Finance (No. 3) Bill

Stephen Kerr Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[Colin Clark]

As my colleagues are saying from a sedentary position, these people are being driven away. The actions of the Scottish Government are leading to divergence in tax rates between Scotland and England, and that is damaging the Scottish economy.

[Stephen Kerr (Stirling) (Con)]

Why does my hon. Friend feel that the SNP Government in Scotland are so against aspiration?

[Colin Clark]

I do not know and I really cannot understand it. Now that the Scottish Government are getting tax independence, one would think that they would want to grow the entire economy, instead of damaging parts of it. This should be a salient lesson that tax divergence is damaging; making your country uncompetitive will hurt services. It will cost higher rate taxpayers in Scotland £2,000 to £3,000 more per £100,000 of income. That means that a consultant in Newcastle may not choose to come to Aberdeen Royal Infirmary, which supports my constituency, and that would be very damaging for the public services.

The Finance Bill stimulates the economy; lower taxes will grow the economy. The hon. Member for Aberdeen North (Kirsty Blackman) is no longer in her seat, but she mentioned a transferable tax history, which is estimated to stimulate the oil and gas industry by £30 billion of investment. I consider that an enormous figure, not a small change. Fiscal stability will benefit the oil and gas industry, and we are grateful to the Chancellor that that is still the target of this Government. Slashing business rates, as the Chancellor has promised, will benefit businesses. However, of course, slashing business rates is not going to happen in Scotland, because that is a devolved matter; the north-east of Scotland got half of the increase in tax, which is damaging businesses in my constituency and other north-east constituencies. Buildings in the north-east of Scotland are being demolished because empty building rates—

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[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to follow the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie). He has proved for me the point I came to when I was listening to the Financial Secretary and putting together my remarks for this debate. Politics is a mixture of rhetoric and reality. It was two years ago at that very Dispatch Box that the former Chancellor, George Osborne, announced that austerity was over, and now the current Chancellor tells us that austerity is coming to an end.

The rhetoric we have heard during the past two weeks has led me to conclude that many Conservative Members are modern-day Warleggans. They remind me of the scene when Captain Poldark—he is no doubt viewed by Conservative Members as some sort of Marxist-Leninist—asked the landowners to cut the price of grain, and George Warleggan said, “Well, if I cut the price of grain, then my profits will decrease, and if my profits decrease, then I won’t have enough money to give provision for the poor.” There it is: modern day Conservativism found in a period drama.

The reality is that, by any measure, this Budget and this Finance Bill benefit the rich on the backs of the very poor. The Resolution Foundation has told us in its research that those in the bottom 30% of the income distribution will on average gain less from the work allowance and income tax changes than they will lose through the benefits freeze. Indeed, a low-income family with children will lose £210 next year as a result of the benefits freeze.

Let us discuss universal credit and the broken social security system in this country. The money announced for universal credit changes is mainly to do with managed migration. Two weeks ago, the Social Security Committee in the Scottish Parliament heard evidence from the Crookston Community Group in my constituency. An eight-year-old boy in my constituency was stopped by a teacher and asked why he was taking so many tomato ketchup sachets. His answer was so he could take them home and put them in boiling water to make soup for him and his family. That makes me want to weep, but it is not a special case. Suzanne McGlone of the Crookston Community Group said:

“While this incident would shock most people, it is actually the lower end of the scale.”

That is the reality of the current social security system.

On top of the cuts, the litany of evidence about the pressures faced by beleaguered staff in the Department for Work and Pensions is coming to fruition. I tabled a parliamentary question, and I got the answer during this debate. I asked a simple question: how many workers in the Department for Work and Pensions are currently dealing with the national tier telephony service? I was advised that 400 staff are now dealing with phone calls. To put that into perspective, according to parliamentary answers, 4,504 DWP staff are chasing social security fraud. That is an unbelievable comparison. DWP staff are telling us that they are having to deal with so many telephone calls from claimants that they are unable to process online journals. What does that mean? It means payment delays, rising food bank use and more people getting into poverty.

[Stephen Kerr]

I recognise the passion with which the hon. Gentleman approaches this subject, but perhaps he can enlighten the House as to why, after it was agreed that social security powers would be devolved to the Scottish Parliament and the Scottish Government in Edinburgh, it is taking so long for the SNP Scottish Government to get to grips with the issues of social security.

[Chris Stephens]

I have just given some examples of how broken the UK social security system is. If the hon. Gentleman seriously believes that any devolved Government could address the mess of the social security system in the UK within weeks, he is kidding himself on.

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[Chris Stephens]

I thank the hon. Lady for that, because the point is well made. I was at the Westminster Hall debate she secured, and she gave an excellent speech on why we need split payments in universal credit. The reality is that the Scottish Government want to do split payments, but the Department for Work and Pensions is trying its best not to. That is despite the Work and Pensions Committee, of which I am a member, telling it that it should engage positively with the Scottish Government. The Department should perhaps use what is happening in Scotland as a pilot, which it could then roll out across the UK. Where individuals are subjected to domestic abuse and go through the universal credit system without split payments, the hon. Lady and I have a very real fear that that domestic abuse will become worse.

[Stephen Kerr]

Will the hon. Gentleman give way?

[Chris Stephens]

Not at the moment.

We have heard warm words about rising wages from those on the Government Benches, but there has been no mention whatever of the fact that 4 million people are in insecure work. There has been complete silence about the Taylor review and what measures the Government will introduce as a result. The reality is that low pay and poorer living standards are on the rise.

As I said, there are 400 people dealing with telephone calls in the Department for Work and Pensions, but 4,504 chasing DWP social security fraud. There are also 400 people employed across the UK by the national minimum wage compliance unit. How are we going to chase these rogue employers if there are only 400 staff chasing up compliance with the minimum wage?

That brings us nicely to the issue of public sector pay and whether there is a public sector pay cap. Earlier, I made an intervention on the Minister. I did not really get an answer, and I do not think that anyone who has raised this issue in the last few weeks has got an answer. The reality is that the public sector pay cap is still in place across UK Government Departments. Why is it still in place? Under freedom of information, we now know that the departmental permanent secretaries got together in February this year and agreed the joint position across all UK Government Departments that there would be a pay rise of 1% to 1.5% for public sector workers. I find that extraordinary, because there are 200 separate pay negotiations across UK Government Departments, so how about a bit of efficiency and small Government from those on the Conservative Benches? Let us reduce the number of pay negotiations from 200. If the departmental permanent secretaries can agree one negotiation, there can surely be one negotiation with the trade unions.

Those on the Scottish Conservative Benches have made a number of, shall we say, interesting observations today. I was interested in the elaborate tax avoidance scheme suggested by the hon. Member for Gordon (Colin Clark): if someone is a higher rate taxpayer in Scotland, they should consider registering themselves somewhere else in the United Kingdom. That is tax avoidance by any description.

[Stephen Kerr]

On a point of order, Madam Deputy Speaker. The hon. Gentleman is making comment on the speech given by my hon. Friend the Member for Gordon (Colin Clark), who is being reported as having said something he did not say. The hon. Gentleman should not be permitted to say that. How can that be corrected?

[Madam Deputy Speaker (Dame Eleanor Laing)]

I appreciate the hon. Gentleman’s point, but it is a point of debate, not a point of order for the Chair. It is, I am very glad to tell the House, not my responsibility to adjudicate between Members who sit on the Government Benches and Members who sit on the Opposition Benches on particular points of fact. The hon. Member for Glasgow South West (Chris Stephens) is in order in the eloquent speech he is making.

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[Chris Stephens]

My hon. Friend makes a fascinating observation, but I think he will be disappointed by the response from the Scottish Conservatives. It will not be on their crib sheet, so I am sure they will not agree.

[Stephen Kerr]

To be clear, my hon. Friend the Member for Gordon (Colin Clark) did not ever, at any time, suggest that Scottish taxpayers should relocate. He was simply pointing out the consequences that might flow from the growing tax gap between Scotland and the rest of the United Kingdom.

[Chris Stephens]

I am not sure whether that was an intervention or a point of order, Madam Deputy Speaker. Suffice to say, once again, that I will allow hon. Members to read Hansard tomorrow morning and reach their own conclusions.

In this centenary year of the women’s vote, what is missing from the Bill and the Budget most of all is anything for women born in the 1950s. That is a disgraceful omission. I am delighted that the Work and Pensions Committee has agreed to my suggestion to hold an inquiry so that we can get to the bottom of helping women born in the 1950s to get justice, to get their pensions and to get compensation.

We were told that austerity is over. It is not. We were then told it is coming to an end. It is not. For the poorest and most vulnerable in our society who have had to pay the price of austerity, austerity must end. That is why I will not be supporting a Second Reading for the Finance Bill.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to follow the hon. Member for Enfield, Southgate (Bambos Charalambous). Although I do not agree with all his views, I thought that the way he put them across was clear and impassioned, and I congratulate him on that.

I must draw the House’s attention to my entry in the Register of Members’ Financial Interests, because I want to focus most of my remarks on business and I was in business for most of my life before entering Parliament, but I will begin by touching on other elements.

As the co-chair of the all-party parliamentary group on poverty, I particularly welcome the measures relating to the personal allowance and the increase in the national living wage. When combined, those measures mean that people who are in full employment and earning the minimum wage will be £3,955 a year better off in cash terms than they were in 2010, which will transform many lives. We simply could not continue with a situation in which the Government were supporting business through tax concessions and tax credits; it is right for business to stand on its own two feet. I hope that the national living wage will increase at some point, as it must if we are to reach a real living wage. The gap is narrowing, but our aspiration should be to ensure that, in a prosperous society, everyone prospers.

I also welcome the extra measures for universal credit, which were called for by many Conservative Members. The extra £2 billion a year will make a big difference to a system that is already working well in many ways. It is not without its faults, and we need to focus on the areas in which it is not right as well as those in which it is, but it, too, will make a huge difference. It was introduced in Ryedale, in my constituency, early in 2017. There were initial problems with some of the payments, but following measures that the Government introduced at the end of that year, most of them have been alleviated.

The 33% rate reduction for many businesses is welcome, as is the fund for investment in our high streets. However, the main issue affecting the retail environment is not the level of business rates, but the migration of consumers from shopping in retail premises to shopping online. We cannot simply cut business rates to deal with that problem. The Chancellor’s contribution is welcome, but we need other measures, too. At some point, we will need a structural review of the business rates system for retail premises. There is no doubt that online retailers pay a much smaller proportion of their turnover in business rates than retail high street premises—about four times less.

Local authorities also need to do their bit. Too often, they are giving permission for out-of-town shopping centres. Consent has been given to four in York, all of which will offer free parking. The city centre car parks run by the local authority are charging £2.50 an hour, which is massively disadvantaging businesses in the city centre. Businesses were telling the local authority that this was going to happen many years ago, and it has had a devastating effect on many high street businesses.

I am most pleased with the Government continuing their corporation tax reductions; it is absolutely the right thing to do. I am also pleased that they are continuing provisions such as entrepreneurs’ relief, the seed enterprise investment scheme and the new enterprise incentive scheme. The Opposition think, “We can simply increase corporation tax. It’s a victimless crime. We’ll collect all this extra money and then the corporations will pay.” That is not how it is. When the Opposition speak on these issues, whether about requisitioning parts of businesses or taxing companies more, they remind me of the Churchill quotation—that some people look at private enterprise as a tiger to be shot or a cow to be milked, when it is actually

“the strong horse that pulls the whole cart.”

And that is the reality.

The Opposition simply want to raise corporation tax, and they think that corporations will just pay and that will be it. Of course they will pay extra tax, but the consequence in a competitive market is that prices will go up. At the end of the day, all consumers pay all taxes. The reality is that excess returns in a competitive marketplace get competed away right down to the cost of capital. Therefore, if we put up corporation tax, the pre-tax profit has to rise to ensure the same return on a post-tax basis. All that will happen in a competitive market—most of our markets—is that prices will go up and the consumer will pay. That is the reality, so I welcome the reduction in corporation tax because it encourages inward investment in this country.

Not all our markets are competitive and not all our enterprise is in competitive markets, so I welcome the fact that we have brought forward a digital services tax for one market that is not competitive—the huge technology giants that are dominating the landscape and not paying their fair share of taxes. It cannot be right. Those companies benefit from the fact we have a well-funded education system, hospitals, welfare system, social care system and pensions system. They cannot just trade in this country, switch the profits to a foreign jurisdiction and avoid tax. It is absolutely right, historic and brave that the Chancellor has acted on this, outside an agreement with the OECD. It would clearly be better if we worked internationally, but it is right to take this first step.

There is one area where the market is not competitive and which I am heavily involved in as the co-chair of the all-party parliamentary group on fair business banking and finance—that is, the relationship between business and banks. Some 90% of business lending is dominated by the four biggest banks—Royal Bank of Scotland, Lloyds, Barclays and HSBC—but when something goes wrong, there is no way on earth a small business can compete with a bank when trying to resolve disputes. It simply cannot be right that these banks can use their financial power in order not to be held accountable when something goes wrong with their own customers. We have seen many cases and have talked about this issue before in Parliament. I know that this is not part of the Finance Bill, although I would very much have liked it to be.

The Chancellor has said that he will support the recommendations of the Financial Conduct Authority to expand the Financial Ombudsman Service from its current jurisdiction of £150,000 compensation limit to £350,000, but most cases we deal with in the all-party group are in the millions of pounds. I am delighted that the Chancellor has just walked in while I am talking about this issue. There is a very good example in an article by Jonathan Ford in today’s Financial Times. The bank sold Arthur Holgate & Son—a company turning over £2 million—an unsuitable interest rate hedging product, sending it under; it went into administration. How on earth is Arthur Holgate & Son supposed to deal with that and take Barclays to court? The company was offered £311,000 in compensation, but it eventually managed to insure the legal fees for the court action and got a settlement off Barclays of £10 million. Most companies that have gone through this process simply do not have the funds to take a bank to court. That cannot be right.

[Stephen Kerr]

I pay tribute to my hon. Friend for the work he does in the APPG on fair business banking. Many thousands of small and medium-sized businesses were mistreated by the banks during the period that we often discuss in the Chamber. Does he agree that it is vital for capitalism in this country and the enterprise economy that justice is done and seen to be done for them?

[Kevin Hollinrake]

My hon. Friend is right. Capitalism depends on a fair and level playing field, and that is not where we are at the moment. As well as the expansion of the Financial Ombudsman Service, which we fully support, our all-party group proposes the introduction of a financial services tribunal that works in pretty much the same way as an employment tribunal. A company could take a bank to court without standing the costs of that bank, with full powers of disclosure, and justice could be seen to be done, which is critical.

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[Stephen Kerr (Stirling) (Con)]

It is, as always, a pleasure to listen to the hon. Member for Glasgow East (David Linden), who treats the House to the usual rendition from the Scottish nationalists of why they stand for independence—in truth, that is all they stand for.

I rise to make a short contribution in this debate on the Second Reading of the Finance Bill, and I will restrict my comments to clause 61. I am mindful that I did not agree with my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) on the issue of safe standing at football matches, but I have nothing but admiration for the principled stand she has taken on the matter of resetting the maximum stake for fixed odds betting terminals to £2, with that measure to be effective by next April at the latest. I completely agree with her position, which is why I have been willing to attach my name to future amendments to this Bill brought forward by friends. Apparently its implementation will take so long, but I really do not believe that that stands up to scrutiny. The Government currently say that it needs to be put in place for next autumn, but I really believe it does not need to take that long.

The simple fact of the matter is that the longer we wait to implement this measure, the more damage is being inflicted on the most vulnerable people in our society. Some 43% of the people using fixed odds betting terminals are either problem or at-risk gamblers, and when we consider that 230,000 sessions on these machines in a single year resulted in losses of more than £1,000 each session, we see that any further delay in reducing the maximum stake to £2 is not justifiable in societal terms. It is also not justifiable in terms of the time that is really needed to make this adjustment happen. It is not justifiable in terms of the ongoing social costs, with the misery that occurs when individuals lose control of their decision-making faculty to a gambling addiction. And I simply cannot accept, on the grounds of any sort of morality that I would wish to be associated with, that the special pleading of the betting firms should take any sort of a priority over the damage inflicted on society, on families and on children by those who are suffering from gambling addiction and for whom these machines are an outlet.

The startling statistic is that for every second of every day these machines cost their players £57 in losses. There are 33,000 of these fixed odds betting terminals in betting shops across the UK. A helpful live ready-reckoner on the website of the all-party group on fixed odds betting terminals calculates to the second how much has been lost on these machines since the Government first called for evidence on what the maximum stake for these terminals should be. That happened way back in October 2016, and the last time I checked, which was earlier today—so after 749 days—this figure is in excess of £3.7 billion. I am not prepared to stand by—I could not do so as a matter of conscience—and do nothing when action is required. The Government have already accepted that that action is necessary and described these machines in the most disparaging terms, so I ask simply that the measure be implemented in April, at the soonest point.

Perhaps a justification will be put forward that somehow it will cost the Treasury lost revenue, but at what price? Are we really saying that there is not a more productive use for these billions of pounds of economic activity in our country? I think that there is. We should not underestimate the devastating effects of the vice-like grip of an addiction such as gambling. The Government should act now to do what they have already resolved to do—not in 12 months’ time, but by April next year at the very latest.

[Jim Shannon]

Is it not a fact that the sector and industry have had 18 months to get themselves ready for this? They knew it was coming and should have got their house in order. They do not need any more time.

[Stephen Kerr]

The hon. Gentleman is quite right. Reference has already been made to the KPMG report, which was provided at the instigation of the Association of British Bookmakers. KPMG itself advised that that report

“should not therefore be regarded as suitable to be used or relied on by any other person or for any other purpose”

because its terms and scope were determined by KPMG’s client, the Association of British Bookmakers. Paddy Power Betfair wrote to the Prime Minister because it was so shocked that the report could be used as a credible source for decision making, saying that some of the assumptions in it were unrealistic.

Overcoming addiction is not simply a matter of exercising willpower. Addiction robs people of the power to decide for themselves. We in this House have the power to take the necessary measures that will protect the most vulnerable people, the most vulnerable families and the children of those families. I very much hope that the Government will take the decision to do that earlier.

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[Drew Hendry]

I thank the hon. Gentleman for his intervention. Indeed, I do welcome the work at St Fergus. It perhaps would have been proper to point out that the Scottish Government are also driving that St Fergus development. It perhaps also would have been appropriate to point out that the funding that has been put forward by BEIS is one tenth of what was removed three years ago. Three years after the point at which it could have taken advantage of world-leading cutting-edge technology, it thinks it is good enough to put in a tenth of the funds and hope that that lip service will pay dividends. It just will not wash.

[Stephen Kerr]

rose—

[Drew Hendry]

I will give way to the hon. Gentleman later.

This Government also continue to fail the young. [Interruption.] Thank you for that direction, Mr Speaker. I will do my best to keep the pace going.

This Government also continue to fail young people. They could have ended wage discrimination, but they chose instead to keep punishing them. Those young people deserve the same pay for the same work and they deserve a real living wage. As my colleagues pointed out earlier, there is nothing—nothing—for the women born in the 1950s who were short-changed on their pension entitlements. It is no wonder that the argument for an independent Scotland has never been stronger. The Tories’ obsessions make the case for us in Scotland.

I do want to refer to the hon. Member for Stirling (Stephen Kerr), because we rarely agree on anything, but the one thing that we do agree on tonight is fixed odds betting terminals. Delaying the reduction of stakes in fixed odds betting terminals is a disgrace; it will only take more money from vulnerable addicts and put it in the pockets of the bookies and those with vested interests. It is a disgrace that is felt right across this House. Research from Landman Economics has shown that the average fixed odds betting terminal user loses £192 a month, with the average user of a machine capped at £2 a spin losing just £22 by comparison. There is no justification for delaying this action.

It is also clear, from this very debate, how the Tories want to muddy the waters on tax avoidance, as they have on the IR35 changes. If they are not pointing the way to tax avoidance, even when they look to clamp down on it they miss the mark, as we can see with the implementation of the IR35 changes. The loopholes absolutely need to be closed. However, the employers and agencies benefiting most from these schemes have, for the most part, got away with it. With HMRC implementing stringent measures on many who were duped, many are now fearful of being forced to repay immediately with no provisions that reasonable time will be allowed and a payment scheme be made available. Folk are genuinely worried about becoming bankrupt.

Austerity lives on for those who can afford it least. The Prime Minister and the Chancellor spin the line that austerity has ended, or is ending; well, maybe, depending on who you hear it from. But everyone knows, even their rare supporters, dwindling though they are, that that is just a toom tabard of a statement—another Government rebranding exercise. My constituents are making the choice between putting food on their tables and heating their homes. They have had enough of it. Those on universal credit with spiralling debt because they do not know when the next payment is coming, or whether, if it does, it will be correct, have had enough of it.

Universal credit impacts on other communities. After five and a half years, we know the truth. As the OBR Budget document details, the changes to the work allowance reverse only half of the cut that was made to it in the 2015 Budget. Are we seriously expected to cheer this Government for putting back in less than half of what they removed, after years of punishing those who could afford it least? Millions of people have been dragged through this system already, with misery, heartache and poverty—and what have they been told? They have been told that the system works—that they are all wrong—but there are now voices joining theirs.

Even in the Minister’s small concessions, he is admitting this Government’s failure. They should be utterly ashamed of what they have inflicted on people. If Ministers had a shred of decency, they would come to the Dispatch Box and apologise to my constituents and to the far too many others who have had to endure the roll-out of universal credit. Let us not forget that these people will not be benefiting from transitional funding announced in the Budget; instead they are left trying to piece together their lives following the impact on their families, sometimes shattered by this move. They are left wondering how on earth a Government supposed to provide them with a safety net to which they and their families have contributed are left counting pennies while those who have the most still avoid paying their share.

For those to be transitioned to universal credit, £1 billion for the transition does not even touch the sides of what is needed. If this Government were serious about mitigating the impacts, they would migrate people to universal credit without expecting them to process a new application. People who need universal credit support simply do not have anything spare to get them through the transition weeks, be it two weeks or five weeks.

Then there is the new funding for universal support to be announced. I will welcome that; any support is better than none. But again it is more fudge, because, as anyone who has any idea about this mess knows, most of the issues people experience with universal credit are long-running and ongoing well after the initial application. So where is the fund for ongoing universal support? While that was omitted from this Bill and by this Government’s PR machine, the chief executive of Citizen’s Advice made it very clear in her letter to the Work and Pensions Committee when she said:

“Our current agreement does not include funding to provide support to people once their claim is complete.”

Of course, I hear the Government’s other rhetoric that for most people the process is simple and problem free.

I do not want to see any more people in tears in my constituency office. I do not want to see any more families struggling to get along. I do not want to see any more families going to food banks and having to prostrate themselves to get what is essentially a handout in order to keep them going when they should be properly protected under a decent social security system that any forward-thinking country would have. Perhaps that country should indeed be an independent Scotland.