning £20,000 will pay almost £100 more in national insurance from next year and a self-employed person earning £30,000 will pay almost £300 more. Up to 8,000 self-employed small businesses in my constituency could be affected by the change. For a self-employed earner bringing up a family on about £25,000, that could be about £15 to £20 a month out of money used to pay for school trips, school uniforms or putting food on the table. At the same time as inflation is going up and average wage growth is being revised down, this measure, implemented in this way, will lead to yet another squeeze on household incomes. The last thing we want is for families to be borrowing more just to make ends meet. The just about managing could become the just about managing no longer.
The self-employed are the engine of the UK economy. I have twice had periods of self-employment and I know the challenges they face. There is not the back-up and security of an employer to fund their pension, pay for a training course, cover them with another member of staff if they are off sick, or provide statutory holiday pay. It is hard and it is stressful, alongside the rewards of being independent and entrepreneurial. Due to income fluctuations, it can be harder to get a mortgage or a rental agreement.
The Budget should have been a chance for the Government to show the self-employed that they are on their side. Indeed, the biggest difference in tax take between self-employment and employment lies in the 13.8% employer national insurance, not the national insurance paid by individuals. If the Government are serious about equalising tax treatment, they should focus on how to work in partnership with the self-employed to balance and share the risk for those who are doing the right thing. The small and medium enterprise community is the backbone of our economy, and the Government should bring forward such proposals only after proper dialogue and consultation with it.
I want to focus on a few other points. Productivity growth is set to be revised down again, even after the UK productivity gap widened last year to the worst levels since records began. After seven years of Tory Government, we still lag behind Germany and the US by more than 30%. As the Chancellor said at the time of the autumn statement, the productivity gap is well known, but it is shocking none the less. The downward revision of productivity is not just due to Brexit. It is a reflection of the Government’s strategy and investment record: their lack of achievement, rather than their recycled infrastructure plans. At some point, the Government will have to take responsibility for their poor record. They now have no one else to blame.
When the Government came to power, they stopped the Building Schools for the Future programme, and two schools in my constituency were affected. We can now see the outcome of the Government’s neglect in favour of a blind ideological pursuit of, and almost exclusive support for, free schools and grammar schools. The National Audit Office calculates that £6.7 billion is needed to bring existing school buildings in England and Wales to a satisfactory standard. Ministers are choosing to give billions of pounds to fund new free schools, while existing schools are crumbling into disrepair. That is not my view, but the conclusion of the Whitehall spending watchdog. The Chair of the Public Accounts Committee called for the money to be reassigned and diverted to existing buildings, arguing that taxpayers’ money could be used to fund much-needed improvements.
Another challenge is 4G coverage. The UK is 54th out of 80 countries surveyed for 4G coverage, with levels here lower than in Bulgaria, Albania and Romania. This is the fifth time the Government have announced this highly limited roll-out of fibre broadband. Once the roll-out is complete, only 7% of homes and businesses will have benefited.
This Budget and previous Budgets have cut corporation tax, which will be 19% this year, 18% next year and 17% the year after, removing £15 billion from public finances in this Parliament. This is a direct cost to the taxpayer. The irony is that not a single business, large or small, that I have talked to, and I talk to many, has put corporation tax levels at the top of their wish list. They have raised infrastructure; affordable housing, so that employees can live and work near where they work; education and skills; and public transport and its affordability. The decision to go ahead with those corporation tax cuts is a self-dug black hole that the Government need to fill. They are plugging the gap with the earnings of the self-employed and cutting the amount spent on children’s education.
In recent weeks and months, teachers have told me about growing parental poverty, and about kids coming to school hungry or without clean school uniforms. Parents are sometimes unable to afford school trips. Schools are having to cut teaching posts and non-teaching welfare and support staff, curriculum teaching time is being reduced and the school day is being shortened. As pupil numbers increase, teachers face increasing class sizes. Increasing numbers of children face mental health conditions but are unable to get the support they need. How can the Government be proud of that record, which is the reality of what our wonderful schools face—the worst they have known in a generation?
The Government should delay or abandon their corporation tax cuts and support schools, which work hard to ensure that the children of our country get the education they need. Indeed, at a minimum, they should delay the application of the apprenticeship levy to schools.
It is worth mentioning one other lost opportunity. In the 2015 Budget, the former Chancellor announced that he had hiked the tax take on dividend income by 7.5%. That change took effect only in April 2016, meaning that people could bring their dividends forward by a year to avoid it. The OBR estimates that, once other factors are taken into account, pre-announcing the policy cost the Treasury £800 million and handed shareholders that same amount; and that each of those individuals withdrew an average of £30 million in dividends and avoided £1.1 million in tax. That is a devastating conclusion and another example of how the Government continue to give to those who already have and take away from those who need the most.
We need better than this. We need a strategy that addresses the needs and challenges that businesses and families in our constituencies face. We need a proper plan for funding public services, an economic plan that suggests a clear sense of direction, an honest assessment of the risks of Brexit, and a sensible response to those risks. What was missing from the Budget was a proper vision of our future and a pathway to get there. It was an unfair Budget, it made the wrong choices and is set to leave us poorer and less prosperous as a nation.
Oral Answers to Questions
Seema Malhotra Excerpts(7 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Jane Ellison
I am extremely well aware of the points my hon. Friend makes, not least, as I say, because of the role I last held in government. We look carefully at all these things, particularly the issue of white cider.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
The Chancellor of the Exchequer (Mr Philip Hammond)
The Government continue to support small businesses to access the finance they need to grow through the British Business Bank, which supports almost £3.4 billion of finance to 54,000 smaller business. In the autumn statement, I announced an additional £400 million of funding for the bank. We also reaffirmed our commitment to the business tax road map, including the permanent doubling of the small business rates relief and the extension of the thresholds for the relief, so that 600,000 small businesses—occupiers of one third of all business properties—will pay no rates at all.
Seema Malhotra
Federation of Small Businesses research says that over a third of small businesses expect their business rates to increase from 1 April. Small shops will be hit hard, while large supermarkets are set to gain. In Hounslow, the estimated 12% increase has led worried businesses to tell me that they expect to see jobs and investment cuts. The Chancellor would not want his fiscal decisions adversely to impact on growth and prosperity, so will he now commit to righting this wrong in his Budget? Will he also support Labour’s five-point plan to help small businesses through the revaluation?
Mr Hammond
I think the last thing small businesses need is any help from the Labour party. From what I have seen of Labour’s plans, that would be the final straw for most of them.
As we have said, we recognise that some small businesses are facing very substantial percentage increases, even where the actual amounts might not be very large, and that that can be difficult for businesses to absorb. We have committed to coming forward with a proposal that will address those who are hardest hit by that phenomenon.
Savings (Government Contributions) Bill
Seema Malhotra ExcerptsMonday 12th December 2016
(7 years, 11 months ago)
Commons ChamberRead Full debate Savings (Government Contributions) Act 2017 View all Savings (Government Contributions) Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 12 December 2016 - (12 Dec 2016)
Mr Thomas
My hon. Friend makes an important point. We need much more ambition for credit unions and for financial mutuals and co-operatives more generally. I am thankful for his intervention.
Ministers claimed in Committee that a multiple provider model for Help to Save would not offer value for money, yet as far as I can see they have produced no costings to justify that claim. It is not as if Ministers are dealing in the case of NS&I with a private company demanding an exclusive arrangement as it feels threatened by the competition that credit unions can offer. NS&I is a state-owned bank, effectively, and is responsible to the Treasury. Indeed, I understand that the Minister responsible is the Economic Secretary to the Treasury, who is also responsible for policy on credit unions. NS&I has some 25 million customers and £135 billion in assets. By comparison, credit unions across the UK have £1.37 billion in assets, less than 1% of the value of NS&I’s investments. In short, credit unions are no threat to NS&I.
NS&I is under the control of the Treasury, as I have said, and it is in Ministers’ hands, or it was until the start of the House’s proceedings on this issue. The House now has the opportunity to decide whether credit unions should be allowed to offer the Help to Save scheme.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I thank my hon. Friend for giving way, and I am delighted to serve as a Labour and Co-operative MP alongside him. Does he agree that allowing such diversity is important in helping to change behaviour? Many of the issues with savings are about cultural attitudes, and having ways to reach out to communities that might not have engaged in such behaviour is an important part of changing the savings culture in this country.
Mr Thomas
My hon. Friend makes a good point, and I hope to deal with it a little more in due course. She is right that credit unions have scope to reach out to more of the 3.5 million people Ministers want to assist through the Help to Save scheme, whom NS&I might not be best placed to help.
Credit unions are not-for-profit financial co-operatives, owned and controlled by their members. They are, I would argue, more uniquely exposed to low and middle- income financial services markets and are used to offering financial services to those who are often excluded from other better known sources of finance. They provide safe savings and affordable loans, with some credit unions offering other products, such as current accounts, individual savings accounts and mortgages.
Autumn Statement
Seema Malhotra Excerpts(8 years ago)
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Mr Hammond
No; I am sorry to say that to my hon. Friend. What I have done today is added £23 billion-worth of infrastructure and R and D expenditure to existing very significant budgets. Part of that will go to transport and some of that will go to road schemes, but it will be for my right hon. Friend the Secretary of State for Transport to listen to the representations that my hon. Friend and others are making and to allocate the fund, according to the appropriate principles, to maximise productivity growth in our economy. I am sure that he will be delighted to talk to her.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Schools in my constituency are not alone in stepping in to fill the welfare gap, as parents on the breadline hit by Government cuts struggle to buy their children’s school uniforms, shoes and stationery. The situation is getting worse—in the 21st century. What impact does the Chancellor believe his projected 8% per-pupil spending cuts, as estimated by the Institute for Fiscal Studies, will have on the social mobility of a generation of children? How can it be right that instead of softening the cuts, for which he voted, he has instead chosen to spend £60 million a year on expanding grammar schools? What I have raised should have been part of his plan for productivity.
Mr Hammond
I do not agree with the hon. Lady; she needs to look at these things in the round. I know that Labour Members like to take a single example and exaggerate it, but they need to look at the package in the round: what we are doing with raising personal allowances for taxation for people in work, dramatically reducing the tax that they pay; taking millions of people out of taxation; and a pay rise for millions of people from the national living wage. The hon. Lady should look at it in the round.